STRATEGIC GAMING INVESTMENTS, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
JANUARY 11, 2006
<PAGE>
NOTE AND WARRANT
PURCHASE AGREEMENT
This
Note and Warrant
Purchase Agreement (the "Agreement") is made as of
the 11th day of January, 2007 by and between Strategic Gaming
Investments, Inc.
(the "Company"), and
the purchasers, who currently include VC Partners,
LLC
("VCP"), Greg
Woods and Steve Romania and such other purchasers who
subsequently agree to be bound by the terms of this Agreement by
executing this
document and
are then listed on listed on Exhibit
A-Schedule of
Purchasers
attached hereto, which Schedule shall be amended as necessary
(collectively the
"Purchasers").
RECITALS
a.
The
Company desires to
issue and sell and the Purchasers desire to
purchase Senior Convertible Notes, executed simultaneously
herewith
(with
respect to the Initial
Investment
(defined herein)) (the
"Note")
and Warrants, executed simultaneously herewith (with
respect
to the Initial Investment) (the "Warrants").
The Notes
and
Warrants executed
in conjunction with
Subsequent
Investments
(defined
herein), if any, shall be substantially the same as
those
executed
with respect to the
Initial Investment, and shall be
referred
to herein as the same. The Note, the
Warrants and
the
equity
securities issuable
upon conversion or exercise thereof are
collectively referred to herein as the "Securities".
b.
The
Purchasers have already advanced to the Company $60,000.
Specifically, subject to the terms and conditions detailed
in this
Agreement, Purchasers,
would make (i) an Initial investment of
$120,000
(including the $60,000
referred to
in (b) above), and
(ii)
Subsequent Investment(s) of up to $990,000; comprised of Notes
bearing up
to a total
face amount of
US$1,100,000 at a conversion
price of
$0.40 per share; and Warrants to purchase shares of common
stock of
the Company
("Shares") at an
exercise price of $0.40 per
share. The
Warrants shall
be exercisable for a
period of ten (10)
years.
AGREEMENT
In
consideration of the mutual promises contained herein and
other good
and valuable
consideration,
receipt of which is hereby acknowledged, the
parties to this Agreement agree as follows:
1.
PURCHASE
AND SALE OF NOTE AND WARRANTS.
(a) SALE AND
ISSUANCE OF NOTE AND WARRANTS. Subject to the terms
and conditions of this Agreement, the Purchasers agree to
purchase at Closing
(as defined below) and the Company agrees to sell and issue to such
Purchasers,
(i) Notes in the principal amount specified with respect to each
such Purchaser
on Exhibit
A and (ii) Warrants to
purchase the number of Shares specified in
Exhibit A ("Shares"). The purchase price of each Note shall
be equal to 100%
of the principal amount of such Note and the exercise price of each Warrant
shall be $0.40 per share. The Company's agreements with each of the Purchasers
are separate agreements, and the sales of the Note and Warrants to each of the
Purchasers are separate sales.
(b) ADDITIONAL
TERMS.
(i) ADDITIONAL
AGREEMENTS. This
Agreement is
intended to
be read and construed in conjunction with the
Registration Rights Agreement
(which shall include demand registration rights with respect to all
Shares held
by Purchasers (issued and issuable upon conversion of the Notes and
exercise of
the Warrants)),
Security Agreement,
Note and Warrants which are executed
concurrently
herewith and
are an integral part of this transaction
(collectively, the "Transaction Documents"). The Company agrees to execute
each of the Transaction Documents, in a form substancially similar
to the forms
exhibited hereto.
(iii)
INITIAL
INVESTMENT.
Within 3
business days of
the
execution of
this Agreement, Purchasers shall make an initial aggregate
purchase of Notes bearing a face amount of sixty thousand dollars (US$60,000)
(together with the Warrants). This amount, plus the $60,000 already
advanced to
the company, for a total of $120,000, shall comprise the "Initial
Investment".
The principal amount of Notes and the number of Shares issuable
with respect to
the Warrants
to be issued with
respect to each such Purchaser is detailed on
Exhibit A.
(iv) SUBSEQUENT
INVESTMENT.
For a period of three years
from the date hereof, at the sole option of the
VCP and with no
obligation
whatsoever to do so,
VCP shall have the right to make subsequent
investments
(each a "Subsequent Investment") in the Company in the form of the
purchase of
additional Notes of up to nine hundred ninety thousand dollars
(US$990,000) and
Warrants to purchase Shares in such number and at such exercise prices as
indicated on
the Warrant Schedule, which warrants
shall be exercisable for a
period of ten years.
The terms of the Notes shall be the same as applicable to
the Initial Investment
and the Note issuable with respect to such
investment
shall be in the form
as attached hereto as
Exhibit B. The terms of the
Warrants shall
be the same as applicable to the Initial
Investment and the
Warrant issuable with respect to such investment shall be in the form as
attached hereto as Exhibit C. The principal amount of any such
Notes purchased
shall equal the amount invested and the number of Warrants to be
issued and the
exercise price
of such warrants for such amount invested
shall be $0.40 per
share. With respect to
any Subsequent
Investment, VCP shall have the right to
assign its option to make any such Subsequent Investment to
another purchaser,
which purchaser shall execute a copy of this Agreement that shall
include such
purchaser's name and address on Schedule A hereto. Such purchaser shall then
be considered a "Purchaser" for the purpose of this Agreement and the other
agreements contemplated hereby. Any such assignment by VCP shall
only apply to
such Purchaser for the
particular Subsequent Investment, and VCP shall retain
the right to make
additional Subsequent Investments until the earlier of three
years from the date
hereof, or the date upon which the total amount of
Subsequent Investments equals $990,000.
For example,
assuming that if VCP assigns the right to make Subsequent
Investments to two different Purchasers to make Subsequent
Investments in
the
amount of $50,000 and $25,000 respectively, then the Purchaser investing
$50,000 would
pay $50,000 to the Company in exchange for
a Note in the
principal amount of $50,000 and Warrants to purchase 50,000 Shares with an
exercise price
of $.040 per share; and the Purchaser
investing $25,000 would
pay $25,000 to the Company in exchange for a Note in the principal amount
of
$25,000 and Warrants to purchase 25,000 Shares with an exercise price of
$0.40
per share.
(vi) WARRANTS.
As part of the Initial Investment, the
Company shall issue Warrants to purchase Shares to the Purchasers
as specified
on Schedule A.
The Warrants issued to Purchasers by
Company with respect
to each investment
of the Subsequent
Investment shall be exercisable at $0.40
per share for a term
of ten (10) years.
(vii) ESCROW.
Within five business
days following the full
execution of
this Agreement and
Closing of any
Subsequent
Investment,
the
Parties shall deposit
with an escrow agent to be selected by the
Purchasers
("Escrow Agent") fully
executed copies of
this Agreement,
the Registration
Rights Agreement, the
Note and the Warrants and (b) at least 24 hours prior to
the Closing,
each Purchaser shall deposit the Purchase Price indicated
following such Purchaser's name on Exhibit A. At the Closing,
the Escrow Agent
shall deliver copies of this Agreement and the Registration Rights
Agreement to
both parties, the Note and Warrants to the Purchasers and the
Purchase Price to
the Company.
(viii) NOTE TERMS.
The Note, with
interest, shall be repaid
in full by the Company in accordance with the terms thereof.
(ix) CONFIDENTIALITY.
Each party shall (and
shall cause its
affiliates, employees and representatives to) hold in strict confidence the
contents and terms of this Agreement, the fact that discussions
concerning the
proposed transaction
are taking place and any due diligence material(s)
received pursuant to, or in furtherance of, this Agreement;
provided, however,
it is expressly agreed by the parties that the Company has
an affirmative
obligation under the Securities Exchange Act of 1934, as amended, to file
the
transaction documents, relating to any investment by a Purchaser, with the
Securities and Exchange Commission.
(c) CLOSING;
DELIVERY. The Closing with respect to
the Initial
Investment shall occur within three days of the execution of this
Agreement.
The purchase and sale of the Note and Warrants shall take place at the date,
time and location
selected by the Purchasers on Closing Date (which time and
place are designated
as the "Closing"). The
parties shall reasonably agree as
to the time and place for Closings with respect to any
Subsequent Investments.
At each Closing, the Escrow Agent shall deliver to the Purchasers the Note
purchased by the Purchaser and the Warrants to be issued
to the Purchasers in
such Closing and the
Escrow Agent shall deliver the Purchase Price (less any
agreed deductions)
by wire transfer to
the Company's designated bank account.
The Parties hereto may agree to forgo the use of the Escrow
Agent.
2.
NOTE
PURCHASE AND
OTHER AGREEMENTS. The
Purchasers understand and
agree that the issuance of Shares upon the conversion of the Note
and exercise
of the Warrants for Shares may necessitate the execution by the Purchasers,
Company and
certain other parties of certain agreements relating
to the
purchase and sale of such securities as well as registration and
voting rights,
if any, relating to such equity securities
and the parties each agree to
negotiate in good
faith with respect to
reaching mutually agreeable terms and
provisions thereof.
3.
REPRESENTATIONS AND
WARRANTIES OF THE
COMPANY. The Company hereby
represents and warrants to each Purchaser that:
(a)
ORGANIZATION, GOOD
STANDING AND
QUALIFICATION. The
Company
is an entity duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate
power and
authority to carry on its business as now conducted and as proposed to be
conducted.
(b)
AUTHORIZATION. All action on the part of the Company,
its
officers,
management,
directors and
shareholders
necessary
for the
authorization, execution and delivery of this Agreement, the authorization,
sale, issuance
and delivery of the Securities, and the
performance of
all
obligations of the Company hereunder and thereunder has been or will be
taken
prior to Closing, except as described in Section 2 and approvals required in
connection with any
amendments to the Company's certificate of incorporation
that may be necessary in order to provide for the conversion or
exercise rights
of the Securities.
(c) VALIDITY.
This
Agreement,
the Note and the
Warrants, when
executed and
delivered by the Company, shall constitute
valid and legally
binding obligations
of the Company, enforceable against the Company in
accordance with
their terms
except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other
laws
of general application affecting enforcement of creditors' rights
generally, as
limited by
laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
(c) WARRANTS
AND SHARES. The Warrants and equity securities
issuable upon the conversion of the Note and exercise of the Warrant will be
validly issued,
fully paid and
nonassessable, will be free of all liens and
encumbrances and will
not be subject to any preemptive rights, rights of first
refusal or redemption rights. Upon conversion of the Note and/or exercise of
the Warrants, the Purchasers will receive good and valid title to such equity
securities free and clear of all liens and encumbrances. Neither
the execution,
delivery or performance by the Company of this Agreement nor
the issuance of
the Note, Warrants or the Shares issuable upon the
conversion of the Note or
exercise of the Warrants, or either of them, will give rise to or result
in
(with or without notice, lapse of time, or both) any anti-dilution adjustment,
acceleration of vesting or other change under or to any option.
(d) GOVERNMENTAL
CONSENTS. No consent, approval, order or
authorization of, or
registration, qualification, designation, declaration or
filing with, any
federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the
transactions
contemplated by this
Agreement, except
for any amendments to the Company's
certificate of
incorporation
or by-laws that may be
necessary in
order to
provide for the conversion or exercise rights of the
Securities.
(e) PRIVATE
PLACEMENT. Subject in
part to the truth and accuracy
of the Purchasers' representations set forth in this Agreement, the
offer, sale
and issuance of the Securities as contemplated by this Agreement is
exempt from
the registration requirements of the Securities Act of 1933 (the "Securities
Act"), pursuant
to Section 4(2) and Rule 506 of Regulation
D promulgated
thereunder, and neither the Company nor any authorized agent acting on its
behalf will
take any action hereafter that would cause the loss of such
exemption. The Purchasers of the Securities shall be "accredited
investors" as
such term is defined under Rule 501(a) of the Securities Act.
(f) LITIGATION.
Excluding the
matter entitled MARK NEWBURG AND
ARNOLD GALASSI V. CRAZYGRAZER.COM, LLC, A NEVADA LIMITED LIABILITY COMPANY,
LEFT RIGHT
MARKETING
TECHNOLOGY,
INC., A DELAWARE CORPORATION, HALL
COMMUNICATIONS, INC., A NEVADA CORPORATION; CASE NO, A500824, DISTRICT
COURT,
CLARK COUNTY, NEVADA,
There is no action, suit, proceeding or investigation
pending or,
to the Company's knowledge, currently threatened against the
Company or
any of its subsidiaries that questions the validity
of this
Agreement, the Note or the Warrants or the right of the Company to consummate
the transactions contemplated hereby or thereby, or that
might result, either
individually or
in the aggregate, in any material adverse changes
in the
assets, condition or affairs of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the
Company aware
that there is any basis for the foregoing. Neither the Company
nor any of its
subsidiaries is
a party or subject to the provisions of any order,
writ,
injunction, judgment
or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or
investigation by
the
Company or
any of its subsidiaries currently
pending or which the Company or
any of its subsidiaries intends to initiate.
(g) COMPLIANCE
WITH OTHER INSTRUMENTS. The Company is not in
violation of any provisions of its certificate of incorporation or
by-laws. The
Company is
not in violation of or default under any
instrument,
judgment,
order, writ, decree or contract to which it is a party or by which it
is bound
or of any provision of federal or state statutes, rules or regulations
applicable to the Company, where such violation would have a material
adverse
effect on the Company. The execution, delivery and performance of this
Agreement, the Note and the Warrants and the consummation of the
transactions
contemplated hereby or thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage
of time and giving
of
notice, either a default under any such provision, instrument,
judgment, order,
writ, decree or contract or an event which results in the creation
of any lien,
charge or encumbrance upon any assets of the Company.
(h) EQUITY
INTERESTS AND RELATED MATTERS.
As of the Closing, the Company will not have outstanding any
securities
convertible or exchangeable for any Shares (or any preferred or other class
of
stock of the Company) or containing any profit
participation
features, nor
shall it have outstanding any rights or options to subscribe for or
to purchase
any Shares or securities convertible into or exchangeable for any
Shares or any
appreciation rights, except for the Warrants contemplated
hereby.
(i) There
are no statutory rights or rights of refusal with
respect to the issuance of the Note or Warrants hereunder
or the issuance of
the equity
securities
upon exercise of the Warrants. The Company has
not
violated any applicable federal or state securities laws in
connection with the
offer, sale or issuance of any of its Shares, and, the offer, sale
and issuance
of the Note and Warrants hereunder does
not require
registration under
the
Securities Act or any applicable state securities laws. There are
no agreements
between the Company's
shareholders
with respect to the
voting or transfer of
the Company's Shares
or with respect to any
other material aspect of the
Company's affairs.
4.
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby represents and warrants to the Company that:
(a) PURCHASE
ENTIRELY FOR
OWN ACCOUNT. The Securities to be
acquired by each
Purchaser will be acquired for investment for the Purchaser's
own account, not
as a nominee or agent, and not with a
view to the resale or
distribution of any part thereof, and the Purchaser has no present
intention of
selling, granting any participation in, or otherwise distributing
the same. The
Purchaser has not been formed for the specific purpose of
acquiring any of the
Securities.
(b) KNOWLEDGE.
The Purchaser is
aware of the Company's business
affairs and financial condition and has acquired sufficient
information about
the Company to reach
an informed and knowledgeable decision to acquire the
securities.
(c) RESTRICTED
SECURITIES.
The
Purchasers understand that the
Securities have not been, and will not be, registered under the Securities Act
by reason of a specific exemption from the
registration
provisions of
the
Securities Act which
depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchasers' representations
as
expressed herein. The Purchasers understand that the Securities are
"restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to
these laws, the
Purchasers must hold the Securities indefinitely
unless they are
registered with
the Securities and Exchange Commission and
qualified by
state authorities, or
an exemption from such
registration
and
qualification requirements is available. The Purchasers acknowledge that
the
Company has no
obligation to register or qualify the Securities for resale
except as set
forth in the Registration Rights Agreement with respect to
Registrable Securities (as defined therein). The Purchasers further
acknowledge
that if an exemption from registration or qualification is
available, it may be
conditioned on various requirements including, but not limited to,
the time and
manner of sale, the holding period for the
Securities, and
on requirements
relating to the Company which are outside of the Purchasers'
control, and which
the Company is under no obligation and may not be able to
satisfy.
(d) LEGENDS.
The Purchasers
understand that the Securities, and
any securities issued
in respect thereof or exchange therefor, may bear one or
all of the following legends:
(i) "THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED
FOR
INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF, NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(ii) Any legend required by the Blue Sky laws of any state to
the extent
such laws are applicable to the securities
represented by
the
certificate so legended.
(iii) Any legend
required by
the agreements referred to in
Section 2.
(e) ACCREDITED
INVESTOR. The Purchasers are accredited investors
as defined
in Rule 501 (a) of
Regulation D promulgated under the Securities
Act.
(f) FOREIGN
INVESTORS.
If a Purchaser is not a United
States
person (as defined by
Rule 902(k) under the Securities Act), such Purchaser
hereby represents that it has satisfied itself as to the full
observance of the
laws of its jurisdiction in connection with any invitation to
subscribe for the
Securities or
any use of this
Agreement, including (i) the legal requirements
within its jurisdiction for the purchase of the Securities, (ii)
any foreign
exchange restrictions applicable to such purchase, (iii) any governmental or
other consents that may need to be obtained and (iv) the
income tax and other
tax consequences,
if any, that may be relevant to the purchase,
holding,
redemption, sale or transfer of the Securities. Such Purchaser's subscription
and payment
for, and his or her continued beneficial ownership of the
Securities, will
not violate any applicable securities
or other laws of
Purchaser's
jurisdiction. Such Purchaser also hereby represents that such
Purchaser is not a
"10 percent owner" as defined in Section 871 (h) of
the
Internal Revenue Code of 1986, as amended.
5.
CONDITIONS
OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The
obligations of
each Purchaser to the
Company under this Agreement are subject
to the fulfillment, on
or before each Closing, of each of the following
conditions, unless otherwise waived:
(a)
REPRESENTATIONS AND
WARRANTIES; NO MATERIAL ADVERSE CHANGE.
The representations and warranties of the Company contained in Section 3
shall
be true on and as of each Closing with the
same effect as though such
representations and warranties had been made on and as of the date of such
Closing. There
shall have been no material adverse change in the Company's
operations, prospects
or financial condition during the period between the
funding of
the Initial Investment and each Closing of the Subsequent
Investment.
(b)
QUALIFICATIONS AND CONSENTS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body
of the United
States or of any state, and all consents, if any, of other third
parties that
are required in
connection with the lawful issuance and sale of the Securities
pursuant to this Agreement shall be obtained and effective as of
each Closing.
(c) PERFORMANCE.
The Company shall have performed and
complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it
on or before
each Closing.
(d) OTHER
AGREEMENTS. The
Company shall have executed the Note,
the Warrant,
the Registration Rights Agreement (in the form as attached
as
Exhibit E) and the Security Agreement (in the form as attached as
Exhibit F).
6.
CONDITIONS
OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of
the Company to each
Purchaser under this Agreement are subject
to the fulfillment, on
or before each Closing, of each of the following
conditions, unless otherwise waived:
(a)
REPRESENTATIONS AND
WARRANTIES.
The representations and
warranties of each
Purchaser contained in Section 4 shall be true on and as of
Closing with the same
effect as though such representations and warranties had
been made on and as of the date of such Closing.
(b)
QUALIFICATIONS. All
authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United
States or
of any state that are required in connection with the lawful issuance and
sale
of the Securities pursuant to this Agreement shall be obtained and
effective as
of each Closing.
(c) PERFORMANCE.
Each
Purchaser shall have performed and
complied with all covenants, agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied
with by it on
or before each Closing.
7.
COVENANTS.
The Company must seek approval of the
Purchasers for
the Company's budget and the Company may not, without the consent of the
Purchasers, which consent shall not be unreasonably withheld:
(i)
authorize,
issue or enter into any agreement providing for the
issuance (contingent or otherwise) of (a) any debt (other
than trade debt for
less than $10,000), (b) any notes or debt securities containing equity
features, (c)
any additional Shares, (d) any class
of equity or
convertible
security senior
or pari passu to the Purchaser's Shares (including any
interests issuable on the conversion of the Notes);
(ii)
make any expenditure
in excess of $25,000;
(iii)
amend its certificate of incorporation or by-laws;
(iv)
sell or ease any of its assets, except in the
ordinary course of
business;
(v) modify any executive
salaries or benefits;
(vi)
appoint any new
members of
senior management or discharge any
current
member of senior managment;
(vii)
enter into
any transactions (including loans) with any
officer,
manager or
shareholders of the
Company;
(viii)make
additions to the board of directors
of the Company (the
"Board");
(ix)
alter or amend the
budget or operating plans for the Company;
(x)
make any
acqusitions of other companies (excluding Neolink Wireless
Content,
Inc.) or assets or divestitures of any Company assets; and
(xi)
adopt or amend any
employee benefits plans.
Approval required by Puchasers hereunder shall be deemed granted upon the
written consent
from at least 51% of
the Purchasers as measured by face value
of the Notes originally purchased. The provisions of this paragraph 7
shall be
null and void at such
time that the Company has fully repaid all
outstanding
amounts under the Notes and the Company has received at least $2 million in
cash financing from one or more transactions not contemplated by
this Agreement
or the agreements related hereto. If no Notes are outstanding,
but approval of
the Purchasers
is required under this paragraph 7,
then for the purposes
of
this Paragraph, VMG shall be deemed to hold at least 51% of the
Notes.
8.
BOARD
PARTICIPATION.
Effective the
date of hereof, the Company
shall appoint and maintain four designated representatives
of the Purchasers
("Designated
Representatives") on
its board of directors (the "Board"). The
Company shall give the Designated Representatives notice of each
meeting of its
board of directors and each sub-committee thereof at least three
(3) days prior
to the date of such meeting, and the
Company shall permit the Designated
Representatives to
attend such meeting. If the Company proposes to take
any
action by written consent in lieu of a meeting of its Board or of any sub-
committee thereof,
the Company shall give written notice thereof to the
Designated
Representatives prior
to the effective date of such consent
describing in reasonable detail the nature and substance of such action. In
addition to the
Designated Representatives' normal rights as a member of the
Board, the Designated
Representatives shall
possess an absolute right to veto
any actions of the committee which are directed at approving
any actions which
are proscribed pursuant to par. 7, above. The Company shall pay the
reasonable
out-of-pocket expenses incurred by the Designated Representatives
in connection
with attending committee meetings, to the extent the Company pays
same for the
members of its Board.
Prior to the time that the Company secures directors and
officers' insurance in
such form and amounts
satisfactory
to Holders, the
Designated Representatives, at the option of the Holders (which
option they may
elect to end at
any time), shall not be members of the
Board, but instead be
non-voting observers
to the Board, with all attendance, notice and
informational rights of members of the Board and as otherwise
stated herein (as
if they were members of the board at such time). At such time that the Company
has received
at least $2 million in cash financing from one or more
transactions not
contemplated
by this Agreement or
the agreements related
hereto, the number of Designated Representative shall be reduced to
two (2).
9.
OPERATING
BUDGETS; OUTSIDE
FINANCIAL REVIEW;
AUDITS. The
Company
shall cause
to be prepared and
delivered to the Purchasers annual operating
budgets not later than
30 days prior to the
commencement of each fiscal year,
which budgets are subject to Purchasers approval. Within 15 days of the
Closing date,
the Company shall appoint, at its expense, an
accounting firm
acceptable to the Purchasers which shall be retained by the Company to (a)
review its operating
and financial statements on a monthly basis and provide
monthly reports to
the Purchasers; (b)
comparisons to the Company's operating
budgets and (c) audit the Company's annual financial statements.
The Company's
senior management shall provide such accounting firm with
all data required by
it to perform its work and to deliver its monthly reports within 15
days of the
end of each calendar month and to complete its annual audit
within 90 days of
the end of each fiscal year.
10.
PREEMPTIVE
RIGHTS. The
Purchasers
shall have the pre-emptive
right to purchase their pro-rata portion of any new offering or
issuance of the
Company's securities
in order to maintain Purchasers' percentage ownership of
the Company's capital
(on a fully diluted as converted basis). Notwithstanding
the foregoing, such
preemptive rights
shall not apply to the securities
("Excluded Interests")
issued to effect any equity split or
dividend by the
Company.
11.
ANTI-DILUTION
PROVISIONS. If
and whenever the Company issues or
sells any Shares (including any options or warrants to purchase Shares and/or
securities convertible
into Shares other than Excluded Interests),
for a
consideration per
Share less than $0.40
("Original Issue
Price"), as such
amount is proportionately adjusted for splits, combinations, dividends and
recapitalizations
affecting the
Company's Shares after
the Date of
Issuance
(the "Reduced Issue Price"), then immediately upon such issue or
sale or deemed
issue or sale, the Purchaser shall be issued such number of additional
Shares
according to the following formula: fully diluted number of Shares held by
Purchasers (or
convertible into or
purchasable under the Warrants) multiplied
by the following: (i)
the Original Issue Price; divided by (ii) the
Reduced
Issue Price. Notwithstanding the other terms of this Paragraph 11,
the Original
Issue Price shall not be reduced as a result of any issuance or exercise of
options, warrants or restricted shares to employees, directors,
consultants or
advisors to
the Company (or any subsidiary) pursuant to the terms of any
compensation plan or
arrangement approved by the Board of Directors of the
Company, or the issuance of 1,000,000 shares of common stock in
connection with
the contemplated Merger and Share Exchange Agreement by and between
the Company
and Neolink Wireless Content, Inc., a Nevada corporation.
12.
RESERVED
13.
MISCELLANEOUS.
(a) SUCCESSORS
AND ASSIGNS. The terms and conditions of this
Agreement shall
inure to the benefit of and be binding
upon the respective
successors and assigns of the parties. Nothing in this Agreement, express
or
implied, is intended to confer upon any party other than the parties hereto
or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as
expressly provided
in this Agreement.
(b) GOVERNING
LAW. This Agreement and all acts and
transactions
pursuant hereto and the rights and obligations of the parties hereto
shall be
governed, construed and interpreted in accordance with the laws of
the State of
Nevada, without giving effect to principles of conflicts of
law.
(c)
COUNTERPARTS.
This Agreement may be executed in two or more
counterparts, each of
which shall be deemed
an original
and all of which
together shall constitute one instrument.
(d) TITLES
AND SUBTITLES.
The titles and
subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) NOTICES.
Any notice required or permitted by
this Agreement
shall be in writing and shall be deemed sufficient upon receipt,
when delivered
personally or by courier, overnight delivery service or confirmed
facsimile, or
forty-eight (48) hours after being deposited in the U.S. mail as certified
or
registered mail with postage prepaid, if such notice is addressed to the party
to be notified at such party's address or facsimile number
as set forth below
or as subsequently modified by written notice.
(f) AMENDMENTS
AND WAIVERS. Any term of this
Agreement may
be
amended or
waived only with the written consent of the Company and the
Purchasers. Any amendment or waiver effected in accordance with this
Section
13(f) shall
be binding upon the Purchasers and each transferee of the
Securities, each future holder of all such Securities, and the
Company.
(g)
SEVERABILITY. If
one or more provisions of this
Agreement
are held to be unenforceable under applicable
law, the parties agree to
renegotiate such provision in good faith, in order to maintain the
economic
position enjoyed by each party as close as possible to that under
the provision
rendered unenforceable. In the event that the parties cannot reach a mutually
agreeable and
enforceable
replacement
for such provision, then (i) such
provision shall
be excluded from this Agreement, (ii) the
balance of
this
Agreement shall be interpreted as if such provision were so excluded
and (iii)
the balance of this Agreement shall be enforceable in accordance with its
terms.
(h) ENTIRE
AGREEMENT.
This Agreement and the
documents referred
to herein constitute the entire agreement among the parties hereto
pertaining
to the subject matter hereof, and any and all other written or oral
agreements
existing between or among the parties hereto are expressly
canceled.
(i) ATTORNEYS'
FEES AND EXPENSES. In the event any action
shall
be brought by any party to enforce any provision of this Agreement
or any other
agreements entered into in connection with this agreement, the
prevailing party
shall be entitled to recover all of its costs and expenses
incurred in
connection with such action, including but not limited to
reasonable attorneys'
fees.
(j) EXCULPATION
AMONG PURCHASERS.
Each Purchaser acknowledges
that it is not relying upon any person, firm or corporation, other than the
Company and its officers and directors, in making its investment or
decision to
invest in the Company. Each Purchaser agrees that no Purchaser nor the
respective controlling
persons, officers, directors, partners, agents, or
employees of
any Purchaser shall be
liable for any action heretofore or
hereafter taken or
omitted to be taken by any of them in
connection with the
Securities.
<PAGE>
The
parties have executed
this Convertible
Note and Warrant Purchase
Agreement as of the date first written above.
COMPANY:
Strategic Gaming Investments, Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
Address:__________________________
Facsimile Number:_________________
PURCHASERS:
VC PARTNERS, LLC
By:_______________________________
Name:_____________________________
Title:____________________________
GREG WOODS
By:_______________________________
Name: Greg Woods
STEVE ROMANIA
By:_______________________________
Name: Steve Romania
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
SCHEDULE OF PURCHASERS
INITIAL INVESTMENT:
<S>
<C>
<C>
<C>
Name and Address
Face Amount Notes
Warrants Shares Exercise
Price
----------------------
----------------- ---------------
-------------
VC Partners, LLC
$60,000
60,000
$0.40/share
(a Nevada company)
6370 Annie Oakley Drive
Las Vegas, NV 89120
Greg Woods
$30,000
30,000
$0.40/share
2364 Parkview Drive
Eugene, OR 97408
Steve Romania
$30,000
30,000
$0.40/share
1645 Williamsburg Way
Eugene, OR 97401
SUBSEQUENT INVESTMENTS:
Name and Address
Face Amount Notes Warrants Shares Exercise
Price
----------------------
----------------- ---------------
--------------
</TABLE>
<PAGE>
EXHIBIT B - FORM OF NOTE
THIS SECURED CONVERTIBLE PROMISSORY NOTE ("NOTE" OR "SECURITIES")
HAS NOT BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF WITHIN THE UNITED STATES,
ITS
TERRITORIES AND POSSESSIONS, OR ANY AREA SUBJECT TO ITS
JURISDICTION, OR TO ANY
CITIZEN OR RESIDENT OF THE UNITED STATES OR ANY STATE, TERRITORY,
OR POSSESSION
THEREOF, INCLUDING
ANY ESTATE OF SUCH PERSON OR
ANY COMPANY, PARTNERSHIP,
TRUST, OR OTHER ENTITY CREATED OR EXISTING UNDER THE LAWS THEREOF, UNTIL
ONE
YEAR AFTER
THE CLOSING OF THE OFFERING IN WHICH
THE HOLDER PURCHASED THE
SECURITIES, AND THEREAFTER MAY NOT BE SO TRANSFERRED ABSENT AN EFFECTIVE
REGISTRATION UNDER
THE ACT, COMPLIANCE WITH RULE 144 OR ITS
SUCCESSOR RULE
UNDER THE ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBJECT TO RESTRICTIONS ON TRANSFER AS DESCRIBED
HEREIN.
STRATEGIC GAMING INVESTMENTS, INC.
SECURED CONVERTIBLE PROMISSORY NOTE
_____________________
Las
Vegas, Nevada
For value received, Strategic Gaming Investments, Inc., a Delaware
corporation
(the "Company"), hereby promises to pay to ____________, the
registered holder
hereof and its authorized successors and permitted assigns, the
("Holder"), the
principal amount of _________________ with simple interest thereon
at the rate
of eight percent (8.0%) per annum on the unpaid balance of the
principal sum on
or before the Maturity Date (defined below). The Company shall make
payment at
such place
as the Holder indicates in Section 17 herein.
All principal and
interest shall be payable, as provided for herein, in immediately available
funds in lawful money of the United States of America. The
principal amount
of
this secured
convertible
promissory
note (the "Note") is convertible
into
common stock
of the Company (the
"Common Stock") as
more fully set forth
herein.
1. LOAN
AMOUNT.
The principal of the Note is in an amount of _________________ and
is issued to
Holder.
2.
MATURITY DATE; PREPAYMENT; LIQUIDATION PREFERENCE.
2.1
MATURITY DATE.
The Note shall mature on the third (3rd) anniversary
date of issuance (the
"Maturity Date"), or such later date as agreed to
in
writing by Holder.
Holder agrees that it shall approve any such request if a
majority of the holders of the notes issued pursuant to that
certain Note
and
Warrant Purchase
Agreement (the "Purchase Agreement") between the
Company,
Holder and the holders of such other notes (individually,
the "Other Holders"
and together
with the Holder, the
"Note Holders") agree in writing to grant
such request. For the
purposes of calculating a majority for the Note Holders,
the majority shall be
deemed achieved if consent is granted by those holding a
majority of the principal amount of the then outstanding
notes issued pursuant
to the Purchase Agreement.
2.2
PREPAYMENT.
Upon providing thirty
(30) days advance written notice
to Holder, and subject to the majority written approval of the Holders, the
Company may, at any time, prepay the outstanding principal and
accrued interest
evidenced by this
Note, in whole or in part, without penalty or premium, by
paying to Holder, by
check in immediately
available federal funds, the amount
of such prepayment. In the event that the Company elects to
pre-pay this Note,
such prepayment amount shall be 125% of the outstanding principal
and accrued
interest evidenced by this Note. If any such prepayment is less than a full
repayment, then
such prepayment shall be applied first to the
payment of
accrued interest and the remaining balance shall be applied to the payment of
principal.
2.3
LIQUIDATION
PREFERENCE.
In the event of a sale of all or
substantially all of the assets of Company, Company shall repay
Holder in full,
with interest thereon as provided for herein, from the proceeds
of such sale,
prior to the payment of any other debts, liabilities or otherwise
of Company.
3.
INTEREST PAYMENTS.
Simple interest shall
accrue monthly on the Note at the rate of eight percent
(8.0%) per annum. Annual interest payments shall be made to Holder
by 5:00 p.m.
PDT on the first,
second and third
anniversary dates of the Note via check at
the address listed in
Section 16 herein. All
payments (including prepayments)
hereunder are to be applied first to the payment of accrued interest and
the
remaining balance
shall be applied to the payment
of principal. Accrued
interest shall be computed on the basis of a 360 day year, based on
the actual
number of days elapsed. All interest shall be paid in the form of
cash.
4.
VOLUNTARY CONVERSION.
4.1.
The outstanding
principal on
this Note may at any time prior to
repayment (whether or
not the Holder has received a notice of the Company's
intent to pre-pay
pursuant to Section
2.2, so long as such prepayment has not
been received by Holder), at the sole discretion of each Holder, be
converted
(in full or in part, at any time) into fully paid and non-assessable shares
of
Common Stock, par value $0.001 per share, of the Company at the rate of $0.40
per share (the "Conversion Rate"). The number of Shares into
which the Holder
is entitled to convert
this Note is hereinafter referred to as the "Conversion
Shares". If the number
of resultant Conversion Shares would as a matter of law
or pursuant to regulatory authority require the Company to seek
member approval
of such issuance, the Company shall, as soon as practicable, take
the necessary
steps to seek such approval. Such conversion shall be effectuated,
by the
Company delivering the Conversion Shares to the Holder within thirty (30)
days
of receipt by the Company of the Notice of Conversion. Once the Holder has
received such
Conversion
Shares, the Holder shall surrender the
Notes to be
converted to the Company, executed by the Holder of this Note evidencing
such
Holder's intention to
convert this Note or a
specified portion
hereof, and
accompanied by proper
assignment hereof in blank. If the Company shall fail to
deliver the Conversion Shares to the Holder within such thirty (30)
day period,
the Conversion Rate
shall be automatically reduced by twenty-five percent
(25%).
5.
MECHANICS OF CONVERSION.
Commencing on the date of issuance, the Holder may at any
time prior to 5:00
p.m. PDT on the Maturity Date, convert the
principal amount of this Note, or
any portion thereof, into fully paid and non-assessable shares of
Common Stock,
par value $0.001 per
share, of the Company at the Conversion Rate. Such
conversion shall be
effected by the surrender of this Note at the principal
office of the Company
(or such other office or agency of the Company as may be
designated from time
to time by written notice to the Holder) at any
time
during usual business hours, together with notice in writing that the Holder
wishes to convert all, or a portion, of the principal
amount of this
Note,
which notice shall also state the name(s) (with addresses) and
denominations in
which the certificate(s) for Common Stock shall be issued and shall include
instructions for delivery thereof. Such conversion shall be deemed to have
been effected as of
the close of business on the date on which this Note shall
have been surrendered
and such notice shall have been received,
and at such
time (the "Conversion Date") the rights of the Holder with respect to the
principal amount
of the Note converted
shall cease and the person(s) in whose
name(s) any certificate(s) for Common Stock are to be issued upon such
conversion shall be deemed to have become the Holder or Holder of
record of the
shares of Common Stock represented by such certificate(s). No
fractional shares
of common stock shall
be issued to Holder upon the conversion of the Note. The
Company shall
round up all note conversion
calculations to the nearest whole
share. As soon as practicable (but in no event more than thirty (30)
calendar
days following the Conversion Date), the Company shall deliver to the Holder,
certificates representing the number of shares of Common
Stock issuable upon
such conversion
registered
in such name or names and such denomination
or
denominations as the Holder shall have specified. The Company shall also make
payment to
the Holder, in the form of cash, all accrued and
outstanding
interest due and payable as of the Conversion Date, calculated in the manner
set forth in Section 3 hereof. In each case of conversion of this
Note in part,
the Company
shall receive and hold this Note as a fiduciary
agent of the
Holder, and shall reissue the Note as of the Conversion Date in the amount
represented by the remaining principal outstanding. Upon issuance
of the new
note, the original note shall be deemed null and void and of no
legal effect.
6.
DEFAULT.
The Company
shall be deemed in default if any of the
following events occur:
(a) the Company fails
to pay all outstanding principal and accrued
interest
relating to the Note when due; (b) the entry of a decree or order by a court
having appropriate jurisdiction adjudging the Company a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization or
liquidation
of Company under the Federal Bankruptcy Act or any other
applicable federal
or
state law, or appointing a receiver, liquidator, assignee or
trustee over any
substantial portion
of Company's property, or ordering the winding up or
liquidation of the Company's affairs, and the continuance of any
such decree or
order unstayed and in effect for a period of sixty (60) consecutive
days; (c)
the institution
by the Company of
proceedings to be adjudicated a bankrupt or
insolvent, or the consent by it to the institution of
bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or
answer or consent
seeking reorganization or relief under the Federal Bankruptcy Act
or any other
applicable federal or state law, or the consent by it to the filing
of any such
petition or to the appointment of a receiver, liquidator, assignee or
trustee
of Company; (d) default in the obligation of the Company for borrowed money,
other than this Note, which shall continue for a period of sixty
(60) days, or
any event that results
in acceleration of the maturity of any indebtedness of
the Company under
any note, indenture, contract, or agreement; (e) any
representation or
statement made or furnished to Holder by the
Company or on
the Company's behalf is false or misleading in any material respect; (f) any
levy, seizure,
attachment,
lien, or encumbrance of or on the Company's
property, other
than those existing as
of the date hereof, which is not
discharged by the Company within twenty (20) days; (g) within 45 days of
the
date hereof, the
Company fails to acquire all of the shares or assets of
NeoLink Wireless
Content, Inc., or the Company subsequently breaches any
agreement related
to such acquisition; or (h) within 20
days of the date
hereof, the Company shall have repurchased no less than 2.0
million shares of
Company stock from S. Matthew Shultz for an amount not to exceed ten
thousand
dollars.
6.1 CURE. The Company shall be provided
a period of fifteen (15)
calendar days from the date of an event of default, as defined in Section
6
above, to cure a
default. In the event
Company fails
to cure any default
within such time
period, including the payment of all costs and expenses
provided for in this Note, Holder may immediately enforce
any and all rights
provided under this Note.
6.2.
EVENTS OF DEFAULT;
CONSEQUENCES. In the
event of the occurrence of
an Event of Default (as defined in Section 6 above) the Holder may
declare the
entire unpaid
principal balance of
this Note, together with accrued interest,
immediately due and
payable at
the place of payment, without presentment,
protest, notice or demand, all of which are expressly waived by the
Company.
6.3.
NO SETOFF, ETC. The obligations of the Company to pay the
principal balance
and interest due to the Holder shall be absolute and
unconditional and
the Company shall make such payment without abatement,
diminution or deduction regardless of any cause or circumstances whatsoever
including, without limitation, any defense, setoff, recoupment, or
counterclaim
which the Company may have or assert against the Holder or any
other person.
6.4.
WAIVER OF PRESENTMENT, ETC. The Company waives presentment,
demand, notice of dishonor, protest and notice of nonpayment and
protest.
6.5.
COSTS OF COLLECTION.
The Company shall
pay all costs and
expenses
of collection incurred by the Holder, including reasonable
attorneys' fees.
7.
SECURITY. The
obligation evidenced by this Note shall be senior to all
other obligations of
the Company other than obligations specifically approved
by the Holder and
other than the obligations of the
holders of similar notes
(the "Other Holders") purchased from the Company pursuant to that
certain Note
and Warrant Purchase Agreement, which obligations shall be parri
pasu with this
Note respecting any
claim on the security
of the Company. The obligation
evidenced by this Note
is secured by a first priority security interest in all
of the assets of
the Company other than liens specifically approved
by the
Holder and as shared on a pari passu basis with the Other
Holders.
8.
ANTI-DILUTION ADJUSTMENTS. The number of Shares issuable upon
conversion
of this Note and the Conversion Rate shall be subject to adjustment
as follows:
(a) In case the
Company shall (i) pay a dividend or make a distribution on
its Shares
in additional Shares or other securities, (ii) subdivide
its
outstanding Shares
into a greater number of Shares, (iii) combine its
outstanding Shares
into a smaller number of Shares or (iv) issue, by
reclassification of
its Shares, any other securities of the Company (including
any such reclassification in connection with a consolidation or
merger in which
the Company is the
continuing entity),
the number of Shares issuable upon
conversion of this Note immediately prior thereto shall be adjusted
so that the
Holder shall be
entitled to receive the kind and number of Conversion Shares,
and other securities of the Company which such holder would have
owned or would
have been entitled
to receive immediately after the happening of
any of the
events described above, had the Note been converted immediately prior to the
happening of
such event or any record date with respect thereto. Any
adjustment made
pursuant to this subsection 8(a) shall become effective
immediately after the effective date of such event.
(b) In case the
Company shall issue rights, options, warrants or convertible
securities to
Holder of its Shares, without any charge to such Holder,
containing the
right to subscribe for or purchase Shares,
the number of
Conversion Shares thereafter issuable upon the conversion of this
Note shall be
determined by multiplying the number of Conversion Shares theretofore
issuable
upon conversion of this Note by a fraction, of which the numerator
shall be the
number of Shares outstanding immediately prior to the issuance of such
rights,
options, warrants
or convertible
securities plus the
number of additional
Shares offered for subscription or purchase, and of which the
denominator shall
be the number of Shares outstanding immediately prior to the issuance
of such
rights, options, warrants or convertible securities. Such adjustment shall be
made whenever such
rights, options, warrants or convertible securities are
issued, and
shall become effective immediately upon
issuance of such rights,
options, warrants or convertible securities. In the event of such
adjustment,
corresponding adjustments shall be made to the Conversion Rate
(c) In case the
Company shall
distribute to Holder of its Shares evidences of
its indebtedness or assets (excluding cash dividends or distributions out
of
current earnings made in the ordinary course of business consistent with past
practices), then
in each case the number of Conversion Shares
thereafter
issuable upon the conversion of this Note shall be determined by multiplying
the number of Conversion Shares theretofore issuable upon
conversion
of this
Note by a fraction, of which the numerator
shall be the then Market Price (as
defined below) on
the date of such
distribution, and of which the denominator
shall be such Market
Price on such date
minus the then fair value (determined
as provided in subsection 8(e) below) of the portion of the assets
or evidences
of indebtedness so distributed applicable to one unit. Such adjustment shall
be made whenever any such distribution is made and shall become effective on
the date of distribution. In the event of any such
adjustment, the
number of
Conversion Shares shall also be adjusted and shall be that number
determined by
multiplying the
number of Shares
issuable upon exercise before the adjustment
by a fraction, the
numerator of
which shall be the
Conversion Rate in effect
immediately before the adjustment and the denominator of which shall be the
Conversion Rate as so adjusted.
(d) Whenever the
number of Conversion Shares issuable upon the conversion of
this Note is adjusted as provided in this Section 8, the Conversion
Rate shall
be adjusted
by multiplying such Conversion Rate immediately prior to such
adjustment by
a fraction, the numerator of which shall
be the number of
Conversion Shares issuable upon the conversion of this Note
immediately prior
to such adjustment,
and the denominator of
which shall be the number of
Conversion Shares issuable immediately thereafter.
(e) In the event
that at any time, as a result of an adjustment made pursuant
to this Section
8, a Note holder shall be entitled to
convert such Note into
any securities of the Company other than Shares, (i) if the Note
holder's right
to convert is on any other basis than that available to all holders of the
Company's Shares, the Company shall obtain an opinion of a
reputable investment
banking firm valuing such other securities and (ii) thereafter
the number of
such other
securities
so purchasable upon conversion of a Note and the
Conversion Rate of such securities shall be subject to adjustment
from time
