EX-4.18
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT ("Agreement"), dated as of June 8, 2004, by and
between GameZnFlix, Inc., a Nevada corporation ("Company"), and Southern
Securities, Inc., a Delaware corporation ("Investor").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Investor shall invest up to Fifteen Million
Dollars ($15,000,000) to purchase the Company's common stock, one tenth of
one cent ($0.001) par value per share ("Common Stock");
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) under the Securities Act of 1933, as amended ("1933 Act"), Rule
506 of Regulation D, and the rules and regulations promulgated thereunder,
and/or upon such other exemption from the registration requirements of the
1933 Act as may be available with respect to any or all of the investments
in Common Stock to be made hereunder; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as Exhibit A (as
amended from time to time, "Registration Rights Agreement") pursuant to
which the Company has agreed to provide certain registration rights under
the 1933 Act, and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, in consideration of the foregoing recitals, which shall
be considered an integral part of this Agreement, the covenants and
agreements set forth hereafter, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company and
the Investor hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings specified or indicated, and such meanings shall be equally
applicable to the singular and plural forms of the defined terms:
"1933 Act" shall have the meaning set forth in the preamble, above.
"1934 Act" shall mean the Securities Exchange Act of 1934, as it may be
amended.
"Affiliate" shall have the meaning specified in Section 5(h), below.
"Agreement" shall mean this Investment Agreement.
"Best Bid" shall mean the highest posted bid price of the Common Stock.
"Buy In" shall have the meaning specified in Section 6, below.
"Buy In Adjustment Amount" shall have the meaning specified in Section 6.
"Closing" shall have the meaning specified in Section 2(h).
"Closing Date" shall mean seven (7) Trading Days following the Put Notice
Date.
"Common Stock" shall have the meaning set forth in the preamble to this
Agreement.
"Control" or "Controls" shall have the meaning specified in Section 5(h).
"Covering Shares" shall have the meaning specified in Section 6.
"Effective Date" shall mean the date the SEC declares effective under the
1933 Act the Registration Statement covering the Securities.
"Environmental Laws" shall have the meaning specified in Section 4(m), below.
"Execution Date" shall mean the date first indicated above.
"Indemnitiees" shall have the meaning specified in Section 10, below.
"Indemnified Liabilities" shall have the meaning specified in Section 10,
below.
"Ineffective Period" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (as defined in the
Registration Rights Agreement) becomes ineffective or unavailable for use
for the sale or resale, as applicable, of any or all of the Registrable
Securities (as defined in the Registration Rights Agreement) for any reason
(or in the event the prospectus under either of the above is not current and
deliverable) during any time period required under the Registration Rights
Agreement.
"Investor" shall have the meaning indicated above.
"Major Transaction" shall have the meaning specified in Section 2(g), above.
"Material Adverse Effect" shall have the meaning specified in Section 4(a).
"Material Facts" shall have the meaning specified in Section 2(m).
"Maximum Common Stock Issuance" shall have the meaning specified in Section
2(j).
"Open Period" shall mean the period beginning on and including the Trading
Day immediately following the Effective Date and ending on the earlier to
occur of (i) the date which is 36 months from the Effective Date; and (ii)
termination of the Agreement in accordance with Section 9, below.
"Partial Release Form" shall have the meaning specified in Section 2(i),
below.
"Pricing Period" shall mean the period beginning on the Put Notice Date and
ending on and including the date that is five (5) Trading Days after such
Put Notice Date.
"Principal Market" shall mean the American Stock Exchange, Inc., the
National Association of Securities Dealers, Inc. Over-the-Counter Bulletin
Board, the Nasdaq National Market System or the Nasdaq SmallCap Market,
whichever is the principal market on which the Common Stock is listed.
"Prospectus" shall mean the prospectus, preliminary prospectus and
supplemental prospectus used in connection with the Registration Statement.
"Purchase Amount" shall mean the total amount being paid by the Investor on
a particular Closing Date to purchase the Securities.
"Purchase Price" shall mean eighty-eight percent (88%) of the lowest volume
weighted average price of the Common Stock during the Pricing Period.
"Put Amount" shall have the meaning set forth in Section 2(b) hereof.
"Put Notice" shall mean a written notice sent to the Investor by the Company
stating the Put Amount of Shares the Company intends to sell to the Investor
pursuant to the terms of the Agreement and stating the current number of
Shares issued and outstanding on such date.
"Put Notice Date" shall mean the Trading Day immediately following the day
on which the Investor receives a Put Notice, however a Put Notice shall be
deemed delivered on (X) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 9:00 am
Eastern Time, or (Y) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 9:00 am Eastern Time on a Trading
Day. No Put Notice may be deemed delivered on a day that is not a Trading
Day.
"Put Restriction" shall mean the days between the end of the Pricing Period
and the date on which the Investor deems the Put closed. During this time,
the Company shall not be entitled to deliver another Put Notice.
"Registration Period" shall have the meaning specified in Section 5(c),
below.
"Registration Rights Agreement" shall have the meaning set forth in the
recitals, above.
"Registration Statement" means the registration statement of the Company
filed under the 1933 Act covering the Common Stock issuable hereunder.
"Related Party" shall have the meaning specified in Section 5(h).
"Resolution" shall have the meaning specified in Section 8(f).
"SEC" shall mean the U.S. Securities & Exchange Commission.
"SEC Documents" shall have the meaning specified in Section 4(f).
"Securities" shall mean the shares of Common Stock issued pursuant to the
terms of the Agreement.
"Shares" shall mean the shares of the Company's Common Stock.
"Sold Shares" shall have the meaning specified in Section 6.
"Subsidiaries" shall have the meaning specified in Section 4(a).
"Trading Day" shall mean any day on which the Principal Market for the
Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm.
"Transaction Documents" shall mean this Agreement, the Registration Rights
Agreement, and each of the other agreements entered into by the parties
hereto in connection with this Agreement.
"Valuation Event" shall have the meaning specified in Section 2(k).
SECTION 2. PURCHASE AND SALE OF COMMON STOCK.
(a) Purchase and Sale of Common Stock. Subject to the terms and
conditions set forth herein, the Company shall issue and sell to the
Investor, and the Investor shall purchase from the Company, up to that
number of Shares having an aggregate Purchase Price of Fifteen Million
Dollars ($15,000,000).
(b) Delivery of Put Notices.
(i) Subject to the terms and conditions of the Transaction Documents,
and from time to time during the Open Period, the Company may, in its
sole discretion, deliver a Put Notice to the Investor which states the
Put Amount (designated in shares of Common Stock) which the Company
intends to sell to the Investor on a Closing Date. The Put Notice
shall be in the form attached hereto as Exhibit B and incorporated
herein by reference. The amount that the Company shall be entitled to
Put to the Investor ("Put Amount") shall be equal to, at the Company's
election, either: (A) two hundred percent (200%) of the average daily
volume (U.S. market only) of the Common Stock for the ten (10) Trading
Days prior to the applicable Put Notice Date, multiplied by the
average of the three (3) daily closing Best Bid prices immediately
preceding the Put Date, or (B) ten thousand dollars ($10,000);
provided that in no event will the Put Amount be more than three
hundred thousand dollars ($300,000) with respect to any single Put,
and the aggregate dollar amount of all Puts in any thirty (30) day
period shall not exceed three hundred thousand dollars ($300,000).
During the Open Period, the Company shall not be entitled to submit a
Put Notice until after the previous Closing has been completed. The
Purchase Price for the Common Stock identified in the Put Notice shall
be equal to eighty-eight percent (88%) of the lowest closing Best Bid
price of the Common Stock during the Pricing Period.
(ii) Within seven (7) calendar days after the commencement of each
calendar quarter occurring subsequent to the commencement of the Open
Period, the Company undertakes to notify Investor as to its reasonable
expectations as to the Put Amount it intends to raise during such
calendar quarter, if any, through the issuance of Put Notices. Such
notification shall constitute only the Company's good faith estimate
with respect to such calendar quarter and shall in no way obligate the
Company to raise such amount during such calendar quarter or otherwise
limit its ability to deliver Put Notices during such calendar quarter.
The failure by the Company to comply with this provision may be cured
by the Company's notification Investor at any time as to its
reasonable expectations with respect to the current calendar quarter.
(c) Interest. It is the intention of the parties that any interest
that may be deemed to be payable under this Agreement shall not exceed the
maximum amount permitted under applicable law. If any applicable law sets
the maximum interest amount, and any payment required under this Agreement
exceeds such limit, then: (i) any such interest shall be reduced by the
amount necessary to reduce the interest to the legally permitted limit; and
(ii) any sums already collected (if any) from a party which exceed the
legally permitted limits will be refunded to such party.
(d) Investor's Obligation to Purchase Shares. Subject to the
conditions set forth in this Agreement, following the Investor's receipt of
a validly delivered Put Notice, the Investor shall be required to purchase
from the Company during the related Pricing Period that number of Shares
having an aggregate Purchase Price equal to the lesser of (i) the Put Amount
set forth in the Put Notice, and (ii) two hundred percent (200%) of the
aggregate trading volume of the Common Stock during the applicable Pricing
Period times (x) eighty-eight percent (88%) of the average of the three (3)
lowest closing bid prices of the Company's Common Stock during the specified
Pricing Period, but only if said Shares bear no restrictive legend, are not
subject to stop transfer instructions and are being held in escrow, pursuant
to Section 2(h), prior to the applicable Closing Date.
(e) Limitation on Investor's Obligation to Purchase Shares. In no
event shall the Investor purchase Shares (whether from the Company or in
public or private secondary transactions) other than pursuant to this
Agreement until such date as this Agreement is terminated.
(f) Conditions to Investor's Obligation to Purchase Shares.
Notwithstanding anything to the contrary in this Agreement, the Company
shall not be entitled to deliver a Put Notice and the Investor shall not be
obligated to purchase any Shares at a Closing (as defined in Section 2(h))
unless each of the following conditions are satisfied:
(i) a Registration Statement shall have been declared effective and
shall remain effective and available for the resale of all the
Registrable Securities (as defined in the Registration Rights
Agreement) at all times until the Closing with respect to the subject
Put Notice;
(ii) there shall be a minimum of five (5) trading days between each
Put Notice;
(iii) at all times during the period beginning on the related Put
Notice Date and ending on and including the related Closing Date, the
Common Stock shall have been listed on the Principal Market and shall
not have been suspended from trading thereon for a period of five
consecutive Trading Days during the Open Period and the Company shall
not have been notified of any pending or threatened proceeding or
other action to delist or suspend the Common Stock;
(iv) the Company has complied with its obligations and is otherwise
not in breach of a material provision of, or in default under, this
Agreement, the Registration Rights Agreement or any other agreement
executed in connection herewith which has not been corrected prior to
delivery of the Put Notice Date;
(v) no injunction shall have been issued and remain in force, or
action commenced by a governmental authority which has not been stayed
or abandoned, prohibiting the purchase or the issuance of the
Securities; and
(vi) the issuance of the Securities will not violate any shareholder
approval requirements of the Principal Market.
If any of the events described in clauses (i) through (v) above occurs
during a Pricing Period, then the Investor shall have no obligation to
purchase the Put Amount of Common Stock set forth in the applicable Put
Notice.
(g) Major Transaction. For purposes of this Agreement, a "Major
Transaction" shall be deemed to have occurred upon the closing of any of the
following events: (i) the consolidation, merger or other business
combination of the Company with or into another person (other than pursuant
to a migratory merger effected solely for the purposes of changing the
jurisdiction of incorporation of the Company or other than a transaction in
which the Company is the surviving corporation); (ii) the sale or transfer
of all or substantially all of the Company's assets; or (iii) the
consummation of a purchase, tender or exchange offer made to, and accepted
by, the holders of more than fifty percent (50%) of the economic interest
in, or the combined voting power of all classes of voting stock of, the
Company.
(h) Mechanics of Purchase of Shares by Investor. Subject to the
satisfaction of the conditions set forth in Sections 2(f), 7 and 8, the
closing of the purchase by the Investor of Shares or the Investor deeming a
Put closed (a "Closing") shall occur on the date which is no later than
seven (7) Trading Days following the applicable Put Notice Date or when the
Investor deems a Put closed (each a "Closing Date"). Prior to each Closing
Date, (I) the Company shall deliver to the Investor pursuant to the this
Agreement, certificates representing the Shares to be issued to the Investor
on such date and registered in the name of the Investor; and (II) the
Investor shall deliver to the Company the Purchase Price to be paid for such
Shares, determined as set forth in Sections 2(b) and 2(d). In lieu of
delivering physical certificates representing the Securities and provided
that the Company's transfer agent then is participating in The Depository
Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program,
upon request of the Investor, the Company shall use its commercially
reasonable efforts to cause its transfer agent to electronically transmit
the Securities by crediting the account of the Investor's prime broker
(which shall be specified by the Investor a reasonably sufficient time in
advance) with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system.
The Company understands that a delay in the issuance of Securities
beyond the Closing Date could result in economic loss to the Investor. After
the Effective Date, as compensation to the Investor for such loss, the
Company agrees to pay late payments to the Investor for late issuance of
Securities (delivery of Securities after the applicable Closing Date) in
accordance with the following schedule (where "No. of Days Late" is defined
as the number of days beyond the Closing Date):
Late Payment For Each
No. of Days Late $10,000 of Common Stock
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
Over 10: $1,000 + $200 for each Business Day late beyond 10 days
The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit the
Investor's right to pursue actual damages for the Company's failure to issue
and deliver the Securities to the Investor, except to the extent that such
late payments shall constitute payment for and offset any such actual
damages alleged by the Investor, and any Buy In Adjustment Amount.
(i) Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, if during the Open Period the Company
becomes listed on an exchange that limits the number of shares of Common
Stock that may be issued without shareholder approval, then the number of
Shares issuable by the Company and purchasable by the Investor, including
the shares of Common Stock issuable to the Investors pursuant to Section
11(b), shall not exceed that number of the shares of Common Stock that may
be issuable without shareholder approval, subject to appropriate adjustment
for stock splits, stock dividends, combinations or other similar
recapitalization affecting the Common Stock (the "Maximum Common Stock
Issuance"), unless the issuance of Shares, including any Common Stock to be
issued to the Investors pursuant to Section 11(b), in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders
in accordance with applicable law and the By-laws and Amended and Restated
Certificate of Incorporation of the Company, if such issuance of shares of
Common Stock could cause a delisting on the Principal Market. The parties
understand and agree that the Company's failure to seek or obtain such
shareholder approval shall in no way adversely affect the validity and due
authorization of the issuance and sale of Securities or the Investor's
obligation in accordance with the terms and conditions hereof to purchase a
number of Shares in the aggregate up to the Maximum Common Stock Issuance
limitation, and that such approval pertains only to the applicability of the
Maximum Common Stock Issuance limitation provided in this Section 2(j).
(j) For the purpose of this Agreement, the term "Valuation Event"
means the Company taking any of the following actions at any time during a
Pricing Period:
(i) the subdivision or combinations of the Company's Common Stock;
(ii) the payment of a dividend or any other distribution with respect
to shares of the Company's Common Stock;
(iii) the issuance of any options or other rights to subscribe for or
purchase Common Stock ("Options") or any securities convertible into
or exchangeable for Common Stock ("Convertible Securities"), the price
per share for which Common Stock is shall be less than the bid price
in effect immediately prior to such issuance of such Options or
Convertible Securities;
(iv) the issuance of shares of Common Stock other than as provided in
the foregoing subsections (i) through (iii), at a price per share
less, or for other consideration lower, than the bid price in effect
immediately prior to such issuance, or without consideration; or
(v) the distribution of its assets or evidences of indebtedness to the
holders of Common Stock as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings
or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or
substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (i) through
(iv)).
(k) The Company agrees that it shall not take any action that would
result in a Valuation Event occurring during a Pricing Period.
SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Investor represents and warrants to the Company, and covenants, that:
(a) Sophisticated Investor. The Investor has, by reason of its
business and financial experience, such knowledge, sophistication and
experience in financial and business matters and in making investment
decisions of this type that it is capable of (i) evaluating the merits and
risks of an investment in the Securities and making an informed investment
decision; (ii) protecting its own interest; and (iii) bearing the economic
risk of such investment for an indefinite period of time.
(b) Authorization; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Investor and is
a valid and binding agreement of the Investor enforceable against the
Investor in accordance with its terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or affecting generally, the enforcement of applicable creditors' rights and
remedies.
(c) Section 9 of the 1934 Act. During the term of this Agreement,
the Investor shall comply with the provisions of Section 9 of the 1934 Act,
and the rules promulgated thereunder, with respect to transactions involving
the Common Stock. The Investor agrees not to short, either directly or
indirectly through its affiliates, principals or advisors, the Company's
common stock during the term of this Agreement.
(d) Accredited Investor. Investor is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Investor and the consummation by the Investor
of the transactions contemplated hereby and thereby will not result in a
violation of Partnership Agreement or other organizational documents of the
Investor.
(f) Opportunity To Discuss. The Investor has had an opportunity to
discuss the business, management and financial affairs of the Company with
the Company's management.
(g) Investment Purposes. The Investor is purchasing the Securities
for its own account for investment purposes and not with a view towards
distribution and agrees to resell or otherwise dispose of the Securities
solely in accordance with the registration provisions of the 1933 Act (or
pursuant to an exemption from such registration provisions).
(h) No Registration as a Dealer. The Investor is not and shall not be
required to be registered as a "dealer" under the 1934 Act, either as a
result of its execution and performance of its obligations under this
Agreement or otherwise.
(i) The Investor is a corporation, duly organized, validly existing
and in good standing in the British Virgin Islands.
(j) The Investor understands that it is liable for its own tax
liabilities.
(k) The investor shall comply with Regulation M under the 1934 Act,
if applicable.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules attached hereto, or as disclosed on the
Company's SEC Documents, the Company represents and warrants to the Investor
that:
(a) Organization and Qualification. The Company is a corporation duly
organized and validly existing in good standing under the laws of the
British Virgin Islands, and has the requisite corporate power and
authorization to own its properties and to carry on its business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, "Material
Adverse Effect" means any material adverse effect on the business,
properties, assets, operations, results of operations, financial condition
or prospects of the Company and its Subsidiaries, if any, taken as a whole,
or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority
or ability of the Company to perform its obligations under the Transaction
Documents (as defined in Section 1 and 4(b), below).
(b) Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights
Agreement, and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by
this Agreement (collectively, the "Transaction Documents"), and to
issue the Securities in accordance with the terms hereof and thereof.
(ii) The execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby and thereby, including without limitation the reservation for
issuance and the issuance of the Securities pursuant to this
Agreement, have been duly and validly authorized by the Company's
Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors, or its shareholders.
(iii) The Transaction Documents have been duly and validly executed
and delivered by the Company.
(iv) The Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of creditors' rights and remedies.
(c) Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of nine hundred million (900,000,000) shares
of Common Stock, $0.001 par value per share, of which as of the date hereof,
five hundred fifty-six million one hundred fifty-seven thousand eight
hundred eighty-two (556,157,882) shares are issued and outstanding. All of
such outstanding shares have been, or upon issuance will be, validly issued
and are fully paid and nonassessable. Except as disclosed in the Company's
publicly available filings with Periodic Filings, (i) no shares of the
Company's capital stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding debt securities; (iii) there are no
outstanding shares of capital stock, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries; (iv) there are no
agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act (except the Registration Rights Agreement); (v) there are
no outstanding securities of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its Subsidiaries is or may become bound to redeem a security of the Company
or any of its Subsidiaries; (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; (vii) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement; and (viii) there is no dispute
as to the classification of any shares of the Company's capital stock. The
Company has furnished to the Investor, or the Investor has had access
through ▇▇▇▇▇ to, true and correct copies of the Company's articles of
incorporation, as amended, as in effect on the date hereof ("Articles of
Incorporation"), and the Company's by-laws, as in effect on the date hereof
("By-Laws"), and the terms of all securities convertible into or exercisable
for Common Stock and the material rights of the holders thereof in respect
thereto.
(d) Issuance of Shares. The Company has reserved One Hundred Fifty
Million (150,000,000) Shares for issuance pursuant to this Agreement has
been duly authorized and reserved for issuance (subject to adjustment
pursuant to the Company's covenant set forth in Section 5(f) below) pursuant
to this Agreement. Upon issuance in accordance with this Agreement, the
Securities will be validly issued, fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue thereof. In the
event the Company cannot register a sufficient number of Shares for issuance
pursuant to this Agreement, the Company will use its best efforts to
authorize and reserve for issuance the number of Shares required for the
Company to perform its obligations hereunder as soon as reasonably
practicable.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws; or (ii) conflict with, or constitute a
material default (or an event which with notice or lapse of time or both
would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material
agreement, contract, indenture mortgage, indebtedness or instrument to which
the Company or any of its Subsidiaries is a party, or result in a violation
of any law, rule, regulation, order, judgment or decree (including United
States federal and state securities laws and regulations and the rules and
regulations of the Principal Market or principal securities exchange or
trading market on which the Common Stock is traded or listed) applicable to
the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected. Except as
disclosed in Schedule 4(e), neither the Company nor its Subsidiaries is in
violation of any term of, or in default under, the Articles of
Incorporation, any Certificate of Designations, Preferences and Rights of
any outstanding series of preferred stock of the Company or the By-Laws or
their organizational charter or by-laws, respectively, or any contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
or order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not
individually or in the aggregate have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and
shall not be conducted, in violation of any law, statute, ordinance, rule,
order or regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the
sanctions for which either individually or in the aggregate would not have a
Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act, the Company is not required to
obtain any consent, authorization, permit or order of, or make any filing or
registration (except the filing of a registration statement) with, any
court, governmental authority or agency, regulatory or self-regulatory
agency or other third party in order for it to execute, deliver or perform
any of its obligations under, or contemplated by, the Transaction Documents
in accordance with the terms hereof or thereof. All consents,
authorizations, permits, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been obtained
or effected on or prior to the date hereof and are in full force and effect
as of the date hereof. Except as disclosed in Schedule 4(e), the Company and
its Subsidiaries are unaware of any facts or circumstances that might give
rise to any of the foregoing. The Company is not, and will not be, in
violation of the listing requirements of the Principal Market as in effect
on the date hereof and on each of the Closing Dates and is not aware of any
facts which would reasonably lead to delisting of the Common Stock by the
Principal Market in the foreseeable future.
(f) SEC Documents; Financial Statements. Since at least January 1,
2004, the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents"). The Company has delivered
to the Investor or its representatives, or they have had access through
▇▇▇▇▇ to, true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the
case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). No other written information provided by or on behalf
of the Company to the Investor which is not included in the SEC Documents,
including, without limitation, information referred to in Section 4(d) of
this Agreement, contains any untrue statement of a material fact or omits to
state any material fact necessary to make the statements therein, in the
light of the circumstance under which they are or were made, not misleading.
Neither the Company nor any of its Subsidiaries or any of their officers,
directors, employees or agents have provided the Investor with any material,
nonpublic information which was not publicly disclosed prior to the date
hereof and any material, nonpublic information provided to the Investor by
the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed by
the Company prior to such Closing Date.
(g) Absence of Certain Changes. Except as set forth in the SEC
Documents, the Company does not intend to change the business operations of
the Company. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law
nor does the Company or its Subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
(h) Absence of Litigation. Except as set forth in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by
any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the executive officers of Company or
any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as
such, in which an adverse decision could have a Material Adverse Effect.
(i) Acknowledgment Regarding Investor's Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby
and any advice given by the Investor or any of its respective
representatives or agents in connection with the Transaction Documents and
the transactions contemplated hereby and thereby is merely incidental to the
Investor's purchase of the Securities. The Company further represents to
the Investor that the Company's decision to enter into the Transaction
Documents has been based solely on the independent evaluation by the Company
and its representatives.
(j) No Undisclosed Events, Liabilities, Developments or
Circumstances. Except as set forth in the SEC Documents, since January 1,
2004, no event, liability, development or circumstance has occurred or
exists, or to the Company's knowledge is contemplated to occur, with respect
to the Company or its Subsidiaries or their respective business, properties,
assets, prospects, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale
by the Company of its Common Stock and which has not been publicly
announced.
(k) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of
the Company or any of its Subsidiaries, is any such dispute threatened.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that
relations with their employees are good. No executive officer (as defined
in Rule 501(f) of the ▇▇▇▇ ▇▇▇) has notified the Company that such officer
intends to leave the Company's employ or otherwise terminate such officer's
employment with the Company.
(l) Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade
names, service marks, service ▇▇▇▇ registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. Except as set forth the SEC
Documents, none of the Company's trademarks, trade names, service marks,
service ▇▇▇▇ registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights necessary to conduct its
business as now or as proposed to be conducted have expired or terminated,
or are expected to expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any knowledge
of any infringement by the Company or its Subsidiaries of trademark, trade
name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secret or
other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as
set forth on the SEC Documents, there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its Subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service
names, service marks, service ▇▇▇▇ registrations, trade secret or other
infringement; and the Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing. The Company
and its Subsidiaries have taken commercially reasonable security measures to
protect the secrecy, confidentiality and value of all of their intellectual
properties.
(m) Environmental Laws. The Company and its Subsidiaries (i) are, to
the knowledge of management of the Company, in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"); (ii) have, to the knowledge of management of the Company, received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses; and (iii) are in
compliance, to the knowledge of the Company, with all terms and conditions
of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
(n) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the SEC Documents
or such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its Subsidiaries. Any real property and facilities held
under lease by the Company or any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.
(o) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company reasonably believes
to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.
(p) Regulatory Permits. The Company and its Subsidiaries have in
full force and effect all certificates, approvals, authorizations and
permits from the appropriate federal, state, local or foreign regulatory
authorities and comparable foreign regulatory agencies, necessary to own,
lease or operate their respective properties and assets and conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such certificate, approval, authorization or permit,
except for such certificates, approvals, authorizations or permits which if
not obtained, or such revocations or modifications which, would not have a
Material Adverse Effect.
(q) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(r) No Materially Adverse Contracts, Etc. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have
a Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is a party to any contract or agreement that in the judgment of the
Company's officers has or is expected to have a Material Adverse Effect.
(s) Tax Status. The Company and each of its Subsidiaries has made or
filed all United States federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries
has set aside on its books provisions reasonably adequate for the payment of
all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
(t) Certain Transactions. Except as set forth in the SEC Documents
filed at least ten (10) days prior to the date hereof and except for arm's
length transactions pursuant to which the Company makes payments in the
ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(u) Dilutive Effect. The Company understands and acknowledges that
the number of shares of Common Stock issuable upon purchases pursuant to
this Agreement will increase in certain circumstances including, but not
necessarily limited to, the circumstance wherein the trading price of the
Common Stock declines during the period between the Effective Date and the
end of the Open Period. The Company's executive officers and directors have
studied and fully understand the nature of the transactions contemplated by
this Agreement and recognize that they have a potential dilutive effect.
The Board of Directors of the Company has concluded, in its good faith
business judgment, that such issuance is in the best interests of the
Company. The Company specifically acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue shares of Common Stock upon purchases pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other shareholders
of the Company.
(v) Right of First Refusal. The Company shall not, directly or
indirectly, without the prior written consent of Investor offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition) any of its
Common Stock or securities convertible into Common Stock at a price that is
less than the market price of the Common Stock at the time of issuance of
such security or investment (a "Subsequent Financing") for a period of one
(1) year after the Effective Date, except (i) the granting of options or
warrants to employees, officers, directors and consultants, and the issuance
of shares upon exercise of options granted, under any stock option plan
heretofore or hereafter duly adopted by the Company, or shares issued for
services rendered or to be rendered to the Company; (ii) shares issued upon
exercise of any currently outstanding warrants or options and upon
conversion of any currently outstanding convertible debenture or convertible
preferred stock, in each case disclosed pursuant to Section 4(c); (iii)
securities issued in connection with the capitalization or creation of a
joint venture with a strategic partner; (iv) shares issued to pay part or
all of the purchase price for the acquisition by the Company of another
entity (which, for purposes of this clause (iv), shall not include an
individual or group of individuals); and (v) shares issued in a bona fide
public offering by the Company of its securities, unless (A) the Company
delivers to Investor a written notice ("Subsequent Financing Notice") of its
intention to effect such Subsequent Financing, which Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised
thereunder, the person with whom such Subsequent Financing shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto; and (B) Investor shall not have notified the Company by
5:00 p.m. (New York time) on the fifth (5th) Trading Day after its receipt of
the Subsequent Financing Notice of its willingness to provide, subject to
completion of mutually acceptable documentation, financing to the Company on
substantially the terms set forth in the Subsequent Financing Notice. If
Investor shall fail to notify the Company of its intention to enter into
such negotiations within such time period, then the Company may effect the
Subsequent Financing substantially upon the terms set forth in the
Subsequent Financing Notice; provided that the Company shall provide
Investor with a second Subsequent Financing Notice, and Investor shall again
have the right of first refusal set forth above in this Section, if the
Subsequent Financing subject to the initial Subsequent Financing Notice
shall not have been consummated for any reason on the terms set forth in
such Subsequent Financing Notice within thirty Trading Days after the date
of the initial Subsequent Financing Notice. The rights granted to Investor
in this Section are not subject to any prior right of first refusal given to
any other person disclosed on Schedule 4(c).
(w) Lock-Up. The Company shall cause its officers, insiders,
directors, affiliates or other related parties to refrain from selling
Common Stock during each Pricing Period.
(x) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Common Stock
offered hereby.
(y) No brokers, finders or financial advisory fees or commissions
will be payable by the Company with respect to the transaction contemplated
by this Agreement excepted as outlined in Section 11 (m).
SECTION 5. COVENANTS OF THE COMPANY
(a) Best Efforts. The Company shall use commercially reasonable
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Section 7 of this Agreement.
(b) Blue Sky. The Company shall, at its sole cost and expense, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for, or obtain
exemption for the Securities for, sale to the Investor at each of the
Closings pursuant to this Agreement under applicable securities or "Blue
Sky" laws of such states of the United States, as reasonably specified by
Investor, and shall provide evidence of any such action so taken to the
Investor on or prior to the Closing Date.
(c) Reporting Status. Until the earlier to occur of (i) the first
date which is after the date this Agreement is terminated pursuant to
Section 9 and on which the Holders (as that term is defined in the
Registration Rights Agreement) may sell all of the Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto); and (ii) the date on which (A) the Holders shall have
sold all the Securities; and (B) this Agreement has been terminated pursuant
to Section 9 ("Registration Period"), the Company shall file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as a reporting company under the 1934 Act.
(d) Use of Proceeds. The Company will use the proceeds from the sale
of the Shares (excluding amounts paid by the Company for fees as set forth
in the Transaction Documents) for general corporate and working capital
purposes
(e) Financial Information. The Company agrees to make available to
the Investor via ▇▇▇▇▇ or other electronic means the following to the
Investor during the Registration Period: (i) within five Trading Days after
the filing thereof with the SEC, a copy of its Annual Reports on Form 10-
KSB, its Quarterly Reports on Form 10-QSB, any Current Reports on Form 8-K
and any Registration Statements or amendments filed pursuant to the 1933
Act; (ii) on the same day as the release thereof, facsimile copies of all
press releases issued by the Company or any of its Subsidiaries; (iii)
copies of any notices and other information made available or given to the
shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders; and (iv) within two (2)
calendar days of filing or delivery thereof, copies of all documents filed
with, and all correspondence sent to, the Principal Market, any securities
exchange or market, or the National Association of Securities Dealers, Inc.,
unless such information is material nonpublic information.
(f) Reservation of Shares. Subject to the following sentence, the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, a sufficient number of shares of
Common Stock to provide for the issuance of the Securities hereunder. In
the event that the Company determines that it does not have a sufficient
number of authorized shares of Common Stock to reserve and keep available
for issuance as described in this Section 5(f), the Company shall use its
best efforts to increase the number of authorized shares of Common Stock by
seeking shareholder approval for the authorization of such additional shares.
(g) Listing. The Company shall promptly secure and maintain the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon the Principal Market and each other national
securities exchange and automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, such listing of all Registrable Securities
from time to time issuable under the terms of the Transaction Documents.
The Company shall maintain the Common Stock's authorization for quotation on
the Principal Market. Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal Market
(excluding suspensions of not more than one trading day resulting from
business announcements by the Company). The Company shall promptly provide
to the Investor copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange. The Company shall pay
all fees and expenses in connection with satisfying its obligations under
this Section 5(g).
(h) Transactions with Affiliates. The Company shall not, and shall
cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or
supplement, any agreement, transaction, commitment or arrangement with any
of its or any Subsidiary's officers, directors, persons who were officers or
directors at any time during the previous two years, shareholders who
beneficially own five percent (5%) or more of the Common Stock, or
affiliates or with any individual related by blood, marriage or adoption to
any such individual or with any entity in which any such entity or
individual owns a five percent (5%) or more beneficial interest (each a
"Related Party"), except for (i) customary employment arrangements and
benefit programs on reasonable terms, (ii) any agreement, transaction,
commitment or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, or (iii) any agreement, transaction, commitment or
arrangement which is approved by a majority of the disinterested directors
of the Company. For purposes hereof, any director who is also an officer of
the Company or any Subsidiary of the Company shall not be a disinterested
director with respect to any such agreement, transaction, commitment or
arrangement. "Affiliate" for purposes hereof means, with respect to any
person or entity, another person or entity that, directly or indirectly,
(i) has a five percent (5%) or more equity interest in that person or
entity, (ii) has five percent (5%) or more common ownership with that
person or entity, (iii) controls that person or entity, or (iv) is
under common control with that person or entity. "Control" or
"Controls" for purposes hereof means that a person or entity has the
power, direct or indirect, to conduct or govern the policies of
another person or entity.
(i) Corporate Existence. The Company shall use its best efforts to
preserve and continue the corporate existence of the Company.
(j) Notice of Certain Events Affecting Registration; Suspension of
Right to Make a Put. The Company shall promptly notify Investor upon the
occurrence of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of the Securities:
(i) receipt of any request for additional information by the SEC or any
other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to
the Registration Statement or related prospectus; (ii) the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of any Registration Statement or the initiation
of any proceedings for that purpose; (iii) receipt of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the
happening of any event that makes any statement made in such Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of a Registration Statement, it
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the related
prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate, and the Company shall promptly make available to
Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to Investor any Put Notice during the continuation
of any of the foregoing events.
(k) Reimbursement. If (i) Investor, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if Investor is
impleaded in any such action, proceeding or investigation by any person
(other than as a result of a breach of the Investor's representations and
warranties set forth in this Agreement); or (ii) Investor, other than by
reason of its gross negligence or willful misconduct, becomes involved in
any capacity in any action, proceeding or investigation brought by the SEC
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Documents
(other than as a result of a breach of the Investor's representations and
warranties set forth in this Agreement), or if Investor is impleaded in any
such action, proceeding or investigation by any person, then in any such
case, the Company shall reimburse Investor for its reasonable legal and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. In
addition, other than with respect to any matter in which Investor is a named
party, the Company will pay to Investor the charges, as reasonably
determined by Investor, for the time of any officers or employees of
Investor devoted to appearing and preparing to appear as witnesses,
assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this section shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms and conditions to any affiliates of Investor that are actually named
in such action, proceeding or investigation, and partners, directors,
agents, employees, attorneys, accountants, auditors and controlling persons
(if any), as the case may be, of Investor and any such affiliate, and shall
be binding upon and inure to the benefit of any successors of the Company,
Investor and any such affiliate and any such person.
SECTION 6. OVER.
If the number of Shares represented by any Put Notices become
restricted or are no longer freely trading for any reason, and after the
applicable Closing Date, the Investor purchases, in an open market
transaction or otherwise, the Company's Common Stock ("Covering Shares") in
order to make delivery in satisfaction of a sale of Common Stock by the
Investor ("Sold Shares"), which delivery such Investor anticipated to make
using the Shares represented by the Put Notice (a "Buy-In"), the Company
shall pay to the Investor the Buy-In Adjustment Amount (as defined below).
The "Buy-In Adjustment Amount" is the amount equal to the excess, if any, of
(a) the Investor's total purchase price (including brokerage commissions, if
any) for the Covering Shares over (b) the net proceeds (after brokerage
commissions, if any) received by the Investor from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Investor
in immediately available funds immediately upon demand by the Investor. By
way of illustration and not in limitation of the foregoing, if the Investor
purchases Common Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to the Common Stock
it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which the
Company will be required to pay to the Investor will be $1,000.
SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the
Securities to the Investor is further subject to the satisfaction, at or
before each Closing Date, of each of the following conditions set forth
below. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion.
(a) The Investor shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(b) The Investor shall have delivered to the Company the Purchase
Price for the Securities being purchased by the Investor at the Closing
(after receipt of confirmation of delivery of such Securities) by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
(c) The representations and warranties of the Investor shall be true
and correct as of the date when made and as of the applicable Closing Date
as though made at that time (except for representations and warranties that
speak as of a specific date), and the Investor shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Investor at or prior to such Closing Date.
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(e) No Valuation Event shall have occurred since the applicable Put
Notice Date.
SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is subject
to the satisfaction, on or before each Closing Date, of each of the
following conditions set forth below.
(a) The Company shall have executed each of the Transaction Documents
and delivered the same to the Investor.
(b) The Common Stock shall be authorized for quotation on the
Principal Market and trading in the Common Stock shall not have been
suspended by the Principal Market or the SEC, at any time beginning on the
date hereof and through and including the respective Closing Date (excluding
suspensions of not more than one Trading Day resulting from business
announcements by the Company, provided that such suspensions occur prior to
the Company's delivery of the Put Notice related to such Closing).
(c) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the applicable Closing Date
as though made at that time (except for (i) representations and warranties
that speak as of a specific date and (ii) with respect to the
representations made in Sections 4(g), (h) and (j) and the third sentence of
Section 4(k) hereof, events which occur on or after the date of this
Agreement and are disclosed in SEC filings made by the Company at least ten
Trading Days prior to the applicable Put Notice Date) and the Company shall
have performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company on or before such Closing Date. The Investor
may request an update as of such Closing Date regarding the representation
contained in Section 4(c) above.
(d) The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer
of, the Securities (in such denominations as such Investor shall request)
being purchased by the Investor at such Closing.
(e) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 4(b)(ii) above ("Resolutions") and such
Resolutions shall not have been amended or rescinded prior to such Closing
Date.
(f) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.
(g) The Registration Statement shall be effective on each Closing
Date and no stop order suspending the effectiveness of the Registration
statement shall be in effect or shall be pending or threatened.
Furthermore, on each Closing Date (i) neither the Company nor Investor shall
have received notice that the SEC has issued or intends to issue a stop
order with respect to such Registration Statement or that the SEC otherwise
has suspended or withdrawn the effectiveness of such Registration Statement,
either temporarily or permanently, or intends or has threatened to do so
(unless the SEC's concerns have been addressed and Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such
action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of such Registration Statement or related prospectus shall
exist.
(h) At the time of each Closing, the Registration Statement
(including information or documents incorporated by reference therein) and
any amendments or supplements thereto shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or which
would require public disclosure or an update supplement to the prospectus.
(i) There shall have been no filing of a petition in bankruptcy,
either voluntarily or involuntarily, with respect to the Company and there
shall not have been commenced any proceedings under any bankruptcy or
insolvency laws, or any laws relating to the relief of debtors, readjustment
of indebtedness or reorganization of debtors, and there shall have been no
calling of a meeting of creditors of the Company or appointment of a
committee of creditors or liquidating agents or offering of a composition or
extension to creditors by, for, with or without the consent or acquiescence
of the Company.
(j) If applicable, the shareholders of the Company shall have
approved the issuance of any Shares in excess of the Maximum Common Stock
Issuance in accordance with Section 2(j).
(k) The conditions to such Closing set forth in Section 2(f) shall
have been satisfied on or before such Closing Date.
(l) The Company shall have certified to the Investor the number of
shares of Common Stock outstanding as of a date within ten Trading Days
prior to such Closing Date.
SECTION 9. TERMINATION.
This Agreement shall terminate upon any of the following events:
(a) when the Investor has purchased an aggregate of five million
dollars ($5,000,000) in the Common Stock of the Company pursuant to this
Agreement; provided that the Company's representations, warranties and
covenants contained in this Agreement insofar as applicable to the
transactions consummated hereunder prior to such termination, shall survive
the termination of this Agreement for the period of any applicable statute
of limitations;
(b) on the date which is thirty-six (36) months after the Effective Date;
(c) if the Company shall file or consent by answer or otherwise to
the entry of an order for relief or approving a petition for relief,
reorganization or arrangement or any other petition in bankruptcy for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or shall make an assignment for the benefit of its creditors,
or shall consent to the appointment of a custodian, receiver, trustee or
other officer with similar powers of itself or of any substantial part of
its property, or shall be adjudicated a bankrupt or insolvent, or shall take
corporate action for the purpose of any of the foregoing, or if a court or
governmental authority of competent jurisdiction shall enter an order
appointing a custodian, receiver, trustee or other officer with similar
powers with respect to the Company or any substantial part of its property
or an order for relief or approving a petition for relief or reorganization
or any other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law, or an order for the dissolution,
winding up or liquidation of the Company, or if any such petition shall be
filed against the Company;
(d) if the Company shall issue or sell any equity securities or
securities convertible into, or exchangeable for, equity securities or enter
into any other equity financing facility during the Open Period, other than
in compliance with Section 4(v);
(e) the trading of the Common Stock is suspended by the SEC, the
Principal Market or the NASD for a period of five consecutive Trading Days
during the Open Period;
(f) the Company shall not have filed with the SEC the initial
Registration Statement with respect to the resale of the Registrable
Securities in accordance with the terms of the initial Registration Rights
Agreement within 60 calendar days of the date hereof or the Registration
Statement has not been declared effective within 180 calendar days of the
date hereof; or
(g) the Common Stock ceases to be registered under the 1934 Act or
listed or traded on the Principal Market. Upon the occurrence of one of the
above-described events, the Company shall send written notice of such event
to the Investor.
SECTION 10. INDEMNIFICATION.
In consideration of the parties mutual obligations set forth in the
Transaction Documents, each of the parties (in such capacity, an
"Indemnitor") shall defend, protect, indemnify and hold harmless the other
and all of the other party's shareholders, officers, directors, employees,
counsel, and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any
such Indemnitee is a party to the action for which indemnification hereunder
is sought), and including reasonable attorneys' fees and disbursements
("Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Indemnitor or any other certificate,
instrument or document contemplated hereby or thereby; (b) any breach of any
covenant, agreement or obligation of the Indemnitor contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby; or (c) any cause of action, suit or claim
brought or made against such Indemnitee by a third party and arising out of
or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, except insofar as any such
misrepresentation, breach or any untrue statement, alleged untrue statement,
omission or alleged omission is made in reliance upon and in conformity with
written information furnished to Indemnitor which is specifically intended
for use in the preparation of any such Registration Statement, preliminary
prospectus, prospectus or amendments to the prospectus. To the extent that
the foregoing undertaking by the Indemnitor may be unenforceable for any
reason, the Indemnitor shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. The indemnity provisions contained herein shall be in
addition to any cause of action or similar rights Indemnitor may have, and
any liabilities the Indemnitor or the Indemnitees may be subject to.
SECTION 11. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Nevada without
regard to the principles of conflict of laws. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of Las Vegas, County of ▇▇▇▇▇, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(b) Legal Fees; Miscellaneous Fees. Except as otherwise set forth in
the Transaction Documents, each party shall pay the fees and expenses of its
advisers, counsel, the accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. Any attorneys' fees and
expenses incurred by either the Company or by the Investor in connection with
the preparation, negotiation, execution and delivery of any amendments to this
Agreement or relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions contemplated hereunder,
shall be paid on demand by the party which breached the Agreement and/or
defaulted, as the case may be. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of any Securities.
(c) Transaction Fee. The Company shall upon the Closing issue to the
Investor Two Hundred Twenty-Five Thousand Dollars ($225,000) worth of the
Common Stock as fees. On the first year anniversary from the Closing, the
Company shall issue to the Investor an additional Two Hundred Twenty-Five
Thousand Dollars ($225,000) worth of Common Stock; this second installment
shall be paid only if/when the Company: (i) draws more than Seven Million
Five Hundred Thousand Dollars ($7,500,000) in the first year of the
agreement; or (ii) the Company plans to draw money in the second year from
the Closing. All these shares shall also have registration rights under the
Registration Righs Agreement. The value of the shares to be issued is to be
established as the closing price on the date of issuance. These shares are
for the purpose of offsetting the costs of the Investor in completing this
transaction.
(d) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
(e) Headings; Singular/Plural. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include
the feminine.
(f) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of any
provision of this Agreement in any other jurisdiction.
(g) Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
(including the other Transaction Documents) contain the entire understanding
of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
the Investor makes any representation, warranty, covenant or undertaking
with respect to such matters. No provision of this Agreement may be amended
other than by an instrument in writing signed by the Company and the
Investor, and no provision hereof may be waived other than by an instrument
in writing signed by the party against whom enforcement is sought.
(h) Notices. Any notices or other communications required or
permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (I) upon receipt, when delivered
personally; (II) upon receipt, when sent by facsimile (provided confirmation
of transmission is mechanically or electronically generated and kept on file
by the sending party); or (III) one day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to
the party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
GameZnFlix, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, President
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
A Professional Law Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor:
Southern Securities, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Each party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number.
(i) No Assignment. This Agreement may not be assigned.
(j) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(k) Survival. The representations and warranties of the Company and
the Investor contained in Sections 2 and 3, the agreements and covenants set
forth in Sections 4 and 5, and the indemnification provisions set forth in
Section 10, shall survive each of the Closings and the termination of this
Agreement.
(l) Publicity. The Company and Investor shall consult with each other
in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of Investor without the prior written consent of
such Investor, except to the extent required by law. Investor acknowledges
that this Agreement and all or part of the Transaction Documents may be
deemed to be "material contracts" as that term is defined by Item 601(b)(10)
of Regulation S-B, and that the Company may therefore be required to file
such documents as exhibits to reports or registration statements filed under
the 1933 Act or the 1934 Act. Investor further agrees that the status of
such documents and materials as material contracts shall be determined
solely by the Company, in consultation with its counsel.
(m) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(n) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
(o) Remedies. The Investor and each holder of the Shares shall have
all rights and remedies set forth in this Agreement and the Registration
Rights Agreement and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any person having any rights
under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any default or breach of any provision of this
Agreement, including the recovery of reasonable attorneys fees and costs,
and to exercise all other rights granted by law.
(p) Payment Set Aside. To the extent that the Company makes a payment
or payments to the Investor hereunder or the Registration Rights Agreement
or the Investor enforces or exercises its rights hereunder or thereunder,
and such payment or payments or the proceeds of such enforcement or exercise
or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to
be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any bankruptcy law, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(q) Pricing of Common Stock. For purposes of this Agreement, the bid
price of the Common Stock in this Agreement shall be as reported on
▇▇▇▇▇▇▇▇▇.▇▇▇.
FORM OF INVESTOR QUESTIONNAIRE
The information contained in this Questionnaire is being furnished in
order to determine whether the undersigned's subscription to purchase the
Shares described in this Agreement may be accepted.
ALL INFORMATION CONTAINED IN THIS QUESTIONNAIRE WILL BE TREATED
CONFIDENTIALLY. The undersigned understands, however, that the Company may
present this Questionnaire to such parties as it deems appropriate if called
upon to establish that the proposed offer and sale of the Securities is
exempt from registration under the 1933 Act, as amended. Further, the
undersigned understands that the offering may be required to be reported to
the Securities and Exchange Commission, NASDAQ and to various state
securities and "blue sky" regulators.
IN ADDITION TO SIGNING THE SIGNATURE PAGE, IF REQUESTED BY THE
COMPANY, THE UNDERSIGNED MUST COMPLETE FORM W-9.
I. PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.
1. The undersigned: (a) has total assets in excess of
$5,000,000; (b) was not formed for the specific purpose of
acquiring the securities and (c) has its principal place of
business in ___________.
2. The undersigned is a natural person whose individual net
worth* or joint net worth with his or her spouse exceeds
$1,000,000.
3. The undersigned is a natural person who had an individual
income* in excess of $200,000 in each of the two most recent
years and who reasonably expects an individual income in excess
of $200,000 in the current year. Such income is solely that of
the undersigned and excludes the income of the undersigned's
spouse.
4. The undersigned is a natural person who, together with his
or her spouse, has had a joint income* in excess of $300,000 in
each of the two most recent years and who reasonably expects a
joint income in excess of $300,000 in the current year.
*For purposes of this Questionnaire, the term "net worth" means the
excess of total assets over total liabilities. In determining "income", an
investor should add to his or her adjusted gross income any amounts
attributable to tax-exempt income received, losses claimed as a limited
partner in any limited partnership, deductions claimed for depletion,
contributions to ▇▇▇ or ▇▇▇▇▇ retirement plan, alimony payments and any
amount by which income from long-term capital gains has been reduced in
arriving at adjusted gross income.
5. The undersigned is:
(a) a bank as defined in Section 3(a)(2) of the 1933 Act;
or
(b) a savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the 1933 Act whether
acting in its individual or fiduciary capacity; or
(c) a broker or dealer registered pursuant to Section 15
of the 1934 Act; or
(d) an insurance company as defined in Section 2(13) of
the 1933 Act; or
(e) An investment company registered under the Investment
Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of the Investment Company Act
of 1940; or
(f) a small business investment company licensed by the
U.S. Small Business Administration under Section 301 (c) or
(d) of the Small Business Investment Act of 1958; or
6. The undersigned is an entity in which all of the
equity owners are "accredited investors", as that term is
defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
II. INVESTOR INFORMATION.
(a) IF THE UNDERSIGNED IS AN INDIVIDUAL:
Name _________________________________________
Street Address __________________________________
City, State, Zip Code _____________________________
Phone ____________________ Fax _________________
Social Security Number ___________________________
Send Correspondence to:
_______________________________________________
_______________________________________________
_______________________________________________
(b) IF THE UNDERSIGNED IS NOT AN INDIVIDUAL:
Name of Entity __________________________________
Person's Name ___________________ Title___________
State of Organization ______________________________
Principal Business Address _________________________
City, State, Zip Code ______________________________
Taxpayer Identification Number _____________________
Phone ____________________ Fax _________________
Send Correspondence to:
_______________________________________________
______________________________________________
_______________________________________________
INVESTOR SIGNATURE PAGE
Your signature on this Signature Page evidences your agreement to be
bound by the Questionnaire, this Agreement and Registration Rights
Agreement.
1. The undersigned hereby represents that (a) the information
contained in the Questionnaire is complete and accurate and (b) the
undersigned will notify GameZnFlix, Inc. immediately if any material change
in any of the information occurs prior to the acceptance of the
undersigned's subscription and will promptly send GameZnFlix, Inc. written
confirmation of such change.
2. The undersigned signatory hereby certifies that he/she has read
and understands this Agreement and Questionnaire, and the representations
made by the undersigned in this Investment Agreement and Questionnaire are
true and accurate.
Date: June 8, 2004 SOUTHERN SECURITIES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, President
COMPANY ACCEPTANCE
This Investment Agreement accepted and agreed
to this 8th day of June, 2004.
GAMEZNFLIX, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, President
LIST OF EXHIBITS
EXHIBIT A Registration Rights Agreement
EXHIBIT B Opinion of Company's Counsel
EXHIBIT C Board Resolution
EXHIBIT D Put Notice
EXHIBIT E Put Settlement Sheet
LIST OF SCHEDULES
Schedule 4(a) Subsidiaries
Schedule 4(c) Capitalization
Schedule 4(e) Conflicts
Schedule 4(g) Material Changes
Schedule 4(h) Litigation
Schedule 4(l) Intellectual Property
Schedule 4(n) Liens
Schedule 4(t) Certain Transactions
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement ("Agreement"), dated as of June 8, 2004,
by and between GameZnFlix, Inc., a Nevada corporation ("Company"), and
Southern Securities, Inc., a Delaware corporation ("Investor").
WHEREAS, in connection with the Investment Agreement by and between
the Company and the Investor of even date herewith (the "Investment
Agreement"), the Company has agreed to issue and sell to the Investor an
indeterminate number of shares of the Company's Common Stock, no par value
per share (the "Common Stock"), to be purchased pursuant to the terms and
subject to the conditions set forth in the Investment Agreement; and
WHEREAS, to induce the Investor to execute and deliver the Investment
Agreement, the Company has agreed to provide certain registration rights
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"),
and applicable state securities laws, with respect to the shares of Common
Stock issuable pursuant to the Investment Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained hereinafter and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Company and the Investor hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"Execution Date" means the date first written above.
"Holder" means Southern Securities, Inc., a Delaware corporation.
"Person" means a corporation, a limited liability company, an association, a
partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
"Potential Material Event" means any of the following: (a) the possession by
the Company of material information not ripe for disclosure in a
Registration Statement, which shall be evidenced by determinations in good
faith by the Board of Directors of the Company that disclosure of such
information in the Registration Statement would be detrimental to the
business and affairs of the Company, or (b) any material engagement or
activity by the Company which would, in the good faith determination of the
Board of Directors of the Company, be adversely affected by disclosure in a
Registration Statement at such time, which determination shall be
accompanied by a good faith determination by the Board of Directors of the
Company that the Registration Statement would be materially misleading
absent the inclusion of such information.
"Principal Market" shall mean The American Stock Exchange, National
Association of Securities Dealer's, Inc. Over-the-Counter Bulletin Board,
the Nasdaq National Market or The Nasdaq SmallCap Market whichever is the
principal market on which the Common Stock is listed.
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or
any successor rule providing for offering securities on a continuous basis
("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission ("SEC").
"Registrable Securities" means (a) the shares of Common Stock issued or
issuable pursuant to the Investment Agreement, and (b) any shares of capital
stock issued or issuable with respect to such shares of Common Stock, if
any, as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, which have not been (X) included in
a Registration Statement that has been declared effective by the SEC or (Y)
sold under circumstances meeting all of the applicable conditions of Rule
144 (or any similar provision then in force) under the 1933 Act.
"Registration Statement" means a registration statement of the Company filed
under the 1933 Act covering the Registrable Securities.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning ascribed to them as in the Investment
Agreement.
SECTION 2. REGISTRATION.
(a) On or before the execution of this Agreement, the Company shall
have provided a draft of the Registration Statement covering the Registrable
Securities to the Investor. The Company shall, as soon as practicable, but
not later than fifteen calendar days following the Execution Date, file with
the SEC a Registration Statement or Registration Statements (as is
necessary) on Form SB-2 (or, if such form is unavailable for such a
registration, on such other form as is available for such a registration),
covering the resale of all of the Registrable Securities, which Registration
Statement(s) shall state that, in accordance with Rule 416 promulgated under
the 1933 Act, such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
stock splits, stock dividends or similar transactions. The Company shall
initially register for resale One Hundred Fifty Million (150,000,000) shares
of Common Stock which would be issuable on the date preceding the filing of
the Registration Statement based on the closing bid price of the Company's
Common Stock on such date and the amount reasonably calculated that
represents Common Stock issuable to other parties as set forth in the
Investment Agreement except to the extent that the SEC requires the share
amount to be reduced as a condition of effectiveness
(b) The Company shall use commercially reasonable efforts to have the
Registration Statement(s) declared effective by the SEC within ninety (90)
calendar days after the Execution Date.
(c) The Company agrees not to include any other securities in the
Registration Statement covering the Registrable Securities without
Investor's prior written consent which Investor may withhold in its sole
discretion. Furthermore, the Company agrees that it will not file any other
Registration Statement for other securities, until thirty calendar days
after the Registration Statement for the Registrable Securities is declared
effective by the SEC.
SECTION 3. RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file a
Registration Statement with the SEC pursuant to Section 2(a), the Company
will effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, with respect thereto,
the Company shall have the following obligations:
(a) The Company shall use commercially reasonable efforts to cause
such Registration Statement relating to the Registrable Securities to become
effective within ninety (90) days after the Execution Date and shall keep
such Registration Statement effective until the earlier to occur of (i) the
date as of which the Holders may sell all of the Registrable Securities
without restriction pursuant to Rule 144(k) promulgated under the 1933 Act
(or successor thereto); or (ii) the date on which (A) the Holders shall have
sold all the Registrable Securities; and (B) the Investor has no right to
acquire any additional shares of Common Stock under the Investment Agreement
("Registration Period"). The Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading. The Company shall use its best efforts to respond to all
SEC comments within seven (7) business days from receipt of such comments by
the Company. The Company shall use its best efforts to cause the
Registration Statement relating to the Registrable Securities to become
effective no later than three (3) business days after notice from the SEC
that the Registration Statement may be declared effective. The Holder
agrees to provide all information which it is required by law to provide to
the Company, including the intended method of disposition of the Registrable
Securities, and the Company's obligations set forth above shall be
conditioned on the receipt of such information.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective during the Registration Period, and, during such period, comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of disposition by the
Investor thereof as set forth in such Registration Statement. In the event
the number of shares of Common Stock covered by a Registration Statement
filed pursuant to this Agreement is at any time insufficient to cover all of
the Registrable Securities, the Company shall amend such Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
thirty (30) calendar days after the necessity therefor arises (based on the
then Purchase Price of the Common Stock and other relevant factors on which
the Company reasonably elects to rely), assuming the Company has sufficient
authorized shares at that time, and if it does not, within thirty (30)
calendar days after such shares are authorized. The Company shall use
commercially reasonable efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following
the filing thereof.
(c) The Company shall make available to the Holders whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the
SEC at least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus included
in such Registration Statement (including each preliminary prospectus) and,
with regards to such Registration Statement(s), any correspondence by or on
behalf of the Company to the SEC or the staff of the SEC and any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives; (ii) upon the effectiveness of any Registration Statement,
the Company shall make available copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto; and (iii)
such other documents, including copies of any preliminary or final
prospectus, as the Holders may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities.
(d) The Company shall use commercially reasonable efforts to (i)
register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of such states in
the United States as any Holder reasonably requests; (ii) prepare and file
in those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may
be necessary to maintain the effectiveness thereof during the Registration
Period; (iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (X) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), or (Y) subject itself to general taxation in any such
jurisdiction. The Company shall promptly notify each Holder who holds
Registrable Securities of the receipt by the Company of any notification
with respect to the suspension of the registration or qualification of any
of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual
notice of the initiation or threatening of any proceeding for such purpose.
(e) As promptly as practicable after becoming aware of such event,
the Company shall notify each Holder in writing of the happening of any
event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omission to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading ("Registration Default") and use
all diligent efforts to promptly prepare a supplement or amendment to such
Registration Statement and take any other necessary steps to cure the
Registration Default, (which, if such Registration Statement is on Form S-3,
may consist of a document to be filed by the Company with the SEC pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and
to be incorporated by reference in the prospectus) to correct such untrue
statement or omission, and make available copies of such supplement or
amendment to each Holder. The Company shall also promptly notify each
Holder (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any post-
effective amendment has become effective (the Company will prepare
notification of such effectiveness which shall be delivered to the Holder on
the same day of such effectiveness and by overnight mail), additionally, the
Company will promptly provide to the Holder a copy of the effectiveness
order prepared by the SEC once it is received by the Company; (ii) of any
request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information; (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate; (iv) in the event the Registration Statement
is no longer effective; or (v) if Registration Statement is stale as a
result of the Company's failure to timely file its financials or otherwise.
The Company acknowledges that its failure to cure the Registration Default
within ten (10) business days will cause the Investor to suffer damages in
an amount that will be difficult to ascertain. Accordingly, the parties
agree that it is appropriate to include a provision for liquidated damages.
The parties acknowledge and agree that the liquidated damages provision set
forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. It is the
intention of the parties that interest payable under any of the terms of
this Agreement shall not exceed the maximum amount permitted under any
applicable law. If a law, which applies to this Agreement which sets the
maximum interest amount, is finally interpreted so that the interest in
connection with this Agreement exceeds the permitted limits, then: (1) any
such interest shall be reduced by the amount necessary to reduce the
interest to the permitted limit; and (2) any sums already collected (if any)
from the Company which exceed the permitted limits will be refunded to the
Company. The Investor may choose to make this refund by reducing the amount
that the Company owes under this Agreement or by making a direct payment to
the Company. If a refund reduces the amount that the Company owes the
Investor, the reduction will be treated as a partial payment. In case any
provision of this Agreement is held by a court of competent jurisdiction to
be excessive in scope or otherwise invalid or unenforceable, such provision
shall be adjusted rather than voided, if possible, so that it is enforceable
to the maximum extent possible, and the validity and enforceability of the
remaining provisions of this Agreement will not in any way be affected or
impaired thereby.
(f) The Company shall use commercially reasonable efforts to prevent
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension
at the earliest possible moment and to notify the Holder who holds
Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or
threat of any proceeding for such purpose.
(g) The Company shall permit the Holder and one legal counsel,
designated by the Holder, to review and comment upon a Registration
Statement and all amendments and supplements thereto at least seven business
days prior to their filing with the SEC, and not file any document in a form
to which such counsel reasonably objects. The Company may request to
shorten the Holder's review period and the Holder will, if possible, attempt
to comply with the accelerated review period. The Company shall not submit
to the SEC a request for acceleration of the effectiveness of a Registration
Statement or file with the SEC a Registration Statement or any amendment or
supplement thereto without the prior approval of such counsel, which
approval shall not be unreasonably withheld.
(h) At the request of the Holder, the Company shall cause to be
furnished to such Holder, on the date of the effectiveness of a Registration
Statement, a legal opinion, in form and substance reasonably acceptable to
Holder's counsel, dated as of such date, of counsel representing the Company
for purposes of such Registration Statement.
(i) The Company shall make available for inspection by (i) the Holder
and
(ii) one legal counsel and one firm of accountants or other agents retained
by the Holders (collectively, "Inspectors"), at the Holders' expense, all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, "Records"), as shall be reasonably
deemed necessary by each Inspector, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall hold in
strict confidence and shall not make any disclosure (except to a Holder) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (A) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (B) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court
or government body of competent jurisdiction, or (C) the information in such
Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the
Inspector has knowledge. Each Holder agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential.
(j) The Company shall hold in confidence and not make any disclosure
of information concerning a Holder provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or
other final, non-appealable order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this
Agreement or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning a Holder is sought
in or by a court or governmental body of competent jurisdiction or through
other means, give prompt written notice to such Holder and allow such
Holder, at the Holder's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
(k) The Company shall use commercially reasonable efforts to maintain
designation and quotation of all the Registrable Securities covered by any
Registration Statement on the Principal Market. If, despite the Company's
best efforts, the Company is unsuccessful in satisfying the preceding
sentence, it shall use commercially reasonable efforts to cause all the
Registrable Securities covered by any Registration Statement to be listed on
each other national securities exchange and automated quotation system, if
any, on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is
then permitted under the rules of such exchange or system. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(k).
(l) The Company shall cooperate with the Investor to facilitate the
prompt preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Holders may reasonably
request.
(m) The Company shall provide a transfer agent for all the
Registrable Securities not later than the effective date of the first
Registration Statement filed pursuant hereto.
If requested by the Holder, the Company shall (i) as soon as reasonably
practical incorporate in a prospectus supplement or post-effective amendment
such information as such Holders reasonably determine should be included
therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the offering of
the Registrable Securities to be sold in such offering; (ii) make all
required filings of such prospectus supplement or post-effective amendment
as soon as reasonably possible after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement if
reasonably requested by such Holders.
(n) The Company shall use commercially reasonable efforts to cause
the Registrable Securities covered by the applicable Registration Statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of such
Registrable Securities.
(o) The Company shall otherwise use commercially reasonable efforts
to comply with all applicable rules and regulations of the SEC in connection
with any registration hereunder.
(p) Within one (1) business day after the Registration Statement
which includes Registrable Securities is declared effective by the SEC, the
Company shall deliver to the transfer agent for such Registrable Securities,
with copies to the Investor, confirmation that such Registration Statement
has been declared effective by the SEC.
(q) At or prior to the date of the first Put Notice (as that term is
defined in the Investment Agreement) and at such other times as the Holders
may reasonably request, the Company shall cause to be delivered, letters
from the Company's independent certified public accountants (i) addressed to
the Holders that such accountants are independent public accountants within
the meaning of the 1933 Act and the applicable published rules and
regulations thereunder, and (ii) in customary form and covering such
financial and accounting matters as are customarily covered by letters of
independent certified public accountants delivered to underwriters in
connection with public offerings.
(r) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Holders of Registrable Securities
pursuant to a Registration Statement.
SECTION 4. OBLIGATIONS OF THE HOLDER.
(a) At least five (5) calendar days prior to the first anticipated
filing date of a Registration Statement the Company shall notify the Holder
in writing of the information the Company requires from each such Holder if
such Holder elects to have any of such Holder's Registrable Securities
included in such Registration Statement. It shall be a condition precedent
to the obligations of the Company to complete the registration pursuant to
this Agreement with respect to the Registrable Securities of a particular
Holder that such Holder shall furnish in writing to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as
shall reasonably be required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. The Holder covenants
and agrees that, in connection with any sale of Registrable Securities by it
pursuant to a Registration Statement, it shall comply with the "Plan of
Distribution" section of the current prospectus relating to such
Registration Statement.
(b) The Holder, by such Holder's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Holder has notified the
Company in writing of such Holder's election to exclude all of such Holder's
Registrable Securities from such Registration Statement.
(c) The Holder agrees that, upon receipt of written notice from the
Company of the happening of any event of the kind described in Section 3(f)
or the first sentence of 3(e), such Holder will immediately discontinue
disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated
by Section 3(f) or the first sentence of 3(e).
SECTION 5. EXPENSES OF REGISTRATION.
All expenses, other than underwriting discounts and commissions and
other than as set forth in the Investment Agreement, incurred in connection
with registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printing and accounting fees, and fees and disbursements of counsel
for the Company shall be paid by the Company; provided, however, that
nothing in this Section 5 shall obligate the Company to pay the expenses or
fees of Inspectors or counsel to the Holders.
SECTION 6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Holder who holds such
Registrable Securities, the directors, officers, partners, employees,
counsel, agents, representatives of, and each Person, if any, who controls,
any Holder within the meaning of the 1933 Act or the Securities Exchange Act
of 1934, as amended ("1934 Act") (each, an "Indemnified Person"), against
any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or expenses,
joint or several (collectively, "Claims"), incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may
be a party thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which the
Investor has requested in writing that the Company register or qualify the
Shares ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
therein were made, not misleading; (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to
state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein
were made, not misleading; or (iii) any violation or alleged violation by
the Company of the 1933 Act, the 1934 Act, any other law, including, without
limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through
(iii) being, collectively, "Violations"). Subject to the restrictions set
forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Holders and each such controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out
of or based upon a Violation which is due to the inclusion in the
Registration Statement of the information furnished to the Company by any
Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement
thereto; (ii) shall not be available to the extent such Claim is based on
(A) a failure of the Holder to deliver or to cause to be delivered the
prospectus made available by the Company or (B) the Indemnified Person's use
of an incorrect prospectus despite being promptly advised in advance by the
Company in writing not to use such incorrect prospectus; (iii) any claims
based on the manner of sale of the Registrable Securities by the Holder or
of the Holder's failure to register as a dealer under applicable securities
laws; (iv) any omission of the Holder to notify the Company of any material
fact that should be stated in the Registration Statement or prospectus
relating to the Holder or the manner of sale; and (v) any amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and
shall survive the resale of the Registrable Securities by the Holders
pursuant to the Registration Statement.
(b) In connection with any Registration Statement in which a Holder
is participating, each such Holder agrees to severally and jointly
indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement, each Person, if
any, who controls the Company within the meaning of the 1933 Act or the 1934
Act and the Company's agents (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the
extent, that such Violation is due to the inclusion in the Registration
Statement of the written information furnished to the Company by such Holder
expressly for use in connection with such Registration Statement; and,
subject to Section 6(c), such Holder will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of such Holder, which consent shall not be unreasonably
withheld; provided, further, however, that the Holder shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as
does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the resale of the Registrable Securities by the Holders pursuant to
the Registration Statement. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section
6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the preliminary prospectus were corrected on a
timely basis in the prospectus, as then amended or supplemented. This
indemnification provision shall apply separately to each Investor and
liability hereunder shall not be joint and several.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a
Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the
fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, the representation by counsel of the Indemnified Person
or Indemnified Party and the indemnifying party would be inappropriate due
to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal
counsel for the Indemnified Persons or the Indemnified Parties, as
applicable, and such counsel shall be selected by the Holders, if the
Holders are entitled to indemnification hereunder, or the Company, if the
Company is entitled to indemnification hereunder, as applicable. The
Indemnified Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified
Party or Indemnified Person which relates to such action or Claim. The
indemnifying party shall keep the Indemnified Party or Indemnified Person
fully appraised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall
be liable for any settlement of any action, claim or proceeding effected
without its written consent, provided, however, that the indemnifying party
shall not unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified
Party or Indemnified Person of a release from all liability in respect to
such Claim. Following indemnification as provided for hereunder, the
indemnifying party shall be surrogated to all rights of the Indemnified
Party or Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve
such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.
(d) The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
SECTION 7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that: (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution
from any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (c) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.
SECTION 8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Holders the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Holder to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees
to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 5(c) of the Investment Agreement) and the filing of such reports and
other documents is required for the applicable provisions of Rule 144; and
(c) furnish to the Investor, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as
may be reasonably requested to permit the Investor to sell such securities
pursuant to Rule 144 without registration.
SECTION 9. NO ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall not be assignable.
SECTION 10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended only with the written
consent of the Company and Holders. No such amendment shall be effective to
the extent that it applies to less than all of the Holders of the
Registrable Securities.
SECTION 11. MISCELLANEOUS.
(a) Any notices or other communications required or permitted to be
given under the terms of this Agreement that must be in writing will be
deemed to have been delivered (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided a confirmation of
transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to
the party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
GameZnFlix, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, President
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
A Professional Law Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor:
Southern Securities, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Each party shall provide five business days prior notice to the other
party of any change in address, phone number or facsimile number.
(b) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(c) The laws of the State of Nevada shall govern all issues arising
from or related to this Agreement without regard to the principles of
conflict of laws. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Las
Vegas, County of ▇▇▇▇▇, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address
for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of any provision of this Agreement in any
other jurisdiction.
(d) This Agreement and the Transaction Documents constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
(e) This Agreement and the Transaction Documents supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
(f) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof. Whenever
required by the context of this Agreement, the singular shall include the
plural and masculine shall include the feminine. This Agreement shall not be
construed as if it had been prepared by one of the parties, but rather as if
all the parties had prepared the same.
(g) This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party
so delivering this Agreement.
(h) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the
other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT
Your signature on this Signature Page evidences your agreement to be
bound by the terms and conditions of the Registration Rights Agreement as of
the date first written above.
The undersigned signatory hereby certifies that he has read and
understands the Investment Agreement, and the representations made by the
undersigned in this Investment Agreement are true and accurate, and agrees
to be bound by its terms.
SOUTHERN SECURITIES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, President
GAMEZNFLIX, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, President
EXHIBIT D
Date:
RE: Put Notice Number __
Dear :
This is to inform you that as of today, GameZnFlix, Inc., a Nevada
corporation ("Company"), hereby elects to exercise its right pursuant to the
Investment Agreement to require Southern Securities, Inc. to purchase shares
of its common stock. The Company hereby certifies that:
The amount of this put is $__________.
The Pricing Period runs from ________ until _______.
The current number of shares issued and outstanding as of the Company are:
Regards,
▇▇▇▇ ▇▇▇▇▇▇▇, President
GameZnFlix, Inc.
EXHIBIT E
PUT SETTLEMENT SHEET
Date:
Pursuant to the Put given by GameZnFlix, Inc. to Southern Securities, Inc.
on ______________, 2004, we are now submitting the amount of common shares
for you to issue to this company.
Please have a certificate bearing no restrictive legend totaling __________
shares issued to Southern Securities, Inc. immediately and send via DWAC to
the following account:
If not DWAC eligible, please send Federal Express Priority Overnight to:
Once these shares are received by us, we will break have the funds wired to
the Company.
Regards,
DATE PRICE
Date of Day 1 Closing Bid of Day 1
Date of Day 2 Closing Bid of Day 2
Date of Day 3 Closing Bid of Day 3
Date of Day 4 Closing Bid of Day 4
Date of Day 5 Closing Bid of Day 5
LOWEST 1 (ONE) CLOSING BID IN PRICING PERIOD
PUT AMOUNT
AMOUNT WIRED TO COMPANY
PURCHASE PRICE (88% (EIGHTY-EIGHT PERCENT))
AMOUNT OF SHARES DUE
The undersigned has completed this Put as of this ___ day of _________,
2004.
GameZnFlix, Inc.
By: _____________________
