EXHIBIT 10.1
CONVERTIBLE LOAN AGREEMENT
This Convertible Loan Agreement (the "AGREEMENT") is made as of the 6 day of
March, 2008, by and between Zone 4 Play Inc., a company organized under the laws
of the state of Nevada, USA, (the "COMPANY") and Xxxxxx Xxxxxx, an individual
whose principal office is at 0 Xxxxxx Xx., Xxxxx Xxx 00000, Israel (the
"LENDER").
WHEREAS, the Parties agreed that the Lender will provide the Company with a
loan (the "LOAN") in the aggregate principal amount of US$ 500,000 (the
"PURCHASE PRICE" or "PRINCIPAL AMOUNT"), subject to terms and conditions set
forth in this Agreement; secured promissory notes of the Company ("NOTE" or
"NOTES"), a form of which is annexed hereto as EXHIBIT A, convertible into
shares ("CONVERSION SHARES") of the Company's Common Stock, $.001 par value (the
"COMMON STOCK") at a per share conversion price set forth in the Note (the
"CONVERSION PRICE"); and the amount of Common Stock purchase warrants (the
"WARRANTS"), in the form annexed hereto as EXHIBIT B, exercisable to purchase
shares of Common Stock (the "WARRANT SHARES") during the period and at the per
share purchase price set forth in the Warrants (the "EXERCISE PRICE").
The Notes, Conversion Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the "SECURITIES";
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the lender hereby agree
as follows:
1. THE LOAN.
a. Under the terms and subject to the conditions set forth in
this Agreement, the Lender shall lend to the Company a principal
amount of US $500,000.
b. The Lender shall transfer the Loan to the Company in
installments, the amount and timing of which are specified in EXHIBIT
C attached hereto.
c. The Lender shall transfer each Installment to the Company by
and no later than the date specified for each installment in Exhibit
C. Each installment is payable in US dollars or in Israeli currency
calculated at the most recent representative rate of exchange for the
US Dollar published by the Bank of Israel at the time of payment.
The "CLOSING DATE" shall be the first Drawdown Date as specified in Exhibit C,
that the Lender shall transfer to the benefit of the company the amount of
$15,000 and provide to the company 6 personal checks each of them in the amount
specified in exhibit C, payable 7 days after the date of payment of each
installment in the aggregate amount of US$ 500,000.
d. The Lender shall have the option for one year from the
effective date of the Registration Statement to purchase up to an
additional $500,000 ("Additional Stock"), in the aggregate, of Common
Stock and Warrants under the same Pricing Terms as the Notes and
Warrants purchased at closing date.
2. WARRANTS.
On the Closing Date, the Company will issue and deliver Warrants to the Lender.
One Warrant will be issued for one Share which would be issued on the Closing
Date assuming the complete conversion of the Note on the Closing Date at the
Conversion Price. The exercise price to acquire a Warrant Share upon exercise of
a Warrant shall be the Conversion Price in effect on the Closing Date, subject
to adjusment as described in the Warrant. The Warrants shall be exercisable
until 5 (five) years after the issue date of the Warrants.
3. SECURITY INTEREST.
The lender will be granted a security interest in the assets of the Company,
according the terms and the conditions as specified in the security agreement
("SECURITY AGREEMENT,") a copy of which is annexed hereto as EXHIBIT D. The
Company will execute all such documents reasonably necessary in the opinion of
the Lender to memorialize and further protect the security interest described
herein.
4. LENDER REPRESENTATIONS AND WARRANTIES. Lender hereby represents and
warrants that:
(a) AUTHORIZATION AND POWER. he has the requisite power and
authority to enter into and perform this Agreement and the other
Transaction Documents and to purchase the Notes and Warrants being
sold to it hereunder.
(b) INFORMATION ON COMPANY. As a shareholder of the Company and
as a board member he has been furnished with or has had access to all
information concerning its operations, financial condition and other
matters as he has requested.
(c) COMPLIANCE WITH SECURITIES LAWS. He understands and agrees
that the Securities have not been registered under the 1933 Act or any
applicable state securities laws, by reason of their issuance in a
transaction that does not require registration under the 1933 Act.
(d) that he will not trade in the company stock 30 days prior to
closing date.
5. COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees that:
(a) DUE INCORPORATION. The Company is a corporation or other
entity duly incorporated or organized, validly existing and in good
standing under the laws of Nevada.
(b) OUTSTANDING STOCK. All issued and outstanding shares of
capital stock of the Company and Subsidiary have been duly authorized
and validly issued and are fully paid and non-assessable.
(c) AUTHORITY; ENFORCEABILITY. This Agreement, the Note, the
Warrants, Security Agreement, and all other agreements delivered
together with this Agreement or in connection herewith (collectively
"TRANSACTION DOCUMENTS") have been duly authorized, executed and
delivered by the Company and are valid and binding agreements of the
Company enforceable in accordance with their terms. Provided the
approval of the transaction documents by the Company's shareholders
meeting, the Company has full corporate power and authority necessary
to enter into and deliver the Transaction Documents and to perform its
obligations thereunder. If, for any reason, the shareholder meeting
will not approve the Transaction Documents, during a period of 30 days
from the date of signing the Transaction Documents, Lender shall be
entitled to be repaid all the loan payments plus the accrued interest
and all his expenses within 14 days from that meeting. In no event
shall the Lender transfer to the Company more than US$ 100,000 (one
thundred thousand US dollars) prior to the approval of the Transaction
Documents by the shareholders meeting. .
(d) THE SECURITIES. The Securities upon issuance:
(i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances, subject to
restrictions upon transfer under the 1933 Act and any applicable
state securities laws;
(ii) have been, or will be, duly and validly authorized and
on the date of issuance of the Securities, the Securities will be
duly and validly issued, fully paid and non-assessable and if
registered pursuant to the 1933 Act and resold pursuant to an
effective registration statement.
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any
securities of the Company;
(e) LITIGATION. There is no pending or, to the best knowledge of
the Company, threatened action, suit, proceeding or investigation
before any court, governmental agency or body, or arbitrator having
jurisdiction over the Company.
(f) DEFAULTS. The Company is not in violation of its articles of
incorporation or bylaws. The Company is (i) not in default under or in
violation of any other material agreement or instrument to which it is
a party or by which it or any of its properties are bound or affected,
which default or violation would have a Material Adverse Effect, (ii)
not in default with respect to any order of any court, arbitrator or
governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding
under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters.
(g) NO GENERAL SOLICITATION. Neither the Company, nor any of its
Affiliates, nor to its knowledge, any person acting on its or their
behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the 0000 Xxx) in
connection with the offer or sale of the Securities.
(h) REPORTING COMPANY. The Company is a publicly-held company
subject to reporting obligations pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "1934 ACT") and has a
class of Common Stock registered pursuant to Section 12(g) of the 1934
Act. Pursuant to the provisions of the 1934 Act, the Company has
timely filed all reports and other materials required to be filed
thereunder with the Commission during the twelve months preceding the
date of this Agreement and the Closing Date.
(I) LISTING. The Company's Common Stock is quoted on the Bulletin
Board under the symbol ZFPI.OB. The Company has not received any oral
or written notice that its Common Stock is not eligible nor will
become ineligible for quotation on the Bulletin Board nor that its
Common Stock does not meet all requirements for the continuation of
such quotation. The Company satisfies all the requirements for the
continued quotation of its Common Stock on the Bulletin Board.
6. CONVERSION OF NOTE.
(a) Upon the conversion of a Note or part thereof, the Company
shall, at its own cost and expense, take all necessary action,
including obtaining and delivering, an opinion of counsel to assure
that the Company's transfer agent shall issue stock certificates in
the name of Lender (or its permitted nominee) or such other persons as
designated by Lender and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable
upon such conversion. The Company warrants that no instructions other
than these instructions have been or will be given to the transfer
agent of the Company's Common Stock and that the certificates
representing such shares shall contain no legend other than the usual
1933 Act restriction from transfer legend
(b) The Lender will give notice of its decision to exercise its
right to convert the Note, interest, or part thereof by telecopying,
or otherwise delivering a completed Notice of Conversion (a form of
which is annexed as EXHIBIT A to the Note) to the Company via
confirmed telecopier transmission or otherwise pursuant to this
Agreement. Lender will not be required to surrender the Note until the
Note has been fully converted or satisfied. Each date on which a
Notice of Conversion is telecopied to the Company in accordance with
the provisions hereof by 6 PM (or if received by the Company after 6
PM, then the next business day) shall be deemed a "CONVERSION DATE."
The Company will itself or cause the Company's transfer agent to
transmit the Company's Common Stock certificates representing the
Conversion Shares to such Subscriber via express courier for receipt
by Lender within five business days after receipt by the Company of
the Notice of Conversion (such third day being the "DELIVERY DATE").
7 REDEMPTION. The Notes shall not be redeemable or callable by the
Company except as described in the Note.
8. LEGAL FEES. The Company shall pay to Xxxxxxxxxx-Izardel law office
a fee of $20,000 ("LEGAL FEES") as reimbursement for services rendered to
the parties in connection with this Agreement and the purchase and sale of
the Notes and Warrants.
9. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Lender as follows:
(a) MARKET REGULATIONS. The Company shall notify the Commission,
the and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Securities to the Subscribers and
promptly provide copies thereof to the Subscribers.
(b) FILING REQUIREMENTS. From the date of this Agreement and
until the last to occur of (i) two (2) years after the Closing Date,
(ii) until all the Conversion Shares and Warrant Shares have been
resold or transferred by all the Lender pursuant to the Registration
Statement or pursuant to Rule 144, without regard to volume
limitations, or (iii) the Notes are not outstanding (the date of
occurrence of the last such event being the "END DATE"), the Company
will (A) cause its Common Stock to be registered under Section 12(b)
or 12(g) of the 1934 Act, (B) comply in all respects with its
reporting and filing obligations under the 1934 Act, (C) voluntarily
comply with all reporting requirements that are applicable to an
issuer with a class of shares registered pursuant to Section 12(b) or
Section 12(g) of the 1934 Act, if the Company is not subject to such
reporting requirements, and (D) comply with all requirements related
to any registration statement filed pursuant to this Agreement. The
Company will not take any action or file any document (whether or not
permitted by the 1933 Act or the 1934 Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said acts until the End Date.
Until the End Date, the Company will continue the listing or quotation
of the Common Stock on a Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Principal Market. The Company agrees
to timely file a Form D with respect to the Securities if required
under Regulation D and to provide a copy thereof to each Subscriber
promptly after such filing.
(c) BOOKS AND RECORDS. From the date of this Agreement and until
the End Date, the Company will keep true records and books of account
in which full, true and correct entries will be made of all dealings
or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent
basis.
(d) GOVERNMENTAL AUTHORITIES. From the date of this Agreement and
until the End Date, the Company shall duly observe and conform in all
material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its
properties or assets.
(e) INTELLECTUAL PROPERTY. From the date of this Agreement and
until the End Date, the Company shall maintain in full force and
effect its corporate existence, rights and franchises and all licenses
and other rights to use intellectual property owned or possessed by it
and reasonably deemed to be necessary to the conduct of its business,
unless it is sold for value.
(f) PROPERTIES. From the date of this Agreement and until the End
Date, the Company will keep its properties in good repair, working
order and condition, reasonable wear and tear excepted, and from time
to time make all necessary and proper repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times
comply with each provision of all leases to which it is a party or
under which it occupies property if the breach of such provision could
reasonably be expected to have a Material Adverse Effect.
(g) NON-PUBLIC INFORMATION. The Company covenants and agrees that
except for the Reports, Other Written Information and schedules and
exhibits to this Agreement, which information the Company undertakes
to publicly disclose not later than the sooner of the required or
actual filing date of the Form 8-K described in Section 9(n) above,
neither it nor any other person acting on its behalf will at any time
as of the date hereof provide Lender or its agents or counsel with any
information that the Company believes constitutes material non-public
information, unless prior thereto such Lender shall have agreed in
writing to receive such information or received such information under
his capacity as a board member or officer of the Company. The Company
understands and confirms that each Subscriber shall be relying on the
foregoing representations in effecting transactions in securities of
the Company.
(h) SENIORITY. Except for Permitted Liens and as otherwise
provided for herein, until the Notes are fully satisfied or converted,
the Company shall not grant nor allow any security interest to be
taken in the assets of the Company or any Subsidiary; nor issue any
debt, equity or other instrument which would give the holder thereof
directly or indirectly, a right in any assets of the Company or any
Subsidiary, equal or superior to any right or potential of the holder
of a Note in or to such assets.
10. REGISTRATION RIGHTS. The Company hereby grants the following
registration rights to Lender.
(i) The Company shall file with the Commission a FormSB-2
registration statement (the "REGISTRATION STATEMENT") (or such other
form that it is eligible to use) in order to register the Registrable
Securities for resale and distribution under the 1933 Act within
sixsty (60) calendar days after the conversion Date (the "FILING
DATE"), and use its best efforts to cause the Registration Statement
to be declared effective not later than ninety (90) calendar days
after the conversion Date (the "EFFECTIVE DATE"). The Company will
register not less than a number of shares of common stock in the
aforedescribed registration statement that is equal to 100% of the
Conversion Shares issued and issuable upon conversion of the Notes and
100% of the Warrant Shares issuable upon exercise of the Warrants, and
the Additional Stock (collectively the "REGISTRABLE SECURITIES") The
Registration Statement will immediately be amended or additional
registration statements will be immediately filed by the Company as
necessary to register additional shares of Common Stock to allow the
public resale of all Common Stock included in and issuable by virtue
of the Registrable Securities. Except with the written consent of the
Subscribers, no securities of the Company other than the Registrable
Securities will be included in the Registration Statement.
11 REGISTRATION PROCEDURES. If and whenever the Company is required to
effect the registration of any Registrable Securities under the 1933 Act,
the Company will, as expeditiously as possible:
(a) subject to the timelines provided in this Agreement, prepare
and file with the Commission a registration statement required by
Section 10, with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective
for the period of the distribution contemplated thereby (determined as
herein provided), promptly provide to the holders of the Registrable
Securities copies of all filings and Commission letters of comment and
notify the Lender (by telecopier and by e-mail addresses provided by
the Lender) that the Company receives notice that (i) the Commission
has no comments or no further comments on the Registration Statement,
and (ii) the registration statement has been declared effective.
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective.
(c) if applicable, list the Registrable Securities covered by
such registration statement with any securities exchange on which the
Common Stock of the Company is then listed;
12. EXPENSES. All expenses incurred by the Company in complying with
Section 10, including, without limitation, all registration and filing
fees, printing expenses (if required), fees and disbursements of counsel
and independent public accountants for the Company, fees and expenses
(including reasonable counsel fees) incurred in connection with complying
with state securities or "blue sky" laws, fees of the NASD, transfer taxes,
and fees of transfer agents and registrars, are called "REGISTRATION
EXPENSES." All underwriting discounts and selling commissions applicable to
the sale of Registrable Securities are called "SELLING EXPENSES." The
Company will pay all Registration Expenses in connection with the
registration statement under Section 11. Selling Expenses in connection
with each registration statement under Section 11 shall be borne by the
Seller and may be apportioned among the Sellers in proportion to the number
of shares sold by the Seller relative to the number of shares sold under
such registration statement or as all Sellers thereunder may agree.
13. Miscellaneous.
(a) NOTICES. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered
by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set
forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be: (i)
if to the Company, to: ________________Attn_______________________:
(b) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement and other
documents delivered in connection herewith represent the entire
agreement between the parties hereto with respect to the subject
matter hereof and may be amended only by a writing executed by the
Company and the affected Subscriber and as described in this
agreement. Neither the Company nor the Lender have relied on any
representations not contained or referred to in this Agreement and the
documents delivered herewith. No right or obligation of the Company
shall be assigned without prior notice to and the written consent of
the Lender
(c) COUNTERPARTS/EXECUTION. This Agreement may be executed in any
number of counterparts and by the different signatories hereto on
separate counterparts, each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute but one
and the same instrument. This Agreement may be executed by facsimile
signature and delivered by facsimile transmission.
(d) LAW GOVERNING THIS AGREEMENT. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Israel, without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state
courts of Tel Aviv. The parties to this Agreement hereby irrevocably
waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon FORUM NON CONVENIENS.
(e) SEVERABILITY. In the event that any term or provision of this
Agreement shall be finally determined to be superseded, invalid,
illegal or otherwise unenforceable pursuant to applicable law by an
authority having jurisdiction and venue, that determination shall not
impair or otherwise affect the validity, legality or enforceability:
(i) by or before that authority of the remaining terms and provisions
of this Agreement, which shall be enforced as if the unenforceable
term or provision were deleted, or (ii) by or before any other
authority of any of the terms and provisions of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
SIGNATURE PAGE TO CONVERTIBLE LOAN AGREEMENT
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
ZONE 4 PLAY, INC.
a Nevada corporation
By: /s/ Xxxxx Xxxxx /s/ Adiv Baruch
------------------- ---------------
Dated: March 6, 2008
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LENDER PURCHASE PRICE AND
PRINCIPAL AMOUNT OF NOTE
----------------------------------------------------- ------------------------
Name of Lender:
______________________________________
Address: _____________________________
______________________________________
Fax No.: _____________________________
Email address (not for notice purposes):
__________________________
______________________________________
Jurisdiction of organization (for entities):
__________________________
/s/ Xxxxxx Xxxxxx
-----------------
(Signature)
By: __________________________________
Name: ________________________________
Title: _______________________________
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LIST OF EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Installments of Payments
Exhibit D Security Agreement
EXHIBIT C
Installments of Payment:
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DATE PAYMENT AMOUNT
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February 22, 2008 $ 15,000
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February 28, 2008 $ 35,000
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March 9, 2008 $ 50,000
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April 9, 2008 $100,000
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May 9, 2008 $100,000
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June 9, 2008 $100,000
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July 9, 2008 $100,000
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TOTAL $500,000
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