SYZYGY ENTERTAINMENT, LTD. PUT OPTION AGREEMENT
Exhibit
10.4
SYZYGY
ENTERTAINMENT, LTD.
Issue
Date: July 25, 2008
Syzygy
Entertainment, Ltd., a corporation organized under the laws of the State of
Nevada (“Company”), hereby agrees that, for value received, Shelter Island
Opportunity Fund, LLC, its successors or assigns (the “Holder”), is entitled,
subject to the terms set forth below, to require the Company (as defined herein)
from and after the earlier of (i) the repayment in full of all amounts owed
to
the Holder under the Debenture or (ii) the date that is 18 months after the
Closing Date (as such terms are defined in the Securities Purchase Agreement
dated as of even date herewith between the Company and the Holder) (the “Put
Commencement Date”),
until
July 23, 2013 (the
“Put
Termination Date”), to repurchase
from Holder
at the
Exercise Price (as defined herein) up to the maximum number of shares (the
“Put
Shares”) of Common Stock (as defined herein) that are issuable, but not yet
issued, pursuant to each of the Common Stock Purchase Warrants attached hereto
(the “Warrants”) that are issued by the Company. The number and character of the
Put Shares and the Exercise Price per share are subject to the adjustment
mechanisms under the Warrants.
As
used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:
(a) The
term
“Company” shall include Company and any corporation which shall succeed, or
assume the obligations of, Company hereunder.
(b) The
term
“Common Stock” includes (i) the Company’s Common Stock, $0.001 par value
per share; and (ii) any other class of securities into which such
securities may be reclassified, converted or exchanged into, whether pursuant
to
a plan of recapitalization, reorganization, merger, sale of assets or
otherwise.
1.
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Right
to Require Repurchase.
At
any one or more times after the Put Commencement Date until the Put
Termination Date, Holder may require that the Company repurchase
all or
any portion of the Put Shares at a price equal to the Exercise Price.
The
“Exercise Price” applicable for all the Put Shares under this Put Option
shall be equal to $325,000 or $0.2435 per share.
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2.
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Exercise
of the Put Option.
If the Holder wishes to exercise its Put Option rights, it shall
submit to
the Company, in writing, a notice indicating the number of Put Shares
it
wishes the Company to repurchase (an “Exercise Notice”). The Exercise
Notice may be submitted to the Company at any time beginning 30 days
prior
to the Put Commencement Date and ending on the Put Termination Date.
Upon
receipt of the Exercise Notice, the Company will have thirty (30)
days
from its receipt of the Exercise Notice to pay the Exercise Price
to
Holder. The Put Option will be deemed exercised on the date upon
which the
Company receives the Exercise Notice and the Company shall, subject
to the
provisions of paragraph 3, purchase at the Exercise Price the Put
Shares
subject to such Exercise Notice within thirty (30) days from its
receipt
of the Exercise Notice. The Exercise Price shall be paid by the Company
to
the Holder by wire transfer of funds to such account as is designated
by
Holder.
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3.
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Event
of Default.
If after thirty (30) days from its receipt of an Exercise Notice,
the
Company has not paid the Exercise Price for the Put Shares that are
subject thereto, the Company shall issue to Holder within 10 days
thereafter a convertible promissory note (a “Note”), convertible into the
number of Put Shares that are the subject of such Exercise Notice,
with a
face value equal to such unpaid Exercise Price, bearing interest
at twenty
percent (20%) per annum, payable on a monthly basis based on a 24-month
level amortization, secured by a lien on all of the assets that secure
the
Debenture and containing other mutually agreed upon terms. The Note
shall
contain the following additional terms: (i) anti-dilution provisions,
similar to those contained herein, (ii) customary registration rights,
(iii) an allowance for partial or full conversion of the Note, (iv)
the
Company may satisfy its obligation under the Note (principal and/or
interest) with its Common Stock, subject to any volume or percentage
restriction if such Common Stock is publicly traded at the time of
payment
and (v) optional conversion upon notice of repayment by the Company.
The
Company hereby irrevocably constitutes and appoints Purchaser as
its
attorney-in-fact (which appointment is coupled with an interest)
to
prepare and sign in the name and on behalf of the Company, as the
Company’s attorney-in-fact, a Note to Purchaser in accordance with the
terms hereof in the event the Company has not issued a Note within
the
10-day period referred to above.
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4.
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Assignment.
Subject to compliance with applicable securities laws, this Put Option,
and the rights evidenced hereby, may be transferred by the Holder
hereof,
in whole or in part; provided, however, that the Company must be
notified,
in writing, of such transfer by the
transferor.
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5.
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Miscellaneous.
This Put Option and any term hereof may be changed, waived, discharged
or
terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination
is
sought. This Put Option shall be governed by and construed in accordance
with the laws of the State of New York without regard to its principles
of
conflicts of laws. Any action brought concerning the transactions
contemplated by this Put Option shall be brought only in the state
courts
of New York or in the federal courts located in the State of New
York;
provided, however, that Holder may choose to waive this provision
and
bring an action outside the State of New York. The Company agrees
to
submit to the jurisdiction of such courts and waive trial by jury.
The
prevailing party shall be entitled to recover from the other party
its
reasonable attorney’s fees and costs. In the event that any provision of
this Put Option is invalid or unenforceable under any applicable
statute
or rule of law, then such provision shall be deemed inoperative to
the
extent that it may conflict therewith and shall be deemed modified
to
conform with such statute or rule of law. Any such provision which
may
prove invalid or unenforceable under any law shall not affect the
validity
or enforceability of any other provision of this Put Option. The
headings
in this Put Option are for purposes of reference only, and shall
not limit
or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the
validity or enforceability of any other provision. The Company
acknowledges that its legal counsel participated in the preparation
of
this Put Option and, therefore, stipulates that the rule of construction
that ambiguities are to be resolved against the drafting party shall
not
be applied in the interpretation of this Put Option to favor any
party
against the other party.
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(Signature
Page Follows)
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IN
WITNESS WHEREOF, the undersigned have executed this Put Option as of the date
first written above.
SYZYGY
ENTERTAINMENT, LTD.
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By:
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/s/
Xxxx Xxxxxxxx
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Name:
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Xxxx
Xxxxxxxx
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Title:
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President
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SHELTER
ISLAND OPPORTUNITY FUND, LLC
By;
Shelter Island GP, LLC, its Manager
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By:
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Name:
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Title:
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