SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of the date of acceptance set
forth below, by and between GRAPHIX ZONE, INC., a Delaware corporation, with
headquarters located at 42 Corporate Park, Suite 200, Irvine, California 92606
(the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration provided
by Regulation D under the Securities Act of 1933, as amended (the "1933 Act");
and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of non-voting, convertible preferred
stock of the Company which will be convertible into shares of Common Stock, $.01
par value (the "Common Stock"), of the Company and in connection therewith to
receive warrants to purchase shares of Common Stock, subject to acceptance of
this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO SUBSCRIBE; WARRANTS; PURCHASE PRICE.
(a) SUBSCRIPTION. The undersigned hereby agrees to purchase from the
Company the number of shares (the "Preferred Shares") of Series A Convertible
Preferred Stock, $.01 par value (the "Preferred Stock"), of the Company set
forth on the signature page of this Agreement at the price per share and for the
aggregate purchase price set forth on the signature page of this Agreement. The
Preferred Shares shall have the rights, designations and terms as set forth in
the Amended and Restated Certificate of Designations attached hereto as ANNEX
I-A, as amended by the form of Certificate of Amendment of Amended and Restated
Certificate of Designations attached hereto as ANNEX I-B (collectively, the
"Certificate of Designations"), and the Buyer hereby agrees that certificates
for a number of Preferred Shares equal to one third of the total number of
Preferred Shares shall bear each of the three legends set forth in Section
9(a)(ii) of the terms of the Preferred Stock in the Certificate of Designations.
The purchase price for the Preferred Shares shall be payable in United States
Dollars in immediately available funds. In addition to issuance of the
Preferred Shares, the Company shall issue to the Buyer on the Closing Date (as
herein defined) warrants to purchase shares of Common Stock, such warrants to be
in the form attached hereto as ANNEX II (the "Warrants"). The number of shares
of Common Stock initially
purchasable upon exercise of the Warrants to be issued to the Buyer on the
Closing Date shall be the quotient obtained by dividing (1) the number of shares
of Common Stock into which the number of Preferred Shares to be issued to the
Buyer on the Closing Date would be convertible on the Closing Date, if the
Preferred Shares were convertible on the Closing Date, by (2) five (5). The
shares of Common Stock issuable upon conversion of the Preferred Shares are
referred to herein as the "Conversion Shares." The shares of Common Stock
issuable upon exercise of the Warrants are referred to herein as the "Warrant
Shares." The Conversion Shares and the Warrant Shares are referred to herein
collectively as the "Common Shares." The Common Shares and the Preferred Shares
are referred to herein collectively as the "Shares." The Shares and the
Warrants are referred to herein collectively as the "Securities."
(b) FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Preferred Shares by delivering good funds in United States Dollars to the escrow
agent (the "Escrow Agent") identified in the Joint Escrow Instructions attached
hereto as ANNEX III (the "Joint Escrow Instructions"). Such delivery of funds
shall be made against delivery by the Company of the certificates for the
Preferred Shares registered in the name of the Buyer. Promptly following
payment by the Buyer to the Escrow Agent of the purchase price of the Preferred
Shares, but in no event later than the Closing Date, the Company shall deliver
certificates for the Preferred Shares and Warrants, registered in the name of
the Buyer, to the Escrow Agent. By signing this Agreement, the Buyer and the
Company each agrees to all of the terms and conditions of, and becomes a party
to, the Joint Escrow Instructions, all of the provisions of which are
incorporated herein by this reference as if set forth in full.
(c) METHOD OF PAYMENT. Payment of the purchase price for the
Preferred Shares shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For Further Credit to A/C#37179446
for credit to the account of Brian W. Pusch Attorney
Escrow Account
Reference: [Name of Buyer]/Graphix
Not later than 4:00 p.m., New York City time, on the date which is three New
York Stock Exchange trading day after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Buyer, the
Buyer shall deposit with the Escrow Agent the aggregate purchase price for the
Preferred Shares.
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2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) The Buyer is purchasing the Preferred Shares and the Warrants for
its own account for investment only and not with a view towards the public sale
or distribution thereof;
(b) The Buyer is an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3);
(c) All subsequent offers and sales of the Securities by the Buyer
shall be made pursuant to registration of the Securities being offered and sold
under the 1933 Act or pursuant to an exemption from registration;
(d) The Buyer understands that the Preferred Shares and Warrants are
being offered and sold, and the Common Shares are being offered, to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein and in the Prospective Purchaser Questionnaire, a true and accurate
copy of which has been delivered by the Buyer to the Company (the
"Questionnaire"), in order to determine the availability of such exemptions and
the eligibility of the Buyer to acquire the Preferred Shares and the Warrants
and to receive an offer of the Common Shares;
(e) The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Shares and the
Warrants and the offer of the Common Shares which have been requested by the
Buyer. The Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the
foregoing, the Buyer has had the opportunity to obtain and to review the
following documents: (1) the Company's Registration Statement on Form S-4
(Registration No. 333-02642) filed with the Securities and Exchange Commission
(the "SEC") on March 25, 1996, (2)(A) the Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1995 of Graphix Zone, Inc., a California corporation
("GZ"), (B) GZ's Quarterly Reports on Form 10-QSB for the fiscal quarters ended
September 30, 1995, December 31, 1995 and March 31, 1996, (C) GZ's Current
Reports on Form 8-K, dated August 4, 1995, January 3, 1996 and February 2, 1996,
and (D) GZ's definitive Proxy Statement for its 1995 Annual Meeting of
Shareholders, and (3)(A) the Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1995 of StarPress, Inc., a Colorado
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corporation ("SP" and together with GZ, the "Predecessor Registrants"), (B) SP's
Quarterly Reports on Form 10-QSB for the fiscal quarters ended September 30,
1995, December 31, 1995 and March 31, 1996, (C) SP's Current Reports on Form
8-K, dated December 1, 1995 and January 3, 1996, and (D) SP's definitive Proxy
Statement for its 1995 Annual Meeting of Shareholders, in each case as filed
with the SEC. The Buyer understands that its investment in the Securities
involves a high degree of risk;
(f) The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares; and
(g) This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with,
the Buyer that:
(a) CONCERNING THE SECURITIES. The Securities have been duly
authorized and the Preferred Shares, when issued and paid for in accordance with
this Agreement, and the Common Shares, when issued upon conversion of the
Preferred Shares or exercise of the Warrants, as the case may be, will be duly
and validly issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such holder. There are
no preemptive rights of any stockholder of the Company, as such, to acquire any
of the Shares. The Common Stock is listed for trading on the Nasdaq SmallCap
Market ("Nasdaq") and (1) the Company and the Common Stock meet the criteria for
continued listing and trading on Nasdaq; (2) the Company has not been notified
since January 1, 1994 by the National Association of Securities Dealers, Inc.
("NASD") of any failure or potential failure to meet the criteria for continued
listing and trading on Nasdaq (except for the notices dated February 22, 1995,
March 16, 1995 and April 13, 1995 regarding a potential failure that has been
rectified by the Company, and the notice dated October 24, 1996, regarding the
tardiness of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996, copies of which have been furnished to the Buyer by the Company
prior to the execution and delivery of this Agreement by the Buyer) and (3) no
suspension of trading in the Common Stock is in effect.
(b) SUBSCRIPTION AGREEMENT; REGISTRATION RIGHTS AGREEMENT; WARRANTS.
This Agreement, the Registration Rights Agreement, the form of which is attached
hereto as ANNEX IV (the
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"Registration Rights Agreement") and the Warrants, have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
on behalf of the Company and this Agreement is and the Registration Rights
Agreement and the Warrants, when executed and delivered by the Company, will be,
valid and binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
(c) NON-CONTRAVENTION. The execution and delivery of this Agreement,
the Registration Rights Agreement and the Warrants by the Company and the
consummation by the Company of the issuance of the Preferred Shares and the
Warrants and the other transactions contemplated by this Agreement, the
Registration Rights Agreement and the terms of the Preferred Stock and the
Warrants do not and will not conflict with or result in a breach by the Company
of any of the terms or provisions of, or constitute a default under, the
certificate of incorporation or by-laws of the Company, or any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
or any applicable law, rule or regulation or any applicable decree, judgment or
order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets.
(d) APPROVALS. No authorization, approval or consent of or filing
with any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained by the Company for the issuance and sale of the
Securities as contemplated by this Agreement, the Preferred Stock and the
Warrants, other than (1) listing of the Common Shares on Nasdaq and (2) the
requirements of any applicable blue sky laws.
(e) SEC REPORTING STATUS AND FILINGS. Each of the Company and the
Predecessor Registrants has filed with the SEC all reports and other information
required to be filed under Sections 13(a), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), except that the Company has
not filed with the SEC its Annual Report on Form 10-K for the fiscal year ended
June 30, 1996. Since June 30, 1995, the Company and the Predecessor Registrants
have not filed any reports or other information with the SEC pursuant to
Sections 13(a), 14 and 15(d) of the 1934 Act other than the reports and other
information identified in Section 2(e) hereof.
(f) INFORMATION PROVIDED. The information provided by or on behalf
of the Company to the Buyer and referred to in Section 2(e) of this Agreement
does not contain any untrue statement of a material fact or omit to state any
material fact
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necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
(g) ABSENCE OF CERTAIN CHANGES. Since June 30, 1995, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in the documents referred to in Section 2(e)
hereof.
(h) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business, condition (financial or other), results of operations
or prospects of the Company and its subsidiaries taken as a whole or the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Shares and the Warrants have not been and are not being registered
under the provisions of the 1933 Act and, except as provided in the Registration
Rights Agreement, the Common Shares have not been and are not being registered
under the 1933 Act, and may not be transferred unless (A) subsequently
registered thereunder or (B) the Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Shares or the Warrants to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration; (2)
any sale of the Shares or the Warrants made in reliance on Rule 144 promulgated
under the 1933 Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any such resale of Shares or
Warrants under circumstances in which the seller, or the person through whom the
sale is made, may be deemed to be an underwriter, as that term is used in the
1933 Act, may require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC thereunder; and (3) neither the Company nor
any other person is under any obligation to register the Shares (other than
pursuant to the Registration Rights Agreement) or the Warrants under the 1933
Act or to comply with the terms and conditions of any exemption thereunder
(other than pursuant to Section 4(d) hereof and pursuant to the Registration
Rights Agreement).
(b) RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that, in
addition to the legend on certificates for the
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Preferred Shares contemplated by Section 1(a) hereof and Section 9(a)(ii) of the
Certificate of Designations, the certificates for the Preferred Shares and the
Warrants and, until such time as the Common Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the
certificates for the Common Shares, may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for the Shares):
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under the Securities Act of 1933, as
amended, or an opinion of counsel that registration is not required
under said Act.
(c) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.
(d) FORM D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Buyer promptly after such filing. The Buyer agrees to cooperate with the
Company in connection with such filing and, upon request of the Company, to
provide all information relating to the Buyer reasonably required for such
filing.
(e) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before the
Closing Date, the Company shall file a Nasdaq SmallCap Market Notification Form
for Listing of Additional Shares for the Common Shares with Nasdaq and shall
provide evidence of such filing to the Buyer. So long as the Buyer beneficially
owns any of the Preferred Shares, the Warrants or the Common Shares, the Company
shall file all reports required to be filed with the SEC pursuant to Section 13
or 15(d) of the 1934 Act and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
(f) USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Preferred Shares and the Warrants for the Company's internal working
capital purposes and not for the purpose of any investment in or loan to any
other corporation, partnership, enterprise or other person; PROVIDED, HOWEVER,
that the proceeds may be used for loans to companies which are wholly-owned
subsidiaries at all times when such loans are outstanding or for acquisitions of
other entities for cash.
(g) BLUE SKY LAWS. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify,
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or to obtain an exemption for, the Preferred Shares and the Warrants for sale to
the Buyer pursuant to this Agreement and the Common Shares for issuance to the
Buyer on conversion of the Preferred Shares and on exercise of the Warrants
under such of the securities or "blue sky" laws of jurisdictions in the United
States as shall be applicable to the sale of the Preferred Shares to the Buyer
pursuant to this Agreement and the issuance of the Common Shares to the Buyer on
conversion of the Preferred Shares. The Company shall furnish copies of all
filings, applications, orders and grants or confirmations of exemptions relating
to such securities or "blue sky" laws on or prior to the Closing Date.
(h) CERTAIN EXPENSES. Whether or not any closing occurs, the Company
shall pay or reimburse the Buyer for all reasonable legal fees and expenses of
counsel to the Buyer for the preparation and negotiation of, and closing under,
this Agreement (but not to exceed $5,000). The obligations of the Company under
the provisions of this Section 4(h) shall be in addition to the obligation of
the Company for expenses under the Registration Rights Agreement.
(i) CERTAIN FUTURE FINANCINGS. The Company shall not issue any
equity securities or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any equity securities of the Company (the "New
Equity Securities") (i) prior to the date which is 120 days after September 25,
1996 without the prior written consent of the Buyer and (ii) for a period of one
year on or after the date which is 120 days after September 25, 1996, without
giving the Buyer the first right to acquire the New Equity Securities at
substantially the same terms at which the New Equity Securities are to be
offered to other investors; PROVIDED, HOWEVER, that nothing in this paragraph
shall prohibit the Company from issuing securities (x) as part of a transaction
involving a strategic alliance, collaboration, joint venture or partnership
arrangement of the Company, (y) pursuant to compensation plans for employees,
directors, officers, advisers or consultants of the Company or (z) upon exercise
of conversion, exchange, purchase or similar rights issued, granted or given by
the Company and outstanding as of the date of this Agreement.
(j) CONVERSION PRICE. The Closing Price on the trading day prior to
the first issuance of any share of Series A Convertible Preferred Stock for
purposes of clause (2) of Section 9(a) of the Certificate of Designations shall
be deemed to be $3.375.
(k) LIMITATION ON CERTAIN SALES OF COMMON SHARES. The Buyer agrees
(1) that for a period of sixty (60) days after the Closing Date, the Buyer shall
not make open market sales of any Common Shares and (2) following the date which
is sixty (60) days after the Closing Date, except as hereinafter provided, the
Buyer shall not make open market sales of Common Shares in excess of an amount
equal to the product obtained by multiplying (1) the
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quotient obtained by dividing (A) the aggregate purchase price shown on the
signature page of this Agreement by (B) $100,000 TIMES (2) 8,000 Common Shares
(the amount of such product to be subject to equitable adjustment from time to
time for stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring on or after the date
of this Agreement) during any period of thirty (30) consecutive days ending on
the date of such sale, unless otherwise agreed to in advance by the Company.
Notwithstanding the foregoing, any Common Shares issued on conversion of the
Preferred Shares on the basis of the price of the Common Stock specified in
clause (y)(2) of the second sentence of Section 9(a)(i) of the Certificate of
Designations and set forth in Section 4(j) may be sold without regard to the
foregoing restriction. Notwithstanding the foregoing limitation, the Buyer
shall be permitted to tender all or any portion of the Common Shares in
connection with any tender offer or exchange offer for outstanding shares of
Common Stock.
(l) ANNUAL REPORT ON FORM 10-K. The Company hereby agrees that it
will file its Annual Report on Form 10-K for the fiscal year ended June 30, 1996
not later than November 5, 1996.
5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
(a) TRANSFER AGENT INSTRUCTIONS. Promptly following the delivery by
the Buyer of the aggregate purchase price for the Preferred Shares in accordance
with Section 1(c) hereof, and prior to the Closing Date, the Company will
irrevocably instruct its transfer agent to issue certificates for the Common
Shares from time to time upon conversion of the Preferred Shares and exercise of
the Warrants in such amounts as specified from time to time to the transfer
agent in the conversion certificates surrendered in connection with such
conversions and referred to in Section 5(b) of this Agreement or required by the
Certificate of Designations or in the subscription forms attached to the
Warrants, as the case may be, such certificates to bear the restrictive legend
specified in Section 4(b) of this Agreement prior to registration of the Common
Shares under the 1933 Act, registered in the name of the Buyer or its nominee
and in such denominations to be specified by the Buyer in connection with each
conversion of Preferred Shares or exercise of the Warrants, as the case may be.
The Company warrants that no instruction other than such instructions referred
to in this Section 5 and stop transfer instructions to give effect to Section
4(a) hereof prior to registration of the Common Shares under the 1933 Act will
be given by the Company to the transfer agent and that the Common Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement. Nothing in this Section 5(a) shall
affect in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Shares and to comply with the
terms and conditions of the Certificate of Designations. If the Buyer provides
the Company
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with an opinion of counsel reasonably satisfactory in form, scope and substance
to the Company that registration of a resale by the Buyer of any of the
Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement is
not required under the 1933 Act, the Company shall permit the transfer of such
Securities and, in the case of the Common Shares, instruct the Company's
transfer agent to issue upon transfer promptly, but in no event later than three
business days after receipt of such opinion, one or more share certificates in
such name or names and in such denominations as specified by the Buyer. The
provisions of Section 3(n) of the Registration Rights Agreement shall supersede
this Section 5(a) once said Section 3(n) becomes applicable.
(b) CONVERSION PROCEDURE. In connection with the exercise of
conversion rights relating to the Preferred Shares, if the Common Shares
issuable upon conversion of the Preferred Shares have not been registered for
resale under the 1933 Act prior to such conversion, the Buyer or any
subsequent holder of the Preferred Shares shall, in addition to any other
requirement imposed by the terms of the Preferred Shares as set forth in the
Certificate of Designations, complete, sign and furnish to the Company a
conversion certificate in the form attached hereto as ANNEX V.
6. STOCK DELIVERY INSTRUCTIONS.
The certificates for the Preferred Shares and the Warrants shall be
delivered by the Company to the Escrow Agent pursuant to Section 1(b) hereof on
a delivery against payment basis at the closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Preferred Shares and
issuance of the Warrants (the "Closing Date") shall be 12:00 noon, New York City
time, on the date which is three New York Stock Exchange trading days after the
date on which the Buyer has deposited the purchase price for the Preferred
Shares with the Escrow Agent in accordance with Section 1(c) hereof, or such
other mutually agreed to time. The closing shall occur on the Closing Date at
the offices of the Escrow Agent.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Preferred Shares and to issue the Warrants to the Buyer pursuant to this
Agreement is conditioned upon:
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
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(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Preferred
Shares in accordance with Section 1(c) hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement and in the Questionnaire as
if made on the Closing Date and the performance by the Buyer on or before the
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares and the Warrants on the Closing Date is conditioned upon:
(a) Delivery by the Company to the Escrow Agent of the certificate
for the Preferred Shares and the Warrants in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
such Closing Date; and
(c) Receipt by the Buyer on the Closing Date of an opinion of counsel
for the Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX VI attached hereto.
10. GOVERNING LAW; MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California.
(b) This Agreement may be executed in counterparts and by the parties
hereto on separate counterparts, all of which together shall constitute one and
the same instrument. A facsimile transmission of this Agreement bearing a
signature on behalf of a party hereto shall be legal and binding on such party.
(c) The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
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(e) No failure or delay by any party in exercising any right or
remedy under this Agreement or otherwise, and no course of dealing between the
parties, shall operate as a waiver thereof or amendment of this Agreement, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or exercise of any other right or
power.
(f) Neither this Agreement nor any term thereof (including this
paragraph) may be amended, changed, waived, discharged or terminated unless such
amendment, change, waiver, discharge or termination is in writing signed by the
party to be charged with enforcement.
(g) Any notices required or permitted to be given under the terms of
this Agreement shall be sent by mail or delivered personally (which shall
include telephone line facsimile transmission) or by courier and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier, in each case addressed to a party at such
party's address shown in the introductory paragraph or on the signature page of
this Agreement (facsimile number 714-833-3990, in the case of the Company, and
as set forth on the signature page hereof, in the case of the Buyer) or such
other address as a party shall have provided by notice to the other party in
accordance with this provision. The Buyer hereby designates as its address and
telephone line facsimile transmission number for any notice required or
permitted to be given to the Buyer pursuant to the Certificate of Designations
or the Registration Rights Agreement the address and telephone line facsimile
transmission number set forth on the signature page hereof, until the Buyer
shall by notice to the Company designate another address or telephone line
facsimile transmission number for such purpose.
(h) The Buyer shall have the right to assign its rights and
obligations under this Agreement with respect to the purchase of all or any
portion of the Preferred Shares and the Warrants to another investment fund,
provided such assignee, by written instrument duly executed by such assignee,
assumes all obligations of the Buyer hereunder with respect to the purchase of
the portion of the Preferred Shares and the Warrants so assigned and makes the
same representations and warranties with respect thereto as the Buyer makes in
this Agreement, whereupon the Buyer shall be relieved of any further
obligations, responsibilities and liabilities with respect to the purchase of
all or the portion of the Preferred Shares and the Warrants the obligation for
the purchase of which has been so assigned. In the case of any such assignment,
the Company shall agree in writing with such assignee to make available to such
assignee the benefits of the Registration Rights Agreement with respect to the
Common Shares issuable on conversion of the Preferred Shares and exercise of the
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Warrants with respect to which the purchase under this Agreement has been so
assigned.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer
or one of its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES:
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE:
NAME OF BUYER:
SIGNATURE
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Title:
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Date:
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Address:
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Facsimile Number:
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This Agreement has been accepted as of the date set forth below.
GRAPHIX ZONE, INC.
By:
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Title:
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Date:
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