--------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and among
PARADISE MUSIC & ENTERTAINMENT, INC.
STRAW DOGS ACQUISITION CORP.
and
XXXXX XXXXX
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Dated September 23, 1999
TABLE OF CONTENTS
ARTICLE I
SALE OF SHARES
Section 1.1 Sale of the Shares................................................1
ARTICLE II
PURCHASE PRICE AND CLOSING
Section 2.1 Purchase Price....................................................2
2.1.1 Payment.........................................................2
2.1.2 Accounting Procedures...........................................2
2.1.3 Examination of Books and Records................................3
Section 2.2 Closing and Effective Date........................................3
ARTICLE III
REPRESENTATIONS OF THE STOCKHOLDER
Section 3.1 Execution and Validity of Agreements; Restrictive Documents.......4
3.1.1 Execution and Validity..........................................4
3.1.2 Stock Ownership.................................................4
3.1.3 No Options......................................................4
3.1.4 No Restrictions.................................................4
3.1.5 Non-Contravention...............................................4
Section 3.2 Capital Stock; Existence and Good Standing........................5
3.2.1 Capital Stock...................................................5
3.2.2 Existence and Good Standing.....................................5
Section 3.3 Subsidiaries and Investments......................................5
Section 3.4 Financial Statements and No Material Changes......................6
Section 3.5 Books and Records.................................................6
Section 3.6 Titles to Properties; Encumbrances................................6
Section 3.7 Real Property.....................................................7
3.7.1 Owned Real Property.............................................7
3.7.2 Leased Real Property............................................7
Section 3.8 Contracts.........................................................7
Section 3.9 Non-Contravention; Approvals and Consents.........................8
3.9.1 Non-Contravention...............................................8
3.9.2 Approvals and Consents..........................................9
Section 3.10 Litigation.......................................................9
Section 3.11 Taxes............................................................9
Section 3.12 Liabilities.....................................................10
Section 3.13 Insurance.......................................................10
Section 3.14 Intellectual Properties.........................................11
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Section 3.15 Compliance with Laws; Licenses and Permits......................11
3.15.1 Compliance....................................................11
3.15.2 Licenses......................................................12
Section 3.16 Intentionally Omitted...........................................12
Section 3.17 Accounts Receivable; Work-in-Process; Accounts Payable..........12
Section 3.18 Employment Relations............................................12
Section 3.19 Employee Benefit Plans..........................................13
Section 3.20 Interests in Customers, Suppliers, Etc..........................13
Section 3.21 Bank Accounts and Powers of Attorney............................13
Section 3.22 Compensation of Employees.......................................14
Section 3.23 No Changes Since the Balance Sheet Date.........................14
Section 3.24 Company Controls................................................14
Section 3.25 Brokers.........................................................15
Section 3.26 Year 2000 Compliant.............................................15
3.26.1 Definition....................................................15
3.26.2 Computer Systems..............................................16
3.26.3 Other Products and Services...................................16
Section 3.27 Prepayment for Services.........................................16
Section 3.28 Investment Representations......................................16
Section 3.30 Copies of Documents.............................................18
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER AND PARADISE
Section 4.1 Existence and Good Standing......................................18
Section 4.2 Execution and Validity of Agreement..............................18
Section 4.3 No Restrictions..................................................18
Section 4.4 Non-Contravention; Approvals and Consents........................19
4.4.1 Non-Contravention..............................................19
4.4.2 Approvals and Consents.........................................19
Section 4.5 Compliance with Laws; Licenses and Permits.......................19
4.5.1 Compliance.....................................................19
4.5.2 Licenses.......................................................20
Section 4.6 Paradise Stock...................................................20
Section 4.7 Brokers..........................................................20
ARTICLE V
COVENANTS OF THE COMPANY AND THE OWNERS
Section 5.1 Regulatory and Other Approvals...................................20
Section 5.2 Investigation by Paradise and the Purchaser......................21
Section 5.3 No Solicitations.................................................21
Section 5.4 Conduct of Business..............................................21
Section 5.5 Notice and Cure..................................................23
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Section 5.6 Fulfillment of Conditions........................................23
ARTICLE VI
COVENANTS OF PARADISE AND THE PURCHASER
Section 6.1 Regulatory and Other Approvals...................................23
Section 6.2 Investigation by the Stockholder.................................24
Section 6.3 Notice and Cure..................................................24
Section 6.4 Fulfillment of Conditions........................................25
Section 6.5 Blue Sky.........................................................25
ARTICLE VII
MUTUAL COVENANTS
Section 7.1 Reasonable Efforts to Consummate Transaction.....................25
Section 7.2 Public Announcements.............................................25
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF PARADISE AND THE PURCHASER
Section 8.1 Representations and Warranties...................................26
Section 8.2 Good Standing and Tax Certificates...............................26
Section 8.3 Performance......................................................26
Section 8.4 No Litigation....................................................26
Section 8.5 Regulatory Consents and Approvals................................26
Section 8.6 Required Approvals, Notices and Consents.........................27
Section 8.7 Opinion of Counsel...............................................27
Section 8.9 Repayment of Loans...............................................27
Section 8.10 Material Adverse Effect.........................................27
Section 8.11 Proceedings.....................................................27
Section 8.12 Wonderous Strange Acquisition Agreement.........................28
Section 8.13 Working Capital.................................................28
Section 8.13 Net Worth.......................................................28
Section 8.14 Financial Statements............................................28
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDER
Section 9.1 Representations and Warranties...................................28
Section 9.2 Performance......................................................29
Section 9.3 Certified Resolutions............................................29
Section 9.4 No Litigation....................................................29
Section 9.5 Regulatory Consents and Approvals................................29
Section 9.6 Paradise Stockholder Approval....................................29
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Section 9.7 Opinion of Counsel...............................................29
Section 9.8 Proceedings......................................................30
Section 9.9 Material Adverse Effect..........................................30
Section 9.10 Wonderous Strange Acquisition Agreement.........................30
Section 9.11 Working Capital.................................................30
ARTICLE X
ADDITIONAL AGREEMENTS
Section 10.1 Name of Purchaser...............................................30
Section 10.2 Termination.....................................................30
Section 10.3 Effect of Termination...........................................31
Section 10.4 Registration Rights.............................................31
ARTICLE XI
SURVIVAL; INDEMNITY
Section 11.1 Survival........................................................31
Section 11.2 Obligation of the Stockholder to Indemnify......................32
11.2.1 General Indemnity.............................................32
11.2.3 Losses........................................................32
Section 11.3 Obligation of the Paradise and the Purchaser to Indemnify.......32
Section 11.4 Indemnification Procedures......................................33
11.4.1 Non-Third Party Claims........................................33
11.4.2 Third-Party Claims............................................33
Section 11.5 Limitations on and Other Matters Regarding Indemnification......36
11.5.1 Indemnity Cushion.............................................36
11.5.2 Termination of Indemnification Obligations of the
Stockholder...................................................36
11.5.3 Termination of Indemnification Obligations of Paradise
and the Purchaser.............................................36
11.5.4 Exceptions....................................................37
11.5.5 Control by Paradise...........................................37
ARTICLE XII
MISCELLANEOUS
Section 12.1 Expenses........................................................37
Section 12.2 Governing Law...................................................37
Section 12.3 Jurisdiction....................................................37
Section 12.4 "Person"Defined.................................................38
Section 12.5 "Knowledge".....................................................38
Section 12.6 Affiliate Defined...............................................38
Section 12.7 Captions........................................................38
Section 12.8 Confidentiality.................................................38
Section 12.9 Notices.........................................................39
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Section 12.10 Parties in Interest............................................40
Section 12.11 Severability...................................................40
Section 12.12 Counterparts...................................................40
Section 12.13 Entire Agreement...............................................40
Section 12.14 Amendment......................................................41
Section 12.15 Third Party Beneficiaries......................................41
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EXHIBITS AND APPENDICES
Exhibit A Opinion of Xxxxx, Xxxxxxxx & Xxxxxx
Exhibit B Opinion of Xxxxx & Xxxxxxx LLP
Appendix A Registration Rights Provisions
SCHEDULES
Schedule 3.2 Foreign Qualifications
Schedule 3.3.2 Ownership Interests
Schedule 3.4 Financial Statements
Schedule 3.5 Books and Records
Schedule 3.6 Tangible Personal Property; Encumbrances
Schedule 3.7.2 Leased Real Property
Schedule 3.7.3 Real Property
Schedule 3.8 Contracts
Schedule 3.9.2 Consents and Approvals
Schedule 3.10 Litigation
Schedule 3.11 Taxes
Schedule 3.13 Insurance
Schedule 3.14 Intellectual Properties
Schedule 3.20 Interests in Customers; Suppliers
Schedule 3.21 Bank Accounts and Powers of Attorney
Schedule 3.22 Compensation of Employees
Schedule 3.23 Changes Since the Balance Sheet Date
Schedule 3.25 Brokers
Schedule 3.26 Year 2000 Compliant
Schedule 3.27 Prepayment for Services
Schedule 4.4.1 Approvals and Consents
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated September 23, 1999
(the "Execution Date") by and among PARADISE MUSIC & ENTERTAINMENT CORP., a
Delaware corporation ("Paradise"); STRAW DOGS ACQUISITION CORP., a Delaware
corporation and wholly-owned subsidiary of Paradise (the "Purchaser"); and XXXXX
XXXXX ("the Stockholder").
W I T N E S S E T H :
WHEREAS, the Stockholder owns 100% of the issued and outstanding shares of
common stock, no par value per share (the "Shares") of Spur & Buckle, Inc., a
California corporation; (the "Company"); and
WHEREAS, the Stockholder wishes to transfer, and the Purchaser wishes to
acquire100% of the Shares, in a tax-free reorganization as described in ss.
368(a)(1)(B) of the Internal Revenue Code, upon the terms and subject to the
conditions of this Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
ARTICLE I
SALE OF THE SHARES
Section 1.1 Sale of the Shares. Subject to the terms and conditions of
this Agreement, the Stockholder agrees to sell, assign, transfer and deliver the
Shares to the Purchaser on the Closing Date (as defined in Section 2.2) and the
purchaser agrees to purchase the Shares from the Stockholder on the Closing
Date. All certificates representing the Shares shall be duly endorsed by the
Stockholder, with all necessary transfer tax and other revenue stamps, acquired
at the Stockholder's expense, affixed and canceled.
ARTICLE II
PURCHASE PRICE AND CLOSING
Section 2.1 Purchase Price. In full consideration for the purchase by the
Purchaser of the Shares, the purchase price (the "Purchase Price") shall be paid
by the Purchaser as follows:
2.1.1 Payment. (a) At the Closing, the Purchaser will pay the Stockholder
541,000 shares of Paradise Music & Entertainment, Inc. common stock, par value
$.01 per share ("Paradise Stock").
(b) The Paradise Stock shall be restricted stock and shall be
saleable by the Stockholder only in accordance with the terms of the
Registration Rights Agreement described in Section 8.8 of this Agreement or as
otherwise permitted pursuant to applicable securities laws.
2.1.2 Accounting Procedures.
(i) The Purchaser shall cause Xxxxxxxxx, Kass & Company, P.C., or another
independent accounting firm chosen by the Purchaser (the "Accountants"), as soon
as practicable after the Closing, to prepare in accordance with generally
accepted accounting principles consistently applied ("GAAP"), a report
containing an audited balance sheet of the Company as of the close of business
on the Effective Date (the "Effective Date Balance Sheet"), together with a
statement of the Accountants based upon such report and stating that it was
prepared in accordance with this Agreement and setting forth the Net Worth (as
defined in section 8.13) of the Stockholder (the "Special Determination"). If
the Stockholder does not agree that the Special Determination correctly states
the Net Worth, the Stockholder shall promptly (but not later than 45 days after
the delivery to it of the Special Determination) give written notice to the
Purchaser of any exceptions thereto (in reasonable detail describing the nature
of the disagreement asserted). If the Stockholder and the Purchaser reconcile
their differences, the Net Worth calculation shall be adjusted accordingly and
shall thereupon become binding, final and conclusive upon all of the parties
hereto and enforceable in a court of law. If the Stockholder and the Purchaser
are unable to reconcile their differences in writing within 20 days after
written notice of exceptions is delivered to the Purchaser (the "Reconciliation
Period"), the items in dispute shall be submitted to a mutually acceptable
accounting firm (other than the Accountants) selected from any of the five
largest accounting firms in the United States in terms of gross revenues (the
"Independent Auditors") for final determination, and the Net Worth calculation
shall be deemed adjusted in accordance with the determination of the Independent
Auditors and shall become binding, final and conclusive upon all of the parties
hereto and enforceable in a court of law. The Independent Auditors shall
consider only the items in dispute and shall be instructed to act within 20 days
(or such longer period as the Stockholder and the Purchaser may agree) to
resolve all items in dispute. If the Stockholder does not give notice of any
exception within 45 days after the delivery to it of the Special Determination
or if the Stockholder gives written notification of its acceptance of the Net
Worth prior to the end of
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such 45 day period, the Net Worth set forth in the Special Determination shall
thereupon become binding, final and conclusive upon all the parties hereto and
enforceable in a court of law.
(ii) In the event the Independent Auditors are for any reason unable or
unwilling to perform the services required of it under this Section 2.1, then
the Purchaser and the Stockholder agree to select another accounting firm from
among the five largest accounting firms in the United States in terms of gross
revenues to perform the services to be performed under this Section 2.1.2 by the
Independent Auditors. For purposes of this Section 2.1 the term "Independent
Auditors" shall include such other accounting firm chosen in accordance with
this clause (ii).
(iii) The Independent Auditors shall determine the party (i.e., the
Purchaser or the Stockholder) whose asserted position as to the calculation of
Net Worth for the period under examination before the Independent Auditors is
furthest from the determination of Net Worth by the Independent Auditors, which
non-prevailing party shall pay the fees and expenses of the Independent
Auditors.
2.1.3 Examination of Books and Records. The books and records of the
Company shall be made available during normal business hours upon reasonable
advance notice at the principal office of the Company, to the parties hereto,
the Accountants and the Independent Auditors to the extent required to determine
the calculations required under this Section 2.1. Any such examination shall be
conducted so as to minimize disruption of the Business. The parties hereto shall
cause the Company and the Purchaser to make arrangements to make available to
the parties hereto and their respective representatives (including auditors) any
back-up materials generated by the Company or the Accountants, as the case may
be, with respect to any adjustments made by them to the financial statements in
the process of preparing the Special Determination. In addition, the
Stockholder, on the one hand, and the Purchaser, on the other hand, shall make
available to the other party and their representatives (including auditors) any
back-up materials generated by them to support a position which is contrary to
the position taken by the other party.
Section 2.2 Closing and Effective Date. Not more than one business day
from the approval of this Agreement at the special meeting of stockholders of
Paradise contemplated by Section 9.6, Paradise shall notify the other parties to
this Agreement of its desire to close, specifying a closing date not more than
five business days thereafter. The transfer of the Shares to the Purchaser and
delivery of the Purchase Price in exchange therefor (the "Closing") shall take
place at 10:00 a.m. at the offices of Xxxxx & Xxxxxxx LLP, 0000 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx on the date so determined (the "Closing Date"). In the event a
proceeding shall have been instituted attacking the legality of this Agreement
or seeking to enjoin its consummation, then the Closing Date shall be suspended
pending a final determination of any such proceeding. The transfer of the Shares
by the Stockholder shall be deemed effective as of the close of business on June
1, 1999 (the "Effective Date").
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ARTICLE III
REPRESENTATIONS OF THE STOCKHOLDER
The Stockholder represents and warrants to and with the Purchaser
and Paradise as follows:
Section 3.1 Execution and Validity of Agreement; Restrictive Documents.
3.1.1 Execution and Validity. The Stockholder has the full legal right and
capacity to enter into this Agreement and to perform his obligations hereunder.
This Agreement has been duly and validly executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery by the
Purchaser and Paradise, constitutes a legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms.
3.1.2 Stock Ownership. The Stockholder is the true and lawful owner of the
Shares and all of the Shares have been duly and validly authorized and issued
and are fully paid, nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof, except as such liability may be
imposed pursuant to applicable laws, and such ownership is free and clear of all
mortgages, liens, security interests, encumbrances, claims charges and
restrictions of any kind or character (collectively, "Liens").
3.1.3 No Options. There are no outstanding subscriptions, options, rights
(including "phantom stock rights"), warrants, calls, commitments,
understandings, arrangements, plans or other agreements of any kind
(collectively "Options") to acquire any Shares from the Stockholder and there
are no arrangements or understandings with respect to the sale or transfer of
any Shares by the Stockholder.
3.1.4 No Restrictions. There is no suit, action, claim, investigation or
inquiry by any Governmental or Regulatory Authority, (as defined in Section
3.1.5 below), and no legal, administrative or arbitration proceeding pending or,
to the Stockholder's knowledge, threatened against the Stockholder or any of the
Stockholder's properties or assets, with respect to the execution, delivery and
performance of this Agreement or the transactions contemplated hereby or any
other agreement entered into by the Stockholder in connection with the
transactions contemplated hereby.
3.1.5 Non-Contravention. The execution, delivery and performance by the
Stockholder of his obligations hereunder and the consummation of the
transactions contemplated hereby, will not (a) result in the violation by the
Stockholder of any statute, law, rule, regulation or ordinance (collectively,
"Laws"), or any judgment, decree, order, writ, permit or license (collectively,
"Orders"), of any court, tribunal, arbitrator, authority, agency, commission,
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision (a
"Governmental or Regulatory Authority"), applicable to the Stockholder or any of
the Shares, or (b) conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, or require
the
4
Stockholder to obtain any consent, approval or action of, make any filing with
or give any notice to, or result in or give to any Person any right of payment
or reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any Lien upon any of the Shares, under
any of the terms, conditions or provisions of any agreement, commitment, lease,
license, evidence of undebtedness, mortgage, indenture, security agreement,
instrument, note, bond, franchise, permit, concession, or other instrument,
obligation or agreement of any kind (collectively "Stockholder Contracts")"), to
which the Stockholder is a party or by which the Stockholder or any of his
assets or properties are bound.
Section 3.2 Capital Stock; Existence and Good Standing.
3.2.1 Capital Stock. The Company has an authorized capitalization
consisting of 1,000,000 shares of common stock, no par value, of which 1,000
shares are issued and outstanding, and no shares are held in the treasury of the
Company. All such shares have been duly authorized and validly issued, are fully
paid and non-assessable, and have not been issued in violation of any preemptive
rights of Stockholders. No other class of capital stock of the Company is
authorized or outstanding. There are no outstanding Options providing for the
purchase, issuance or sale of any shares of the capital stock of the Company by
the Company.
3.2.2 Existence and Good Standing. The Company was duly organized and is
validly existing and in good standing under the laws of California, with the
full power and authority to own its property and to carry on its business all as
and in the places where such properties are now owned or operated or such
business is now being conducted. The Company is duly qualified, licensed or
admitted to do business and is in good standing in those jurisdictions set forth
on Schedule 3.2. The Company is qualified, licensed or admitted to do business
in all jurisdictions in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for jurisdictions where a failure to be
so qualified would not have a Material Adverse Effect. For purposes of this
Agreement, "Material Adverse Effect" shall mean any material and adverse effect
on the financial condition, results of operations, assets, properties or
business of the Company, Paradise or the Purchaser, as applicable.
Section 3.3 Subsidiaries and Investments. The Company does not own any
capital stock or other equity or proprietary or ownership interest in any
Person, other than investments of publicly-traded debt and equity securities
held for investment.
Section 3.4 Financial Statements and No Material Changes. Prior to the
Closing Date, the Stockholder will deliver Schedule 3.4 to Paradise and the
Purchaser; provided, however, failure to deliver said Schedule 3.4 shall not be
a breach of this Agreement by the Stockholder. Schedule 3.4 will set forth an
audited balance sheet of the Company as at June 30, 1999, and the related
audited statement of income, retained earnings and cash flow for the twelve
months then ended, prepared by Xxxxxxxxx, Kass & Company, P.C., certified public
accountants (the balance sheet of the Company as at June 30, 1999, including the
footnotes thereto, being referred to in this Agreement as the "Balance Sheet").
Such financial statements will have been prepared in accordance with GAAP
throughout the periods indicated. The Balance Sheet will fairly present the
5
financial condition of the Company at the date thereof and will reflect all
claims against and all debts and liabilities of the Company, fixed or
contingent, as at the date thereof, required to be shown thereon under GAAP and
the related statements of income , retained earnings and cash flow will fairly
present the results of operations of the Company for the period indicated. Since
June 30, 1999 (the "Balance Sheet Date"), there has been no material adverse
change in the assets or liabilities, or in the business or condition, financial
or otherwise, or in the results of operations of the Company.
Section 3.5 Books and Records. All accounts, books, ledgers and official
and other records material to the Company of whatsoever kind have been properly
and accurately kept and are complete in all material respects, and there are no
material inaccuracies or discrepancies of any kind contained or reflected
therein. Except as set forth on Schedule 3.5, the Company does not have any of
its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and possession of the Company.
Section 3.6 Title to Properties; Encumbrances. The Company has good and
valid title to, or enforceable leasehold interests in or valid rights under
contract to use all the material properties and assets owned or used by it
(personal, tangible and intangible), including, without limitation (a) all the
properties and assets reflected in the Balance Sheet, (b) all the properties and
assets purchased or otherwise contracted for by the Company since the Balance
Sheet Date (except for properties and assets reflected in the Balance Sheet or
acquired or otherwise contracted for since the Balance Sheet Date that have been
sold or otherwise disposed of in the ordinary course of business), and (c) all
properties and assets leased by the Company, in each case free and clear of all
Liens, except for Liens set forth on Schedule 3.6. The property, plant and
equipment owned or otherwise contracted for by the Company is in a state of good
maintenance and repair (ordinary wear and tear excepted) and is adequate and
suitable in all material respects for the purposes for which they are presently
being used.
Section 3.7 Real Property.
3.7.1 Owned Real Property. The Company does not own any real property
including ground leases) or hold any option or right of first refusal or first
offer to acquire any real property, and the Company is not obligated by Contract
or otherwise to purchase any real property.
3.7.2 Leased Real Property. Schedule 3.7.2 contains an accurate and
complete list of all real property leases, subleases, licenses and other
occupancy agreements, including without limitation, any modification, amendment
or supplement thereto and any other related document or agreement executed or
entered into by the Company (each individually, a "Real Property Lease" and
collectively the "Real Property Leases") to which to Company is a party
(including, without limitation, any Real Property Lease which the Company has
subleased or assigned to another Person and as to which the Company remains
liable). Except as set forth on Schedule 3.7.2, each
6
Real Property Lease set forth on Schedule 3.7.2 (or required to be set forth on
Schedule 3.7.2): (a) is valid, binding and in full force and effect; (b) all
rents and additional rents and other sums, expenses and charges due to the
Effective Date have been paid; (c) the lessee has been in peaceable possession
since the commencement of the original term thereof; (d) no waiver, indulgence
or postponement of the lessee's obligations thereunder has been granted by the
lessor; (e) there exists no default or event of default by the Company or to the
knowledge of the Stockholder, by any other party thereto; (f) there exists no
occurrence, condition or act which, with the giving of notice, the lapse of time
or the happening of any further event or condition, would become a default or
event of default by the Company thereunder; and (g) there are no outstanding
claims of breach or indemnification or notice of default or termination
thereunder. The Company holds the leasehold estate on all Real Property Leases,
free and clear of all Liens, except as set forth on Schedule 3.6 and the liens
of mortgagees of the real property in which such leasehold estate is located.
Except as set forth on Schedule 3.7.2, the real property leased by the Company
is in a state of good maintenance and repair and is adequate and suitable for
the purposes for which it is presently being used, and there are no material
repair or restoration works likely to be required in connection with any of the
leased real properties. The Company is in physical possession and actual and
exclusive occupation of the whole of each of its leased properties. The Company
does not owe any brokerage commission with respect to any Real Property Lease.
Section 3.8 Contracts. Schedule 3.8 hereto contains an accurate and
complete list of the following agreements, commitments, leases, licenses,
evidences of indebtedness, mortgages, indentures, security agreements,
instruments, notes, bonds, franchises, permits, concessions, or other
instruments, obligations or agreements of any kind to which the Company is a
party (collectively, "Contracts"): (a) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and all bonus, incentive, deferred compensation, retiree medical or
life insurance; supplemental retirement, severance or other benefit plans,
programs or arrangements which are maintained by the Company (collectively,
"Plans"); (b) any personal property lease with a fixed annual rental of $10,000
or more; (c) any Contract relating to capital expenditures which involves
payments of $25,000 or more in any single transaction or series of related
transactions; (d) any Contract relating to the making of a loan or advance to,
or investment in, any other Person; (e) any Contract evidencing or relating in
any way to indebtedness for money borrowed or to be borrowed, whether directly
or indirectly, by way of loan, purchase money obligation, guarantee (other than
the endorsement of negotiable instruments for collection in the ordinary course
of business), conditional sale, purchase or otherwise; (f) any management
service, employment, consulting or similar type of Contract which is not
cancelable by the Company without penalty or other financial obligation within
30 days; (g) any Contract limiting the Company's freedom to engage in any line
of business or to compete with any other Person, including agreements limiting
the ability of the Company or any of its affiliates to service competitive
accounts during or after the term thereof; (h) any collective bargaining or
union agreement; (i) any Contract with any of its officers or directors or the
Stockholder not covered by subsection (f) above (including indemnification
agreements); (j) any secrecy or confidentiality agreement (other than standard
confidentiality agreements in computer software license agreements or agreements
with clients entered into in the ordinary course of business); (k) any Contract
with respect to any Intellectual Property (as defined in Section 3.14) of the
Company, other than "shrink-wrap" and similar end-user licenses; (l) any
agreement with a
7
client required to be listed on Schedule 3.16; (m) any joint venture agreement
involving a sharing of profits not covered by clauses (a) through (l) above; and
(n) any Contract (not covered by another subsection of this Section 3.8) which
involves $25,000 or more over the unexpired term thereof and is not cancelable
by the Company without penalty or other financial obligation within 30 days.
Notwithstanding the foregoing, (x) production expenses which are fully
reimbursable from clients, and (y) estimates or purchase orders given in the
ordinary course of business relating to the execution of projects, do not have
to be set forth on Schedule 3.8. Each Contract to which the Company is a party,
including, but not limited to those set forth on Schedule 3.8, is in full force
and effect, and there exists no default or event of default by the Company or to
the knowledge of the Stockholder, by any other Person, or except as set forth on
Schedule 3.9.2, occurrence, condition, or act (including the purchase of the
Shares hereunder) which, with the giving of notice, the lapse of time or the
happening of any other event or condition, would become a default or event of
default thereunder by the Company, and there are no outstanding claims of breach
or indemnification or notice of default or termination of any such Contract.
Section 3.9 Non-Contravention; Approvals and Consents.
3.9.1 Non-Contravention . The execution, delivery and performance by the
Stockholder of his obligations hereunder and the consummation of the
transactions contemplated hereby, will not (a) violate, conflict with or result
in the breach of any provision of the Certificate of Incorporation or By-Laws
(or other comparable charter documents) of the Company, or (b) result in the
violation by the Company of any Laws or Orders of any Governmental or Regulatory
Authority, applicable to the Company or any of its assets or properties, or (c)
if the consents and notices set forth on Schedule 3.9.2 are obtained, given or
waived, conflict with, result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, or (except as set
forth on Schedule 3.9.2) require the Company to obtain any consent, approval or
action of, make any filing with or give any notice to, or result in or give to
any Person any right of payment or reimbursement, termination, cancellation,
modification or acceleration of, or result in the creation or imposition of any
Lien upon any of the assets of the Company, under any of the terms, conditions
or provisions of any Contract to which the Company is a party or by which the
Company or any of its assets or properties are bound.
3.9.2 Approvals and Consents. Except as disclosed on Schedule 3.9.2, no
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other Person is necessary or required under any of the
terms, conditions or provisions of any Law or Order of any Governmental or
Regulatory Authority or any Contract to which the Company is a party or by which
its assets or properties are bound for the execution and delivery of this
Agreement by the Stockholder, the performance by the Stockholder of his
obligations hereunder or the consummation of the transactions contemplated
hereby.
Section 3.10 Litigation. Except as set forth on Schedule 3.10, there is no
action, suit, proceeding at law or in equity by any Person, or any arbitration
or any administrative or other proceeding by or before (or to the knowledge of
the Stockholder, any investigation by) any Governmental or Regulatory Authority,
pending or, to the knowledge of the Stockholder, threatened against the Company
with respect to this Agreement or the transactions contemplated
8
hereby, or against or affecting the Company or its assets; and to the knowledge
of the Stockholder, no acts, facts, circumstances, events or conditions occurred
or exist which are a basis for any such action, proceeding or investigation.
Schedule 3.10 also sets forth with respect to each pending or threatened action,
suit or proceeding listed thereon, the amount of costs, expenses or damages the
Company has incurred to date and reasonably expects to incur through conclusion
thereof. The Company is not subject to any Order entered in any lawsuit or
proceeding.
Section 3.11 Taxes. The Company has timely filed, or caused to be filed,
taking into account any valid extensions of due dates, completely and
accurately, all federal, state, local and foreign tax or information returns
(including estimated tax returns) required under the statutes, rules or
regulations of such jurisdictions to be filed by the Company with respect to
income, accumulated earnings, franchise, capital stock, employees' income
withholding, back-up withholding, withholding on payments to foreign persons,
social security, unemployment, disability, real property, personal property,
sales, use, excise, transfer and other taxes (including interest, penalties or
additions to tax in respect of the foregoing) whether disputed or not (all of
the foregoing collectively referred to as "Taxes"). All Taxes shown on said
returns to be due and all additional assessments received prior to the Balance
Sheet Date have been paid or are being contested in good faith, in which case,
such contested assessments are set forth on Schedule 3.11. The amount set up as
an accrual for Taxes on the Balance Sheet is sufficient for the payment of all
unpaid Taxes of the Company, whether or not disputed, for all periods ended on
and prior to the date thereof. Since the Balance Sheet Date, the Company has not
incurred any liabilities for Taxes other than in the ordinary course of
business. The Company has delivered to the Purchaser correct and complete copies
of all federal and state income tax returns filed with respect to the Company
for all taxable periods beginning on or after January 1, 1997. Except as set
forth on Schedule 3.11, none of the federal, state or local tax returns of the
Company has ever been audited by the Internal Revenue Service or any other
Governmental or Regulatory Authority. No audit or examination of any return of
the Company by any Governmental or Regulatory Authority is currently in
progress, and the Company has not received notice of any proposed audit or
examination. No deficiency in the payment of Taxes by the Company for any period
has been asserted in writing by any taxing authority and remains unsettled at
the date of this Agreement. The Company has not made any agreement, waiver or
other arrangement providing for an extension of time with respect to the
assessment or collection of any tax against it. Except as disclosed on Schedule
3.11, the Company is not (and has not been since its formation) subject to
entity-level income or gross receipts tax. The Company has not been a member of
an affiliated group filing consolidated federal income tax returns nor has it
been included in any combined consolidated or unitary state or local income tax
return. The Company is not a party to any tax allocation or tax sharing
agreement nor does it have any contractual obligation to indemnify any other
person with respect to Taxes. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
within the period specified in Section 897(c)(1)(A)(ii) of the Code. The Company
will not be required as a result of a change in accounting method for any period
ending on or before the Closing Date or as a result of the transactions
contemplated
9
herein to include any adjustment under Section 481 of the Code (or any similar
provision of state, local or foreign income tax law) in income for any period
ending after the Closing Date.
Section 3.12 Liabilities. Except as set forth in the Balance Sheet, the
Company does not have any outstanding claims, liabilities or indebtedness of any
nature whatsoever (collectively in this Section 3.12, "Liabilities"), whether
accrued, absolute or contingent, determined or undetermined, asserted or
unasserted, and whether due or to become due, other than (i) Liabilities
specifically disclosed in any Schedule hereto; (ii) Liabilities under Contracts
of the type required to be disclosed by the Stockholder on any Schedule and so
disclosed or which because of the dollar amount or other qualifications are not
required to be listed on such Schedule; and (iii) Liabilities incurred in the
ordinary course of business and consistent with past practice since the Balance
Sheet Date not involving borrowings by the Company.
Section 3.13 Insurance. Schedule 3.13 contains a true and complete list
(including the names and addresses of the insurers, the names of the Persons to
whom such insurance policies have been issued, the expiration dates thereof, the
annual premiums and payment terms thereof, whether it is a "claims made" or an
"occurrence" policy and a brief description of the interests insured thereby) of
all liability, property, workers' compensation and other insurance policies
currently in effect that insure the property, assets or business of the Company
or its employees (other than self-obtained insurance policies by such
employees). Each such insurance policy is valid and binding and in full force
and effect, all premiums due thereunder have been paid and the Company has not
received any notice of cancellation or termination in respect of any such policy
or default thereunder. To the knowledge of the Stockholder, such insurance
policies are placed with financially sound and reputable insurers, and in light
of the nature of the Company's business, assets and properties, the Stockholder
believes they are in amounts and have coverage that are reasonable and customary
for Persons engaged in such business and having such assets and properties.
Neither the Company nor to the Stockholder's knowledge, the Person to whom such
policy has been issued has received notice that any insurer under any policy
referred to in this Section is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause. Except as set
forth on Schedule 3.13, within the last two years the Company has not filed for
any claims exceeding $25,000 against any of its insurance policies, exclusive of
automobile and health insurance policies. None of such policies shall lapse or
terminate by reason of the transactions contemplated by this Agreement and all
such policies shall continue in effect after the Closing Date for the benefit of
the Purchaser. The Company has not received any notice of cancellation of any
such policy. The Company has not received written notice from any of its
insurance carriers that any premiums will be materially increased in the future
or that any insurance coverage listed on Schedule 3.13 will not be available in
the future on substantially the same terms now in effect.
Section 3.14 Intellectual Properties. Schedule 3.14 hereto contains an
accurate and complete list of all Intellectual Property (as defined below) owned
by the Company and all agreements under which any Person has granted a license
for any Intellectual Property to the Company (other than license agreements for
"off the shelf" third party computer software not included within the Company's
products or services). The Company has all right, title and
10
interest in, a valid and binding license to use, or has the requisite permission
and authority to use all Intellectual Property used in the conduct of its
business. No claim of infringement or misappropriation of Intellectual Property
is or has been pending or, to the knowledge of the Stockholder, threatened
against the Company and/or the Stockholder and, to the knowledge of the
Stockholder, the Company and/or the Stockholder are not infringing or
misappropriating any Intellectual Property of any Person. The Company has not
expressly granted any license, franchise or permit in effect on the date hereof
to any Person to use any of the trade names or any of the trademarks owned by
it. The term "Intellectual Property" means patents and patent rights, trademarks
and trademark rights, tradenames and tradename rights, service marks and service
xxxx rights, service names and service name rights, copyright and copyright
rights, trade secrets and trade secret rights, rights of privacy and publicity,
and other proprietary intellectual property and personal rights and all pending
applications for and registrations of any of the foregoing.
Section 3.15 Compliance with Laws; Licenses and Permits.
3.15.1 Compliance. The Company is and its business has been conducted, in
compliance with all applicable Laws and Orders, except in each case (other than
with respect to compliance with environmental Laws and Orders relating to the
regulation or protection of the environment; "Environmental Laws and Orders")
where the failure to so comply would not reasonably be expected to have a
Material Adverse Effect, including without limitation: (a) all Laws and Orders
promulgated by the Federal Trade Commission or any other Governmental or
Regulatory Authority; (b) all Environmental Laws and Orders; and (c) all Laws
and Orders relating to labor, civil rights, and occupational safety and health
laws, worker's compensation, employment and wages, hours and vacations, or pay
equity. The Company has not been charged with, or, to the knowledge of the
Stockholder threatened with or under any investigation with respect to, any
charge concerning any violation of any Laws or Orders.
3.15.2 Licenses. The Company has all Licenses required by any Governmental
or Regulatory Authority for the operation of its business and the use of its
assets as presently operated or used, except where the failure to have such
Licenses would not reasonably be expected to have a Material Adverse Effect. All
of the Licenses are in full force and effect and no action or claim is pending,
nor to the knowledge of the Stockholder is threatened, to revoke or terminate
any of such Licenses or declare any such License invalid in any material
respect.
Section 3.16 Intentionally Omitted
Section 3.17 Accounts Receivable; Work-in-Process; Accounts Payable. The
amount of all work-in-process, accounts receivable, unbilled invoices (including
without limitation unbilled invoices for services and out-of-pocket expenses)
and other debts due or recorded in the records and books of account of the
Company as being due to the Company and reflected on the Balance Sheet and the
Effective Date Balance Sheet represent or will represent valid obligations
arising from sales actually made or services actually performed in the ordinary
course of business, and none of the accounts receivable or other debts (or
accounts receivable arising from any such work-in-process or
11
unbilled invoices) is or will be subject to any counterclaim or set-off except
to the extent of any provision, reserve or adjustment therefor reflected on the
Balance Sheet and the Effective Date Balance Sheet. There has been no material
adverse change since the Balance Sheet Date in the amount or aging of the
work-in-process, accounts receivable, unbilled invoices, or other debts due to
the Company, or the reserves with respect thereto, or accounts payable of the
Company.
Section 3.18 Employment Relations. (a) The Stockholder has no knowledge of
any acts which would give rise to any unfair labor practice claims against the
Company ; (b) no unfair labor practice complaint against the Company is pending
before any Governmental or Regulatory Authority; (c) there is no organized labor
strike, dispute, slowdown or stoppage actually pending or to the knowledge of
the Stockholder threatened against or involving the Company; (d) there are no
labor unions representing or, to the knowledge of the Stockholder, attempting to
represent the employees of the Company; (e) no claim or grievance nor any
arbitration proceeding arising out of or under any collective bargaining
agreement is pending and to the knowledge of the Stockholder, no such claim or
grievance has been threatened; (f) no collective bargaining agreement is
currently being negotiated by the Company; and (g) the Company has not
experienced any work stoppage or similar organized labor dispute during the last
three years. There is no legal action, suit, proceeding or claim pending or, to
the knowledge of the Stockholder, threatened between the Company and any of its
employees, former employees, agents, former agents, job applicants or any
association or group of any of its employees, except as set forth on Schedule
3.10.
Section 3.19 Employee Benefit Plans. The Company does not maintain or
contribute to any Plan which could in any way impose any liability on Purchaser
as a result of the transactions contemplated hereby. Each Plan of the Company
has been operated materially in accordance with the requirements of all
applicable law, including, without limitation, ERISA and the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations and authorities
published thereunder. All reports, disclosures, notices and filings with respect
to such Plans required to be made to employees, participants, beneficiaries,
alternate payees and government agencies have been timely made or an extension
has been timely obtained. There has been no prohibited transactions (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Plan maintained by the Company. All contributions, premiums or payments required
to be made, paid or accrued with respect to any such Plan have been made, paid
or accrued on or before their due dates, including extensions thereof.
Section 3.20 Interests in Customers, Suppliers, Etc. Except as set forth
on Schedule 3.20, (x) neither the Stockholder nor any Person controlled by the
Stockholder nor (y) to the knowledge of the Stockholder (without making any
inquiry of any member of the Related Group, as hereinafter defined), any
officer, director, or employee of the Company, any parent, brother, sister,
child or spouse of any such officer, director or employee or of the Stockholder
(collectively, the "Related Group"), or any entity controlled by anyone in the
Related Group:
(i) owns, directly or indirectly, any interest in (excepting for
ownership, directly or indirectly, of less than 5% of the issued and
outstanding shares of any class of securities of a
12
publicly held and traded company) or received or has any right to receive
payments from, or is an officer, director, employee or consultant of, any
Person which is, or is engaged in business as, a competitor, lessor,
lessee, supplier, distributor, sales agent, customer or client of the
Company;
(ii) owns, directly or indirectly, in whole or in part, any tangible or
intangible property (including, but not limited to Intellectual Property)
that the Company uses in the conduct of the business of the Company, other
than immaterial personal items owned and used by employees at their work
stations; or
(iii) has any cause of action or other claim whatsoever against, or owes
any amount to, the Company, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date
hereof.
Section 3.21 Bank Accounts and Powers of Attorney. Set forth in Schedule
3.21 is an accurate and complete list showing (a) the name of each bank in which
the Company has an account, credit line or safe deposit box and the names of all
Persons authorized to draw thereon or to have access thereto, and (b) the names
of all Persons, if any, holding powers of attorney from the Company and a
summary statement of the terms thereof.
Section 3.22 Compensation of Employees. Since its formation, the
Stockholder has been the only employee of the Company and the Company has never
engaged any exclusive consultant. Schedule 3.22 sets forth the Stockholder's
current annual salary, and the annual salary, bonus and incentive compensation
paid or payable to him with respect to calendar years 1998 and 1999, and his
material fringe benefits. The Company has not, because of past practices or
previous commitments with respect to the Stockholder, established any rights on
the part of the Stockholder to additional compensation with respect to any
period after the Closing Date (other than wage increases in the ordinary course
of business).
Section 3.23 No Changes Since the Balance Sheet Date. Since the Balance
Sheet Date, except as specifically stated on Schedule 3.23, the Company has not
(a) incurred any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except in the ordinary course of business;
(b) permitted any asset of the Company to be subjected to any Lien; (c) sold,
transferred or otherwise disposed of any asset of the Company except in the
ordinary course of business; (d) made any capital expenditure or commitment
therefor which individually or in the aggregate exceeded $25,000; (e) declared
or paid any dividends or made any distributions on any shares of its capital
stock or any option, warrant or other right to purchase or acquire any such
shares; (f) made any bonus or profit sharing distribution; (g) increased or
prepaid its indebtedness for borrowed money, except current borrowings under
credit lines listed on Schedule 3.8, or made any loan to any Person other than
to the Stockholder for normal travel and expense advances; (h) written down the
value of any work-in-process, or written off as uncollectible any notes or
accounts receivable, except write-downs and write-offs in the ordinary course of
business, none of which, individually or in the aggregate, is material to the
Company; (i) granted any increase in the rate of wages, salaries, bonuses or
other remuneration of the Stockholder; (j) entered into an employment
13
or exclusive consultant agreement which is not cancelable without penalty or
other financial obligation within 30 days; (k) canceled or waived any claims or
rights of material value; (l) made any change in any method of accounting
procedures; (m) otherwise conducted its business or entered into any
transaction, except in the usual and ordinary manner and in the ordinary course
of its business; (n) amended or terminated any agreement which is material to
its business; (o) renewed, extended or modified any Real Property Lease or
except in the ordinary course of business, any personal property lease; (p)
adopted, amended or terminated any Plan; or (q) agreed, whether or not in
writing, to do any of the actions set forth in any of the above clauses.
Section 3.24 Company Controls. Neither the Stockholder, nor, to the
knowledge of the Stockholder, any officer, authorized agent, employee or any
other Person while acting on behalf of the Company, has, directly or indirectly:
used any company fund for unlawful contributions, gifts, or other unlawful
expenses relating to political activity; made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from company funds; established or maintained any unlawful
or unrecorded fund of company monies or other assets; made any false or
fictitious entry on its books or records; made any bribe, rebate, payoff,
influence payment, kickback, or other unlawful payment, or other payment of a
similar or comparable nature, to any Person, private or public, regardless of
form, whether in money, property, or services, to obtain favorable treatment in
securing business or to obtain special concessions, or to pay for favorable
treatment for business secured or for special concessions already obtained, and
the Company has not participated in any illegal boycott or other similar illegal
practices affecting any of its actual or potential customers.
Section 3.25 Brokers. Except as set forth on Schedule 3.25, no broker,
finder, agent or similar intermediary has acted on behalf of the Company or the
Stockholder in connection with this Agreement or the transactions contemplated
hereby, and no brokerage commissions, finder's fees or similar fees or
commissions are payable by the Company or the Stockholder in connection
therewith based on any agreement, arrangement or understanding with any of them.
Section 3.26 Year 2000 Compliant.
3.26.1 Definition. The term "Year 2000 Compliant" shall mean:
(i) the functions, calculations and other computer processes of all
computer hardware, software and systems, including but not limited to
internal and outsourced MIS systems and embedded computer features within
other systems of the Company (collectively, "Processes"), perform properly
in a consistent manner regardless of the date in time on which the
Processes are actually performed and regardless of the date of input to
the software, whether before, on or after January 1, 2000 and whether or
not the dates are affected by leap years;
(ii) the computer hardware, software and systems accept, calculate,
compare, sort, extract, sequence and otherwise process data inputs and
date values, and return and display date values, in a consistent manner
regardless of the dates used, whether before, on or after January 1, 2000;
14
(iii) the computer hardware, software and systems will function
properly without interruptions or extraordinary manual intervention caused
by the date in time on which the Processes are actually performed or by
the date of input to the software, whether before, on or after January 1,
2000;
(iv) the computer hardware, software and systems accept and respond
to two-digit year data input in the Processes in a manner that resolves
any ambiguities as to the century in a defined, predetermined and
appropriate manner; and
(v) the computer hardware, software and systems store and display
data information in the Processes in ways that are unambiguous as to the
determination of the century.
3.26.2 Computer Systems. Except as set forth on Schedule 3.26, (a) the
current computer hardware, software and systems, and accompanying documentation,
of the Company will be Year 2000 Compliant in a full production version, with
accompanying documentation, in all material respects, on or before December 31,
1999; and (b) the Company will use reasonable efforts to obtain confirmation
that Year 2000 Compliant computer hardware, software and systems will be
provided to the Company in a timely manner under current supplier contracts or
standard maintenance and support plans without additional fee or charge of any
kind (including any installation, freight, or other costs or fees) to the
Company.
3.26.3 Other Products and Services. Except as set forth on Schedule 3.26,
(a) the Company's products will be delivered and its services will be scheduled
and performed in a timely manner without interruptions caused by the date in
time on which the product is ordered or is actually delivered or the services
are scheduled or actually performed under normal procedures in the ordinary
course, whether before, on or after January 1, 2000; and (b) the Company has
made reasonable efforts to obtain confirmation that the Company's essential
suppliers of products and services, including the suppliers of its
infrastructure systems, have Year 2000 Compliant programs in place to avoid
interruptions in the supplier-customer trading relationship which could have a
Material Adverse Effect, whether before, on or after January 1, 2000.
Section 3.27 Prepayment for Services Except as disclosed on Schedule 3.27,
the Company has not prior to the Closing Date received any payments from any of
its clients with respect to services to be rendered by the Company after the
Closing Date.
Section 3.28 Investment Representations.
(a) The Stockholder is acquiring the Paradise Stock for investment
purposes only and does not intend to resell, distribute or subdivide the
Paradise Stock other than pursuant to an effective registration statement or an
available exemption under the Securities Act of 1933, as amended (the "Act").
The Stockholder is acquiring the Paradise Stock for his own account and no other
person will have any beneficial interest in the Paradise Stock.
15
(b) The Stockholder acknowledges that Paradise is offering and
selling the Paradise Stock pursuant to exemptions from registration under the
Act and exemptions from qualification under the securities laws of certain
states, for transactions not involving any public offering, and that Paradise is
relying on the representations and warranties included herein to obtain those
exemptions. The Stockholder further represents and warrants to Paradise and the
Purchaser as follows:
(i) The Stockholder has the financial ability to bear the
economic risk of its or his investment in the Paradise Stock (including the
possible loss of such investment in its entirety), has adequate means of
providing for his current needs and personal contingencies, and has no need for
liquidity with respect to his investment in Paradise; and
(ii) The Stockholder is not an "underwriter" as such term is
defined under the Act and the Stockholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in Paradise and has obtained, in the best judgment of the
Stockholder, sufficient information from Paradise to evaluate the merits and
risks of an investment in Paradise.
(c) The Stockholder understands that the Paradise Stock has not been
registered under the Act or qualified under the securities laws of any state,
and therefore cannot be transferred, resold, pledged, hypothecated, assigned, or
otherwise disposed of unless they are subsequently registered under the Act and
qualified under applicable state securities laws and in compliance with any
other applicable securities laws, or an exemption from registration and/or
qualification is available. The Stockholder will not sell, distribute, dispose
of or otherwise transfer the Paradise Stock or any part thereof, or interest
therein, except pursuant to an effective registration under the Act or pursuant
to an exemption from the registration requirements of the Act and in compliance
with any other applicable securities laws. The Stockholder understands that all
stock certificates representing the Paradise Stock shall bear a legend
reflecting the restrictions contained in this clause (c).
(d) The Stockholder has been given the opportunity to ask questions
of, and receive answers from, and conduct due diligence meetings with
representatives of Paradise concerning the terms and conditions of this offering
and other matters pertaining to this investment and have been given the
opportunity to obtain such additional information as is necessary to evaluate
the merits and risks of an investment in Paradise, in all cases to the extent
that Paradise possessed such information. The Stockholder's decision to acquire
the Paradise Stock was made on the basis of the Stockholder's independent
analysis of the terms of the purchase and arms' length discussions with
representatives of Paradise.
(e) The Stockholder is not relying on Paradise or any representative
of Paradise, for advice as to tax, legal, or economic considerations as they
relate to the Stockholder's circumstances. No such representations or warranties
have been made to the Stockholder by Paradise, or any employee or agent of
Paradise. In particular, the Stockholder acknowledges that there have been no
representations, guarantees or warranties made to him by
16
Paradise, its employees or agents, or by any other person, with respect to (i)
the approximate length of time that will be required to remain as the owner of
the Paradise Stock; or (ii) the percentage of profit and/or amount of or type of
consideration, profit or loss to be realized, if any, as a result of this
investment.
(f) The Stockholder has determined that the Paradise Stock is a
suitable investment in light of his investment goals, ability to sustain losses,
needs for liquidity and previous decisions to invest in securities such as the
Paradise Stock or securities bearing similar risks.
(g) The Stockholder is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D.
Section 3.29 Copies of Documents. The Company has caused to be made
available for inspection and copying by the Purchaser and Paradise and its
advisers, true, complete and correct copies of all documents referred to in this
Article III or in any Schedule. Summaries of all oral contracts contained in
Schedule 3.8 are complete and accurate in all material respects.
ARTICLE IV
REPRESENTATIONS OF THE PURCHASER AND PARADISE
Each of the Purchaser and Paradise, jointly and severally, represent,
warrant and agree to and with the Stockholder as follows:
Section 4.1 Existence and Good Standing. Each of the Purchaser and
Paradise is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware with full corporate power and authority
to own its property and to carry on its business all as and in the places where
such properties are now owned or operated or such business is now being
conducted, except for jurisdictions where the failure to be so qualified would
not have a Material Adverse Effect. For purposes of this Agreement, "Material
Adverse Effect" shall mean any material and adverse effect on the financial
condition, results of operations, assets, properties or business of Paradise or
the purchaser. Paradise is qualified to do business in New York.
Section 4.2 Execution and Validity of Agreement. Each of the Purchaser and
Paradise has the full corporate power and authority to make, execute, deliver
and perform this Agreement by the Purchaser and Paradise and the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all required corporate action on behalf of the Purchaser and Paradise, and
this Agreement has been duly and validly executed and delivered by the Purchaser
and Paradise and, assuming due authorization, execution and delivery by the
Stockholder, constitutes legal, valid and binding obligations of the Purchaser
and Paradise, enforceable against them in accordance with its terms.
17
Section 4.3 No Restrictions. There is no suit, action, claim,
investigation or inquiry by any Governmental or Regulatory Authority, and no
legal, administrative or arbitration proceeding pending or, to the knowledge of
Purchaser and Paradise, threatened against the Purchaser or Paradise with
respect to the execution, delivery and performance of this Agreement or the
transactions contemplated hereby, and to the knowledge of Paradise and the
Purchaser, no acts, facts, circumstances, events or conditions occurred or exist
which are a basis for any such action, proceeding or investigation.
Section 4.4 Non-Contravention; Approvals and Consents.
4.4.1 Non-Contravention. The execution, delivery and performance by each
of the Purchaser and Paradise of its obligations hereunder and the consummation
of the transactions contemplated hereby will not (a) violate, conflict with or
result in the breach of any provision of the Certificate of Incorporation or
By-laws of the Purchaser or Paradise, or (b) result in the violation by the
Purchaser or Paradise of any Laws or Orders of any Governmental or Regulatory
Authority applicable to the Purchaser or any of its assets or properties, or (c)
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, or except as set forth on Schedule 4.4.1,
require the Purchaser or Paradise to obtain any consent, approval or action of,
make any filing with or give any notice to, or result in or give to any Person
any right of payment or reimbursement, termination, cancellation, modification
or acceleration of, or result in the creation or imposition of any Lien upon any
of the assets or properties of the Purchaser or Paradise, under any of the
terms, conditions or provisions of any contract to which the Purchaser or
Paradise is a party or by which the Purchaser or Paradise or any of their
respective assets or properties are bound.
4.4.2 Approvals and Consents. Except as set forth on Schedule 4.4.1, no
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other public or private third party is necessary or
required under any of the terms, conditions or provisions of any Law or Order of
any Governmental or Regulatory Authority or any contract to which the Purchaser
or Paradise is a party or by which the Purchaser or Paradise or any of their
assets or properties are bound for the execution and delivery of this Agreement
by the Purchaser and Paradise, the performance by the Purchaser and Paradise of
their obligations hereunder or the consummation of the transactions contemplated
hereby by the Purchaser and Paradise.
Section 4.5 Compliance with Laws; Licenses and Permits.
4.5.1 Compliance. Each of Paradise and the Purchaser is and its business
has been conducted, in compliance with all applicable Laws and Orders, except in
each case (other than with respect to compliance with environmental Laws and
Orders relating to the regulation or protection of the environment;
"Environmental Laws and Orders") where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect, including without
limitation: (a) all Laws and Orders promulgated by the Federal Trade Commission
or any other Governmental or Regulatory Authority; (b) all Environmental Laws
and Orders; and (c) all Laws and Orders relating to labor, civil rights, and
occupational safety and health laws, worker's compensation, employment and
wages, hours and vacations, or pay equity. Neither Paradise nor the Purchaser
has been
18
charged with, or, to the knowledge of Paradise and the Purchaser threatened with
or under any investigation with respect to, any charge concerning any violation
of any Laws or Orders.
4.5.2 Licenses. Each of Paradise and the Purchaser has all Licenses
required by any Governmental or Regulatory Authority for the operation of its
business and the use of its assets as presently operated or used, except where
the failure to have such Licenses would not reasonably be expected to have a
Material Adverse Effect. All of the Licenses are in full force and effect and no
action or claim is pending, nor to the knowledge of Paradise and the Purchaser
is threatened, to revoke or terminate any of such Licenses or declare any such
License invalid in any material respect.
Section 4.6 Paradise Stock. . The shares of Paradise Stock to be delivered
to the Stockholder pursuant to this Agreement, when delivered as provided
herein, will be validly issued and outstanding shares of voting common stock of
Paradise, fully paid and non-assessable, and will not be subject to pre-emptive
rights of any Person.
Section 4.7 Brokers. No broker, finder, agent or similar intermediary has
acted on behalf of the Purchaser, Paradise or any of their affiliates in
connection with this Agreement or the transactions contemplated hereby, and no
brokerage commissions, finders' fees or similar fees or commissions are payable
by the Purchaser, Paradise or any of their affiliates in connection therewith
based on any agreement, arrangement or understanding with any of them.
ARTICLE V
COVENANTS OF THE STOCKHOLDER
The Stockholder covenants and agrees with Paradise and the Purchaser that,
at all times from and after the Execution Date until the Closing or earlier
termination of this Agreement, the Stockholder will comply, and will cause the
Company to comply, with all covenants and provisions of this Article V, except
to the extent Paradise (on behalf of itself and the Purchaser) may otherwise
consent in writing.
Section 5.1 Regulatory and Other Approvals. The Stockholder will take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents and approvals required of the Company and
Stockholder to consummate the transactions contemplated hereby. The Stockholder
will provide prompt notification to Paradise when any such consent or approval
is obtained.
Section 5.2 Investigation by Paradise and the Purchaser. Subject to the
confidentiality provisions of Section 12.8, the Company and the Stockholder will
(a) provide Paradise and the Purchaser and their respective officers, employees,
counsel, accountants, financial advisors, consultants and other representatives
(collectively, "Representatives") with
19
full access, upon reasonable prior notice and during normal business hours, to
the executive officers and agents of the Company who have any material
responsibility for the conduct of the business of the Company and to the
Company's accountants and their work papers, but only to the extent that such
access does not unreasonably interfere with the business of the Company and (b)
furnish Paradise, the Purchaser and the Representatives with all such
information and data concerning the business of the Company as Paradise, the
Purchaser or the Representatives reasonably may request in connection with such
investigation, except to the extent that furnishing any such information or data
would violate any Law, Order, Contract or License applicable to the Company.
Section 5.3 No Solicitations. The Stockholder will not, and will cause the
Company to not, nor will they permit any affiliate of the Company or the
Stockholder (or authorize or permit any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf of
the Company, the Stockholder or any such affiliate) to take, directly or
indirectly, any action to solicit, encourage, negotiate, assist or otherwise
facilitate (including by furnishing confidential information with respect to the
business of the Company or permitting access to the assets of the Company ) any
offer or inquiry concerning the acquisition of the Company (whether by sale of
assets, sale of stock, merger or otherwise) from any Person other than Paradise
or the Purchaser.
Section 5.4 Conduct of Business. From the Execution Date to the Closing
Date, except as contemplated or otherwise permitted under the terms of this
Agreement, the Company and the Stockholder will operate the business of the
Company only in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, except as contemplated by or otherwise
permitted by the terms of this Agreement or any Schedule to this Agreement, the
Stockholder will refrain and the Stockholder will cause the Company to refrain,
from taking any of the following actions unless consented to in writing by
Paradise (on behalf of itself and the Purchaser), which consent shall not be
unreasonably withheld:
(i) selling, leasing or otherwise disposing of all or substantially all
of its assets or business;
(ii) amending its Certificate of Incorporation or by-laws;
(iii) changing its capitalization;
(iv) engaging in any acquisition of the stock, assets or business of
another Person or making any equity investment of funds of the
Company in another Person other than short-term investments in cash
equivalents;
(v) merging or consolidating with and into any Person or merging or
consolidating any Person with and into it;
20
(vi) engaging in any liquidation or dissolution;
(vii) entering into any new line of business;
(viii) making any loans to any Person other than normal employee travel
and expense advances consistent with past practice.
(ix) entering into any real estate, lease or personal property lease;
(x) granting any compensation increase to the Stockholder;
(xi) entering into any Contract with any officer, director or employee;
(xii) declaring or paying any dividends or other distributions or bonuses
to the Stockholder except as set forth on Schedule 3.23;
(xiii) amending any contract or agreement in any material respect;
(xiv) entering into any severance agreement involving a payment, or
obligation to pay, any amount in excess of the Company's normal
severance benefit;
(xv) releasing, canceling or assigning any indebtedness for borrowed
money owed to it, or waiving any material right relating to its
properties;
(xvi) creating or modifying any Plan or entering into or modifying any
employment agreement with the Stockholder which is not cancelable
without penalty or other obligation on 30 days notice;
(xvii) entering into any transaction or performing any act which would be
reasonably likely to result in any of the representations and
warranties of the Stockholder contained in this Agreement not being
true and correct; or agreeing to take any of the actions that are
prohibited herein or which would constitute a violation of any of
the covenants of the Stockholder contained herein; and
(xviii) delegating to any other Person the power to take any of the actions
prohibited by any of the foregoing clauses.
Section 5.5 Notice and Cure. The Stockholder will notify Paradise in
writing of, and contemporaneously will provide Paradise with true and complete
copies of any and all information or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event,
transaction or circumstance, as soon as practicable after it becomes known to
the Stockholder, occurring after the Execution Date that causes or will cause
any covenant or agreement of the Stockholder under this Agreement to be breached
or
21
that renders or will render untrue any representation or warranty of the
Stockholder contained in this Agreement as if the same were made on or as of the
date of such event, transaction or circumstance. The Stockholder also will
notify Paradise in writing of, and will use all commercially reasonable efforts
to cure, before the Closing, any other violation or breach, as soon as
practicable after it becomes known to the Stockholder, of any representation,
warranty, covenant or agreement made by the Stockholder in this Agreement. No
notice given pursuant to this Section shall have any effect on the
representations, warranties, covenants or agreements contained in this Agreement
for purposes of determining satisfaction of any condition contained herein;
provided, however, if the Stockholder has cured such violation or breach prior
to the Closing to the reasonable satisfaction of Paradise, Paradise and the
Purchaser shall not have the right to terminate this Agreement based on such
violation or breach.
Section 5.6 Fulfillment of Conditions. The Stockholder will execute and
deliver at the Closing each agreement that the Stockholder is required hereby to
execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Paradise and the Purchaser
contained in this Agreement.
ARTICLE VI
COVENANTS OF PARADISE AND THE PURCHASER
Paradise and the Purchaser covenant and agree with the Stockholder that,
at all times from and after the Execution Date until the Closing or earlier
termination of this Agreement, Paradise and the Purchaser will comply with all
covenants and provisions of this Article VI, except to the extent the
Stockholder may otherwise consent in writing.
Section 6.1 Regulatory and Other Approvals. Paradise and the Purchaser
will (a) take all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable to obtain all consents, approvals or actions
of, to make all filings with and to give all notices to Governmental or
Regulatory Authorities or any other Person required of Paradise or the Purchaser
to consummate the transactions contemplated hereby, including without limitation
those described on Schedule 4.4.1, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as such Governmental or Regulatory Authorities or other Persons may reasonably
request in connection therewith and (c) provide reasonable cooperation to the
Stockholder in obtaining all consents or approvals required of the Stockholder
to consummate the transactions contemplated hereby. Paradise will provide prompt
notification to the Stockholder when any such consent, approval, action, filing
or notice referred to in clause (a) above is obtained, taken, made or given, as
applicable.
22
Section 6.2 Investigation by the Stockholder . Paradise and the Purchaser
will (a) provide the Stockholder and its counsel, accountants, financial
advisors, consultants and other representatives (collectively,
"Representatives") with full access, upon reasonable prior notice and during
normal business hours, to the executive officers and agents of Paradise who have
any material responsibility for the conduct of the business of Paradise and to
Paradise's accountants and their work papers, but only to the extent that such
access does not unreasonably interfere with the business of Paradise and (b)
furnish the Stockholder and the Representatives with all such information and
data concerning the business of Paradise as the Stockholder or the
Representatives reasonably may request in connection with such investigation,
except to the extent that furnishing any such information or data would violate
any Law, Order, Contract or License applicable to the Company.
Section 6.3 Notice and Cure. Paradise or the Purchaser will notify the
Stockholder in writing of, and contemporaneously will provide the Stockholder
with true and complete copies of any and all information or documents relating
to, and will use all commercially reasonable efforts to cure before the Closing,
any event, transaction or circumstance, as soon as practicable after it becomes
known to Paradise or the Purchaser, occurring after the Execution Date that
causes or will cause any covenant or agreement of Paradise or the Purchaser
under this Agreement to be breached or that renders or will render untrue any
representation or warranty of Paradise or the Purchaser contained in this
Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. Paradise or the Purchaser also will notify the
Stockholder in writing of, and will use all commercially reasonable efforts to
cure, before the Closing, any other violation or breach, as soon as practicable
after it becomes known to Paradise or the Purchaser, of any representation,
warranty, covenant or agreement made by Paradise or the Purchaser in this
Agreement. No notice given pursuant to this Section shall have any effect on the
representations, warranties, covenants or agreements contained in this Agreement
for purposes of determining satisfaction of any condition contained herein;
provided, however, if Paradise or the Purchaser have cured such violation or
breach prior to the Closing to the reasonable satisfaction of the Stockholder,
the Stockholder shall not have the right to terminate this Agreement based on
such violation or breach.
Section 6.4 Fulfillment of Conditions. Paradise and the Purchaser will
execute and deliver or cause the execution and delivery at the Closing each
agreement that Paradise and the Purchaser or one of their affiliates is hereby
required to execute and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each other condition to the obligations of the
Stockholder contained in this Agreement.
Section 6.5 Blue Sky. Paradise and the Purchaser will use their best
efforts to obtain all necessary state securities and blue sky authorizations
required to issue the Paradise Stock as contemplated by this Agreement.
23
ARTICLE VII
MUTUAL COVENANTS
Paradise, the Purchaser and the Stockholder mutually covenant and agree
with each other as follows:
Section 7.1 Reasonable Efforts to Consummate Transaction. Paradise, the
Purchaser, and the Stockholder will each use its reasonable efforts and will
fully cooperate with each other to consummate the transactions contemplated by
this Agreement.
Section 7.2 Public Announcements.Paradise, the Purchaser, and the
Stockholder will consult with each other before issuing any press releases or
otherwise making any public statements with respect to this Agreement or any of
the transactions contemplated hereby and shall not issue any such press release
or make any public statement without the prior consent of the other parties
which shall not be unreasonably withheld, except as may be required by law or by
obligations pursuant to any listing agreements with any securities exchange.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF PARADISE AND THE PURCHASER
The obligations of the Purchaser hereunder to purchase the Shares and
issue Paradise Stock are subject to the fulfillment, at or before the Closing,
of each of the following conditions, all or any of which may be waived in whole
or in part by Paradise, on behalf of itself and the Purchaser, in its sole
discretion:
Section 8.1 Representations and Warranties. The representations and
warranties made by the Stockholder in this Agreement, or in any Schedule
delivered pursuant hereto, shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date or, in the case of representations and warranties made as
of a specified date earlier than the Closing Date, on and as of such earlier
date, and Stockholder shall have delivered to Paradise and the Purchaser a
certificate, dated the Closing Date, to such effect.
Section 8.2 Good Standing and Tax Certificates The Stockholder shall have
delivered to Paradise and the Purchaser (i) a copy of the Company's Articles of
Incorporation, including all amendments, certified by the Secretary of State (or
comparable official) of the State of California, (ii) a certificate from the
Secretary of State (or comparable official) of the
24
State of California, to the effect that the Company is in good standing in
California and (iii) a certificate as to the tax status of the Company in the
State of California.
Section 8.3 Performance. The Stockholder shall have performed and complied
with the agreements, covenants and obligations required by this Agreement to be
so performed or complied with by the Stockholder at or before the Closing, and
the Stockholder shall have delivered to Paradise and the Purchaser a
certificate, dated the Closing Date, to such effect.
Section 8.4 No Litigation. There shall not be pending any litigation,
proceeding, investigation, review, arbitration or claim by Governmental or
Regulatory Authority, and no preliminary or permanent injunction or other order
shall have been issued, to restrain or invalidate the consummation by the
Stockholder of this Agreement and the transactions contemplated hereby, and no
material litigation shall be pending or to the knowledge of the Stockholder
threatened against the Company or the Stockholder with respect to this Agreement
or the transactions contemplated hereby or arising out of the actions required
or permitted to be taken by any of them pursuant to this Agreement, or against
or affecting either the Company or the Stockholder or any of their properties or
rights which, if adversely determined, would be reasonably likely to have a
Material Adverse Effect.
Section 8.5 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Paradise, the Purchaser, and the Stockholder to perform
their obligations under this Agreement and to consummate the transactions
contemplated hereby shall have been duly obtained, made or given and shall be in
full force and effect.
Section 8.6 Required Approvals, Notices and Consents. The Stockholder
shall have obtained or given, as the case may be, at no expense to Paradise or
the Purchaser and there shall not have been withdrawn or modified any notices,
consents, approvals or other actions listed on Schedule 3.9.2 hereof (including
without limitation, obtaining all consents, approvals and/or waivers required
under the contracts listed on Schedule 3.8 in order to permit the consummation
of the transactions contemplated by this Agreement without causing or resulting
in a default, event of default, acceleration event or termination event under
any of such documents and without entitling any party to any of such documents
to exercise any other right or remedy adverse to the interests of Paradise, the
Purchaser or the Company thereunder). Each such consent shall be in form
reasonably satisfactory to counsel for Paradise and the Purchaser.
Section 8.7 Opinion of Counsel. Paradise and the Purchaser shall have
received the opinion of Xxxxx, Xxxxxxxx & Xxxxxx, counsel to the Stockholder,
dated the Closing Date, substantially in the form and to the effect of Exhibit A
hereto.
Section 8.8 Repayment of Loans. All indebtedness of the Stockholder to the
Company, if any, shall have been repaid in full, other than routine travel and
expense
25
advances in the ordinary course of business consistent with past practice, and
the Stockholder shall have delivered to Paradise and the Purchaser a
certificate, dated the Closing Date, to such effect.
Section 8.9 Material Adverse Effect. Except for the execution and delivery
of this Agreement and the transactions required or permitted to take place
pursuant hereto on or prior to the Closing Date, since the Execution Date there
shall not have occurred any Material Adverse Effect, or any event or development
which, individually or together with such events, could reasonably be expected
to result in a Material Adverse Effect and the Stockholder shall have delivered
to Paradise and the Purchaser, a certificate dated the Closing Date to such
effect.
Section 8.10 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto must be reasonably satisfactory in form and substance to Paradise and
the Purchaser, and Paradise and the Purchaser shall have received copies of all
such documents and other evidences as Paradise and the Purchaser may reasonably
request in order to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
Section 8.11 Straw Dogs Acquisition Agreement. On the Closing Date, the
transactions contemplated in the Asset Purchase Agreement of even date herewith
between Paradise, the Purchaser, Consolidated Entertainment, LLC (d/b/a/ Straw
Dogs), the Stockholder and Xxxxx Xxxxxxx (the "Straw Dogs Agreement"), shall
have been consummated contemporaneously with the Closing hereunder.
Section 8.12 Working Capital. Appropriate working capital lines of credit,
as determined by Paradise and subject to the reasonable approval of the
Stockholder, shall have been obtained for the Purchaser and Paradise.
Section 8.13 Net Worth .The Net Worth (as defined below) of the Company as
of the Effective Date shall not have been less than $1.00, as finally determined
pursuant to the procedures set forth in Section 2.1.2 above. As used in this
Section 8.13, the term "Net Worth" shall mean the aggregate net book value of
the Company as of the Effective Date as represented by the aggregate value of
its assets, minus the aggregate value of it liabilities, calculated as of the
Effective Date in accordance with GAAP.
Section 8.14 Financial Statements. The Stockholder shall have delivered
Schedule 3.4 (Financial Statements) to Paradise and the Purchaser; provided,
however, failure to deliver said Schedule 3.4 shall not be a breach of this
Agreement by the Stockholder.
26
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE STOCKHOLDER
The obligations of the Stockholder hereunder to sell the Shares are
subject to the fulfillment, at or before the Closing, of each of the following
conditions (except with respect to Section 9.6, all or any of which may be
waived in whole or in part by the Stockholder in his sole discretion):
Section 9.1 Representations and Warranties. The representations and
warranties made by Paradise and the Purchaser in this Agreement or in any
Schedule delivered hereto, shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though made on and
as of the Closing Date, and Paradise and the Purchaser shall have delivered to
the Stockholder a certificate, dated the Closing Date, to such effect.
Section 9.2 Performance. Paradise and the Purchaser shall have performed
and complied with the agreements, covenants and obligations required by this
Agreement to be so performed or complied with by Paradise and the Purchaser at
or before the Closing, and Paradise and the Purchaser shall have delivered to
the Stockholder a certificate, dated the Closing Date, to such effect.
Section 9.3 Certified Resolutions. Paradise and the Purchaser shall have
delivered to the Stockholder a copy of the resolutions of the boards of
directors of each of Paradise and the Purchaser authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, certified to by an officer of Paradise and the Purchaser, respectively.
Section 9.4 No Litigation. There shall not be pending any litigation,
proceeding, investigation, review, arbitration or claim by Governmental or
Regulatory Authority, and no preliminary or permanent injunction or other order
shall have been issued to restrain or invalidate the consummation by Paradise or
the Purchaser of this Agreement and the transactions contemplated hereby, and no
material litigation shall be pending or to the knowledge of Paradise and the
Purchaser, threatened against Paradise or the Purchaser with respect to this
Agreement or the transactions contemplated hereby or arising out of the actions
required or permitted to be taken by any of them pursuant to this Agreement, or
against or affecting either Paradise or the Purchaser or any of their properties
or rights which, if adversely determined, would be reasonably likely to have a
Material Adverse Effect.
Section 9.5 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit the Stockholder, Paradise and the Purchaser to perform their
obligations under this
27
Agreement and to consummate the transactions contemplated hereby shall have been
duly obtained, made or given and shall be in full force and effect.
Section 9.6 Paradise Stockholder Approval. The special meeting of
stockholders of Paradise shall have been duly held and at such meeting the
requisite affirmative vote of the Paradise stockholders shall have been recorded
to authorize and to approve the transactions contemplated hereby in accordance
with applicable provisions of Delaware law.
Section 9.7 Opinion of Counsel. The Stockholder shall have received the
opinion of Xxxxx & Xxxxxxx LLP, counsel to Paradise and the Purchaser, dated the
Closing Date, substantially in the form and to the effect of Exhibit B hereto.
Section 9.8 Proceedings. All proceedings to be taken on the part of
Paradise and the Purchaser in connection with the transactions contemplated by
this Agreement and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Stockholder, and the Stockholder shall
have received copies of all such documents and other evidences as the
Stockholder may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.
Section 9.9 Material Adverse Effect. Since the Execution Date there shall
not have occurred any Material Adverse Effect, or any event or development
which, individually or together with such events, could reasonably be expected
to result in a Material Adverse Effect and Paradise shall have delivered to the
Stockholder a certificate, dated the Closing Date, to such effect.
Section 9.10 Straw Dogs Acquisition Agreement. On the Closing Date, the
transactions contemplated by the Straw Dogs Agreement shall have been
consummated contemporaneously with the Closing hereunder.
Section 9.11 Working Capital. Appropriate working capital lines of credit,
as determined by Paradise and subject to the reasonable approval of the
Stockholder , shall have been obtained for the Purchaser and Paradise.
ARTICLE X
ADDITIONAL AGREEMENTS
Section 10.1 Name of Purchaser. The parties hereto agree that immediately
after the Closing, the corporate name of the Purchaser will be changed to "Straw
Dogs, Inc."
Section 10.2 Termination. This Agreement may be terminated and the sale of
Shares and other transactions contemplated herein may be abandoned at any time
prior to the
28
Closing, notwithstanding the adoption of this Agreement by the Stockholder or
the stockholders of Paradise by:
(a) mutual consent of the Boards of Directors of each Paradise and
the Purchaser, and the Stockholder;
(b) either Paradise and the Purchaser, on the one hand, or the
Stockholder, on the other hand, (provided the terminating party is not then in
breach hereof and has not received notice of any breach) if the other party
breaches its representations, warranties or covenants hereunder in any material
respect and such breach is not cured within 15 days after the delivery of
written notice thereof to such breaching party unless the breach of any such
representation, warranty, or covenant does not materially adversely affect the
business or assets of the breaching party or the ability of any or all parties
to consummate the transactions contemplated hereby;
(c) the Boards of Directors of either Paradise and the Purchaser,
and the Stockholder in the event a final and nonappealable order, decree or
judgment of any court, agency, commission or governmental authority is issued or
existing against the parties or any of them or any of their directors which
would enjoin the transactions contemplated hereby; or
(d) either Paradise and the Purchaser, on the one hand, or the
Stockholder, on the other hand, if the Closing Date has not occurred prior to
the close of business on September 30, 1999.
Section 10.3 Effect of Termination. If this Agreement is terminated as
provided in Section 10.8 hereof, this Agreement (except as otherwise herein
provided) shall forthwith become void and there shall be no liability on the
part of any party hereto or its respective officers or directors arising from
the act of such permitted termination. Nothing herein shall preclude, however,
any action or claim for damages to which any party is otherwise entitled as a
result of breach by the other party hereto. In the event of any termination,
each of the parties shall promptly return to the other, all documents and other
written information received from the other in connection with the transactions
contemplated by this Agreement and shall not retain any copies or summaries
thereof.
Section 10.4 Registration Rights. After the Closing Date, the Stockholder
shall have the registration rights set forth in Appendix A to this Agreement
with respect to the Paradise Stock acquired by him pursuant to this Agreement.
29
ARTICLE XI
SURVIVAL; INDEMNITY
Section 11.1 Survival. Notwithstanding any right of any party hereto fully
to investigate the affairs of any other party, and notwithstanding any knowledge
of facts determined or determinable pursuant to such investigation or right of
investigation, each party hereto shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement and the Schedules, if any, furnished by any other
party pursuant to this Agreement, or in any certificate delivered at the Closing
by any other party. Subject to the limitations set forth in Sections 11.5.2,
11.5.3 and 11.5.4, the respective representations, warranties, covenants and
agreements (including but not limited to, the confidentiality obligations of
Section 12.8) of the Stockholder, Paradise and the Purchaser contained in this
Agreement shall survive the Closing.
Section 11.2 Obligation of the Stockholder to Indemnify
11.2.1 General Indemnity Subject to the limitations contained in Section
11.5, the Stockholder hereby agrees, to indemnify Paradise, the Purchaser and
their affiliates, shareholders, officers, directors, employees, agents,
representatives and successors, permitted assignees of the Paradise the
Purchaser and their affiliates (including the Company) (individually a
"Purchaser Indemnified Party" and collectively, the "Purchaser Indemnified
Parties") against, and to protect, save and keep harmless the Purchaser
Indemnified Parties from, and to pay on behalf of or reimburse the Purchaser
Indemnified Parties as and when incurred for, any and all liabilities (including
liabilities for Taxes), obligations, losses, damages, penalties, demands,
claims, actions, suits, judgments, settlements, penalties, interest,
out-of-pocket costs, expenses and disbursements (including reasonable costs of
investigation, and reasonable attorneys', accountants' and expert witnesses'
fees) of whatever kind and nature (collectively, "Losses"), that may be imposed
on or incurred by any Purchaser Indemnified Party as a consequence of, in
connection with, incident to, resulting from or arising out of or in any way
related to or by virtue of: (a) any misrepresentation, inaccuracy or breach of
any warranty or representation contained in Article III hereof or in any
certificate delivered by the Stockholder at the Closing; (b) any action, demand,
proceeding, investigation or claim by any third party (including any
Governmental or Regulatory Authority) against or affecting any Purchaser
Indemnified Party which may give rise to or evidence the existence of or relate
to a misrepresentation or breach of any of the representations and warranties of
the Stockholder contained in Article III hereof or in any certificate delivered
by the Stockholder at the Closing; and (c) any breach or failure by the
Stockholder to comply with perform or discharge any obligation, agreement or
covenant by the Stockholder contained in this Agreement.
11.2.2 "Losses". The term "Losses" as used in this Agreement is not
limited to matters asserted by third parties against an Indemnified Party, but
includes Losses incurred or sustained by an Indemnified Party in the absence of
third party claims. All Losses suffered by the Purchaser by virtue of a state of
facts which constitutes a misrepresentation, inaccuracy or breach of a warranty
or representation by the Stockholder shall (without duplication) be deemed to
have
30
been suffered by the Purchaser and, accordingly, the Purchaser shall have the
right, but not the obligation, to make indemnification claims that may be made
by the Stockholder in respect of such Losses, in its own name and for its own
benefit.
Section 11.3 Obligation of Paradise and the Purchaser to Indemnify.
Subject to the limitations set forth in Section 11.5.2 hereof, Paradise and the
Purchaser hereby agree, jointly and severally, to indemnify the Stockholder and
his affiliates, officers, directors, employees, agents, representatives and
successors, permitted assigns of the Stockholder and his affiliates (the
"Stockholder Indemnified Party") against, and to protect, save and keep harmless
the Stockholder Indemnified Party from, and to pay on behalf of or reimburse the
Stockholder Indemnified Party as and when incurred for, any and all Losses that
may be imposed on or incurred by the Stockholder Indemnified Party as a
consequence of, in connection with, incident to, resulting from or arising out
of or in any way related to or by virtue of: (a) any misrepresentation,
inaccuracy or breach of any warranty or representation of Paradise or the
Purchaser contained in Article IV hereof or in any certificate delivered by
Paradise or the Purchaser at the Closing; (b) any action, demand, proceeding,
investigation or claim by any third party (including any Governmental or
Regulatory Authority) against or affecting the Stockholder Indemnified Party
which may give rise to or evidence the existence of or relate to a
misrepresentation or breach of any of the representations and warranties of
Paradise or the Purchaser contained in Article IV hereof or in any certificate
delivered by Paradise or the Purchaser at the Closing; and (c) any breach or
failure by Paradise or the Purchaser to comply with, perform or discharge any
obligation, agreement or covenant by Paradise or the Purchaser contained in this
Agreement.
Section 11.4 Indemnification Procedures.
11.4.1 Non-Third-Party Claims. In the event that any Person entitled to
indemnification under this Agreement (an "Indemnified Party") asserts a claim
for indemnification which does not involve a Third Party Claim (as defined in
Section 11.4.2 below), against which a party to this Agreement is required to
provide indemnification under this Agreement (an "Indemnifying Party"), the
Indemnifying Party may acknowledge and agree by notice to the Indemnifying Party
in writing to satisfy such claim within 20 days of receipt of notice of such
claim from the Indemnified Party. In the event that the Indemnifying Party
disputes such claim, the Indemnifying Party shall provide written notice of such
dispute to the Indemnified Party within 20 days of receipt of notice of such
claim, setting forth a reasonable basis of such dispute. In the event that the
Indemnifying Party shall fail to provide written notice to the Indemnified Party
within 20 days of receipt of notice from the Indemnified Party that the
Indemnifying Party either acknowledges and agrees to pay such claim or disputes
such claim, the Indemnifying Party shall be deemed to have acknowledged and
agreed to pay such claim in full and to have waived any right to dispute such
claim. Once the Indemnifying Party has acknowledged and agreed to pay any claim
pursuant to this Section 11.4.1, or once any dispute under this Section 11.4.1
has been finally resolved in favor of indemnification by a court or other
tribunal of competent jurisdiction, subject to Section 11.5.1, the Indemnifying
Party shall pay the amount of such claim to the Indemnified Party within 10 days
of the date of acknowledgement or resolution, as the case may be, to such
account and in such manner as is designated in writing by the Indemnified Party.
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11.4.2 Third-Party Claims.
(a) In the event that any Indemnified Party asserts a claim for
indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any Person who is not a party
to this Agreement or an affiliate of a party to this Agreement (a "Third
Party Claim") against an Indemnifying Party, the Indemnified Party shall
give written notice together with a statement of any available information
regarding such claim to the Indemnifying Party within 30 days after
learning of such claim (or within such shorter time as may be necessary to
give the Indemnifying Party a reasonable opportunity to respond to such
claim). The Indemnifying Party shall have the right, upon written notice
to the Indemnified Party (the "Defense Notice") within 15 days after
receipt from the Indemnified Party of notice of such claim, which Defense
Notice by the Indemnifying Party shall specify the counsel it will appoint
to defend such claim ("Defense Counsel"), to conduct at its expense the
defense against such claim in its own name, or if necessary in the name of
the Indemnified Party; provided, however, that the Indemnified Party shall
have the right to approve the Defense Counsel, which approval shall not be
unreasonably withheld or delayed, and in the event the Indemnifying Party
and the Indemnified Party cannot agree upon such counsel within 10 days
after the Defense Notice is provided, then the Indemnifying Party shall
propose an alternate Defense Counsel, which shall be subject again to the
Indemnified Party's approval which approval shall not be unreasonably
withheld or delayed. If the parties still fail to agree on the Defense
Counsel, then, at such time, they shall mutually agree in good faith on a
procedure to determine the Defense Counsel.
(b) In the event that the Indemnifying Party shall fail to give the
Defense Notice within such 15 day period, it shall be deemed to have
elected not to conduct the defense of the subject claim, and in such event
the Indemnified Party shall have the right to conduct the defense and to
compromise and settle the claim without prior consent of the Indemnifying
Party and the Indemnifying Party will be liable for all reasonable costs,
expenses, settlement amounts or other Losses paid or incurred in
connection therewith.
(c) In the event that the Indemnifying Party does deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim, the
Indemnifying Party shall be entitled to have the exclusive control over
the defense and settlement of the subject claim and the Indemnified Party
will cooperate with and make available to the Indemnifying Party such
assistance and materials as it may reasonably request, all at the expense
of the Indemnifying Party; the Indemnified Party shall have the right at
its expense to participate in the defense assisted by counsel of its own
choosing. In such an event, the Indemnifying Party will not settle the
subject claim without the prior written consent of the Indemnified Party,
which consent will not be unreasonably withheld or delayed.
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(d) Without the prior written consent of the Indemnified Party, the
Indemnifying Party will not enter into any settlement of any Third Party
Claim or cease to defend against such claim, if pursuant to or as a result
of such settlement or cessation, (i) injunctive relief or specific
performance would be imposed against the Indemnified Party, or (ii) such
settlement or cessation would lead to liability or create any financial or
other obligation on the part of the Indemnified Party for which the
Indemnified Party is not entitled to indemnification hereunder.
(e) If an Indemnified Party refuses to consent to a bona fide offer
of settlement which provides for a full release of the Indemnified Party
and its affiliates and solely for a monetary payment which the
Indemnifying Party wishes to accept, the Indemnified Party may continue to
pursue such matter, free of any participation by the Indemnifying Party,
at the sole expense of the Indemnified Party. In such an event, the
obligation of the Indemnifying Party shall be limited to the amount of the
offer of settlement which the Indemnified Party refused to accept plus the
costs and expenses of the Indemnified Party incurred prior to the date the
Indemnifying Party notified the Indemnified Party of the offer of
settlement.
(f) Notwithstanding clause (b) above, the Indemnifying Party shall
not be entitled to control, but may participate in, and the Indemnified
Party shall be entitled to have sole control over, the defense or
settlement of any claim (i) that seeks a temporary restraining order, a
preliminary or permanent injunction or specific performance against the
Indemnified Party, (ii) to the extent such claim involves criminal
allegations against the Indemnified Party, (iii) that if unsuccessful,
would set a precedent that would materially interfere with, or have a
material adverse effect on, the business or financial condition of the
Indemnified Party or (iv) if such claim would impose liability on the part
of the Indemnified Party for which the Indemnified Party is not entitled
to indemnification hereunder. In such an event, the Indemnifying Party
will still have all of its obligations hereunder provided that the
Indemnified Party will not settle the subject claim without the prior
written consent of the Indemnifying Party, which consent will not be
unreasonably withheld or delayed.
(g) Any final judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party, and
shall conclusively be deemed to be an obligation with respect to which the
Indemnified Party is entitled to prompt indemnification hereunder.
(h) A failure by an Indemnified Party to give timely, complete or
accurate notice as provided in this Section 11.4 will not affect the
rights or obligations of any party hereunder except and only to the extent
that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially
damaged as a result of such failure to give timely notice.
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Section 11.5 Limitations on and Other Matters Regarding Indemnification.
11.5.1 Indemnity Cushion and Cap. Subject to Section 11.5.4 below, the
Stockholder shall not have any liability to any Purchaser Indemnified Party with
respect to Losses arising out of any of the matters referred to in Section
11.2.1 until such time as the amount of such liability shall exceed in the
aggregate (i) $25,000, plus (ii) the amount by which Net Worth of the Company
(as defined in Section 8.13) as of the Effective Date exceeded $1.00 (the
"Aggregate Cushion") (in which case the Stockholder shall be liable for all
Losses in excess of the Aggregate Cushion). Subject to Section 11.5.4 below, the
indemnity obligations of the Stockholder with respect to Losses arising out of
any matter referred to in Section 11.2.1 shall not exceed the value of the
Paradise Stock delivered to the Stockholder at the Closing. For purposes of
calculating the value of the Paradise Stock received by the Stockholder, the
Paradise Stock shall be valued at its fair market value, which shall be the
average closing price for Paradise Stock on the Nasdaq Small Cap Market for the
ten trading days ending two business days immediately prior to the date of
payment.
11.5.2 Termination of Indemnification Obligations of the Stockholder . The
obligation of the Stockholder to indemnify under Section 11.2 hereof shall
terminate one year from the Closing Date, except (a) as to matters as to which
the Purchaser Indemnified Party has made a claim for indemnification on or prior
to such date and (b) with respect to any claim for Losses pertaining to a
misrepresentation or a breach of representation or warranty under Section 3.11
or any other Section of Article III of this Agreement relating to Taxes . The
obligation to indemnify referred to in:
(i) the preceding clause (a) shall survive the expiration of such period
until such claim for indemnification is finally resolved and any
obligations with respect thereto are fully satisfied; and
(ii) the preceding clause (b) shall terminate 180 days after the
expiration of the relevant Federal, state or local statute of limitations
(taking into account any extensions or waivers thereof), except as to
matters as to which any Indemnified Party has made a claim for
indemnification on or prior to such date, in which case the right to
indemnification with respect thereto shall survive the expiration of any
such period until such claim for indemnification is finally resolved and
any obligations with respect thereto are fully satisfied.
11.5.3 Termination of Indemnification Obligations of Paradise and the
Purchaser. The obligation of Paradise and the Purchaser to indemnify under
Section 11.3 hereof shall terminate one year from the Closing Date except as to
matters as to which the Stockholder Indemnified Party has made a claim for
indemnification on or prior to such date, in which case the right to
indemnification with respect thereto shall survive such period until such claim
for indemnification is resolved and any obligations with respect thereto are
fully satisfied.
11.5.4 Exceptions. Each of the limitations set forth above in this Section
11.5 shall in no event (a) apply to any Losses incurred by a Purchaser
Indemnified Party which relate, directly or
34
indirectly, to (i) any fraudulent acts committed by the Stockholder (including
without limitation, fraud in connection with the transaction contemplated hereby
and any fraudulent acts by any manager, officer, employee, agent or equity
holder of the Stockholder or the Company); (ii) any indemnification obligation
under Section 11.2.1(c); and (iii) the Stockholder's obligations set forth in
Section 12.1 to pay certain expenses; or (b) apply to any Losses incurred by the
Stockholder Indemnified Party which relate, directly or indirectly, to (i) any
fraudulent acts committed by Paradise, the Purchaser (including without
limitation, fraud in connection with the transaction contemplated hereby and any
fraudulent acts by any officer, director, employee, agent or shareholder of
Paradise or the Purchaser); (ii) any indemnification obligation under Section
11.3(c); and (iii) Paradise's obligations set forth in Section 12.1 to pay
certain expenses.
11.5.5 Control by Paradise. All decisions and determinations to be made by
the Purchaser and/or a Purchaser Indemnified Party under this Article XI shall
be made by Paradise in the name of and on behalf of the Purchaser or such other
the Purchaser Indemnified Party.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Expenses. Except for the costs of auditing the Company's
financial statements (as described in Sections 2.1.2 and 3.4), which costs shall
be paid by Paradise, the parties hereto shall pay all of their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisors.
Section 12.2 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, (including, without limitation, the
validity or enforcement of this Agreement), shall be governed by the laws of the
State of Delaware without reference to its conflict of laws provisions.
Section 12.3 Jurisdiction. Any judicial proceeding brought against any of
the parties to this Agreement on any dispute arising out of this Agreement or
any matter related hereto shall be brought in (i) the courts of the State of New
York or in the United States District Court for the Southern District of New
York, if the principal office of Paradise is then located in New York, or (ii)
the courts of the State of California or in the United States District Court for
the Southern District of California, if the principal office of paradise is then
located in California. Each party hereto irrevocably waives to the fullest
extent permitted by law any objection that it may now or hereafter have to the
laying of the venue of any judicial proceeding brought in such courts and any
claim that any such judicial proceeding has been brought in an inconvenient
forum. The foregoing consent to jurisdiction shall not constitute general
consent to service of process in the States of New York or California for any
purpose except as provided above and shall not be deemed to confer rights on any
person other than
35
the respective parties to this Agreement. EACH PARTY HEREBY WAIVES TRIAL BY JURY
IN ANY JUDICIAL PROCEEDINGS UNDER THIS AGREEMENT.
Section 12.4 "Person" Defined. "Person" shall mean and include an
individual, a company, a partnership, a joint venture, a corporation (including
any non-profit corporation), a trust, an estate, a limited liability company, a
limited liability partnership, an unincorporated organization and a government
or other department or agency thereof.
Section 12.5 "Knowledge" Defined. Where any representation and warranty
contained in this Agreement is expressly qualified by reference to the knowledge
of the Stockholder, such term shall be limited to the actual knowledge of the
Stockholder and unless otherwise stated such knowledge that would have been
discovered by the Stockholder after reasonable inquiry. Where any representation
and warranty contained in this Agreement is expressly specified by reference to
the knowledge of Paradise or the Purchaser, as the case may be, such term shall
be limited to the actual knowledge of the executive officers of such entity and
unless otherwise stated, such knowledge that would have been discovered by such
executive officers after reasonable inquiry.
Section 12.6 "Affiliate"Defined. As used in this Agreement, an "affiliate"
of any Person, shall mean any Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with such Person.
Section 12.7 Captions. The Article and Section captions used herein are
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 12.8 Confidentiality. Unless and until the Closing shall have
occurred and except as may be required in connection with (i) any public
announcement that Paradise, the Purchaser and the Stockholder have executed this
Agreement, or (ii) any governmental filings contemplated under this Agreement,
Paradise, the Purchaser and the Stockholder shall, and shall cause their
respective employees, agents, consultants and representatives to, maintain in
confidence and not otherwise use or permit the use of information, documents,
and data respecting any other party to this Agreement furnished to them, or to
any person or entity on their behalf except to the extent that such information
is elsewhere available to the public or otherwise rightfully obtained without
violation of this Section 12.8 or any other agreement. If this Agreement is
terminated pursuant to Section 10.2 hereof or otherwise, each party shall (and
Paradise the Purchaser and the Stockholder shall cause any third party to whom
it has made permitted disclosures to) (i) return to the other party or destroy
all written information, documents, and data furnished to it or to any person or
entity on its behalf, and (ii) maintain in confidence all information received
by it, or by any person or entity on its behalf, and shall not use or permit the
use of such information by others except to the extent that such information is
elsewhere available to the public or otherwise rightfully obtained without
violation of this Section 12.8 or any other agreement. Notwithstanding the
foregoing, the foregoing provision shall not apply to the extent that Paradise
is required to
36
make any announcement or file information relating to or arising out of this
Agreement by virtue of the federal securities laws of the United States or the
rules and regulations promulgated thereunder or other rules of the Nasdaq Small
Cap Market, or any announcement by any party pursuant to applicable law or
regulations.
Section 12.9 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand or by courier, (b) three days after the
date of deposit in the mails, postage prepaid, if mailed by certified or
registered mail, or (c) the next business day if sent by facsimile transmission
(if receipt is electronically confirmed) or by a prepaid overnight courier
service, and in each case at the respective addresses or numbers set forth below
or such other address or number as such party may have fixed by notice:
If to either Paradise or to the Purchaser, addressed to:
Paradise Music & Entertainment, Inc.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Fax: 000-000-0000
with a copy to:
Xxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to the Stockholder, addressed to:
Consolidated Entertainment, LLC
0000 X. Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxxx & Xxxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
37
Attention: Xxxxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
Section 12.10 Parties in Interest. This Agreement may not be transferred,
assigned pledged or hypothecated by any party hereto, other than by operation of
law. Any purported transfer, assignment, pledge or hypothecation (other than by
operation of law) shall be void and ineffective. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and permitted assigns.
Section 12.11 Severability. In the event any provision of this Agreement
is found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement shall nevertheless be binding upon the
parties with the same effect as though the void or unenforceable part had been
severed and deleted.
Section 12.12 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
Section 12.13 Entire Agreement. This Agreement, including the other
documents referred to herein which form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior oral and written
agreements and understandings between the parties with respect to such subject
matter.
Section 12.14 Amendment. This Agreement may not be amended, supplemented
or modified orally, but only by an agreement in writing signed on behalf of each
of the parties hereto.
Section 12.15 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto and their respective
successors and assigns as permitted under Section 12.10.
38
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement, on the day and year first above written.
PARADISE MUSIC &
ENTERTAINMENT, INC.
By:
----------------------------------
Name:
Title:
STRAW DOGS ACQUISITION CORP.
By:
----------------------------------
Name:
Title:
--------------------------------------
XXXXX XXXXX
39
