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.
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 any 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, writ, 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, charter, 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
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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
asset of DME or Dash.
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 on the 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 of 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 described 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 has 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 it's 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
7
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 From 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 a 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 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 wavier 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 this
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 Acceptance 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 2.2, 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.
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ARTICLE 7
Conditions Precedent to
DME's and Shareholders' 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 this
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 Officers of Pride Automotive Group. Effective on the Closing, Pride
Automotive Group shall have elected new officers of Pride Automotive Group to
consist of the following persons:
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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 $1,300,000, 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
(d) 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:
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(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.
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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 upon 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, postage prepaid,
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
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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 upon 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 of 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.
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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:
Darien Dash, President
(d:\pride\exchange.agt)
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SHAREHOLDERS NUMBER OF DME NUMBER OF PRIDE
SHARES AUTOMOTIVE GROUP
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