[Letterhead of The Xxxxxxxxx Group, Inc.]
December 3, 1998
Board of Directors
Paradise Music & Entertainment, Inc.
00 Xxxx 00xx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
Gentlemen:
Re: Purchase of $2 million of Registered and Unrestricted Common Stock.
This letter contains a general recitation of the material business terms to be
incorporated into any definitive common stock subscription agreement(s) (the
"Definitive Agreement(s)") which we agree to negotiate, in good faith, pursuant
to which we have agreed to purchase, for the benefit of our clients, $2 million
in registered and unrestricted securities of Paradise Music & Entertainment,
Inc. ("Paradise"). This letter sets forth our mutual intent and understanding,
but is not meant to be binding upon either party (except for Sections 3(a) and
(b) which shall be binding) unless and until we both execute and deliver a
Definitive Agreement covering the subject matter discussed below. If either
party decides that it no longer wishes to pursue the transaction contemplated
hereunder for any reason, such terminating party shall give the other party
prompt written notice to such effect. We presently contemplate that the
Definitive Agreement will cover the following material terms:
Section 1: Sale of $2 Million Common Stock.
(a) The Definitive Agreement will provide that the Company, a Delaware
corporation, will sell us $2 million in common stock ("Equity") at a price of
$1.00 per share on such terms set forth in the term sheet annexed hereto which
is incorporated herein by reference with the same force and effect as if recited
here in its entirety. The Equity shall be denominated in such increments and in
the names of the investors as we otherwise direct. The Equity will be sold to
certain investors we represent pursuant to an exemption under Section 4(2) of
the Securities Act of 1933, as amended (the "Act"). As soon as we provide you
with the names of the subscribers, the amounts of their subscriptions, their
addressees and social security numbers, and their subscriptions for $2 million
(with an initial funding of $500,000) you will promptly file a registration
statement on Form S-3 relating to the Equity being sold hereunder.
(b) We agree to use our best efforts to cause the first $500,000 of
subscriptions (the "Initial Subscriptions") to be funded on or before December
4, 1998, but you acknowledge and understand that we cannot guaranty with any
certainty, the date of such first funding. In the event that we have not funded
the Initial Subscriptions on or before December 15, 1998, you reserve the right
to terminate this Agreement. We agree to fund the remaining $1.5 million in
Equity subscriptions (the "Remaining Equity Subscriptions") promptly upon the
effective date of the registration statement relating to the Equity.
(c) In the event that the S-3 registration statement relating to the $2
million in Equity is not effective by the 90th day after its filing with the
Securities Exchange Commission, we reserve the right to (i) put back to the
Company at a price of $1.00 per share the Equity represented by the Initial
Subscriptions, and (ii) cancel all Remaining Equity Subscriptions.
Section 2: Employment Agreements and Board Representation. As a condition to
funding the Equity, a letter agreement in the form annexed hereto must be
executed by each of Messrs. Xxxxxxxx, Xxxxx, and Xxxxx and the current Board of
Directors must deliver resolutions in the form annexed hereto.
Section 3: Miscellaneous.
(a) The parties represent, warrant and covenant to each other that no
party is entitled to any broker's or finder's fee in connection with the
transaction contemplated hereby. Paradise (and each of its executive officers
and directors, regardless of whether they are executing counterparts of this
letter), agree that they will not, jointly or severally, undertake or engage in
any discussions or negotiations with any third party or otherwise solicit
interest with respect to the sale or financing of Paradise, its assets, its
businesses, or any transaction involving the sale of all or substantially all of
the stock or assets of Paradise, or any other arrangement or understanding which
would adversely effect the ability of Paradise to consummate the transaction as
contemplated hereunder or diminish the worth of its business or assets in any
way for a period of five (5) months from the date of the execution of this
letter agreement.
(b) The parties agree that they shall not issue any press releases or make
any public statements relating to the execution of this letter, or the
transactions contemplated hereby without first receiving the consent of the
other party hereto, such consent not to be unreasonably withheld. The content of
any such press release or statement shall be subject to the reasonable prior
review and comment by the other party and their counsel.
(c) Except as set forth in the attached term sheet, the parties agree to
bear all of their respective expenses in connection herewith and in consummating
the transactions contemplated hereby.
(d) This letter (including the term sheet annexed hereto) sets forth the
entire agreement among the parties with respect to the subject matter hereof,
and supersedes all prior consistent and inconsistent agreements, written or
oral, with respect thereto.
(e) This letter may be amended, modified, superseded, canceled, renewed or
extended, and the terms and conditions hereof may be waived, only by a written
instrument signed by each of the parties hereto, or in the case of a waiver,
signed by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
(f) This letter shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to principles of conflicts
of law.
(g) This letter is not assignable except by operation of law or as
specifically set forth herein.
(h) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person or persons
may required.
(i) This letter may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
If the above is satisfactory to you and adequately reflects our understanding,
please acknowledge by executing in the space below provided.
2
THE XXXXXXXXX GROUP, INC..
By: /s/ Xxxx Xxxxxxxxxx
-------------------------------
Xxxx Xxxxxxxxxx, President
AGREED TO AND ACCEPTED BY:
PARADISE MUSIC & ENTERTAINMENT, INC.
By: /s/ Xxxx Xxxxxxxx
-------------------------------
Name: Xxxx Xxxxxxxx
Title: President
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Private Placement of
$2 Million in Common Stock (the "Equity")
to
Certain Clients of The Xxxxxxxxx Group, Inc. ("Investors")
by
Paradise Music & Entertainment, Inc. ("Paradise")
--------------------------------------------------------------------------------
Term Sheet
--------------------------------------------------------------------------------
Equity: $2,000,000 in unrestricted Common Stock at the price at a
price of $1.00 per share (the "Equity") issued pursuant to
Section 4(2) of the Securities Act of 1933.
Board Reps: Investors to gain three (3) Board Representatives with full
voting rights.
Closing and Initial Subscription of $500,000 on December 1, 1998 (or as
Funding: soon thereafter as practicable) with filing thereafter at the
earliest practicable opportunity of an S-3 registration
statement registering the shares underlying the full $2
million in Equity such that, upon registration, the full $2
million in Equity will be freely tradable and unrestricted;
The Remaining Equity Subscription balance of $1,500,000 will
be funded on the effective date of the S-3 registration
statement. In the event that the S-3 registration statement
relating to the $2 million in Equity is not effective by the
90th day after its filing with the Securities Exchange
Commission, you reserve the right to (i) put back to the
Company at a price of $1.00 per share the Equity represented
by the Initial Subscriptions, and (ii) cancel all Remaining
Equity Subscriptions.
-1-
Use Of Proceeds: (a) up to $750,000 in trade and other short-term payables
booked as of November 20, 1998;
(b) $200,000 production advance to Blessid Union of Souls (in
fulfillment of existing contract terms);
(c) Up to $100,000 production/licensing advance for a Xxxxx
Xxxx solo album;
(d) funding of PUSH Records at an SG&A budget of $75,000 for
December, 1998, $100,000 for January, 1999, and $125,000 for
February of 1999;
(e) funding of various marketing expenses related to PUSH
Record's existing and planned releases in the amount of
$200,000 for the period beginning November 15, 1998 and
ending January 31, 1999; and
(f) balance for Paradise Music and subsidiaries working
capital.
Legal and Company to pay up to $10,000 of Investors' transaction costs;
Accounting Fees: The Company to bear the costs of outside counsel in preparing
the transaction documents and S-3 registration statement.
Xxxxx's o Paradise agrees to "no shopping" of deal for five months
Conditions: from date of execution of the letter agreement to which
this Term Sheet is annexed.
o Subject at all times to final terms, due diligence and
legal documentation satisfactory to in its sole and
absolute discretion.
Officers: The Investors are making the investment on the basis of the
following management team being in place prior to funding of
the Equity:
Xxxx Xxxxxxxx: Chairman and President ($25,000 per annum
stipend from Paradise) plus $225,000 base
from Rave with an earn up as per Employment
Modification Letter Agreement.
Xxxxx Xxxxx: CEO ($50,000 per annum base from Paradise
with profit sharing to be negotiated plus
$100,000 base from each of All Access and
PUSH Records with an earn up as per
Employment Modification Letter Agreement).
Xxxxxxx Xxxxx: Chief Operating Officer ($50,000 from
Paradise per annum plus $100,000 base from
each of All Access and PUSH with an earn up
as per Employment Modification Letter
Agreement).
Xxxxxx Xxxxx: Chief Financial Officer and VP of
Acquisitions ($100,000 per annum base (with
all benefits to which other executive
officers are entitled, as a consultant for
the first six months from Paradise with
profit sharing and future salary to be
negotiated).
-2-
The Investors believe that the record label is an integral
component of Paradise and to incentivize the executives and
employees thereof, Paradise must issue an additional 180,000
shares of common stock to each of Messrs. Xxxxx and Xxxxx
(payable into a deferred compensation plan or as otherwise
directed by such executives), and the Board must adopt a
compensation plan pursuant to which key employees of
Paradise will receive an allocation of up to 5% of the
issued and outstanding shares of Paradise in the form of
restricted stock awards under a deferred compensation plan,
all to be awarded as the Board deems appropriate over
calendar year 1999.
-3-
