SERIES C PREFERRED STOCK PURCHASE AGREEMENT
February
3, 2006
Xxxxx
Xxxxxx, Xx. (the "Purchaser")
hereby
purchases from Xxxxxx Xxxxxxx (the "Seller"),
and
the
Seller hereby sells to the Purchaser 10,000,000 shares (the "Shares")
of
Series
C Preferred Stock, par value $0.001 ("Preferred
Stock") of
Zann
Corp., a Nevada corporation (the "Company"),
for
an
aggregate purchase price of $500,000.00 (the "Purchase
Price"), which
amount shall be payable by means of Purchaser's payment to Seller of a $50,000
in cash, which amount Purchaser has previously paid to Seller as a
non-refundable deposit, and Purchaser's delivery to Seller of that certain
secured interest bearing promissory note in the original principal amount of
$450,000 (the "Note"), a copy of which is annexed hereto as Exhibit
A.
The
Purchaser acknowledges receipt of a stock certificate representing the Shares
(a
copy of which is annexed hereto as Exhibit
B)
and the
Seller acknowledges receipt from the Purchaser of the Purchase
Price.
1.
Acknowledgement
Regarding Purchase Price. The
Purchaser acknowledges that the Purchase Price is not based on an independent
valuation of the Shares and may not reflect the fair market value of the Shares.
The Purchaser acknowledges that the Company may immediately sell additional
equity at a lower valuation or may be acquired in a transaction that values
its
Common Stock at a lower valuation than the Purchase Price. The Purchaser further
acknowledges that neither the Seller nor the Company has made any
representations and warranties to the Seller with respect to the Purchase Price
or the transactions contemplated herein, that the Purchaser's decision to enter
into the transactions contemplated herein is based on the Purchaser's own
evaluation of the risks and merits of the Company's business activities, and
that the Purchaser assumes the risk that the Purchase Price may not reflect
the
fair market value of the Shares or the value of the Shares pursuant to any
other
valuation basis.
2.
Investor
Representations. The
Purchaser hereby represents and warrants to the Seller as follows:
(a)
Accredited
Investor. I
am an
"accredited investor" within the meaning of Regulation D, Rule 501(a),
promulgated by the Securities and Exchange Commission under the Securities
Act
of 1933, as amended (the "Securities
Act"), and
shall
submit to the Company such further assurances of such status as may be
reasonably requested by the Company.
(b)
I
am
Purchasing for Investment. I
am
purchasing the Shares solely for investment purposes, and not for further
distribution. My entire legal and beneficial ownership interest in the Shares
is
being purchased and shall be held solely for my account, except to the extent
I
intend to hold the Shares jointly with my spouse. I am not a party to, and
do
not presently intend to enter into, any contract or other arrangement with
any
other person or entity involving the resale, transfer, grant of participation
with respect to or other distribution of any of the Shares. My investment intent
is not limited to my present intention to hold the Shares for the minimum
capital gains period specified under any applicable tax law, for a deferred
sale, for a specified increase or decrease in the market price of the Shares,
or
for any other fixed period in the future.
(c)
I
Know the Shares are Restricted Securities. I
understand that the Shares are "restricted securities" in that the sale of
the
Shares to me has not been registered under the Securities Act in reliance upon
an exemption for non-public offerings. In this regard, I also understand and
agree that:
(d)
I must hold the Shares indefinitely, unless any subsequent proposed resale
by me
is registered under the Securities Act, or unless an exemption from registration
is otherwise available (such as Rule 144);
(e)
the
Company is under no obligation to register any subsequent proposed resale of
the
Shares by me; and
(f)
the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless such transfer is registered or
such
registration is not required in the opinion of counsel for the
Company.
(g)
/
am
Familiar With Rule 144. I
am
familiar with Rule 144 adopted under the Securities Act, which in some
circumstances permits limited public resales of "restricted securities" like
the
Shares acquired from an issuer in a non-public offering. I understand that
my
ability to sell the Shares under Rule 144 in the future is uncertain, and will
depend upon, among other things: (i) the availability of certain current public
information about the Company; (ii)
the
resale occurring more than one year after my purchase and full payment (within
the meaning of Rule 144) for the Shares; and (iii)
if I am
an affiliate of the Company, or a non-affiliate who has held the Shares less
than two years after my purchase and full payment: (A) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker, as said term is defined under the Securities
Exchange Act of 1934, as amended, (B) the amount of Shares being sold during
any
three month period not exceeding the specified limitations stated in Rule 144,
and (C) timely filing of a notice of proposed sale on Form 144, if
applicable.
(h)
/ Know
Rule 144 May Never be Available. I
understand that the requirements of Rule 144 may never be met, and that the
Shares may never be saleable. I further understand that at the time I wish
to
sell the Shares, there may be no public market for the Company's stock upon
which to make such a sale, or the current public information requirements of
Rule 144 may not be satisfied, either of which would preclude me from selling
the Shares under Rule 144 even if the one-year minimum holding period had been
satisfied.
(i)
I
Know I am Subject to Further Restrictions on Resale. I
understand that in the event Rule 144 is not available to me, any future
proposed sale of any of the Shares by me will not be possible without prior
registration under the Securities Act, compliance with some other registration
exemption (which may or may not be available), or each
of the
following: (i) my written notice to the Company containing detailed information
regarding the proposed sale, (ii) my providing an opinion of my counsel to
the
effect that such sale will not require registration, and (iii) the Company
notifying me in writing that its counsel concurs in such opinion. I understand
that neither the Company nor its counsel is obligated to provide me with any
such opinion. I understand that although Rule 144 is not exclusive, the Staff
of
the SEC has stated that persons proposing to sell private placement securities
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 their
respective brokers who participate in such transactions do so at their own
risk.
(j)
Residence.
The
address of my principal residence is set forth on the signature page
below.
3.
Seller
Representations. The
Seller hereby represents and warrants to the Purchaser as follows:
-2-
(a)
Authorization; Enforcement, (a)
The
Seller has the requisite power and authority to enter into and perform this
Agreement and to sell the Shares in accordance with the terms hereof, (b) no
consent or authorization of any party is required for the Seller to execute
and
deliver this Agreement and to consummate the transactions contemplated hereby,
including the transfer of the Shares, and (c) this Agreement constitutes a
valid
and binding obligation of the Seller enforceable against the Seller in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general
application.
(b)
Ownership
of Common Shares. Seller
is
the sole record and beneficial owner of the Shares. The Shares are validly
issued and fully paid and nonassessable. The Shares are free and clear of any
lien, encumbrance, option, charge, equity or restriction, other than
restrictions set forth herein; provided,
however,
that
the Shares may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein. The sale of the Shares is not subject
to
rights of first refusal.
(c)
No
Conflicts of the Seller. The
execution, delivery and performance of this Agreement by the Seller and the
consummation by the Seller of the transactions contemplated hereby do not and
will not conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Seller
or any of its subsidiaries is a party, or result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to
the
Seller or by which any property or asset of the Seller is bound or
affected.
(d)
Opportunity
to Consult with Advisors. The
Seller has properly evaluated the merits and risks of selling the Shares and
can
protect his own interests in this regard, whether by reason of his own business
and financial expertise, the business and financial expertise of certain
professional advisors unaffiliated with the Company with whom Seller has
consulted, or Seller's preexisting business or personal relationship with the
Company or any of its officers, directors or controlling persons.
4.
No
Right of First Refusal. The
Company and the Seller hereby acknowledge that the Shares are not subject to
any
right of first refusal in favor of the Company or any other party.
5.
Indemnification.
Purchaser
and Seller agree, and Purchaser shall cause the Company to agree, that all
rights to indemnification now existing in favor of Seller as provided in the
Company's articles of incorporation or bylaws, or otherwise, as in effect on
the
date of this Agreement, shall continue in full force and effect for a period
of
6 years after the date hereof; provided
however, that,
in
the event any claim or claims are asserted or made within such six (6)-year
period, all rights to indemnification in respect of any such claim or claims
shall continue to disposition of any and all such claims. In the event that
Seller becomes involved in any capacity in any claim, suit, action, proceeding,
investigation or inquiry (including, without limitation, any shareholder or
derivative action or arbitration proceeding) (collectively, a "Proceeding")
arising out of or based upon this Agreement, the Note or the Security Agreement
or arising out of the matters contemplated herein or therein, Purchaser agrees,
and Purchaser shall cause the Company to agree, to indemnify, defend and hold
Seller harmless to the fullest extent permitted by law, from and against any
losses, claims, damages, liabilities and expenses in connection with any matter
in any way relating to or referred to in this Agreement or arising out of the
matters contemplated herein or therein. The foregoing indemnification clause
shall be in addition to any rights that Seller may have.
-3-
6.
Assumption of Liabilities. Purchaser
shall assure that after the date hereof the Company will discharge the
liabilities of the Company listed as Exhibit
C
annexed
hereto (the "Liabilities") as they mature and not allow the
Liabilities to become delinquent or accrue penalties thereon.
7.
Miscellaneous.
This
agreement shall be governed in all respects by the laws of the State of Nevada
without regard to principles of conflicts of laws. The representations,
warranties, covenants and agreements made in this agreement shall survive any
investigation made by any party hereto and the closing of the transactions
contemplated hereby. Except as otherwise provided in this agreement, the
provisions of this agreement shall inure to the benefit of, and be binding
upon,
the successors, assigns, heirs, executors and administrators of the parties
to
this agreement. This agreement and the Note and their respective exhibits
(including that certain Security Agreement, dated the date hereof, by and
between Purchaser and Seller (the "Security Agreement")) constitute the full
and
entire understanding and agreement between the parties with regard to the
subject matter hereof and thereof, and supersede all prior agreements, and
no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein. Except as expressly provided in this agreement, none of this
agreement, the Note or the Security Agreement, nor any term hereof or thereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought. The parties acknowledge and agree
that the provisions of Sections 5 and 6 hereof shall survive the Closing. This
agreement may be executed in any number of counterparts, each of which shall
be
enforceable against the parties actually executing such counterparts, and all
of
which together shall constitute one instrument. Facsimile copies of signed
signature pages shall be binding originals.
[SIGNATURE
PAGE FOLLOWS]
-4-
IN
WITNESS WHEREOF, this Series C Preferred Stock Purchase Agreement is executed
effective as of the date first written above.
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SELLER:
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/s/
Xxxxxx Xxxxxxx
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Seller's
Signature
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Xxxxxx
Xxxxxxx
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Print
Name
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PURCHASER:
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/s/
Xxxxx Xxxxxx, Xx.
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Purchaser's
Signature
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Xxxxx
Xxxxxx, Xx.
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Print
Name
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Address
of Purchaser's Principal Residence
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0000
Xxxxxxxx Xx
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Xxxxxxxxxxx
XX 00000
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