AGREEMENT
CONCERNING THE EXCHANGE OF COMMON STOCK
AMONG
PRIDE AUTOMOTIVE GROUP, INC.
DIGITAL MAFIA ENTERPRISES, LLC
and
THE SHAREHOLDERS OF DIGITAL MAFIA ENTERPRISES, LLC
TABLE OF CONTENTS
Page No.
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ARTICLE 1-- EXCHANGE OF SECURITIES 1
1.1-- Issuance of Shares 1
1.2-- Exemption from Registration 1
ARTICLE 2-- REPRESENTATIONS AND WARRANTIES OF DME 2
2.1-- Organization 2
2.2-- Capital 2
2.3-- Subsidiaries 2
2.4-- Directors and Officers 2
2.5-- Financial Statements 2
2.6-- Investigation of Financial Condition 3
2.7-- Compliance with Laws 3
2.8-- Litigation 3
2.9-- Authority 3
2.10-- Ability to Carry Out Obligations 4
2.11-- Full Disclosure 4
2.12-- Material Contracts 4
2.13-- Indemnification 4
2.14-- Transactions with Officers and Directors 4
2.15-- Background of Officers and Directors 5
2.16-- Employee Benefits 6
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF PRIDE
AUTOMOTIVE GROUP 6
3.1--Organization 6
3.2-- Capital 6
3.3-- Subsidiaries 6
3.4-- Directors and Officers 6
3.5-- Financial Statements 6
3.6-- Absence of Changes 7
3.7-- Absence of Undisclosed Liabilities 7
3.8-- Tax Returns 7
3.9-- Investigation of Financial Condition 7
3.10-- Trade Names and Rights 7
3.11-- Compliance with Laws 7
3.12-- Litigation 8
3.13-- Authority 8
3.14-- Ability to Carry Out Obligations 8
3.15-- Validity of Pride Automotive Group Shares 8
3.16-- Full Disclosure 8
3.17-- Assets 9
3.18-- Material Contracts 9
ARTICLE 4-- REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS 9
4.1-- Share Ownership 9
4.2-- Investment Intent 9
4.3-- Indemnification 10
4.4-- Legend 10
ARTICLE 5-- COVENANTS 11
5.1-- Investigative Rights 11
5.2-- Conduct of Business 11
ARTICLE 6 -- CONDITIONS PRECEDENT TO PRIDE AUTOMOTIVE
GROUP'S PERFORMANCE 11
6.1-- Conditions 11
6.2-- Accuracy of Representations 11
6.3-- Performance 12
6.4-- Absence of Litigation 12
6.5-- Acceptance by DME Shareholders 12
6.6-- Officer's Certificate 12
6.7-- Opinion of Counsel to DME 12
ARTICLE 7-- CONDITIONS PRECEDENT TO DME'S PERFORMANCE 13
7.1-- Conditions 13
7.2-- Accuracy of Representations 13
7.3-- Performance 14
7.4-- Absence of Litigation 14
7.5-- Current Status 14
7.6-- Directors of Pride Automotive Group 14
7.7-- Officers of Pride Automotive Group 14
7.8-- Cash Assets 14
7.9-- Officer's Certificate 14
7.10-- Opinion of Counsel 14
ARTICLE 8-- CLOSING 16
8.1 -- Closing 16
ARTICLE 9 -- MISCELLANEOUS 17
9.1-- Captions and Headings 17
9.2-- No Oral Change 17
9.3-- Non-Waiver 17
9.4-- Entire Agreement 17
9.5-- Choice of Law 17
9.6-- Counterparts 17
9.7-- Notices 17
9.8-- Brokers 18
9.9-- Binding Effect 18
9.10-- Mutual Cooperation 18
9.11-- Announcements 19
9.12-- Expenses 19
9.13-- Survival of Representations and Warranties 19
9.14-- Exhibits 19
Signatures 19
EXHIBITS
Allocation of DME Shares Exhibit 1.1
Directors and Officers of DME Exhibit 2.4
DME Financial Statements Exhibit 2.5
Material Contracts Exhibit 2.12
Directors and Officers of Pride Automotive Group Exhibit 3.4
Pride Automotive Group November 30, 1998
Report on Form 10-KSB
AGREEMENT
AGREEMENT, made as of the 30th day of March, 1999, by and among Pride
Automotive Group, Inc., a Delaware corporation ("Pride Automotive Group"),
Digital Mafia Enterprises, LLC, a New Jersey Limited Liability Corporation
("DME") and the shareholders of DME, Inc.
(the "Shareholders").
WHEREAS, Pride Automotive Group desires to acquire all of the issued
and outstanding shares and/or membership interests of DME, in exchange for an
aggregate of 14,800,000 authorized but unissued shares of the common stock,
$.001 par value, of Pride Automotive Group (the "Exchange Stock"); and
WHEREAS, the Shareholders desire to exchange their DME shares for the
Exchange Stock as set forth herein; and
WHEREAS, DME desires to assist Pride Automotive Group in a business
combination which will result in the Shareholders of DME owning approximately
66% of the then issued and outstanding shares of Pride Automotive Group's Common
Stock and Pride Automotive Group owning 100% of the issued and outstanding
shares of DME's Capital Stock;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
representations contained herein, the parties hereto agree as follows:
ARTICLE I
Exchange of Securities
1.1 ISSUANCE OF SHARES. Subject to all of the terms and conditions of
this Agreement, Pride Automotive Group agrees to issue to Shareholders
14,800,000 shares the Exchange Stock in exchange for all of the outstanding
shares of DME capital stock owned by the Shareholders. The Exchange Stock will
be issued directly to the Shareholders of DME on the Closing Date, subject to
the tender of their respective DME stock certificates to Pride Automotive Group,
duly endorsed in blank.
1.2 EXEMPTION FROM REGISTRATION. The parties hereto intend that the
Common Stock to be issued by Pride Automotive Group to the Shareholders shall be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Act") pursuant to Section 4(2) of the Act and the rules and
regulations promulgated thereunder.
ARTICLE 2
Representations and Warranties of DME
dme AND Darien Dash (Darien Dash ["Dash"] being hereinafter referred to as the
"Principal Shareholder") represents to Pride Automotive Group that:
2.1 ORGANIZATION. DME is a corporation duly organized and validly
existing and in good standing under the laws of New Jersey and has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, and is duly qualified to do business and is in good standing
in each of the states where its business requires qualification.
2.2 CAPITAL. The authorized capital stock of DME is as set forth on the
annexed exhibit 2.2, a copy of which is annexed hereto and made a part hereof.
The shares currently outstanding are owned by the Shareholders of DME as set
forth in Exhibit 2.1 hereto. All of the issued and outstanding shares of DME are
duly and validly issued, fully paid, and non-assessable. There are no
outstanding subscriptions, options, rights, warrants, debentures, instruments,
convertible securities, or other agreements or commitments obligating DME to
issue or to transfer from treasury and additional shares of its capital stock of
any class.
2.3 SUBSIDIARIES. As of the date of this Agreement, DME does not have
any subsidiaries or own any interest in any other enterprise.
2.4 (a) DIRECTORS AND OFFICERS. Exhibit 2.4 to this Agreement, the text
of which is incorporated herein by reference, contains the names and titles of
all directors and officers of DME as of the date of this Agreement.
2.5 (b) FINANCIAL STATEMENTS. The current DME audited financial
statements as of December 31, 1998, which are annexed hereto as Exhibit 2.5 and
have been delivered to Pride Automotive Group prior to the Closing, are
complete, accurate and fairly present the financial condition of DME as of the
date thereof and the results of operations for the period then ended. Since
December 31, 1998, the business of DME has been operated only in the normal
course.
There are no material liabilities, either fixed or contingent, not reflected in
such financial statements other than contracts or obligations in the ordinary
and usual course of business; and no such contracts or obligations in the usual
course of business constitute liens or other liabilities which, if disclosed,
would materially alter the financial condition of DME as reflected in such
financial statements. The financial statements of DME are incorporated herein by
reference and deemed to be a part hereof.
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2.6 INVESTIGATION OF FINANCIAL CONDITION. Without in any manner
reducing or otherwise mitigating the representations contained herein, Pride
Automotive Group and/or its attorneys shall have the opportunity to meet with
accountants and attorneys of DME to discuss the financial condition of DME. DME
shall make available to Pride Automotive Group and/or its attorneys all books
and records of DME. If the transaction contemplated hereby is not completed, all
documents received by Pride Automotive Group and/or its attorneys shall be
returned to DME and all information so received shall be treated as
confidential.
2.7 COMPLIANCE WITH LAWS. DME has complied with and are not in
violation of applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the operation of its
business. All Federal and State income tax returns required to be filed by DME
have been filed and all required taxes have been paid or an adequate reserve
therefor has been established in the financial statements. DME's tax returns
have not been audited by any authority empowered to do so.
2.8 LITIGATION. Neither DME nor Dash is a party to any suit, action,
arbitration or legal, administrative or other proceeding, or governmental
investigation pending or, to the best knowledge of DME and the Principal
Shareholder, threatened against or affecting DME or Dash, their assets or
financial condition, except for matters which would not have a material effect
on DME , Dash or their respective properties. Neither DME nor Dash is in default
with respect to any order, write, injunction or decree of any federal, state,
local or foreign court, department, agency or instrumentality applicable to it.
Neither DME nor Dash is engaged in any lawsuits to recover any material amount
of moneys due to DME or Dash.
2.9 AUTHORITY. The Board of Directors of DME has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and upon obtaining any necessary shareholder approval DME
will have full power and authority to execute, deliver and perform this
Agreement and this Agreement will be a legal, valid and binding obligation of
DME, enforceable in accordance with its terms and conditions, except as may be
limited by bankruptcy and insolvency laws and by other laws affecting the rights
of creditors generally.
2.10 ABILITY TO CARRY OUT OBLIGATIONS. The execution and delivery of
this Agreement by DME and the performance by DME of its obligations hereunder in
the time and manner contemplated will not cause, constitute or conflict with or
result in (a) any breach or violation of any of the provisions of or constitute
a default under any license, indenture, mortgage, charger, instrument, articles
of incorporation, by-laws, or other agreement or instrument to which DME or Dash
is a party or by which either party may be bound, nor will any consents or
authorizations of any party other than those hereto be required; (b) an event
that would permit any party to any agreement or instrument, to terminate it or
to accelerate the maturity of any indebtedness or other obligation of DME or
Dash; or (c) an event that would result in the creation or imposition of any
lien, charge, or encumbrance on any asst of DME or Dash.
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2.11 FULL DISCLOSURE. None of the representations and warranties made
by DME and the Principal Shareholder herein, or in any exhibit, certificate or
memorandum furnished or to be furnished by DME, or on its behalf, contains or
will contain any untrue statement of material fact, or omit any material fact,
the omission of which would be misleading.
2.12 MATERIAL CONTRACTS. Neither DME nor Dash has any material
contracts to which either is a party or by which they are bound, except for
those agreements set forth ont he annexed hereto as Exhibit 2.12.
2.13 INDEMNIFICATION. DME and the Principal Shareholder agree to defend
and hold harmless Pride Automotive Group, its officers and directors against and
in respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest, penalties
and reasonable attorney's fees, that it shall incur or suffer, which arise out
of, result from or relate to any breach of or failure by DME to perform any of
its respective representations, warranties, covenants and agreements in this
Agreement or in any exhibit or other instrument furnished or to be furnished by
DME under this Agreement.
2.14 TRANSACTIONS WITH OFFICERS AND DIRECTORS. Except as otherwise
disclosed in DME's financial statements dated December 31, 1998 and delivered to
Pride Automotive Group, there have been, and through the date of Closing there
will be (1) no bonuses or unusual compensation to any of the officers or
directors of DME; (2) no loans, leases or contracts made to or with any of the
officers or directors of DME; (3) no dividends or other distributions declared
or paid by DME; and (4) no purchases by DME of any of its capital shares.
2.15 BACKGROUND OF OFFICERS AND DIRECTORS. During the past five year
period, no officer or director of DME has been the subject of:
(a) A petition under the Federal Bankruptcy laws or any other
insolvency law or has a receiver, fiscal agent or similar officer been appointed
by a court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time or such
filing, or any corporation or business association of which he was an executive
officer at or within two years before the time of such filing;
(b) A conviction in a criminal proceeding or a named subject
of a pending criminal proceeding (excluding traffic violations and other minor
offenses);
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(c) Any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining him from, or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant,
introducing broker, commodities trading advisor, commodity pool operator, floor
broker, leverage transaction merchant, any other person regulated by the United
States Commodity Futures Trading Commission or an associated person of any of
the foregoing, or as an investment advisor, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, or engaging in
or continuing any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the
purchase and sale of any security or commodity or in connection with any
violation of Federal, State or other securities law or commodities law.
(d) Any order, judgment, decree, not subsequently reversed,
suspended or vacated, of any Federal, State or local authority barring,
suspending, or otherwise limiting for more than 60 days the right of such person
to engage in any activity descried in the preceding sub- paragraph, or to be
associated with persons engaged in any such activity;
(e) a finding by any court of competent jurisdiction in a
civil action or by the United States Securities and Exchange Commission to have
violated any securities law, and the judgment in such civil action or finding by
such Commission has not been subsequently reversed, suspended or vacated; or
(f) a finding by any court of competent jurisdiction in a
civil action or by the United States Commodity Futures Trading Commission to
have violated any commodities law, and the judgment in such civil action or
finding by such Commission has not been subsequently reversed, suspended or
vacated.
2.16 EMPLOYEE BENEFITS. DME does not have any pension plan, profit
sharing or similar employee benefit plan.
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ARTICLE 3
Representations and Warranties of Pride Automotive Group
Pride Automotive Group represents and warrants to DME that:
3.1 ORGANIZATION. Pride Automotive Group is a corporation duly
organized, validly existing and in good standing under the laws of Delaware, and
has all necessary corporate powers to own properties and to carry on business.
3.2 CAPITAL. The authorized capital stock of Pride Automotive Group
consists of 10,000,000 shares of Common Stock, par value $.001 per share and
2,000,000 shares of Preferred Stock, par value $.01 per share, which may be
issued in one or more series at the discretion of the board of directors. As of
the date of this Agreement, there were 2,822,500 shares of Common Stock
outstanding, all of which were fully paid and non-assessable. Except for the
Options owned by those persons identified in the Report on Form 10-KSB of Pride
Automotive Group for the year ended November 31, 1998, the Underwriters'
Warrants issued in connection with Pride Automotive Group's initial public
offering and the 1,300,000 Warrants which were sold in the Pride Automotive
Group initial offering, there are no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments obligating
Pride Automotive Group to issue or to transfer from treasury any additional
shares of its capital stock of any class.
3.3 SUBSIDIARIES. Pride Automotive Group does not have any subsidiaries
or own any interest in any other enterprise (whether or not such enterprise is a
corporation) except for those entities identified on Exhibit 3.3, annexed hereto
and made a part hereof. Notwithstanding the foregoing, Pride Automotive Group
has agreed to sell its interest in PMS and in Automotive to Pride, Inc. for the
sum of $1.00 at the Closing of this transaction.
3.4 DIRECTORS AND OFFICERS. Exhibit 3.4, annexed hereto and hereby
incorporated herein by reference, contains the names and titles of all directors
and officers of Pride Automotive Group as of the date of this Agreement. All of
such officers and directors shall resign at the Closing.
3.5 FINANCIAL STATEMENTS. Exhibit 3.5, annexed hereto and incorporated
herein by reference, consists of the Pride Automotive Group audited financial
statements as of November 30, 1998.
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3.6 CHANGES SINCE NOVEMBER 30, 1998. Since November 30, 1998, there has
been a change in the financial condition and operations of Pride Automotive
Group, to the extent that its PMS subsidiary has sold the majority of its
leasing assets, has agreed to sell its interest in PMS and Automotive for $1.00
and has generally discontinued active business operations.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. As of September 30, 1991, Pride
Automotive Group did not have any material debt, liability, or obligation of any
nature, whether accrued, absolute, contingent, or otherwise, and whether due or
to become due, that is not reflected in Pride Automotive Group's balance sheet
as of November 30, 1998. There have been no new liabilities incurred since
November 30, 1998, except for those incurred in the ordinary course of business
and in connection with this transaction.
3.8 TAX RETURNS. Within the times and in the manner prescribed by law,
Pride Automotive Group has filed all federal, state and local tax returns
required by law and has paid all taxes, assessments and penalties due and
payable. The provisions for taxes, if any, reflected in the balance sheet
included in Exhibit 3.5 is adequate for any and all federal, state, county and
local taxes for the period ending on the date of such balance sheet and for all
prior periods, whether or not disputed. There are no present disputes as to
taxes of any nature payable by Pride Automotive Group.
3.9. INVESTIGATION OF FINANCIAL CONDITION. Without in any manner
reducing or otherwise mitigating the representations contained herein, DME shall
have the opportunity to meet with Pride Automotive Group's accountants and
attorneys to discuss the financial condition of Pride Automotive Group. Pride
Automotive Group shall make available to DME all books and records of Pride
Automotive Group.
3.10 TRADE NAMES AND RIGHTS. Pride Automotive Group does not use any
trademark, service xxxx, trade name, or copyright in its business, or own any
trademarks, trademark registrations or applications. To the best knowledge of
Pride Automotive Group, no person owns any trademark, trademark registration or
application, service xxxx, trade name, copyright, or copyright registration or
application the use of which is necessary or contemplated in connection with the
operation of Pride Automotive Group's business. 3.11 COMPLIANCE WITH LAWS. Pride
Automotive Group has complied with and is not in violation of applicable
federal, state or local statutes, laws or regulations (including, without
limitation, any applicable building, zoning, securities or other law, ordinance,
or regulation) affecting its properties or the operation of its business.
3.12 LITIGATION. Pride Automotive Group is not a party to any suit,
action, arbitration, or legal, administrative, or other proceeding, or
governmental investigation pending or, to the best knowledge of Pride Automotive
Group, threatened against or affecting Pride Automotive
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Group or its business, assets or financial condition, except for litigation in
the amount of $95,000 relating to the non-payment of an overdue promissory note.
Pride Automotive Group also in default with respect to an additional $1,615,000
of notes and owes non-trade debt of approximately $364,000, which debt shall be
satisfied at the Closing by the issuance of 728,000 shares of common stock.
Pride Automotive Group shall additionally offer holders of said $1,700,000 of
overdue notes the right to convert same to 3,400,000 shares of common stock on
or before the Closing. Pride Automotive Group is not engaged in any legal action
to recovery moneys due to it.
3.13 AUTHORITY. The Board of Directors and Shareholders of Pride
Automotive Group have authorized the execution of this Agreement and the
transactions contemplated herein, and Pride Automotive Group has full power and
authority to execute, deliver and perform this Agreement and this Agreement is
the legal, valid and binding obligation of Pride Automotive Group, is
enforceable in accordance with its terms and conditions, except as may be
limited by bankruptcy and insolvency laws and by other laws affecting the rights
of creditors generally.
3.14 ABILITY TO CARRY OUT OBLIGATIONS. The execution and delivery of
this Agreement by Pride Automotive Group and the performance by Pride Automotive
Group of its obligations hereunder will not cause, constitute, or conflict with
or result in (a) any breach or violation of any of the provisions of or
constitute a default under any license, indenture, mortgage, charter,
instrument, articles of incorporation, by-laws, or other agreement or instrument
to which Pride Automotive Group is a party, or by which it may be bound, nor
will any consents or authorizations of any party other than those hereto be
required; (b) an event that would permit any party to any agreement or
instrument to terminate it or to accelerate the maturity of any indebtedness or
other obligation of Pride Automotive Group; or (c) an event that would result in
the creation or imposition of any lien, charge, or encumbrance on any asset of
Pride Automotive Group.
3.15 VALIDITY OF PRIDE AUTOMOTIVE GROUP SHARES. The shares of Pride
Automotive Group Common Stock to be delivered pursuant to this Agreement, when
issued in accordance with the provisions of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable.
3.16 FULL DISCLOSURE. None of the representations and warranties made
by Pride Automotive Group herein, or in any exhibit, certificate or memorandum
furnished or to be furnished by Pride Automotive Group, or on its behalf,
contains or will contain any untrue statement of material fact, or omit any
material fact, the omission of which would be misleading.
3.17 ASSETS. Pride Automotive Group has good and marketable title to
all of its property free and clear of any and all liens, claims and
encumbrances, except as disclosed in its financial statements.
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3.18 MATERIAL CONTRACTS. Except as otherwise disclosed in this
Agreement and in its Report on Form 10-KSB for the period ended November 30,
1998, Pride Automotive Group has no material contracts to which it is a party or
by which it is bound.
ARTICLE 4
Representations and Warranties of Shareholders
4.1 SHARE OWNERSHIP. Each Shareholder represents that he holds shares
of DME's common stock as set forth in Exhibit 2.2 hereof, and that such shares
are owned of record and beneficially by such shareholder, and such shares are
not subject to any lien, encumbrance or pledge, and are restricted securities as
defined in Rule 144 of the Securities Act of 1933. Each Shareholder severally
represents that he holds authority to exchange his shares pursuant to this
Agreement.
4.2 INVESTMENT INTENT. Each Shareholder understands and acknowledges
that the shares of Exchange Stock are being offered for exchange in reliance
upon the exemption provided in Section 4(2) of the Securities Act of 1933 for
non-public offerings; and each Shareholder makes the following representations
and warranties with the intent that same may be relied upon in determining the
suitability of each such shareholder as a purchaser of securities:
(a) Each such Shareholder acknowledges that the Exchange Stock
being acquired solely for the account of such Shareholder, for investment
purposes only, and not with a view towards or for sale in connection with any
distribution thereof, and with no present intention of distributing or
re-selling any part of the Exchange Stock;
(b) Each Shareholder agrees not to dispose of his Exchange
Stock, or any portion thereof unless and until counsel for Pride Automotive
Group shall have determined that the intended disposition is permissible and
does not violate the Securities Act of 1933 or any applicable state securities
laws, or the rules and regulations thereunder;
(c) Each Shareholder acknowledges that Pride Automotive Group
has made all documentation pertaining to all aspects of the herein transaction
available to him and to his qualified representatives, if any, and has offered
such person or persons an opportunity to discuss such transaction with the
officers of Pride Automotive Group.
(d) Each Shareholder represents that he has relied solely upon
Pride Automotive Group's Report on Form 10-KSB for the period ended November 30,
1998 and independent investigations made by such Shareholder or his
representatives, if any;
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(e) Each Shareholder represents that he is knowledgeable and
experienced in making and evaluating investments of this nature and desires to
acquire the Exchange Stock on the terms and conditions herein set forth;
(f) Each Shareholder represents that he is able to bear the
economic risk of an investment, as of result of the herein transaction, in the
Exchange Stock;
(g) Each Shareholder represents that he understands that an
investment in the Exchange Stock is not liquid, and each Shareholder represents
that he has adequate means of providing for his current needs and personal
contingencies and has no need of liquidity in this investment; and
(h) Each Shareholder represents that he is an "accredited
investor" as that term is defined in Rule 501 of Regulation D, promulgated under
the Securities Act of 1933.
4.3 INDEMNIFICATION. Each Shareholder recognizes that the offer of the
Exchange Stock to him is based upon the representations and warranties made by
such Shareholder set forth and contained herein and each Shareholder hereby
agrees to indemnify and hold harmless Pride Automotive Group against all
liability, costs or expenses (including reasonable attorney's fees) arising as a
result of any misrepresentations made herein by such Shareholder.
4.4 LEGEND. Each Shareholder agrees that the certificates evidencing
the Exchange Stock acquired pursuant to this Agreement will have a legend placed
thereon stating that the securities have not been registered under the Act or
any state securities laws and setting forth or referring to the restrictions on
transferability and sale of such securities.
ARTICLE 5
Covenants
5.1 INVESTIGATIVE RIGHTS. From the date of this Agreement until the
Closing date, Pride Automotive Group and DME shall provide to each other, and
such other party's counsels, accountants, auditors and other authorized
representatives, full access during during normal business hours and upon
reasonable advance written notice of each party's properties, books, contracts,
commitments and records for the purpose of examining the same. Each party shall
furnish the other party with all information concerning each party's affairs as
the other party may reasonably request.
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5.2 CONDUCT OF BUSINESS. Prior to the Closing, Pride Automotive Group
and DME shall each conduct its business in the normal course, and shall not
sell, pledge, or assign any assets, without the prior written approval of the
other party except in the regular course of business or as part of the
transactions contemplated hereby. Neither Pride Automotive Group nor DME shall
amend its Articles of Incorporation or By-laws, declare dividends, redeem or
sell stock or other securities, incur additional or newly funded liabilities,
acquire or dispose of fixed assets, change employment terms, enter into any
material or long term contract, guarantee obligations of any third party, settle
or discharge any balance sheet receivable for less than its stated amount, pay
more on any liability than its stated amount, or enter into any other
transaction other than in the regular course of business.
ARTICLE 6
Conditions Precedent to Pride Automotive Group's Performance
6.1 CONDITIONS. Pride Automotive Group's obligations hereunder shall be
subject to the satisfaction, at or before the Closing, of all the conditions set
forth in this Article 6. Pride Automotive Group may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that no
such waiver of a condition shall constitute a waiver by Pride Automotive Group
of any other condition or of any of Pride Automotive Group's other rights or
remedies, at law or in equity, if DME or the Shareholders shall be in default of
any of their representations, warranties or covenants under this Agreement.
6.2 ACCURACY OF REPRESENTATIONS. Except as otherwise permitted by this
Agreement, all representations and warranties by Shareholders and DME in the
Agreement or in any written statement that shall be delivered to Pride
Automotive Group by DME under this Agreement shall be true and accurate on and
as of the Closing Date as though made at that time.
6.3 PERFORMANCE. DME shall have performed, satisfied, and complied with
all covenants, agreements and conditions required by this Agreement to be
performed or complied with by it, on or before the Closing Date.
6.4 ABSENCE OF LITIGATION. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against DME or Dash on or before the Closing Date.
6.5 ACCEPT BY DME SHAREHOLDERS. The holders of an aggregate of not less
than 100% of the issued and outstanding shares of common stock of DME shall have
agreed to exchange their shares for shares of the Exchange Stock.
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6.6 OFFICER'S CERTIFICATE. DME shall have delivered to Pride Automotive
Group a certificate, dated the Closing Date, and signed by the President and
Secretary of DME, certifying that each of the conditions specified in Sections
6.2 through 6.5 hereof have been fulfilled.
6.7 OPINION OF COUNSEL TO DME. DME shall have delivered to Pride
Automotive Group an opinion of its counsel, dated the Closing Date, to the
effect that:
(a) DME is a corporation duly organized, validly existing and
in good standing under the laws of the State of New Jersey and has the corporate
power and is duly authorized, qualified, franchised and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to own
all of its properties and assets and to carry on its business in all material
respects as it is now being conducted, including qualification to do business as
a foreign corporation in the states in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification;
(b) To the best knowledge of such legal counsel, the execution
and delivery by DME of this Agreement and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not
conflict with or result in the breach of any term or provision of DME's
certificate of incorporation or by-laws or constitute a default or give rise to
a right of termination, cancellation or acceleration under any material
mortgage, indenture, deed of trust, license agreement or other obligation, or
violate any court order, writ, injunction or decree applicable to DME,or their
properties or assets;
(c) The authorized capital stock of DME is as set forth on the
annexed exhibit 21.2, a copy of which is annexed hereto and made a part hereof.
All issued and outstanding shares are legally issued pursuant to an exemption
from registration under Federal and State securities laws, are fully paid and
non-assessable and not issued in violation of the preemptive rights of any
person. There are no other outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements or commitments obligating DME to
issue any additional shares of any class of its capital stock.
(d) This Agreement has been duly and validly authorized,
executed and delivered and constitutes the legal and binding obligation of DME,
except as limited by bankruptcy and insolvency laws and by other laws affecting
the rights of creditors generally; and
(e) To the best knowledge of such counsel, there are no
actions, suits or proceedings pending or threatened by or against DME or Dash,
or affecting DME or Dash or their properties, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind.
12
ARTICLE 7
Conditions Precedent to
DME's and Shareholder's Performance
7.1 CONDITIONS. DME's and Shareholders' obligations hereunder shall be
subject to the satisfaction, at or before the Closing, of all the conditions set
forth in this Article 7. DME and Shareholders may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that no
such waiver of a condition shall constitute a waiver by DME and Shareholders of
any other condition or of any of DME's and Shareholders' rights or remedies, at
law or in equity, if Pride Automotive Group shall be in default of any of its
representations, warranties or covenants under this Agreement.
7.2 ACCURACY OF REPRESENTATIONS. Except as otherwise permitted by this
Agreement, all representations and warranties by Pride Automotive Group in this
Agreement or in any written statement that shall be delivered to DME and
Shareholders by Pride Automotive Group under this Agreement shall be true and
accurate on and as of the Closing Date as though made at that time.
7.3 PERFORMANCE. Pride Automotive Group shall have performed,
satisfied, and complied with all covenants, agreements and conditions required
by the Agreement to be performed or complied with by it, on or before the
Closing Date.
7.4 ABSENCE OF LITIGATION. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against Pride Automotive Group on or before the Closing
Date, except as disclosed herein.
7.5 CURRENT STATUS. Pride Automotive Group shall have prepared and
filed with the Securities and Exchange Commission its Annual Report on Form
10-KSB for the period ended November 30, 1998.
7.6 DIRECTORS OF PRIDE AUTOMOTIVE GROUP. Effective on the Closing,
Pride Automotive Group shall cause persons nominated by DME to be elected to the
Board of Directors. All of the current Officers and Directors of Pride
Automotive Group shall have submitted their resignations as Directors and
Officers of Pride Automotive Group effective on the Closing of this transaction.
7.7 OFFICE OF PRIDE AUTOMOTIVE GROUP. Effective on the Closing DME
shall have elected new officers of Pride Automotive Group to consist of the
following persons:
13
President and Treasurer
Secretary
Vice-President
7.8 CONVERSION OF DEBT. At the Closing, Pride Automotive Group shall
have debt to noteholders of not more than $400,000, with the remainder of such
notes being converted to shares of common stock as set forth herein.
7.9 OFFICERS' CERTIFICATE: Pride Automotive Group shall have delivered
to DME and Shareholders a certificate, dated the Closing Date and signed by the
President of Pride Automotive Group certifying that each of the conditions
specified in Sections 7.2 through 7.8 have been fulfilled.
7.10 OPINION OF COUNSEL. Pride Automotive Group shall have delivered to
Stockholders an opinion of its counsel dated the Closing Date to the effect
that:
(a) Pride Automotive Group is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(b) To the best knowledge of Counsel, the authorized
capitalization of Pride Automotive Group consists of 10,000,000 shares of common
stock, par value $.001. As of the date of this Agreement there were 2,822,500
shares of common stock issued and outstanding (exclusive of the shares to be
issued pursuant to this Agreement, to creditors and noteholders). All issued and
outstanding shares as of the date of this Agreement are legally issued, fully
paid and non-assessable and not issued in violation of the preemptive rights of
any person; and
(c) This Agreement has been duly and validly authorized,
executed and delivered and constitutes the legal and binding obligation of Pride
Automotive Group, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally.
ARTICLE 8
Closing
8.1 CLOSING. The Closing of this transaction shall be held at the
offices of Xxxxxxx, Xxxxxxx & Xxxxxxx, Esqs., 000 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, or such other place as shall be mutually agreed upon, on April
25, 1999 or such other date as shall be mutually agreed upon by the parties. At
the Closing:
14
(a) Shareholders shall present the certificates representing
their shares of DME being exchanged to Pride Automotive Group, and such
certificates will be duly endorsed with signature guaranteed;
(b) Shareholders shall receive a certificate or certificates
representing the number of shares of Pride Automotive Group Common Stock for
which the shares of DME common stock shall have been exchanged;
(c) Pride Automotive Group shall deliver an officer's
certificate, as described in Section 7.9 hereof, dated the Closing Date, that
all representations, warranties, covenants and conditions set forth in this
Agreement on behalf of Pride Automotive Group are true and correct as of, or
have been fully performed and complied with by, the Closing Date;
(d) Pride Automotive Group shall deliver an opinion of its
counsel, as described in Section 7.10 hereof, dated the Closing Date;
(e) Pride Automotive Group shall deliver a resolution of its
Board of Directors of Pride Automotive Group approving this Agreement and each
matter to be approved by the Directors of Pride Automotive Group under this
Agreement;
(f) DME shall deliver an officer's certificate, as described
in Section 6.6 hereof, dated the Closing Date, that all representations,
warranties, covenants and conditions set forth in this Agreement on behalf of
DME are true and correct as of, or have been fully performed and complied with
by, the Closing Date;
(g) DME shall deliver an opinion of its counsel, as described
in Section 6.7 hereof, dated the Closing Date;
(h) DME shall deliver resolutions of its Board of Directors
approving this Agreement and each matter to be approved by the Directors of DME
under this Agreement; and
(i) Pride Automotive Group shall deliver to Xxxxx Xxxx & Co.,
Inc. a certificate for 740,000 shares of Common Stock pursuant to Article 9.8 of
this Agreement.
ARTICLE 9
Miscellaneous
9.1 CAPTIONS AND HEADINGS. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
15
9.2 NO ORAL CHANGE. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but it can be changed by an
agreement in writing, signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
9.3 NON-WAIVER. Except as otherwise expressly provided herein, no
waiver of any covenant, condition or provision of this Agreement shall be deemed
to have been made unless expressly in writing and signed by the party against
whom such waiver is charged; and (i) the failure of any party to insist in any
one or more cases up on the performance of any of the provisions, covenants or
conditions of this Agreement or to exercise any option herein contained shall
not be construed as a waiver or relinquishment for the future of any such
provisions, covenants or conditions; (ii) the acceptance of performance of
anything required by this Agreement to be performed with knowledge of the breach
of failure of a covenant, condition or provision hereof shall not be deemed a
waiver of such breach or failure; and (iii) no waiver by any party of one breach
by another party shall be construed as a waiver with respect to any other or
subsequent breach.
9.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings.
9.5 CHOICE OF LAW. This Agreement and its application shall be governed
by the laws of the State of New York.
9.6 COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.7 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified,
postageprepaid, and properly addressed as follows:
TO PRIDE AUTOMOTIVE GROUP, INC.:
Xx. Xxxx Xxxxxxxx, President
Pride Automotive Group, Inc.
Pride House
Watford Metro Centre, Tolpits Lane
Watford Hertfordshire
WD1 8SB England
16
TO DIGITAL MAFIA ENTERPRISES, LLC:
Mr. Darien Dash, President
Digital Mafia Entertainment, LLC
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, Xxx Xxxxxx 00000
9.8 BROKERS. The parties hereto represent and agree that Xxxxx Xxxx &
Co., Inc. has acted as a broker and consultant with respect to the aforesaid
exchange for stock and that no finder's fee has been paid or is payable by any
party hereto, except that a fee of 740,000 shares of Pride Automotive Group's
Common Stock is payable by Pride Automotive Group to Xxxxx Xxxx & Co., Inc. at
the Closing. Each of the parties hereto shall indemnify and hold the other
harmless against any and all claims, losses, liabilities or expenses which may
be asserted against it as a result of its dealings, arrangements or agreements
with any such broker or person.
9.9 BINDING EFFECT. This Agreement shall inure to and be binding up on
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
9.10 MUTUAL COOPERATION. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
9.11 ANNOUNCEMENTS. Pride Automotive Group and DME will consult and
cooperate with each other as to the timing and content of any announcements of
the transactions contemplated hereby to the general public or to employees,
customers or suppliers.
9.12 EXPENSES. Each party will pay its own legal, accounting and any
other out-of-pocket expenses reasonably incurred in connection with this
transaction, whether or not the transaction contemplated hereby is consummated.
In no event shall one party be liable for any of the expenses of the other
party.
9.13 SURVIVAL OR REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements of the parties set forth
in this Agreement or in any instrument, certificate, opinion or other writing
provided for in it, shall survive the Closing irrespective of any investigation
made by or on behalf of any party,.
17
9.14 EXHIBITS. As of the execution hereof, the parties hereto have
provided each other with the Exhibits provided for hereinabove, including any
items referenced therein or required to be attached thereto,. Any material
changes to the Exhibits shall be immediately disclosed to the other party.
WHEREFORE, the above agreement is hereby agreed to and accepted as of
the date first above written.
PRIDE AUTOMOTIVE GROUP, INC.
By: ------------------------------
Xxxx Xxxxxxxx, President
DIGITAL MAFIA ENTERPRISES, LLC
By: /s/ DARIEN DASH
----------------------
Darien Dash, President
/s/ DARIEN DASH
-------------------------
Darien Dash, CEO/Chairman
/s/ XXXXX XXXXXX
------------------------
Xxxxx Xxxxxx, Secretary
18
AMENDMENT TO AGREEMENT
CONCERNING EXCHANGE OF COMMON STOCK
This Amendment ("Amendment") is made this 17th day of June 1999 by and
between Pride Automotive Group Inc., Digital Mafia Entertainment LC, Darien Dash
and Pride, Inc.
PREAMBLE The parties to this Amendment, other than Pride, Inc., are the
parties to an Agreement Concerning Exchange of Common Stock ("Agreement") dated
as of March 30, 1999 and desire to amend the Agreement as set forth herein.
Pride Inc., a Delaware corporation, ("Parent") is the owner of in excess of 50%
of the outstanding capital stock of Pride Automotive Group and is joining in
this Amendment for the purposes provided herein.
All terms defined in the Agreement and used , but not otherwise defined
herein, will have the meanings ascribed to them in the Agreement.
NOW THEREFORE, in consideration of the mutual premises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
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4. The following sections or subsections of the Agreement are hereby
amended to read as set forth herein:
(a) "2.1 ORGANIZATION. DME is a limited liability corporation duly
organized and validly existing and in good standing under the laws of New Jersey
and has all necessary powers to own its properties and to carry on its business
as now owned and operated by it, and is duly qualified to do business and, is in
good standing in each of the states where its business requires qualification
except when the failure to do so would not have a material adverse effect on the
business of DME";
(b) "2.2 CAPITAL. The outstanding membership interests of DME are as
set forth on Exhibit 2.2, a copy of which is annexed hereto and made a part
hereof. The membership interests currently outstanding are owned by the
Shareholders of DME as set forth in Exhibit 2.2 hereto. All of the issued and
outstanding membership interests of DME are duly and validly issued, fully paid,
and non-assessable. There are no outstanding subscriptions, options, rights,
warrants, debentures, instruments, convertible securities, or other agreements
or commitments obligating DME to issue or to transfer from treasury any
additional membership interests of any class."
-2-
(c) "2.4 (a) DIRECTORS AND OFFICERS. Exhibit 2.4 to this Agreement, the
text of which is incorporated herein by reference, contains the names and titles
of all managers and officers of DME as of the date of this Agreement."
(d) "2.5 (b) FINANCIAL STATEMENTS. The DME unaudited financial
statements as of December 31, 1998, which are annexed hereto as Exhibit 2.5 and
have been delivered to Pride Automotive Group are complete, accurate and fairly
present the financial condition of DME as of the date thereof and results of
operations for the period then ended. Since December 31, 1998, the business of
DME has been operated only in the normal course."
(e) "3.2 CAPITAL. The authorized capital stock of Pride Automotive
Group consists of 10,000,000 shares of Common Stock, par value $.001 per share
and 2,000,000 shares of Preferred Stock, par value $.01 per share, which may be
issued in one or more series at the discretion of the board of directors. As of
the date of the Agreement, there were 2,822,500 shares of Common Stock
outstanding, all of which were fully paid and non-assessable. Except for the
options owned by those persons identified in the Report on Form 10-KB of Pride
Automotive Group for the year ended November 31, 1998, the Underwriters'
Warrants issued on connection with Pride Automotive Group's initial public
-3-
offering, the 2,300,000 Warrants which were sold in the Pride Automotive Group
initial offering, the Special Warrant to purchase 2,500,000 shares of Common
Stock issued to Parent ("Special Warrant") and options issued to management and
other employees and listed in Exhibit 3.2 ("Employee Options"), there are no
outstanding subscriptions, options, rights, warrants, convertible securities, or
other agreements or commitments obligating Pride Automotive Group to issue or to
transfer from treasury any additional share of its capital stock of any class as
at the date of the Agreement. Subsequent to the date of the Agreement, but prior
to the date of this Amendment, Pride Automotive Group issued the following
shares:
(a) Conversion of notes 3,000,000
(b) Conversion of other debt 728,000
(c) Private Placement 1,179,500
(d) Xxxxx Xxxx 82,594
(f) "3.5 FINANCIAL STATEMENT. Exhibit 3.5, annexed hereto and
incorporated herein by reference, consists of the Pride Automotive Group audited
financial statements as of November 30, 1998 ("Audited Financials") and the
unaudited consolidating financial statements of Pride Automotive Group as of
such date ("Consolidating Financials"). The Audited Financials are complete,
accurate and fairly present the financial condition of Pride Automotive Group
and its subsidiaries on a consolidated basis as of the dates thereof and the
results of operations for the periods then ended. There are no material
liabilities, either fixed or contingent, not reflected in the Audited
Financials. The Audited Financials are incorporated herein by reference and
deemed to be a part hereof.
-4-
The Consolidating Financials have been prepared from the Audited
Financials and are complete and accurate.
On or before closing Pride Automotive Group shall deliver to DME, a pro
forma balance sheet of Pride Automotive Group, as at the Closing, giving effect
to the transactions contemplated hereby but excluding the assets and liabilities
of DME ("Pro Forma Balance Sheet"). The Pro Forma Balance Sheet shall be
prepared in accordance with generally accepted accounting principles
consistently applied. The Pro Forma Balance Sheet shall disclose no liabilities
except for the loan from Pride Automotive Group, $190,000 notes payable (of
which $100,000 shall be compromised and paid at the closing) and $10,000 of
additional liabilities and no assets. Without limiting the generality of the
foregoing, as of the Closing date, Pride will have no known liabilities for
taxes of any kind or nature. There will be no liabilities of Pride Automotive
Group, fixed or contingent, not reflected on the Pro Forma Balance Sheet."
-5-
(g) "3.6 CHANGE SINCE NOVEMBER 30, 1998. Since November 30, 1998, there
has been no material change in this business, operations or financial condition
of Pride Automotive Group in individually or on a consolidated basis except to
the extent that its PMS subsidiary has sold the majority of its leasing assets,
and Pride Automotive Group has agreed to sell its interest in PMS and Automotive
to Parent for $1.00 and has generally discontinued active business operations.
Since November 30, 1998 and except as set forth on Exhibit 5.2 annexed hereto,
Pride Automotive Group has not incurred any liabilities or obligations on behalf
of its subsidiaries, has advanced no monies or assets to such subsidiaries, has
not guaranteed or assumed any obligations or liabilities of any such
subsidiaries and has operated its business only in the ordinary course of
business and independently of the businesses of its subsidiaries."
(h) "3.16 FULL DISCLOSURE. None of the representations and warranties
made by Pride Automotive Group or Parent herein, or in any exhibit, certificate
or memorandum furnished or to be furnished by Pride Automotive Group or Parent,
or on their respective behalf, contains or will contain any untrue statement of
material fact, or omit any material fact, the omission of which would be
misleading. Pride Automotive Group has filed all reports and other filings ("SEC
Filings") required to be filed by it with the Securities and Exchange Commission
("SEC") through the date of this Amendment. The SEC Filings are in compliance
with the rules and regulations of the SEC, are complete and accurate, and do not
contain any untrue statement of material fact or omit any material fact, the
omission of which would be misleading."
-6-
(i) "4.1 SHARE OWNERSHIP. Each Shareholder represents that he holds the
membership interest of DME?s as set forth in Exhibit 2.2 hereof, and that such
membership interest is owned of record and beneficially by such Shareholder, and
such membership interest is not subject to any lien, encumbrance or pledge, and
is a "restricted security" as defined in Rule 144 of the Securities Act of 1933.
Each Shareholder severally represents that he holds authority to exchange his
membership interest pursuant to this Agreement."
(j) "5.2 CONDUCT OF BUSINESS. Prior to the Closing, Pride Automotive
Group and DME shall each conduct its business in the normal course, and shall
not sell, pledge, or assign any assets, without the prior written approval of
the other party except in the regular course of business or as part of the
transactions contemplated hereby. Neither Pride Automotive Group nor DME shall
amend its articles of incorporation, certificate of formation, operating
agreement or by-laws, declare dividends, redeem or sell stock or other
securities, incur additional or newly funded liabilities, acquire or dispose of
fixed assets, change employment terms, enter into any material or long term
contract, guarantee obligations of any third party, settle or discharge any
balance sheet receivable for less than its stated amount, pay more on any
liability than its stated amount, or enter into any other transaction other than
in the regular course of business. From April 1, 1999 through the closing, Pride
Automotive Group will not incur any liabilities or obligations on behalf of its
subsidiaries and will not advance any monies or assets to such subsidiaries and
will not guarantee or assume any obligations or liabilities of any such
subsidiaries, except as set forth on Schedule 5.2 annexed hereto."
-7-
(k) "6.7 OPINION OF COUNSEL TO DME.DME shall have delivered to Pride
Automotive Group an opinion of its counsel, dated the Closing date, to the
effect that:
DME is a limited liability corporation duly organized,validly existing
and in good standing under the laws of the State of New Jersey and has the power
and is duly authorized, qualified, franchised and licensed under all applicable
laws, regulations, ordinances and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects as
it is now being conducted, including qualification to do business as a foreign
corporation in the states in which the character and locations of the assets
owned by it or the nature of the business transacted by it requires
qualification except where the failure to do so would not have a material
adverse effect on DME;
-8-
To the best knowledge of such legal counsel, the execution and delivery
by DME of this Agreement and the consummation of the transactions contemplated
by this Agreement in accordance with the terms hereof will not conflict with or
result in the breach of any term or provision of DME's Certificate of Formation
or Operating Agreement or constitute a default or give rise to a right of
termination, cancellation or acceleration under any material mortgage,
indenture, deed of trust, license agreement or other obligation, or violate any
court order, writ, injunction or decree applicable to DME, or its properties or
assets;
The authorized capital of DME is as set forth on the annexed Exhibit
2.2, a copy of which is annexed hereto and made a part hereof. All issued and
outstanding membership interests are legally issued pursuant to an exemption
from registration under Federal and State securities laws, are fully paid and
non-assessable and not issued in violation of the preemptive rights of any
person. There are no other outstanding subscriptions, options, rights, warrants,
convertible securities or other agreements or commitments obligating DME to
issue any additional membership interests of any class; This Agreement has been
duly and validly authorized, executed and delivered and constitutes the legal
and binding obligation of DME, except as limited by bankruptcy and insolvency
laws and by other laws affecting the rights of creditors generally."
-9-
(e) "7.8 CONVERSION OF DEBT. At the Closing, Pride Automotive Group
shall have no liabilities or obligations, fixed or contingent, known or unknown,
except for not more than $190,000 due to note holders (the balance of such
liability to note holders having been converted to common stock) and other
liabilities and obligations not exceeding $10,000 in the aggregate."
2. The following new provisions shall be added to the Agreement, with
the remaining section and subsection numbers being deemed amended approximately:
(a) "7.11 SPECIAL WARRANT AND EMPLOYEE OPTIONS. The Special Warrant and
all Employee Options shall have been canceled and terminated by the holders
thereof pursuant to agreements in form and substance reasonably satisfactory to
DME and its counsel. Parent agrees to the cancellation of the Special Warrant."
-10-
(b) "7.12 SALE OF SUBSIDIARIES. Parent shall have acquired Pride
Automotive Group's stock ownership of all of its subsidiaries on terms and
conditions which impose no liability or obligation on Pride Automotive Group in
connection with such sale."
(c) "7.13 STOCK ISSUANCES. Pride Automotive Group shall have issued no
common stock after November 30, 1998, except for not more than 3,728,000 shares
in connection with the conversion of indebtedness to note holders and others, up
to 1,200,000 shares to be issued in a private placement at $1.00 per share and
740,000 shares to be issued to Xxxxx Xxxx, Inc. as contemplated herein and at
the Closing, there shall be outstanding no contract rights, options, warrants or
other securities convertible into, or exercisable for, common stock of Pride
Automotive Group. In addition to the foregoing, Xxxxx Xxxx Inc. shall have
purchased up to 120,000 shares of Pride Automotive Group common stock as part of
the private placement; such investment to be in an amount equal to the placement
agent fees received by Xxxxx Xxxx, Inc. in connection with its services, as
placement agent, in the private placement."
-11-
(4) "ARTICLE 8
Indemnity
8.1 PARENT. (a) Parent by signing this Amendment, hereby jointly and
severally with Pride Automotive Group, joins in and makes all the warranties and
representations made by Pride Automotive Group herein and agrees to take all
action to cause Pride Automotive Group to comply with its obligations hereunder.
Parent warrants and represents to DME and Shareholders that the execution and
delivery of this Amendment and the transactions contemplated in the Agreement
and herein have been duly and validly authorized by all requisite corporate and
shareholder actions and Parent has full power and authority to execute, deliver
and perform this Agreement as amended and this Agreement as amended is legal,
valid and binding obligation of Parent; is enforceable in accordance with its
terms and conditions, except as may be limited by bankruptcy and insolvency laws
and by other laws affecting the rights of creditors generally; and the execution
and delivery of this Amendment by Parent and the performance by Parent of its
obligations hereunder will not cause, constitute, or conflict with or result in
(a) any breach or violation of any of the provisions of or constitute a default
under any license, indenture, mortgage, charter, instrument, articles of
incorporation, by-laws, or other agreement or instrument to which Parent is a
party, or by which is may be bound, nor will any consents or authorizations of
any party other than those hereto be required; (b) an event that would permit
any party to any agreement or instrument to terminate it or to accelerate the
maturity of any indebtedness or other obligation of Parent; or (c) an event that
would result in the creation or imposition of any lien, charge, or encumbrance
on any asset of Parent.
-12-
8.2 INDEMNITY. Parent and Pride Automotive Group, jointly and
severally, agree to defend and hold harmless DME, the Shareholders and DME's
members, officers, managers and agents against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties and reasonable
attorney's fees, that any of them shall incur or suffer, which arise out of,
result from, or relate to any breach of or failure by Parent or Pride Automotive
Group to perform any of its representations, warranties, covenants and
agreements in this Agreement, as amended, or in any exhibit or other instrument
furnished or to be furnished by Parent or Pride Automotive Group, under this
Agreement, as amended.
3. Except as modified herein, the Agreement shall remain in full force
and effect in accordance with its terms.
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IN WITNESS whereof the parties have set their hands and seals as of the
date first above written.
PRIDE AUTOMOTIVE GROUP
BY:/s/
--------------------------
PRIDE INC.
BY:/s/
--------------------------
DIGITAL MAFIA ENTERTAINMENT LLC
BY:/s/ DARIEN DASH
--------------------------
BY:/s/ DARIEN DASH
--------------------------
DARIEN DASH
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