THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
CONVERSION AGREEMENT
THIS CONVERSION AGREEMENT, dated as of January 6, 2004, is made by and
between Infinium Labs, Inc., a Delaware corporation ("Company"), and Phoenix
Capital Opportunity Fund, LP ("Holder").
WHEREAS, the Company issued to Holder that certain 15% Secured Debenture,
dated September 10, 2004 ("Note"); and
WHEREAS, Company and Holder wish to provide for the terms and conditions
pursuant to which the Note may be converted to common stock, par value $0.0001
per share ("Common Stock"), of the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which the parties hereby acknowledge, the parties agree as
follows:
1. Conversion of Note. The Company and Holder hereby agree that the
outstanding principal balance of the Note and all interest accrued and unpaid
thereon ("Balance") shall convert into shares of the Company's Common Stock at a
per share price equal to ten cents ($.10). The Company and Holder agree that the
Balance is $704,375 and that upon conversion of the Note in full and the
issuance by the Company of (i) 7,043,750 shares of Common Stock ("Conversion
Shares") as full payment of the Balance and (ii) 175,000 shares of Common Stock
("Interest Shares") pursuant to the letter agreement between Holder and the
Company dated December 20, 2004, the Company shall be forever released from all
its obligations and liabilities under the Note.
2. Closing. At the Closing, Holder shall deliver the Note to the Company
and the Company shall deliver the Conversion Shares and the Interest Shares to
Holder.
3. Further Assurances. In connection with the conversion of the Note, the
Holder, by entering into this Conversion Agreement, agrees to execute all
agreements and other documents as reasonably requested by the Company.
4. Investor Representations and Warranties and Covenants. The Holder
represents, warrants and covenants to the Company as follows:
a. No Registration. Such Holder understands that the Note, the
Conversion Shares and the Interest Shares have not been, and will not be,
registered under the Securities Act of 1933, as amended (the "Securities Act")
by reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of such Holder's
representations as expressed herein or otherwise made pursuant hereto.
Company:____
Holder:____
b. Investment Intent. Such Holder has acquired the Note, and is
acquiring the Conversion Shares and Interest Shares, for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof, and such Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Such Holder further represents that it will not violate the Securities
Act and does not have any contract, undertaking, agreement or arrangement with
any person or entity to sell, transfer or grant participation to such person or
entity or to any third person or entity with respect to the Note, Conversion
Shares and Interest Shares.
c. Investment Experience. Such Holder has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company and acknowledges that such Holder can protect
its own interests. Such Holder has such knowledge and experience in financial
and business matters so that such Holder is capable of evaluating the merits and
risks of its investment in the Company.
d. Residency. The residency of the Holder (or, in the case of a
partnership or corporation, such entity's principal place of business) is
correctly set forth on the signature page hereto.
e. Speculative Nature of Investment. Such Holder understands and
acknowledges that the Company has a limited financial and operating history and
that an investment in the Company is highly speculative and involves substantial
risks. Such Holder can bear the economic risk of such Holder's investment and is
able, without impairing such Holder's financial condition, to hold the
Conversion Shares and Interest Shares for an indefinite period of time and to
suffer a complete loss of such Holder's investment.
f. Access to Data. The Holder and its advisors, if any, have been
furnished with or have been given access to all materials relating to the
business, finances and operations of the Company and any reasonably requested
materials requested by the Holder. The Holder and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and its management
and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Holder has had the
opportunity to obtain and to review the Company's filings available on the XXXXX
web site of the Securities and Exchange Commission (xxx.xxx.xxx).
g. Accredited Investor. The Holder is an "accredited investor"
within the meaning of Regulation D, Rule 501(a), promulgated by the Securities
and Exchange Commission under the Securities Act and shall submit to the Company
such further assurances of such status as may be reasonably requested by the
Company.
h. Rule 144. Such Holder acknowledges that the Conversion Shares and
Interest Shares must be held indefinitely unless subsequently registered under
the Securities Act or an exemption from such registration is available. Such
Holder is aware of the provisions of Rule 144 promulgated under the Securities
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including among other things,
the existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring not less than
one year after a party has purchased and paid for the security to be sold, the
sale being effected through a "broker's transaction" or in transactions directly
with a "market maker" and the number of shares being sold during any three-month
period not exceeding specified limitations. Such Holder acknowledges that, in
the event all of the requirements of Rule 144 are not met, registration under
the Securities Act or an exemption from registration will be required for any
disposition of the Conversion Shares or Interest Shares. Such Holder understands
that, although Rule 144 is not exclusive, the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell restricted securities
received in a private offering other than in a registered offering or pursuant
to Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales and that such
persons and the brokers who participate in the transactions do so at their own
risk.
Company:____
Holder:____
i. Authorization.
i. Such Holder has all requisite power and authority to
execute and deliver this Conversion Agreement, and to carry out and perform its
obligations under the terms hereof. All action on the part of the Holder
necessary for the authorization, execution, delivery and performance of this
Conversion Agreement, and the performance of all of the Holder's obligations
herein, has been taken.
ii. This Conversion Agreement, when executed and delivered by
the Holder, will constitute valid and legally binding obligations of the Holder,
enforceable in accordance with its terms except: (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies or by general principles of equity.
iii. No consent, approval, authorization, order, filing,
registration or qualification of or with any court, governmental authority or
third person is required to be obtained by the Holder in connection with the
execution and delivery of this Conversion Agreement by the Holder or the
performance of the Holder's obligations hereunder.
j. Brokers or Finders. Such Holder has not engaged any brokers,
finders or agents, and the Company has not, and will not, incur, directly or
indirectly, as a result of any action taken by the Holder, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Conversion Agreement and the transactions related hereto.
k. Tax Advisors. Such Holder has reviewed with its own tax advisors
the U.S. federal, state, local and foreign tax consequences of this investment
and the transactions contemplated by this Conversion Agreement. With respect to
such matters, such Holder relies solely on such advisors and not on any
statements or representations of the Company or any of its agents, written or
oral. The Holder understands that it (and not the Company) shall be responsible
for its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Conversion Agreement.
Company:____
Holder:____
l. Legends. Such Holder understands and agrees that the certificates
evidencing the Conversion Shares and Interest Shares shall bear a legend in
substantially the form as follows (in addition to any legend required by any
other applicable agreement or under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR
APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE COMPANY HAS RECEIVED
AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO
THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED."
5. Registration Rights. In the event that the Company enters into a
definitive agreement to complete a Qualified Financing on or before March 1,
2005, the Company shall xxxxx Xxxxxx "piggyback" registration rights with
respect to the Conversion Shares and Interest Shares in connection with the
Qualified Financing (as defined herein), provided that the investors in the
Qualified Financing may reasonably limit the registration rights granted
hereunder to pro-rata participation based on Holder's percentage ownership in
the Company. A "Qualified Financing" shall be the closing of a transaction (or
series of related transactions) after the date hereof in which the Company
issues and sells shares of its capital stock in exchange for aggregate gross
proceeds of at least $12,000,000. If the Company has not entered into a
Definitive Agreement to complete a Qualified Financing on or before March 5,
2004, Holder may make a written request for registration of the Conversion
Shares and Interest Shares under the Securities Act of 1933 for sale in an
offering (a "Demand Registration"). Upon a request for a Demand Registration,
the Company shall use commercially reasonable efforts to effect such Demand
Registration in accordance with the terms of this Section 6. The Company shall
have no obligation to register Conversion Shares or Interest Shares under this
Section 6 on more than two occasions.
* * *
Company:____
Holder:____
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereonto duly authorized as of the day
and year first above written.
INFINIUM LABS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
PHOENIX CAPITAL OPPORTUNITY FUND, LP
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------------------------
Xxxxx Xxxxxxxxx
Managing Director
By: /s/ Xxxxx Xxxxxxxx
-------------------------------------------------
Xxxxx Xxxxxxxx
Managing Director
Address: One Sarasota Tower
0 X. Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Company:____
Holder:____
