AGENCY AGREEMENT
Exhibit
10.20
June
22,
0000
Xxx
Xxxx Xxxxxxxxxxxxx, Inc.
0000
Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxxxxx 00000
Attention: Xxxxxxx
X. Xxxxxxxx
Dear
Sirs:
Re: Issue
and Sale of Units
X.X.
Xxxxxx & Company Ltd. (the “Agent”) understands that Red
Mile Entertainment Inc. (the “Corporation”) proposes to sell
and issue up to 4,000,000 units (the "Units") of the
Corporation at a price of US$2.50 per Unit, each Unit being comprised of one
common share (“Common Share”) of the Corporation and 0.2 of one
warrant ("Warrant") of the Corporation (the
“Offering”). Each whole Warrant shall entitle the
holder thereof to acquire, for no additional consideration, one Common Share
in
the event that a Liquidity Transaction (as defined herein) is not
unconditionally completed by the Corporation prior to the date that is eight
months following the Closing Date.
Subject
to the terms and conditions hereof, the Agent agrees to act as, and the
Corporation appoints the Agent as, the sole and exclusive agent of the
Corporation to offer for sale on the Closing Date on a private placement basis
the Units in the Provinces of Alberta, British Columbia, Saskatchewan, Ontario
and Nova Scotia (the "Selling Jurisdictions") and to use its
commercially reasonable best efforts to secure subscriptions therefor, provided
that the Agent shall be under no obligation to purchase any of such Units as
principal. The Agent shall be entitled in connection with the
offering and sale of the Units to retain as sub-agents other registered
securities dealers and may receive (for delivery to the Corporation at the
Closing Time) subscriptions for Units from other registered securities
dealers. The fee payable to such sub-agents shall be for the account
of the Agent.
In
consideration for its services hereunder the Agent shall be entitled to the
commission and expenses provided for in sections 8 and 9, which shall be payable
or issued, as the case may be, at the Closing Time. For greater certainty,
except as provided for in sections 8 and 9, the services provided by the Agent
in connection herewith will not be subject to Goods and Services Tax provided
for in the Excise Tax Act (Canada) and taxable supplies will be
incidental to the exempt financial services provided.
The
following are the terms and conditions of this Agreement:
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1.
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Definitions:
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In
this
Agreement:
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(a)
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“Agent”
means X. X. Xxxxxx & Company
Ltd.;
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(b)
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"Agent's
Warrants" means warrants to be issued by the Corporation to the
Agent and its nominees on the Closing Date substantially in the form
attached as Schedule 1(b), each Agent's Warrant entitling the holder
thereof to acquire one Common Share at a price of $3.00 for a period
of 24
months from the Closing Date;
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(c)
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“Agent's
counsel” means Xxxxxx Blaikie LLP, or such other legal counsel as
the Agent, with the consent of the Corporation, acting reasonably,
may
appoint;
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(d)
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“Agreement”
means this agency agreement dated effective June 22, 2007 between
the
Agent and the Corporation;
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(e)
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“Applicable
Securities Laws” includes, collectively, all securities laws,
rules, regulations, notices, policies and similar instruments applicable
to the Corporation and to the distribution of securities in accordance
with this Agreement;
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(f)
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“associates”
has the meaning ascribed thereto in the Securities Act
(Alberta);
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(g)
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“business
day” means a day which is not Saturday, Sunday or a legal holiday
in the City of Calgary;
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(h)
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“Closing
Date” means July 18, 2007 or such other date or dates as the
Agent and the Corporation may agree in
writing;
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(i)
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“Closing
Time” means 9:00 a.m. (Calgary time), or such other time on the
Closing Date as the Agent and the Corporation may agree in
writing;
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(j)
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“Common
Shares” means common shares in the capital of the
Corporation;
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(k)
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"Convertible
Debentures" means the convertible debentures issued by the
Corporation pursuant to an indenture dated October 19, 2006 between
the
Corporation and Olympia Trust
Company;
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(l)
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"Convertible
Promissory Notes" means convertible promissory notes of the
Corporation dated June 25, 2007 and June 26, 2007, in the form attached
as
Schedule 1(l) hereto, having a combined principal amount of US$2,400,000
and convertible into Units at a ratio of one Unit for each US$2.50
of
principal amount converted and also entitling the holder thereof
to one
half of one Convertible Promissory Note Warrant for every Common
Share
received upon conversion;
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(m)
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"Convertible
Promissory Note Warrants" means the warrants issuable upon
conversion of the Convertible Promissory Notes, each whole warrant
entitling the holder thereof to purchase one Common Share at an exercise
price of US$2.75 for a period of two years from the date of
issue;
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(n)
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“Copyrights”
shall mean all copyrights, and all right, title and interest in all
copyrights, copyright registrations and applications for copyright
registration, certificates of copyright and copyrightable subject
matter
throughout the world, all right, title and interest in related
applications and registrations throughout the world, and all moral
rights;
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(o)
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“Corporation”
means Red Mile Entertainment, Inc., a body corporate incorporated
pursuant
to the laws of Delaware;
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(p)
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“Corporation
Intellectual Property Rights” shall mean all Intellectual
Property Rights and Corporation Technology used or proposed to be
used in,
or necessary to, the business of the Corporation as currently conducted
or
as currently reasonably contemplated by the Corporation, whether
owned or
controlled, licenced, or otherwise held by or for the benefit of
the
Corporation;
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(q)
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“Corporation
Technology” shall mean all Technology used or proposed to be used
in, or necessary to, the business of the Corporation as currently
conducted or as currently contemplated by the Corporation, whether
owned
or controlled, licenced or otherwise held by or for the benefit of
the
Corporation.
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(r)
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“Corporation's
counsel” means Xxxxxxx Xxxxx LLP with respect to matters governed
by the laws of Canada and Xxxxxx and Eilen LLP with respect to matters
governed by the laws of the United States, or such other legal counsel
as
the Corporation may appoint;
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(s)
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“Documents”
means all documents and other information filed by or on behalf of
the Corporation in compliance with or intended compliance with Applicable
Securities Laws or mailed to the securityholders of the
Corporation;
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(t)
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"Due
Diligence Responses" means the written responses of the
Corporation, as given by the directors and officers of the Corporation
at
the Due Diligence Sessions, excluding the portion of such responses
which
are forward-looking or relate to projections or
forecasts;
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(u)
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“Due
Diligence Sessions” has the meaning set forth in subsection 2(c);
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(v)
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“Financial
Statements” means the audited financial statements of the
Corporation for the years ended March 31, 2006 and
2007;
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(w)
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“Indemnified
Persons” means each of: (i) the Agent; (ii) agents of
the Agent; (iii) affiliates of the Agent; and (iv) the
directors, officers, shareholders, partners and employees of the
Agent,
agents of the Agent and affiliates of the
Agent;
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(x)
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“Intellectual
Property Rights” means (i) any trademarks, trade xxxx
registrations, trade xxxx applications, trade dress and logos, trade
names, domain names, business names, corporate names, website
names and world wide web addresses, business names, brand names,
service
marks, computer software, computer programs, Copyrights, including
any
performing, author or moral rights, designs, integrated circuit
topographies, inventions, Patents, franchises, formulae, processes,
know-how, technology and related goodwill, (ii) any applications,
registrations, issued Patents, continuations in part, divisional
applications or analogous rights or licence rights therefor, (iii)
proprietary and non-public business information, including inventions
(whether patentable or not), invention disclosures, improvements,
discoveries, trade secrets, know-how, methods, processes, schematics
and
any documentation relating thereto, and (iv) other intellectual or
industrial property;
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(y)
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"Liquidity
Transaction" means any of:
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(i)
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the
Common Shares being listed on the TSX Venture Exchange, the Toronto
Stock
Exchange, or any other exchange (a "Recognized Exchange") acceptable
to
the Agent and the Corporation becoming a "reporting issuer" (as defined
in
applicable securities legislation) in at least one of the Canadian
Selling
Jurisdictions;
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(ii)
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all
of the issued and outstanding Common Shares having been sold, transferred
or exchanged pursuant to an amalgamation, plan of arrangement or
other
business combination, for cash or securities ("Free Trading Securities")
that are listed on a Recognized Exchange and that are not subject
to any
restricted period or hold period under applicable securities laws
in
Canada (other than in respect of resales by control
persons);
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(iii)
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the
sale by the Corporation of all or substantially all of its assets
for cash
or Free Trading Securities and the subsequent distribution of all
of such
consideration to all of the Corporation's shareholders (including
the
Investors), on a pro-rata basis;
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(iv)
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the
acceptance of a takeover bid or an issuer bid, made to all holders
of
Common Shares for proceeds consisting of cash or Free Trading Securities,
by holders of Common Shares: (A) who hold not less than 662/3% of
the
outstanding Common Shares; and (B) who hold not less than 662/3%
of the
outstanding Warrants; or
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(v)
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any
combination of the events or circumstances described in Subsections
(i),
(ii), (iii) or (iv) above;
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(z)
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“Offering”
means the offering of a minimum of 1,800,000 and a maximum of 4,000,000
Units;
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(aa)
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“Patents”
shall mean all patent rights and all right, title and interest in
and to
all letters patent or equivalent rights and applications including
any
reissue, extension, division, continuation, or continuation in part
applications throughout the world and any patents issuing with respect
to
such applications;
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(bb)
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“Person”
means a natural person, partnership, limited liability partnership,
corporation, joint stock company, trust, unincorporated association,
joint
venture or other entity;
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(cc)
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“Securities
Commissions” means the securities commissions or similar
regulatory authorities in the Selling Jurisdictions and the United
States
Securities and Exchange Commission and regulatory authorities in
the
individual states of the United
States;
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(dd)
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“Subscriber”
means any person who subscribes for Units and whose Subscription
Agreement
is accepted by the Corporation, and “Subscribers” means,
collectively, all such persons;
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(ee)
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“Subscription
Agreement” means a subscription agreement to be entered into
between the Corporation and Subscribers including any amendments
or
addendums thereto;
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(ff)
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“Subscription
Proceeds” means the aggregate gross proceeds received in respect
of the sale of Units pursuant to the
Offering;
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(gg)
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“Subsidiary”
means a subsidiary of the Corporation within the meaning of subsection
2(4) of the Business Corporations Act (Alberta) and
“Subsidiaries” means all of
them;
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(hh)
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“Technology”
shall mean any algorithms, computer software (in source code and
object
code form), documentation, data and data bases, inventions and discoveries
(whether or not patented or patentable), ideas, concepts, techniques,
know-how, processes, methods, applications, know-how, content, technical
information, engineering, production and other designs, drawings,
schematics, specifications, formulas and all other technology or
information existing anywhere in the
world;
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(ii)
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“Third
Party Intellectual Property Rights” shall mean the Intellectual
Property Rights and Technology of Persons other than the Corporation
that
are used in or necessary to the business of the Corporation as presently
conducted or as contemplated to be
conducted;
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(jj)
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"Underlying
Securities" means the Common Shares and Warrants underlying the
Units;
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(kk)
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"Units"
means units of the Corporation, each comprised of one Common Share
and 0.2
of a Warrant;
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(ll)
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"Warrant"
means a warrant entitling the holder thereof to acquire one Common
Share
of the Corporation for no additional consideration in the event that
a
Liquidity Transaction is not unconditionally completed by the Corporation
on or prior to the date that is eight months following the Closing
Date;
and
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(mm)
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"Warrant
Indenture" means the indenture dated July 18, 2007 between the
Corporation and Olympia Trust Company pursuant to which the Warrants
will
be issued.
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In
this
agreement, “misrepresentation”, “material
change” and “material fact” shall have the meanings
ascribed thereto under the Applicable Securities Laws of the Province of
Alberta; “distribution” means “distribution”
or “distribution to the public”, as the case may be,
as defined
under the Applicable Securities Laws of the Province of Alberta; and
“distribute” has a corresponding meaning.
In
this
agreement, “to the best of the knowledge, information and belief
of” or “to the best of its knowledge, information and
belief” means, unless otherwise expressly stated, a statement of the
declarant's knowledge of the facts or circumstances to which such phrase
related, after having made due and applicable inquiries and investigations
in
connection with such facts and circumstances; and “to the best of the
knowledge, information and belief of the Corporation” or “to
the best of the Corporation's knowledge, information and belief” means,
unless otherwise expressly stated, a statement as to the best knowledge of
each
of the directors and senior officers of the Corporation about the facts or
circumstances to which such phrase related, after having made due and applicable
inquiries and investigations in connection with such facts and
circumstances.
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2.
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Corporation's
Covenants as to Creation and
Qualification
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The
Corporation covenants and agrees:
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(a)
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that
the Units and Underlying Securities will be duly and validly created,
authorized and issued pursuant to the terms of the Subscription
Agreements;
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(b)
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that
the Corporation will: (i) promptly perform all the obligations to be
performed by it hereunder and under the Subscription Agreements;
and
(ii) as soon as reasonably possible, and in any event by the Closing
Date, execute or procure the execution of all documents and to use
its
best efforts to take or cause to be taken all steps as may be necessary
or
desirable to fulfill, to the satisfaction of Agent's counsel and
Corporation's counsel, all legal requirements to enable the Units
to be
offered for sale and sold on a private placement basis in the Selling
Jurisdictions through the Agent by way of the exemptions under Applicable
Securities Laws of the Selling Jurisdictions as contemplated
hereby;
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(c)
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that,
prior to the Closing Time, the Corporation shall allow the Agent
the
opportunity to conduct required due diligence, including, without
limiting
the generality of the foregoing, due diligence in relation to the
operations and affairs of the Corporation and provide and cause to
be
provided to the Agent and the Agent's counsel reasonable access to
the
properties, senior management personnel, and corporate, financial,
property and other records of the Corporation for the purposes of
conducting such due diligence reviews. Without limiting the
scope of the due diligence inquiries the Agent may conduct, the
Corporation shall make available its directors and senior management
to
answer any questions which the Agent may have and to participate
in one or
more due diligence sessions to be held prior to Closing (collectively,
the
“Due Diligence Sessions”);
and
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(d)
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that,
for the purposes of the Convertible Promissory Notes, all references
therein to "capital stock of the Company issued in the next financing"
shall refer to Units.
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3.
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Corporation's
Covenants as to Changes
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The
Corporation covenants and agrees that:
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(a)
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during
the period commencing with the date hereof and ending on the Closing
Date,
the Corporation will promptly inform the Agent of the full particulars
of
(i) any material adverse change, (actual, anticipated or threatened)
in the assets, liabilities (absolute, accrued, contingent or otherwise),
business, operations, capital or condition (financial or otherwise)
of the
Corporation; and (ii) the occurrence of a material fact or event
which, in any such case is, or may be, of such a nature to render
any
previous disclosure to the Agent untrue, false or misleading in any
material respect; provided that if there is any reasonable doubt
as to
whether a material change, occurrence or event of the nature referred
to
in this subsection has occurred, the Corporation shall promptly inform
the
Agent of the full particulars of the occurrence giving rise to the
uncertainty and shall consult with the Agent as to whether the occurrence
is of such nature;
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(b)
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during
the period commencing with the date hereof and ending thirty days
after
the Closing Date, the Corporation will promptly inform the Agent
of the
full particulars of: (i) any material request or inquiry
of any Securities Commission for any information relating to the
Offering,
the distribution of the Common Shares, or the Corporation (or any
of its
directors or officers); (ii) the issuance by any Securities
Commission or other securities commissions or similar regulatory
authority
or by any other competent authority of any order to cease or suspend
trading or issuance of any securities of the Corporation or of the
institution or threat of institution of any proceedings for that
purpose
and (iii) the receipt by the Corporation of any communication from
any
Securities Commission or any other securities commission, securities
regulatory authority, stock exchange or other regulatory authority
relating to the Offering; and
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(c)
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during
the period commencing on the date hereof and ending thirty days following
the Closing Date, the Corporation will promptly provide to the Agent,
for
review by the Agent and the Agent's counsel, prior to filing, delivery
or
issuance: (i) any proposed document to be delivered to the
shareholders of the Corporation; and (ii) any press release relating
to the Corporation or the Offering.
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4.
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Corporation's
Other Covenants
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The
Corporation covenants and agrees:
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(a)
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to
use commercially reasonable efforts to complete a Liquidity Transaction
on
or prior to the date that is eight months following the Closing
Date;
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(b)
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to
use commercially reasonable efforts to cause and allow the conversion
of
the Convertible Debentures into Common Shares at a conversion price
of one
Common Share for every $2.50 of principal and accrued interest on
or prior
to the date that is sixty days following the Closing
Date;
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(c)
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that,
from the date hereof and ending on the date that is 90 days following
the
Closing Date, it will not offer, or announce the offering of, or
make or
announce any agreement to issue, sell, or exchange Common Shares,
debt
instruments, preferred shares or securities convertible or exchangeable
into Common Shares without the prior consent of the Agent, not to
be
unreasonably withheld, provided that notwithstanding the foregoing,
the
Corporation may: (i) issue Common Shares on exercise of existing
options
and warrants outstanding on the date hereof and on conversion of
outstanding Convertible Debentures, Convertible Promissory Notes
and
Convertible Promissory Note Warrants and may grant stock options
and issue
Common Shares on the exercise thereof in accordance with the Corporation’s
existing option incentive programs, without such consent; and (ii)
issue
Common Shares in connection with a merger or acquisition without
such
consent. Nothwithstanding the foregoing, the Agent hereby grants
its
consent to the issue and sale of Units on the same terms and conditions
as
the Units issued pursuant to the Offering, up to a maximum of 800,000
Units, for a period ending on the date that is sixty (60) days following
the Closing Date pursuant to subscriptions secured by Xxxxxxxx Capital
Inc., as sub-agent to the Offering;
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(d)
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that,
in the event that the Corporation proposes to retain, in Canada,
an agent,
underwriter or financial advisor in respect of a merger, acquisition,
disposition, take-over, reorganization, arrangement or other corporate
transaction or the public offering or private placement of any securities
of the Corporation on an agency or underwritten basis at any time
prior to
the date that is twelve months following the Closing Date (the
"ROFR Expiry Date"), the Agent shall have the right to
participate as lead agent, lead underwriter or financial advisor,
as the
case may be, in respect of such transaction or financing on the proposed
terms. If the Corporation proposes to effect any such
transaction on or before the ROFR Expiry Date, it shall provide the
Agent
with written notice thereof setting forth the proposed terms thereof
and
the proposed terms of engagement of the Agent, including the proposed
compensation of the Agent, and the Agent shall have three business
days
following the receipt of such notice during which to notify the
Corporation of its election to accept the position of lead agent,
lead
underwriter, or financial advisor, as the case may be, on the terms
presented. If the Agent elects to exercise such right in
connection with the transaction proposed to be undertaken, the Corporation
will retain the Agent as lead agent, lead underwriter, or financial
advisor, as the case may be. If the Agent elects not
to exercise such right or the Corporation and the Agent are unable
to
agree to the terms of a proposed engagement within such three business
day
period, the Corporation may proceed to engage another lead agent,
lead
underwriter, or financial advisor, as the case may be, for purposes
of
such proposed transaction, provided that in the case where the Corporation
and the Agent are unable to agree on the terms of the proposed engagement,
the terms are no more favourable than those offered to the
Agent.
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5.
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Agent's
Covenants
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The
Agent
covenants and agrees with the Corporation that it will:
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(a)
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conduct
activities in connection with the proposed offer and sale of the
Units in
compliance with all Applicable Securities Laws in the Selling
Jurisdictions;
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(b)
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not
solicit subscriptions for Units, trade in Units or Underlying Securities
or otherwise do any act in furtherance of a trade of Units or Underlying
Securities outside of the Selling Jurisdictions, except in compliance
with
the applicable laws thereof in accordance with the terms and conditions
of
this Agreement and upon obtaining the prior written consent of the
Corporation, not to be unreasonably
withheld;
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(c)
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obtain
from each Subscriber an executed Subscription Agreement and all applicable
undertakings, questionnaires and other forms required under Applicable
Securities Laws and supplied to the Agent by the Corporation for
completion in connection with the distribution of the Units;
and
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(d)
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not
advertise the proposed offering or sale of the Common Shares in printed
media of general and regular paid circulation, radio or
television.
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6.
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Representations
and Warranties of the
Corporation
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The
Corporation represents and warrants to the Agent, and acknowledges that the
Agent is relying upon such representations and warranties, that:
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(a)
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the
Corporation and each of its Subsidiaries has been duly incorporated
and is
valid and subsisting under the laws of its jurisdiction of incorporation
and has all requisite corporate authority and power to carry on its
business, as now conducted and as presently proposed to be conducted
by
it, and to own, lease and operate its assets and
properties;
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(b)
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the
Corporation and each of its Subsidiaries is qualified to carry on
business
and is validly existing under the laws of each jurisdiction in which
it
carries on a material portion of its
business;
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(c)
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other
than 2WG Media, Inc., Roveractive Ltd. and Red Mile
Entertainment, Pty, the Corporation has no
Subsidiaries and the Corporation is not affiliated with nor is it
a
holding corporation of any other body
corporate;
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(d)
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the
Corporation owns all of the outstanding securities of 2WG Media,
Inc.,
Roveractive Ltd. and Red Mile Entertainment, Pty, and Red Mile
Entertainment, Pty does not carry on any active
business;
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(e)
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the
Corporation and each of its Subsidiaries has conducted and is conducting
its business in compliance in all material respects with all applicable
laws, rules and regulations and, in particular, all applicable licensing
and environmental legislation, regulations or by-laws or other lawful
requirements of any governmental or regulatory bodies applicable
to it in
each jurisdiction in which it carries on business, and the Corporation
and
each of its Subsidiaries holds all material licences, registrations
and
qualifications in all jurisdictions in which it carries on its business
which are necessary or desirable to carry on the business as now
conducted
and as presently proposed to be conducted, and all such licenses,
registrations or qualifications are valid and existing and in good
standing and none of such licenses, registrations or qualifications
contains any burdensome term, provision, condition or limitation
which has
or is likely to have any material adverse effect on the business
of the
Corporation and its Subsidiaries (taken as a whole) as now conducted
or as
proposed to be conducted;
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(f)
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the
Corporation has full corporate power and authority to enter into
this
Agreement , the Indenture and the Subscription Agreements and to
perform
its obligations set out herein and therein (including, without limitation,
to cause the issuance of the Units, the Underlying Securities, the
Agent's
Warrants and the Common Shares issuable on exercise of the Warrants
and
Agent's Warrants), and this Agreement has been, and the Subscription
Agreements and the Warrant Indenture will on the Closing Date be,
duly
authorized, executed and delivered by the Corporation and this Agreement
is, and the Subscription Agreements and the Warrant Indenture will
on the
Closing Date be, legal, valid and binding obligations of the Corporation,
enforceable against the Corporation in accordance with their respective
terms subject to applicable bankruptcy, insolvency, moratorium,
reorganization and other laws and equitable principles affecting
creditors' rights generally, the statutory and equitable powers of
the
courts in Canada and the United States to stay proceedings before
them and
the execution of judgments and the fact that specific performance
and
injunctive relief are equitable remedies which may be ordered by
a court
in its discretion and, accordingly, may not be available as a remedy
in an
action to enforce a covenant and subject to the fact that the rights
to
indemnity, contribution and waiver set forth herein may be limited
by
applicable laws or the public policy underlying such
laws;;
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(g)
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the
Common Shares and Warrants comprising the Units have been reserved
and
allotted for issuance and when issued on the Closing Date the Common
Shares issued pursuant to the Offering will be validly issued, fully
paid
and non-assessable Common Shares;
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(h)
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the
Common Shares issuable on exercise of the Warrants and Agent's Warrants
have been reserved for issuance and, upon exercise of the Warrants
or
Agent's Warrants, as the case may be, will be validly issued, fully
paid
and non-assessable Common Shares;
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(i)
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the
definitive forms of certificates representing the Common Shares are
in due
and proper form under the laws governing the
Corporation;
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(j)
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the
authorized capital of the Corporation consists solely of 100,000,000
Common Shares and 20,000,000 Preferred Shares of which, as at the
Closing
Date (prior to the issuance of Common Shares on the Closing Date),
9,661,810 Common Shares and nil Preferred Shares shall be issued
and
outstanding, which shares shall be validly issued, fully paid and
non-assessable;
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(k)
|
neither
the Corporation nor its Subsidiaries is a party to or bound by any
agreement of guarantee, indemnification (other than an indemnification
of
directors and officers in accordance with the by-laws of the Corporation
or its Subsidiaries and applicable laws, indemnities in favour of
the
Agent pursuant to this Agreement, indemnities in favour of purchasers
of
securities or assets in purchase and sale agreements and indemnities
and
guarantees in favour of the bankers of the Corporation, including
the
Agent) or any other like commitment of the obligations, liabilities
(contingent or otherwise) of indebtedness of any other
person;
|
|
(l)
|
other
than this Agreement and the agreements set forth in Schedule 6(l) hereto, there are no material contracts
or
agreements which have or which might have or create any material
obligation to the Corporation or from which they derive or could
derive
any material benefit or which are required by the Corporation to
carry on
its business as now conducted by it or as is now proposed to be carried
on
by it. For the purposes of this representation and warranty,
contracts shall be deemed to give rise to a material obligation where
such
contract provides for expenditures by the Corporation for an aggregate
of
more than $100,000 during any 12 month
period;
|
|
(m)
|
other
than promissory notes owing to one of the Corporation's directors
having
an aggregate principal amount of $100,000, the Corporation has no
loans or
other indebtedness outstanding which have been made to or from any
of its
shareholders, officers, directors or employees or any other person
not
dealing at arm's length with the
Corporation;
|
|
(n)
|
except
for transactions contemplated herein and except as otherwise disclosed
in
the Documents, the Corporation has not entered into any transaction
which
is or may reasonably be expected to be material to the Corporation
and
which is not in the ordinary course of
business;
|
|
(o)
|
the
Corporation is not in default or breach of, and the execution and
delivery
of, and the performance of and compliance with the terms of, this
Agreement and the Subscription Agreements by the Corporation or any
of the
transactions contemplated hereby or thereby, does not and will not
result
in any breach of, or constitute a default under, and does not and
will not
create a state of facts which, after notice or lapse of time or both,
would result in a breach of or constitute a default under, any term
or
provision of the articles, by-laws or resolutions of shareholders
or
directors of the Corporation, or any indenture, mortgage, note, contract,
agreement (written or oral), instrument, lease or other document
to which
the Corporation is a party or by which it is bound, or any judgment,
decree, order, statute, rule or regulation applicable to the Corporation,
which default or breach might reasonably be expected to materially
adversely affect the business, operations, capital or condition (financial
or otherwise) of the Corporation, or its
assets;
|
|
(p)
|
the
Corporation has provided to the Agent true and correct copies of
the
constating documents of the Corporation and minutes of all meetings
and
all the resolutions of the directors, shareholders and committees
of the
Corporation;
|
|
(q)
|
there
has not been any material adverse change in the consolidated capital,
assets, or liabilities (absolute, accrued, contingent or otherwise)
of the
Corporation from the position set forth in the Financial
Statements;
|
|
(r)
|
the
books of account and other records of the Corporation, whether of
a
financial or accounting nature or otherwise, have been maintained
in all
material respects in accordance with prudent business
practices;
|
|
(s)
|
there
has not been any material adverse change in the business, operations,
capital or condition (financial or otherwise) or results of the operations
of the Corporation since the date of the Financial Statements that
has not
been disclosed in the Documents and since that date there have been
no
material facts, transactions, events or occurrences which, to the
knowledge of the Corporation could materially adversely affect the
consolidated capital, assets, liabilities (absolute, accrued, contingent
or otherwise), business, operations or condition (financial or otherwise)
or results of the operations of the
Corporation;
|
|
(t)
|
the
Financial Statements fairly present, in all material respects and
in
accordance with generally accepted accounting principles in the United
States consistently applied, the financial position and condition
of the
Corporation as at the dates thereof and reflect all liabilities (absolute,
accrued, contingent or otherwise) of the Corporation as at the dates
thereof;
|
|
(u)
|
to
the knowledge of the Corporation, after due inquiry, there have not
occurred any material spills, emissions or pollution on any property
of
the Corporation or for which the Corporation may be responsible,
nor is
the Corporation the subject of any outstanding stop orders, control
orders, clean-up orders or reclamation orders under applicable
environmental laws and regulations;
|
|
(v)
|
to
the best of the knowledge of the Corporation, no other party is in
default
in the observance or performance of any term or obligation to be
performed
by it under any contract to which the Corporation is a party or by
which
they are bound which is material to the business of the Corporation,
no
event has occurred which with notice or lapse of time or both would
directly or indirectly constitute such a default, in any such case
which
default or event would reasonably be expected to have a material
adverse
effect on the assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the
Corporation;
|
|
(w)
|
there
are no judgments against the Corporation which are unsatisfied, nor
are
there any consent decrees or injunctions to which the Corporation
is
subject;
|
|
(x)
|
the
information and statements set forth in the Documents as at the date
hereof, as they relate to the Corporation, are true, correct, and
complete
and did not contain any misrepresentation as of the respective dates
of
such information or statements, and no material change (as defined
in
Applicable Securities Laws of the Selling Jurisdictions) has occurred
in
relation to such information and statements since the respective
dates of
such information and statements;
|
|
(y)
|
other
than the securities issued or to be issued pursuant to the Offering,
no
person, firm, corporation or other entity holds any securities convertible
or exchangeable into shares of the Corporation or now has any agreement,
warrant, option, right or privilege (whether contractual or pre-emptive)
being or capable of becoming an agreement, warrant, option or right
for
the purchase or other acquisition of any unissued shares, securities
(including convertible securities) or warrants of the Corporation
except
for outstanding warrants, options, Convertible Debentures, Convertible
Promissory Notes and Convertible Promissory Note Warrants to purchase
an
aggregate of not more than 6,353,305 Common
Shares;
|
|
(z)
|
the
Corporation has duly and on a timely basis filed all tax returns
required
to be filed by it, has paid all taxes due and payable by it and has
paid
all assessments and re-assessments and all other taxes, governmental
charges, penalties, interest and other fines due and payable by it
and
which are claimed by any governmental authority to be due and owing
and
adequate provision has been made for taxes payable for any completed
fiscal period for which tax returns are not yet required and there
are no
agreements, waivers, or other arrangements providing for an extension
of
time with respect to the filing of any tax return or payment of any
tax,
governmental charge or deficiency by the Corporation and, to the
best of
the Corporation's knowledge, information and belief, after due inquiry,
there are no actions, suits, proceedings, investigations or claims
threatened or pending against the Corporation in respect of taxes,
governmental charges or assessments or any matters under discussion
with
any governmental authority relating to taxes, governmental charges
or
assessments asserted by any such
authority;
|
|
(aa)
|
except
as disclosed in the Financial Statements (i) the Corporation has no
outstanding liabilities in excess of $10,000 other than those set
forth in
Schedule 6(aa), and (ii) there are no
actions, suits, proceedings or inquiries in existence or, to the
Corporation's knowledge, after due inquiry, pending or threatened
against
or affecting the Corporation at law or in equity or before or by
any
federal, provincial, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality which in any
way
materially adversely affects, or could reasonably be expected in
any way
to materially adversely affect, the business, operations, capital
or
condition (financial or otherwise) of the Corporation, or any of
its
assets or which affects or may affect the distribution of the Units
or
Underlying Securities and the Corporation is not aware of any existing
ground on which such action, suit, proceeding or inquiry might be
commenced with any reasonable likelihood of
success;
|
|
(bb)
|
other
than the Agent, there is no person, firm or corporation acting or
purporting to act for the Corporation entitled to any brokerage or
finder's fee or other fee or commission in connection with the Offering,
this Agreement or any of the transactions contemplated
hereby;
|
|
(cc)
|
no
Securities Commission or any other securities commission or similar
regulatory authority has issued any order which is currently outstanding
ceasing, halting, suspending or preventing other trading in any securities
of the Corporation, no such proceeding is, to the knowledge of the
Corporation, pending, contemplated or threatened, the Corporation
is not
in default of any requirement of Applicable Securities Laws and the
Corporation is entitled to avail itself of the applicable prospectus
exemptions available under the Applicable Securities Laws in respect
of
the trades in its securities to Subscribers as contemplated by this
Agreement;
|
|
(dd)
|
the
Corporation is not a “reporting issuer” or the equivalent in any
jurisdiction in Canada;
|
|
(ee)
|
the
Common Shares are listed and posted for trading on the Over-the-Counter
Bulletin Board;
|
|
(ff)
|
to
the knowledge of the Corporation, other than as previously disclosed
to
the Agent in writing, no insider of the Corporation has any present
intention to sell any securities of the
Corporation;
|
|
(gg)
|
except
as have been provided to the Agent as at the date hereof, the Corporation
is not a party to any contracts of employment which may not be terminated
on one month's notice or which provide for payments occurring on
a change
of control of the Corporation;
|
|
(hh)
|
other
than leases of the Corporation with respect to its office premises,
the
Corporation does not own or lease nor has it agreed to acquire or
lease,
any interest in real property;
|
|
(ii)
|
to
the knowledge of the Corporation, no officer, director or securityholder
of the Corporation is subject to any limitations or restrictions
on their
activities or investments, including any non-competition provisions,
that
would in any way restrict or limit their involvement with the Corporation
or the business and affairs of the
Corporation;
|
|
(jj)
|
all
filings by the Corporation pursuant to which the Corporation has
received
or is entitled to receive government incentives, have been made in
accordance, in all material respects, with all applicable legislation
and
contain no misrepresentations of material fact or omit to state any
material fact which could cause any amount previously paid to the
Corporation or previously accrued on the accounts thereof to be recovered
or disallowed;
|
|
(kk)
|
to
its knowledge, neither the Corporation nor any of its shareholders
is a
party to any unanimous shareholders agreement, pooling agreement,
voting
trust or other similar type of arrangements in respect of outstanding
securities of the Corporation;
|
|
(ll)
|
the
representations and warranties made by the Corporation in the Subscription
Agreements are, or will at the Closing Date be, true and correct
as of the
date at which they are made;
|
|
(mm)
|
the
Corporation either exclusively owns or has the valid right to use
all
Corporation Intellectual Property Rights, Corporation Technology
and all
Third Party Intellectual Property Rights (and, to the knowledge of
the
Corporation, no third party, including any past or present employee
or
contractor of the Corporation, owns or has any ownership interest
in any
Corporation Intellectual Property Rights or Corporation Technology
that
are not Third Party Intellectual Property Rights of the
Corporation);
|
|
(nn)
|
to
the knowledge of the Corporation, neither the Corporation Intellectual
Property Rights nor the conduct of the business of the Corporation
as
presently conducted or reasonably currently contemplated to be conducted
uses or discloses in an unauthorized manner, infringes, or constitutes
a
misappropriation of any Intellectual Property Right or Technology
of any
Person;
|
|
(oo)
|
to
the knowledge of the Corporation, none of the Corporation Intellectual
Property Rights or Corporation Technology are the subject of any
interference, re-examination, cancellation, or opposition proceeding,
or
any currently pending or to the knowledge of the Corporation threatened,
suit, action, or proceeding arising out of an alleged right of any
Person
with respect to any Intellectual Property Right or
Technology;
|
|
(pp)
|
the
Corporation Intellectual Property Rights are in full force and effect
and
have not been used or enforced or failed to be used or enforced in
a
manner that would result in the abandonment, cancellation or
unenforceability of any of the Corporation Intellectual Property
Rights.
All registrations and filings necessary to preserve the rights of
the
Corporation in and to the Corporation Intellectual Property Rights
have
been made;
|
|
(qq)
|
the
Corporation has not received any oral, written, or other communication
that the Corporation is using or disclosing in an unauthorized manner,
infringing, or misappropriating the alleged right of any Person with
respect to any Intellectual Property Right, other than as set forth
in
Schedule 6(qq);
|
|
(rr)
|
to
the knowledge of the Corporation, there is
no:
|
|
(i)
|
claim
of adverse ownership or invalidity or other opposition to or conflict
with
any of the Corporation Intellectual Property Rights or Corporation
Technology nor of any pending or threatened suit, proceeding, claim,
demand, action or investigation of any nature or kind against the
Corporation relating to the Corporation Intellectual Property Rights
or
Corporation Technology; or
|
|
(ii)
|
claim
that any products manufactured, produced, used or sold by the Corporation
or any process, method, packaging, advertising, or material that
the
Corporation employs in the manufacture, marketing, or sale of any
such
product, or the use of any of the Corporation Intellectual Property
Rights
or Corporation Technology breaches, violates, infringes or interferes
with
any rights of any Person or requires payment for the use of any
Intellectual Property Right, know-how or Technology of another
Person;
|
|
(ss)
|
other
than as set forth in Schedule 6(ss), none of
the Corporation Intellectual Property Rights or Corporation Technology
are
subject to any proceeding that restricts in any manner the use, transfer
or licensing thereof by the Corporation or that may affect the validity,
use or enforceability of the Corporation Intellectual Property Rights
or
Corporation Technology; provided that nothing herein applies to the
prosecution (except for any interference or opposition proceeding)
of any
Corporation Intellectual Property Rights in the U.S. Patent and Trademark
Office or any other government office;
and
|
|
(tt)
|
the
Corporation has maintained and continues to maintain a system to
safeguard
and maintain the secrecy and confidentiality of and its proprietary
rights
in all of the material Corporation Intellectual Property Rights and
Corporation Technology not otherwise protected by patents, patent
applications, or copyright or trademark law. Without limitation
on the generality of the foregoing, (i) any disclosures to third
parties of trade secrets that are material to the operation of the
Corporation business have been pursuant to executed written
confidentiality agreements, (ii) the Corporation has obtained
confidentiality and inventions assignment agreements, in one or more
forms, that have protections and conditions, from all of the past
and
present employees and independent contractors of the Corporation
involved
in the creation or development of the Corporation Intellectual Property
Rights and Corporation Technology that are material to the operation
of
the business of the Corporation, (iii) to the knowledge of the
Corporation, there has been no breach or violation of any secrecy
or
confidentiality commitments of any person in respect of any material
confidential information of the Corporation, and (iv) the measures
taken by the Corporation to protect the proprietary and non-public
aspects
of the Corporation’s processes and methodology are reasonably designed to
adequately prevent third parties from using any such aspects of such
products, without the approval of the Corporation. No Person
who has performed services related to the Corporation business has
any
right, title or interest in any Corporation Intellectual Property
Rights
or Corporation Technology.
|
|
(uu)
|
the
Subscription Proceeds will be used to fund marketing efforts and
final
development expenditures for Jackass, the Game™, game development for
Heroes over Europe™, initial game development for Sin City™ and for
general corporate purposes, including ongoing working capital requirements
as determined by management and the Corporation’s board of
directors.
|
|
7.
|
Conditions
|
The
obligations of the Agent hereunder shall be conditional upon the Agent
receiving, and the Agent shall have the right on the Closing Date on behalf
of
Subscribers to withdraw all Subscription Agreements delivered and not previously
withdrawn, unless the Agent receives, on or prior to the Closing
Date:
|
(a)
|
legal
opinions of the Corporation's counsel addressed to the Agent, the
Agent's
counsel and the Subscribers in form and substance reasonably satisfactory
to the Agent, with respect to such matters as the Agent may reasonably
request relating to the offering, issuance and sale of the Units,
including, without limitation, that as at the Closing
Date:
|
|
(i)
|
the
Corporation and each of its Subsidiaries is valid and subsisting
under the
laws of its jurisdiction of incorporation and has all requisite corporate
power and authority to carry on its business as now conducted by
it and to
own its assets and is qualified to carry on business under the laws
of
each jurisdiction in which it carries on a material portion of its
business;
|
|
(ii)
|
the
Corporation has full corporate power and authority to enter into
this
Agreement and the Subscription Agreements and to perform its obligations
set out herein and therein, and this Agreement has been and the
Subscription Agreements will, on the Closing Date, be duly authorized,
executed and delivered by the Corporation and constitute legal, valid
and
binding obligations of the Corporation enforceable against the Corporation
in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization and other laws
and
equitable principles affecting creditors' rights generally, the statutory
and equitable powers of the courts in Canada or the United States
to stay
proceedings before them and the execution of judgments and the fact
that
specific performance and injunctive relief are equitable remedies
which
may be ordered by a court in its discretion and, accordingly, may
not be
available as a remedy in an action to enforce a covenant and subject
to
the fact that the rights to indemnity, contribution and waiver set
forth
herein may be limited by applicable laws or the public policy underlying
such laws;
|
|
(iii)
|
the
execution and delivery of this Agreement and the Subscription Agreements
and the fulfillment of the terms hereof or thereof by the Corporation
and
the performance of and compliance with the terms of this Agreement
and the
Subscription Agreements by the Corporation do not and will not result
in a
breach of, or constitute a default under, and do not and will not
create a
state of facts which, after notice or lapse of time or both, will
result
in a breach of or constitute a default
under:
|
|
A.
|
any
applicable federal laws of the United States applicable to the
Corporation;
|
|
B.
|
any
term or provision of the articles, by-laws or resolutions of the
directors
or shareholders of the Corporation;
|
|
C.
|
of
which the Corporation's counsel is aware, any of the terms or provisions
of any mortgage, note, indenture, contract, agreement (written or
oral),
instrument, lease or other document to which the Corporation is a
party or
by which it is bound on the Closing Date;
or
|
|
D.
|
of
which Corporation’s counsel is aware, any judgment, decree or order
applicable to the Corporation, which
default or breach might reasonably be expected to materially adversely
affect the business, operations, capital or condition (financial
or
otherwise) of the Corporation or its properties or
assets.
|
|
(iv)
|
the
form and terms of the certificates representing the Common
Shares have been approved and adopted by the board of directors
of the Corporation and confirm with applicable law and the constating
documents of the Corporation;
|
|
(v)
|
the
Common Shares and Warrants comprising the Units have been reserved
and
allotted for issuance and, when issued in accordance with the terms
of the
Subscription Agreements, the Common Shares issued pursuant to the
Offering
will be validly issued, fully paid and non-assessable Common Shares
of the
Corporation;
|
|
(vi)
|
the
Common Shares to be issued upon exercise of the Warrants and Agent's
Warrants have been reserved and allotted for issuance and, when issued
upon exercise of the Warrants or Agent's Warrants, as the case may
be,
will be validly issued as fully paid and non-assessable Common Shares
of
the Corporation;
|
|
(vii)
|
all
Applicable Securities Laws of the Selling Jurisdictions and the United
States of America in connection with the creation, offering, issuance
and
sale of the Units, Underlying Securities and Agent's Warrants have
been
complied with by the Corporation assuming distribution by the Agent
in
compliance with the relevant provisions of such Applicable Securities
Laws;
|
and
additionally relating to:
|
(i)
|
the
distribution of the Common Shares issuable on exercise of the Warrants
and
the Agent's Warrants; and
|
|
(ii)
|
the
first trade in Canada of the Common Shares and Warrants and the Common
Shares issuable on exercise of the Warrants and Agent's
Warrants;
|
and
as to
all other legal matters, in any way connected with the Offering and issuance,
sale and delivery of the Units as the Agent may reasonably request.
It
is
understood that the Corporation's counsel may rely on the opinions of local
counsel acceptable to it as to matters governed by the laws of jurisdictions
other than the jurisdiction of residence of such counsel and on certificates
of
officers of the Corporation and public officials as to relevant matters of
fact.
|
(b)
|
a
certificate of the Corporation dated the Closing Date, addressed
to the
Agent and signed on the Corporation's behalf by its President or
such
other officer or director of the Corporation satisfactory to the
Agent,
acting reasonably, certifying that:
|
|
(i)
|
the
Corporation has complied with and satisfied in all material respects
all
covenants and conditions of this Agreement on its part to be complied
with
or satisfied at or prior to the Closing Time except to the extent
same
have been waived by the Agent;
|
|
(ii)
|
the
representations and warranties of the Corporation set forth in this
Agreement and, where applicable, in the Subscription Agreements are
true
and correct in all material respects at the Closing Time, as if made
at
such time;
|
|
(iii)
|
no
event of a nature referred to in subsection 12(b)(i), (iii), (vi) or (ix) has occurred since
the date of this Agreement or to the knowledge of such officer is
pending,
contemplated or threatened;
|
|
(iv)
|
the
Corporation has made and/or obtained, at or prior to the Closing
Time, all
necessary filings, approvals, consents and acceptances under Applicable
Securities Laws, and under any applicable agreement or document to
which
the Corporation is a party or by which it is bound in respect of
the
execution and delivery of this Agreement and the offering and sale
of the
Units and the consummation of the transactions contemplated hereby;
and
|
|
(v)
|
no
order suspending the sale or ceasing the trading of Common Shares
has been
issued and no proceedings for that purpose have been instituted or
are
pending or to the knowledge of such officer are threatened under
Applicable Securities Laws;
|
|
(c)
|
definitive
certificates for the Common Shares and Warrants comprising the Units
subscribed for pursuant to the Offering, registered in such name
or names
as the Agent shall notify the Corporation in writing not less than
48 hours prior to the Closing Time, provided such certificates
registered in such names may, subject to receipt by the Corporation,
be
delivered in advance of the Closing Date to the Agent or such other
parties in such locations as the Agent may direct and the Agent and
the
Corporation may agree upon;
|
|
(d)
|
definitive
certificates for the Common Shares, Warrants and Convertible Promissory
Note Warrants issuable on conversion of the Convertible Promissory
Notes
held by persons with accounts established with the Agent, registered
in
such name or names as the Agent shall notify the Corporation in writing
not less than 48 hours prior to the Closing
Time;
|
|
(e)
|
definitive
certificates for the Agent's Warrants issuable hereunder registered
in
such name or names as the Agent shall notify the Corporation in writing
not less than 48 hours prior to the Closing
Time;
|
|
(f)
|
executed
copies of the Subscription Agreements in form and substance reasonably
satisfactory to the Agent and the Agent's
counsel;
|
|
(g)
|
payment
of all commissions payable by the Corporation to the Agent pursuant
to
section 8 and all expenses payable by the Corporation pursuant to
section 9; and
|
|
(h)
|
such
other matters as may be reasonably requested by the
Agent.
|
The
foregoing conditions are for the sole benefit of the Agent and may be waived
in
whole or in part by the Agent at any time and without limitation, and
the Agent shall have the right, if any of the foregoing conditions are not
met,
on behalf of potential Subscribers, to withdraw all Subscription Agreements
delivered and not previously accepted by the Corporation or withdrawn or
rescinded by such persons. If any of the foregoing conditions are not
met on or before the Closing Date, the Agent may terminate its obligations
under
this Agreement without prejudice to any other remedies it may have.
|
8.
|
Agent’s
Commission
|
In
consideration for the services performed by the Agent hereunder, the Corporation
agrees to, at the Closing Time:
|
(a)
|
pay
to the Agent a commission equal to 6.0% of the gross proceeds raised
from
the sale of the Units plus 6% of the principal amount of the Convertible
Promissory Notes held by persons with accounts established with the
Agent;
and
|
|
(b)
|
issue
to the Agent and/or its nominees an aggregate number of Agent's Warrants
equal to 8% of the aggregate of (i) the number of Units issued pursuant
to
the Offering and (ii) the number of Common Shares issuable pursuant
to the
Convertible Promissory Notes held by persons with accounts established
with the Agent, which Agent's Warrants shall be substantially in
the form
set forth in Schedule 1(b) hereto.
|
|
9.
|
Expenses
|
Whether
or not the transactions contemplated herein shall be completed, the Corporation
agrees to pay all reasonable costs and expenses of or incidental to the
Offering, including, without limitation, all reasonable costs and expenses
related to the preparation, filing and reproduction of documents and the
out-of-pocket expenses of the Agent including the reasonable fees, disbursements
and expenses incurred by the Agent's counsel (to a maximum of US$40,000)
relating to the transactions contemplated herein.
|
10.
|
Closing
|
The
issue
and sale of the Units shall be completed at the Closing Time at the offices
of
the Corporation's counsel or at such other place as the Corporation and the
Agent may agree. Subject to the conditions set forth in section 7, the Agent, on the Closing Date, shall deliver
to the
Corporation:
|
(a)
|
all
executed Subscription Agreements;
|
|
(b)
|
via
wire transfer, United States funds in an amount equal to the aggregate
gross subscription price of all subscriptions delivered to and accepted
by
the Corporation (other than in respect of the Agent Units) less the
fees
and expenses set forth in sections 8 and 9 hereof;
and
|
|
(c)
|
all
Convertible Promissory Notes held by persons with accounts established
with the Agent tendered to the Corporation for cancellation,
against
delivery by the Corporation to the Agent of the certificates, opinions
and
documents set forth in section 7
hereof.
|
The
Corporation may not reject any properly completed Subscription Agreement, unless
(i) the issuance of Units would breach Applicable Securities Laws or (ii) the
aggregate of the number of Units subscribed for pursuant to all Subscription
Agreements tendered by the Agent exceeds the maximum number of Units to be
issued pursuant to the Offering.
|
11.
|
Waiver
|
The
Agent
may waive in whole or in part any breach of, default under or non-compliance
with any representation, warranty, covenant, term or condition hereof, or extend
the time for compliance therewith, without prejudice to any of its rights in
respect of any other representation, warranty, covenant, term or condition
hereof or any other breach of, default under or non-compliance with any other
representation, warranty, covenant, term or condition hereof, provided that
any
such waiver or extension shall be binding on the Agent only if the same is
in
writing.
|
12.
|
Termination
Events
|
|
(a)
|
All
representations, warranties, covenants, terms and conditions of this
Agreement shall be construed as conditions, and any material breach
or
failure to comply with any such representation, warranty, covenant,
term
or condition shall entitle the Agent or the Corporation, as applicable,
to
terminate its obligation to distribute the Units by written notice
to that
effect given to the Corporation or the Agent, as applicable, prior
to the
Closing Date.
|
|
(b)
|
In
addition to any other remedies which may be available to the Agent,
the
Agent shall be entitled, at its option, to terminate and cancel its
obligations under this Agreement if, prior to the Closing Time on
the
Closing Date:
|
|
(i)
|
any
inquiry, investigation (whether formal or informal) or other proceeding
is
announced or commenced by any Securities Commission or similar regulatory
authority, or any order is issued in relation to the Corporation,
any of
its Subsidiaries, or any of its directors or officers or any of the
Corporation's securities or any order is issued under or pursuant
to any
statute of Canada or the United States or of any of the provinces
of
Canada or states of the United States, or any other applicable law
or
regulatory authority (unless based on the activities or alleged activities
of the Agent or its sub-agents); or
|
|
(ii)
|
there
is any change of law, regulation or policy or the interpretation
or
administration thereof, which, in the reasonable opinion of the Agent,
prevents or materially restricts trading in or the distribution of
the
Common Shares or has or would be expected to have a material adverse
effect on the market price or value of or the investment quality
or
marketability of the Common Shares;
or
|
|
(iii)
|
there
shall occur an event, fact or circumstance, (actual, contemplated
or
threatened), which constitutes a material change or any change in
a
material fact or a development that could result in a material change
or
change in a material fact in respect of the business, operations,
capital,
condition (financial or otherwise), properties, assets, liabilities,
obligations or affairs of the Corporation which, in the reasonable
opinion
of the Agent, could reasonably be expected to prevent or materially
restrict trading in or the distribution of the Common Shares or has
or
would reasonably be expected to have a material adverse effect on
the
market price or value of or the investment quality or marketability
of the
Common Shares; or
|
|
(iv)
|
the
state of the financial markets or the market for video games or any
aspects thereof including federal, provincial or state tax laws applying
thereto become such that in the opinion of the Agent (A) the Common
Shares cannot be profitably marketed; or (B) the advantages or risk
of investing in the Common Shares has been materially adversely altered;
or
|
|
(v)
|
there
should develop, occur or come into effect or existence any event,
action,
state, condition or major financial occurrence of national or
international consequence, acts of hostility or escalation thereof
or any
other calamity or crisis or any change or development involving a
prospective change in national or international political, financial
or
economic conditions, or any law or regulation (including federal,
provincial or state taxation laws) is enacted or changed which, in
the
sole opinion of the Agent, acting reasonably, materially adversely
affects, or involves, or could reasonably be expected to materially
adversely affect or involve, the business, operations, affairs, assets,
liabilities (contingent or otherwise), capital or control of the
Corporation or the market price or value of the Common Shares;
or
|
|
(vi)
|
the
Corporation shall be in breach of, default under or non-compliance
with
any material representation, warranty, term or condition of this
Agreement
or the Subscription Agreements; or
|
|
(vii)
|
the
Agent discovers any facts or matters with respect to the Corporation
or
the insiders of the Corporation pursuant to the Agent's due diligence
review or otherwise that are not satisfactory to the Agent, acting
reasonably; or
|
|
(viii)
|
the
Agent shall determine that the responses provided by the Corporation
at
the Due Diligence Sessions contained information which would have,
in the
sole opinion of the Agent, acting reasonably, a material adverse
effect on
the market price or value of the Common Shares;
or
|
|
(ix)
|
any
order to cease or suspend trading in any securities of the Corporation,
or
prohibiting or restricting the distribution of the Common Shares
is made,
or proceedings are announced or commenced for the making of, any
such
order, by any Securities Commission, any other securities commissions
or
similar regulatory authority, and has not been rescinded, revoked
or
withdrawn within two business days;
|
in
any of
which cases the Agent shall be entitled, at its option, to terminate and cancel
its obligations to the Corporation under this Agreement and the obligations
of
any purchaser under any Subscription Agreement by written notice to that effect
given to the Corporation prior to the Closing. In the event of any
such termination, the Corporation's liabilities to the Agent shall be at an
end
except for any liability of the Corporation provided for in this Agreement
which
by its terms survives termination.
|
(c)
|
The
Agent may exercise any or all of the rights provided for in section
7 or
subsections 12(a) or 12(b) notwithstanding any material change, change,
event or state of facts and notwithstanding any act or thing taken
or done
by the Agent or any inaction by the Agent, whether before or after
the
occurrence of any material change, including, without limitation,
any act
of the Agent related to the Offering or continued offering of the
Units
for sale other than any unlawful act relating solely to the Agent
and the
Agent shall only be considered to have waived or be estopped from
expressing or relying upon any of their rights under or pursuant
to
section 7 or subsections 12(a) or 12(b) if such waiver or estoppel
is in
writing and specifically waives or estops such exercise or
reliance.
|
|
(d)
|
Any
termination pursuant to the terms of this Agreement shall be effected
by
notice in writing delivered by the Agent to the Corporation; provided
that
no termination shall discharge or otherwise affect any obligation
of the
Corporation under section 9, provided that the termination does
not result from a breach by the Agent of its representations, warranties
and covenants hereunder, and sections 14 through 22. The rights
of the Agent to terminate its obligations hereunder are in addition
to,
and without prejudice to, any other remedies it may
have.
|
|
13.
|
Survival
|
All
representations, warranties, terms and conditions herein or contained in
certificates or documents submitted pursuant to or in connection with the
transactions contemplated herein shall not merge on the completion of the
transactions contemplated hereby or the termination of this Agreement, but
shall
survive and continue in full force and effect for the benefit of the Agent
and
the Subscribers for a period of two years from the Closing Date regardless
of
any investigation by or on behalf of the Agent with respect
thereto.
|
14.
|
Indemnity
|
|
(a)
|
The
Corporation shall indemnify and save each of the Indemnified Persons
harmless from and against any and all losses (other than loss of
profits
or commissions), claims, damages, liabilities, demands, expenses
(including reasonable fees and disbursements of counsel) or costs
(collectively “Claims”) which any of the Indemnified Persons may suffer or
incur, whether under the provisions of any statute or otherwise,
in any
way caused by, or arising directly or indirectly from or in consequence
of:
|
|
(i)
|
any
information or statement contained in the Subscription Agreements
or the
Documents which is untrue or misleading or which omits to provide
any
information or state any fact the omission of which makes the statement
untrue or misleading in light of the circumstances in which it was
made;
or
|
|
(ii)
|
any
misrepresentation or alleged misrepresentation contained in the
Subscription Agreements or the Documents;
or
|
|
(iii)
|
any
order, inquiry or investigation of the type referred to in
subsection 12(b)(i); or
|
|
(iv)
|
any
prohibition or restriction in trading in the securities of the Corporation
or any prohibition or restriction affecting the distribution of the
Units
or the Underlying Securities imposed by any competent authority if
such
prohibition or restriction is based on any misrepresentation or alleged
misrepresentation of a kind referred to in subsection 14(a)(ii);
or
|
|
(v)
|
any
breach of, default under or non-compliance by the Corporation with
any
representation, warranty, term or condition of this Agreement or
any
requirement of Applicable Securities
Laws.
|
|
(b)
|
The
rights of indemnity contained in this section 14 shall not apply
to any
Claim to the extent that a court of competent jurisdiction in a final
judgment from which no appeal can be made or regulatory authority
in a
final ruling from which no appeal can be made shall determine that
such
Claim resulted from the gross negligence, fraud or wilful misconduct
of
the person claiming indemnity.
|
|
(c)
|
The
Corporation hereby waives its rights to recover contribution from
the
Agent and any Indemnified Persons with respect to any liability of
the
Corporation by reason of or arising out of any misrepresentation
contained
in any of the documents referred to in subsection 14(a) provided,
however,
that such waiver shall not apply to misrepresentations relating to
the
Agent contained in any of the documents referred to in subsection
14(a)
and furnished to the Corporation by the Agent expressly for inclusion
in
such document or to any Claim to the extent that a court of competent
jurisdiction in a final judgment from which no appeal can be made
or
regulatory authority in a final ruling from which no appeal can be
made
shall determine that such Claim resulted from the gross negligence,
fraud
or willful misconduct of the person claiming
indemnity.
|
|
(d)
|
The
Corporation agrees that in case any legal proceedings or investigation
shall be brought against or initiated against the Corporation by
any
governmental commission, regulatory authority, exchange, court or
other
authority and an Indemnified Person or other representative of the
Agent
shall be required to testify or respond to procedures designed to
discover
information regarding, in connection with or relating to the performance
of professional services rendered to the Corporation by the Agent,
the
Corporation shall be responsible to pay the Agent the reasonable
costs
(including an amount to reimburse the Indemnified Person for the
time
spent by its personnel in connection therewith on a per diem basis
and out
of pocket expenses) in connection
therewith.
|
|
(e)
|
Promptly
after receipt of notice of the commencement or threatened commencement
of
any legal proceeding of the type described or referred to above against
an
Indemnified Person, such Indemnified Person shall notify the Corporation
in writing of the commencement thereof and, throughout the course
thereof,
shall provide copies of all relevant documentation to the Corporation,
will keep the Corporation advised of the progress thereof and will
discuss
with the Corporation all significant actions proposed. The
omission so to notify the Corporation shall not relieve the Corporation
of
any liability which the Corporation may have to the Indemnified Person
provided that any such delay in or failure to give notice as herein
required does not materially prejudice the defence of the legal
proceedings or investigation and does not result in any material
increase
in the liability which the Corporation would otherwise have under
this
indemnity had the Indemnified Person not so delayed in or failed
to give
the notice herein required.
|
|
(f)
|
The
Corporation shall have the right to assume the carriage of the defence
of
any such legal proceeding or investigation on behalf of the Indemnified
Person unless:
|
|
(i)
|
the
Indemnified Person has been advised in writing by its counsel that
by so
doing there is a substantial risk of a conflict of interest between
the
position of the Indemnified Person and the Corporation's position
as to
the conduct of the defence thereof;
or
|
|
(ii)
|
the
Corporation has failed to undertake a defence of such legal proceeding
or
investigation or appoint counsel reasonably acceptable to the Indemnified
Person within seven days from the date that notice of the action
has been
first received by the Corporation.
|
The
reasonable fees and expenses of counsel for the Indemnified Person in either
of
the circumstances described in subsection 14(f)(i) or subsection 14(f)(ii)
above
shall be for the account of and shall be paid by the Corporation; it being
understood, however, that the Corporation shall not, in connection with any
one
such action or separate but substantially similar or related actions in the
same
jurisdiction arising out of the same general allegations or circumstances,
be
liable for the reasonable fees and expenses of more than one separate law firm
(in addition to any local counsel) for all such Indemnified
Persons. Neither the Corporation nor the Indemnified Person may
effect settlement of the action without the other's prior written
consent.
|
(g)
|
It
is the intention of the Corporation to constitute the Agent as trustee
for
the Indemnified Persons for the purposes of this section 14 and the
Agent
agrees to accept such trust and to hold and enforce such covenants
on
behalf of such persons.
|
|
(h)
|
No
admission of liability and no settlement of any proceeding shall
be made
without the consent of the Indemnified Persons affected, such consent
not
to be unreasonably withheld.
|
|
15.
|
Right
of Contribution
|
In
order
to provide for just and equitable contribution in circumstances in which the
indemnification provided for in this Agreement is due in accordance with its
terms but is (in whole or in part), for any reason, held by a court to be
unavailable from the Corporation on grounds of policy or otherwise, each of
the
Corporation and the party or parties seeking indemnification shall contribute
to
the aggregate liabilities, claims, demands, losses (other than losses of profit
in connection with the distribution of the Units or Underlying Securities),
costs, damages and expenses (or claims, actions, suits or proceedings in respect
thereof) to which they may be subject or which they may suffer or
incur:
|
(a)
|
in
such proportion as is appropriate to reflect the relative benefit
received
by the Corporation on the one hand and by the Agent on the other
hand from
the offering of the Units; or
|
|
(b)
|
if
the allocation provided by subsection 15(a) above is not permitted
by
applicable law, in such proportion as is appropriate to reflect not
only
the relative benefits referred to in subsection 15(a) above but also
to
reflect the relative fault of the party or parties seeking indemnity,
on
the one hand, and the parties from whom indemnity is sought, on the
other
hand, in connection with the statement, omission, misrepresentation
or
alleged misrepresentation, order, inquiry, investigation or other
matter
or thing which resulted in such Claims, as well as any other relevant
equitable considerations.
|
The
relative benefits received by the Corporation, on the one hand, and the Agent,
on the other hand, shall be deemed to be in the same proportion that the total
proceeds of the Offering received by the Corporation (net of fees but before
deducting expenses) bear to the commission and fees received by the
Agent.
The
amount paid or payable by an Indemnified Person as a result of Claims referred
to above shall, without limitation, include any legal or other expenses
reasonably incurred by the Indemnified Person in connection with investigating
or defending such Claims, whether or not resulting in any action, suit,
proceeding or claim.
The
Corporation agrees that it would not be just and equitable if contributions
pursuant to this Agreement were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to in the immediately preceding sections. The
rights to contribution provided in this section 15 shall be in addition to,
and
without prejudice to, any other right to contribution which the Agent may
have.
Any
liability of the Agent under this section 15 shall be limited to the commissions
payable to the Agent pursuant to section 8 hereof.
|
16.
|
Notices
|
Any
notice or other communication to be given hereunder shall, in the case of notice
to be given to the Corporation, be addressed to:
Red
Mile
Entertainment, Inc.
0000
Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxxxxx 00000
Attention: Xx.
Xxx Xxxxx, Chief Financial Officer
Facsimile
No.: (000)
000-0000
with
copies to:
Xxxxxxx
Xxxxx LLP
0000
Xxxxxxx Xxxx Xxxx
000-0xx
Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: Xxxxx
Xxxxxxx
Facsimile
No.: (000)000-0000
and
in
the case of notice to be given to the Agent, addressed to:
X.
X.
Xxxxxx & Company Ltd.
Xxxxx
0000, 000-0xx Xxxxxx X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: Xxxx
Xxxxx
Facsimile
No.: (000)
000-0000
with
a
copy to:
Xxxxxx
Blaikie LLP
Barristers
and Solicitors
0000,
000-0xx Xxxxxx
X.X.
Xxxxxxx,
Xxxxxxx X0X 0X0
Attention: Xxx Xxxxxxx
Facsimile
No.: (000)
000-0000
or
to
such other address as the party may designate by notice given to the others.
Each communication shall be personally delivered to the addressee or sent by
facsimile transmission to the addressee, and:
|
(a)
|
a
communication which is personally delivered shall, if delivered before
4:30 p.m. (local time) on a business day, be deemed to be given and
received on that day and, in any other case be deemed to be given
and
received on the first business day following the day on which it
is
delivered; and
|
|
(b)
|
a
communication which is sent by facsimile transmission shall, if sent
on a
business day before 4:30 p.m. (local time), be deemed to be given
and
received on that day and, in any other case be deemed to be given
and
received on the first business day following the day on which it
is
sent.
|
|
17.
|
Trust
|
The
Corporation hereby constitutes the Agent as trustee for the Subscribers in
respect of the benefit to the representations, warranties and covenants of
the
Corporation set forth in this Agreement and the Subscription
Agreements.
|
18.
|
Severance
|
If
one or
more of the provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein.
|
19.
|
Governing
Law
|
This
Agreement shall be governed by and construed in accordance with the laws of
the
Province of Alberta and the laws of Canada applicable therein, with the
exception of those principles relating to conflict of laws. Each of
the parties hereto irrevocably attorns to the jurisdiction of the courts of
the
Province of Alberta.
|
20.
|
Currency
|
Unless
otherwise indicated, all references to dollar amounts contained herein shall
refer to lawful money of the United States of America.
|
21.
|
Time
of the Essence
|
Time
shall be of the essence of this Agreement.
|
22.
|
Counterpart
Execution
|
This
Agreement may be executed in one or more counterparts each of which so executed
shall constitute an original and all of which together shall constitute one
and
the same agreement. The parties hereto shall be entitled to rely on delivery
of
a facsimile or other electronic copy of this executed agreement and such
facsimile or other electronic copy shall be legally effective to create a valid
and binding agreement.
|
23.
|
Entire
Agreement
|
It
is
understood that the terms and conditions of this Agreement supersede any
previous verbal or written agreement between the Agent and the Corporation
with
respect to the issuance of Units by the Corporation.
[Remainder
of page intentionally left blank]
If
the
foregoing is in accordance with your understanding and is agreed to by you,
please confirm your acceptance by signing the enclosed copies of this letter
at
the place indicated and by returning the same to the Agent's
counsel.
|
RED
MILE ENTERTAINMENT, INC.
|
|
|
Per:
|
/s/ Xxx Xxxxx |
|
Xxx
Xxxxx
|
|
|
X.
X. XXXXXX & COMPANY LTD.
|
|
|
Per:
|
/s/ Xxxx Xxxxx |
|
Xxxx
Xxxxx
|
|
Schedule
1(b) – Form of Agent's Warrant
UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER
THE
LATER OF JULY 18, 2007 AND THE DATE THE CORPORATION BECAME A REPORTING ISSUER
IN
ANY PROVINCE OR TERRITORY OF CANADA.
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR STATE SECURITIES
LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF RED MILE ENTERTAINMENT, INC. THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO RED MILE ENTERTAINMENT, INC., (B) OUTSIDE
THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 144A UNDER THE
SECURITIES ACT, OR (D) INSIDE THE UNITED STATES, PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS
AFTER
PROVIDING A LEGAL OPINION REASONABLY SATISFACTORY TO RED MILE ENTERTAINMENT,
INC.
THIS
WARRANT AND THE SECURITIES TO BE ISSUED UPON THE EXERCISE THEREOF HAVE NOT
BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 AS AMENDED (THE “1933
SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND THE WARRANTS MAY NOT BE
EXERCISED IN THE UNITED STATES OR BY OR FOR THE ACCOUNT OR BENEFIT OF A PERSON
IN THE UNITED STATES OR A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE
1933
SECURITIES ACT) WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL AND STATE SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE
EXEMPTION THEREFROM AND THE CORPORATION SHALL HAVE RECEIVED AN OPINION OF
COUNSEL TO SUCH EFFECT SATISFACTORY TO IT.
THIS
AGREEMENT made as of the 18th day of
July,
2007
BETWEEN:
RED
MILE ENTERTAINMENT, INC., a corporation incorporated under the laws of
the State of Delaware and having an office in the City of Sausalito, California
(the “Corporation”)
-
and -
l,
(the “Warrantholder”)
WHEREAS
the Corporation has agreed pursuant to an Agency Agreement made
effective the 22nd day of
June, 2007
between the Corporation and the Agent (the “Agency Agreement”)
to grant the Agent and its nominees, warrants to purchase that number of Common
Shares equal to the aggregate of 8% of the Common Shares sold by the Agent
pursuant to the Offering and 8% of the Common Shares issuable pursuant to
Convertible Promissory Notes issued by the Corporation to persons with accounts
established with the Agent.
NOW
THEREFORE in consideration of the premises, mutual covenants and
agreements herein contained, this agreement witnesses and it is understood
and
agreed by and between the parties hereto as follows:
1. Interpretation
All
capitalized terms herein and not defined herein shall have the meaning given
to
such terms in the Agency Agreement.
2. Grant
of Agent's Warrants
Subject
to the provisions hereinafter contained, the Corporation hereby grants to the
Warrantholder an aggregate of l share purchase
warrants
(the “Agent’s Warrants”), each Agent's Warrant entitling the Warrantholder to
purchase ● Common Shares (the “Optioned Securities”).
3. Exercise
of Agent's Warrants
The
Agent
may exercise the Agent’s Warrants at any time on or before 4:30 p.m. Calgary
time (the “Expiry Time”) on or before July 18, 2009 at an exercise price of US
$3.00, subject to adjustment as set forth herein.
4. Manner
of Exercise
The
Warrantholder may exercise the Agent's Warrants represented by this certificate
in whole or in part, at any time and from time to time, on or prior to the
Expiry Time, by notice in writing given by the Warrantholder to the Corporation
at its address for notice set out in the Agency Agreement, specifying the number
of Agent's Warrants to be exercised and accompanied by payment in cash or
certified cheque for the purchase price of all of the Common Shares issuable
by
the Corporation, calculated in accordance with Articles 3 and 9
hereof.
5. Certificates
Upon
exercise of the Agent's Warrants, the Corporation shall cause the transfer
agent
and registrar of the Corporation to deliver to the Warrantholder, or as the
Warrantholder may otherwise in writing direct in the notice of exercise of
the
Agent's Warrants, within seven (7) days following the receipt by the Corporation
of payment in accordance with Article 4 hereof, certificates representing in
the
aggregate the number of Common Shares for which payment has been received by
the
Corporation.
6. No
Rights of Shareholder Until Exercise
The
Warrantholder shall have no rights whatsoever as a shareholder (including any
rights to receive dividends or other distributions to shareholders or to vote
at
a general meeting of shareholders of the Corporation, except as provided in
Article 10 hereof) other than in respect to Common Shares in respect of which
the Warrantholder shall have exercised its right to purchase hereunder and
which
the Warrantholder shall have actually taken up and paid for.
7. Non-Transferable
The
rights conferred upon the Warrantholder hereunder shall be non-transferable
and
non-tradable.
8. No
Fractional Common Shares
No
fractional Optioned Securities will be issued on exercise of the Agent's
Warrants.
9. Adjustments
in Event of Change in Common Shares
Definitions. For
the purposes of this section 9, unless there is something in the subject matter
or context inconsistent therewith, the words and terms defined below will have
the respective meanings specified therefor in this subsection:
(a) "Adjustment
Period" means the period commencing on July 18, 2007 and ending at the
Time of Expiry;
(b) "Current
Market Price" of the Common Shares at any date means the price per
share equal to the weighted average price at which the Shares have traded on
the
Over-the-Counter Bulletin Board, on such other stock exchange as may be selected
by the directors of the Corporation for such purpose, during the period of
any
twenty consecutive trading days ending not more than three trading days before
such date; provided that the weighted average price will be determined by
dividing the aggregate sale price of all Common Shares sold on the said exchange
or market, as the case may be, during the said twenty consecutive trading days
by the total number of Common Shares so sold; and provided further that if
the
Common Shares are not then listed on any stock exchange or traded in the
over-the-counter market, then the Current Market Price will be determined by
such firm of independent chartered accountants as may be selected by the
directors of the Corporation;
(c) "director"
means a director of the Corporation for the time being and, unless otherwise
specified herein, a reference to action "by the directors" means action by
the
directors of the Corporation as a board or, whenever empowered, action by the
executive committee of such board; and
(d) "trading
day" with respect to a stock exchange or over-the-counter market means
a day on which such stock exchange or market is open for business.
Adjustments. The
number of Common Shares which the holder shall be entitled to receive pursuant
to the Warrants represented by this certificate (the "Share Rate") and the
exercise price for such Common Shares (the "Exercise Price") shall be subject
to
adjustment from time to time in the events and in the manner provided as
follows.
(1) If
at any time during the Adjustment Period the Corporation:
|
(a)
|
fixes
a record date for the issue of, or issues, Common Shares to the holders
of
all or substantially all of the outstanding Shares by way of a stock
dividend;
|
|
(b)
|
fixes
a record date for the distribution to, or makes a distribution to,
the
holders of all or substantially all of the Common Shares payable
in Common
Shares or securities exchangeable for or convertible into
Shares;
|
|
(c)
|
subdivides
the outstanding Common Shares into a greater number of Common Shares;
or
|
|
(d)
|
consolidates
the outstanding Common Shares into a lesser number of Common
Shares;
|
(any
of
such events in subclauses (i), (ii), (iii) and (iv) above being herein called
a
"Common Share Reorganization"),
|
(i)
|
the
Share Rate shall be adjusted on the earlier of the record date on
which
holders of Common Shares are determined for the purposes of the Common
Share Reorganization and the effective date of the Common Share
Reorganization to the amount determined by multiplying the Share
Rate in
effect immediately prior to such record date or effective date, as
the
case may be, by a fraction:
|
|
A.
|
the
denominator of which will be the number of Common Shares outstanding
on
such record date or effective date before giving effect to such Common
Share Reorganization; and
|
|
B.
|
the
numerator of which will be the number of Common Shares which will
be
outstanding immediately after giving effect to such Common Share
Reorganization (including in the case of a distribution of securities
exchangeable for or convertible into Common Shares the number of
Common
Shares that would be outstanding had such securities all been exchanged
for or converted into Common Shares on such date);
and
|
|
(ii)
|
the
Exercise Price shall be concurrently adjusted by multiplying the
Exercise
Price in effect immediately prior to such record date or effective
date,
as the case may be, by a fraction which shall be the reciprocal of
the
fraction used in the adjustment of the Share Rate in the paragraph
above;
|
To
the
extent that any adjustment in the Share Rate or Exercise Price occurs pursuant
to this clause as a result of the fixing by the Corporation of a record date
for
the distribution of securities exchangeable for or convertible into Common
Shares, such Share Rate and Exercise Price will be readjusted immediately after
the expiry of any relevant exchange or conversion right to the Share Rate and
Exercise Price which would then be in effect based upon the number of Common
Shares actually issued and remaining issuable after such expiry and will be
further readjusted in such manner upon the expiry of any further such
right.
|
(2)
|
If
at any time during the Adjustment Period the Corporation fixes a
record
date for the issue or distribution to the holders of all or substantially
all of the outstanding Common Shares of rights, options or warrants
pursuant to which such holders are entitled, during a period expiring
not
more than 45 days after the record date for such issue (such period
being
the "Rights Period"), to subscribe for or purchase Common Shares
or
securities exchangeable for or convertible into Common Shares at
a price
per share (or in the case of securities exchangeable for or convertible
into Shares at an exchange or conversion price per share at the date
of
issue of such securities) of less than 85% of the Current Market
Price of
the Common Shares on such record date (any of such events being herein
called a "Rights Offering"),
|
|
(a)
|
the
Share Rate will be adjusted effective immediately after the record
date
for the Rights Offering to the amount determined by multiplying the
Share
Rate in effect on such record date by a
fraction:
|
|
(i)
|
the
denominator of which will be the aggregate
of
|
|
A.
|
the
number of Common Shares outstanding on the record date for the Rights
Offering; and
|
|
B.
|
the
quotient determined by dividing
|
|
a)
|
either
(a) the product of the number of Common Shares offered during the
Rights
Period pursuant to the Rights Offering and the price at which such
Common
Shares are offered, or, (b) the product of the exchange or conversion
price of the securities so offered and the number of Common Shares
for or
into which the securities offered pursuant to the Rights Offering
may be
exchanged or converted, as the case may be,
by
|
|
b)
|
the
Current Market Price of the Common Shares as of the record date for
the
Rights Offering; and
|
|
(ii)
|
the
numerator of which will be the aggregate of the number of Common
Shares
outstanding on such record date and the number of Common Shares offered
pursuant to the Rights Offering (including in the case of the issue
or
distribution of securities exchangeable for or convertible into Common
Shares the number of Common Shares for or into which such securities
may
be exchanged or converted); and
|
|
(b)
|
the
Exercise Price shall be concurrently adjusted by multiplying the
Exercise
Price in effect immediately prior to such record date or effective
date,
as the case may be, by a fraction which shall be the reciprocal of
the
fraction used in the adjustment of the Share Rate in the paragraph
above;
|
If
by the
terms of the rights, options, or warrants referred to in this clause, there
is
more than one purchase, conversion or exchange price per Common Share, the
aggregate price of the total number of additional Common Shares offered for
subscription or purchase, or the aggregate conversion or exchange price of
the
convertible or exchangeable securities so offered, will be calculated for
purposes of the adjustment on the basis of the weighted average purchase,
conversion or exchange price per Common Share, as the case may
be. Any Common Shares owned by or held for the account of the
Corporation will be deemed not to be outstanding for the purpose of any such
calculation. To the extent that any adjustment in the Share Rate and
Exercise Price occurs pursuant to this clause as a result of the fixing by
the
Corporation of a record date for the issue or distribution of rights, options
or
warrants referred to in this clause, the Share Rate and Exercise Price will
be
readjusted immediately after the expiry of any relevant exchange, conversion
or
exercise right to the Share Rate which would then be in effect based upon the
number of Common Shares actually issued and remaining issuable after such expiry
and will be further readjusted in such manner upon the expiry of any further
such right.
|
(3)
|
If
at any time during the Adjustment Period the Corporation fixes a
record
date for the issue or distribution to the holders of all or substantially
all of the Common Shares of:
|
|
(a)
|
shares
of the Corporation of any class other than Common
Shares;
|
|
(b)
|
rights,
options or warrants to acquire Common Shares or securities exchangeable
for or convertible into Common Shares (other than rights, options
or
warrants pursuant to which holders of Common Shares are entitled,
during a
period expiring not more than 45 days after the record date for such
issue, to subscribe for or purchase Common Shares at a price per
share (or
in the case of securities exchangeable for or convertible into Common
Shares at an exchange or conversion price per share at the date of
issue
of such securities) of at least 85% of the Current Market Price of
the
Common Shares on such record date);
|
|
(c)
|
evidences
of indebtedness of the Corporation;
or
|
|
(d)
|
any
property or assets of the
Corporation;
|
and
if
such issue or distribution does not constitute a Common Share Reorganization
or
a Rights Offering (any of such non-excluded events being herein called a
"Special Distribution"):
|
(i)
|
the
Share Rate will be adjusted effective immediately after the record
date
for the Special Distribution to the amount determined by multiplying
the
Share Rate in effect on the record date for the Special Distribution
by a
fraction:
|
|
A.
|
the
numerator of which will be the aggregate
of
|
|
a)
|
the
product of the number of Common Shares outstanding on such record
date and
the Current Market Price of the Common Shares on such record date,
and
|
|
b)
|
the
aggregate fair value, as determined by the directors of the Corporation,
to the holders of the Common Shares of the shares, rights, options,
warrants, evidences of indebtedness or property or assets to be issued
or
distributed in the Special Distribution,
and
|
|
B.
|
the
denominator of which will be the product obtained by multiplying
the
number of Common Shares outstanding on such record date by the Current
Market Price of the Common Shares on such record date;
and
|
|
(ii)
|
the
Exercise Price shall be concurrently adjusted by multiplying the
Exercise
Price in effect immediately prior to such record date or effective
date,
as the case may be, by a fraction which shall be the reciprocal of
the
fraction used in the adjustment of the Share Rate in the paragraph
above;
|
Any
Common Shares owned by or held for the account of the Corporation will be deemed
not to be outstanding for the purpose of such calculation. To the
extent that any adjustment in the Share Rate occurs pursuant to this clause
as a
result of the fixing by the Corporation of a record date for the issue or
distribution of rights, options or warrants to acquire Shares or securities
exchangeable for or convertible into Shares referred to in this clause, the
Share Rate will be readjusted immediately after the expiry of any relevant
exercise, exchange or conversion right to the amount which would then be in
effect if the fair market value had been determined on the basis of the number
of Shares issued and remaining issuable immediately after such expiry, and
will
be further readjusted in such manner upon the expiry of any further such
right.
(4) If
at any time during the Adjustment Period there occurs:
|
(a)
|
a
reclassification or redesignation of the Common Shares, any change
of the
Common Shares into other shares or securities or any other capital
reorganization involving the Common Shares other than a Common Share
Reorganization;
|
|
(i)
|
a
consolidation, amalgamation, arrangement or merger of the Corporation
with
or into any other body corporate which results in a reclassification
or
redesignation of the Common Shares or a change or exchange of the
Common
Shares into other shares or securities;
or
|
|
(ii)
|
the
transfer of the undertaking or assets of the Corporation as an entirety
or
substantially as an entirety to another corporation or
entity;
|
(any
of
such events being herein called a "Capital Reorganization"), after the effective
date of the Capital Reorganization the Warrantholder will be entitled to
receive, and shall accept, upon exercise of the Agent's Warrants, in lieu of
the
number of Common Shares which the Warrantholder shall be entitled to receive
pursuant to the Agent's Warrants, the kind and aggregate number of shares and
other securities or property resulting from the Capital Reorganization which
the
Warrantholder would have been entitled to receive as a result of the Capital
Reorganization if, on the effective date thereof, the Warrantholder had been
the
registered holder of the number of Common Shares which the Warrantholder would
have been entitled to receive pursuant to the Agent's Warrants represented
by
this certificate if exercised immediately prior to such Capital Reorganization.
If necessary, as a result of any Capital Reorganization, appropriate adjustments
will be made in the application of the provisions of this certificate with
respect to the rights and interest thereafter of the Holder to the end that
the
provisions of this certificate will thereafter correspondingly be made
applicable as nearly as may reasonably be possible in relation to any shares
or
other securities or property thereafter deliverable upon the exercise of the
Agent's Warrants.
Rules. The
following rules and procedures will be applicable to adjustments made pursuant
to this Article 9.
|
(a)
|
Subject
to the following provisions hereof, any adjustment made pursuant
to
Article 9 above will be made successively whenever an event referred
to
therein occurs.
|
|
(b)
|
No
adjustment will be made in the Share Rate unless it would result
in a
change of at least three percent in the prevailing Share Rate; provided,
however, that any adjustments which except for the provisions of
this
Article 9 would otherwise have been required to be made will be carried
forward and taken into account in any subsequent
adjustment.
|
|
(c)
|
If
at any time during the Adjustment Period the Corporation will take
any
action affecting the Common Shares, other than an action or an event
described above, which in the opinion of the directors would have
a
material adverse effect upon the rights of the Warrantholder under
this
certificate, the Exercise Price and/or the number of Common Shares
purchasable hereunder will be adjusted in such manner and at such
time as
the directors may determine to be equitable in the
circumstances. Failure of the taking of action by the directors
so as to provide for an adjustment prior to the effective date of
any
action by the Corporation affecting the Common Shares will be deemed
to be
conclusive evidence that the directors have determined that it is
equitable to make no adjustment in the
circumstances.
|
|
(d)
|
No
adjustment in the number or kind of securities purchasable on the
exercise
of the Agent's Warrant's will be made in respect of any event described
herein if the Warrantolder is entitled to participate in such event
on the
same terms mutatis mutandis as if the Warrantholder had exercised
the
Agent's Warrants prior to or on the record date or effective date,
as the
case may be, of such event.
|
|
(e)
|
If
the Corporation sets a record date to determine holders of Common
Shares
for the purpose of entitling such holders to receive any dividend
or
distribution or any subscription or purchase rights and will thereafter
and before the distribution to such holders of any such dividend,
distribution or subscription or purchase rights legally abandon its
plan
to pay or deliver such dividend, distribution or subscription or
purchase
rights, no adjustment in the Share Rate will be required by reason
of the
setting of such record date.
|
|
(f)
|
If
a dispute arises at any time with respect to any adjustment of the
Exercise Price, Share Rate or the number of Common Shares purchasable
hereunder, such dispute will be conclusively determined by the auditors
of
the Corporation or if they are unable or unwilling to act by such
other
firm of independent chartered accountants as may be selected by the
directors of the Corporation.
|
Taking
of Actions. As a condition precedent to the taking of
any action which would require an adjustment hereunder, the Corporation will
take any action which may, in the opinion of the Corporation's legal counsel,
be
necessary in order that the Corporation may validly and legally issue as fully
paid and non-assessable shares all of the Common Shares which the Warrantholder
is entitled to receive.
Notice. At
least ten days prior to any record date or effective date, as the case may
be,
for any event which requires or might require an adjustment in any of the rights
of the Warrantholder hereunder, including the Exercise Price and the number
of
Common Shares which are purchasable hereunder, the Corporation will deliver
to
the Warrantholder, at the Warrantholder's registered address, a certificate
of
the Corporation specifying the particulars of such event and, if determinable,
the required adjustment and the calculation of such adjustment. In
case any adjustment for which a notice has been given is not then determinable,
the Corporation will promptly after such adjustment is determinable deliver
to
the Warrantholder, at the Warrantholders registered address, a certificate
providing the calculation of such adjustment. The Corporation hereby
covenants and agrees that the register of transfers and share transfer books
for
the Common Shares will be open, and that the Corporation will not take any
action which might deprive the Warrantholder of the opportunity of exercising
the rights of subscription contained herein, during such period.
10. Intentionally
Deleted
11. Reservation
of Securities
The
Corporation shall at all times, during the term of this Agreement, reserve
and
keep available a sufficient number of unissued Common Shares to satisfy the
requirements hereof.
12. Entire
Agreement
This
Agreement supersedes all other agreements, documents, writings and verbal
understandings among the parties relating to the subject matter hereof and
represents the entire agreement between the parties relating to the subject
matter hereof. This Agreement may be executed by facsimile in any
number of counterparts all of which when taken together shall be deemed to
be
one and the same document and notwithstanding the actual date of execution
of
each counterpart, this Agreement shall be deemed to be dated as of the date
first above written.
13 Enurement
Except
as
otherwise set forth herein, this Agreement shall be binding upon and enure
to
the benefit of the successors and assigns of the Agent and of the Corporation,
respectively.
14. Time
Time
shall be of the essence of this Agreement.
IN
WITNESS WHEREOF the Corporation has caused this warrant certificate to
be executed by its duly authorized officer.
RED
MILE ENTERTAINMENT, INC.
Per: _______________________________
Xxx
Xxxxx
Chief
Financial Officer
Schedule
1(l) – Form of Convertible Promissory Note
THIS
NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
CONVERTIBLE
PROMISSORY NOTE
OF
RED
MILE ENTERTAINMENT, INC.
Sausalito,
CA
$•
US Made
as of June __, 2007
For
value
received, RED MILE ENTERTAINMENT, INC., a Delaware corporation, on behalf of
itself and its successors and assigns (collectively, the
“Company”), with principal offices at 0000 Xxxxxxxxx,
Xxxxx 000, Xxxxxxxxx, XX 00000, hereby promises to pay to __________________.
or
its registered assigns (“Holder”), $• US
(the “Principal Amount”) on the Maturity Date, together
with simple interest on the unpaid principal and interest at a rate equal to
ten
percent (10%) per annum, computed on the basis of the actual number of days
elapsed and a year of 365 days (the “Rate”) from the
date of this Note until the Maturity Date. All accrued interest
hereunder shall be payable in cash by the Company to the Holder on the Maturity
Date.
Unless
earlier accelerated or converted pursuant to the terms hereof, the unpaid
Principal Amount, shall be due and payable immediately on the Maturity
Date. Unless earlier accelerated or converted pursuant to the terms
hereof, any unpaid interest as of the Maturity Date, as applicable, shall become
immediately due and payable. Any amounts owed hereunder shall be sent
by wire transfer in accordance with instructions included in such notice or
by
check sent by mail to the address of the registered holder of this Note in
lawful money of the United States.
Unless
agreed to by both parties, Company will issue no more than USD $2,400,000 in
principal amount.
The
following is a statement of the rights of Holder and the conditions to which
this Note is subject, and to which Holder hereof, by the acceptance of this
Note, agrees:
|
1.
|
Definitions. Unless
otherwise defined herein, the following definitions shall apply for
all
purposes of this Note:
|
1.1 “Maturity
Date” means the earlier to occur of a Sale Event or the one year
anniversary of the date hereof.
1.2 “Next
Financing” means the contemplated equity financing in which X.X.
Xxxxxx & Company Ltd. (“X.X. Xxxxxx”) will act as placement agent for the
Company in an approximately $10 million equity private placement (or such lesser
amount as X.X. Xxxxxx and the Company may agree to in writing).
1.3 “Next
Financing Stock” means the capital stock of the Company issued in
the Next Financing.
1.4 “Note”
means this Convertible Promissory Note.
1.5 “Person”
means an individual, a corporation, an association, a joint venture, a
partnership, a limited liability company, an estate, a trust, an unincorporated
organization and any other entity or organization, governmental or
otherwise.
1.6 “Sale
Event” means a bona fide, negotiated transaction or integrated
series of transactions pursuant to which either (i) the Company merges or
consolidates with any other non-affiliated entity or sells, exchanges or
otherwise disposes of all or substantially all of its assets to a non-affiliated
third party or (ii) in which in excess of 50% of the Company’s voting power is
transferred in a private placement to one Person.
|
2.
|
Conversion. Concurrent
with the consummation of a Next Financing prior to the Maturity Date,
the
outstanding Principal Amount hereunder shall be automatically converted,
without any action by the Holder, into the Next Financing Stock at
price
equal to the lowest price per share of the Next Financing Stock in
such
Next Financing. Anything in this Note to the contrary
notwithstanding, in the event of such a conversion this Note shall
not
bear any interest and no interest shall be due with respect thereto
following such conversion. Immediately upon conversion of the Note,
the
holder shall also be offered one half of one warrant (“Warrant”), for
every share received from the conversion of the Note. The Warrant
shall be
exercisable at $2.75 per share for a period 2 years from the Closing
Date
of such Next
Financing.
|
|
3.
|
Termination
of Rights. All rights with
respect to the Note shall terminate on Conversion or on the Maturity
Date,
whether or not this Note has been surrendered. Notwithstanding
the foregoing, Holder agrees to surrender this Note to the Company
for
cancellation as soon as is possible following conversion or maturity
of
this Note. The Holder shall not be entitled to receive the Next
Financing Stock and half Warrants to be issued upon conversion of
this
Note until the original of this Note (or an executed affidavit of
loss,
damage or mutilation and agreement to indemnify the Company therefrom,
in
form reasonably requested by the Company) is surrendered (or delivered
in
the case of such affidavit and agreement) to the Company and the
agreements referenced in this Section 3 have been executed and delivered
to the Company.
|
|
4.
|
Defaults
and Remedies.
|
4.1 Events
of Default
. Upon
written notice to the Company by the Holder of its desire to deem any of the
following events an Event of Default, the following events shall be deemed
“Events of Default” hereunder:
(a) the
Company fails to pay any amounts due under the Note when due;
(b) the
Company is or becomes insolvent or is involved in any financial difficulty
as
evidenced by:
(i) an
assignment, composition or similar device for the benefit of creditors,
or
(ii) general
failure to pay debts when due that results in a material action against the
Company taken by a third party other than the Holder, or
(iii) an
attachment or receivership of assets not dissolved within thirty (30) days,
or
(iv) the
appointment of a custodian, trustee or receiver for a substantial portion of
the
Company’s property, or
(v) the
filing by the Company or any guarantor of a petition under any chapter of the
United States Bankruptcy Code or the institution of any other proceeding under
any law relating to bankruptcy, bankruptcy reorganization, insolvency or relief
of the Company, or
(vi) the
filing against the Company or any guarantor of an involuntary petition under
any
chapter of the United States Bankruptcy Code or the institution of any other
proceeding under any law relating to bankruptcy, bankruptcy reorganization,
insolvency or relief of the Company where such petition or proceeding is not
dismissed within thirty (30) days from the date on which it is filed or
instituted; or
(c) the
Company materially breaches, which breach remains uncured for at least five
(5)
business days after receipt of notice from the Holder relating thereto, any
of
the provisions of this Note.
4.2 Rights
and Remedies on Default
. Upon
the occurrence of an Event of Default, the Holder shall have, by way of example
and not of limitation of the rights and remedies granted to the Holder in law,
equity or otherwise, the following rights:
(a) the
Holder may declare this Note to be immediately due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived.
|
4.3
|
Waiver
|
. No
course of dealing or delay in accelerating this Note or in taking or failing
to
take any other action with respect to any Event of Default shall affect the
Holder’s right to take such action at a later time. No waiver as to
any one Event of Default shall affect the Holder’s rights upon any other Event
of Default.
|
4.4
|
Remedies
Cumulative
|
. The
Holder may exercise any or all of their rights and remedies upon an Event of
Default concurrently with or independently of and without regard to the
provisions of any other document which secures any obligation of the
Company.
|
5.
|
Prepayment. This
Note may be prepaid at any time in whole or in part without premium
or
penalty. While the Note is outstanding and prior to conversion
thereof, the Company shall not pay any dividends or distributions
and
shall not repurchase any shares of
stock.
|
|
6.
|
No
Rights or Liabilities as
Stockholder. This Note does not
by itself entitle the Holder to any voting rights or other rights
as a
stockholder of the Company. No provisions of this Note, and no
enumeration herein of the rights or privileges of the Holder, shall
cause
the Holder to be a stockholder of the Company for any
purpose.
|
|
7.
|
No
Impairment. The Company will not
willfully avoid or seek to avoid the observance or performance of
any of
the terms of this Note, but will at all times in good faith assist
in the
carrying out of all such terms and in the taking of all such action
as may
be necessary or appropriate in order to protect the rights of the
Holder
under this Note against wrongful impairment. Without limiting
the generality of the foregoing, the Company will take all such action
as
may be necessary or appropriate in order that the Company may duly
and
validly issue the Next Financing Stock upon a conversion of this
Note.
|
|
8.
|
Waivers. The
Company and all endorsers of this Note hereby waive notice, presentment,
protest, notice of dishonor and all other demands in connection with
the
delivery, acceptance, performance and enforcement of this
Note.
|
|
9.
|
Attorneys’
Fees. In the event any party is
required to engage the services of any attorneys for the purpose
of
enforcing this Note, or any provision thereof, the prevailing party
shall
be entitled to recover its reasonable expenses and costs in enforcing
this
Note, including reasonable attorneys’
fees.
|
|
10.
|
Transfer. This
Note and any rights hereunder may not be assigned, conveyed or
transferred, in whole or in part, by the Company, on the one hand,
or the
Holder, on the other hand, without the prior written consent of the
Holder
or the Company,
respectively.
|
|
11.
|
Governing
Law. This Note shall be governed
by and construed under the internal laws of the State of California,
without reference to principles of conflict of laws or choice of
laws.
|
|
12.
|
Headings. The
headings and captions used in this Note are used only for convenience
and
are not to be considered in construing or interpreting this
Note.
|
|
13.
|
Notices. Unless
otherwise provided, any notice required or permitted under this Note
shall
be given in writing and shall be deemed effectively given (a) at
the time
of personal delivery, if delivery is in person; (b) one (1) business
day
after deposit with an express overnight courier for United States
deliveries, or two (2) business days after such deposit for deliveries
outside of the United States, with proof of delivery from the courier
requested; or (c) three (3) business days after deposit in the United
States mail by certified mail (return receipt requested) for United
States
deliveries when addressed to the party to be notified at the address
indicated for such party on the signature pages hereto or, in the
case of
the Company, to the address on the first page of this Note, or at
such
other address as any party or the Company may designate by giving
ten (10)
days’ advance written notice to all other
parties.
|
|
14.
|
Amendments
and Waivers. This Note may only
be amended in writing and if the amendment is signed by both the
Company
and the Holder.
|
|
15.
|
Severability.
If one or more provisions of this Note
are
held to be unenforceable under applicable law, such provision(s)
shall be
excluded from this Note and the balance of the Note shall be interpreted
as if such provision(s) were so excluded and shall be enforceable
in
accordance with its terms.
|
IN
WITNESS WHEREOF, the Company has caused this Note to be signed in its
name as of the date first above written.
THE COMPANY:
RED
MILE
ENTERTAINMENT, INC.
By: ________________________________
Name: __________________________
Title: ____________________________
AGREED
AND ACKNOWLEDGED:
THE
HOLDER:
By: ________________________________
Name: __________________________
Title: ____________________________
Schedule
6(l) – Material Contracts
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1.
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Agreement
with MTVN for a license to the intellectual property known as Jackass
for
video games on various hardware
platforms.
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2.
|
Agreement
with Fleshwound Films for a license to the intellectual property
known as
Crusty Demons of dirt for video games on various hardware
platforms.
|
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3.
|
Limited
use license from Disney interactive for a license to the intellectual
property known as Disney’s Aladdin for use on a P.C. based video game
(Disney’s Aladdin Chess
Adventures).
|
|
4.
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License
from IR Gurus for a license to the intellectual property known as
"Heroes
Of The Pacific" on the Sony PS2, Microsoft Xbox and
PC’s.
|
|
5.
|
License
from Prodigy Design Ltd. for a license to the intellectual property
known
as "GripShift" on the Sony PSP.
|
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6.
|
Development
Agreement with Prodigy Design Ltd. For the development of the video
game
known as "Jackass" on the Sony PS2 and
PSP.
|
|
7.
|
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as "Heroes Of The Pacific" on the Sony
PSP.
|
|
8.
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Development
and Licensing Agreement with IR Gurus for the development of a game
known
as "Heroes Over Europe" on the Sony PS3 and Microsoft Xbox
360.
|
|
9.
|
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as "Equestriad" on the Sony PS2 and
P.C’s.
|
|
10.
|
Development
agreement with Climax Action Limited for development of a video game
known
as "Crusty Demons" for the Sony PS2 and Microsoft
Xbox.
|
|
11.
|
Licensing
Agreement with Sony Online Entertainment for the worldwide publishing
rights to GripShift on the Sony
PSP.
|
|
12.
|
Co-publishing
Agreement with Codemasters for the European publishing rights to
Heroes Of
The Pacific on the Sony PS2, Microsoft Xbox and
PC’s.
|
|
13.
|
Publishing
Agreement with Ubisoft for the North American publishing rights to
Heroes
Of The Pacific on the Sony PS2, Microsoft Xbox and
PC’s.
|
|
14.
|
Publishing
Agreement with Strategy First Corp. for the worldwide publishing
rights to
Disney’s Aladdin Chess Adventures.
|
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15.
|
Co-publishing
Agreement with Evolved Games for the North American publishing rights
to
the Crusty Demons video game.
|
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16.
|
Co-publishing
Agreement with Xxxx Media GmbH for the European publishing rights
to the
Crusty Demons video game.
|
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17.
|
Letter
of Intent with the other owners of IR Gurus for the option to purchase
their ownership position in IR
Gurus.
|
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18.
|
License
Agreement with Marshmallowville Media, L.L.C. for a license to the
intellectual properties known as Marshmallow Shooter or Xxxxxx Blaster’s
M-Force for video games on various hardware
platforms.
|
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19.
|
License
Agreement with Xxxxx Xxxxxx Inc., Ground Zero Productions, Inc. and
Union
Entertainment, LLC for a license to the intellectual property known
as
"Sin City" or Xxxxx Xxxxxx’x Sin City for video games on various hardware
platforms.
|
|
20.
|
Distribution
Agreement with Navarre Corporation for distribution of products in
North
America.
|
|
21.
|
Marketing
Support Agreement with MTVN whereby MTVN will provide marketing support
services in exchange for a royalty on each game sold in North
America.
|
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22.
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Development
Agreement with MTVN for Jackass on the Nintendo DS
Platform.
|
|
23.
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Investment
Banking Services Agreement with Xxxxxxxx Curhan Ford and Company
for
services in the United States.
|
Schedule
6(aa) – Material Liabilities
Liabilities
greater than $10,000 as of July 18, 2007
|
1.
|
Commitments
to pay IR Gurus for two months at approximately $50,000/month for
Sin City
preproduction services.
|
Schedule
6(qq) – Summary of Communications regarding Intellectual Property
claims
|
1.
|
On
September 9, 2005, Vivendi Universal Games, Inc. (VUG) notified the
Company that they believed the trademark "Heroes of the Pacific"
infringed
on a trademark of theirs "Aces of the
Pacific".
|
After
thorough review of our intellectual property counsel, they informed us the
VUG
game was published in 1992 and appeared to be last used in 1997 or 1998 by
VUG
was long out of commercial use. Our council responded that their xxxx appeared
to be abandoned. There were two subsequent letters from VUG (the last
in December 2005) where they disagreed with our assessment and tried to start
a
dialog toward our ceasing to use the xxxx or settlement (that is, pay them
some
sort of royalty). We last responded on December 13, 2005 telling them
that we found their claim baseless and were not interested in negotiating with
them. They never responded to this last letter and we believe they have dropped
the issue. We believe that there is no significant liability to VUG regarding
this issue.
|
2.
|
In
February 2006, we were contacted by phone and later by email by Equity
management, Inc. on behalf of Lockheed Xxxxxx Corporation. In
the 1940’s Lockheed manufactured an aircraft known as the P-38J
Lightning. They still have a trademark for model planes. Our
counsel did not think this xxxx was strong or would carryover to
video
games. We told Equity verbally that we did not believe the
claim was valid and have not heard from them since. We believe that
there
is no significant liability to Lockheed Xxxxxx regarding this
issue.
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Schedule
6(ss) – Restrictions on Intellectual Property Rights
The
software code for the following games (either completed or under development)
is
subject to a license which is fully transferable to purchasers of the
business. It is also transferable to others, but only with prior
approval of developer, such approval not to be unreasonably
withheld.
|
·
|
Development
agreement with Climax Action Limited for development of a video game
known
as "Crusty Demons" for the Sony PS2 and Microsoft
Xbox.
|
|
·
|
Development
Agreement with Prodigy Design Ltd. For the development of the video
game
known as "Jackass" on the Sony PS2 and
PSP.
|
|
·
|
There
are restrictions on transfer of the code for "Jackass" in relation
to the
DS sku version, whereby the Corporation may only transfer the portion
of
the code for which it has paid the developer and not the unpaid work
in
progress.
|
The
software code and license for the intellectual property included within the
game
for the following games (either completed or under development) is subject
to a
license which is fully transferable to purchasers of the business. It
is also transferable to others, but only with prior approval of developer,
such
approval not to be unreasonably withheld.
|
·
|
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as "Heroes Of The Pacific" on the Sony PS2, Microsoft Xbox and
PC’s.
|
|
·
|
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as "Heroes Of The Pacific" on the Sony
PSP.
|
|
·
|
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as "Heroes Over Europe" on the Sony PS3 and Microsoft Xbox
360.
|
|
·
|
Development
and Licensing Agreement with Prodigy Design Ltd. for the development
of a
game known as "GripShift" on the Sony
PSP.
|
|
·
|
Development
and Licensing Agreement with IR Gurus for the development of a game
known
as "Equestrian Challenge" on the Sony PS2 and
P.C’s.
|
The
Publishing and Development Agreement with Buena Vista Games is only transferable
to a controlled or controlling entity. The Company may request a transfer to
a
different entity, but approval is at Disney’s sole discretion and they may
charge a transfer fee of up to $25,000.
The
license for Crusty Demons is only transferable as part of the direct or indirect
merger, consolidation, corporate restructuring or sale or transfer of all or
substantially all of our assets or a controlling interest of 51% or more of
the
voting securities of the company.
The
MTVN
Merchandising and License Agreement is transferable as part of the direct or
indirect merger, consolidation, corporate restructuring or sale or transfer
of
all or substantially all of our assets or a controlling interest of 51% or
more
of the voting securities of the company, so long as this entity is not a
"Restricted Entity". A Restricted Entity means a competitor to MTVN
or an entity that’s capitalization and funding sources are less than those of
Red Mile or the combined resources, post-merger will be less than Red Mile’s at
the time of merger. Other assignments, however, including a pledge,
require MTVN’s consent.
The
Sin
City License Agreement is transferable upon a change of control, but only upon
approval from Xxxxx Xxxxxx Inc.
Licensing
agreement with Marshmallowville Media, L.L.C. for a license to the intellectual
properties known as Marshmallow Shooter or Xxxxxx Blaster’s M-Force has no
limitations.
The
following agreements are exclusive licenses, which allows our licensee to sell
a
game in a specific territory and which therefore precludes the Company from
directly selling or licensing that game in that territory.
|
·
|
Licensing
Agreement with Sony Online Entertainment for the worldwide publishing
rights to GripShift on the Sony
PSP.
|
|
·
|
Co-publishing
Agreement with Codemasters for the European publishing rights to
Heroes Of
The Pacific on the Sony PS2, Microsoft Xbox and
PC’s.
|
|
·
|
Publishing
Agreement with Ubisoft for the North American publishing rights to
Heroes
Of The Pacific on the Sony PS2, Microsoft Xbox and
PC’s.
|
|
·
|
Publishing
Agreement with Strategy First Corp. for the worldwide publishing
rights to
Disney’s Aladdin Chess Adventures.
|
|
·
|
Co-publishing
Agreement with Evolved Games for the North American publishing rights
to
the Crusty Demons video game.
|
|
·
|
Co-publishing
Agreement with Xxxx Media GmbH for the European publishing rights
to
Crusty Demons.
|
The
following agreements are exclusive licenses, which allows our licensee to sell
a
game in a specific territory and which therefore precludes the Company from
directly selling or licensing that game in that territory.
|
·
|
Licensing
Agreement with Sony Online Entertainment for the worldwide publishing
rights to GripShift on the Sony
PSP.
|
|
·
|
Co-publishing
Agreement with Codemasters for the European publishing rights to
Heroes Of
The Pacific on the Sony PS2, Microsoft Xbox and
PC’s.
|
|
·
|
Publishing
Agreement with Ubisoft for the North American publishing rights to
Heroes
Of The Pacific on the Sony PS2, Microsoft Xbox and
PC’s.
|
|
·
|
Publishing
Agreement with Strategy First Corp. for the worldwide publishing
rights to
Disney’s Aladdin Chess Adventures.
|
|
·
|
Co-publishing
Agreement with Evolved Games for the North American publishing rights
to
the Crusty Demons video game.
|
|
·
|
Co-publishing
Agreement with Xxxx Media GmbH for the European publishing rights
to
Crusty Demons.
|
