SUBSCRIPTION, LOAN AND RIGHTS AGREEMENT SAYSWAP, INC.
SAYSWAP,
INC.
THIS
SUBSCRIPTION, LOAN AND RIGHTS AGREEMENT
(this
“Agreement”)
dated
as of June 8, 2007 by and between SAYSWAP, INC., a Delaware corporation (the
“Company”), and DIGITALFX INTERNATIONAL, INC., a Florida corporation
(“DFXN”).
1. LOAN
AND PROMISSORY NOTE.
Subject
to the terms and conditions of this Agreement, on the Closing Date DFXN agrees
to make a secured term loan (the “Loan”)
to the
Company in the amount of Two Hundred Twenty-Five Thousand Dollars and No
One-Hundredths ($225,000.00)(the “Loan Amount”). The Loan shall be evidenced by
a senior secured convertible promissory note executed by the Company (the
“Senior
Secured Promissory Note”)
in
substantially the form of Exhibit
A
attached
hereto, dated the Closing Date, payable to DFXN in a principal amount equal
to
the Loan Amount.
DFXN
agrees to transfer the Loan Amount to the Company on the Closing Date, pursuant
to the following wire transfer instructions:
U.S.
Bank
Minneapolis,
Minnesota
Transit
Number 000000000
Account
Number 104776558009
For
the
account of:
SaySwap,
Inc.
0000
Xxxxxx Xxxx Xxxxx
Xxxxxxxxxxx,
Xxxxxxxxx 00000
2. WARRANTS.
DFXN
hereby subscribes for and agrees to purchase from the Company, on the Closing
Date, for a purchase price equal to $1.00 and the mutual promises contained
herein, a warrant or warrants (the “Warrants”) to purchase an aggregate of
Twenty-Six and One-Tenth (26.1) shares (as adjusted) of the fully paid and
nonassessable Common Stock, no par value per share, of the Company, at a
purchase price per share initially equal to $3,831.42, which warrants shall
expire at 5:00 P.M., Eastern Time, on May 31, 2010, subject to the provisions
and upon the terms and conditions therein set forth. The Warrants shall be
in
substantially the form of Exhibit
B
attached
hereto. On the Closing Date the Company will issue the Warrants to
DFXN.
3. REPRESENTATIONS
AND WARRANTIES.
3.1 Representations
and Warranties of the Company.
In
order to induce DFXN to execute and deliver this Agreement, the Company
represents, warrants, and covenants to DFXN as follows:
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(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly authorized to transact
business as a foreign corporation in the State of Minnesota. The Company
has
full power and authority to own its properties and to carry on its business
as
currently conducted.
(b) The
execution, delivery and performance by the Company of this Agreement and
the
transactions contemplated hereby shall be in compliance with the exemptions
from
registration set forth in Regulation D and/or Section 4(2) of the 1933 Act
and
applicable state securities “blue sky” laws, and the Company shall make all
filings required to qualify for such exemptions. No additional permit, license,
exemption, consent, authorization or approval of, or the giving of any notice
by
the Company to, any governmental or regulatory body, agency or authority
is
required in order for the Company to execute, deliver and perform its
obligations hereunder, which has not been made, or will not when required
be
made, by the Company. No notice by the Company to any third party, and no
consent or approval of any third party, of the Company’s execution, delivery and
performance of this Agreement is required which has not been given or
obtained.
(c) The
Company has the requisite power and authority to execute and deliver this
Agreement, and perform its obligations herein, and consummate the transactions
contemplated hereby. Upon the execution of this Agreement by both parties,
this
Agreement will be a valid, legal and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors’ rights generally and
subject to general principles of equity (regardless of whether such enforcement
is considered in a proceeding at law or at equity).
(d) The
Company has reserved sufficient conversion shares (the
“Conversion
Shares”) and warrant shares (the “Warrant Shares”) for conversion of the Senior
Secured Promissory Note and the exercise of the Warrants,
respectively.
(e) The
Conversion Shares and Warrant Shares underlying the Senior Secured Promissory
Note and the Warrants to be issued to DFXN pursuant to this Agreement, when
issued and delivered in accordance with the terms of this Agreement, in each
case, shall be duly authorized, validly issued, fully paid and
non-assessable.
(f) The
Company has no subsidiaries.
(g) The
execution, delivery and performance by the Company of this Agreement, the
Senior
Secured Promissory Note and the Warrants (collectively, the “Transaction
Documents”)
and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action of the Company.
The
execution and delivery by the Company of this Agreement and each of the other
Transaction Documents, the performance by the Company of its obligations
hereunder and thereunder and the consummation by the Company of the transactions
contemplated hereby and thereby do not:
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(i) violate
any provision of the certificate of incorporation or bylaws (or similar
organizational documents) of the Company;
(ii) result
in: (A) a violation or breach of, or constitute (with or without due notice
or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under any of the terms, conditions
or
provisions of any material contract to which the Company is a party or by
which
any of the properties or assets of the Company may be bound or otherwise
subject; or (B) in the creation or imposition of any Lien upon any of the
properties or assets of the Company; or
(iii) contravene
or violate any Law applicable to the Company or its properties or
assets.
(h) As
of the
Closing, the issued and outstanding capital stock of the Company will consist
of
1,333.3 shares of Common Stock, and the capitalization shall be as indicated
on
Schedule 3.1(h). As of the Closing of the transactions contemplated herein,
except for the Warrants and the Senior Secured Promissory Note, as contemplated
by this Agreement, and except as set forth on Schedule 3.1(h), there are
no (i)
outstanding options, warrants, preemptive rights, participation rights,
antidilution provisions or other rights to acquire or subscribe to, or calls
or
commitments of any character whatsoever to which the Company is a party or
may
be bound, requiring the issuance or sale of shares of any class of capital
stock
or other equity securities of the Company or securities or rights convertible
into or exchangeable for such shares or other equity securities, or (ii)
contracts, commitments, understandings or arrangements for which the Company
is
or may become bound to issue additional shares of its capital stock or other
equity securities or options, warrants or rights to acquire or subscribe
to any
additional shares of any class of its capital stock or other equity securities
or securities convertible into or exchangeable for such shares or other equity
securities. None of the Company’ capital stock has been issued or will be issued
in connection with the transactions contemplated by this Agreement in violation
of any preemptive right.
(i) Except
for expense reimbursements or payments to employees, officers or directors
in
the ordinary course of business and except as set forth on Schedule 3.1(i)
hereto, (i) the Company is not indebted to any of its officers, directors,
or
shareholders or to Affiliates of such Persons or members of their respective
families; (ii) none of such officers, directors or shareholders, or any of
their
Affiliates or members of their families, are indebted to the Company; and
(iii)
no officer, director, shareholder, or any Affiliates of such Person or member
of
such Persons’ families, is a party to any material Contract with the Company.
(j) The
Company neither owns nor leases any real property.
(k) There
is
no pending or, to the knowledge of the Company, threatened audit, investigation,
proceeding or claim respecting any Tax for which the Company is or may be
liable
or which relates to the income, assets or operations of the Company and no
such
audit, investigation, proceeding or claim has been conducted or is ongoing.
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(l) Other
than the Senior Secured Promissory Note, Borrower has no material liability
or
obligation, absolute or contingent (individually or in the aggregate) except
as
set forth on Schedule 3.1(i) hereto.
(m) The
Company owns, or is licensed to use, on the Effective Date, and will own,
or be
licensed to use, on the Closing Date, all trademarks, tradenames, copyrights,
patents and other intellectual property material to its business (the
“Intellectual Property”), and the use thereof by the Company does not, to the
Company’s knowledge, infringe upon the rights of any other entity or person. To
the Company’s knowledge, there are no liens or other encumbrances against the
Intellectual Property. Except as listed on Schedule 3.1(n), neither the Company
nor any other entity or person is currently a party to any agreement pursuant
to
which the Company has granted to any third party any right in and to any
of the
Intellectual Property for any purpose whatsoever. To the Company’s knowledge,
there are no adverse claims in existence with respect to any of the Intellectual
Property. The Company is not in default or breach of the license agreements
pursuant to which rights have been granted to the Company to use Intellectual
Property, and, to the Company’s knowledge, there exists no state of facts which
after notice or lapse of time or both would constitute such a default or
breach,
and all such license agreements are still in full force and effect.
(n) There
is
no pending or, to the knowledge of the Company, threatened litigation or
proceeding: (a) that has been commenced by or against the Company or any
part of its business, operations, properties or assets; or (b) that
challenges or seeks to alter or materially delay the transactions contemplated
hereby and, to the knowledge of the Company, there exists no basis for any
such
Proceeding.
(o) The
information, reports, financial statements, exhibits and schedules furnished
in
writing by or on behalf of the Company to DFXN in connection with the
negotiation, preparation or delivery of the Transaction Documents or included
in
or delivered pursuant to any Transaction Document, when taken as a whole
do not
contain any untrue statement of material fact or omit to state any material
fact
necessary to make the statements in any Transaction Document, in light of
the
circumstances under which they were made, not misleading. All written
information furnished by or on behalf of the Company or any of its Subsidiaries
to DFXN in connection with the Transaction Documents and the transactions
contemplated by the Transaction Documents will be true, complete and accurate
in
every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to the Company that could have a material adverse
effect
on the Company that has not been disclosed in the Transaction Documents or
in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to DFXN for use in connection with the transactions
contemplated by the Transaction Documents. DFXN acknowledges receipt by it
of
the disclaimers set forth in Schedule 3.1(o), which disclaimers have been
previously provided by the Company to DFXN.
(p) The
Company has not employed any broker, agent or finder other than Xxxxx-Xxxxxx,
or
agreed to incur any liability for any brokerage fees, agents’ commissions or
finders’ fees in connection with the transactions contemplated hereby, except as
otherwise disclosed herein.
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3.2 Representations
and Warranties of DFXN.
In
order to induce the Company to execute and deliver this Agreement, DFXN
represents, warrants, and covenants to the Company as follows:
(a) DFXN
is a
corporation duly organized, validly existing and in good standing under the
laws
of the State of Florida and is duly authorized to transact business as a
foreign
corporation in the State of Nevada.
(b) DFXN
has
the requisite power and authority to execute and deliver this Agreement,
and
perform its obligations herein, and consummate the transactions contemplated
hereby. Upon the execution of this Agreement by both parties, this Agreement
will be a valid, legal and binding obligation of DFXN enforceable against
DFXN
in accordance with its terms, except to the extent that enforceability may
be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally and subject to general principles of
equity (regardless of whether such enforcement is considered in a proceeding
at
law or at equity).
(c) the
Senior Secured Promissory Note and the Warrants to be issued to DFXN pursuant
to
this Agreement, and the Conversion Shares and the Warrant Shares will be
acquired for DFXN’s own account, and not as a nominee or agent, and not with a
view to distribution of any part thereof, and DFXN has no present intention
of
selling, granting participation in, or otherwise distributing the
same;
(d) DFXN
understands that neither the Senior Secured Promissory Note and the Warrants
to
be issued to DFXN pursuant to this Agreement, nor the Conversion Shares or
the
Warrant Shares have been registered under the Securities Act of 1933 (the
“1933
Act”) or any state’s securities laws by reason of reliance upon certain
exemptions therefrom and that the Company has no obligation or intention
to
register the offering of the Warrant Shares, the Conversion Shares or any
future
offering of the Company’s securities under the Act or any state act or to file
the reports which would enable DFXN to sell the Warrant Shares and/or the
Conversion Shares under the 1933 Act, and that the reliance of the Company
on
such exemptions is predicated upon, among other things, the bona fide nature
of
DFXN’s investment intent as expressed herein; and
(e) DFXN
is
an “accredited investor” as that term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act, has sufficient knowledge and experience in
financial and business matters that DFXN is capable of evaluating the merits
and
risks of the transactions contemplated herein, and DFXN understands that
the
purchase of the Warrant Shares and/or the Conversion Shares is a speculative
investment and involves a high degree of economic risk.
(f) DFXN
has
been given full access to information regarding the Company and has utilized
such access to its satisfaction for the purpose of obtaining information
necessary to make an informed investment decision.
(g) DFXN
understands and agrees that a legend will be placed on the certificates
representing the Warrant Shares and/or the Conversion Shares containing
substantially the following language and that any transfer of the Warrant
Shares
and/or the Conversion Shares is subject to the terms of this
legend:
5
“No
registration statement as to the shares of common stock represented by this
certificate has been filed pursuant to the Securities Act of 1933 with the
Securities and Exchange Commission or pursuant to any applicable state statue.
These shares, accordingly, may not be sold, transferred, or otherwise disposed
of for value unless and until a registration statement including these shares
has been filed with the Securities and Exchange Commission and any applicable
state authority including, but not limited to, the State of Delaware and
has
become effective or until the holder of said shares has obtained an opinion
from
counsel satisfactory to the issuer of these shares to the effect that such
registration is not required.
Furthermore,
the shares represented by this stock certificate are subject to the provisions
of a Shareholders Agreement, a copy of which is on file with the Secretary
of
the Company at its registered office.”
3.3 Indemnification;
Survival.
(a) Indemnification.
(i) The
Company shall hold harmless, defend and indemnify DFXN and each of DFXN’s
agents, officers, directors, managing members and Affiliates in their respective
capacities as such from and against any losses, claims, damages, liabilities,
costs and expenses (including reasonable attorneys’ fees and disbursements)
suffered or incurred by it arising out of or in connection with this agreement
or the transactions contemplated hereby, based upon or resulting from: (i)
the
failure of any representation or warranty made by the Company to be true
and
correct on the date hereof and at the Closing Date; and (ii) the Company’s
failure to perform or to comply with any covenant or agreement to be performed
or complied with hereunder.
(ii) DFXN
shall hold harmless, defend and indemnify the Company and each of the Company’s
agents, officers, directors, members and Affiliates in their respective
capacities as such from and against any losses, claims, damages, liabilities,
costs and expenses (including reasonable attorneys’ fees and disbursements)
suffered or incurred by it arising out of or in connection with this agreement
or the transactions contemplated hereby, based upon or resulting from: (i)
the
failure of any representation or warranty made by DFXN to be true and correct
on
the date hereof and at the Closing Date; and (ii) DFXN’s failure to perform or
to comply with any covenant or agreement to be performed or complied with
hereunder.
(iii) In
no
event shall the aggregate indemnity obligation of any indemnifying party
under
this Section 3.3(a) exceed the Loan Amount. An indemnifying party shall make
payments of all amounts required to be made pursuant to this Section 3.3(a)
to,
or for the account of, the indemnified party from time to time promptly upon
receipt of bills or invoices relating thereto or when otherwise due and
payable.
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(iv) Any
Person entitled to indemnification under this Section 3.3(a) will: (i) give
prompt notice to the indemnifying party of any claim with respect to which
it
seeks indemnification; and (ii) permit such indemnifying party to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party, to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. Whether or not such defense is assumed
by
the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will
not
be unreasonably withheld). If the indemnifying party elects to assume the
defense of a claim, it shall not be liable to such indemnified party for
any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof. Notwithstanding the indemnifying party’s election to
assume the defense of a claim, the indemnified party shall have a right to
employ separate counsel, and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if the actual or potential
defendants in, or targets of, any such action include both the indemnified
party
and the indemnifying party and the indemnified party shall have reasonably
concluded that (x) there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to
the indemnifying party or (y) a conflict of interest between such indemnified
party and indemnifying parties may exist in respect of such claim. No
indemnifying party will consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. If the indemnifying party
is
not entitled to, or elects not to, assume the defense of a claim, it will
not be
obligated to pay the fees and expenses of more than one counsel (and one
local
counsel) for all parties indemnified by such indemnifying party with respect
to
such claim. If the failure of any Person to give prompt notice to one
indemnifying party of any claim with respect to which it seeks indemnification
materially prejudices such indemnifying party, such indemnifying party shall
be
relieved of its obligation to indemnify such Person to the extent such
indemnifying party has been prejudiced.
(b) Survival
of Representations.
The
representations and warranties of the parties shall survive the execution
and
delivery of this Agreement and the Closing until such time as the Senior
Secured
Promissory note is satisfied.
4. REGISTRATION
RIGHTS.
DFXN
shall have the registration rights set forth in this Section 4 with respect
to
the Warrant Shares and the Conversion Shares.
(a) If
the
Company files a registration statement with the SEC to register the resale
of
its common stock under the 1933 Act (the “Common Stock”), then DFXN has the
right to demand the inclusion of the Conversion Shares and the Warrant Shares
(which are hereinafter collectively referred to in this Section 4 as the
“Registrable Securities”) in the registration statement within twenty (20) days
of receipt of the Company’s notice of intention to effect such a registration
and DFXN shall specify therein the number of Registrable Securities DFXN
desires
to register for sale. In addition, the Company shall use its best efforts
to
cause such registration statement to become effective as soon as practicable
after the date of such initial filing.
DFXN
shall have unlimited rights to make such demand with respect to any offering
by
the Company other than the Company’s initial offering to the public generally,
employee plan registrations, Rule 145 transactions, a registration on a form
that that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of
the
Registrable Securities, and registrations in which the only Common Stock
being
registered is Common Stock issuable upon conversion of debt securities also
being registered).
7
(b) In
addition to the covenants set forth in Section 4(a), the Company
shall:
(i) cause
any registration statement with respect to the Registrable Securities to
remain
effective for the earliest of (A) the second anniversary of the date the
registration statement has been declared effective, (B) such time as all
of the
Registrable Securities issued or issuable hereunder can be sold by DFXN
immediately without compliance with the registration requirements of the
Securities Act pursuant to Rule 144(k) under the Securities Act (“Rule
144”) and (C) the date all of the Registrable Securities issued shall have
been sold by DFXN (such period, the “Registration Period”);
(ii) prepare
and file with the SEC such amendments to such registration statement and
supplements to the prospectus contained therein as may be necessary to
keep such
registration statement effective for the applicable period in accordance
with
the provisions of Section 4(b)(i) above;
(iii) furnish
to DFXN such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
holder
may reasonably request in order to facilitate the public offering of DFXN’s
securities;
(iv) use
its
best efforts to register or qualify the Registrable Securities covered by
such
registration statement under such state securities or blue sky laws of such
jurisdictions as DFXN may reasonably request in writing within twenty (20)
days
following the original filing of such registration statement, except that
the
Company shall not for any purpose be required to execute a general consent
to
service of process or to qualify to do business as a foreign corporation
in any
jurisdiction wherein it is not so qualified;
(v) notify
DFXN, promptly after it shall receive notice thereof, of the time when such
registration statement or a supplement to any prospectus forming a part of
such
registration statement has become effective;
(vi) notify
DFXN promptly of any request by the Staff of the SEC for the amending or
supplementing of such registration statement or prospectus or for additional
information;
(vii) prepare
and file with the SEC any amendments or supplements to such registration
statement or prospectus which is required under the 1933 Act or the rules
and
regulations promulgated thereunder in connection with the distribution of
the
Registrable Securities by DFXN;
(viii) prepare
and promptly file with the SEC and promptly notify DFXN of the filing of
such
amendment or supplement to such registration statement or prospectus as may
be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such Registrable Securities is required to be delivered
under the 1933 Act, any event shall have occurred as the result of which
any
such prospectus or any other prospectuses then in effect would include an
untrue
statement of a material fact or omit to state any material fact necessary
to
make the statements therein, in the light of the circumstances in which they
were made, not misleading;
8
(ix) advise
DFXN promptly after it shall receive notice or obtain knowledge thereof,
of the
issuance of any stop order by the Division of Enforcement of the SEC suspending
the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best
efforts
to prevent the issuance of any stop order or to obtain its withdrawal if
such
stop order should be issued;
(x) indemnify
and hold harmless DFXN against any and all losses, claims, damages or
liabilities to which DFXN shall become subject, under the 1933 Act or otherwise,
that arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the effective registration statement
or any prospectus that forms a part thereof or any amendment or supplement
thereto, or arise out of or are based upon any omission or alleged omission
to
state therein a material fact required to be stated therein or necessary
to make
the statements there in not misleading; provided,
however,
that no
such indemnification shall be available to DFXN (and DFXN shall indemnify
and
hold harmless the Company) with respect to, and to the extent there is liability
attributable to, written information provided by DFXN to the Company for
use in
such registration statement or prospectus thereunder or any amendment or
supplement thereto, or any related preliminary prospectus; and
(xi) cause
its
executive officers to cooperate in good faith with any managing underwriter
in
connection with taking all actions reasonably necessary to successfully
consummate the public offering, including but not limited to, active
participation at so-called “road shows” to the extent requested by the managing
underwriter, and using best efforts to obtain as high a valuation of the
Company
as possible.
(c) (i) All
fees,
costs and expenses of and incidental to the registration of Registrable
Securities, shall be borne by the Company; provided,
however,
that
DFXN shall bear its pro rata share of the underwriting discount, if any,
and
commissions and transfer taxes, and any professional fees or costs of
accounting, financial or legal advisors to any of DFXN.
(ii) The
fees,
costs and expense of registration to be borne by the Company as provided
in
Section 4(c)(i) above shall include, without limitation, all registration,
filing fees, exchange or market listing fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees
and
disbursements and other expenses of complying with state securities or blue
sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified.
(d) The
registration rights granted by this Section 4 shall be subject to the following
conditions
and limitations:
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(i) If
the
managing underwriter or underwriters of any proposed public offering advises
the
Company that the total amount of Registrable Securities is sufficiently large
to
adversely affect the success of such proposed public offering, then the amount
of securities to be offered for the account of DFXN shall be reduced pro
rata,
based upon the aggregate number of securities to be offered for the accounts
of
all of the holders of Registrable Securities (except the Company) intended
to be
included in such offering and the number of securities to be offered for
the
account of DFXN, to the extent necessary to reduce the total amount of
securities to be included in such proposed public offering to the amount
recommended by such managing underwriter or underwriters before the securities
of the Company are so reduced.
(ii) The
price
at which the Registrable Securities are offered to the public shall be the
same
as the price at which the Common Stock then registered is offered to the
public.
(iii) The
Company shall have the right to withdraw or postpone a registration statement
referred to in this Section 4 at any time before it becomes effective without
obligation to DFXN, provided that the Company’s obligations under this Section 4
shall remain effective.
(e) In
the
case of (i) the Company’s initial public offering and (ii) any underwritten
offering of Common Stock within three (3) years after the effective date
of such
initial public offering, DFXN agrees not to effect any public sale or
distribution of Registrable Securities except as part of such offering during
the period beginning 7 days prior to the closing date of such underwritten
offering and ending 180 days after such closing date (or such shorter period
as
may be requested by the managing underwriter or underwriters). The Company
may
impose stop-transfer restrictions in order to enforce the
foregoing.
(f) The
rights of DFXN to request registration or inclusion of Registrable Securities
in
any registration pursuant to Section 4 shall terminate upon the earliest
to
occur of:
(i) the
consummation of a sale, transfer or other disposition, in a single transaction
or series of related transactions, by the Company of all or substantially
all
its assets or the merger or consolidation of the Company with or into another
company in which the stockholders of the Company own less than 50% of the
voting
securities of the surviving entity;
(ii) the
dissolution or winding up of the Company;
(iii) when
all
of DFXN’s Registrable Securities could be sold within a three month period in
compliance with Rule 144; and
(iv) the
date
upon which DFXN ceases to own any Registrable Securities.
5. APPROVAL
RIGHTS.
So long
as any amount of the Company’s obligations under the Senior Secured Promissory
Note, including principal and accrued interest, remains unpaid, the Company
shall not require DFXN’s approval to obtain additional financing through the
issuance of equity securities or securities convertible into equity securities;
provided that Company shall require the written consent of DFXN before issuing
any additional debt that is pari passu or senior to the security of the Senior
Secured Promissory Note. Notwithstanding the foregoing, without the approval
of
DFXN, Live Universe may invest up to $200,000 in convertible secured notes
having the same terms as the Senior Secured Promissory Note issued to DFXN,
and,
without the approval of DFXN, the Company may raise an additional aggregate
amount of up to $200,000 from Xxxxxx Properties and/or K5 Leisure Products,
Inc.
or one of their nominees, through the issuance of convertible secured notes
having the same terms as the Senior Secured Promissory Note issued to DFXN.
10
6. ADDITIONAL
AGREEMENTS.
(a) The
Company agrees that upon the closing of the transactions contemplated herein,
it
will use its reasonable commercial efforts to secure a Qualified Financing,
defined as an amount of at least $2,500,000.
(b) The
Company agrees to enter into a private label program with DFXN
for the
Company’s game trading platform. This will be subject to the Company’s “White
Label Share of Revenue Agreement.” The Company shall have the option to
integrate DFXN
video
features into its game trading sites subject to applicability to the Company’s
format and any technology constraints. The Company and DFXN
will
discuss alternate methods of assisting each other to monetize their respective
assets.
7. AGENT.
The
Parties agree that the Company will pay Xxxxx-Xxxxxx a fee of $25,000 at
closing
of the issuance of the Senior Secured Promissory Note to DFXN.
The
Company has signed an exclusive
engagement with Xxxxx-Xxxxxx to which Xxxxx-Xxxxxx shall serve as agent in
a
private placement of the Company’s securities or a sale of the
Company.
8. NOTICE
PROVISIONS.
Any
and
all notices, demands or requests required or permitted to be given under
this
Agreement shall be given in writing and sent, by registered or certified
U.S.
mail, return receipt requested, by hand, or by overnight courier, addressed
to
the parties hereto at their addresses set forth above or such other addresses
as
they may from time-to-time designate by written notice, given in accordance
with
the terms of this Section 8, together with copies thereof as
follows:
|
In
the case of the Company to:
|
SaySwap,
Inc.
|
|
|
0000
Xxxxxx Xxxx Xxxxx
|
||
|
Xxxxxxxxxxx,
Xxxxxxxxx 00000
|
||
|
Attn:
Xxxxxx Xxxxxxxxx
|
||
|
with
a copy to:
|
Xxxxxx
Xxxxxxxxxx Law Group
|
|
|
0000
Xxxxxxxxxx Xxxx Xx., Xxx. 000
|
||
|
Xxxxxxxxxxx,
Xxxxxxxxx 00000
|
||
|
Attn:
Xxxxxxx Xxxxxxxxxx, Esq.
|
||
|
In
the case of DFXN, to:
|
DigitalFX
International, Inc.
|
|
|
0000
Xxxx Xxxxxxx Xxxx, Xxxxx #0
|
||
|
Xxx
Xxxxx, Xxxxxx 00000
|
||
|
Attn:
Xxxxx Xxxxxx
|
||
|
with
a copy to:
|
Xxxxxx
Xxxxxxx, Esq.
|
|
|
Attorney
at Law
|
||
|
000
Xxxxxx Xxxxxx, X000
|
||
|
Xxx
Xxxx, Xxx Xxxx 00000
|
11
Notice
given as provided in this Section shall be deemed effective: (i) on the business
day hand delivered (or, if it is not a business day, then the next succeeding
business day thereafter), (ii) on the first business day following the sending
thereof by overnight courier, and (iii) on the seventh calendar day (or,
if it
is not a business day, then the next succeeding business day thereafter)
after
the depositing thereof into the exclusive custody of the U.S. Postal Service.
As
used herein, the term business day (other than Saturday or Sunday) shall
mean
any day when commercial banks are open in the State of New York to accept
deposits.
9. MISCELLANEOUS.
(a) The
rights under this Agreement may be assigned (but only with all related
obligations) by DFXN to a transferee of Registrable Securities that (i) is
a
subsidiary, affiliate or stockholder of DFXN; (ii) is not a competitor of
the
Company, as “competitor” is defined by the Company at the time of such
assignment; or (iii) after such transfer, holds all of the Registrable
Securities previously held by DFXN (subject to appropriate adjustment for
stock
splits, stock dividends, combinations, and other recapitalizations); provided,
however, that (x) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee
and the
Registrable Securities with respect to which such rights are being transferred;
and (y) such transferee agrees in a written instrument delivered to the Company
to be bound by and subject to the terms and conditions of this Agreement,
including the provisions of Section 4(e). The terms and conditions of this
Agreement shall inure to the benefit of and are binding upon the respective
successors and permitted assignees of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assignees any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
(b) This
Note
shall be governed and construed in accordance with the laws of the defendant’s
Home State, as applicable, in any action arising in connection herewith
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law. The Company and DFXN each irrevocably submit to the
exclusive jurisdiction of the state and federal courts located in the
defendant’s Home State, as applicable, for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. For purposes of this Agreement, “Home State”
shall mean the State of Minnesota with respect to the Company and the State
of
Nevada with respect to the Holder and shall include, for purposes of
jurisdiction, Hennepin County with respect to the Company and Xxxxx County
with
respect to the Holder.
(c) This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. This Agreement may also be executed and delivered by facsimile
signature and in two or more counterparts, each of which shall be deemed
an
original, but all of which together shall constitute one and the same
instrument.
12
(d) The
titles and subtitles used in this Agreement are for convenience only and
are not
to be considered in construing or interpreting this Agreement.
(e) Any
term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, and
either retroactively or prospectively) only with the written consent of the
Company and DFXN; provided that any provision hereof may be waived by any
waiving party on such party’s own behalf, without the consent of any other
party. No waivers of or exceptions to any term, condition, or provision of
this
Agreement, in any one or more instances, shall be deemed to be or construed
as a
further or continuing waiver of any such term, condition, or
provision.
(f) In
case
any one or more of the provisions contained in this Agreement is for any
reason
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision of this
Agreement, and such invalid, illegal, or unenforceable provision shall be
reformed and construed so that it will be valid, legal, and enforceable to
the
maximum extent permitted by law.
(g) This
Agreement (including any Schedules and Exhibits hereto) constitutes the full
and
entire understanding and agreement among the parties with respect to the
subject
matter hereof, and any other written or oral agreement relating to the subject
matter hereof existing between the parties is expressly canceled.
(h) No
delay
or omission to exercise any right, power, or remedy accruing to any party
under
this Agreement, upon any breach or default of any other party under this
Agreement, shall impair any such right, power, or remedy of such nonbreaching
or
nondefaulting party, nor shall it be construed to be a waiver of or acquiescence
to any such breach or default, or to any similar breach or default thereafter
occurring, nor shall any waiver of any single breach or default be deemed
a
waiver of any other breach or default theretofore or thereafter occurring.
All
remedies, whether under this Agreement or by law or otherwise afforded to
any
party, shall be cumulative and not alternative.
* * *
13
IN
WITNESS WHEREOF, the undersigned has executed this Subscription, Loan and
Rights
Agreement on this 8th
day of
June, 2007.
| DIGITAL FX INTERNATIONAL, INC. | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxx | |
|
Xxxxx Xxxxxx |
||
| President | ||
| SAYSWAP, INC. | ||
| |
|
|
| By: | /s/ Xxxxxx Xxxxxxxxx | |
|
Xxxxxx Xxxxxxxxx |
||
| President | ||
14
EXHIBIT
A
SENIOR
SECURED PROMISSORY NOTE
15
EXHIBIT
B
WARRANT
16
