SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as of the
20th day of July, 2005, by and among SHERIDAN SQUARE ENTERTAINMENT, INC., a
Delaware corporation (the "Company"), and XXXXXX INTERNATIONAL CORP., a Delaware
corporation (the "Investor").
RECITALS
The Company desires to sell up to forty (40) shares of the Company's
Series B Convertible Participating Preferred Stock (the "Series B Shares") to
Investor, and Investor desires to purchase the Series B Shares from the Company,
on the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereto agree as follows:
1. Purchase and Sale of Stock; Sale and Issuance of Series B Shares.(a) The
Company has authorized the sale and issuance of the Series B Shares which shall
have the designations, powers, preferences and rights and the qualifications,
limitations and restrictions set forth in the Certificate of Designations in the
form attached hereto as Exhibit A (the "Certificate of Designations").
(b) Subject to the terms and conditions of this Agreement, Investor agrees to
purchase, and the Company agrees to sell and issue to Investor, the Series B
Shares, at a purchase price of $25,000 per share (an aggregate of up to
$1,000,000).
1.1 Closing. The purchase and sale of the Series B Shares shall take place at
10:00 a.m. on the date hereof (the "Closing Date"), at the offices of Ruskin
Moscou Faltischek, P.C., East Tower, 15th Floor, 000 XXX Xxxxx, Xxxxxxxxx, XX
00000, or at such other time and place as shall be mutually agreed upon between
the Investor and the Company (the "Closing"). At the Closing, the Company shall
deliver to Investor a certificate representing the Series B Shares requested by
the Company to be purchased by Investor and agreed to by Investor against
receipt of a wire transfer of the purchase price to an account designated by the
Company prior to the date of Closing.
1.2 Subsequent Closings. Within three business days of Investor's receipt from
time to time of the certificate described in the last sentence of this Section
1.2, the Company and Investor shall have a deferred closing hereunder (a
"Subsequent Closing"), which shall be held at the offices of Ruskin Moscou
Faltischeck, P.C., East Tower, 15th Floor, 000 XXX Xxxxx, Xxxxxxxxx, XX 00000,
at such time as the Company may determine (the date of each Subsequent Closing
being referred to as a "Subsequent Closing Date"). In connection with any
Subsequent Closing, the Company will deliver to Investor an appropriate stock
certificate representing the applicable Series B Shares being purchased and
Investor will deliver to the Company the applicable purchase price. The number
of shares of additional Series B Shares which Investor shall purchase pursuant
to any subsequent closing shall be as set forth in a certificate delivered by
the Company prior to the Subsequent Closing and signed by either or both of the
Company's Co-Chief Executive Officers, Xxxxxx Xxxxxx and Xxxx Xxxxxx, which
certificate shall state that the Company has a bona fide use for the applicable
purchase price to be received by the Company, but in no event shall the
aggregate gross dollar amount of the Series B Shares sold in the Closing and in
such Subsequent Closings exceed One Million ($1,000,000) Dollars.
2. Representations and Warranties of the Company. For purposes of Subsections
2.5 through 2.9 and Section 6, references to the "Company" shall include the
Company, its predecessor and any subsidiaries of the Company. The Company hereby
represents and warrants, as of the date hereof (except as otherwise specifically
set forth in Subsections 2.1 through 2.9) to Investor that:
2.1 Organization, Good Standing, Qualification and Corporate Power.
(a) The Company and each of its subsidiaries is either a corporation or limited
liability company, as the case may be, duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate or limited liability company, as
the case may be, power and authority and all licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
business as now conducted and as proposed to be conducted. The Company and each
subsidiary is qualified to transact business and is in good standing as a
foreign corporation or limited liability company, as the case may be, in each
jurisdiction where it is required to so qualify except for such jurisdictions
where the failure to so qualify would not have a Material Adverse Effect. True
and correct copies of the Company's Certificate of Incorporation and Bylaws have
been provided to Investor.
(b) The Company has all requisite legal and corporate power and authority to
execute and deliver this Agreement and each of the other Basic Documents (as
defined in Section 7), and to issue and sell the Series B Shares hereunder, to
issue the Reserved Shares (as defined in Section 7), and to carry out and
perform its obligations under the terms of this Agreement and the other Basic
Documents.
2.2 Capitalization. The authorized capital stock of the Company consists, and
will consist at the Closing, of:
(a) Preferred Stock. Fifty Thousand (50,000) shares of Preferred Stock, par
value $1.00 per share (the "Preferred Stock"), of which (i) One Thousand Three
Hundred (1,300) shares have been designated Series A Convertible Preferred Stock
("Series A Preferred Stock") and 901.90621 of which are issued and outstanding
and (ii) forty (40) shares have been designated Series B Convertible Preferred
Stock ("Series B Preferred Stock") and none of which are issued and outstanding
prior to the Closing.
(b) Common Stock. Ten Million One Thousand (10,001,000) shares of Common Stock,
$.01 par value consisting of Ten Million (10,000,0000) shares of Class A Common
Stock and One Thousand (1,000) share of Class B Common Stock (the "Common
Stock"), of which 107,134.38 shares of Class A Common Stock and 288.34 shares of
Class B Common Stock are issued and outstanding.
2.3 Authorization. The Basic Documents have been duly authorized, executed and
delivered by the Company and constitute the legal, valid and binding obligations
of the Company, enforceable in accordance with their respective terms, subject
to (i) applicable bankruptcy, insolvency, reorganization and moratorium laws,
(ii) other laws of general application affecting the enforcement of creditors'
rights generally and general principles of equity, (iii) the discretion of the
court before which any proceeding therefor may be brought, and (iv) as rights to
indemnity may be limited by federal or state securities laws or by public
policy.
2.4 Valid Issuance of Series B Shares and Reserved Shares. The issuance, sale
and delivery of the Series B Shares which are being purchased by Investor
hereunder, and the reservation for issuance of the Reserved Shares, have been
duly authorized by all required corporate action on the part of the Company, and
when issued, sold, and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly authorized, validly issued, fully
paid and non-assessable. The Reserved Shares have been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Certificate
of Designations, shall be duly authorized, validly issued, fully paid, and
non-assessable. The Series B Shares issued hereunder and the Reserved Shares
will be free and clear from any liens or encumbrances other than those created
by, or imposed upon, the holders thereof through no action of the Company, other
than restrictions on transfer under state and/or federal securities laws and
restrictions set forth in the Basic Documents. Issuance of the Series B Shares
and the Reserved Shares will be free of statutory preemptive rights and such
issuance is in full compliance with all contractual preemptive rights.
2.5 Governmental and Third Party Consents. Except for the filing of any notice
subsequent to the Closing that may be required under applicable Federal and/or
state securities laws (which, if required, shall be filed on a timely basis as
may be so required), no consent, approval or authorization of, or declaration
to, or filing with, any Person (governmental or private) is required for the
valid authorization, execution, delivery and performance by the Company of the
Basic Documents or for the valid authorization, designation, issuance, sale and
delivery of the Series B Shares, or for the valid authorization, reservation,
issuance, sale and delivery of the Reserved Shares other than (i) the filing of
the Certificate of Designations with the Secretary of State of the State of
Delaware, (ii) filings pursuant to Regulation D of the Securities Act of 1933,
as amended (the "Securities Act"), and (iii) applicable "blue sky" securities
filings.
2.6 Regulations U, T and X. The Company does not own or have any present
intention of acquiring any "margin security" within the meaning of Regulation U
(12 C.F.R. Part 221) of the Board of Governors of the Federal Reserve System
(herein called "margin security"). None of the proceeds of the Series B Shares
will be used, directly or indirectly, by the Company for the purpose of
purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any margin
security or for any purpose which could be reasonably expected to cause any
Basic Document and the transactions contemplated thereby to violate Regulation
U, Regulation T, Regulation X, or any other regulation of the Board of Governors
of the Federal Reserve System.
2.7 Incorporation by Reference of Representations and Warranties. Concurrently
with the execution of this agreement, the parties hereto, together with SSE
Acquisition Corp. ("SSE"), a wholly owned subsidiary of Investor, are entering
into a certain Agreement and Plan of Merger of even date herewith, (the "Merger
Agreement"), pursuant to which the Company agrees to merge with SSE at the
closing thereof, with the Company being the surviving corporation and becoming a
wholly-owned subsidiary of Investor. The representations and warranties of the
Company contained in the Merger Agreement are hereby incorporated by reference
in this Agreement as if such representations and warranties are made herein.
2.8 Offering. Subject to the accuracy of Investor's representations in Section 3
hereof, the offer, sale and issuance of the Series B Shares and the Common Stock
to be issued upon conversion of the Series B Shares constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act,
and are in compliance with all applicable securities laws of the United States
and each of the states whose laws govern the issuance of such securities.
2.9 Private Placement Memorandum. The Company has provided Investor with a copy
of a Private Placement Memorandum ("PPM") dated December 3, 2004 concerning the
Company. The PPM does not contain any material misstatements of fact nor does it
omit any facts necessary to make the statements of fact therein not misleading
in any material respect.
3. Representations and Warranties of the Investor. Investor hereby represents
and warrants to the Company that:
3.1 Organization and Existence. It is a corporation duly organized and validly
existing under the laws of its state of incorporation. Investor represents that
it was not organized for the purpose of making an investment in the Company.
3.2 Authorization. The execution, delivery and performance by Investor of this
Agreement and the Basic Documents and the consummation by Investor of the
transactions contemplated hereby and thereby are within the powers of such
Investor and have been duly authorized by all necessary corporate action. This
Agreement and each of the Basic Documents to which Investor is a party
constitute valid and binding agreements of Investor, enforceable in accordance
with their respective terms, subject to (i) applicable bankruptcy, insolvency,
reorganization and moratorium laws, (ii) other laws of general application
affecting the enforcement of creditors' rights generally and general principles
of equity, (iii) the discretion of the court before which any proceeding
therefor may be brought, and (iv) as rights to indemnity may be limited by
federal or state securities laws or by public policy.
3.3 Purchase Entirely for Own Account. The Series B Shares will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof. Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the Series B Shares or the Reserved Shares acquired by Investor.
Investor has no contract, undertaking, agreement or arrangement with any Person
to sell or transfer, or grant any participation to such Person or to any third
Person, with respect to Series B Shares; provided, however, that (i) Investor
may grant a security interest in and effect the pledge of the Series B Shares to
Wachovia Bank, National Association, its successors and/or assigns ("Lender") as
collateral security for the obligations of Investor and certain of its
affiliates in connection with financing arrangements of Lender in favor of
Investor and (ii) nothing herein shall in any manner impair, delay, hinder or
otherwise limit the exercise by Lender of its rights and remedies in respect of
the Series B Shares including, without limitation, the rights of Lender to: (A)
register any or all of the Series B Shares in the name of Lender or in the name
of Lender's nominee and exercise all voting and corporate rights, rights of
conversion, redemption, exchange, subscription or any other rights, privileges,
or options pertaining to any shares of the Series B Shares, as if Lender were
the absolute owner thereof, and (B) to redeem, sell, or otherwise dispose of and
deliver said Series B Shares or any part thereof.
3.4 Investor Access to Information, Experience, Etc.
(a) Investor has had an opportunity to (i) ask questions of and receive answers
from representatives of the Company concerning the terms and conditions of this
investment, and (ii) conduct such investigation as Investor deems necessary.
Investor can fend for itself, can bear the economic risk of its investment, has
substantial experience in evaluating non-liquid investments such as the Series B
Shares and the Reserved Shares, and is capable of evaluating the merits and
risks of an investment in the Company. Such Investor is an "accredited investor"
as that term is defined in Rule 501(c) of Regulation D promulgated under the
Securities Act.
(b) Investor has been furnished access to the business records of the Company
and such additional information and documents as Investor has requested and has
been afforded an opportunity to ask questions of, and receive answers from,
representatives of the Company concerning the terms and conditions of this
Agreement, the purchase of the Series B Shares, the business, operations, market
potential, capitalization, financial condition and prospects of the Company, and
all other matters deemed relevant to Investor.
(c) Investor acknowledges that it has had an opportunity to evaluate all
information regarding the Company as it has deemed necessary or desirable in
connection with the transactions contemplated by this Agreement, has
independently evaluated the transactions contemplated by this Agreement and has
reached its own decision to enter into this Agreement.
3.5 Restricted Securities. Investor understands that the Series B Shares and the
Reserved Shares have not been registered under the Securities Act or the laws of
any state and may not be sold or transferred, or otherwise disposed of, without
registration under the Securities Act and applicable state securities laws, or
pursuant to an exemption therefrom. In the absence of an effective registration
statement covering the Series B Shares and the Reserved Shares, Investor will
sell or transfer, or otherwise dispose of, the Series B Shares only in a manner
consistent with its representations and agreements set forth herein, the terms
and conditions set forth in the Basic Documents and any applicable Federal and
state securities laws.
3.6 Legends. Investor agrees that each certificate or other document evidencing
any of the Series B Shares or the Reserved Shares shall bear the following or
similar legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT UNDER THE ACT
IN EFFECT WITH RESPECT TO THESE SECURITIES OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
REQUIRED."
4. Conditions of Investor's Obligations at Closing and Subsequent Closing. The
obligations of Investor to purchase Series B Shares pursuant to this Agreement
are subject to the fulfillment on or before the Closing (or Subsequent Closing,
if any) of each of the following conditions, the waiver of which shall not be
effective against Investor unless Investor has consented in writing thereto or
delivered the applicable price for the shares to the Company:
4.1 Representations and Warranties. The representations and warranties of the
Company contained in Section 2 shall be true and correct on and as of the
Closing Date (and the Subsequent Closing Date, if any) in all material respects
with the same effect as though such representations and warranties had been made
on and as of the Closing Date (and the Subsequent Closing Date, if any), except
where the failure to do so would not have a Material Adverse Effect.
4.2 Performance. The Company shall have performed and complied, in all material
respects, with all agreements, obligations, and conditions contained in the
Basic Documents that are required to be performed or complied with by it on or
before the Closing or Subsequent Closing, if applicable.
4.3 Secretary's Certificate. The Secretary of the Company shall deliver to
Investor at the Closing, a certificate certifying: (i) that attached thereto is
a true and complete copy of the Certificate of Incorporation of the Company as
then in effect; (ii) that attached thereto is a true and complete copy of the
Bylaws of the Company as then in effect, (iii) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of Directors and the
stockholders of the Company consenting to the transactions contemplated by the
Basic Documents; and (iv) to the incumbency and specimen signatures of each
officer of the Company executing the Basic Documents and the other agreements
and certificates contemplated thereby.
4.4 Certificate of Designations. The Certificate of Designations shall have been
executed by the Company and filed with the Secretary of State of the State of
Delaware and evidence of such filing shall have been provided to the Investors
(with a complete copy of such filing being provided to the Investor as soon as
practicable thereafter).
4.5 Consents and Waivers; Qualifications. The Company shall have obtained any
and all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by the Basic Documents, except where the failure to do
so would not have a Material Adverse Effect. The Company shall have obtained all
necessary Blue Sky law permits and qualifications, or have the availability of
exemptions therefrom, required for any state for the offer and sale of the
Series B Shares, and the Reserved Shares.
4.6 Stock Certificates. Investor shall have received a stock certificate dated
the Closing Date for the Series B Shares.
5. Conditions of the Company's Obligations at Closing and Subsequent Closing.
The obligations of the Company to Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
Investor, the waiver of which shall not be effective against the Company unless
the Company has consented in writing thereto:
5.1 Representations and Warranties. The representations and warranties of the
Investor contained in Section 3 shall be true on and as of the Closing in all
material respects with the same effect as though such representations and
warranties had been made on and as of the Closing Date or Subsequent Closing, if
applicable, except where the failure to do so would not have a Material Adverse
Effect.
5.2 Qualifications. All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Series
B Shares pursuant to this Agreement shall have been duly obtained and effective
as of the Closing or Subsequent Closing, if applicable, except where the failure
to do so would not have a Material Adverse Effect.
5.3 Payment. Investor shall have paid the requisite purchase price for the
Series B Shares pursuant to the terms of this Agreement.
6. Covenants. The Company covenants and agrees that so long as the Series B
Shares shall remain outstanding:
6.1 Financial Statements and Other Information. The Company will furnish or
cause to be furnished to each Person holding Series B Shares the financial
statements set forth in subparagraphs (a) and (b) below and Persons (either
individually or as a "group," as such term is used in Section 13d(3) of the
Securities Exchange Act of 1934, as amended, a "Group") holding at least 25% of
the shares of Series B Shares then outstanding shall receive, at such Person's
written request to the Company, the other information set forth in subparagraphs
(c) and (d) below, and each such Person severally and not jointly agrees to
maintain the confidentiality of any information received by it pursuant to this
Section 6.1, none of which shall be duplicated, disclosed, or distributed to any
third-party, until such information becomes public or is otherwise no longer
confidential through no wrongful act of such Persons or their agents or as
otherwise required by law, provided, however, that each such Person may share
the information received by it pursuant to this Section 6.1 with its partners,
if any, and with its legal, accounting, financial and other advisors and
representatives, provided that such persons agree to maintain the
confidentiality of any information disclosed hereunder as provided for in this
Section 6.1.
(a) as soon as reasonably possible, and in any event within 120 days after the
end of each fiscal year of the Company, the consolidated balance sheet of the
Company as at the end of such fiscal year, and consolidated statements of
operations and cash flow of the Company for such fiscal year, all in reasonable
detail and prepared in accordance with GAAP, and certified (in the case of
financial statements) by an independent accounting firm accompanied by such
firm's opinion;
(b) as soon as reasonably possible, and in any event within 50 days after the
end of each of the first three fiscal quarters of each fiscal year of the
Company the unaudited consolidated balance sheet and statements of operations
and cash flow of the Company for such quarter, all in reasonable detail,
prepared in accordance with GAAP, and certified to be complete and correct
(subject to year-end adjustments) by the chief financial officer or other
authorized executive officer of the Company;
(c) promptly after the commencement or threatened commencement thereof, notice
of all actions, suits, investigations, and proceedings before any court or
governmental department, arbitration panel, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Company or any of its
subsidiaries other than ordinary and routine litigation covered under the limits
of existing insurance policies or other matters which could not reasonably be
expected to result in a Material Adverse Effect;
(d) promptly, copies of all amendments to the Certificate of Incorporation or
Bylaws of the Company.
6.2 Legal Existence, Compliance, Etc.
(a) The Company and each Subsidiary will maintain its existence as a corporation
or limited liability company, as the case may be, duly organized, validly
existing and in good standing under the laws of the state of its incorporation
or organization.
(b) The Company will conduct its business in compliance in all material respects
with all permits and licenses issued by, and all statutes, rules, regulations
and orders of, and all restrictions imposed by, all governmental authorities,
domestic or foreign, federal or state, applicable to the conduct of its business
and the ownership of its property (including, without limitation, applicable
statutes, rules, regulations, orders and restrictions relating to environmental,
safety and other similar standards or controls).
(c) The Company will conduct its business in compliance in all material respects
with all licenses, agreements and contracts to which it is a party.
(d) The Company will maintain, keep, and preserve all of its material properties
(tangible and intangible) necessary in the proper conduct of its business in
good working order and condition, ordinary wear and tear excepted.
(e) The Company will maintain or cause to be maintained, with financially sound
and reputable insurers, insurance with respect to its assets and businesses
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts and with such deductibles
as are customarily carried by such other corporations.
6.3 Reservation of Shares. The Company shall at all times duly reserve for
issuance the Reserved Shares. The Company shall comply with the terms and
conditions of the Series B Shares as set forth in the Certificate of
Designations.
6.4 Use of Proceeds. The Company shall use the proceeds received from the sale
and issuance of the Series B Shares for general working capital purposes.
6.5 Right of Inspection. At any reasonable time and from time to time, upon
reasonable notice, the Company shall permit any Person (either individually or
as Group) that holds at least 25% in the aggregate of Series B Shares or any
agent or representative thereof, at such Person's or Group's expense, to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Company and to discuss the affairs, finances and
accounts of the Company with any of its officers and directors and furnish to
each such Person, promptly upon the request of such Person, copies of such
financial and operating data (such as patents, issued or filed, licensing
agreements, research and development contracts, joint venture agreements, etc.)
and other information as reasonably requested by such Person. The Company will
permit such Persons to inspect, audit and make copies of the books and records
of the Company, to discuss the business and affairs of the Company with the
officers of the Company, and to inspect any of the properties or assets of the
Company upon reasonable notice to the Company and at such reasonable times as
such Persons may from time to time request. Upon five (5) business days' prior
notice to the Company, such Persons shall have the right to confer in their
discretion with the independent certified public accountants of the Company at
any time during normal business hours upon any matter involving the financial
condition of the Company. Each such Person severally and not jointly agrees to
maintain the confidentiality of any information received by it pursuant to this
Section 6.5, until such information becomes public or is otherwise no longer
confidential through no wrongful act of any such Person or their agents or as
otherwise required by law, provided, however, that each such Person may share
the information received by it pursuant to this Section 6.5 with its partners,
if any, and with its legal, accounting, financial and other advisors and
representatives if such persons agree to maintain the confidentiality of any
information disclosed hereunder as provided for in this Section 6.5.
7. Definitions. All capitalized terms used in this Agreement shall have the
meanings assigned to them elsewhere in this Agreement or as specified below:
(a) "Affiliate" shall mean, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person. For the purposes of this definition, "control" when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
(b) "Basic Document" shall mean each of this Agreement and the Certificate of
Designations each as at any time amended and in effect from time to time.
(c) "GAAP" shall mean generally accepted accounting principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, (ii) applied on a basis
consistent with prior periods (except for changes in the application of such
principles that have been approved by the Company's Board of Directors), and
(iii) such that, insofar as the use of accounting principles is pertinent, a
certified public accountant could deliver an unqualified opinion with respect to
financial statements in which such principles have been properly applied,
subject, however, to the absence of footnotes.
(d) "Material Adverse Effect" shall mean a material adverse effect on the
assets, condition (financial or otherwise), affairs, earnings, business,
operations or prospects of the Company.
(e) "Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature, including, as appropriate, the Company or any subsidiary thereof.
(f) "Reserved Shares" shall mean the 15,228 shares of Class A Common Stock
initially issuable upon conversion of the Series B Shares pursuant to the
Certificate of Designations, and any such other number of shares resulting from
adjustments set forth in the Certificate of Designations.
(g) "Securities Act" shall mean the Securities Act of 1933, as at any time
amended.
8. Indemnity. Each party (an "Indemnifying Party") shall, severally and not
jointly, with respect to the representations, warranties, covenants and
agreements made by each such party herein indemnify, defend and hold the other
parties (and their respective shareholders, directors, officers, employees,
agents, affiliates and controlling parties) (each, an "Indemnified Party")
harmless from and against all actions, causes of action, suits, claims, costs,
penalties, fees, liabilities, losses or damages, together with all reasonable
costs and expenses related thereto (including reasonable legal and accounting
fees and expenses), arising from the breach, in any material respect, of any
such representations, warranties, covenants or agreements of the Indemnifying
Party contained in this Agreement or the assertion of any claims relating to the
foregoing. The Indemnifying Party shall indemnify and hold harmless each
Indemnified Party against any losses, claims, damages or liabilities, joint or
several, to which any of the foregoing persons may become subject, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any violations by the Indemnifying Party of the
Securities Act or state securities or "blue sky" laws applicable to the
Indemnifying Party relating to action or inaction required of the Indemnifying
Party in connection with the Securities Act or registration or qualification
under such state securities or blue sky laws; and shall reimburse each such
Indemnified Party for any legal or any other expenses reasonably incurred by any
of them in connection with investigating or defending any such loss, claim,
damage, liability or action. In case any such action is brought against an
Indemnified Party, the Indemnifying Party will be entitled to participate in and
assume the defense thereof with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the Indemnifying Party to such
Indemnified Party of its election to assume the defense thereof, the
Indemnifying Party shall not be responsible for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof, provided that if any Indemnified Party shall have reasonably concluded
that there may be one or more legal defenses available to such Indemnified Party
which conflict in any material respect with those available to the Indemnifying
Party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity agreement provided in this Section 8,
the Indemnifying Party shall not have the right to assume the defense of such
action on behalf of such Indemnified Party and the Company shall reimburse such
Indemnified Party and any person controlling such Indemnified Party for that
portion of the fees and expenses of one counsel retained by the Indemnified
Party which are reasonably related to the matters covered by the indemnity
agreement provided in this Section 8. The Indemnifying Party shall not be liable
for the settlement by the Indemnified Party of any action, proceeding or
investigation effected without its written consent, which consent shall not be
unreasonably withheld. The Indemnifying Party shall not make any settlement of
any claims indemnified against under this Section 8 without the written consent
of the Indemnified Party or Parties, which consent shall not be unreasonably
withheld or delayed. Without limiting the foregoing in the event of a
misrepresentation or breach of Section 2.2 hereof, an Investor may require the
Company to issue additional shares of Series B Shares to such Investor so that
following such issuance, such Investor will own the percentage of the Company's
capital stock (after giving effect to the assumed conversion exercise and
exchange of all capital stock convertible into or exercisable for Common Stock)
that such Investor would have owned if the representations set forth in Section
2.2 were true and correct.
9. Miscellaneous.
9.1 Survival of Representations, Warranties and Covenants. The representations,
warranties and covenants of the Company and Investor contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investors or the
Company.
9.2 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and permitted assigns of the parties (including
permitted transferees of Series B Shares or the Reserved Shares). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. The Company may not
assign or transfer any of its rights under this Agreement without the prior
written consent of the holders of a majority of the then outstanding Series B
Shares. At any time following the termination of the Merger Agreement, Investor
or subsequent holder of Series B Shares may assign and transfer its rights under
this Agreement at such times and upon such conditions as Investor or such holder
shall determine in its sole discretion subject to the obligations imposed on
such Investor by this Agreement provided that Investor shall have the right,
effective as of the date hereof, to grant a first priority lien and security
interest to Wachovia Bank, N.A., the Investor's primary lender, pursuant to the
terms of a certain Pledge and Security Agreement to be entered into between
Investor and Wachovia. Notwithstanding the foregoing, each such permitted
transferee or assignee shall be bound by the terms and conditions of this
Agreement and the other applicable Basic Documents pursuant to a written
instrument signed by such permitted transferee reasonably satisfactory to the
Company.
9.3 Governing Law; Jurisdiction. This Agreement shall be governed by, construed,
applied and enforced in accordance with the laws of the State of New York,
including the Uniform Commercial Code, except that no doctrine of choice of law
shall be used to apply any law other than that of New York, and no defense,
counterclaim or right of set-off given or allowed by the laws of any other state
or jurisdiction, or arising out of the enactment, modification or repeal of any
law, regulation, ordinance or decree of any foreign jurisdiction, shall be
interposed in any action hereon. The parties hereto agree that any action or
proceeding to enforce any right arising out of this Agreement and the other
Basic Document may be commenced in any New York State court or United States
District Court sitting in the State of New York, and the parties hereto consent
to such jurisdiction, agree that venue will be proper in such courts in any such
matter, agrees that the State of New York is the most convenient forum for
litigation in any such suit, action or legal proceeding, and agree that a
summons and complaint commencing an action or proceeding in any such court shall
be properly served and shall confer personal jurisdiction if served by
registered or certified mail, or as otherwise provided by the laws of the State
of New York or the United States. The parties hereto agree that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
9.4 Counterparts. This Agreement 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.
9.5 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
9.6 Notices. Any and all notices, designations, consents, offers, acceptances,
or any other communication provided for herein shall be given in writing by
hand, facsimile transmission, electronic mail (provided that an appropriate
address has been designated for such party), overnight courier, or by registered
or certified mail, addressed to the address set forth below, or such other
address of which notice is given in accordance herewith:
If to the Company:
Sheridan Square Entertainment, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
If to Investor:
Xxxxxx International Corp.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Except as otherwise provided in this Agreement, each such
notice shall be deemed given when delivered in person, by facsimile
transmission, electronic mail or by overnight courier.
9.7 Finders' Fees. Each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. Each party agrees to indemnify and hold harmless the other parties
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each party or any of its officers, employees or
representatives is responsible.
9.8 Entire Agreement; Amendments and Waivers. This Agreement, including the
Schedules and Exhibits hereto and the other Basic Document, constitutes the full
and entire understanding and agreement between the parties with regard to the
subject hereof. Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of two-thirds of the Series B Shares then
outstanding.
9.9 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
9.10 Expenses and Taxes. At the Closing, the Company shall pay any and all stamp
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing and recording of this Agreement and agrees to
save the holders of the Series B Shares harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees. Notwithstanding the foregoing, each party shall be
responsible for all fees of their respective attorneys' and advisors in
connection with the negotiation and execution of this Agreement.
9.11 Attorneys' Fees and Costs. With respect to any dispute relating to this
Agreement, or in the event that a suit, action, arbitration, or other proceeding
of any nature whatsoever, including, without limitation, any proceeding under
the U.S. Bankruptcy Code and involving issues peculiar to federal bankruptcy
law, any action seeking a declaration of rights or a suit for rescission, is
instituted to interpret or enforce this Agreement or any provision of this
Agreement, except as otherwise provided herein, the prevailing party shall be
entitled to recover from the losing party its reasonable attorneys',
paralegals', accountants', and other experts' and professional fees and all
other fees, costs, and expenses actually incurred and reasonably necessary in
connection therewith, as determined by the judge or arbitrator at trial or other
proceeding, or on any appeal or review, in addition to all other amounts
provided by law.
9.12 Waiver of Trial by Jury. TO THE EXTENT THEY MAY LEGALLY DO SO, THE COMPANY
AND THE HOLDERS OF SERIES B SHARES HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER
OR WITH RESPECT TO THIS AGREEMENT AND THE BASIC DOCUMENTS OR IN ANY WAY
CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE PARTIES
HERETO WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS RELATED THERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE. TO THE EXTENT THEY MAY LEGALLY DO SO,
THE COMPANY AND THE HOLDERS OF SERIES B SHARES HEREBY AGREE THAT ANY SUCH CLAIM,
DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION 9.12 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE OTHER PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY
JURY.
9.13 Independence of Covenants. All covenants under this Agreement shall be
given independent effect so that if a particular action or condition is not
permitted by any one covenant, the fact that it would be permitted by another
covenant, by an exception thereto, or would otherwise be within the limitations
thereof, shall not avoid the occurrence of breach of this Agreement if such
action is taken or condition exists.
9.14 Exchanges; Lost, Stolen or Mutilated Certificates. Upon surrender by a
holder of Series B Shares to the Company of any certificate representing Series
B Shares purchased or acquired hereunder, the Company at its expense will issue
in exchange therefor, and deliver to the holder of Series B Shares, a new
certificate or certificates representing such shares, in such denominations as
may be requested by the holder of Series B Shares. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
certificate representing any Series B Shares purchased or acquired by a holder
of Series B Shares, and in case of any such loss, theft or destruction, upon
delivery of any indemnity agreement satisfactory to the Company, or in case of
any such mutilation, upon surrender and cancellation of such certificate, the
Company at its expense will issue and deliver to such holder a new certificate
for such Series B Shares of like tenor, in lieu of such lost, stolen or
mutilated certificate.
IN WITNESS WHEREOF, the parties hereto have executed this SECURITIES
PURCHASE AGREEMENT as of the day and year first above written.
SHERIDAN SQUARE ENTERTAINMENT, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Xxxxxx X. Xxxxxx
Co-Chief Executive Officer
XXXXXX ENTERNATIONAL CORP.
By:/s/ Xxxx Xxxxxxxxx
---------------------
Xxxx Xxxxxxxxx
Chief Executive Officer
