EXHIBIT 10.4
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made as of the 12th day of
April, 2004, by and between MME, Inc., a New Jersey corporation (the "Lender"),
and PARADISE MUSIC & ENTERTAINMENT, INC., a Delaware corporation having an
office at PMB 300 1630 A 00xx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (the "Borrower").
WHEREAS, Borrower has requested Lender to make a loan to Borrower in the
principal amount of $880,000.00;
WHEREAS, Lender has agreed to make such loan to Borrower, subject to the
terms and conditions contained herein; and
NOW, THEREFORE, for good and valuable consideration, and intending to be
legally bound, the parties agree as follows:
1. GENERAL
1.1 AGREEMENT TO LEND. Lender has agreed to loan to Borrower
and Borrower has agreed to borrow from Lender the principal amount of
$880,000.00 (the "Loan").
1.2 PURPOSE OF LOAN AND USE OF FUNDS. The purpose of the Loan
is to provide Borrower with additional working capital.
1.3 THE CLOSING DATE. The closing date of the Loan shall be
deemed to be April 12, 2004 (the "Closing Date").
1.4 TERM. The term of the Loan shall be to April 12, 2007 (the
"Term").
1.5 THE NOTE. The Loan shall be evidenced by that certain
promissory note dated as of the Closing Date given by Borrower in favor of
Lender in the principal amount of $880,000.00, or the principal amount of all
advances under the note during its duration, (the "Note"), substantially in the
form of EXHIBIT "A" annexed hereto and made a part hereof. The Note shall bear
interest at the rate of ten (10%) percent per annum and such interest shall be
paid quarterly in arrears.
1.6 THE SECURITY AGREEMENT. The payment of the Note is secured
by all of the assets of Borrower pursuant to that certain Security Agreement
dated as of the Closing Date between Borrower, as debtor, and Lender, as secured
party (the "Security Agreement"), substantially in the form of EXHIBIT "B"
annexed hereto and made a part hereof.
2. DELIVERY OF DOCUMENTS. Upon execution of this Agreement, Borrower
shall deliver to Lender, in form and substance satisfactory to Lender and
(unless otherwise indicated) each dated as of the Closing Date, the following
(the "Loan Documents"):
2.1 The Note.
2.2 The Security Agreement.
2.3 Corporate Resolutions of Borrower.
2.4 Warrant for 9,614,009 shares of Common Stock of Borrower at
an exercise price of $0.002 per share.
2.5 Such additional instruments, information and materials as
Lender may reasonably request.
3. REPRESENTATION AND WARRANTIES. Borrower makes the following
representations and warranties to Lender, all of which are material and are made
to induce Lender to make the Loan, are true as of the date hereof and shall
continue to be true until the Loan is repaid in full.
3.1 ORGANIZATION OF BORROWER; AUTHORITY; POWER, ETC. Borrower
is a corporation duly formed and validly existing under the laws of the State of
Delaware, and has full power, legal capacity and authority to execute each of
the Loan Documents and to perform and observe all of its obligations thereunder.
3.2 VIOLATION OF OTHER AGREEMENTS. The execution and delivery
of the Loan Documents and the performance and observance of the covenants to be
performed and observed thereunder do not violate or constitute a default in any
agreement to which Borrower is a party.
3.3 VALIDITY OF LOAN DOCUMENTS. Upon due execution and delivery
thereof, the Loan Documents shall constitute the legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, subject only to bankruptcy and insolvency laws applicable to
creditors generally and to equity principles which may preclude specific
performance and other equitable remedies.
3.4 CHARACTER OF REPRESENTATIONS; SURVIVAL. The representations
and warranties contained in this Agreement or in any certificate or statement
furnished to Lender by Borrower shall survive the execution of this Agreement
and shall not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
3.5 LIENS AND ENCUMBRANCES. As of the date hereof there are no
liens, claims, security interests or other charges or encumbrances (other than
those in favor of Lender) on any assets to which Lender has an interest
hereunder and Borrower covenants and agrees to keep such assets free from all
liens and encumbrances.
3.6 AUTHORIZED SHARES. As of the date hereof there are
75,000,000 shares of Borrower's Common Stock authorized for issuance and
75,000,000 shares of Borrower's
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Common Stock are outstanding [after giving effect to all options, warrants and
other securities that are convertible into shares of Borrower's Common Stock].
4. COVENANTS OF BORROWER. Borrower covenants and agrees as follows:
4.1 PERFORMANCE OF COVENANTS IN LOAN DOCUMENTS. To fully and
faithfully perform and observe the covenants and obligations to be performed and
observed in each of the Loan Documents, and not suffer or permit a default
thereunder.
4.2 BOOKS AND RECORDS. To use its best efforts to keep adequate
records of the operations of the Borrower in accordance with generally accepted
accounting principles and permit Lender, during regular business hours, to
examine, make copies, and take away copies of such books and records. Upon
execution of this Agreement, Borrower shall deliver to Lender a detailed
schedule of all current and contingent liabilities of Borrower known as of the
date hereof, indicating the claimant(s), including their address and telephone
numbers, the amount alleged to be due and Borrower's position with respect to
each of such liabilities.
4.3 COOPERATION WITH LENDER. To cause Xxxxx X. Xxxxxx, its
President and Chairman, to cooperate fully with Lender in order to carry out the
intent of the Loan Documents.
4.4 INDEMNIFICATION. Borrower agrees to indemnify and hold
Lender harmless against any and all claims and liability, including reasonable
legal costs and expenses happening in or arising out of or in any way relating
to the Loan, and the use of the Loan proceeds, except if such claims and
liability arise from the gross negligence or willful misconduct of Lender.
Lender shall be entitled to appear in any action or proceeding to defend itself
against any such claims, and, if Borrower is not named and served as a party to
such action or proceeding, Lender agrees to promptly notify Borrower of the
pendency of such action or proceeding and cooperate with Borrower to permit
Borrower to intervene therein. All costs incurred by Lender in connection with
any such action or proceeding, including attorneys' fees, shall be reimbursed by
Borrower to Lender within thirty (30) days after presentment.
4.7 ISSUANCE OF WARRANTS FOR SHARES OF COMMON STOCKS. As
further consideration for the Loan, as of the Closing Date, Borrower shall (i)
issue warrants for Lender to receive nine million, six hundred and fourteen
thousand and nine (9,614,009) fully paid and non-assessable shares of Common
Stock of Borrower to Lender (the "Warrants") at an exercise price of $0.002 per
share. Lender shall have piggyback registration rights to the shares underlying
the warrants with registration costs to be borne by Borrower. The shares
underlying the warrants shall be registered by the Borrower as soon as
practicable, but in no event later than the first registration statement filed
by the Borrower subsequent to the Closing Date.
5. EXPENSES. Borrower shall be responsible for Lender's legal fees
and other costs and expenses with respect to the negotiation, execution and the
delivery of this Agreement and the Loan Documents.
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6. EVENTS OF DEFAULT AND REMEDIES.
6.1 DEFAULT. The occurrence of any one or more of the following
at the option of Lender constitutes an event of default ("Event of Default")
hereunder:
(a) Borrower defaults in the payment of principal or
interest on the Note when and as the same shall become due and payable whether
by acceleration thereof or otherwise;
(b) Borrower defaults in the performance or observance
of any of the covenants and agreements contained in the Note (other than those
relating to payment) and same shall remain unremedied for a period of five (5)
business days after Borrower shall receive written notice of such default from
Lender, unless such cure cannot reasonably be completed within said period, then
if a remedy is not commenced within said time period and diligently and
continuously prosecuted to completion within sixty (60) days following the
default;
(c) Borrower defaults in the performance or observance
of any of the covenants and agreements contained in any other contracts or
agreements between Borrower and Lender;
(d) Borrower makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally as they
become due; or Borrower files any petition for relief under the federal
Bankruptcy Code; or any order, judgment or decree is entered adjudicating
Borrower bankrupt or insolvent;
(e) Borrower petitions or applies to any tribunal for
the appointment of a trustee, receiver or liquidator of Borrower, or of any
substantial part of the assets of or any proceedings for the voluntary
liquidation and dissolution of Borrower under any bankruptcy, reorganization,
compromise, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect;
(f) any such petition or application is filed, or any
such proceedings are commenced, against Borrower and Borrower by any act
indicates its approval thereof, consent thereto or acquiescence therein, or any
order, judgment or decree is entered appointing any such trustee, receiver or
liquidator, or approving the petition in any such proceedings and such order,
judgment or decree remains unstayed and in effect for more than thirty (30)
days;
(g) any order, judgment or decree is entered in any
proceeding against Borrower decreeing the dissolution of Borrower and such
order, judgment or decree remains unstayed and in effect for more than thirty
(30) days; or
(h) Borrower defaults in the performance of any of its
obligations herein.
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6.2 REMEDIES. Upon the occurrence of any Event of Default as
defined in Paragraph 6.1 hereof, Lender may exercise any or all of the following
rights and remedies as Lender, in its sole discretion, may deem necessary or
appropriate:
(a) Declare immediately due and payable, without notice
or demand, all monies advanced pursuant to this Agreement and under the Note,
which is then unpaid, and accelerate payment thereof notwithstanding contrary
terms of payment stated therein, and exercise all rights and remedies available
under any of the Loan Documents, at law, in equity or otherwise.
(b) Institute appropriate proceedings for injunctive
relief (including specific performance of the obligations of Borrower
hereunder).
(c) Terminate any further obligations of Lender under
this Agreement.
The remedies provided in this Agreement may be exercised by Lender without
notice to Borrower (to the extent permitted by law and except as notice is
herein expressly required), shall be in addition to and not in substitution for
the rights and remedies which would otherwise be vested in Lender for the
recovery of damages or otherwise in the event of a breach of any of the
undertakings of Borrower hereunder. No failure by Lender to exercise and no
delay in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other, further or additional
exercise thereof.
7. MISCELLANEOUS.
7.1 GOVERNING LAW. This Agreement and all matters relating to
the Loan shall be governed by the laws of the State of Connecticut.
7.2 MODIFICATION; WAIVER; CONSENT. Any modification, or waiver
of any provision of this Agreement, or any consent to any departure by Borrower
therefrom, shall not be effective unless the same is in writing and signed by
Lender, and then such modification, waiver or consent shall be effective only in
the specific instance and for the specific purpose given. The giving by Lender
of any notice to or demand on Borrower not specifically required of Lender
hereunder shall not entitle Borrower to any other or further notice or demand in
the same, similar or other circumstances.
7.3 COMMUNICATIONS. All notices, requests, demands,
instructions and other communications required or permitted to be given under
this Agreement shall be in writing and shall be deemed to have been duly given
(i) upon hand delivery, (ii) upon receipt by facsimile, (iii) the next business
day after delivery to a reputable overnight courier which provides for
acknowledgement of receipt, or (iv) three (3) days after deposit in the United
States mail by first-class, postage prepaid, registered or certified mail,
return receipt requested, as follows:
(i) If to Lender, to:
MME, Inc.
000 Xxxxxxx Xxxx, Xxx. 000
Xxxxxxxxxx, XX 00000
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(ii) If to Borrower, to:
Xx. Xxxxx X. Xxxxxx, President
Paradise Music & Entertainment, Inc.
PMB 300 1630 A 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax No. 000 000 0000
With a copy to:
Xx. Xxxxxxx Xxxxx
Xxxxx & Schloss
00 X. 00xx. Xx.
XX, XX 00000
Fax No. (000) 000-0000
7.4 ASSIGNMENT. This Agreement may be assigned at any time, in
whole or part, by Lender. Borrower may not assign, pledge or hypothecate this
Agreement or any interest herein to any person without the prior written consent
of Lender.
7.5 TIME OF ESSENCE. Time is of the essence hereof.
7.6 SEVERABILITY; TITLES. In case any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect by any court or other entity having the authority
to do so, the validity of the remaining provisions hereof shall be in no way
affected, prejudiced or disturbed. The titles of the Paragraphs hereof are for
reference purposes only and do not constitute part of this Agreement.
7.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one agreement.
7.8 ENTIRE AGREEMENT. This Agreement, together with the other
Loan Documents, contains the entire agreement between Lender and Borrower with
respect to the subject matter hereof and except as specifically set forth herein
supersedes and cancels any prior understandings and agreements between Lender
and Borrower with respect to the subject matter hereof.
7.9 CONFLICT WITH OTHER LOAN DOCUMENTS. In the event any
provision, term or condition of this Agreement conflicts with the terms or
conditions of the other Loan Documents, the terms and conditions of this
Agreement shall control.
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7.10 BINDING EFFECT; BENEFIT. This Agreement shall be binding
upon and shall inure to the benefit of the successors and permitted assigns of
Lender and the successors and permitted assigns of Borrower.
7.11 ATTORNEYS' FEES. If any legal action is brought to enforce
the terms of this Agreement or for damages resulting from a default in the
performance of any party's obligations hereunder, the prevailing party shall be
entitled to collect its court costs and reasonable attorneys' fees and expenses
incurred in the prosecution of such legal action.
7.12 CONSTRUCTION. Each party has been advised by counsel of its
choice, and each knowingly and intentionally waives the applicability of any
rule of construction which provides that in the event of ambiguity, the
provision in question is to be construed to the detriment of the party
responsible for the drafting of the document. This provision shall be applicable
to the construction of all of the Loan Documents.
[The remainder of this page is left intentionally blank.
Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
PARADISE MUSIC & ENTERTAINMENT, INC.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Chairman and President
MME, Inc.
By: [SIGNATURE ILLEGIBLE]
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EXHIBIT "A"
THE NOTE
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EXHIBIT "B"
THE SECURITY AGREEMENT
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