AGREEMENT
This
Agreement (this “Agreement”) is made as of the 22nd day of
December, 2008 by and between DIGITALFX INTERNATIONAL, Inc., a Florida
corporation (the “Corporation”) and Xx. XXXXXXX
XXXX of 0000 Xxxxxxx Xxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000 (“Kall”).
WHEREAS, the Corporation and
certain investors (“Investors”) are parties to
that certain Securities Purchase Agreement, dated as of November 29, 2007 (the
“Original Securities Purchase
Agreement”), as amended by those certain Amendment and Exchange
Agreements dated as of March 24, 2008 (the “Amendment and Exchange
Agreements” and together with the Original Securities Purchase Agreement,
the “Amended
Agreement”);
WHEREAS, as a consequence of
the occurrence of an Event of Default under the Amended and Restated Senior
Secured Convertible Notes (the “Amended Notes”), issued
pursuant to the Amended Agreement, by reason of the occurrence of one or more
Financial Covenant Failures (as defined in the Amended Notes) with respect to
the Corporation’s fiscal quarter ended June 30, 2008, the Corporation, each
Investor and Kall entered into a Note Purchase Agreement on October 15, 2008
pursuant to which Kall purchased from each Investor its pro rata share of (i) an
aggregate of $350,000 of the unpaid principal amount of the Amended Notes, (ii)
Amended and Restated Warrants to purchase an aggregate of 90,518 shares of the
Corporation’s Common Stock (“Common Stock”) and (iii) an
aggregate of 120,000 shares of Common Stock, in consideration for, among other
things, each Investor’s forbearance from enforcing any rights regarding
redemption of the Amended Notes that may have arisen by reason of the
aforementioned Financial Covenant Failures for a period of 30 days;
WHEREAS, the principal owed on
the Amended Notes to the Investors as of the date of this Agreement is
$2,550,000 and the interest owed on this principal amount is $67,912.46
(together, the “Debt”);
WHEREAS, Kall has agreed to
purchase (i) Two Million shares of Series A 12% Cumulative Convertible Preferred
Stock of the Corporation at $1 per share and (ii) a Series A Warrant to purchase
One Million shares of Series A 12% Cumulative Convertible Preferred Stock via a
Stock Purchase Agreement for a total of $2,000,000, per Schedule “A” (the “Investment”), and has
conditioned his Investment on the restructuring of the Debt, as more fully
provided hereunder;
WHEREAS, Kall advanced to the
Corporation the sum of $700,000 on account of the Investment ( $500,000 on
November 15, 2008 and $200,000 on December 18, 2008);
WHEREAS, the Corporation and
each Investor, upon the closing of Amendment and Exchange Agreements dated
December 22, 2008 (the “December Agreements”), will
facilitate the Corporation’s repayment of the Debt through a cash payment in the
aggregate amount of $650,000 (the “Debt Reduction Cash Amount”),
and the payment of the balance of the Debt as follows: (i) $800,000 of the Debt
will be exchanged for 5,520,000 shares of the common stock of WoozyFly Inc. (the
“WoozyFly Shares”), (ii)
$600,000 through the issuance of 5,149,440 (assuming Closing on such date, or
such other amount to be issued upon the Second Closing Date as defined in the
December Agreements) shares of Common Stock (the “Common Shares”), and (iii) the
balance of $572,274.02 (assuming a Closing on December 22, 2008) through the
exchange of Amended Notes for Second Amended and Restated Senior Secured
Convertible Notes substantially in the form attached hereto as Schedule “B” (the “Notes”) having an aggregate
principal amount of $572,274.02 (assuming a Closing on December 22, 2008); and
such repayment is more fully described on Schedule “C” (the “Securities
Schedule”);
WHEREAS, the Corporation and
Kall desire to exchange Kall’s Amended Notes for a new note having a principal
balance of $357,929.65 (assuming a Closing on December 22, 2008) and having
terms identical to the Notes described on Schedule “B” (the “New Kall Note”):
WHEREAS, to maintain
compliance with listing requirements, any issuance of new shares of common stock
by the Corporation as contemplated by this Agreement must be pre-approved by the
American Stock Exchange (“AMEX”) by filing an
application for additional listing (the “AMEX Approval”), and such
application has been submitted by counsel to the Corporation on Monday December
15, 2008 with a petition for expedited review,
NOW, THEREFORE, in
consideration of the premises, and the mutual terms and conditions hereinbelow
set forth, the Parties agree, as follows:
ARTICLE
1.
CONSTRUCTION
AND DEFINED TERMS
1.1 Articles and
Sections. The Article and Section headings and captions in
this Agreement are for convenience only and shall not affect the construction or
interpretation of this Agreement. The references in this Agreement to
Articles and Sections shall be read as Articles or Sections of this Agreement
unless otherwise specifically provided.
1.2 Defined
Terms. Unless otherwise expressly stated in this Agreement,
capitalized terms used in this Agreement shall have the following
meanings:
(a) “Board” means the Board of
Directors of the Corporation.
(b) “Closing” means the closing of
the transactions contemplated by this Agreement. The Closing shall be
10:00 a.m., Pacific Time, on the Business Day on which the conditions set forth
in Article 5 are satisfied (or waived) (or such other time and date as is
mutually agreed to by the Parties).
(c) “Closing Date” means the date
and time of the Closing.
(d) “Party” means any of the
Corporation or Kall considered individually as the context may require, and
“Parties” means all of
them considered together.
(e) “Person” means any natural
person, corporation, limited liability company, partnership, joint venture,
entity, association, joint-stock company, trust or unincorporated organization
and any governmental authority.
ARTICLE
2.
EXCHANGE
The
Investment is conditioned upon the exchange of the notes held by Kall, as
described below:
2.1 Exchange of Kall Amended
Notes. Kall shall surrender to the Corporation his three Amended Notes
totaling in the aggregate $350,000 and in consideration therefore the
Corporation shall issue and deliver to Kall a New Kall Note in the principal
amount of $357,331.
ARTICLE
3.
AMENDMENTS
TO TRANSACTION DOCUMENTS
3.1 Reaffirmation. The
Corporation hereby confirms and agrees that, except as otherwise expressly
provided herein:
(a) The
Amended Agreement, the December Agreements and each other Transaction Document
(as defined in the Amended Agreement) is, and shall continue to be, in full
force and effect and is hereby ratified and confirmed in all respects, except
that on and after the Closing Date (i) all references in the Amended Agreement
to “this Agreement,” “hereto,” “hereof,” “hereunder” or words of like import
referring to the Amended Agreement shall mean the Amended Agreement as amended
by this Agreement, and (ii) all references in the other Transaction
Documents to the “Securities Purchase Agreement,” “thereto,” “thereof,”
“thereunder” or words of like import referring to the Amended Agreement shall
mean the Amended Agreement as amended by this Agreement. REFERENCES
TO NOTES IN ALL TRANSACTION DOCUMENTS MEANS NOTES AND THE NEW KALL NOTE UNDER
THIS AGREEMENT;
(b) To
the extent that the Amended Agreement or any other Transaction Document purports
to assign or pledge to the Collateral Agent for the Investors and Kall
(collectively the “Note
Holders”), or to grant to the Collateral Agent a security interest in or
lien on, any collateral as security for the obligations of the Corporation from
time to time existing in respect of the Amended Notes and any other existing
Transaction Document, such pledge, assignment and/or grant of the security
interest or lien is hereby ratified and confirmed in all respects, and shall
apply with respect to the obligations under the Notes and the New Kall Note and
no additional filing is required to be made in order to maintain the perfection
of the security interest in, or lien, on such collateral, except that the
Corporation shall be permitted to grant liens or security interests with
seniority over any and all the liens and / or liens under the Amended
Agreement; and
(c) the
execution, delivery and effectiveness of this Agreement shall not operate as an
amendment of any right, power or remedy of the Collateral Agent or the Note
Holders under any Transaction Document, nor constitute an amendment of any
provision of any Transaction Document.
3.2 Amendment to Transaction
Documents. Each of the Transaction Documents is hereby amended
as follows:
(a) All
references to “Notes” shall be amended to mean the Notes and the New Kall Note
as defined in this Agreement.
(b) The
defined term “Transaction Documents” is hereby amended to include this
Agreement.
3.3 Amendment to Amendment and
Exchange Agreement. Each of Section 4(d), Section 4(e) and
Section 4(h) of the Amendment and Exchange Agreement is hereby amended in its
entirety to read as follows:
“Intentionally
omitted.”
ARTICLE
4.
ACTIONS
AT CLOSING
4.1 Actions by the
Corporation. The Corporation shall deliver to Kall (i) a share
certificate for 2,000,000 shares of Series A 12% Cumulative Convertible
Preferred Stock of the Corporation, (ii) an executed copy of this Agreement,
(iii) copies of the December Agreements signed by each of the Investors, (iv)
confirmation of payment of the Debt Reduction Cash Amount via wire transfers to
the accounts of the Investors, (v) an executed Series A 12% Cumulative
Convertible Preferred Stock Purchase Agreement, and (vi) an Executed Exhibit B
to the Series A 12% Cumulative Convertible Preferred Stock Purchase Agreement
granting Kall the Series A Warrant.
No more
than three (3) Business Days following the earlier of (i) the Company’s receipt
of the AMEX Approval and (ii) the Company’s Common Stock being listed on the OTC
Bulletin Board, and only if the AMEX Approval or OTC Bulletin Board listing has
been completed, the Company shall deliver to Kall the New Kall Note with a
principal amount of [$357,331].
4.2 Actions by
Kall. Kall shall deliver to the Corporation (i) an executed
copy of this Agreement, (ii) an executed copy of a Series A 12% Cumulative
Convertible Preferred Stock Purchase Agreement, (iii) three Kall Amended Notes
totaling $350,000 (to be held in escrow pending the AMEX Approval or OTC
Bulletin Board listing of the Common Stock), and (iv) proof of wire transfer of
$1,300,000 into the trust account of Xxxxxx Xxxxxxxx & Markiles, LLP,
outside counsel to the Corporation, or to a bank account of the
Corporation.
ARTICLE
5.
CONDITIONS
TO CLOSING
5.1 Conditions to Kall’s
Obligations. The obligations of Kall hereunder are subject to
the satisfaction of each of the following conditions, provided that these
conditions are for Kall’s sole benefit and may be waived by Kall at any time in
his sole discretion by providing the Corporation and/or the Investors, as
applicable, with prior written notice thereof:
(a) The
Corporation shall have executed this Agreement, all schedules, and delivered the
same to Kall.
(b) Each
of the Investors shall have (i) executed the December Agreement and (ii)
surrendered their Amended Notes for cancellation in exchange for the Notes and
their pro rata share of the WoozyFly Shares and the Exchange
Shares.
(c) The
Corporation shall have executed and delivered to Kall a share certificate for
2,000,000 shares of Series A 12% Cumulative Convertible Preferred Stock of the
Corporation, and the Stock Purchase Warrant for 1,000,000 shares of Preferred
Stock.
(d) The
Corporation shall have delivered to Kall a certificate, executed by the
Secretary of the Corporation and dated as of the Closing Date, as to the
resolutions approving the transactions contemplated hereby as adopted by the
Board.
(e) Each
of the Investors and the Corporation shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement and the December Agreement to be performed, satisfied
or complied with by such Party at or prior to the Closing Date and after giving
effect to the terms of this Agreement
5.2 Conditions to Corporation’s
Obligations. The obligations of the Corporation to Kall are
subject to the satisfaction of each of the following conditions, provided that
these conditions are for the Corporation’s sole benefit and may be waived by the
Corporation at any time in its sole discretion by providing Kall, as applicable,
with prior written notice thereof:
(a) Kall
shall have executed this Agreement, all schedules, and delivered the same to the
Corporation.
(b) Each
Investor shall have executed the December Agreement and shall have delivered to
the Corporation such Investor’s Amended Note for cancellation.
(c) Each
Investor shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the December Agreement
to be performed, satisfied or complied with by such Investor at or prior to the
Closing Date.
(d) Kall
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by Kall at or prior to the Closing Date.
(e) Kall
shall have delivered to the Corporation three Amended Notes totaling
$350,000.
(f) Each
of the Investors shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the December
Agreements to be performed, satisfied or complied with by such Party at or prior
to the Closing Date and after giving effect to the terms of this
Agreement
(g) Kall
shall have advanced no later than Wednesday, December 22, 2008 the sum of
$1,300,000 to a trust account of Xxxxxx Xxxxxxxx & Markiles, LLP, outside
counsel to the Corporation, or to a bank account of the
Corporation.
ARTICLE
6
TERMINATION
6.1 Termination. This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time by the mutual agreement of the Parties; or by any of the
Parties in the event that the conditions to such Parties’ obligations under this
Agreement are not satisfied.
6.2 Effect of
Termination. If this Agreement is terminated pursuant to
Section 6.1, all obligations of the Parties under this Agreement shall terminate
and this Agreement shall thereupon be deemed to be null, void and unenforceable
ab initio.
ARTICLE
7
MISCELLANEOUS
7.1 Notices. Any notices,
consents, waivers or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when sent by facsimile or electronic mail (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day (as defined in the Amended Agreement) after
deposit with an overnight courier service, in each case properly addressed to
the Party to receive the same. The addresses and facsimile numbers or email
addresses for such communications shall be:
If to the
Corporation:
DigitalFX International, Inc.
0000 Xxxx Xxxxxxx Xxxx, Xxxxx
0
Xxx Xxxxx,
Xxxxxx 00000
Attn: Abraham, Sofer, Esq.,
President
Facsimile
No.: 000-000-0000
With a copy to:
If to
Kall: 0000
Xxxxxxx Xxxx Xxxxx
Xxx Xxxxx,
Xxxxxx 00000
Email:
xxxxxxxx@xxxxxxxx.xxx
7.2 Amendments, Waivers and
Consents; Successors and Assigns. Neither this Agreement nor
any of the terms hereof may be amended, changed, waived or discharged, nor shall
any consent be given, unless such amendment, change, waiver, discharge or
consent is in writing and signed by the Parties hereto. This
Agreement shall inure to the benefit of and be binding upon each Party hereto
and each Party’s successors and assigns. This Agreement may not be
assigned by any Party hereto without the prior written consent of each of the
other Parties hereto.
7.3 Governing Law; Jurisdiction;
Venue. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
7.4 Counterparts;
Facsimile. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each Party hereto shall have received a
counterpart, or facsimile of a counterpart, of the Agreement, signed by the
other Party or Parties hereto. Delivery of an executed copy of this
Agreement by facsimile transmission or in digital image format shall have the
same effect as delivery of an originally executed copy of this Agreement,
whether an originally executed copy shall be delivered subsequent
thereto.
7.5 Amendments; No
Waivers. No provision of this Agreement may be amended other
than by an instrument in writing signed by each Party hereto. No
provision hereof may be waived other than by an instrument in writing signed by
the party against whom enforcement is sought. No consideration shall
be offered or paid to any Party to amend or consent to a waiver or modification
of any provision of this Agreement unless the same consideration also is offered
to all of the other Parties hereto.
7.6 Expenses. Each
of the Parties shall pay all of its, his or her own fees, costs and expenses
(including, without limitation, fees, costs and expenses of legal counsel)
incurred in connection with the negotiation of this Agreement, the performance
of its, his or her obligations hereunder, and the consummation of the
transactions contemplated hereby.
7.7 Successors and
Assigns. No Party to this Agreement may assign his, her or its
rights or delegate his, her or its obligations hereunder without the prior
written consent of the other Parties. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective successors and assigns.
7.8 Severability. If
any provision of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).
7.9 Entire
Agreement. This Agreement constitutes the entire agreement
among the Parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral, among
the Parties with respect to the subject matter hereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any Party
hereto. None of the provisions of this Agreement is intended to
confer upon any Person other than the Parties hereto any rights or remedies
hereunder.
7.10 Waiver. Effective
as of the Closing, Kall hereby irrevocably waives forever any past, present and
future claims he might be entitled to against the Company as a result of a
failure to meet any and/or all of the Financial Covenants (as defined in Kall’s
Amended Notes) prior to the date hereof. For the avoidance of doubt,
Kall does not waive any rights he has under the New Kall Note being issued
pursuant to this Agreement.
7.11 Acknowledgement and
Waiver. Kall (i) acknowledges that the preferred stock
issued under this agreement cannot be converted into common stock prior to the
receipt of the AMEX Approval and (ii) hereby waives any rights he may have to
participate in the transactions contemplated by the December
Agreements.
[Signature Page
Follows]
IN
WITNESS WHEREOF, and intending to be legally bound hereby, each of the Parties
hereto executes this Agreement under seal as of the date first above
written.
By:
|
/s/
Xxxxxxx Xxxxx
|
Xxxxxxx
Xxxxx, President
|
|
XXXXXXX
XXXX
|
|
/s/ Xxxxxxx
Xxxx
|
SCHEDULE
A
Stock Purchase
Agreement
SCHEDULE
B
Form of a Note and the New
Kall Note
SCHEDULE
C
Securities
Schedule
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|||||||||||||||||
Investor
|
Address
and Facsimile
Number
|
Debt
Reduction
Cash
Amount
|
Number
of
WoozyFly
Shares
|
Number
of
Common
Shares
|
Principal
of
New
Notes
|
|||||||||||||||||
Portside
Growth and
Opportunity
Fund
|
c/o
Ramius LLC
000 Xxxxxxxxx Xxx., 00xx
Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Xxxx Xxxxxxx
Facsimile: (000) 000-0000
(000) 000-0000
Telephone: (000) 000-0000
(000) 000-0000
Residence: Cayman Islands
|
$ | 464,285.71 | 3,942,857 | 3,678,172 | $ | 408,767.15 | |||||||||||||||
Highbridge
International
LLC
|
c/o
Highbridge Capital
Management,
LLC
0
Xxxx 00xx Xx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxx X. Xxxxxx /
Xxxx X. Chill
Tel:
000-000-0000
Fax:
000-000-0000
Residence:
Cayman Islands
|
$ | 139,285.71 | 1,182,857 | 1,103,451 | $ | 122,630.15 | |||||||||||||||
Iroquois
Master
Fund,
Ltd.
|
000
Xxxxxxxxx Xxxxxx,
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx
Xxxxxxxxx
Facsimile: (000)
000-0000
Telephone:
(000) 000-0000
Residence: Cayman
Islands
|
$ | 46,428.58 | 394,286 | 367,817 | $ | 40,876.72 | |||||||||||||||
Total
|
$ | 650,000.00 | 5,520,000 | 5,147,440 | $ | 572,274.02 |