Securities Purchase Agreement - GameZnFlix Inc. and Golden Gate Investors Inc.
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement dated as of November 11, 2004
(this "Agreement") by and between GameZnFlix, Inc., a Nevada
corporation, with principal executive offices located at 1535
Blackjack Road, Franklin, Kentucky 42134 (the "Company"), and Golden
Gate Investors, Inc. ("Buyer").
WHEREAS, Buyer desires to purchase from the Company, and the
Company desires to issue and sell to Buyer, upon the terms and
subject to the conditions of this Agreement, the Convertible
Debenture of the Company in the aggregate principal amount of
$1,500,000 (the "Debenture"); and
WHEREAS, in conjunction with the Debenture, the Company has
issued a Warrant to Purchase Common Stock to the Buyer (the "Warrant
or Conversion Warrant"); and
WHEREAS, upon the terms and subject to the conditions set forth
in the Debenture and the Warrant, the Debenture and Warrant are
convertible and exercisable, respectively, into shares of the
Company's Common Stock (the "Common Stock");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
I. PURCHASE AND SALE OF DEBENTURE
A. Transaction. Buyer hereby agrees to purchase from the
Company, and the Company has offered and hereby agrees to issue and
sell to Buyer in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Debenture.
B. Purchase Price; Form of Payment. The purchase price for
the Debenture to be purchased by Buyer hereunder shall be $1,500,000
(the "Purchase Price"). Simultaneously with the execution of this
Agreement, Buyer shall pay $500,000 of the Purchase Price (the
"Initial Purchase Price") by wire transfer of immediately available
funds to the Company. Simultaneously with the execution of this
Agreement, the Company shall deliver the Debenture and the Conversion
Warrants (which shall have been duly authorized, issued and executed
I/N/O Buyer or, if the Company otherwise has been notified, I/N/O
Buyer's nominee). When the remaining principal balance of the
Debenture declines to less than $100,000, Buyer shall immediately
send via wire an additional $500,000 of the Purchase Price. When the
remaining principal balance of the Debenture once again declines to
less than $100,000, Buyer shall immediately send via wire the
remaining $500,000 of the Purchase Price.
II. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer is purchasing the Debenture and the Common Stock
issuable upon conversion or redemption of the Debenture (the
"Conversion Shares" and, collectively with the Debenture and the
Warrant Shares, the "Securities") for its own account, for investment
purposes only and not with a view towards or in connection with the
public sale or distribution thereof in violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act, (ii) experienced
in making investments of the kind contemplated by this Agreement,
(iii) capable, by reason of its business and financial experience, of
evaluating the relative merits and risks of an investment in the
Securities, and (iv) able to afford the loss of its investment in the
Securities.
C. Buyer understands that the Securities are being offered and
sold by the Company in reliance on an exemption from the registration
requirements of the Securities Act and equivalent state securities
and "blue sky" laws, and that the Company is relying upon the
accuracy of, and Buyer's compliance with, Buyer's representations,
warranties and covenants set forth in this Agreement to determine the
availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer understands that the Securities have not been
approved or disapproved by the Securities and Exchange Commission
(the "Commission") or any state or provincial securities commission.
E. This Agreement has been duly and validly authorized,
executed and delivered by Buyer and is a valid and binding agreement
of Buyer enforceable against it in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and except as rights to indemnity and
contribution may be limited by federal or state securities laws or
the public policy underlying such laws.
III. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company consists
of nine hundred million (900,000,000) shares of Common Stock of which
six hundred fifty million seven hundred one thousand six hundred five
(650,701,605) shares are issued and outstanding as of the date hereof
and are fully paid and nonassessable. The amount, exercise,
conversion or subscription price and expiration date for each
outstanding option and other security or agreement to purchase shares
of Common Stock is accurately set forth on Schedule III.A.1.
2. The Conversion Shares and the Warrant Shares have been
duly and validly authorized and reserved for issuance by the Company,
and, when issued by the Company upon conversion of the Debenture,
will be duly and validly issued, fully paid and nonassessable and
will not subject the holder thereof to personal liability by reason
of being such holder.
3. Except as disclosed on Schedule III.A.3., there are no
preemptive, subscription, "call," right of first refusal or other
similar rights to acquire any capital stock of the Company or other
voting securities of the Company that have been issued or granted to
any person and no other obligations of the Company to issue, grant,
extend or enter into any security, option, warrant, "call," right,
commitment, agreement, arrangement or undertaking with respect to any
of their respective capital stock.
B. Organization; Reporting Company Status.
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state or
jurisdiction in which it is incorporated and is duly qualified as a
foreign corporation in all jurisdictions in which the failure so to
qualify would reasonably be expected to have a material adverse
effect on the business, properties, prospects, condition (financial
or otherwise) or results of operations of the Company or on the
consummation of any of the transactions contemplated by this
Agreement (a "Material Adverse Effect").
2. The Company is subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Common Stock is traded on the OTC Bulletin Board service
of the National Association of Securities Dealers, Inc. ("OTCBB") and
the Company has not received any notice regarding, and to its
knowledge there is no threat of, the termination or discontinuance of
the eligibility of the Common Stock for such trading.
C. Authorization. The Company (i) has duly and validly
authorized and reserved for issuance shares of Common Stock, which is
a number sufficient for the conversion of the Debenture and the
exercise of the Conversion Warrant and (ii) at all times from and
after the date hereof shall have a sufficient number of shares of
Common Stock duly and validly authorized and reserved for issuance to
satisfy the conversion of the Debenture in full and the exercise of
the Conversion Warrant. The Company understands and acknowledges the
potentially dilutive effect on the Common Stock of the issuance of
the Conversion Shares and the Warrant Shares. The Company further
acknowledges that its obligation to issue Conversion Shares upon
conversion of the Debenture and the exercise of the Conversion
Warrant and the Initial Warrant in accordance with this Agreement is
absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of
any case under 11 U.S.C. Sec. 101 et seq. (the "Bankruptcy Code"). In
the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to
relief it may have under 11 U.S.C. Sec 362 in respect of the conversion
of the Debenture. The Company agrees, without cost or expense to
Buyer, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. Sec. 362.
D. Authority; Validity and Enforceability. The Company has
the requisite corporate power and authority to enter into the
Documents (as such term is hereinafter defined) and to perform all of
its obligations hereunder and thereunder (including the issuance,
sale and delivery to Buyer of the Securities). The execution,
delivery and performance by the Company of the Documents and the
consummation by the Company of the transactions contemplated hereby
and thereby (including, without limitation, the issuance of the
Debenture and the issuance and reservation for issuance of the
Conversion Shares and the Warrant Shares) have been duly and validly
authorized by all necessary corporate action on the part of the
Company. Each of the Documents has been duly and validly executed
and delivered by the Company and each Document constitutes a valid
and binding obligation of the Company enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and
except as rights to indemnity and contribution may be limited by
federal or state securities laws or the public policy underlying such
laws. The Securities have been duly and validly authorized for
issuance by the Company and, when executed and delivered by the
Company, will be valid and binding obligations of the Company
enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally. For purposes of this Agreement, the
term "Documents" means (i) this Agreement; (ii) the Registration
Rights Agreement dated as of even date herewith between the Company
and Buyer, (iii) the Debenture; and (iv) the Conversion Warrant.
E. Validity of Issuance of the Securities. The Debenture, the
Conversion Shares upon their issuance in accordance with the
Debenture, and the Warrant Shares will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any
preemptive rights, rights of first refusal, tag-along rights, drag-
along rights or other similar rights.
F. Non-contravention. The execution and delivery by the
Company of the Documents, the issuance of the Securities, and the
consummation by the Company of the other transactions contemplated
hereby and thereby do not, and compliance with the provisions of this
Agreement and other Documents will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material
benefit under, or result in the creation of any Lien (as such term is
hereinafter defined) upon any of the properties or assets of the
Company or any of its Subsidiaries under, or result in the
termination of, or require that any consent be obtained or any notice
be given with respect to (i) the Articles or Certificate of
Incorporation or By-Laws of the Company or the comparable charter or
organizational documents of any of its Subsidiaries, in each case as
amended to the date of this Agreement, (ii) any loan or credit
agreement, Debenture, bond, mortgage, indenture, lease, contract or
other agreement, instrument or permit applicable to the Company or
any of its Subsidiaries or their respective properties or assets or
(iii) any Law (as such term is hereinafter defined) applicable to, or
any judgment, decree or order of any court or government body having
jurisdiction over, the Company or any of its Subsidiaries or any of
their respective properties or assets.
G. Approvals. No authorization, approval or consent of any
court or public or governmental authority is required to be obtained
by the Company for the issuance and sale of the Securities to Buyer
as contemplated by this Agreement, except such authorizations,
approvals and consents as have been obtained by the Company prior to
the date hereof.
H. Commission Filings. The Company has properly filed with
the Commission all reports, proxy statements, forms and other
documents required to be filed with the Commission under the
Securities Act and the Exchange Act since becoming subject to such
Acts (the "Commission Filings"). As of their respective dates, (i)
the Commission Filings complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations of the Commission promulgated
thereunder applicable to such Commission Filings and (ii) none of the
Commission Filings contained at the time of its filing any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company
included in the Commission Filings, as of the dates of such
documents, were true and complete in all material respects and
complied with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, were
prepared in accordance with generally accepted accounting principles
in the United States ("GAAP") (except in the case of unaudited
statements permitted by Form 10-Q under the Exchange Act) applied on
a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented the consolidated
financial position of the Company and its Subsidiaries as of the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments that in
the aggregate are not material and to any other adjustment described
therein).
I. Full Disclosure. There is no fact known to the Company
(other than general economic or industry conditions known to the
public generally) that has not been fully disclosed in the Commission
Filings that (i) reasonably could be expected to have a Material
Adverse Effect or (ii) reasonably could be expected to materially and
adversely affect the ability of the Company to perform its
obligations pursuant to the Documents.
J. Absence of Events of Default. No "Event of Default" (as
defined in any agreement or instrument to which the Company is a
party) and no event which, with notice, lapse of time or both, would
constitute an Event of Default (as so defined), has occurred and is
continuing.
K. Securities Law Matters. Assuming the accuracy of the
representations and warranties of Buyer set forth in Article II, the
offer and sale by the Company of the Securities is exempt from (i)
the registration and prospectus delivery requirements of the
Securities Act and the rules and regulations of the Commission
thereunder and (ii) the registration and/or qualification provisions
of all applicable state and provincial securities and "blue sky"
laws. The Company shall not directly or indirectly take, and shall
not permit any of its directors, officers or Affiliates directly or
indirectly to take, any action (including, without limitation, any
offering or sale to any person or entity of any security similar to
the Debenture) which will make unavailable the exemption from
Securities Act registration being relied upon by the Company for the
offer and sale to Buyer of the Debenture, the Conversion Shares and
the Warrant Shares as contemplated by this Agreement. No form of
general solicitation or advertising has been used or authorized by
the Company or any of its officers, directors or Affiliates in
connection with the offer or sale of the Debenture (and the
Conversion Shares) as contemplated by this Agreement or any other
agreement to which the Company is a party.
L. Registration Rights. Except as set forth on
Schedule III.L, no Person has, and as of the Closing (as such term
is hereinafter defined), no Person shall have, any demand, "piggy-
back" or other rights to cause the Company to file any registration
statement under the Securities Act relating to any of its securities
or to participate in any such registration statement.
M. Interest. The timely payment of interest on the Debenture
is not prohibited by the Articles or Certificate of Incorporation or
By-Laws of the Company, in each case as amended to the date of this
Agreement, or any agreement, contract, document or other undertaking
to which the Company is a party.
N. No Misrepresentation. No representation or warranty of the
Company contained in this Agreement or any of the other Documents,
any schedule, annex or exhibit hereto or thereto or any agreement,
instrument or certificate furnished by the Company to Buyer pursuant
to this Agreement contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
O. Finder's Fee. There is no finder's fee, brokerage
commission or like payment in connection with the transactions
contemplated by this Agreement for which Buyer is liable or
responsible.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. Filings. The Company shall make all necessary Commission
Filings and "blue sky" filings required to be made by the Company in
connection with the sale of the Securities to Buyer as required by
all applicable Laws, and shall provide a copy thereof to Buyer
promptly after such filing.
B. Reporting Status. So long as Buyer beneficially owns any
of the Securities, the Company shall timely file all reports required
to be filed by it with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act.
C. Listing. Except to the extent the Company lists its Common
Stock on The New York Stock Exchange, The American Stock Exchange or
The Nasdaq Stock Market, the Company shall use its best efforts to
maintain its listing of the Common Stock on OTCBB. If the Common
Stock is delisted from OTCBB, the Company will use its best efforts
to list the Common Stock on the most liquid national securities
exchange or quotation system that the Common Stock is qualified to be
listed on.
D. Reserved Conversion Common Stock. The Company at all times
from and after the date hereof shall have such number of shares of
Common Stock duly and validly authorized and reserved for issuance as
shall be sufficient for the conversion in full of the Debenture and
the exercise of the Conversion Warrant.
E. Information. Each of the parties hereto acknowledges and
agrees that Buyer shall not be provided with, nor be given access to,
any material non-public information relating to the Company.
F. Accounting and Reserves. The Company shall maintain a
standard and uniform system of accounting and shall keep proper books
and records and accounts in which full, true, and correct entries
shall be made of its transactions, all in accordance with GAAP
applied on consistent basis through all periods, and shall set aside
on such books for each fiscal year all such reserves for
depreciation, obsolescence, amortization, bad debts and other
purposes in connection with its operations as are required by such
principles so applied.
G. Transactions with Affiliates. So long as the Debenture is
outstanding, neither the Company nor any of its Subsidiaries shall,
directly or indirectly, enter into any material transaction or
agreement with any stockholder, officer, director or Affiliate of the
Company or family member of any officer, director or Affiliate of the
Company, unless the transaction or agreement is (i) reviewed and
approved by a majority of Disinterested Directors (as such term is
hereinafter defined) and (ii) on terms no less favorable to the
Company or the applicable Subsidiary than those obtainable from a
nonaffiliated person. A "Disinterested Director" shall mean a
director of the Company who is not and has not been an officer or
employee of the Company and who is not a member of the family of,
controlled by or under common control with, any such officer or
employee.
H. Certain Restrictions. So long as the Debenture is
outstanding, no dividends shall be declared or paid or set apart for
payment nor shall any other distribution be declared or made upon any
capital stock of the Company, nor shall any capital stock of the
Company be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock
made for purposes of an employee incentive or benefit plan (including
a stock option plan) of the Company or pursuant to any of the
security agreements listed on Schedule III.A, for any consideration
by the Company, directly or indirectly, nor shall any moneys be paid
to or made available for a sinking fund for the redemption of any
Common Stock of any such stock.
I. Short Selling. So long as the Debenture is outstanding,
Buyer agrees and covenants on its behalf and on behalf of its
affiliates that neither Buyer nor its affiliates shall at any time
engage in any short sales with respect to the Company's Common Stock,
or sell put options or similar instruments with respect to the
Company's Common Stock.
V. ISSUANCE OF COMMON STOCK
A. The Company undertakes and agrees that no instruction other
than the instructions referred to in this Article V and customary
stop transfer instructions prior to the registration and sale of the
Common Stock pursuant to an effective Securities Act registration
statement shall be given to its transfer agent for the Conversion
Shares and the Warrant Shares and that the Conversion Shares and the
Warrant Shares shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement and applicable law.
Nothing contained in this Section V.A. shall affect in any way
Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of such Common Stock.
B. Buyer shall have the right to convert the Debenture and
exercise the Warrant by telecopying an executed and completed
Conversion Notice (as such term is defined in the Debenture) or
Warrant Notice of Exercise (as such term is defined in the Warrant)
to the Company. Each date on which a Conversion Notice or Warrant
Notice of Exercise is telecopied to and received by the Company in
accordance with the provisions hereof shall be deemed a Conversion
Date (as such term is defined in the Debenture). The Company shall
cause the transfer agent to transmit the certificates evidencing the
Common Stock issuable upon conversion of the Debenture (together with
a new debenture, if any, representing the principal amount of the
Debenture not being so converted) or exercise of the Warrant
(together with a new Warrant, if any, representing the amount of the
Warrant not being so exercised) to Buyer via express courier, or if a
Registration Statement covering the Common Stock has been declared
effective by the SEC by electronic transfer, within three (3)
business days after receipt by the Company of the Conversion Notice
or Warrant Notice of Exercise (the "Delivery Date").
C. Upon the conversion of the Debenture or exercise of the
Warrant or part thereof, the Company shall, at its own cost and
expense, take all necessary action (including the issuance of an
opinion of counsel) to assure that the Company's transfer agent shall
issue stock certificates in the name of Buyer (or its nominee) or
such other persons as designated by Buyer and in such denominations
to be specified at conversion representing the number of shares of
common stock issuable upon such conversion or exercise. The Company
warrants that the Conversion Shares and Warrant Shares will be
unlegended, free-trading, and freely transferable, and will not
contain a legend restricting the resale or transferability of the
Company Common Stock provided the Conversion Shares and Warrant
Shares are being sold pursuant to an effective registration statement
covering the Common Stock to be sold or is otherwise exempt from
registration when sold.
D. The Company understands that a delay in the delivery of the
Common Stock in the form required pursuant to this section, or the
Mandatory Redemption Amount described in Section E hereof, beyond the
Delivery Date or Mandatory Redemption Payment Date (as hereinafter
defined) could result in economic loss to the Buyer. As compensation
to the Buyer for such loss, the Company agrees to pay late payments
to the Buyer for late issuance of Common Stock in the form required
pursuant to Section C hereof upon Conversion of the Debenture or late
payment of the Mandatory Redemption Amount, in the amount of $100 per
business day after the Delivery Date or Mandatory Redemption Payment
Date, as the case may be, for each $10,000 of Debenture principal
amount being converted or redeemed. The Company shall pay any
payments incurred under this Section in immediately available funds
upon demand. Furthermore, in addition to any other remedies which may
be available to the Buyer, in the event that the Company fails for
any reason to effect delivery of the Common Stock by the Delivery
Date or make payment by the Mandatory Redemption Payment Date, the
Buyer will be entitled to revoke all or part of the relevant Notice
of Conversion or rescind all or part of the notice of Mandatory
Redemption by delivery of a notice to such effect to the Company
whereupon the Company and the Buyer shall each be restored to their
respective positions immediately prior to the delivery of such
notice, except that late payment charges described above shall be
payable through the date notice of revocation or rescission is given
to the Company.
E. Mandatory Redemption. In the event the Company is
prohibited from issuing Common Stock, or fails to timely deliver
Common Stock on a Delivery Date, or upon the occurrence of an Event
of Default (as defined in the Debenture) or for any reason other than
pursuant to the limitations set forth herein, or upon the occurrence
of an Event of Default as defined in the Debenture, then at the
Buyer's election, the Company must pay to the Buyer ten (10) business
days after request by the Buyer or on the Delivery Date (if requested
by the Buyer) a sum of money determined by multiplying up to the
outstanding principal amount of the Debenture designated by the Buyer
by 130%, together with accrued but unpaid interest thereon
("Mandatory Redemption Payment"). The Mandatory Redemption Payment
must be received by the Buyer on the same date as the Company Common
Stock otherwise deliverable or within ten (10) business days after
request, whichever is sooner ("Mandatory Redemption Payment Date").
Upon receipt of the Mandatory Redemption Payment, the corresponding
Debenture principal and interest will be deemed paid and no longer
outstanding.
F. Buy-In. In addition to any other rights available to the
Buyer, if the Company fails to deliver to the Buyer such Common Stock
issuable upon conversion of a Debenture or exercise of a Warrant by
the Delivery Date and if ten (10) days after the Delivery Date the
Buyer purchases (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the Buyer of
the Common Stock which the Buyer anticipated receiving upon such
conversion (a "Buy-In"), then the Company shall pay in cash to the
Buyer (in addition to any remedies available to or elected by the
Buyer) the amount by which (A) the Buyer's total purchase price
(including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (B) the aggregate principal and/or
interest amount of the Debenture or Warrant for which such conversion
or exercise was not timely honored, together with interest thereon at
a rate of 15% per annum, accruing until such amount and any accrued
interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if the Buyer
purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of
$10,000 of Debenture or Warrant principal and/or interest, the
Company shall be required to pay the Buyer $1,000, plus interest. The
Buyer shall provide the Company written notice indicating the amounts
payable to the Buyer in respect of the Buy-In.
G. The Securities shall be delivered by the Company to the
Buyer pursuant to Section I.B. hereof on a "delivery-against-payment
basis" at the Closing.
VI. CLOSING DATE
The Closing shall occur by the delivery: (i) to the Buyer of the
certificate evidencing the Debenture and all other Agreements, and
(ii) to the Company the Purchase Price.
VII. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Buyer understands that the Company's obligation to sell the
Debenture on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:
A. Delivery by Buyer to the Company of the Initial Purchase
Price;
B. The accuracy on the Closing Date of the representations and
warranties of Buyer contained in this Agreement as if made on the
Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in
which case such accuracy shall be measured as of such specified date)
and the performance by Buyer in all material respects on or before
the Closing Date of all covenants and agreements of Buyer required to
be performed by it pursuant to this Agreement on or before the
Closing Date; and
C. There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental authority
restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by this Agreement.
VIII. CONDITIONS TO BUYER'S OBLIGATIONS
The Company understands that Buyer's obligation to purchase the
Securities on the Closing Date pursuant to this Agreement is
conditioned upon:
A. Delivery by the Company of the Debenture, the Conversion
Warrant and the other Agreements (I/N/O Buyer or I/N/O Buyer's
nominee);
B. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on
the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in
which case such accuracy shall be measured as of such specified date)
and the performance by the Company in all respects on or before the
Closing Date of all covenants and agreements of the Company required
to be performed by it pursuant to this Agreement on or before the
Closing Date, all of which shall be confirmed to Buyer by delivery of
the certificate of the chief executive officer of the Company to that
effect;
C. There not having occurred (i) any general suspension of
trading in, or limitation on prices listed for, the Common Stock on
the OTCBB/Pink Sheet, (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States,
(iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving
the United States or any of its territories, protectorates or
possessions or (iv) in the case of the foregoing existing at the date
of this Agreement, a material acceleration or worsening thereof;
D. There not having occurred any event or development, and
there being in existence no condition, having or which reasonably and
foreseeably could have a Material Adverse Effect;
E. The Company shall have delivered to Buyer reimbursement of
Buyer's reasonable out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by this Agreement;
F. There shall not be in effect any Law, order, ruling,
judgment or writ of any court or public or governmental authority
restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by this Agreement;
G. The Company shall have obtained all consents, approvals or
waivers from governmental authorities and third persons necessary for
the execution, delivery and performance of the Documents and the
transactions contemplated thereby, all without material cost to the
Company;
H. Buyer shall have received such additional documents,
certificates, payment, assignments, transfers and other deliveries as
it or its legal counsel may reasonably request and as are customary
to effect a closing of the matters herein contemplated;
I. Delivery by the Company of an enforceability opinion from
its outside counsel in form and substance satisfactory to Buyer
J. Reimbursement of Buyer's legal fees in the amount of
$5,000.
IX. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each
of the Company and Buyer in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate
entered into and delivered by them pursuant to this Agreement shall
survive the Closing and the consummation of the transactions
contemplated hereby. In the event of a breach or violation of any of
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have
all rights and remedies for such breach or violation available to it
under the provisions of this Agreement or otherwise, whether at law
or in equity, irrespective of any investigation made by or on behalf
of such party on or prior to the Closing Date.
B. The Company hereby agrees to indemnify and hold harmless
Buyer, its affiliates and their respective officers, directors,
partners and members (collectively, the "Buyer Indemnitees") from and
against any and all losses, claims, damages, judgments, penalties,
liabilities and deficiencies (collectively, "Losses") and agrees to
reimburse Buyer Indemnitees for all out-of-pocket expenses (including
the fees and expenses of legal counsel), in each case promptly as
incurred by Buyer Indemnitees and to the extent arising out of or in
connection with:
1. any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties contained in this
Agreement or the other Documents, or the annexes, schedules or
exhibits hereto or thereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this
Agreement or the other Documents;
2. any failure by the Company to perform any of its
covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or
agreement entered into or delivered by the Company pursuant to this
Agreement or the other Documents;
3. the purchase of the Debenture, the conversion of the
Debenture, the payment of interest on the Debenture, the issuance of
the Warrant Shares, the consummation of the transactions contemplated
by this Agreement and the other Documents, the use of any of the
proceeds of the Purchase Price by the Company, the purchase or
ownership of any or all of the Securities, the performance by the
parties hereto of their respective obligations hereunder and under
the Documents or any claim, litigation, investigation, proceedings or
governmental action relating to any of the foregoing, whether or not
Buyer is a party thereto; or
4. resales of the Common Stock by Buyer in the manner and
as contemplated by this Agreement and the Registration Rights
Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Company Indemnitees") from
and against any and all Losses, and agrees to reimburse the Company
Indemnitees for all out-of-pocket expenses (including the fees and
expenses of legal counsel), in each case promptly as incurred by the
Company Indemnitees and to the extent arising out of or in connection
with:
1. any misrepresentation, omission of fact or breach of
any of Buyer's representations or warranties contained in this
Agreement or the other Documents, or the annexes, schedules or
exhibits hereto or thereto or any instrument, agreement or
certificate entered into or delivered by Buyer pursuant to this
Agreement or the other Documents; or
2. any failure by Buyer to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement or the other Documents or any instrument,
certificate or agreement entered into or delivered by Buyer pursuant
to this Agreement or the other Documents.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Article 0 (an "Indemnified Party")
of written notice of any investigation, claim, proceeding or other
action in respect of which indemnification is being sought (each, a
"Claim"), the Indemnified Party promptly shall notify the party
against whom indemnification pursuant to this Article 0 is being
sought (the "Indemnifying Party") of the commencement thereof, but
the omission so to notify the Indemnifying Party shall not relieve it
from any liability that it otherwise may have to the Indemnified
Party except to the extent that the Indemnifying Party is materially
prejudiced and forfeits substantive rights or defenses by reason of
such failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the
Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the
Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel
to the Indemnified Party if (and only if): (x) the Indemnifying Party
shall have agreed to pay such fees, out-of-pocket costs and expenses,
(y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the
Indemnifying Party by the same legal counsel would not be appropriate
due to actual or, as reasonably determined by legal counsel to the
Indemnified Party, potentially differing interests between such
parties in the conduct of the defense of such Claim, or if there may
be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying
Party or (z) the Indemnifying Party shall have failed to employ legal
counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such
Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z)
above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more
than one firm of legal counsel for the Indemnified Party (together
with appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party (which
consent shall not unreasonably be withheld), settle or compromise any
Claim or consent to the entry of any judgment that does not include
an unconditional release of the Indemnified Party from all
liabilities with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly shall
deliver notice of such claim to the Indemnifying Party. If the
Indemnified Party disputes the claim, such dispute shall be resolved
by mutual agreement of the Indemnified Party and the Indemnifying
Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association.
Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
X. GOVERNING LAW
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, without regard
to the conflicts of law principles of such state.
XI. SUBMISSION TO JURISDICTION
Each of the parties hereto consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part
of the City of San Diego or the state courts of the State of
California sitting in the City of San Diego in connection with any
dispute arising under this Agreement and the other Documents. Each
party hereto hereby irrevocably and unconditionally waives, to the
fullest extent it may effectively do so, any defense of an
inconvenient forum or improper venue to the maintenance of such
action or proceeding in any such court and any right of jurisdiction
on account of its place of residence or domicile. Each party hereto
irrevocably and unconditionally consents to the service of any and
all process in any such action or proceeding in such courts by the
mailing of copies of such process by registered or certified mail
(return receipt requested), postage prepaid, at its address specified
in Article XVII. Each party hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner
provided by law.
XII. WAIVER OF JURY TRIAL
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES
HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i) CERTIFIES THAT
NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND
(ii) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS HEREIN.
XIII. COUNTERPARTS; EXECUTION
This Agreement may be executed in counterparts, each of which
when so executed and delivered shall be an original, but both of
which counterparts shall together constitute one and the same
instrument. A facsimile transmission of this signed Agreement shall
be legal and binding on both parties hereto.
XIV. HEADINGS
The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this
Agreement.
XV. SEVERABILITY
In the event any one or more of the provisions contained in this
Agreement or in the other Documents should be held invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or
therein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
XVI. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This Agreement and the Documents constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof
and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of such parties. No
supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by both parties. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
XVII NOTICES
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally, or sent by telecopier
machine or by a nationally recognized overnight courier service, and
shall be deemed given when so delivered personally, or by telecopier
machine or overnight courier service as follows:
A. if to the Company, to:
GameZnFlix, Inc.
1535 Blackjack Road
Franklin, Kentucky 42134
Telephone: 270-598-0385
Facsimile: 270-778-0025
B. if to Buyer, to:
Golden Gate Investors, Inc.
7817 Herschel Avenue, Suite 200
La Jolla, California 92037
Telephone: 858-551-8789
Facsimile: 858-551-8779
The Company or Buyer may change the foregoing address by notice given
pursuant to this Article XVII.
XVIII. CONFIDENTIALITY
Each of the Company and Buyer agrees to keep confidential and
not to disclose to or use for the benefit of any third party the
terms of this Agreement or any other information which at any time is
communicated by the other party as being confidential without the
prior written approval of the other party; provide, however, that
this provision shall not apply to information which, at the time of
disclosure, is already part of the public domain (except by breach of
this Agreement) and information which is required to be disclosed by
law (including, without limitation, pursuant to Item 601(b)(10) of
Regulation S-K under the Securities Act and the Exchange Act).
XIX. ASSIGNMENT
This Agreement shall not be assignable by either of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have duly caused this
Agreement to be executed and delivered on the date first above written.
GameZnFlix, Inc. Golden Gate Investors, Inc.
By: /s/ John Fleming By: /s/ Travis W. Hoff
John Fleming Travis W. Hoff
Title: Chief Executive Officer Title: Portfolio Manager