AMENDMENT AND EXCHANGE AGREEMENT
AMENDMENT
AND EXCHANGE AGREEMENT
(this
"Agreement"),
dated
as of March 24, 2008, by and among DigitalFX International, Inc., a Florida
corporation, with headquarters located at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx 0,
Xxx
Xxxxx, XX 00000 (the "Company"),
and
[Portside Growth and Opportunity Fund] [Highbridge International LLC] [Iroquois
Master Fund, Ltd.] (the "Investor").
WHEREAS:
A.
The
Company, the Investor and certain other investors (the "Other
Investors",
and
collectively with the Investor, the "Investors")
are
parties to that certain Securities Purchase Agreement, dated as of November
29,
2007 (the "Existing
Securities Purchase Agreement"),
pursuant to which, among other things, the Investors purchased from the Company
(i) senior secured convertible notes (the "Existing
Notes"),
which
are convertible into shares of the Company's common stock, par value $0.001
per
share (the "Common
Stock")
(the
Existing Notes as converted, the "Existing
Conversion Shares"),
in
accordance with the terms thereof and (ii) warrants (the "Existing
Warrants"),
which
are exercisable into shares of Common Stock (the "Existing
Warrant Shares").
B.
In
connection with the execution and delivery of the Existing Securities Purchase
Agreement, the Company obtained certain irrevocable transferable letters
of
credit (each a "Letter
of Credit")
from
Xxxxx Fargo Bank, N.A. in the aggregate amount of $2,000,000 (the "Initial
LC Amount")
for
the benefit of the Investors.
C.
In
connection with the execution and delivery of the Existing Securities Purchase
Agreement, the Company and the Investors entered into that certain Registration
Rights Agreement, dated November 30, 2007 (the "Registration
Rights Agreement"),
by
and among the Company and the Investors, pursuant to which the Company agreed
to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Registration Rights Agreement) under the Securities Act
of
1933, as amended (the "1933
Act"),
and
the rules and regulations promulgated thereunder, and applicable state
securities laws.
D.
The
Company and the Investor desire to enter into this Agreement, pursuant to
which,
among other things, (i) at the Company's direction, the Investor shall
irrevocably instruct Xxxxx Fargo Bank, N.A. to redeem in cash from such Investor
an amount equal to such Investor's pro rata portion of the Initial LC Amount
(such Investor's "LC
Reduction Amount"),
as
set forth opposite such Investor's name in column (3) on the Securities Schedule
attached hereto, (ii) the Company shall redeem in cash from each Investor
an
amount equal to such Investor's pro rata portion of $2,000,000 (such Investor's
"Redemption
Payment Amount"),
as
set forth opposite such Investor's name in column (4) on the Securities Schedule
attached hereto, (iii) the Company shall amend and restate all of such
Investor's Existing Notes for (A) notes in the form attached hereto as
Exhibit
A
(the
"Notes")
with a
principal amount set forth opposite the Investor's name in column (5) on
the
Securities Schedule attached hereto, which shall be convertible into Common
Stock (the "Conversion
Shares")
and
(B) that aggregate number of shares of Common Stock, set forth opposite such
Investor's name in column (6) on the Securities Schedule attached hereto
(collectively, the "Common
Shares")
(which
aggregate amount for all Investors shall be 1,000,000 Common Shares); (iv)
the
Company shall amend and restate all of such Investor's Existing Warrants
for
warrants in the form attached hereto as Exhibit
B
(the
"Warrants")
which
shall be exercisable to acquire that number of shares of Common Stock set
forth
opposite the Investor's name in column (7) on the Securities Schedule attached
hereto (the "Warrant
Shares");
and
(v) the Company shall pay to the Investor, in cash, the interest payable
under
such Investor's Existing Notes through the Closing Date (the "2008
Interest Payment")
in the
amount set forth opposite the Investor's name in column (8) of the Securities
Schedule.
E.
The
amendment and restatement of the Existing Notes for the Notes and the Common
Shares and the amendment and restatement of the Existing Warrants for the
Warrants is being made in reliance upon the exemption from registration provided
by Section 3(a)(9) of the 1933 Act.
F.
Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings ascribed to them in the Existing Securities Purchase
Agreement.
NOW,
THEREFORE,
in
consideration of the foregoing recitals and the mutual promises hereinafter
set
forth, the Company and the Investor hereby agree as follows:
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1.
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AMENDMENT
AND RESTATEMENT OF EXISTING NOTES; ISSUANCE OF COMMON SHARES; AMENDMENT
AND RESTATEMENT OF EXISTING WARRANTS; LETTER OF CREDIT; INTEREST
PAYMENT.
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(a)
Letter
of Credit; Interest Payment.
Subject
to satisfaction (or waiver) of the conditions set forth in Sections 5 and
6
below, at the closing contemplated by this Agreement (the "Closing"),
at
the direction of the Company, the Investor shall irrevocably instruct Xxxxx
Fargo Bank, N.A. to redeem in cash from such Investor an amount equal to
the
Investor's LC Reduction Amount, as set forth opposite such Investor's name
in
column (3) on the Securities Schedule attached hereto; the
Company shall redeem in cash from each Investor an amount equal to the
Investor's Redemption Payment Amount, as set forth opposite such Investor's
name
in column (4) on the Securities Schedule attached hereto; and the Company
shall
pay to each Investor an amount in cash equal to the Investor's 2008 Interest
Payment, as set forth opposite such Investor's name in column (8) on the
Securities Schedule attached hereto.
(b)
Amendment
and Restatement of Existing Note and Existing Warrants.
Subject
to satisfaction (or waiver) of the conditions set forth in Sections 5 and
6
below, at the Closing, the Investor shall surrender to the Company its Existing
Note and its Existing Warrants and the Company shall issue and deliver to
the
Investor (I) a Note in the principal amount set forth opposite the Investor's
name in column (5) of the Securities Schedule attached hereto with a principal
amount reflecting the Investor's LC Reduction Amount and (II) the number
of
Common Shares as is set forth opposite the Investor's name in column (6)
on the
Securities Schedule; and the Warrants to acquire that number of Warrant Shares
as is set forth opposite the Investor's name in column (7) on the Securities
Schedule attached hereto; and
2
(c)
Closing
Date.
The
date and time of the Closing (the "Closing
Date")
shall
be 10:00 a.m., New York Time, on the Business Day immediately following the
date
hereof, subject to notification of satisfaction (or waiver) of the conditions
to
the Closing set forth in Sections 5 and 6 below (or such other time and date
as
is mutually agreed to by the Company and the Investor). The Closing shall
occur
on the Closing Date at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(d)
Release
of Letter of Credit Funds.
At the
direction of the Company, the Investor shall irrevocably instruct Xxxxx Fargo
Bank, N.A. to redeem in cash from such Investor an amount equal to the
Investor's LC Reduction Amount, as set forth opposite such Investor's name
in
column (3) on the Securities Schedule attached hereto, which the Company
and the
Investor agree shall be considered a Holder Optional Redemption payment for
purposes of the Investor's Letter of Credit. On the date hereof, at the
direction of the Company, the Investor shall deliver to Xxxxx Fargo Bank,
N.A. a
demand letter, in the form attached to the Investor's Letter of Credit,
requesting release of such LC Reduction Amount by wire transfer of immediately
available funds to the Investor.
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2.
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AMENDMENTS
TO TRANSACTION DOCUMENTS.
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(a)
Reaffirmation.
The
Company hereby confirms and agrees that, except as otherwise expressly provided
herein:
(i)
the
Existing Securities Purchase Agreement and each other Transaction Document
is,
and shall continue to be, in full force and effect and is hereby ratified
and
confirmed in all respects, except that on and after the Closing Date (i)
all
references in the Existing Securities Purchase Agreement to "this Agreement",
"hereto", "hereof", "hereunder" or words of like import referring to the
Securities Purchase Agreement shall mean the Existing Securities Purchase
Agreement as amended by this Agreement, (ii) all references in the other
Transaction Documents to the "Securities Purchase Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Securities
Purchase Agreement shall mean the Existing Securities Purchase Agreement
as
amended by this Agreement, and (iii) all references in the other Transaction
Documents to the "Registration Rights Agreement", "thereto", "thereof",
"thereunder" or words of like import referring to the Registration Rights
Agreement shall mean the Registration Rights Agreement as amended by this
Agreement. REFERENCES TO NOTES AND WARRANTS IN ALL TRANSACTION DOCUMENTS
MEANS
NOTES AND WARRANTS UNDER THIS AGREEMENT;
(ii) to
the
extent that the Securities Purchase Agreement or any other Transaction Document
purports to assign or pledge to the Collateral Agent for the Buyers and the
holders of the Securities, or to grant to the Collateral Agent a security
interest in or lien on, any collateral as security for the obligations of
the
Company from time to time existing in respect of the Existing Notes and any
other existing Transaction Document, such pledge, assignment and/or grant
of the
security interest or lien is hereby ratified and confirmed in all respects,
and
shall apply with respect to the obligations under the Notes and no additional
filing is required to be made in order to maintain the perfection of the
security interest in, or lien, on such collateral; and
3
(iii) the
execution, delivery and effectiveness of this Agreement shall not operate
as an
amendment of any right, power or remedy of the Collateral Agent or the Investors
under any Transaction Document, nor constitute an amendment of any provision
of
any Transaction Document.
(b)
Amendment
to Transaction Documents. Each
of
the Transaction Documents is hereby amended as follows:
(i) All
references to "Notes" shall be amended to mean the Notes as defined in this
Agreement.
(ii) All
references to "Conversion Shares" shall be amended to mean the Conversion
Shares
as defined in this Agreement.
(iii) All
references to "Warrants" shall be amended to mean the Warrants as defined
in
this Agreement.
(iv) All
references to "Warrant Shares" shall be amended to mean the Warrant Shares
as
defined in this Agreement.
(v) The
defined term "Transaction Documents" is hereby amended to include this
Agreement.
(vi) The
defined term "Securities" is hereby amended to include the Common
Shares.
(vii) All
references to "Lock-Up Agreement" shall be amended to mean the Lock-Up Agreement
as defined in this Agreement.
(viii) All
references to "Eligible Market" shall be amended to include the OTC Bulletin
Board.
(c)
Amendment
to Registration Rights Agreement.
(i) The
defined term "Required Registration Amount" shall be amended and restated
in its
entirety as follows:
""Required
Registration Amount"
for the
Registration Statement means (i) the sum of (x) the aggregate of the maximum
number of Conversion Shares issued and issuable pursuant to the Notes at
the
then applicable Conversion Price as of the Trading Day (as defined in the
Notes)
immediately preceding the applicable date of determination; (y) the number
of
Warrant Shares issued and issuable pursuant to the Warrants as of the Trading
Day immediately preceding the applicable date of determination, all subject
to
adjustment as provided in Section 2(e) (without regard to any limitations
on
conversion of the Notes or exercise of the Warrants); and (z) the aggregate
number of Common Shares issued pursuant to each of the Amendment and Exchange
Agreements, dated as of March 24, 2008, by and between the Company and each
of
the Buyers or (ii) such other amount as may be required by the staff of the
SEC
pursuant to Rule 415 with any cutback applied among the Investors pro rata:
(A)
first, to any Common Shares and Conversion Shares being registered under
such
Registration Statement on a 3:2 basis (meaning for every three (3) Common
Shares
cutback, two (2) Conversion Shares will be cutback) until all such Common
Shares
and Conversion Shares are cutback; (B) second, to any Conversion Shares being
registered under such Registration Statement until all such Conversion Shares
are cutback; (C) third, to any Warrant Shares being registered under such
Registration Statement until all such Warrant Shares are cutback; and (D)
thereafter, to all other Registrable Securities."
4
(ii) The
defined term "Effectiveness Deadline" shall be amended and restated in its
entirety as follows:
""Effectiveness
Deadline"
means
(A) if the Registration Statement is the Company's registration statement
on
Form S-3 (File No. 333-148033) filed with the SEC on December 12, 2007 (the
"Existing
Registration Statement"),
the
date which is sixty (60) calendar days after the earlier of (i) the date
the
Company files its Annual Report on Form 10-KSB for the year ended December
31,
2007 (the "2007
10-K")
and
(ii) the last date the Company could have timely filed its 2007 10-K; or
(B) if
the Company withdraws the Existing Registration Statement, the earlier of
the
date which is (i) in the event that the Registration Statement is not subject
to
a full review by the SEC, one-hundred and twenty (120) calendar days after
March
26, 2008 (the "Amendment
Closing Date")
or
(ii) in the event that the Registration Statement is subject to a full review
by
the SEC, one-hundred and fifty (150) calendar days after the Amendment Closing
Date."
(iii) Section
2(f) is hereby deleted in its entirety.
(iv) The
defined term "Cutback Note Amount" is hereby deleted in its entirety.
(d)
Amendment
to Securities Purchase Agreement.
(i) The
Securities Purchase Agreement is hereby amended by adding the following to
the
end of Section 4(k):
"For
so
long as any Notes or Warrants remain outstanding, the Company shall not,
in any
manner, enter into or effect any Dilutive Issuances (as defined in the Notes)
if
the effect of such Dilutive Issuance is to cause the Company to be required
to,
but for the Share Cap, issue upon conversion of any Note or exercise of any
Warrant any shares of Common Stock in excess of that number of shares of
Common
Stock which the Company may issue upon conversion of the Notes and exercise
of
the Warrants without exceeding the Share Cap (as defined in the
Notes)."
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3.
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REPRESENTATIONS
AND WARRANTIES
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(a)
Investor
Bring Down.
The
Investor hereby represents and warrants to the Company with respect to itself
only as set forth in Section 2 of the Existing Securities Purchase Agreement
as
if such representations and warranties were made as of the date hereof and
set
forth in their entirety in this Agreement. Such representations and warranties
to the transactions thereunder and the securities issued thereby are hereby
deemed for purposes of this Agreement to be references to the transactions
hereunder and the issuance of the securities hereby.
5
(b)
Company
Bring Down.
The
Company represents and warrants to the Investor as set forth in Section 3
of the
Existing Securities Purchase Agreement, as if such representations and
warranties were made as of the date hereof and set forth in their entirety
in
this Agreement. Such representations and warranties to the transactions
thereunder and the securities issued thereby are hereby deemed for purposes
of
this Agreement to be references to the transactions hereunder and the issuance
of the securities hereby, references therein to "Closing Date" being deemed
references to the Closing Date as defined in Section 1(b) above, and references
to "the date hereof" being deemed references to the date of this
Agreement.
(c)
No
Event of Default.
The
Company represents and warrants to the Investor that after giving effect
to the
terms of this Agreement and the Other Agreements (as defined below), no Event
of
Default (as defined in the Notes) shall have occurred and be continuing as
of
the date hereof.
(d)
Holding
Period.
For
the
purposes of Rule 144, the Company acknowledges that the holding period of
(i)
the Notes (including the corresponding Conversion Shares) may be tacked onto
the
holding period of the Existing Notes; (ii) the Common Shares may be tacked
onto
the holding period of the Existing Notes; and (iii) the Warrants (including
the
corresponding Warrant Shares) may be tacked onto the holding period of the
Existing Warrants (in the case of Cashless Exercise (as defined in the
Warrants)), and the Company agrees not to take a position contrary to this
Section 3(d). The Company agrees to take all actions, including, without
limitation, the issuance by its legal counsel of any necessary legal opinions,
necessary to issue to the Investor Conversion Shares, the Common Shares and
Warrant Shares (so long as such Warrants are exercised by way of a Cashless
Exercise) that are freely tradable on an Eligible Market without restriction
and
not containing any restrictive legend without the need for any action by
the
Investor; provided,
however,
that to
the extent the representation and warranty of the Investor in Section 3(e)
of
this Agreement does not continue to be accurate on the date of such issuance
and
during the preceding three-month period (except for purposes of this proviso,
references in Section 3(e) to "the date hereof" shall be deemed to be references
to "the date of such issuance"), the trading of such shares shall be subject
to
compliance with Rule 144.
(e)
Investor
Status.
As of
the date hereof and during the preceding three-month period, such Investor,
together with any other person with whom such Investor must aggregate sales
under Rule 144, does not, and has not, (i) beneficially owned in excess of
10%
of the Common Stock, (ii) appointed any member to the board of directors
of the
Company or (iii) participated in the management or daily operations of the
Company.
(f)
Shell
Company Status.
The
Company has complied with all of the requirements set forth in Rule
144(i)(2).
6
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4.
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CERTAIN
COVENANTS AND AGREEMENTS;
WAIVER
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(a)
Best
Efforts.
Each
party shall use its best efforts timely to satisfy each of the conditions
to be
satisfied by it as provided in Sections 5 and 6 of this Agreement.
(b)
Disclosure
of Transactions and Other Material Information.
On or
before 8:30 a.m., New York City time, on the first Business Day following
the
date of this Agreement, the Company shall issue a press release and file a
Current Report on Form 8-K, which the Collateral Agent shall have approved
prior
to its release and filing, describing the terms of the transactions contemplated
by this Agreement in the form required by the 1934 Act and attaching the
material Transaction Documents not previously filed (including, without
limitation, this Agreement, the form of the Notes (and the schedules thereto);
the form of the Warrants; the Lock-Up Agreement and the New Lock-Up Agreements
(as defined below)) (including all attachments, the "8-K
Filing").
From
and after the filing of the 8-K Filing with the SEC, the Investor shall not
be
in possession of any material, nonpublic information received from the Company,
any of its Subsidiaries or any of its respective officers, directors, employees
or agents, that is not disclosed in the 8-K Filing. The Company shall not,
and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide the Investor with
any
material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 8-K Filing with the SEC without the express
written consent of the Investor. If the Investor has, or believes it has,
received any such material, nonpublic information regarding the Company or
any
of its Subsidiaries, it shall provide the Company with written notice thereof.
The Company shall, within five (5) Trading Days (as defined in the Notes)
of
receipt of such notice, make public disclosure of such material, nonpublic
information. In the event of a breach of the foregoing covenant by the Company,
any of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or
in the
Transaction Documents, the Investor shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. The Investor shall not have any liability
to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such disclosure. Subject
to
the foregoing, neither the Company, its Subsidiaries nor the Investor shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall
be
entitled, without the prior approval of the Investor, to make any press release
or other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as
is
required by applicable law and regulations (provided that in the case of
clause
(i) the Investor shall be consulted by the Company in connection with any
such
press release or other public disclosure prior to its release). Without the
prior written consent of the Investor, neither the Company nor any of its
Subsidiaries or affiliates shall disclose the name of the Investor in any
filing
(other than as is required by applicable law or regulations), announcement,
release or otherwise.
7
(c)
Fees
and Expenses.
[INSERT
IN PORTSIDE AGREEMENT ONLY:
The
Company shall reimburse the Investor, in the maximum aggregate amount of
$20,000
for its legal and due diligence fees and expenses in connection with the
preparation and negotiation of this Agreement and transactions contemplated
thereby by paying any such amount to Xxxxxxx Xxxx & Xxxxx LLP (the
"Investor
Counsel Expense").
The
Investor Counsel Expense shall be paid by the Company whether or not the
transactions contemplated by this Agreement are consummated.] Except as
otherwise set forth in this Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any,
and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
(d)
Certain
Trading Limitations.
During
the thirty (30) Trading Day period ending on the one (1) year anniversary
of the
Closing Date (the "Lock-Up
Period"),
the
Investor covenants that neither it nor any of its Trading Affiliates (as
defined
in the Existing Securities Purchase Agreement) shall directly or indirectly,
nor
shall any Person acting on behalf of or pursuant to any understanding with
such
Investor or Trading Affiliate, effect or agree to effect any transactions
in the
securities of the Company. Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall preclude any actions, with respect
to the
identification of the availability of, or securing of, available shares to
borrow in order to effect short sales or similar transactions in the
future.
(e)
Company
Lock-Up.
During
the Lock-Up Period, the Company shall not directly or indirectly, nor shall
any
Person acting on behalf of or pursuant to any understanding with the Company,
effect or agree to effect any transactions in the securities of the Company
nor
shall the Company announce any agreement to effect any transaction in the
securities of the Company.
(f)
New
Lock-Up.
The
Company shall not amend or waive any provision of any of the New Lock-Up
Agreements except to extend the term of the lock-up period.
(g)
Common
Shares.
The
Company and the Investor agree that the provisions of the Existing Securities
Purchase Agreement concerning the Conversion Shares and the Warrant Shares
shall
apply to the Common Shares issued hereunder including, without limitation,
that
the certificates or other instruments representing the Common Shares shall
be
subject to Section 2(g) of the Existing Securities Purchase Agreement. If
the
Company shall fail for any reason or for no reason to issue to the Investor
unlegended certificates or issue Common Shares to such Investor by electronic
delivery at the applicable balance account at DTC within three (3) Trading
Days
after the receipt of documents necessary for the removal of the legend set
forth
in Section 2(g) of the Existing Securities Purchase Agreement (the "Removal
Date"),
then
in addition to all other remedies available to the Investor, if on or after
the
Trading Day immediately following such three (3) Trading Day period, the
Investor purchases (in an open market transaction or otherwise) shares of
Common
Stock to deliver in satisfaction of a sale by the Investor of such Common
Shares
that the Investor anticipated receiving without legend from the Company (a
"Buy-In"),
then
the Company shall, within three (3) Business Days after the Investor's request
and in the Investor's discretion, either (i) pay cash to the Investor in
an
amount equal to the Investor's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the
"Buy-In
Price"),
at
which point the Company's obligation to deliver such unlegended Common Shares
shall terminate, or (ii) promptly honor its obligation to deliver to the
Investor such unlegended shares of Common Stock as provided above and pay
cash
to the Investor in an amount equal to the excess (if any) of the Buy-In Price
over the product of (A) such number of shares of Common Stock, times (B)
the
Closing Bid Price (as defined in the Warrants) on the Removal Date.
8
(h)
Sale
of Common Shares.
So long
as the Notes are outstanding, the Investor shall not sell a number of Common
Shares exceeding more than two-thirds (2/3) of the number of Conversion Shares
previously issued, or required to have been issued, to the Investor upon
conversion of the Investor's Notes.
(i)
Public
Information.
At any
time during the period commencing on the six (6) month anniversary of the
Closing Date (as defined in the Existing Securities Purchase Agreement) and
ending at such time that all of the Securities can be sold without the
requirement to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, including Rule 144(i), if
a
registration statement is not available for the resale of all of the Securities
and the Company shall fail for any reason to satisfy the current public
information requirement under Rule 144 (a "Public
Information Failure")
then,
as partial relief for the damages to any holder of Securities by reason of
any
such delay in or reduction of its ability to sell the Securities (which remedy
shall not be exclusive of any other remedies available at law or in equity),
the
Company shall pay to each such holder an amount in cash equal to one and
one-half percent (1.5%) of the aggregate Purchase Price of such holder's
Securities on the day of a Public Information Failure and on every thirtieth
day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (i) the date such Public Information Failure is cured and (ii)
such
time that such public information is no longer required pursuant to Rule
144.
The payments to which a holder shall be entitled pursuant to this Section
4(i)
are referred to herein as "Public
Information Failure Payments."
Public
Information Failure Payments shall be paid on the earlier of (I) the last
day of
the calendar month during which such Public Information Failure Payments
are
incurred and (II) the third Business Day after the event or failure giving
rise
to the Public Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at the rate of 1.5%
per
month (prorated for partial months) until paid in full.
(j)
Withdrawal
of Existing Registration Statement.
On or
before 9:30 a.m., New York City time, on the third Business Day following
the
date of this Agreement, the Company shall withdraw the Existing Registration
Statement or file an amendment to the Existing Registration Statement to
update
the disclosure to reflect this Agreement, the Notes and the Warrants.
(k)
Waiver
of Registration Delay Payments.
For
purposes of clarity, Investor hereby agrees and acknowledges that by its
execution of this Agreement Investor does hereby irrevocably waive any and
all
Registration Delay Payments that may be due and payable in connection with
the
Existing Registration Statement.
9
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5.
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CONDITIONS
TO COMPANY'S OBLIGATIONS
HEREUNDER.
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The
obligations of the Company to the Investor hereunder are subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Company's sole benefit and may be waived by the Company at any
time
in its sole discretion by providing the Investor with prior written notice
thereof:
(a)
The
Investor shall have executed this Agreement and delivered the same to the
Company.
(b)
The
Investor shall have delivered to the Company the Investor's Existing Note
and
Existing Warrants for cancellation.
(c)
The
representations and warranties of the Investor shall be true and correct
in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true
and
correct in all respects) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that
speak
as of a specific date, which shall be true and correct as of such specified
date) and the Investor shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required
by this
Agreement to be performed, satisfied or complied with by the Investor at
or
prior to the Closing Date.
|
6.
|
CONDITIONS
TO INVESTOR'S OBLIGATIONS
HEREUNDER.
|
The
obligations of the Investor hereunder are subject to the satisfaction of
each of
the following conditions, provided that these conditions are for the Investor's
sole benefit and may be waived by the Investor at any time in its sole
discretion by providing the Company with prior written notice
thereof:
(a)
The
Company shall have delivered to the Investor its Redemption Payment Amount
and
2008 Interest Payment (plus, in the case of Portside Growth and Opportunity
Fund, the amounts due pursuant to Section 4(c) hereof) and Xxxxx Fargo Bank,
N.A. shall have delivered to the Investor its LC Reduction Amount.
(b)
The
Company shall have executed this Agreement and delivered the same to the
Investor.
(c)
The
Company shall have executed and delivered to the Investor the Notes, the
Common
Shares and the Warrants being issued to such Investor at the
Closing.
(d)
Each
of
the Other Investors shall have (i) executed agreements identical to this
Agreement (the "Other
Agreements")
(other
than proportional changes (the "Proportionate
Changes")
in the
numbers reflecting the different dollar amount of such Investor's Notes,
the
number of Common Shares being issued to such Investor and the number of Warrant
Shares underlying such Investor's Warrants and Section 4(c)), (ii) satisfied
or
waived all conditions to the closings contemplated by such agreements and
(iii)
surrendered their Existing Notes and Existing Warrants for the new Notes,
the
Common Shares and the Warrants (other than the Proportionate
Changes).
10
(e)
The
Company shall have delivered to the Company's transfer agent, with a copy
to the
Investors, Irrevocable
Transfer Agent Instructions in the form of Exhibit
C
attached
hereto.
(f)
The
Investor shall have received the opinion of Xxxxxx Xxxxxxxx & Markiles, LLP,
the Company's outside counsel, dated as of the Closing Date, in substantially
the form of Exhibit Dattached
hereto.
(g)
The
Company shall have delivered to such Investor a certificate (or a fax or
pdf
copy of such certificate) evidencing the formation and good standing of the
Company and each of its Subsidiaries in such entity's jurisdiction of formation
issued by the Secretary of State (or comparable office) of such jurisdiction,
as
of a date within 10 days of the Closing Date.
(h)
The
Company shall have delivered to such Investor a certificate (or a fax or
pdf
copy of such certificate) evidencing the Company's qualification as a foreign
corporation and good standing issued by the Secretary of State (or comparable
office or a bring-down certificate from Corporation Service Company) of each
jurisdiction in which the Company conducts business and is required to so
qualify, as of a date within 10 days of the Closing Date.
(i)
The
Company shall have delivered to the Investor a certified copy of the Articles
of
Incorporation of the Company as certified by the Secretary of State of the
State
of Florida (or a fax or pdf copy of such certificate) within ten (10) days
of
the Closing Date.
(j)
The
Company shall have delivered to the Investor a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions approving the transactions contemplated hereby as adopted by
the
Board in a form reasonably acceptable to the Investor, (ii) the Articles
of
Incorporation and (iii) the Bylaws, each as in effect as of the Closing,
in the
form attached hereto as Exhibit E.
(k)
The
representations and warranties of the Company hereunder shall be true and
correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect,
which
shall be true and correct in all respects) as of the date when made and as
of
the Closing Date as though made at that time (except for representations
and
warranties that speak as of a specific date, which shall be true and correct
as
of such specified date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by this Agreement and the other Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing Date and after
giving
effect to the terms of this Agreement and the Other Agreements, no default
or
Event of Default shall have occurred and be continuing as of the Closing
Date.
The Investor shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by the Investor
in
the form attached hereto as Exhibit
F.
(l)
The
Company and VM Investors LLC shall have entered into an amended and restated
Lock-Up Agreement in the form attached hereto as Exhibit
G
(the
"Lock-Up
Agreement").
11
(m)
Each
of
the Company's and VM Investors LLC's directors, executive officers and
affiliates shall have entered into a lock-up agreement in the form attached
hereto as Exhibit
H
(the
"New
Lock-Up Agreements").
(n)
Each
Subsidiary of the Company that has entered into a Guaranty on or prior to
the
date hereof in accordance with the terms of the Security Documents shall
have
executed and delivered to the Investor an acknowledgement and ratification
agreement in the form attached hereto as Exhibit
I.
(o)
The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by
the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of
the
Closing Date, either (A) in writing by the SEC or the Principal Market or
(B) by
falling below the minimum listing maintenance requirements of the Principal
Market.
(p)
The
Company shall have obtained all governmental, regulatory or third party consents
and approvals, if any, necessary for the sale of the Securities.
(q)
The
Company shall have delivered to the Investor such other documents relating
to
the transactions contemplated by this Agreement as the Investor or its counsel
may reasonably request.
|
7.
|
TERMINATION.
|
In
the
event that the Closing does not occur on or before five (5) Business Days
from
the date hereof, due to the Company's or the Investor's failure to satisfy
the
conditions set forth in Sections 5 and 6 hereof (and the nonbreaching party's
failure to waive such unsatisfied conditions(s)), the nonbreaching party
shall
have the option to terminate this Agreement with respect to such breaching
party
at the close of business on such date without liability of any party to any
other party [INSERT IN PORTSIDE AGREEMENT ONLY:; provided,
however,
if this
Agreement is terminated pursuant to this Section 7, the Company shall remain
obligated to reimburse the Investor for the expenses described in Section
4(c)
above]. Upon such termination, the terms hereof shall be null and void and
the
parties shall continue to comply with all terms and conditions of the
Transaction Documents, as in effect prior to the execution of this
Agreement.
|
8.
|
MISCELLANEOUS.
|
(a)
Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective
when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and
shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
(b)
Headings.
The
headings of this Agreement are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Agreement.
12
(c)
Severability.
If any
provision of this Agreement is prohibited by law or otherwise determined
to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect
the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does
not
substantially impair the respective expectations or reciprocal obligations
of
the parties or the practical realization of the benefits that would otherwise
be
conferred upon the parties. The parties will endeavor in good faith negotiations
to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s).
(d)
Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of
New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein,
and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be
deemed
to limit in any way any right to serve process in any manner permitted by
law.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(e)
No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may
any
provision hereof be enforced by, any other Person.
(f)
Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
13
(g)
No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen
by the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
(h)
Entire
Agreement; Effect on Prior Agreements; Amendments.
Except
for the Transaction Documents in effect prior to this Agreement (to the extent
any such Transaction Document is not amended by this Agreement), this Agreement
supersedes all other prior oral or written agreements between the Investor,
the
Company, their affiliates and Persons acting on their behalf with respect
to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth
herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement may be amended other than by an instrument in writing signed
by
the Company and the Investor. No provision hereof may be waived other than
by an
instrument in writing signed by the party against whom enforcement is sought.
No
consideration shall be offered or paid to any Person to amend or consent
to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the
case
may be. The Company has not, directly or indirectly, made any agreements
with
any of the Investors relating to the terms or conditions of the transactions
contemplated by the Transaction Documents, including through any agreement
that
is not identical to this Agreement, except as set forth in the Transaction
Documents. In the event that the Company enters into any such agreement with
more favorable terms than those set forth in this Agreement and the documents
contemplated hereby, the Investor shall be granted the benefit of such more
beneficial terms.
(i)
Notices.
Any
notices, consents, waivers or other communications required or permitted
to be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party);
or (iii) one Business Day after deposit with an overnight courier service,
in
each case properly addressed to the party to receive the same. The addresses
and
facsimile numbers for such communications shall be:
If
to the
Company:
DigitalFX
International, Inc.
0000
Xxxx
Xxxxxxx Xxxx, Xxxxx 0
Xxx
Xxxxx, Xxxxxx 00000
| Telephone: | (000) 000-0000 |
| Facsimile: | (000) 000-0000 |
| Attention: | Xxxxxx Xxxxxxxxx |
14
Copy
to:
Xxxxxx
Xxxxxxxx & Markiles, LLP
00000
Xxxxxxx Xxxxxxxxx
00xx
Xxxxx
Xxxxxxx
Xxxx, Xxxxxxxxxx 00000
|
Telephone:
|
(000) 000-0000 |
| Facsimile: | (000) 000-0000 |
| Attention: | Xxxxxxx Xxxxxxxx |
If
to the
Investor, to its address and facsimile number set forth in the Securities
Schedule attached hereto,
with
a
copy (for informational purposes only) to:
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
| Telephone: | (000) 000-0000 |
| Facsimile: | (000) 000-0000 |
| Attention: | Xxxxxxx X. Xxxxx, Esq. |
or
to
such other address and/or facsimile number and/or to the attention of such
other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by an
overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.
(j)
Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any purchasers of the
Notes
or the Warrants. The Company shall not assign this Agreement or any rights
or
obligations hereunder without the prior written consent of the Investor,
including by way of a Fundamental Transaction (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions
set
forth in the Notes and the Warrants). The Investor may assign some or all
of its
rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be an Investor hereunder with respect to such
assigned rights.
(k)
Survival.
Unless
this Agreement is terminated under Section 7, the representations and warranties
of the Company and the Investor contained herein and the agreements and
covenants set forth herein shall survive the Closing.
15
(l)
Remedies.
The
Investor and each holder of the Securities shall have all rights and remedies
set forth in the Transaction Documents and all rights and remedies which
such
holders have been granted at any time under any other agreement or contract
and
all of the rights which such holders have under any law. Any Person having
any
rights under any provision of this Agreement shall be entitled to enforce
such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes
that in the event that it fails to perform, observe, or discharge any or
all of
its obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Investor. The Company therefore agrees that the
Investor shall be entitled to seek temporary and permanent injunctive relief
in
any such case without the necessity of proving actual damages and without
posting a bond or other security.
(m)
Indemnification.
In
consideration of the Investor's execution and delivery of the Transaction
Documents, acquiring the Securities thereunder and entering into this Agreement
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless
the
Investor and each other holder of the Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from
and against any and all actions, causes of action, suits, claims, losses,
costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for
which
indemnification hereunder is sought), and including reasonable attorneys'
fees
and disbursements (the "Indemnified
Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating
to (a)
any misrepresentation or breach of any representation or warranty made by
the
Company in the Transaction Documents or any other certificate, instrument
or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or
any other certificate, instrument or document contemplated hereby or thereby
or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought
on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any
other
certificate, instrument or document contemplated hereby or thereby, (ii)
any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by the Investor pursuant to Section 4(c), or (iv) the status
of
the Investor or holder of the Securities as an investor in the Company pursuant
to the transactions contemplated by the Transaction Documents. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section
8(m)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
16
(n)
Independent
Nature of Investor's Obligations and Rights.
The
obligations of the Investor under any Transaction Document (including this
Agreement) are several and not joint with the obligations of any Other Investor,
and the Investor shall not be responsible in any way for the performance
of the
obligations of any Other Investor under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken
by
the Investor pursuant hereto, shall be deemed to constitute the Investor
and
Other Investors as a partnership, an association, a joint venture or any
other
kind of entity, or create a presumption that the Investor and Other Investors
are in any way acting in concert or as a group, and the Company will not
assert
any such claim with respect to the obligations or the transactions contemplated
by the Transaction Documents and the Company acknowledges that the Investor
and
Other Investors are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents.
The
Company acknowledges and the Investor confirms that the Investor has
independently participated in the negotiation of the transactions contemplated
hereby with the advice of its own counsel and advisors. The Investor shall
be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any Other Investor
to
be joined as an additional party in any proceeding for such
purpose.
[Signature
Page Follows]
17
IN
WITNESS WHEREOF,
the
Investor and the Company have caused their respective signature page to this
Agreement to be duly executed as of the date first written above.
| COMPANY: | ||
| DIGITALFX INTERNATIONAL, INC. | ||
| |
|
|
| By: | ||
|
Name: Xxxxx Xxxxxx |
||
| Title: Chief Executive Officer | ||
[Signature
Page to Amendment and Exchange Agreement]
18
IN
WITNESS WHEREOF,
the
Investor and the Company have caused their respective signature page to this
Agreement to be duly executed as of the date first written above.
|
INVESTOR:
|
||
|
[
________________]
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
19
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
(7)
|
(8)
|
(9)
|
|||||||||||||||||
|
Investor
|
Address
and
Facsimile
Number
|
LC
Reduction Amount
|
Redemption
Payment Amount
|
Aggregate
Principal
Amount
of Amended and Restated
Notes
|
Number
of Common Shares
|
Number
of
Amended
and Restated Warrant Shares
|
2008
Interest Payment
|
Legal
Representative's
Address
and Facsimile Number
|
|||||||||||||||||
|
Portside
Growth & Opportunity Fund
|
c/o
Ramius Capital Group, L.L.C.
000
Xxxxxxxxx Xxxxxx,
00xx
Xxxxx
Xxx
Xxxx, XX 00000
Attention:
Xxxxxxx Xxxxx
Xxxx Xxxxxxx
Facsimile:
(000) 000-0000
(000) 000-0000
Telephone:
(000) 000-0000
(000)
000-0000
Residence:
Cayman Islands
|
$
|
1,428,571.43
|
$
|
1,428,571.43
|
$
|
2,142,857
|
714,286
|
535,715
|
$
|
89,583.33
|
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxx, Esq.
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
|
|||||||||||||
|
Highbridge
International LLC
|
c/o
Highbridge Capital Management, LLC
0
Xxxx 00xx Xx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Attn:
Xxx X. Xxxxxx /
Xxxx
X. Chill
Tel:
000-000-0000
Fax:
000-000-0000
Residence:
Cayman Islands
|
$
|
428,571.43
|
$
|
428,571.43
|
$
|
642,857
|
214,286
|
160,715
|
$
|
26,875.00
|
||||||||||||||
|
Iroquois
Master Fund, Ltd.
|
000
Xxxxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx Xxxxxxxxx
Facsimile:
(000) 000-0000
Telephone:
(000) 000-0000
Residence:
Cayman Islands
|
$
|
142,857.14
|
$
|
142,857.14
|
$
|
214,286
|
71,428
|
53,572
|
$
|
8,958.33
|
||||||||||||||
20
