Registration Rights Agreement - GameZnFlix Inc. and Golden Gate Investors Inc.
REGISTRATION RIGHTS AGREEMENT
Registration Rights 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. (the "Initial Investor").
WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of even date herewith, by and
between the Initial Investor and the Company (the "Securities
Purchase Agreement"), the Company has agreed to issue and sell to the
Initial Investor a Convertible Debenture (the "Debenture") of the
Company in the aggregate principal amount of $1,500,000 which, upon
the terms of and subject to the conditions contained therein, is
convertible into shares of the Company's Common Stock (the "Common
Stock"); and
WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide
with respect to the Common Stock issued upon conversion of the
Debenture and the Warrant Shares certain registration rights under
the Securities Act;
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:
1. Definitions
(A) As used in this Agreement, the following terms shall
have the meanings:
(1) "Affiliate" of any specified Person means any
other Person who directly, or indirectly through one or more
intermediaries, is in control of, is controlled by, or is under
common control with, such specified Person. For purposes of this
definition, control of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and
policies of such Person whether by contract, securities ownership or
otherwise; and the terms "controlling" and "controlled" have the
respective meanings correlative to the foregoing.
(2) "Closing Date" means the date of this Agreement.
(3) "Commission" means the Securities and Exchange Commission.
(4) "Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(5) "Investor" means each of the Initial Investor and
any transferee or assignee of Registrable Securities which agrees to
become bound by all of the terms and provisions of this Agreement in
accordance with Section 8 hereof.
(6) "Person" means any individual, partnership,
corporation, limited liability company, joint stock company,
association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
(7) "Prospectus" means the prospectus (including,
without limitation, any preliminary prospectus and any final
prospectus filed pursuant to Rule 424(b) under the Securities Act,
including any prospectus that discloses information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance on Rule 430A under the Securities Act) included
in the Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus
by the Company under the Exchange Act and incorporated by reference
therein.
(8) "Public Offering" means an offer registered with
the Commission and the appropriate state securities commissions by
the Company of its Common Stock and made pursuant to the Securities Act.
(9) "Registrable Securities" means the Common Stock
issued or issuable (i) upon conversion or redemption of the
Debenture, (ii) exercise of the Conversion Warrants (iii) pursuant to
the terms and provisions of the Debenture or the Securities Purchase
Agreement, (iv) in connection with any distribution,
recapitalization, stock-split, stock adjustment or reorganization of
the Company; provided, however, a share of Common Stock shall cease
to be a Registrable Security for purposes of this Agreement when it
no longer is a Restricted Security.
(10) "Registration Statement" means a registration
statement of the Company filed on an appropriate form under the
Securities Act providing for the registration of, and the sale on a
continuous or delayed basis by the holders of, all of the Registrable
Securities pursuant to Rule 415 under the Securities Act, including
the Prospectus contained therein and forming a part thereof, any
amendments to such registration statement and supplements to such
Prospectus, and all exhibits to and other material incorporated by
reference in such registration statement and Prospectus.
(11) "Restricted Security" means any share of Common
Stock issued upon conversion or redemption of the Debenture or
Warrant except any such share that (i) has been registered pursuant
to an effective registration statement under the Securities Act and
sold in a manner contemplated by the prospectus included in such
registration statement, (ii) has been transferred in compliance with
the resale provisions of Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph
(k) of Rule 144 under the Securities Act (or any successor provision
thereto) or (iii) otherwise has been transferred and a new share of
Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company.
(12) "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute.
(B) All capitalized terms used and not defined herein have
the respective meaning assigned to them in the Securities Purchase
Agreement or the Debenture.
2. Registration
(A) Filing and Effectiveness of Registration Statement.
The Company shall prepare and file with the Commission as soon as
practicable a Registration Statement relating to the offer and sale
of the Registrable Securities and shall use its best efforts to cause
the Commission to declare such Registration Statement effective under
the Securities Act as promptly as practicable but in no event later
than the Deadline (as defined in the Debenture). The Company shall
promptly (and, in any event, no more than 24 hours after it receives
comments from the Commission), notify the Buyer when and if it
receives any comments from the Commission on the Registration
Statement and promptly forward a copy of such comments, if they are
in writing, to the Buyer. At such time after the filing of the
Registration Statement pursuant to this Section 2(A) as the
Commission indicates, either orally or in writing, that it has no
further comments with respect to such Registration Statement or that
it is willing to entertain appropriate requests for acceleration of
effectiveness of such Registration Statement, the Company shall
promptly, and in no event later than two (2) business days after
receipt of such indication from the Commission, request that the
effectiveness of such Registration Statement be accelerated within
forty-eight (48) hours of the Commission's receipt of such request.
The Company shall notify the Initial Investor by written notice that
such Registration Statement has been declared effective by the
Commission within 24 hours of such declaration by the Commission.
(B) Eligibility for Use of Form S-3 or an SB-2. The
Company agrees that at such time as it meets all the requirements for
the use of Securities Act Registration Statement on Form S-3 or SB-2
and it shall file all reports and information required to be filed by
it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(C) Additional Registration Statement. In the event the
Current Market Price declines to a price per share the result of
which is that the Company cannot satisfy its conversion obligations
to Initial Investor hereunder, the Company shall, to the extent
required by the Securities Act (because the additional shares were
not covered by the Registration Statement filed pursuant to Section
2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement with the Commission for such
additional number of Registrable Securities as would be issuable upon
conversion of the Debenture (the "Additional Registrable Securities")
in addition to those previously registered. The Company shall, to
the extent required by the Securities Act, as reasonably determined
by the Initial Investor, prepare and file with the Commission not
later than the 30th day thereafter, a Registration Statement relating
to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such
Registration Statement effective under the Securities Act as promptly
as practicable but not later than the Deadline. The Company shall
not include any other securities in the Registration Statement
relating to the offer and sale of such Additional Registrable Securities.
(D) (i) If the Company proposes to register any of its
warrants, Common Stock or any other shares of common stock of the
Company under the Securities Act (other than a registration (A) on
Form S-8 or S-4 or any successor or similar forms, (B) relating to
Common Stock or any other shares of common stock of the Company
issuable upon exercise of employee share options or in connection
with any employee benefit or similar plan of the Company or (C) in
connection with a direct or indirect acquisition by the Company of
another Person or any transaction with respect to which Rule 145 (or
any successor provision) under the Securities Act applies), whether
or not for sale for its own account, it will each such time, give
prompt written notice at least 20 days prior to the anticipated
filing date of the registration statement relating to such
registration to each Investor, which notice shall set forth such
Investor's rights under this Section 2(D) and shall offer such
Investor the opportunity to include in such registration statement
such number of Registrable Securities as such Investor may request.
Upon the written request of any Investor made within 10 days after
the receipt of notice from the Company (which request shall specify
the number of Registrable Securities intended to be disposed of by
such Investor), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities
that the Company has been so requested to register by each Investor,
to the extent requisite to permit the disposition of the Registrable
Securities so to be registered; provided, however, that (A) if such
registration involves a Public Offering, each Investor must sell its
Registrable Securities to any underwriters selected by the Company
with the consent of such Investor on the same terms and conditions as
apply to the Company and (B) if, at any time after giving written
notice of its intention to register any Registrable Securities
pursuant to this Section 2 and prior to the effective date of the
registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such
Registrable Securities, the Company shall give written notice to each
Investor and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such
registration. The Company's obligations under this Section 2(D)
shall terminate on the date that the registration statement to be
filed in accordance with Section 2(A) is declared effective by the
Commission.
(ii) If a registration pursuant to this Section 2(D)
involves a Public Offering and the managing underwriter thereof
advises the Company that, in its view, the number of shares of Common
Stock that the Company and the Investors intend to include in such
registration exceeds the largest number of shares of Common Stock
that can be sold without having an adverse effect on such Public
Offering (the "Maximum Offering Size"), the Company will include in
such registration only such number of shares of Common Stock as does
not exceed the Maximum Offering Size, and the number of shares in the
Maximum Offering Size shall be allocated among the Company, the
Investors and any other sellers of Common Stock in such Public
Offering ("Third-Party Sellers"), first, pro rata among the Investors
until all the shares of Common Stock originally proposed to be
offered for sale by the Investors have been allocated, and second,
pro rata among the Company and any Third-Party Sellers, in each case
on the basis of the relative number of shares of Common Stock
originally proposed to be offered for sale under such registration by
each of the Investors, the Company and the Third-Party Sellers, as
the case may be. If as a result of the proration provisions of this
Section 2(D)(ii), any Investor is not entitled to include all such
Registrable Securities in such registration, such Investor may elect
to withdraw its request to include any Registrable Securities in such
registration. With respect to registrations pursuant to this Section
2(D), the number of securities required to satisfy any underwriters'
over-allotment option shall be allocated among the Company, the
Investors and any Third Party Seller pro rata on the basis of the
relative number of securities offered for sale under such
registration by each of the Investors, the Company and any such Third
Party Sellers before the exercise of such over-allotment option.
3. Obligations of the Company
In connection with the registration of the Registrable
Securities, the Company shall:
(A) Promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration
Statement and supplements to the Prospectus as may be necessary to
keep the Registration Statement continuously effective and in
compliance with the provisions of the Securities Act applicable
thereto so as to permit the Prospectus forming part thereof to be
current and useable by Investors for resales of the Registrable
Securities for a period of five (5) years from the date on which the
Registration Statement is first declared effective by the Commission
(the "Effective Time") or such shorter period that will terminate
when all the Registrable Securities covered by the Registration
Statement have been sold pursuant thereto in accordance with the plan
of distribution provided in the Prospectus, transferred pursuant to
Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities not subject to
transfer restrictions under the Securities Act (the "Registration
Period") and (ii) take all lawful action such that each of (A) the
Registration Statement and any amendment thereto does not, when it
becomes effective, contain an 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, not misleading and (B) the
Prospectus forming part of the Registration Statement, and any
amendment or supplement thereto, does not at any time during the
Registration Period include an 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 under which they were made, not misleading;
(B) During the Registration Period, comply with the
provisions of the Securities Act with respect to the Registrable
Securities of the Company covered by the Registration Statement until
such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the
Investors as set forth in the Prospectus forming part of the
Registration Statement;
(C) (i) Prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the
distribution or delivery of any Prospectus (including any supplements
thereto), provide (A) draft copies thereof to the Investors and
reflect in such documents all such comments as the Investors (and
their counsel) reasonably may propose and (B) to the Investors a copy
of the accountant's consent letter to be included in the filing and
(ii) furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel
identified to the Company, (A) promptly after the same is prepared
and publicly distributed, filed with the Commission, or received by
the Company, one copy of the Registration Statement, each Prospectus,
and each amendment or supplement thereto and (B) such number of
copies of the Prospectus and all amendments and supplements thereto
and such other documents, as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by such Investor;
(D) (i) Register or qualify the Registrable Securities
covered by the Registration Statement under such securities or "blue
sky" laws of such jurisdictions as the Investors who hold a majority-
in-interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in such jurisdictions such amendments
(including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to
maintain such registrations and qualifications in effect at all times
during the Registration Period and (iv) take all such other lawful
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 (A) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 3(D), (B) subject itself to general taxation in any such
jurisdiction or (C) file a general consent to service of process in
any such jurisdiction;
(E) As promptly as practicable after becoming aware of
such event, notify each Investor of the occurrence of any event, as a
result of which the Prospectus included in the Registration
Statement, as then in effect, includes an 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, in light of the
circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and
supplement to the Prospectus to correct such untrue statement or
omission, and deliver a number of copies of such supplement and
amendment to each Investor as such Investor may reasonably request;
(F) As promptly as practicable after becoming aware of
such event, notify each Investor who holds Registrable Securities
being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance by the Commission of any stop
order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time and take all lawful action to
effect the withdrawal, rescission or removal of such stop order or
other suspension;
(G) Cause all the Registrable Securities covered by the
Registration Statement to be listed on the principal national
securities exchange, and included in an inter-dealer quotation system
of a registered national securities association, on or in which
securities of the same class or series issued by the Company are then
listed or included;
(H) Maintain a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement;
(I) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and
delivery of certificates for the Registrable Securities to be offered
pursuant to the registration statement and enable such certificates
for the Registrable Securities to be in such denominations or
amounts, as the case may be, as the Investors reasonably may request
and registered in such names as the Investor may request; and, within
three (3) business days after a registration statement which includes
Registrable Securities is declared effective by the Commission,
deliver and cause legal counsel selected by the Company to deliver to
the transfer agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such
registration statement) an appropriate instruction and, to the extent
necessary, an opinion of such counsel;
(J) Take all such other lawful actions reasonably
necessary to expedite and facilitate the disposition by the Investors
of their Registrable Securities in accordance with the intended
methods therefor provided in the Prospectus which are customary under
the circumstances;
(K) Make generally available to its security holders as
soon as practicable, but in any event not later than three (3) months
after (i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Registration Statement and (ii) the effective
date of each post-effective amendment to the Registration Statement,
as the case may be, an earnings statement of the Company and its
subsidiaries complying with Section 11 (a) of the Securities Act and
the rules and regulations of the Commission thereunder (including, at
the option of the Company, Rule 158);
(L) In the event of an underwritten offering, promptly
include or incorporate in a Prospectus supplement or post-effective
amendment to the Registration Statement such information as the
managers reasonably agree should be included therein and to which the
Company does not reasonably object and make all required filings of
such Prospectus supplement or post-effective amendment as soon as
practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective
amendment;
(M) (i) Make reasonably available for inspection by
Investors, any underwriter participating in any disposition pursuant
to the Registration Statement, and any attorney, accountant or other
agent retained by such Investors or any such underwriter all relevant
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and (ii) cause the
Company's officers, directors and employees to supply all information
reasonably requested by such Investors or any such underwriter,
attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence
examinations; provided, however, that all records, information and
documents that are designated in writing by the Company, in good
faith, as confidential, proprietary or containing any material
nonpublic information shall be kept confidential by such Investors
and any such underwriter, attorney, accountant or agent (pursuant to
an appropriate confidentiality agreement in the case of any such
holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an
opportunity promptly to seek a protective order or otherwise limit
the scope of the information sought to be disclosed) or is required
by law, or such records, information or documents become available to
the public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and provided, further,
that, if the foregoing inspection and information gathering would
otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent
possible, be coordinated on behalf of the Investors and the other
parties entitled thereto by one firm of counsel designated by and on
behalf of the majority in interest of Investors and other parties;
(N) In connection with any underwritten offering, make
such representations and warranties to the Investors participating in
such underwritten offering and to the managers, in form, substance
and scope as are customarily made by the Company to underwriters in
secondary underwritten offerings;
(O) In connection with any underwritten offering, obtain
opinions of counsel to the Company (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the
managers) addressed to the underwriters, covering such matters as are
customarily covered in opinions requested in secondary underwritten
offerings (it being agreed that the matters to be covered by such
opinions shall include, without limitation, as of the date of the
opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the
absence from the Registration Statement and the Prospectus, including
any documents incorporated by reference therein, of an untrue
statement of a material fact or the omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, subject to customary
limitations);
(P) In connection with any underwritten offering, obtain
"cold comfort" letters and updates thereof from the independent
public accountants of the Company (and, if necessary, from the
independent public accountants of any subsidiary of the Company or of
any business acquired by the Company, in each case for which
financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each
underwriter participating in such underwritten offering (if such
underwriter has provided such letter, representations or
documentation, if any, required for such cold comfort letter to be so
addressed), in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(Q) In connection with any underwritten offering, deliver
such documents and certificates as may be reasonably required by the
managers, if any, and
(R) In the event that any broker-dealer registered under
the Exchange Act shall be an "Affiliate" (as defined in Rule
2729(b)(1) of the rules and regulations of the National Association
of Securities Dealers, Inc. (the "NASD Rules") (or any successor
provision thereto)) of the Company or has a "conflict of interest"
(as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group
or assist in the distribution of any Registrable Securities covered
by the Registration Statement, whether as a holder of such
Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, the
Company shall assist such broker-dealer in complying with the
requirements of the NASD Rules, including, without limitation, by
(A) engaging a "qualified independent underwriter" (as defined in
Rule 2720(b)(15) of the NASD Rules (or any successor provision
thereto)) to participate in the preparation of the Registration
Statement relating to such Registrable Securities, to exercise usual
standards of due diligence in respect thereof and to recommend the
public offering price of such Registrable Securities,
(B) indemnifying such qualified independent underwriter to the extent
of the indemnification of underwriters provided in Section 6 hereof
and (C) providing such information to such broker-dealer as may be
required in order for such broker-dealer to comply with the
requirements of the NASD Rules.
4. Obligations of the Investors
In connection with the registration of the Registrable
Securities, the Investors shall have the following obligations:
(A) 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
Investor that such Investor shall furnish 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 be reasonably 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;
(B) Each Investor by its acceptance of the Registrable
Securities agrees to cooperate with the Company in connection with
the preparation and filing of the Registration Statement hereunder,
unless such Investor has notified the Company in writing of its
election to exclude all of its Registrable Securities from the
Registration Statement; and
(C) Each Investor agrees that, upon receipt of any notice
from the Company of the occurrence of any event of the kind described
in Section 3(E) or 3(F), it shall immediately discontinue its
disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Investor's
receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(E) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company)
or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the Prospectus covering
such Registrable Securities current at the time of receipt of such notice.
5. Expenses of Registration
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications
pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and
engraving fees, accounting fees, and the fees and disbursements of
counsel for the Company, and the reasonable fees of one firm of
counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
6. Indemnification and Contribution
(A) Indemnification by the Company. The Company shall
indemnify and hold harmless each Investor and each underwriter, if
any, which facilitates the disposition of Registrable Securities, and
each of their respective officers and directors and each person who
controls such Investor or underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes hereinafter referred to as an "Indemnified
Person") from and against any losses, claims, damages or liabilities,
joint or several, to which such Indemnified Person may become subject
under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement of a material fact
contained in any Registration Statement or an omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, not misleading,
or arise out of or are based upon an untrue statement of a material
fact contained in any Prospectus or an omission or alleged omission
to state therein a 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 the
Company hereby agrees to reimburse such Indemnified Person for all
reasonable legal and other expenses incurred by them in connection
with investigating or defending any such action or claim as and when
such expenses are incurred; provided, however, that the Company shall
not be liable to any such Indemnified Person in any such case to the
extent that any such loss, claim, damage or liability arises out of
or is based upon (i) an untrue statement or alleged untrue statement
made in, or an omission or alleged omission from, such Registration
Statement or Prospectus in reliance upon and in conformity with
written information furnished to the Company by such Indemnified
Person expressly for use therein or (ii) in the case of the
occurrence of an event of the type specified in Section 3(E), the use
by the Indemnified Person of an outdated or defective Prospectus
after the Company has provided to such Indemnified Person an updated
Prospectus correcting the untrue statement or alleged untrue
statement or omission or alleged omission giving rise to such loss,
claim, damage or liability.
(B) Notice of Claims, Etc. Promptly after receipt by a
party seeking indemnification pursuant to this Section 6 (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
Section 6 is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so 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 and 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, costs and
expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified
Party by 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 counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnified Party
shall not, without the prior written consent of the Indemnifying
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 Indemnifying Party
from all liabilities with respect to such Claim or judgment.
(C) Contribution. If the indemnification provided for in
this Section 6 is unavailable to or insufficient to hold harmless an
Indemnified Person under subsection (A) above in respect of any
losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party as
a result of such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and the Indemnified
Party in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information
supplied by such Indemnifying Party or by such Indemnified Party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(D) were determined by pro
rata allocation (even if the Investors or any underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable
considerations referred to in this Section 6(D). The amount paid or
payable by an Indemnified Party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to
above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any
underwriters in this Section 6(D) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(D) Notwithstanding any other provision of this Section 6,
in no event shall any (i) Investor be required to undertake liability
to any person under this Section 6 for any amounts in excess of the
dollar amount of the proceeds to be received by such Investor from
the sale of such Investor's Registrable Securities (after deducting
any fees, discounts and commissions applicable thereto) pursuant to
any Registration Statement under which such Registrable Securities
are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other
compensation payable to such underwriter with respect to the
Registrable Securities underwritten by it and distributed pursuant to
the Registration Statement.
(E) The obligations of the Company under this Section 6
shall be in addition to any liability which the Company may otherwise
have to any Indemnified Person and the obligations of any Indemnified
Person under this Section 6 shall be in addition to any liability
which such Indemnified Person may otherwise have to the Company. The
remedies provided in this Section 6 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to an
indemnified party at law or in equity.
7. Rule 144
With a view to making available to the Investors the benefits of
Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the
Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to use its best efforts
to:
(1) comply with the provisions of paragraph (c) (1) of
Rule 144 and
(2) file with the Commission in a timely manner all
reports and other documents required to be filed by the Company
pursuant to Section 13 or 15(d) under the Exchange Act; and, if at
any time it is not required to file such reports but in the past had
been required to or did file such reports, it will, upon the request
of any Investor, make available other information as required by, and
so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the
Investors to any permitted transferee of all or any portion of such
Registrable Securities (or all or any portion of the Debenture or
Warrant of the Company which is convertible into such securities)
only if (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name
and address of such transferee or assignee and (ii) the securities
with respect to which such registration rights are being transferred
or assigned, (c) immediately following such transfer or assignment,
the securities so transferred or assigned to the transferee or
assignee constitute Restricted Securities and (d) at or before the
time the Company received the written notice contemplated by clause
(b) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein.
9. Amendment and Waiver
Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority-in-
interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 9 shall be binding upon each
Investor and the Company.
10. Changes in Common Stock
If, and as often as, there are any changes in the Common Stock
by way of stock split, stock dividend, reverse split, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall
be made in the provisions hereof, as may be required, so that the
rights and privileges granted hereby shall continue with respect to
the Common Stock as so changed.
11. Miscellaneous
(A) A person or entity shall be deemed to be a holder of
Registrable Securities whenever such person or entity owns of record
such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company
shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
(B) If, after the date hereof and prior to the Commission
declaring the Registration Statement to be filed pursuant to Section
2(a) effective under the Securities Act, the Company grants to any
Person any registration rights with respect to any Company securities
which are more favorable to such other Person than those provided in
this Agreement, then the Company forthwith shall grant (by means of
an amendment to this Agreement or otherwise) identical registration
rights to all Investors hereunder.
(C) 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:
(1) if to the Company, to:
GameZnFlix, Inc.
1535 Blackjack Road
Franklin, Kentucky 42134
Telephone: 270-598-0385
Facsimile: 270-778-0025
(2) if to the Investor, to:
Golden Gate Investors, Inc.
7817 Herschel Avenue, Suite 200
La Jolla, California 92037
Telephone: 858-551-8789
Facsimile: 858-551-8779
(3) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the
foregoing address by notice given pursuant to this Section 11(C).
(D) 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.
(E) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California. Each of the
parties consents to the 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 hereby
waives, to the maximum extent permitted by law, any objection
including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
(F) Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment
based on this Agreement, in any legal proceeding whatsoever,
including insolvency, bankruptcy, arbitration, declaratory relief or
other litigation, the prevailing party shall be entitled to receive
from the other party or parties thereto reimbursement for all
reasonable attorneys' fees and all reasonable costs, including but
not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the
cost of any bonds, whether taxable or not, and that such
reimbursement shall be included in any judgment or final order issued
in that proceeding. The "prevailing party" means the party
determined by the court to most nearly prevail and not necessarily
the one in whose favor a judgment is rendered.
(G) The remedies provided in this Agreement are cumulative
and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(H) The Company shall not enter into any agreement with
respect to its securities that is inconsistent with the rights
granted to the holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. The Company is not
currently a party to any agreement granting any registration rights
with respect to any of its securities to any person which conflicts
with the Company's obligations hereunder or gives any other party the
right to include any securities in any Registration Statement filed
pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the
foregoing, without the written consent of the holders of a majority
in interest of the Registrable Securities, the Company shall not
grant to any person the right to request it to register any of its
securities under the Securities Act unless the rights so granted are
subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement. The
restrictions on the Company's rights to grant registration rights
under this paragraph shall terminate on the date the Registration
Statement to be filed pursuant to Section 2(A) is declared effective
by the Commission.
(I) This Agreement, the Securities Purchase Agreement, the
Debenture and the Conversion Warrants Agreement, of even date
herewith among the Company and the Initial Investor constitute the
entire agreement among the parties hereto with respect to the subject
matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.
These Agreements supersede all prior agreements and undertakings
among the parties hereto with respect to the subject matter hereof.
(J) Subject to the requirements of Section 8 hereof, this
Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
(K) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may
require.
(L) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
thereof.
(M) The Company acknowledges that any failure by the
Company to perform its obligations under Section 3, or any delay in
such performance, could result in direct damages to the Investors and
the Company agrees that, in addition to any other liability the
Company may have by reason of any such failure or delay, the Company
shall be liable for all direct damages caused by such failure or delay.
(N) This Agreement may be executed in counterparts, each
of which shall be deemed an original but both of which shall
constitute one and the same agreement. A facsimile transmission of
this signed Agreement shall be legal and binding on 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