CONVERSION AGREEMENT
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
THIS
CONVERSION AGREEMENT, dated as of August 4, 2006, is
made
by and between Phantom Entertainment, Inc. (f/k/a Infinium Labs, Inc.,) a
corporation (“Company”), and Xxxxxxx Xxxxxxxxx (“Holder”).
WHEREAS,
the Company issued to Xxxxxxx Xxxxxxxxx, as assignee to a promissory note issued
by the Company to Xxxxxxx X. Xxxxxx, Trustee U/A February 7, 1985 (the “Note”).
The Note was issued on July 28, 2004 and currently bears interest at 15% per
annum; and
WHEREAS,
the Holder wishes to convert the Note into common stock, par value
$0.0001 per
share
(“Common
Stock”),
of the
Company;
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which the parties hereby acknowledge, the parties agree as follows:
1. Conversion
of Note.
The
Company and Holder hereby agree that the outstanding principal balance of the
Note is $560,437.43 and all interest accrued and unpaid thereon of $64,450.30
(collectively, the “Balance”) shall convert into shares of the Company’s Common
Stock at a per share price equal to $.015 cents. The Company and Holder agree
that the Balance is $624,887.73 and that upon conversion of the Note in full
and
the issuance by the Company of (i) 37,362,495 shares of Common Stock
(“Conversion Shares”) as full payment of the Balance and (ii) 4,296,686 shares
of Common Stock (“Interest Shares”), the Company shall be forever released from
all its obligations and liabilities under the Note.
2. Closing.
At the
Closing, Holder shall deliver the Note to the Company and the Company shall
deliver the Conversion Shares and the Interest Shares to Holder.
3. Further
Assurances.
In
connection with the conversion of the Note, the Holder, by entering into this
Conversion Agreement, agrees to execute all agreements and other documents
as
reasonably requested by the Company.
4. Investor
Representations and Warranties and Covenants~.
The
Holder represents, warrants and covenants to the Company as
follows:
a,
No
Registration.
Such
Holder understands that the Note, the Conversion Shares and the Interest Shares
have not been, and will not be, registered under the Securities Act of 1933,
as
amended (the “Securities
Act”)
by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things,
the
bona fide nature of the investment intent and the accuracy of such Holder’s
representations as expressed herein or otherwise made pursuant
hereto.
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b. Investment
Intent.
Such
Holder has acquired the Note, and is acquiring the Conversion Shares and
Interest Shares, for investment for its own account, not as a nominee or agent,
and not with the view to, or for resale in connection with,
any
distribution thereof, and such Holder has no present intention of selling,
granting any participation in, or otherwise distributing the same. Such Holder
further represents that it will not violate the Securities Act and does not
have
any contract, undertaking, agreement or arrangement with any person or entity
to
sell, transfer or grant participation to such person or entity or to any third
person or entity with respect to the Note, Conversion Shares and Interest
Shares.
c. Investment
Experience.
Such
Holder has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the Company and
acknowledges that such Holder can protect its own interests. Such Holder has
such knowledge and experience in financial and business matters so that such
Holder is capable of evaluating the merits and risks of its investment in the
Company.
d. Residency.
The
residency of the Holder (or, in the case of a partnership or corporation, such
entity’s principal place of business) is correctly set forth on the signature
page hereto.
e. Speculative
Nature of Investment.
Such
Holder understands and acknowledges that the Company has a limited financial
and
operating history and that
an
investment
in the Company is highly speculative and involves substantial risks. Such Holder
can bear the
economic risk of such Holder’s investment and is able, without impairing such
Holder’s financial
condition, to hold the Conversion Shares and Interest Shares for an indefinite
period of time and to suffer a complete loss of such Holder’s
investment.
f. Access
to Data.
The
Holder and its advisors, if any, have been furnished with or have been given
access to all materials relating to the business, finances and operations
of
the
Company and any reasonably requested materials requested by the Holder, The
Holder and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality
of
the foregoing, the Holder has had the opportunity to obtain and to review the
Company’s filings available on the XXXXX web site of the Securities and Exchange
Commission (xxx.xxx.xxx).
g. Accredited
Investor.
The
Holder is an “accredited investor’ within the meaning of Regulation D, Rule 50
1(a), promulgated by the Securities and Exchange Commission under the Securities
Act and shall submit to the Company such further assurances of such status
as
may be reasonably requested by the Company.
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h.
Rule
144.
Such
Holder acknowledges that the Conversion Shares and Interest Shares must be
held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Such Holder is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction
of
certain conditions, including among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than one year after a party
has
purchased and paid for the security to be sold, the sale being effected through
a “broker’s transaction” or in transactions directly with a “market maker” and
the number of shares being sold during any three-month period not exceeding
specified limitations. Such Holder acknowledges that, in the event all of the
requirements of Rule 144 are not met, registration under the Securities Act
or
an exemption from registration will be required for any disposition of the
Conversion Shares or Interest Shares Such Holder understands that, although
Rule
144 is not exclusive, the Securities and Exchange Commission has expressed
its
opinion that persons proposing to sell restricted securities received in a
private offering other than in a registered offering or pursuant to Rule 144
will have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales and that such persons and
the
brokers who participate in the transactions do so at their own
risk.
i.
Authorization.
i.
Such
Holder has all requisite power and authority to execute and deliver this
Conversion Agreement, and to carry out and perform its obligations under the
terms hereof. All action on the part of the Holder necessary for the
authorization, execution, delivery and performance of this Conversion Agreement,
and the performance of all of the Holder’s obligations herein, has been
taken.
ii. This
Conversion Agreement, when executed and delivered by the Holder, will constitute
valid and legally binding obligations of the Holder, enforceable in accordance
with its terms except: (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies or by general principles of equity.
iii. No
consent, approval, authorization, order, filing, registration or qualification
of or with any court, governmental authority or third person is required to
be
obtained by the Holder in connection with the execution and delivery of this
Conversion Agreement by the Holder or the performance of the Holder’s
obligations hereunder.
j. Brokers
or Finders.
Such
Holder has not engaged any brokers, finders or agents, and the Company has
not,
and will not, incur, directly or indirectly, as a result of any action taken
by
the Holder, any liability for brokerage or finders’ fees or agents’ commissions
or any similar charges in connection with this Conversion Agreement and the
transactions related hereto.
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k. Tax
Advisors.
Such
Holder has reviewed with its own tax advisors the U.S. federal, state, local
and
foreign tax consequences of this investment and the transactions contemplated
by
this Conversion Agreement. With respect to such matters, such Holder relies
solely on such advisors and not on any statements or representations of the
Company or any of its agents, written or oral. The Holder understands that
it
(and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Conversion Agreement.
1. Legends.
Such
Holder understands and agrees that the certificates evidencing the Conversion
Shares and Interest Shares shall bear a legend in substantially the form as
follows (in addition to any legend required by any other applicable agreement
or
under applicable state securities laws):
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT
BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY
STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT AND/OR APPLICABLE
STATE SECURITIES LAWS, OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
IS NOT REQUIRED.”
IN WITNESS
WHEREOF, the parties have caused this Agreement to be duly executed by parties
duly authorized to act as of the day and year first above written.
| PHANTOM ENTERTAINMENT, INC. | ||||||||||
| By: | /s/ Xxxx Xxxxx | |||||||||
|
Xxxx
Xxxxx
Chief
Executive Officer
|
||||||||||
|
/s/
Xxxxxxx Xxxxxxxxx
|
||||||||||
| Xxxxxxx Xxxxxxxxx | ||||||||||
| Address: | ||||||||||
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