PURCHASE AGREEMENT by and among SOUTHPEAK INTERACTIVE CORPORATION, INTERMEZZO ESTABLISHMENT, AND PARAGON INVESTMENT FUND March 31, 2010
by
and among
SOUTHPEAK
INTERACTIVE CORPORATION,
INTERMEZZO
ESTABLISHMENT,
AND
PARAGON
INVESTMENT FUND
March
31, 2010
This
Purchase Agreement (the “Agreement”) is made and entered into this 31st day of
March, 2010, by and among SouthPeak Interactive Corporation, a Delaware
corporation (“Buyer”), Intermezzo Establishment, a Liechtenstein
corporation (“Intermezzo”), and Paragon Investment Fund, an investment fund
organized under the laws of the Cayman Islands (“Paragon”).
WHEREAS,
Intermezzo has assigned all of its right, title and interest in and to the
Publishing Agreement dated August 20, 2009 between Intermezzo and FireFly
Holdings Limited (“FireFly
Agreement”) for the development of
the electronic game “Stronghold 3” (the “Game”) to IRP GmbH, a
corporation organized under the laws of Switzerland (the “Company”);
WHEREAS,
Intermezzo and Paragon (collectively, the “Shareholders”) are the sole shareholders of the
Company;
WHEREAS,
the Buyer desires to acquire all the outstanding shares of stock that the
Shareholders hold of the Company (the “Stock”), and the Shareholders desire to sell the
shares of Stock to Buyer for the consideration set forth below, subject to the
terms and conditions of this Agreement;
WHEREAS,
Intermezzo holds a note (the “Note”) in the
principal amount of EUR 4,385,371.43 of CDV Finance Schweiz, AG for which CDV
Software Entertainment AG, a corporation organized under the laws of Germany,
has assumed the obligation to pay; and
WHEREAS,
Buyer desires to obtain by sale and assignment the right to repayment of EUR
3,700,000 of the principal and interest due thereon under the Note.
NOW,
THEREFORE, in consideration of the mutual promises hereinafter set forth and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereby agree as follows:
ARTICLE
I
DEFINITIONS
AND INTERPRETATION
1.1
Definitions.
For purposes of this Agreement, the following terms have the respective meanings
set forth below:
“Governmental
Entity” means any court,
administrative agency, commission, governmental or regulatory authority,
domestic or foreign.
“knowledge” means
actual knowledge or awareness as to a specified fact or event of a Person that
is an individual or of an officer, director or managerial personnel of a Person
that is a corporation or of a Person in a similar capacity of an entity other
than a corporation.
“Legal
Requirements” means any federal,
state, local, municipal, foreign or other law, statute, constitution, principle
of common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental
Entity.
“Lien” means any mortgage, pledge, security interest,
encumbrance, lien, restriction or charge of any kind (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any affiliate
of the seller, or any agreement to give any security interest).
“Losses” shall include
any loss, damage, injury, liability, claim, demand, settlement, judgment, award,
fine, penalty, tax, fee (including any reasonable legal fee, expert fee,
accounting fee or advisory fee), charge, cost (including any cost of
investigation) or expense of any nature.
“Material Adverse
Effect” means
any change, event, violation, inaccuracy, circumstance or effect, individually
or when aggregated with other changes, events, violations, inaccuracies,
circumstances or effects, that is materially adverse to the business, assets,
revenues, financial condition, results of operations or business prospects of an
entity and its subsidiaries, taken as a whole, except to the extent resulting
from: (a) changes in general industry or economic conditions, (b) adverse
effects arising from the announcement or consummation of the transactions
contemplated hereby, or (c) changes to generally accepted accounting principles
that apply generally to the industry in which the entity operates.
“Net Receipts” means all monies
(expressed in U.S. Dollars) Buyer and its subsidiaries actually receive from the
sale, license or lease of the Game under the FireFly Agreement net of a
reasonable reserve for returns, less all Advance Royalty and Royalty payments
paid and payable under Sections 6.1 and 6.2 of the FireFly Agreement and less,
to the extent deducted under the FireFly Agreement to determine net receipts
thereunder, (i) all applicable duties, value-added taxes and other similar
taxes, (ii) direct manufacturing costs and other costs of fulfillment, (iii)
discounts, markdowns and allowances, (iv) marketing and PR expenses and (v)
localization expenses.
“Person” means any individual,
corporation, partnership, firm, joint venture, limited liability company,
association, joint-stock company, trust, unincorporated organization,
Governmental Entity or other entity.
“SEC” means the Securities and
Exchange Commission.
“Tax” or “Taxes” refers to any
and all federal, foreign, state, provincial, local and foreign taxes, including,
without limitation, gross receipts, income, profits, sales, use, occupation,
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, assessments, governmental charges and
duties together with all interest, penalties and additions imposed with respect
to any such amounts and any obligations under any agreements or arrangements
with any other Person with respect to any such amounts and including any
liability of a predecessor entity for any such amounts.
1.2
Other Defined
Terms. For purposes of this Agreement, the following terms have the
respective meanings set forth in the section opposite each such
term:
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TERM
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SECTION
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Agreement
|
Preamble
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Buyer
|
Preamble
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Buyer
Indemnified Party
|
Section
7.1
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Buyer
Shares
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Section
2.2
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Closing
|
Section
2.1
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Closing
Date
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Section
3.1
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Common
Stock
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Section
2.2
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Company
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Preamble
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Deductible
Amount
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Section
7.4
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Exchange
Act
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Section
4.5
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FireFly
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Section
4.6
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FireFly
License
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Section
4.6
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Fixed
Payments
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Section
2.2
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Game
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Section
2.2
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Indemnified
Party
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Section
7.3
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Net
Receipts Payments
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Section
2.2
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PDF
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Section
3.1
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SEC
Reports
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Section
5.7
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Shareholder
Indemnified Party
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Section
7.2
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Stock
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Recitals
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Stronghold
3
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Recitals
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Survival
Period
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Section
7.5
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Third
Party Claim
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Section
7.3
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ARTICLE
II
PURCHASE
AND SALE OF THE STOCK
2.1
Purchase of the Stock
from the Shareholders and Right to Repayment of Part of Note from
Intermezzo. Subject to and upon the terms and conditions of this
Agreement, at the closing of the transactions contemplated by this Agreement
(the “Closing”), the
Shareholders shall sell, transfer, convey, assign and deliver to the Buyer, and
the Buyer, in part, upon reliance of the covenants set forth in Section 6.5 of
this Agreement, shall purchase, acquire and accept from the Company, all of the
Stock. Pursuant to the Sale and Assignment Agreement attached hereto as Exhibit A (“Assignment
Agreement”) which shall be executed
at the Closing, Buyer shall purchase from Intermezzo the principal and interest
amount of EUR 3,700,000 due under the Note plus the interest accrued and unpaid
thereon after March 31,2010 for the consideration set forth in the Assignment
Agreement.
2.2
Purchase Price.
The purchase price (the “Purchase Price”) to be paid to the Shareholders by the Buyer
for the Stock shall be (a) Ten Million (10,000,000) shares (“Buyer Shares”) of the Buyer’s common stock, par value $.0001
per share (the “Common
Stock”), (b) 10% of Net Receipts not
to exceed $1,000,000 (“Net Receipts
Payments”) and (c) fixed payments totaling $1,200,000 at such times and
in such amounts as set forth on Exhibit B, by wire
transfer of immediately available funds to the accounts of the Shareholders
designated in writing prior to the Closing (the “Fixed Payments”). The Buyer will account for and make the Net
Receipts Payments at the same time and in the same manner that accountings for
and payments of the Royalty payments are required and due under the FireFly
Agreement; provided, however, no obligation will exist on the part of the
Shareholders to render an invoice for such Net Receipts Payments. All amounts
and shares payable and issuable to the Shareholders shall be equally divided
between the Shareholders unless they indicate otherwise to
Buyer.
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ARTICLE
III
THE
CLOSING
3.1
Closing. The
Closing shall take place at the offices of Xxxxxxxxx Xxxxxxx, LLP, 0000 Xxxxxx
Xxxxxxxxx, Xxxxx 0000, XxXxxx, Xxxxxxxx 00000 contemporaneously with the
execution and delivery of this Agreement (the “Closing Date”). The documents to be delivered at the Closing
(other than stock certificates evidencing the Buyer Shares) may, at the election
of the parties, be exchanged by telecopier or electronic transmission in
portable document format (“PDF”) upon a written undertaking to provide original
executed copies within one business day following the Closing.
3.2
Sale.
Shareholders, upon the terms and conditions of this Agreement, hereby sell (verkaufen) and hereby
transfer (treten ab)
the Stock to the Buyer under the condition precedent (unter der aufschiebenden Bedingung)
of the receipt of the Buyer Shares and the initial payment set forth in
Section. 3.7(ii).
3.3
Acceptance.
Buyer hereby accepts such sale and transfer of the Stock.
3.4
Ancillary
Rights. The sale and transfer of the Stock hereunder shall include
without limitation any and all ancillary rights (Nebenrechte) pertaining to
the Stock, including the rights to any undistributed profits (Gewinnbezugsrechte).
3.5
Cooperation.
The Parties shall reasonably cooperate with each other with respect to all
filings that the Parties are required to make or elect to make in connection
with the consummation of this Agreement.
3.6
Closing Deliveries by
Paragon and Intermezzo. Paragon and Intermezzo shall deliver to the Buyer
at the Closing the following:
(i)
stock certificates representing the Stock duly endorsed in blank or accompanied
by stock powers duly executed by Paragon;
(ii) certificates
of the Secretary of the Company attesting to the incumbency of the Company’s
officers, the authenticity of the resolutions authorizing the transactions
contemplated by this Agreement, and the authenticity and continuing validity of
the organizational documents delivered pursuant to Section
4.1;
(iii) the
original minute book of the Company to the extent one exists;
(iv) the
consent of FireFly Holdings Limited to the assignment of the FireFly Agreement
to the Company;
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(v) a
resignation, effective as of the Closing, of each officer and director of the
Company from each such position, executed by such person;
(vi) the
executed Assignment Agreement; and
(vii) a
cross receipt executed by the Shareholders for the portion of Purchase Price
being paid at the Closing and a cross receipt of Intermezzo for the
consideration it is receiving under the Assignment Agreement.
3.7 Closing Deliveries of the
Buyer. The Buyer shall deliver to Paragon and Intermezzo at the Closing
the following:
(i) the
Buyer Shares (issued in accordance with
Section
2.2);
(ii) the
initial $50,000 of the Fixed Payments;
(iii) the
initial $50,000 payment due Intermezzo under the Assignment
Agreement;
(iv) certificates
of the Secretary of the Buyer attesting to the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement; and
(v) a
cross receipt executed by the Buyer for the Stock.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF INTERMEZZO AND PARAGON
Intermezzo
and Paragon jointly and severally represent and warrant to the Buyer, as set
forth below in this Article
IV.
4.1 Organization and
Qualification. The Company is an unused shell corporation, duly
organized, validly existing and in good standing under the laws of Switzerland
and has the requisite corporate power and authority to own, lease and operate
its assets and properties and to carry on its business as it is now being
conducted. Complete and correct copies of the charter of the Company, as amended
and currently in effect, have been heretofore delivered to Buyer or Buyer’s
counsel. The Company is not in violation of any of the provisions of its charter
or any other governing document.
4.2 Subsidiaries. The
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any other company, corporation, limited liability company
or other business entity.
4.3 Capitalization.
(a)
The Stock represents all of the outstanding capital stock or other equity
securities of the Company. The shares of Stock are validly issued, fully paid
and nonassessable. The shares of Stock are owned by Paragon free and clear of
any Liens and Paragon has all right to sell and transfer the shares of Stock as
contemplated by this Agreement and upon such sale and transfer, such Stock shall
be acquired by the Buyer as contemplated by Section 2.1 of this
Agreement free and clear of any Liens.
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(b) There
are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the Company is a
party or by which it is bound obligating the Company to issue, deliver or sell,
or cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any Stock or
similar equity security of the Company or obligating the Company to grant,
extend, accelerate the vesting of or enter into any such subscription, option,
warrant, equity security, call, right, commitment or agreement.
(c) All
shares of Stock have been issued in compliance with all applicable securities
laws and other applicable laws and regulations.
(d) There
are no registration rights, and there is no voting trust, proxy, rights plan,
anti-takeover plan or other agreement or understanding to which the Company is a
party or by which the Company is bound with respect to any equity security of
any class of the Company.
(e) No
shares of Stock are subject to a repurchase option, risk of forfeiture or other
condition under any applicable agreement with the Company.
4.4
Authority
Relative to this Agreement.
(a) Each
of Intermezzo and Paragon has all necessary power and authority to execute and
deliver this Agreement and to perform its respective obligations hereunder and
to consummate the transactions contemplated hereby.
(b) The
execution and delivery of this Agreement and the consummation by Intermezzo and
Paragon of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on their part and no corporate or
organizational proceedings on the part of Intermezzo or Paragon are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
pursuant to the applicable law and the terms and conditions of this
Agreement.
(c) This
Agreement has been duly and validly executed and delivered by Intermezzo and
Paragon, and assuming the due authorization, execution and delivery thereof by
Buyer, constitutes the legal and binding obligations of Intermezzo and Paragon,
enforceable against each of them in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity.
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4.5
No Conflict; Required
Filings and Consents.
(a)
The execution and delivery of this Agreement by each of
Intermezzo and Paragon does not, and the performance of this Agreement by such
Persons shall not, (i) conflict with or violate any of their respective charters
or other organizational documents, (ii) conflict with or
violate any Legal Requirements, (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair the Company’s rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of the
Company, or (iv) result in the triggering, acceleration or increase of any
payment to any Person, including any “change in control” or similar provision,
except, with respect to clauses (ii), (iii) or (iv), for any such conflicts,
violations, breaches, defaults, triggers, accelerations, increases or other
occurrences that would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or its rights under the FireFly
Agreement.
(b)
The execution, delivery and performance of this
Agreement by each of Intermezzo and Paragon does not require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity or other third party (including, without limitation, lenders
and lessors, except (i) for applicable requirements, if any, of the Securities
Act of 1933, amended (the “Securities
Act”), the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”) or applicable securities laws of any
foreign country, and the rules and regulations thereunder, and appropriate
documents received from or filed with the relevant authorities of other
jurisdictions in which the Company is licensed or qualified to do business, (ii)
[SHARE REGISTRY IN [SWITZERLAND]?], and (iii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company or prevent
consummation of the transactions contemplated hereby or otherwise prevent the
parties hereto from performing their obligations under this
Agreement.
4.6
Assets and
Liabilities. The Company has no assets other than the FireFly Agreement.
The Company has no liabilities other than its obligations arising after the
Closing under the FireFly Agreement.
. Intermezzo
has made available to the Buyer a correct and complete copy of the FireFly
Agreement (as amended to date). The FireFly Agreement: (a) is in full force and
effect; (ii) is legal, valid, binding and enforceable against FireFly Holdings
Limited (“FireFly”); and (iii) will continue to be in full force
and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing. No party is in breach or default, and
no event has occurred which with notice or lapse of time or both would
constitute a breach or default or permit termination, modification or
acceleration, under the FireFly Agreement. Intermezzo and the Company have duly
exercised all of their rights under the FireFly Agreement to assure that FireFly
is performing its obligations under the FireFly Agreement and Intermezzo and the
Company have no knowledge that FireFly has failed to perform in any material
respect its obligations under the FireFly Agreement.
4.7
Litigation.
There are no claims, suits, actions or proceedings pending or, to the knowledge
of Intermezzo and Paragon, threatened against, Intermezzo, the Company or
Paragon before any Governmental Entity, governmental department or
instrumentality, or any arbitrator. There are no claims, suits, actions or
proceedings pending or, to the knowledge of Intermezzo, the Company or Paragon,
threatened against Intermezzo, the Company or Paragon before any Governmental
Entity, governmental department or instrumentality, or any arbitrator that seeks
to restrain or enjoin the consummation of the transactions contemplated by this
Agreement.
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4.8
Intellectual
Property. The Company’s rights under the FireFly Agreement are not
subject to any material proceeding or outstanding decree, order, judgment,
contract, license or stipulation restricting in any manner the use, transfer or
licensing thereof by the Company, or which may affect the validity, use or
enforceability of such rights.
4.9
Investment
Intent.
(a) The
Shareholders are acquiring the Buyer Shares hereunder for their own accounts for
investment and not for distribution, assignment or resale to
others.
(b) The
Shareholders acknowledge that the issuance of the Buyer Shares has not been
registered under the Securities Act in reliance upon an exemption therefrom for
nonpublic offerings.
(c) The
Shareholders acknowledge that the Buyer Shares may not be sold or otherwise
transferred unless such sale or other transfer is registered under the
Securities Act or an exemption from registration is available.
(d) Each
of the Shareholders is an “accredited investor” as that term is defined in Rule
501 of Regulation D promulgated under the Securities Act, and has had access to
such financial and other information and has been afforded the opportunity to
ask questions of the Buyer’s representatives and has received answers thereto,
as deemed necessary in connection with its decision to accept the Buyer Shares
hereunder.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
The Buyer
represent and warrant to Intermezzo and Paragon as set forth below in this Article
V.
5.1
Organization and
Qualification. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being or currently
planned by the Buyer to be conducted. The Buyer is not in violation of any of
the provisions of its certificate of incorporation and bylaws.
5.2
Capitalization.
The Buyer’s periodic reports on Form 10-Q and Form 10-K and current reports on
Form 8-K filed with the SEC accurately reflect its capitalization as of the
dates indicated in such reports. The issued and outstanding capital stock of the
Buyer (a) has been duly and validly issued; (b) is fully paid and nonassessable;
and (c) was not issued in violation of any preemptive rights or rights of first
refusal or first offer.
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5.3
Valid Issuance of the
Buyer Shares. The Buyer Shares issued to Paragon hereunder have been duly
authorized, validly issued, fully paid and are non-assessable, free of
restrictions on transfer other than restrictions on transfer under applicable
state and federal securities laws, are not subject to any preemptive rights,
rights of first refusal, tag-along rights, drag-along rights or other similar
rights, and have been issued in compliance with applicable state and federal
securities laws. Upon consummation of the transactions contemplated by this
Agreement, Paragon and Intermezzo will acquire marketable title to the Buyer
Shares free and clear of all Liens.
5.4
Authority Relative to
this Agreement. The Buyer has full corporate power and authority to: (a)
execute, deliver and perform this Agreement, and each ancillary document that
the Buyer has executed or delivered or is to execute or deliver pursuant to this
Agreement, and (b) carry out the Buyer’s obligations hereunder and thereunder
and, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation by the Buyer
of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of the Buyer,
and no other corporate proceedings on the part of the Buyer are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Buyer
and, assuming the due authorization, execution and delivery thereof by the other
parties hereto, constitutes the legal and binding obligation of the Buyer,
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and by general principles of
equity.
5.5
No Conflict; Required
Filings and Consents.
(a) The
execution and delivery of this Agreement by the Buyer do not, and the
performance of this Agreement by the Buyer shall not (i) conflict with or
violate the Buyer’s certificate or incorporation or bylaws, (ii) conflict with
or violate any Legal Requirements or any rule or regulation of the
Over-the-Counter bulletin board, (iii) result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or materially impair the Buyer’s rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Buyer pursuant to,
any contracts to which the Buyer is a party or by or to which any of the
properties or assets of the Buyer may be bound, subject or affected, or (iv)
result in the triggering, acceleration or increase of any payment to any Person
pursuant to any contracts to which the Buyer is a party or by or to which any of
the properties or assets of the Buyer may be bound, subject or affected,
including any “change in control” or similar provision thereof, except, with
respect to clauses (ii), (iii) or (iv), for any such conflicts, violations,
breaches, defaults, triggers, accelerations, increases or other occurrences that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Buyer.
(b) The
execution and delivery of this Agreement by the Buyer do not, and the
performance of its respective obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements, if any, of
the Securities Act, the Exchange Act, Blue Sky Laws, and the rules and
regulations thereunder, and appropriate documents with the relevant authorities
of other jurisdictions in which the Buyer is qualified to do business, and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Buyer, or prevent consummation of the transaction contemplated hereby or
otherwise prevent the parties hereto from performing their obligations under
this Agreement.
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5.6
Reporting Company
Status. The Buyer is subject to the reporting requirements of the
Exchange Act and the Buyer has taken no action designed to, or which to its
knowledge is likely to, have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Buyer received any notification
that the SEC is contemplating terminating such registration. The Common Stock is
traded on the Over-the-Counter bulletin board and the Buyer has not received any
notice regarding, and to the Buyer’s knowledge there is no threat of, the
termination or discontinuance of the eligibility of the Common Stock for such
trading.
5.7
Exchange Act Filings;
Financial Statements. Buyer has filed all reports, forms or other
information required to be filed by it under the Securities Act and the Exchange
Act (the foregoing materials being collectively referred to herein as the “SEC Reports”), except
as otherwise disclosed in any EC Reports. Except as otherwise disclosed in any
SEC Reports, as of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Buyer included
in the SEC Reports were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
Buyer and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
5.8
Private
Placement. No registration under the Securities Act is required for the
offer and sale of the Buyer Shares by the Buyer to Paragon as contemplated
hereby.
ARTICLE
VI
ADDITIONAL
AGREEMENTS
6.1
Confidential
Information. Except in connection with any dispute between the parties
and subject to any obligation to comply with (i) any applicable law, (ii) any
rule or regulation of any Governmental Entity or securities exchange, or (iii)
any subpoena or other legal process to make information available to the persons
entitled thereto, whether or not the transactions contemplated herein shall be
concluded, all information obtained by any party about any other, and all of the
terms and conditions of this Agreement, shall be kept in confidence by each
party, and each party shall cause its stockholders, directors, officers,
managers, employees, agents and attorneys to hold such information confidential.
Such confidentiality shall be maintained to the same degree as such party
maintains its own confidential information and shall be maintained until such
time, if any, as any such data or information either is, or becomes, published
or a matter of public knowledge; provided, however, that the foregoing shall not
apply to any information obtained by a party through its own independent
investigations of the other party or received by a party from a source not known
by such party to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the other
party, nor to any information obtained by a party which is generally known to
others engaged in the trade or business of such party. In the event a party to
this Agreement becomes legally compelled to disclose any such information, it
shall promptly provide the others with written notice of such requirement so
that the other parties to this Agreement may seek a protective order or other
remedy. If this Agreement shall be terminated for any reason, the parties shall
return or cause to be returned to the others all written data, information,
files, records and copies of documents, worksheets and other materials obtained
by such parties in connection with this Agreement.
- 10
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6.2
Public
Disclosure. Unless otherwise permitted by this Agreement, the Buyer,
Paragon and Intermezzo shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior written approval of the other (which approval shall
not be unreasonably withheld), except as may be required by law, in which case
the party proposing to issue such press release or make such public statement or
disclosure shall use its commercially reasonable efforts to consult with the
other party before issuing such press release or making such public statement or
disclosure.
6.3
Piggyback
Registration. The Buyer shall use its reasonable best efforts to provide
to Paragon and Intermezzo piggyback registration rights as to Buyer Shares in
any registration statement the Buyer files in which it is registering any shares
of Common Stock other than on a Form S-4 or Form S-8 or any successor forms
thereto. As a condition to such registration right, each Stockholder, or any
affiliate thereof, shall agree to be bound by the provisions of any registration
rights agreement pursuant to which other shares are being registered and, absent
any such agreement, to such standard limitations and obligations to which
registration rights are generally subject, including, but not limited to, the
obligation to participate in any underwriting and the right to have any
underwriter limit the number of shares being registered by a stockholder, or any
affiliate thereof. In no event, however, shall the Buyer have the obligation to
register any Buyer Shares if such shares can be sold in accordance with Rule 144
promulgated under the Securities Act.
6.4
Timely Filing of SEC
Reports. The Buyer will use its best efforts to file its SEC Reports with
the SEC until the one year anniversary of the Closing.
6.5
Best Efforts of
Intermezzo and Paragon. Intermezzo and Paragon agree, for each of
themselves and their affiliates, to use its best efforts to:
(a) identify
potential equity or debt financing opportunities for the Buyer over the eighteen
months following the Closing;
- 11
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(b)
cause any fund which Intermezzo, Paragon or any affiliate thereof forms to
finance the development of electronic games to consider financing games for the
benefit of Buyer and its affiliates; and
(c)
assign to Buyer at Buyer’s request any videogame distribution or videogame
development contracts, and intellectual property rights related to videogames
obtained from CDV Software Entertainment, AG and its affiliates that revert to
Intermezzo, Paragon or any of their affiliates in satisfaction of the exercise
of their rights; provided that any such assignment shall be subject to (i)
Buyer’s repayment of any production or royalty advances directly funded by
Intermezzo or an affiliate thereof, and (ii) assumption by Buyer or any of its
affiliates of any future financial obligations arising under any such videogame
distribution or videogame development contract.
6.6
Tax
Obligations.
(a)
Intermezzo and Paragon, on or after the Closing Date, shall pay any and all
Taxes due or imposed in connection with the transfer of the FireFly Agreement to
the Company or the transactions contemplated in this Agreement, at such time as
such Taxes become due and payable, and shall remain exclusively liable for (i)
any Taxes with respect to the FireFly Agreement or the Company to the extent
such Taxes accrued prior to the Closing Date or arose out of acts occurring or
conditions existing prior to the Closing Date; (ii) any Taxes of the Company
arising before the Closing Date.
(b)
The Buyer shall remain exclusively liable for (i) any Taxes with respect to the
FireFly License or the Company to the extent such Taxes accrue after the Closing
Date or arise out of acts occurring or conditions existing after the Closing
Date; (ii) any Taxes of Buyer arising before or after the Closing Date; or (iii)
any Taxes of the Buyer arising out of or with respect to the operation of the
Company after the Closing Date.
6.7
Notice and Rights Upon
Default. If Buyer shall fail to pay or cause IRP to pay any Milestone
payments due FireFly (as defined in the FireFly Agreement) within 75 days of its
due date, or any Royalty (as defined in the FireFly Agreement) payment within 20
days of its due date, Buyer shall provide notice thereof to Intermezzo.
Intermezzo shall then have the right to make such payments on behalf of Buyer
and IRP. If Intermezzo makes any such payment and is not reimbursed by the time
such payment was otherwise due (after regard for cure periods under the FireFly
Agreement), upon notice by Intermezzo, Buyer shall either assign the FireFly
Agreement to Intermezzo or its designee, after consent to such assignment is
obtained from FireFly, or transfer the stock of IRP to Intermezzo or its
designee. In addition, if Buyer shall fail to make any Net Receipts Payment,
Fixed Payment or any payment due under the Assignment Agreement within 60 days
when due, then upon notice from Intermezzo, the same rights shall exist in favor
of Intermezzo as existed for failures to pay under the FireFly Agreement. In no
event shall Intermezzo have any rights resulting from the failure to make any
payment under the FireFly Agreement if a bona fide dispute exists as to the
obligation to make any such payment.
6.8
Further
Assurances. Each of the parties to this Agreement shall use its
commercially reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby,
including under the Assignment Agreement.
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ARTICLE
VII
INDEMNIFICATION
7.1
Indemnification of
Buyer. The Buyer and each of its officers, directors, employees,
stockholders and agents (each, a “Buyer Indemnified
Party”) shall be entitled to be indemnified by Intermezzo and Paragon
against any and all Losses suffered or incurred by such Buyer Indemnified Party,
arising from, relating to or otherwise in connection with:
(a)
any breach of any representation or warranty of
Intermezzo or Paragon contained in this Agreement or the Assignment Agreement as
modified by the exceptions thereto and other disclosures included in any other
agreement or instrument furnished to the Buyer pursuant to this
Agreement;
(b)
any breach or failure to perform any covenant or agreement of
Intermezzo or Paragon contained in this Agreement or any other agreement or
instrument furnished to the Buyer pursuant to this Agreement; or
(c)
any legal, accounting, or advisory expenses of
Intermezzo and Paragon incurred in connection with the transaction contemplated
by this Agreement.
7.2
Indemnification of
Paragon and Intermezzo. The Buyer shall indemnify, defend and hold
harmless Intermezzo and Paragon and their respective officers, directors,
employees, stockholders and agents (each, a “Shareholder Indemnified
Party”) from and against any and all Losses suffered or incurred by such
Shareholder Indemnified Party, arising from, relating to or otherwise in
connection with:
(a)
any breach of any representation or warranty of the Buyer
contained in this Agreement as modified by the exceptions thereto and other
disclosures included in any other agreement or instrument furnished to
Intermezzo or Paragon pursuant to this Agreement;
(b)
any breach or failure to perform any covenant or
agreement of the Buyer contained in this Agreement or any other agreement or
instrument furnished to Intermezzo or Paragon pursuant to this Agreement;
or
(c)
any legal, accounting, or advisory expenses of the Buyer incurred
in connection with the transaction contemplated by this
Agreement.
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-
7.3
Indemnification
Claims.
(a)
In order for a Buyer Indemnified Party or a Shareholder
Indemnified Party, as applicable (an “Indemnified Party”),
to be entitled to any indemnification provided for under Section 7.1 or
Section 7.2 in
respect of, arising out of or involving a claim by a third party (“Third Party Claim”),
such Indemnified Party, must notify the indemnifying party (the “Indemnifying Party”)
in writing of the Third Party Claim within 30 days after receipt by such
Indemnified Party of notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
under Section
7.1 or Section
7.2 except to the extent the Indemnifying Party has been actually
prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within 10 days after the Indemnified Party’s
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim. The
Indemnifying Party shall have the right to assume and conduct and control the
defense of such Third Party Claim and the Indemnified Party shall have the right
to observe and receive information regarding the defense of such claim. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (such consent not to be unreasonably delayed, withheld or
conditioned), settle, compromise or offer to settle or compromise any such claim or demand on a basis which
would result in the imposition of a consent order, injunction or decree that
does not include an unconditional release of the Indemnified Party for any
liability arising out of such claim or demand or any related claim or
demand.
(b)
In order for an Indemnified Party to be entitled
to any indemnification provided for under this Agreement other than in respect
of, arising out of or involving a Third Party Claim, such Indemnified Party
shall deliver notice of such claim with reasonable promptness after discovery of
any such claim to the Indemnifying Party; provided, however, that failure to
give such notification shall not affect the indemnification provided under Section 7.1 or Section 7.2 except to
the extent the Indemnifying Party has been actually prejudiced as a result of
such failure. If the Indemnifying Party does not notify the Indemnified Party
within 30 days following its receipt of such notice that the Indemnifying Party
disputes its liability to the Indemnified Party, such claim specified by the
Indemnified Party in such notice shall be conclusively deemed a liability of the
Indemnifying Party under Section 7.1 or Section 7.2 and the
Indemnifying Party shall pay the amount of the Losses stated in such notice to
the Indemnified Party in the manner set forth in Section 7.4 or, in
the case of any notice in which the Losses (or any portion thereof) are
estimated, on such later date when the amount of such Losses (or such portion
thereof) becomes finally determined.
7.4
Limitations.
(a)
Except as otherwise provided in Section 7.8, Buyer
shall be required to make any indemnification payment pursuant to Section 7.2(a) for
any breach of the representations and warranties made by Buyer until such time
as the total amount of all indemnifiable Losses (including Losses arising from
such breach and all other indemnifiable Losses arising from any other breaches
of any representations or warranties) that have been suffered or incurred by all
of the Paragon Indemnified Parties collectively exceeds $50,000 (the “Deductible Amount”).
In such event, if the total amount of such indemnifiable Losses exceeds the
Deductible Amount, the Paragon Indemnified Parties shall be entitled, in
accordance with the provisions in this Article VII, to be indemnified against and compensated and
reimbursed for all indemnifiable Losses in excess of the Deductible Amount.
Except as otherwise provided in Section 7.7, in no
event shall the aggregate liability of the Buyer pursuant to Sections 7.2(a),
(b) or (c) exceed an amount equal to
$5,000,000 (the “Cap
Amount”). Buyer shall have the right to reacquire Buyer Shares from the
Shareholders, if any of such shares are then held, in satisfaction of an
indemnification claim with each share being deemed to have the same value per
share as of the end of the Closing Date.
- 14
-
(b)
Except as otherwise provided in Section 7.8, Paragon
and Intermezzo shall not be required to make any indemnification payment
pursuant to Section
7.1(a) for any breach of the representations and warranties made by
either of them until such time as the total amount of all indemnifiable Losses
(including Losses arising from such breach and all other indemnifiable Losses
arising from any other breaches of any representations or warranties) that have
been suffered or incurred by all of the Buyer Indemnified Parties collectively
exceeds the Deductible Amount. In such event, if the total amount of such
indemnifiable Losses exceeds the Deductible Amount, the Buyer Indemnified
Parties shall be entitled, in accordance with the provisions in this Article VII, to be indemnified against and compensated and
reimbursed for all indemnifiable Losses in excess of the Deductible Amount.
Except as otherwise provided in Section 7.7, in no
event shall the aggregate liability of each of Paragon and Intermezzo pursuant
to Section
7.1(a), (b) or (c) exceed
the Cap. Paragon and Intermezzo shall have the right to satisfy any
indemnification claim by tendering to the Buyer Indemnified Parties Buyer Shares
which shall be deemed to have a value of the closing price of such shares on the
Closing Date. In no event will Paragon and Intermezzo have any liability to pay
an indemnification claim that exceeds the value of the Buyer Shares and all
payments they have received under this Agreement and the Assignment Agreement,
it being understood that Buyer shall have the right to exercise its set-off
right for any further amounts under Section 7.6 hereof.
7.5
Termination of
Indemnification. The representations and warranties in this Agreement
shall survive the Closing until the second anniversary of the Closing Date;
provided, however, that the representations and warranties contained in Sections 4.1, 4.3, 4.4, 5.3, and 5.4, shall
survive until the expiration of the applicable statutes of limitations
(collectively, the “Survival Period”).
Any claim made by a party hereunder shall be preserved despite the subsequent
expiration of the Survival Period and any claim made prior to the expiration of
the Survival Period shall survive until final resolution thereof. Except as set
forth in the immediately preceding sentence, no claim for indemnification under
this Article
VII shall be brought after the end of the Survival Period.
7.6
Right to
Set-Off. The Buyer or any of its affiliates may, at their discretion,
satisfy the unpaid portion of any of indemnification obligations due them by, to
the extent permitted by law, setting-off against any amounts due and owing from
the Buyer or any of its affiliates to Paragon and Intermezzo including, without
limitation, any Net Receipts Payments or Fixed Payments due under this Agreement
or payments due under the Assignment Agreement. Notwithstanding the foregoing,
in the event that there exists a reasonable and good faith dispute as to whether
(i) either of the Shareholders has an indemnification obligation hereunder or
(ii) the Buyer or any Buyer Indemnified Party may enforce its right to set-off
under this Section
7.6, then, in each case, the Buyer shall be entitled to place any amounts
due and owing to the Shareholders hereunder into a third-party escrow account
until such dispute has been fully and finally resolved.
7.7
Adjustment to Purchase
Price. All indemnification payments paid pursuant to this Article VII shall, to
the maximum extent permitted by law, be treated as an adjustment to the Purchase
Price or the purchase of the interest in the Note.
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-
7.8
Exclusivity.
The right of Paragon, Intermezzo and the Buyer to assert indemnification claims
and receive indemnification payments pursuant to this Article VII shall be
the sole and exclusive right and remedy exercisable by such party with respect
to any breach by the other party hereto of any covenant, representation or
warranty or otherwise under this Agreement or relating to the transactions
contemplated hereby; provided, however, that the remedies of each such party for
fraud in the inducement or criminal acts (as determined by a final judgment of a
court of competent jurisdiction) by another party shall not be subject to any
limitation pursuant to this Agreement.
7.9
Determination of
Losses.
(a)
Losses payable to an Indemnified Party shall be reduced by
any insurance proceeds received by such Indemnified Party on account of such
matter. The parties hereto shall seek full recovery under all insurance policies
covering any indemnifiable matter in the ordinary course of business and to the
same extent as they would if such claim were not subject to right of
indemnification hereunder. No indemnifying party shall be required to make any
payment under this Article VII unless
and until all claims for insurance have been exhausted and all payments under
applicable insurance policies have been paid. Notwithstanding the foregoing, if
an insurance recovery is made by an Indemnified Party with respect to any
indemnification payment for which an indemnification payment has been made, such
Indemnified Party shall promptly pay to the indemnifying party the amount of the
insurance recovery, but not more than the amount of such indemnification
payment.
(b)
All indemnification payments payable hereunder shall be reduced by the net
amount of any tax benefits inuring to the benefit of the Indemnified Party as a
result of the Losses for which the Indemnified Party is seeking indemnification,
offset by tax benefits lost due to such payment.
ARTICLE
VIII
GENERAL
PROVISIONS
8.1
Notices.
All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial delivery service, or
mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with confirmation of receipt) to the parties at the following address
(or at such other address for a party as shall be specified by like
notice):
(a)
if to the Buyer to:
SouthPeak
Interactive Corporation
0000 Xxxx
Xxxxxxx
Xxxxxxxxxx,
Xxxxxxxx 00000
Attn:
Xxxxx Xxxxxxxx
with a
copy (which shall not constitute notice) to:
Xxxxxxxxx
Traurig, LLP
0000
Xxxxxx Xxxxxxxxx
- 00
-
Xxxxx
0000
XxXxxx,
Xxxxxxxx 00000
Attn:
Xxxx Xxxxxxx, Esq.
(b)
if to Paragon and Intermezzo:
Intermezzo
Establishment
Landstrasse
114
9495
Triefen, Liechtenstein
Attn:
Xxxx Xxxxx
with a
copy (which shall not constitute notice) to:
Holme,
Xxxxxxx & Xxxx, LLP
Xxxxxxxx
0
X-00000
Xxxxxx
Xxxxxxx
Attn:
Xxxx Xxxxxxxxx
8.2
Counterparts.
This Agreement may be executed in one or more counterparts, including by
facsimile and/or PDF, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
8.3
Entire Agreement;
Nonassignability; Parties in Interest. This Agreement and the documents
and instruments and other agreements specifically referred to herein or
delivered pursuant hereto, including the Exhibits, (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, (b) are not intended to
confer upon any other person any rights or remedies hereunder, and (c) shall not
be assigned. No representations, warranties, inducements, promises or
agreements, oral or written, by or among the parties not contained herein shall
be of any force of effect.
8.4
Severability.
If any provision of this Agreement, or the application thereof, becomes or is
declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
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8.5 Remedies Cumulative;
Specific Performance.
(a)
Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy. The
parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.
(b)
It is accordingly agreed that the parties hereto shall be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which they are entitled at law or in
equity.
8.6 Governing Law. This
Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to the laws that might
otherwise govern under applicable principles of conflicts of law. Each of the
parties hereto irrevocably consents to the exclusive jurisdiction of any state
or Federal court located Chesterfield, County, Virginia in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner authorized by
the laws of the Commonwealth of Virginia for such persons and waives and
covenants not to assert or plead any objection which they might otherwise have
to such jurisdiction and such process.
8.7 Rules of
Construction. The parties hereto agree that they have been represented by
counsel during the negotiation, preparation and execution of this Agreement and,
therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document. References
herein to “Dollars” or “$” shall refer to U.S. dollars and all payments and all
calculations of amount hereunder shall be made in U.S. dollars.
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IN
WITNESS WHEREOF, this Stock Purchase Agreement has been duly executed by the
parties as of and on the date first above written.
|
BUYER:
|
||
|
SOUTHPEAK
INTERACTIVE CORPORATION
|
||
|
By:
|
/s/
Xxxxx Xxxxxxxx
|
|
|
Name:
|
Xxxxx Xxxxxxxx
|
|
|
Title:
|
Chairman
|
|
|
PARAGON
INVESTMENT FUND
|
||
|
By:
|
/s/ [ILLEGIBLE]
|
|
|
Name:
|
[ILLEGIBLE] | |
|
Title:
|
Director | |
|
INTERMEZZO
ESTABLISHMENT
|
||
|
By:
|
/s/ [ILLEGIBLE]
|
|
|
Name:
|
[ILLEGIBLE] | |
|
Title
|
Director | |
- 19
-
EXHIBIT
A
Sale and Assignment
Agreement
EXHIBIT
B
FireFly Consent
Letter
- 2
-
EXHIBIT
B
Fixed Payments
Schedule
|
Fixed Payments Date
|
Amount
|
|||
|
Closing
Date
|
$ | 50,000 | ||
|
May
15, 2010
|
$ | 100,000 | ||
|
June
15, 2010
|
$ | 100,000 | ||
|
July
15, 2010
|
$ | 150,000 | ||
|
August
15, 2010
|
$ | 150,000 | ||
|
September
15, 2010
|
$ | 250,000 | ||
|
October
15, 2010
|
$ | 200,000 | ||
|
November
15, 2010
|
$ | 200,000 | ||
|
Total
|
$ | 1,200,000 | ||
