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EQUITY
DISTRIBUTION AGREEMENT
THIS
AGREEMENT dated as of the 6th day of July 2007 (the
“Agreement”) between IFG Opportunity Fund, LLC.,
(the “Investor”), and RED ROCK PICTURES HOLDINGS,
INC., a corporation organized and existing under the laws of
the State of Nevada (the “Company”).
WHEREAS,
the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell
to the Investor, from time to time as provided herein, and the
Investor shall purchase from the Company up to Twenty-five
Million Dollars ($25,000,000) of the Company’s common
stock, par value $0.001 per share (the “Common
Stock”); and
WHEREAS,
such investments will be made in reliance upon the provisions
of Regulation D (“Regulation D”) of the Securities
Act of 1933, as amended, and the regulations promulgated
thereunder (the “Securities Act”), and or upon
such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all
of the investments to be made hereunder.
NOW,
THEREFORE, the parties hereto agree as follows:
ARTICLE
I.
Certain
Definitions
Section
1.1. “Advance” shall
mean the portion of the Commitment Amount requested by the
Company in the Advance Notice.
Section
1.2. “Advance Date”
shall mean the first (1st) Trading Day after expiration of the
applicable Pricing Period for each Advance.
Section
1.3. “Advance Notice”
shall mean a written notice in the form of Exhibit A attached
hereto to the Investor executed by an officer of the Company
and setting forth the Advance amount that the Company requests
from the Investor.
Section
1.4. “Advance Notice
Date” shall mean each date the Company delivers (in
accordance with Section 2.2(b) of this Agreement) to the
Investor an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this
Agreement. No Advance Notice Date shall be less
than five (5) Trading Days after the prior Advance Notice
Date.
Section
1.5. “Closing” shall
mean one of the closings of a purchase and sale of Common
Stock pursuant to Section 2.3.
Section
1.6. “Commitment
Amount” shall mean the aggregate amount of up to
Twenty-five Million Dollars ($25,000,000) which the
Investor has agreed to provide to the Company in order to
purchase the Company’s Common Stock pursuant to the
terms and conditions of this Agreement.
Section
1.7. “Commitment
Period” shall mean the period commencing on the earlier
to occur of (i) the Effective Date, or (ii) such earlier date
as the Company and the Investor may mutually agree in writing,
and expiring on the earliest to occur of (x) the date on which
the Investor shall have made payment of Advances pursuant to
this Agreement in the aggregate amount of the Commitment
Amount, (y) the date this Agreement is terminated pursuant to
Section 10.2 or (z) the date occurring thirty (30) months
after the Effective Date.
Section
1.8. “Common Stock”
shall mean the Company’s common stock, par value $0.001
per share.
Section
1.9. “Condition Satisfaction
Date” shall have the meaning set forth in Section
7.2.
Section
1.10. “Damages” shall mean any
loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorney’s fees and
disbursements and costs and expenses of expert witnesses and
investigation).
Section
1.11. “Effective Date” shall mean
the date on which the SEC first declares effective a
Registration Statement registering the resale of the
Registrable Securities as set forth in Section
7.2(a).
Section
1.12. “Exchange Act” shall mean
the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
Section
1.13. “Material Adverse Effect”
shall mean any condition, circumstance, or situation that
would prohibit or otherwise materially interfere with the
ability of the Company to enter into and perform any of its
obligations under this Agreement or the Registration Rights
Agreement in any material respect.
Section
1.14. “Market Price” shall mean
the VWAP of the Common Stock during the Pricing Period as
defined by Bloomberg.
Section
1.15. “Maximum Advance Amount”
shall be One Million Dollars
($1,000,000)
per Advance Notice, but in no case more than Four Million
Dollars ($4,000,000) in any thirty-day (30) calendar
period.
Section
1.16. “NASD” shall mean the
National Association of Securities Dealers, Inc.
Section
1.17. “Person” shall mean an
individual, a corporation, a partnership, an association, a
trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality
thereof.
Section
1.18. “Pricing Period” shall mean
the five (5) consecutive Trading Days after the Advance Notice
Date subject to any reduction pursuant to Section
2.2(c).
2
Section
1.19. “Principal Market” shall
mean the Nasdaq National Market, the Nasdaq Capital Market,
the American Stock Exchange, the OTC Bulletin Board or the New
York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
Section
1.20. “Purchase Price” shall be
set at ninety seven percent (97%) of the Market Price during
the Pricing Period.
Section
1.21. “Registrable Securities”
shall mean the shares of Common Stock to be issued hereunder
(i) in respect of which the Registration Statement has not
been declared effective by the SEC, (ii) which have not been
sold under circumstances meeting all of the applicable
conditions of Rule 144 (or any similar provision then in
force) under the Securities Act (“Rule 144”) or
(iii) which have not been otherwise transferred to a holder
who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities
not bearing a restrictive legend.
Section
1.22. “Registration Rights
Agreement” shall mean the Registration Rights Agreement
dated the date hereof, regarding the filing of the
Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the
Investor.
Section
1.23. “Registration Statement”
shall mean a registration statement on Form S-1 or SB-2 (if
use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form
promulgated by the SEC for which the Company then qualifies
and which counsel for the Company shall deem appropriate, and
which form shall be available for the resale of the
Registrable Securities to be registered thereunder in
accordance with the provisions of this Agreement and the
Registration Rights Agreement, and in accordance with the
intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable
Securities under the Securities Act.
Section
1.24. “Regulation D” shall have
the meaning set forth in the recitals of this
Agreement.
Section
1.25. “SEC” shall mean the United
States Securities and Exchange Commission.
Section
1.26. “Securities Act” shall have
the meaning set forth in the recitals of this
Agreement.
Section
1.27. “SEC Documents” shall mean
Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB, Current Reports on Form 8-K and Proxy Statements of
the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve (12) months
immediately preceding the date hereof or the Advance Date, as
the case may be, until such time as the Company no longer has
an obligation to maintain the effectiveness of a Registration
Statement as set forth in the Registration Rights
Agreement.
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Section
1.28. “Trading Day” shall mean
any day during which the New York Stock Exchange shall be open
for business.
Section
1.29. “VWAP” shall mean the
volume weighted average price of the Company’s Common
Stock as quoted by Bloomberg, LP.
ARTICLE
II.
Advances
Section
2.1. Advances.
Subject
to the terms and conditions of this Agreement (including,
without limitation, the provisions of Article VII hereof), the
Company, at its sole and exclusive option, may issue and sell
to the Investor, and the Investor shall purchase from the
Company, shares of the Company’s Common Stock by the
delivery, in the Company’s sole discretion, of Advance
Notices. The number of shares of Common Stock that
the Investor shall purchase pursuant to each Advance shall be
determined by dividing the amount of the Advance by the
Purchase Price. No fractional shares shall be issued.
Fractional shares shall be rounded to the next higher whole
number of shares. The aggregate maximum amount of
all Advances that the Investor shall be obligated to make
under this Agreement shall not exceed the Commitment
Amount.
Section
2.2. Mechanics.
(a) Advance
Notice. At any time during the Commitment Period,
the Company may require the Investor to purchase shares of
Common Stock by delivering an Advance Notice to the Investor,
subject to the conditions set forth in Section 7.2; provided,
however, the amount for each Advance as designated by the
Company in the applicable Advance Notice shall not be more
than the Maximum Advance Amount and the aggregate amount of
the Advances pursuant to this Agreement shall not exceed the
Commitment Amount. The Company acknowledges that
the Investor may sell shares of the Company’s Common
Stock corresponding with a particular Advance Notice after the
Advance Notice is received by the Investor. There
shall be a minimum of five (5) Trading Days between each
Advance Notice Date.
(b) Date
of Delivery of Advance Notice. An Advance Notice
shall be deemed delivered on (i) the Trading Day it is
received by facsimile or otherwise by the Investor if such
notice is received prior to 5:00 pm Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received by
facsimile or otherwise after 5:00 pm Eastern Time on a Trading
Day or at any time on a day which is not a Trading
Day. No Advance Notice may be deemed delivered on a
day that is not a Trading Day.
(c) Minimum
Acceptable Price. The lowest closing Bid Price of
the Common Stock during the Pricing Period (before taking into
account any discount used to calculate the Purchase Price) for
any particular Advance shall, in connection with each Advance
Notice delivered by the Company, be equal to seventy five
percent (75%) of the closing Bid Price on the Trading Day
immediately preceding the Advance Notice Date for such Advance
Notice (the “Minimum Acceptable
Price”).
4
Subject
to the next sentence, upon the issuance by the Company of an
Advance Notice with a Minimum Acceptable Price, if any of the
closing Bid Prices during the Pricing Period are below the
Minimum Acceptable Price (i) the Company shall automatically
reduce the amount of the Advance set forth in such Advance
Notice by twenty percent (20%) for each Trading Day during the
Pricing Period that the closing Bid Price of the Common Stock
is below the Minimum Acceptable Price (each such day, an
“Excluded Day”), and (ii) each Excluded Day shall
be excluded from the Pricing Period for purposes of
determining the Market Price. The number of shares
of Common Stock to be delivered to the Investor at the Closing
(in accordance with Section 2.3 of this Agreement) shall
correspond with the Advance Notice amount as reduced pursuant
to clause (i) above. The Company, and only the
Company, may waive the Minimum Acceptable Price with respect
to any particular Advance Notice by providing the Investor
with written notice of waiver on or prior to the Advance
Date.
(d) Floor
Price. The Company at its option may select a
Floor Price for any Put, which the Company will not put
shares to Investor under that Floor Price.
Section
2.3. Closings. Within
two (2) Trading Days of each Advance Date (i) the
Company shall deliver to the Investor such number of shares of
the Common Stock registered in the name of the Investor as
shall equal (x) the amount of the Advance specified in such
Advance Notice pursuant to Section 2.1 herein, divided by (y)
the Purchase Price and (ii) upon receipt of such shares, the
Investor shall deliver to the Company the amount of the
Advance specified in the Advance Notice by wire transfer of
immediately available funds. In addition, on or
prior to the Advance Date, each of the Company and the
Investor shall deliver to the other all documents, instruments
and writings required to be delivered by either of them
pursuant to this Agreement in order to implement and effect
the transactions contemplated herein. To the extent
the Company has not paid the fees, expenses, and disbursements
of the Investor in accordance with Section 12.4, the amount of
such fees, expenses, and disbursements may be deducted by the
Investor (and shall be paid to the relevant party) directly
out of the proceeds of the Advance with no reduction in the
amount of shares of the Company’s Common Stock to be
delivered on such Advance Date.
(a) Company’s
Obligations Upon Closing.
(i) The
Company shall deliver to the Investor the shares of Common
Stock applicable to the Advance in accordance with Section
2.3. The certificates evidencing such shares shall
be free of restrictive legends.
(ii) the
Company’s Registration Statement with respect to the
resale of the shares of Common Stock delivered in connection
with the Advance shall have been declared effective by the
SEC;
(iii) the
Company shall have obtained all material permits and
qualifications required by any applicable state for the offer
and sale of the Registrable Securities, or shall have the
availability of exemptions therefrom. The sale and
issuance of the Registrable Securities shall be legally
permitted by all laws and regulations to which the Company is
subject;
5
(iv) the
Company shall have filed with the SEC in a timely manner all
reports, notices and other documents required of a
“reporting company” under the Exchange Act and
applicable Commission regulations;
(v) the
fees as set forth in Section 12.4 below shall have been paid
or can be withheld as provided in Section 2.3;
and
(vi) the
Company’s transfer agent shall be DWAC
eligible.
(b) Investor’s
Obligations Upon Closing. Upon
receipt of the shares referenced in Section 2.3(a)(i) above
and provided the Company is in compliance with its obligations
in Section 2.3, the Investor shall deliver to the Company the
amount of the Advance specified in the Advance Notice by wire
transfer of immediately available funds.
ARTICLE
III.
Representations
and Warranties of Investor
Investor
hereby represents and warrants to, and agrees with, the
Company
that the following are true and correct as of the date hereof
and as of each
Advance Date:
Section
3.1. Organization and
Authorization. The Investor is duly incorporated or
organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and
authority to purchase and hold the securities issuable
hereunder. The decision to invest and the execution
and delivery of this Agreement by such Investor, the
performance by such Investor of its obligations hereunder and
the consummation by such Investor of the transactions
contemplated hereby have been duly authorized and requires no
other proceedings on the part of the Investor. The
undersigned has the right, power and authority to execute and
deliver this Agreement and all other instruments (including,
without limitations, the Registration Rights Agreement), on
behalf of the Investor. This Agreement has been
duly executed and delivered by the Investor and, assuming the
execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor
in accordance with its terms.
Section
3.2. Evaluation of
Risks. The Investor has such knowledge and
experience in financial, tax and business matters as to be
capable of evaluating the merits and risks of, and bearing the
economic risks entailed by, an investment in the Company and
of protecting its interests in connection with this
transaction. It recognizes that its investment in
the Company involves a high degree of risk.
Section
3.3. No Legal Advice From the
Company. The Investor acknowledges that it had the
opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal
counsel and investment and tax advisors. The
Investor is relying solely on such counsel and advisors and
not on any statements or representations of the Company or any
of its representatives or agents for legal, tax or investment
advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
6
Section
3.4. Investment Purpose. The
securities are being purchased by the Investor for its own
account, and for investment purposes. The Investor
agrees not to assign or in any way transfer the
Investor’s rights to the securities or any interest
therein and acknowledges that the Company will not recognize
any purported assignment or transfer except in accordance with
applicable Federal and state securities laws. No
other person has or will have a direct or indirect beneficial
interest in the securities. The Investor agrees not
to sell, hypothecate or otherwise transfer the
Investor’s securities unless the securities are
registered under Federal and applicable state securities laws
or unless, in the opinion of counsel satisfactory to the
Company, an exemption from such laws is
available.
Section
3.5. Accredited
Investor. The Investor is an “Accredited
Investor” as that term is defined in Rule 501(a)(3) of
Regulation D of the Securities Act.
Section
3.6. Information. The
Investor and its advisors (and its counsel), if any, have been
furnished with all materials relating to the business,
finances and operations of the Company and information it
deemed material to making an informed investment
decision. The Investor and its advisors, if any,
have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries
nor any other due diligence investigations conducted by such
Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor’s right to rely on
the Company’s representations and warranties contained
in this Agreement. The Investor understands that
its investment involves a high degree of risk. The
Investor is in a position regarding the Company, which, based
upon employment, family relationship or economic bargaining
power, enabled and enables such Investor to obtain information
from the Company in order to evaluate the merits and risks of
this investment. The Investor has sought such
accounting, legal and tax advice, as it has considered
necessary to make an informed investment decision with respect
to this transaction.
Section
3.7. Receipt of Documents. The
Investor and its counsel have received and read in their
entirety: (i) this Agreement and the Exhibits
annexed hereto; (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the
Company’s Form 10-KSB for the year ended
August 31, 2006 and Form 10-QSB for the period
ended November 30, 2006; and (iv) answers to all questions the
Investor submitted to the Company regarding an investment in
the Company; and the Investor has relied on the information
contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
Section
3.8. Registration Rights
Agreement. The parties have entered into the
Registration Rights Agreement dated the date
hereof.
Section
3.9. No General
Solicitation. Neither the Company, nor any of its
affiliates, nor 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
Securities Act) in connection with the offer or sale of the
shares of Common Stock offered hereby.
7
Section
3.10. Not an Affiliate. The
Investor is not an officer, director or a person that
directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with
the Company or any “Affiliate” of the Company (as
that term is defined in Rule 405 of the Securities
Act).
Section
3.11. Trading Activities. The
Investor’s trading activities with respect to the
Company’s Common Stock shall be in compliance with all
applicable federal and state securities laws, rules and
regulations and the rules and regulations of the Principal
Market on which the Company’s Common Stock is listed or
traded. Neither the Investor nor its affiliates has an open
short position in the Common Stock of the Company, the
Investor agrees that it shall not, and that it will cause its
affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock.
ARTICLE
IV.
Representations
and Warranties of the Company
Except
as stated below, on the disclosure schedules attached hereto
or in the SEC Documents (as defined herein), the Company
hereby represents and warrants to, and covenants with, the
Investor that the following are true and correct as of the
date hereof:
Section
4.1. Organization and
Qualification. The Company is duly incorporated or
organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite corporate
power to own its properties and to carry on its business as
now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in
which the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a
Material Adverse Effect on the Company and its subsidiaries
taken as a whole.
Section
4.2. Authorization, Enforcement,
Compliance with Other Instruments. (i) The Company
has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement,
the Placement Agent Agreement and any related agreements, in
accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration
Rights Agreement, the Placement Agent Agreement and any
related agreements by the Company and the consummation by it
of the transactions contemplated hereby and thereby, have been
duly authorized by the Company’s Board of Directors and
no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, (iii)
this Agreement, the Registration Rights Agreement, the
Placement Agent Agreement and any related agreements have been
duly executed and delivered by the Company, (iv) this
Agreement, the Registration Rights Agreement, the Placement
Agent Agreement and assuming the execution and delivery
thereof and acceptance by the Investor and any related
agreements constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of
creditors’ rights and remedies.
8
Section
4.3. Capitalization. The
authorized capital stock of the Company consists of 75,000,000
shares of Common Stock and 5,000,000 shares of Preferred
Stock, $0.001 par value per share (“Preferred
Stock”), of which 61,910,000 shares of Common Stock and
no shares of Preferred Stock are issued and
outstanding. All of such outstanding shares have
been validly issued and are fully paid and
nonassessable. Except as disclosed in the SEC
Documents, no shares of Common Stock are subject to preemptive
rights or any other similar rights or any liens or
encumbrances suffered or permitted by the
Company. Except as disclosed in the SEC Documents,
as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of
its subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, (ii)
there are no outstanding debt securities (iii) there are no
outstanding registration statements other than on Form S-8 and
(iv) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register
the sale of any of their securities under the Securities Act
(except pursuant to the Registration Rights
Agreement). There are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the
consummation of the transactions described herein or
therein. The Company has furnished to the Investor
true and correct copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof
(the “Certificate of Incorporation”), and the
Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities
convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect
thereto.
Section
4.4. No Conflict. The
execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a
violation of the Certificate of Incorporation, any certificate
of designations of any outstanding series of preferred stock
of the Company or By-laws or (ii) 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 or instrument to which the
Company or any of its subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal
Market on which the Common Stock is quoted) applicable to the
Company or any of its subsidiaries or by which any material
property or asset of the Company or any of its subsidiaries is
bound or affected and which would cause a Material Adverse
Effect. Except as disclosed in the SEC Documents,
neither the Company nor its subsidiaries is in violation of
any term of or in default under its Articles of Incorporation
or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order
or any statute, rule or regulation applicable to the Company
or its subsidiaries.
9
The
business of the Company and its subsidiaries is not being
conducted in violation of any material law, ordinance,
regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required
under the Securities Act and any applicable state securities
laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights
Agreement in accordance with the terms hereof or
thereof
