PURCHASE AGREEMENT
by
and among
SOUTHPEAK
INTERACTIVE CORPORATION,
INTERMEZZO
ESTABLISHMENT,
AND
PARAGON
INVESTMENT FUND
March
31, 2010
This
Purchase Agreement (the “Agreement”) is made
and entered into this 31st day of March, 2010, by and among SouthPeak
Interactive Corporation, a Delaware corporation (“Buyer”), Intermezzo
Establishment, a Liechtenstein corporation (“Intermezzo”), and
Paragon Investment Fund, an investment fund organized under the laws of the
Cayman Islands (“Paragon”).
WHEREAS,
Intermezzo has assigned all of its right, title and interest in and to the
Publishing Agreement dated August 20, 2009 between Intermezzo and FireFly
Holdings Limited (“FireFly Agreement”)
for the development of the electronic game “Stronghold 3” (the “Game”) to IRP GmbH, a
corporation organized under the laws of Switzerland (the “Company”);
WHEREAS,
Intermezzo and Paragon (collectively, the “Shareholders”) are
the sole shareholders of the Company;
WHEREAS,
the Buyer desires to acquire all the outstanding shares of stock that the
Shareholders hold of the Company (the “Stock”),
and the Shareholders desire to sell the shares of Stock to Buyer for
the consideration set forth below, subject to the terms and conditions of this
Agreement;
WHEREAS,
Intermezzo holds a note (the “Note”) in the
principal amount of EUR 4,385,371.43 of CDV Finance Schweiz, AG for which CDV
Software Entertainment AG, a corporation organized under the laws of Germany,
has assumed the obligation to pay; and
WHEREAS,
Buyer desires to obtain by sale and assignment the right to repayment of EUR
3,700,000 of the principal and interest due thereon under the Note.
NOW,
THEREFORE, in consideration of the mutual promises hereinafter set forth and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereby agree as follows:
ARTICLE
I
DEFINITIONS
AND INTERPRETATION
1.1 Definitions. For
purposes of this Agreement, the following terms have the respective meanings set
forth below:
“Governmental Entity”
means any court, administrative agency, commission, governmental or regulatory
authority, domestic or foreign.
“knowledge” means
actual knowledge or awareness as to a specified fact or event of a Person that
is an individual or of an officer, director or managerial personnel of a Person
that is a corporation or of a Person in a similar capacity of an entity other
than a corporation.
“Legal Requirements”
means any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity.
“Lien” means any
mortgage, pledge, security interest, encumbrance, lien, restriction or charge of
any kind (including, without limitation, any conditional sale or other title
retention agreement or lease in the nature thereof, any sale with recourse
against the seller or any affiliate of the seller, or any agreement to give any
security interest).
“Losses” shall include
any loss, damage, injury, liability, claim, demand, settlement, judgment, award,
fine, penalty, tax, fee (including any reasonable legal fee, expert fee,
accounting fee or advisory fee), charge, cost (including any cost of
investigation) or expense of any nature.
“Material Adverse
Effect” means any change, event, violation, inaccuracy, circumstance or
effect, individually or when aggregated with other changes, events, violations,
inaccuracies, circumstances or effects, that is materially adverse to the
business, assets, revenues, financial condition, results of operations or
business prospects of an entity and its subsidiaries, taken as a whole, except
to the extent resulting from: (a) changes in general industry or economic
conditions, (b) adverse effects arising from the announcement or consummation of
the transactions contemplated hereby, or (c) changes to generally accepted
accounting principles that apply generally to the industry in which the entity
operates.
“Net Receipts” means
all monies (expressed in U.S. Dollars) Buyer and its subsidiaries actually
receive from the sale, license or lease of the Game under the FireFly Agreement
net of a reasonable reserve for returns, less all Advance Royalty and Royalty
payments paid and payable under Sections 6.1 and 6.2 of the FireFly Agreement
and less, to the extent deducted under the FireFly Agreement to determine net
receipts thereunder, (i) all applicable duties, value-added taxes and other
similar taxes, (ii) direct manufacturing costs and other costs of fulfillment,
(iii) discounts, markdowns and allowances, (iv) marketing and PR expenses and
(v) localization expenses.
“Person” means any
individual, corporation, partnership, firm, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization,
Governmental Entity or other entity.
“SEC” means the
Securities and Exchange Commission.
“Tax” or “Taxes” refers to any
and all federal, foreign, state, provincial, local and foreign taxes, including,
without limitation, gross receipts, income, profits, sales, use, occupation,
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, assessments, governmental charges and
duties together with all interest, penalties and additions imposed with respect
to any such amounts and any obligations under any agreements or arrangements
with any other Person with respect to any such amounts and including any
liability of a predecessor entity for any such amounts.
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1.2 Other Defined
Terms. For
purposes of this Agreement, the following terms have the respective meanings set
forth in the section opposite each such term:
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TERM
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SECTION
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Agreement
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Preamble
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Buyer
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Preamble
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Buyer
Indemnified Party
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Section
7.1
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Buyer
Shares
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Section
2.2
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Closing
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Section
2.1
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Closing
Date
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Section
3.1
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Common
Stock
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Section
2.2
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Company
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Preamble
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Deductible
Amount
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Section
7.4
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Exchange
Act
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Section
4.5
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FireFly
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Section
4.6
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FireFly
License
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Section
4.6
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Fixed
Payments
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Section
2.2
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Game
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Section
2.2
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Indemnified
Party
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Section
7.3
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Net
Receipts Payments
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Section
2.2
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PDF
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Section
3.1
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SEC
Reports
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Section
5.7
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Shareholder
Indemnified Party
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Section
7.2
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Stock
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Recitals
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Stronghold
3
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Recitals
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Survival
Period
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Section
7.5
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Third
Party Claim
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Section
7.3
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ARTICLE
II
PURCHASE
AND SALE OF THE STOCK
2.1 Purchase of the Stock from
the
Shareholders and Right to Repayment of Part of Note from
Intermezzo. Subject
to and upon the terms and conditions of this Agreement, at the closing of the
transactions contemplated by this Agreement (the “Closing”), the
Shareholders shall sell, transfer, convey, assign and deliver to the Buyer, and
the Buyer, in part, upon reliance of the covenants set forth in Section 6.5 of
this Agreement, shall purchase, acquire and accept from the Company,
all of the Stock. Pursuant to the Sale and Assignment Agreement attached hereto
as Exhibit A
(“Assignment
Agreement”) which shall be executed at the Closing, Buyer shall purchase
from Intermezzo the principal and interest amount of EUR 3,700,000 due under the
Note plus the interest accrued and unpaid thereon after March 31, 2010 for the
consideration set forth in the Assignment Agreement.
2.2 Purchase
Price. The
purchase price (the “Purchase Price”) to
be paid to the Shareholders by the Buyer for the Stock shall be (a) Ten Million
(10,000,000) shares (“Buyer Shares”) of the
Buyer’s common stock, par value $.0001 per share (the “Common Stock”), (b)
10% of Net Receipts not to exceed $1,000,000 (“Net Receipts
Payments”) and (c) fixed payments totaling
$1,200,000 at such times and in such amounts as set forth on Exhibit B, by wire
transfer of immediately available funds to the accounts of the Shareholders
designated in writing prior to the Closing (the “Fixed Payments”). The
Buyer will account for and make the Net Receipts Payments at the same time and
in the same manner that accountings for and payments of the Royalty payments are
required and due under the FireFly Agreement; provided, however, no obligation
will exist on the part of the Shareholders to render an invoice for such Net
Receipts Payments. All amounts and shares payable and issuable to the
Shareholders shall be equally divided between the Shareholders unless they
indicate otherwise to Buyer.
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ARTICLE
III
THE
CLOSING
3.1 Closing. The
Closing shall take place at the offices of Xxxxxxxxx Xxxxxxx, LLP, 0000 Xxxxxx
Xxxxxxxxx, Xxxxx 0000, XxXxxx, Xxxxxxxx 00000 contemporaneously with the
execution and delivery of this Agreement (the “Closing
Date”). The documents to be delivered at the Closing (other
than stock certificates evidencing the Buyer Shares) may, at the election of the
parties, be exchanged by telecopier or electronic transmission in portable
document format (“PDF”) upon a written
undertaking to provide original executed copies within one business day
following the Closing.
3.2 Sale. Shareholders,
upon the terms and conditions of this Agreement, hereby sell (verkaufen) and hereby
transfer (treten ab)
the Stock to the Buyer under the condition precedent (unter der aufschiebenden
Bedingung) of the receipt of the Buyer Shares and the initial payment set
forth in Section. 3.7(ii).
3.3 Acceptance. Buyer
hereby accepts such sale and transfer of the Stock.
3.4 Ancillary
Rights. The sale and transfer of the Stock hereunder shall
include without limitation any and all ancillary rights (Nebenrechte) pertaining to
the Stock, including the rights to any undistributed profits (Gewinnbezugsrechte).
3.5 Cooperation. The
Parties shall reasonably cooperate with each other with respect to all filings
that the Parties are required to make or elect to make in connection with the
consummation of this Agreement.
3.6 Closing Deliveries by
Paragon and
Intermezzo. Paragon
and Intermezzo shall deliver to the Buyer at the Closing the
following:
(i) stock
certificates representing the Stock duly endorsed in blank or accompanied by
stock powers duly executed by Paragon;
(ii) certificates
of the Secretary of the Company attesting to the incumbency of the Company’s
officers, the authenticity of the resolutions authorizing the transactions
contemplated by this Agreement, and the authenticity and continuing validity of
the organizational documents delivered pursuant to Section
4.1;
(iii) the
original minute book of the Company to the extent one exists;
(iv) the
consent of FireFly Holdings Limited to the assignment of the FireFly Agreement
to the Company;
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(v) a
resignation, effective as of the Closing, of each officer and director of the
Company from each such position, executed by such person;
(vi) the
executed Assignment Agreement; and
(vii) a cross
receipt executed by the Shareholders for the portion of Purchase Price being
paid at the Closing and a cross receipt of Intermezzo for the consideration it
is receiving under the Assignment Agreement.
3.7 Closing Deliveries of the
Buyer. The
Buyer shall deliver to Paragon and Intermezzo at the Closing the
following:
(i) the Buyer
Shares (issued in accordance with Section
2.2);
(ii) the
initial $50,000 of the Fixed Payments;
(iii) the
initial $50,000 payment due Intermezzo under the Assignment
Agreement;
(iv) certificates
of the Secretary of the Buyer attesting to the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement; and
(v) a cross
receipt executed by the Buyer for the Stock.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF INTERMEZZO AND PARAGON
Intermezzo
and Paragon jointly and severally represent and warrant to the Buyer, as set
forth below in this Article
IV.
4.1 Organization and
Qualification. The
Company is an unused shell corporation, duly organized, validly existing and in
good standing under the laws of Switzerland and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Complete and
correct copies of the charter of the Company, as amended and currently in
effect, have been heretofore delivered to Buyer or Buyer’s
counsel. The Company is not in violation of any of the provisions of
its charter or any other governing document.
4.2 Subsidiaries. The
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any other company, corporation, limited liability company
or other business entity.
4.3 Capitalization.
(a) The Stock
represents all of the outstanding capital stock or other equity securities of
the Company. The shares of Stock are validly issued, fully paid and
nonassessable. The shares of Stock are owned by Paragon free and
clear of any Liens and Paragon has all right to sell and transfer the shares of
Stock as contemplated by this Agreement and upon such sale and transfer, such
Stock shall be acquired by the Buyer as contemplated by Section 2.1 of this
Agreement free and clear of any Liens.
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(b) There are
no subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or
cause the repurchase, redemption or acquisition of, any Stock or similar equity
security of the Company or obligating the Company to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement.
(c) All
shares of Stock have been issued in compliance with all applicable securities
laws and other applicable laws and regulations.
(d) There are
no registration rights, and there is no voting trust, proxy, rights plan,
anti-takeover plan or other agreement or understanding to which the Company is a
party or by which the Company is bound with respect to any equity security of
any class of the Company.
(e) No shares
of Stock are subject to a repurchase option, risk of forfeiture or other
condition under any applicable agreement with the Company.
4.4 Authority Relative to this
Agreement.
(a) Each of
Intermezzo and Paragon has all necessary power and authority to execute and
deliver this Agreement and to perform its respective obligations hereunder and
to consummate the transactions contemplated hereby.
(b) The
execution and delivery of this Agreement and the consummation by Intermezzo and
Paragon of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on their part and no corporate or
organizational proceedings on the part of Intermezzo or Paragon are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
pursuant to the applicable law and the terms and conditions of this
Agreement.
(c) This
Agreement has been duly and validly executed and delivered by Intermezzo and
Paragon, and assuming the due authorization, execution and delivery thereof by
Buyer, constitutes the legal and binding obligations of Intermezzo and Paragon,
enforceable against each of them in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity.
4.5 No Conflict; Required
Filings and Consents.
(a) The
execution and delivery of this Agreement by each of Intermezzo and Paragon does
not, and the performance of this Agreement by such Persons shall not,
(i) conflict with or violate any of their respective charters or other
organizational documents, (ii) conflict with or violate any Legal
Requirements, (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
materially impair the Company’s rights or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company, or
(iv) result in the triggering, acceleration or increase of any payment to
any Person, including any “change in control” or similar provision, except, with
respect to clauses (ii), (iii) or (iv), for any such conflicts, violations,
breaches, defaults, triggers, accelerations, increases or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company or its rights under the FireFly Agreement.
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(b) The
execution, delivery and performance of this Agreement by each of Intermezzo and
Paragon does not require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity or other third party
(including, without limitation, lenders and lessors, except (i) for
applicable requirements, if any, of the Securities Act of 1933, amended (the
“Securities
Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or
applicable securities laws of any foreign country, and the rules and regulations
thereunder, and appropriate documents received from or filed with the relevant
authorities of other jurisdictions in which the Company is licensed or qualified
to do business, (ii) [SHARE REGISTRY IN [SWITZERLAND]?], and (iii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or
prevent consummation of the transactions contemplated hereby or otherwise
prevent the parties hereto from performing their obligations under this
Agreement.
4.6 Assets and
Liabilities. The
Company has no assets other than the FireFly Agreement. The Company has no
liabilities other than its obligations arising after the Closing under the
FireFly Agreement.
Intermezzo
has made available to the Buyer a correct and complete copy of the FireFly
Agreement (as amended to date). The FireFly Agreement: (a)
is in full force and effect; (ii) is legal, valid, binding and
enforceable against FireFly Holdings Limited (“FireFly”); and
(iii) will continue to be in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect prior to
the Closing. No party is in breach or default, and no event has occurred which
with notice or lapse of time or both would constitute a breach or default or
permit termination, modification or acceleration, under the FireFly
Agreement. Intermezzo and the Company have duly exercised all of
their rights under the FireFly Agreement to assure that FireFly is performing
its obligations under the FireFly Agreement and Intermezzo and the Company have
no knowledge that FireFly has failed to perform in any material respect its
obligations under the FireFly Agreement.
4.7 Litigation. There
are no claims, suits, actions or proceedings pending or, to the knowledge of
Intermezzo and Paragon, threatened against, Intermezzo, the Company or Paragon
before any Governmental Entity, governmental department or instrumentality, or
any arbitrator. There are no claims, suits, actions or proceedings
pending or, to the knowledge of Intermezzo, the Company
or Paragon, threatened against Intermezzo, the Company or Paragon
before any Governmental Entity, governmental department or instrumentality, or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement.
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4.8 Intellectual
Property. The
Company’s rights under the FireFly Agreement are not subject to any material
proceeding or outstanding decree, order, judgment, contract, license or
stipulation restricting in any manner the use, transfer or licensing thereof by
the Company, or which may affect the validity, use or enforceability of such
rights.
4.9 Investment
Intent.
(a) The
Shareholders are acquiring the Buyer Shares hereunder for their own
accounts for investment and not for distribution, assignment or resale to
others.
(b) The
Shareholders acknowledge that the issuance of the Buyer Shares has not been
registered under the Securities Act in reliance upon an exemption therefrom for
nonpublic offerings.
(c) The
Shareholders acknowledge that the Buyer Shares may not be sold or otherwise
transferred unless such sale or other transfer is registered under the
Securities Act or an exemption from registration is available.
(d) Each of
the Shareholders is an “accredited investor” as that term is defined in Rule 501
of Regulation D promulgated under the Securities Act, and has had access to such
financial and other information and has been afforded the opportunity to ask
questions of the Buyer’s representatives and has received answers thereto, as
deemed necessary in connection with its decision to accept the Buyer
Shares hereunder.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
The Buyer
represent and warrant to Intermezzo and Paragon as set forth below in this Article
V.
5.1 Organization and
Qualification. The
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being or currently planned by the Buyer to be
conducted. The Buyer is not in violation of any of the provisions of
its certificate of incorporation and bylaws.
5.2 Capitalization. The
Buyer’s periodic reports on Form 10-Q and Form 10-K and current reports on Form
8-K filed with the SEC accurately reflect its capitalization as of the dates
indicated in such reports. The issued and outstanding capital stock
of the Buyer (a) has been duly and validly issued; (b) is fully paid
and nonassessable; and (c) was not issued in violation of any preemptive
rights or rights of first refusal or first offer.
5.3 Valid Issuance of the Buyer
Shares. The
Buyer Shares issued to Paragon hereunder have been duly authorized, validly
issued, fully paid and are non-assessable, free of restrictions on transfer
other than restrictions on transfer under applicable state and federal
securities laws, are not subject to any preemptive rights, rights of first
refusal, tag-along rights, drag-along rights or other similar rights, and have
been issued in compliance with applicable state and federal securities
laws. Upon consummation of the transactions contemplated by this
Agreement, Paragon and Intermezzo will acquire marketable title to the Buyer
Shares free and clear of all Liens.
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5.4 Authority Relative to this
Agreement. The
Buyer has full corporate power and authority to: (a) execute, deliver and
perform this Agreement, and each ancillary document that the Buyer has executed
or delivered or is to execute or deliver pursuant to this Agreement, and
(b) carry out the Buyer’s obligations hereunder and thereunder and, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation by the Buyer of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Buyer, and no other corporate proceedings on
the part of the Buyer are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Buyer and, assuming the due
authorization, execution and delivery thereof by the other parties hereto,
constitutes the legal and binding obligation of the Buyer, enforceable against
it in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity.
5.5 No Conflict; Required
Filings and Consents.
(a) The
execution and delivery of this Agreement by the Buyer do not, and the
performance of this Agreement by the Buyer shall not (i) conflict with or
violate the Buyer’s certificate or incorporation or bylaws, (ii) conflict with
or violate any Legal Requirements or any rule or regulation of the
Over-the-Counter bulletin board, (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair the Buyer’s rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Buyer pursuant to,
any contracts to which the Buyer is a party or by or to which any of the
properties or assets of the Buyer may be bound, subject or affected, or (iv)
result in the triggering, acceleration or increase of any payment to any Person
pursuant to any contracts to which the Buyer is a party or by or to which any of
the properties or assets of the Buyer may be bound, subject or affected,
including any “change in control” or similar provision thereof, except, with
respect to clauses (ii), (iii) or (iv), for any such conflicts, violations,
breaches, defaults, triggers, accelerations, increases or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Buyer.
(b) The
execution and delivery of this Agreement by the Buyer do not, and the
performance of its respective obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements, if
any, of the Securities Act, the Exchange Act, Blue Sky Laws, and the rules and
regulations thereunder, and appropriate documents with the relevant authorities
of other jurisdictions in which the Buyer is qualified to do business, and
(ii) where the failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Buyer, or prevent consummation of the transaction contemplated hereby or
otherwise prevent the parties hereto from performing their obligations under
this Agreement.
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5.6 Reporting Company
Status. The
Buyer is subject to the reporting requirements of the Exchange Act and the Buyer
has taken no action designed to, or which to its knowledge is likely to, have
the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Buyer received any notification that the SEC is
contemplating terminating such registration. The Common Stock is traded on the
Over-the-Counter bulletin board and the Buyer has not received any notice
regarding, and to the Buyer’s knowledge there is no threat of, the termination
or discontinuance of the eligibility of the Common Stock for such
trading.
5.7 Exchange Act Filings;
Financial Statements. Buyer
has filed all reports, forms or other information required to be filed by it
under the Securities Act and the Exchange Act (the foregoing materials being
collectively referred to herein as the “SEC Reports”), except
as otherwise disclosed in any EC Reports. Except as otherwise
disclosed in any SEC Reports, as of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
financial statements of Buyer included in the SEC Reports were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of Buyer and its consolidated subsidiaries as of
and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
5.8 Private
Placement. No
registration under the Securities Act is required for the offer and sale of the
Buyer Shares by the Buyer to Paragon as contemplated hereby.
ARTICLE
VI
ADDITIONAL
AGREEMENTS
6.1 Confidential
Information. Except
in connection with any dispute between the parties and subject to any obligation
to comply with (i) any applicable law, (ii) any rule or regulation of any
Governmental Entity or securities exchange, or (iii) any subpoena or other legal
process to make information available to the persons entitled thereto, whether
or not the transactions contemplated herein shall be concluded, all information
obtained by any party about any other, and all of the terms and conditions of
this Agreement, shall be kept in confidence by each party, and each party shall
cause its stockholders, directors, officers, managers, employees, agents and
attorneys to hold such information confidential. Such confidentiality
shall be maintained to the same degree as such party maintains its own
confidential information and shall be maintained until such time, if any, as any
such data or information either is, or becomes, published or a matter of public
knowledge; provided, however, that the foregoing shall not apply to any
information obtained by a party through its own independent investigations of
the other party or received by a party from a source not known by such party to
be bound by a confidentiality agreement with, or other contractual, legal or
fiduciary obligation of confidentiality to, the other party, nor to any
information obtained by a party which is generally known to others engaged in
the trade or business of such party. In the event a party to this Agreement
becomes legally compelled to disclose any such information, it shall promptly
provide the others with written notice of such requirement so that the other
parties to this Agreement may seek a protective order or other remedy. If this
Agreement shall be terminated for any reason, the parties shall return or cause
to be returned to the others all written data, information, files, records and
copies of documents, worksheets and other materials obtained by such parties in
connection with this Agreement.
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6.2 Public
Disclosure. Unless
otherwise permitted by this Agreement, the Buyer, Paragon and Intermezzo shall
consult with each other before issuing any press release or otherwise making any
public statement or making any other public (or non-confidential) disclosure
(whether or not in response to an inquiry) regarding the terms of this Agreement
and the transactions contemplated hereby, and neither shall issue any such press
release or make any such statement or disclosure without the prior written
approval of the other (which approval shall not be unreasonably withheld),
except as may be required by law, in which case the party proposing to issue
such press release or make such public statement or disclosure shall use its
commercially reasonable efforts to consult with the other party before issuing
such press release or making such public statement or disclosure.
6.3 Piggyback
Registration. The
Buyer shall use its reasonable best efforts to provide to Paragon and Intermezzo
piggyback registration rights as to Buyer Shares in any registration statement
the Buyer files in which it is registering any shares of Common Stock other than
on a Form S-4 or Form S-8 or any successor forms thereto. As a condition to such
registration right, each Stockholder, or any affiliate thereof, shall agree to
be bound by the provisions of any registration rights agreement pursuant to
which other shares are being registered and, absent any such agreement, to such
standard limitations and obligations to which registration rights are generally
subject, including, but not limited to, the obligation to participate in any
underwriting and the right to have any underwriter limit the number of shares
being registered by a stockholder, or any affiliate thereof. In no
event, however, shall the Buyer have the obligation to register any Buyer Shares
if such shares can be sold in accordance with Rule 144 promulgated under the
Securities Act.
6.4 Timely Filing of SEC
Reports. The
Buyer will use its best efforts to file its SEC Reports with the SEC until the
one year anniversary of the Closing.
6.5 Best Efforts
of Intermezzo and Paragon. Intermezzo
and Paragon agree, for each of themselves and their affiliates, to use its best
efforts to:
(a) identify
potential equity or debt financing opportunities for the Buyer over the eighteen
months following the Closing;
11
(b) cause any
fund which Intermezzo, Paragon or any affiliate thereof forms to finance the
development of electronic games to consider financing games for the benefit of
Buyer and its affiliates; and
(c) assign to
Buyer at Buyer’s request any videogame distribution or videogame development
contracts, and intellectual property rights related to videogames obtained from
CDV Software Entertainment, AG and its affiliates that revert to Intermezzo,
Paragon or any of their affiliates in satisfaction of the exercise of their
rights; provided that any such assignment shall be subject to (i) Buyer’s
repayment of any production or royalty advances directly funded by Intermezzo or
an affiliate thereof, and (ii) assumption by Buyer or any of its affiliates of
any future financial obligations arising under any such videogame distribution
or videogame development contract.
6.6 Tax
Obligations.
(a) Intermezzo
and Paragon, on or after the Closing Date, shall pay any and all Taxes due or
imposed in connection with the transfer of the FireFly Agreement to the Company
or the transactions contemplated in this Agreement, at such time as such Taxes
become due and payable, and shall remain exclusively liable for (i) any Taxes
with respect to the FireFly Agreement or the Company to the extent such Taxes
accrued prior to the Closing Date or arose out of acts occurring or conditions
existing prior to the Closing Date; (ii) any Taxes of the Company arising before
the Closing Date.
(b) The Buyer
shall remain exclusively liable for (i) any Taxes with respect to the FireFly
License or the Company to the extent such Taxes accrue after the Closing Date or
arise out of acts occurring or conditions existing after the Closing Date; (ii)
any Taxes of Buyer arising before or after the Closing Date; or (iii) any Taxes
of the Buyer arising out of or with respect to the operation of the Company
after the Closing Date.
6.7 Notice and Rights Upon
Default. If Buyer shall fail to pay or cause IRP to pay any
Milestone payments due FireFly (as defined in the FireFly Agreement)
within 75 days of its due date, or any Royalty (as defined in the FireFly
Agreement) payment within 20 days of its due date, Buyer shall provide notice
thereof to Intermezzo. Intermezzo shall then have the right to make
such payments on behalf of Buyer and IRP. If Intermezzo makes any
such payment and is not reimbursed by the time such payment was otherwise due
(after regard for cure periods under the FireFly Agreement), upon notice by
Intermezzo, Buyer shall either assign the FireFly Agreement to Intermezzo or its
designee, after consent to such assignment is obtained from FireFly, or transfer
the stock of IRP to Intermezzo or its designee. In addition, if Buyer
shall fail to make any Net Receipts Payment, Fixed Payment or any payment due
under the Assignment Agreement within 60 days when due, then upon notice from
Intermezzo, the same rights shall exist in favor of Intermezzo as existed for
failures to pay under the FireFly Agreement. In no event shall
Intermezzo have any rights resulting from the failure to make any payment under
the FireFly Agreement if a bona fide dispute exists as to the obligation to make
any such payment.
6.8 Further
Assurances. Each of the parties to this Agreement shall use
its commercially reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby,
including under the Assignment Agreement.
12
ARTICLE
VII
INDEMNIFICATION
7.1 Indemnification of
Buyer. The
Buyer and each of its officers, directors, employees, stockholders and agents
(each, a “Buyer
Indemnified Party”) shall be entitled to be indemnified by Intermezzo and
Paragon against any and all Losses suffered or incurred by such Buyer
Indemnified Party, arising from, relating to or otherwise in connection
with:
(a) any
breach of any representation or warranty of Intermezzo or Paragon contained in
this Agreement or the Assignment Agreement as modified by the exceptions thereto
and other disclosures included in any other agreement or instrument furnished to
the Buyer pursuant to this Agreement;
(b) any
breach or failure to perform any covenant or agreement of Intermezzo or Paragon
contained in this Agreement or any other agreement or instrument furnished to
the Buyer pursuant to this Agreement; or
(c) any
legal, accounting, or advisory expenses of Intermezzo and Paragon incurred in
connection with the transaction contemplated by this Agreement.
7.2 Indemnification of
Paragon and
Intermezzo. The
Buyer shall indemnify, defend and hold harmless Intermezzo and Paragon and their
respective officers, directors, employees, stockholders and agents (each, a
“Shareholder
Indemnified Party”) from and against any and all Losses suffered or
incurred by such Shareholder Indemnified Party, arising from, relating to or
otherwise in connection with:
(a) any
breach of any representation or warranty of the Buyer contained in this
Agreement as modified by the exceptions thereto and other disclosures included
in any other agreement or instrument furnished to Intermezzo or Paragon pursuant
to this Agreement;
(b) any
breach or failure to perform any covenant or agreement of the Buyer contained in
this Agreement or any other agreement or instrument furnished to Intermezzo or
Paragon pursuant to this Agreement; or
(c) any
legal, accounting, or advisory expenses of the Buyer incurred in connection with
the transaction contemplated by this Agreement.
7.3 Indemnification
Claims.
(a) In order
for a Buyer Indemnified Party or a Shareholder Indemnified Party, as applicable
(an “Indemnified
Party”), to be entitled to any indemnification provided for under Section 7.1 or Section 7.2 in
respect of, arising out of or involving a claim by a third party (“Third Party Claim”),
such Indemnified Party, must notify the indemnifying party (the “Indemnifying Party”)
in writing of the Third Party Claim within 30 days after receipt by such
Indemnified Party of notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
under Section
7.1 or Section
7.2 except to the extent the Indemnifying Party has been actually
prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within 10 days after the Indemnified Party’s
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim. The
Indemnifying Party shall have the right to assume and conduct and control the
defense of such Third Party Claim and the Indemnified Party shall have the right
to observe and receive information regarding the defense of such claim. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (such consent not to be unreasonably delayed, withheld or
conditioned), settle, compromise or offer to settle or compromise any such claim
or demand on a basis which would result in the imposition of a consent order,
injunction or decree that does not include an unconditional release of the
Indemnified Party for any liability arising out of such claim or demand or any
related claim or demand.
13
(b) In order
for an Indemnified Party to be entitled to any indemnification provided for
under this Agreement other than in respect of, arising out of or involving a
Third Party Claim, such Indemnified Party shall deliver notice of such claim
with reasonable promptness after discovery of any such claim to the Indemnifying
Party; provided, however, that failure to give such notification shall not
affect the indemnification provided under Section 7.1 or Section 7.2 except to
the extent the Indemnifying Party has been actually prejudiced as a result of
such failure. If the Indemnifying Party does not notify the
Indemnified Party within 30 days following its receipt of such notice that the
Indemnifying Party disputes its liability to the Indemnified Party, such claim
specified by the Indemnified Party in such notice shall be conclusively deemed a
liability of the Indemnifying Party under Section 7.1 or Section 7.2 and the
Indemnifying Party shall pay the amount of the Losses stated in such notice to
the Indemnified Party in the manner set forth in Section 7.4 or, in
the case of any notice in which the Losses (or any portion thereof) are
estimated, on such later date when the amount of such Losses (or such portion
thereof) becomes finally determined.
7.4 Limitations.
(a) Except as
otherwise provided in Section 7.8, Buyer
shall be required to make any indemnification payment pursuant to Section 7.2(a) for
any breach of the representations and warranties made by Buyer until such time
as the total amount of all indemnifiable Losses (including Losses arising from
such breach and all other indemnifiable Losses arising from any other breaches
of any representations or warranties) that have been suffered or incurred by all
of the Paragon Indemnified Parties collectively exceeds $50,000 (the “Deductible
Amount”). In such event, if the total amount of such
indemnifiable Losses exceeds the Deductible Amount, the Paragon Indemnified
Parties shall be entitled, in accordance with the provisions in this Article VII, to be
indemnified against and compensated and reimbursed for all indemnifiable Losses
in excess of the Deductible Amount. Except as otherwise provided in
Section 7.7, in
no event shall the aggregate liability of the Buyer pursuant to Sections 7.2(a),
(b) or (c) exceed an amount
equal to $5,000,000 (the “Cap
Amount”). Buyer shall have the right to reacquire Buyer Shares
from the Shareholders, if any of such shares are then held, in satisfaction of
an indemnification claim with each share being deemed to have the same value per
share as of the end of the Closing Date.
14
(b) Except as
otherwise provided in Section 7.8, Paragon
and Intermezzo shall not be required to make any indemnification payment
pursuant to Section
7.1(a) for any breach of the representations and warranties made by
either of them until such time as the total amount of all
indemnifiable Losses (including Losses arising from such breach and all other
indemnifiable Losses arising from any other breaches of any representations or
warranties) that have been suffered or incurred by all of the Buyer Indemnified
Parties collectively exceeds the Deductible Amount. In such event, if
the total amount of such indemnifiable Losses exceeds the Deductible Amount, the
Buyer Indemnified Parties shall be entitled, in accordance with the provisions
in this Article
VII, to be indemnified against and compensated and reimbursed for all
indemnifiable Losses in excess of the Deductible Amount. Except as
otherwise provided in Section 7.7, in no
event shall the aggregate liability of each of Paragon and Intermezzo pursuant
to Section
7.1(a), (b) or (c) exceed the
Cap. Paragon and Intermezzo shall have the right to satisfy any
indemnification claim by tendering to the Buyer Indemnified Parties Buyer Shares
which shall be deemed to have a value of the closing price of such shares on the
Closing Date. In no event will Paragon and Intermezzo have any
liability to pay an indemnification claim that exceeds the value of the Buyer
Shares and all payments they have received under this Agreement and the
Assignment Agreement, it being understood that Buyer shall have the right to
exercise its set-off right for any further amounts under Section 7.6
hereof.
7.5 Termination of
Indemnification. The
representations and warranties in this Agreement shall survive the Closing until
the second anniversary of the Closing Date; provided, however, that the
representations and warranties contained in Sections 4.1, 4.3, 4.4, 5.3, and 5.4, shall survive
until the expiration of the applicable statutes of limitations (collectively,
the “Survival
Period”). Any claim made by a party hereunder shall be preserved despite
the subsequent expiration of the Survival Period and any claim made prior to the
expiration of the Survival Period shall survive until final resolution thereof.
Except as set forth in the immediately preceding sentence, no claim for
indemnification under this Article VII shall be
brought after the end of the Survival Period.
7.6 Right to
Set-Off. The
Buyer or any of its affiliates may, at their discretion, satisfy the unpaid
portion of any of indemnification obligations due them by, to the extent
permitted by law, setting-off against any amounts due and owing from the Buyer
or any of its affiliates to Paragon and Intermezzo including, without
limitation, any Net Receipts Payments or Fixed Payments due under this Agreement
or payments due under the Assignment Agreement. Notwithstanding the
foregoing, in the event that there exists a reasonable and good faith dispute as
to whether (i) either of the Shareholders has an indemnification obligation
hereunder or (ii) the Buyer or any Buyer Indemnified Party may enforce its right
to set-off under this Section 7.6, then, in
each case, the Buyer shall be entitled to place any amounts due and owing to the
Shareholders hereunder into a third-party escrow account until such dispute has
been fully and finally resolved.
7.7 Adjustment to Purchase
Price. All indemnification payments
paid pursuant to this Article VII shall, to
the maximum extent permitted by law, be treated as an adjustment to the Purchase
Price or the purchase of the interest in the Note.
15
7.8 Exclusivity. The right of Paragon,
Intermezzo and the Buyer to assert indemnification claims and receive
indemnification payments pursuant to this Article VII shall be
the sole and exclusive right and remedy exercisable by such party with respect
to any breach by the other party hereto of any covenant, representation or
warranty or otherwise under this Agreement or relating to the transactions
contemplated hereby; provided, however, that the remedies of each such party for
fraud in the inducement or criminal acts (as determined by a final judgment of a
court of competent jurisdiction) by another party shall not be subject to any
limitation pursuant to this Agreement.
7.9 Determination of
Losses.
(a) Losses
payable to an Indemnified Party shall be reduced by any insurance proceeds
received by such Indemnified Party on account of such matter. The
parties hereto shall seek full recovery under all insurance policies covering
any indemnifiable matter in the ordinary course of business and to the same
extent as they would if such claim were not subject to right of indemnification
hereunder. No indemnifying party shall be required to make any
payment under this Article VII unless
and until all claims for insurance have been exhausted and all payments under
applicable insurance policies have been paid. Notwithstanding the
foregoing, if an insurance recovery is made by an Indemnified Party with respect
to any indemnification payment for which an indemnification payment has been
made, such Indemnified Party shall promptly pay to the indemnifying party the
amount of the insurance recovery, but not more than the amount of such
indemnification payment.
(b) All
indemnification payments payable hereunder shall be reduced by the net amount of
any tax benefits inuring to the benefit of the Indemnified Party as a result of
the Losses for which the Indemnified Party is seeking indemnification, offset by
tax benefits lost due to such payment.
ARTICLE
VIII
GENERAL
PROVISIONS
8.1 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial delivery service, or
mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with confirmation of receipt) to the parties at the following address
(or at such other address for a party as shall be specified by like
notice):
(a) if to the
Buyer to:
SouthPeak
Interactive Corporation
0000 Xxxx
Xxxxxxx
Xxxxxxxxxx,
Xxxxxxxx 00000
Attn: Xxxxx
Xxxxxxxx
16
with a
copy (which shall not constitute notice) to:
Xxxxxxxxx
Traurig, LLP
0000
Xxxxxx Xxxxxxxxx
Xxxxx
0000
XxXxxx,
Xxxxxxxx 00000
Attn: Xxxx
Xxxxxxx, Esq.
(b) if to
Paragon and Intermezzo:
Intermezzo
Establishment
Landstrasse
114
9495
Triefen, Liechtenstein
Attn:
Xxxx Xxxxx
with a
copy (which shall not constitute notice) to:
Holme,
Xxxxxxx & Xxxx, LLP
Xxxxxxxx
0
X-00000
Xxxxxx
Xxxxxxx
Attn: Xxxx
Xxxxxxxxx
8.2 Counterparts. This
Agreement may be executed in one or more counterparts, including by facsimile
and/or PDF, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.3 Entire Agreement;
Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof, (b) are not intended to confer upon any other person any
rights or remedies hereunder, and (c) shall not be assigned. No
representations, warranties, inducements, promises or agreements, oral or
written, by or among the parties not contained herein shall be of any force of
effect.
8.4 Severability. If
any provision of this Agreement, or the application thereof, becomes or is
declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
8.5 Remedies Cumulative;
Specific Performance.
(a) Except as
otherwise provided herein, any and all remedies herein expressly conferred upon
a party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy. The
parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.
17
(b) It is
accordingly agreed that the parties hereto shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
8.6 Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware, without regard to the laws that might otherwise govern under
applicable principles of conflicts of law. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any state or Federal court
located Chesterfield, County, Virginia in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the Commonwealth of Virginia for such persons and waives and covenants not to
assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
8.7 Rules of
Construction. The
parties hereto agree that they have been represented by counsel during the
negotiation, preparation and execution of this Agreement and, therefore, waive
the application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document. References
herein to “Dollars” or “$” shall refer to U.S. dollars and all payments and all
calculations of amount hereunder shall be made in U.S. dollars.
18
IN
WITNESS WHEREOF, this Stock Purchase Agreement has been duly executed by the
parties as of and on the date first above written.
|
BUYER:
|
|||
|
|
|||
|
SOUTHPEAK
INTERACTIVE CORPORATION
|
|||
|
|
By:
|
/s/ Xxxxx Xxxxxxxx | |
| Name: Xxxxx Xxxxxxxx | |||
| Title: Chairman | |||
|
PARAGON
INVESTMENT FUND
|
|||
| By: | /s/ X. Xxxxxx | ||
| Name: X. Xxxxxx | |||
|
Title: Director
|
|||
|
INTERMEZZO
ESTABLISHMENT
|
|||
|
By:
|
/s/ X. Xxxxxx | ||
| Name: X. Xxxxxx | |||
| Title: Director | |||
19
EXHIBIT
A
Sale and Assignment
Agreement
EXHIBIT
B
FireFly Consent
Letter
EXHIBIT
B
Fixed Payments
Schedule
|
Fixed
Payments Date
|
Amount
|
|||
|
Closing
Date
|
$ | 50,000 | ||
|
May
15, 2010
|
$ | 100,000 | ||
|
June
15, 2010
|
$ | 100,000 | ||
|
July
15, 2010
|
$ | 150,000 | ||
|
August
15, 2010
|
$ | 150,000 | ||
|
September
15, 2010
|
$ | 250,000 | ||
|
October
15, 2010
|
$ | 200,000 | ||
|
November
15, 2010
|
$ | 200,000 | ||
|
Total
|
$ | 1,200,000 | ||
