As filed with the Securities and Exchange Commission on December 23, 1998.
Registration No. ______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------
PARADISE MUSIC & ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3906452
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
53 West 23rd Street
New York, NY 10010
(212) 590-2100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Philip G. Nappo, III, Chief Financial Officer
Paradise Music & Entertainment, Inc.
53 West 23rd Street - 11th Floor
New York, NY 10010
(212) 590-2100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Walter M . Epstein, Esq.
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
(212) 468-4911
-----------------------
Approximate date of commencement of proposed sale to the public: On such date as
the selling stockholders shall elect to commence sales to the public following
the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================
Proposed
Amount to maximum Proposed maximum Amount of
Title of each class of be offering price aggregate registration
securities to be registered registered per share(1) offering price fee
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 2,628,205
$.01 per share shares $1.77 $4,651,923 $1,375
=========================================================================================
</TABLE>
(1) Based on the average of the high and low sale prices of the Common Stock
reported on the Nasdaq SmallCap Market on December 18, 1998 of $1.77 per
share, solely for the purpose of calculating the registration fee pursuant
to Rule 457(c).
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion
Dated December 23, 1998
Prospectus
Paradise Music & Entertainment, Inc.
Common Stock
2,628,205 Shares
The offering is being made only for the benefit of the selling
stockholders. They may elect from time to time to sell their shares but are not
required to do so. We will not receive any of the sale proceeds. We are paying
all the expenses of the offering.
Our shares currently trade on the Nasdaq Small Cap Market (SM) and on the
Boston Stock Exchange. However, we were recently advised by Nasdaq that they
want to delist us. See "Risk Factors." On December 18, 1998 the last sale price
on NASDAQ was $1.625 per share. (Trading Symbols: Nasdaq Small Cap Market -
PDSE; Boston Stock Exchange - PMU)
Investing in the Company involves a high degree of risk. You should
purchase shares only if you can afford a complete loss. You should carefully
read and review this prospectus including the "Risk Factors" beginning on page 7
before deciding whether to buy shares in this Offering.
The Securities and Exchange Commission has not approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Prospectus dated December 23, 1998.
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement which includes this prospectus
covering this offering with the Securities and Exchange Commission ("SEC"). This
prospectus does not contain all the information included in the registration
statement. You can request a copy of the registration statement and the exhibits
from us to get a more complete description of our Company and this offering. We
have provided our address, telephone number and e-mail address in the next
section "Incorporation of Certain Information by Reference" if you wish to
obtain free copies of the registration statement and exhibits.
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference room in Washington D.C., New
York, New York and Chicago, Illinois. You can also request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public on the SEC
Internet site at http\\www.sec.gov. The registration statement, of which this
prospectus forms a part, including all exhibits, has been filed in electronic
form with the SEC through EDGAR.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
Commission will automatically update and supersede this information.
We incorporate by reference the following documents filed by us with the
SEC:
o Our Annual Report on Form 10-KSB for the year ended June 30, 1998 filed
with the SEC on October 8, 1998;
o Our Quarterly Report on Form 10-QSB for the quarter ended September 30,
1998 filed with the SEC on November 20, 1998;
o All other reports and other documents filed by us pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") since
September 30, 1998;
o Our registration statement on Form 8-A filed on January 9, 1997 and
declared effective on January 22, 1997 registering the Common Stock under
Section 12(b) of the Exchange Act; and
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<PAGE>
o All documents and reports subsequently filed by us pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
and prior to the filing of a post-effective amendment which indicates that all
securities which may be offered hereby have been sold or which deregisters all
securities then remaining unsold.
At your request, we will provide you, without charge, with a copy of any
information incorporated by reference in this prospectus. If you want more
information, write or call us at:
Paradise Music & Entertainment
53 West 23rd Street
New York, New York 1010
(212) 590-2100
Attn: Philip G. Nappo, III
In addition, the Company's information may be obtained electronically from our
web site at http://www.paradiseme.com or by submitting a request via email to
[email protected].
You may also obtain information from the SEC as described in "Where You
Can Find More Information."
3
<PAGE>
PROSPECTUS SUMMARY
We have provided you with a summary of important information on our
business. You should read all the information in this prospectus for a more
complete understanding. Some of the information has been incorporated from our
SEC filings. You can obtain copies of this incorporated information from us
without charge as described beginning on page 2. Please be sure to read "Risk
Factors" beginning on page 7 for a description of the high risk involved in
acquiring our shares.
THE COMPANY
Principal Executive Paradise Music & Entertainment, Inc.
Offices: 53 West 23rd Street
New York, NY 10010
(212) 590-2100
Our Business: We engage in various music related businesses,
including:
o Production of music videos and music specials for
television and cable through Picture Vision, Inc.
o Music artist management through All Access
Entertainment, Inc.
o Production of original scores for television,
radio and advertising through Rave Music, Inc.
o Production and commercial release of recorded music
through PUSH Records, Inc.
Here are highlights of each business.
PICTURE VISION
Picture Vision produces:
o Music videos used to promote music artists
o Music specials for television and cable featuring
music artists. Recent productions include Janet
Jackson's "Velvet Rope Concert" and Garth Brooks'
"Live From Central Park Concert" for HBO.
These services are provided on a fixed budget basis
with profitability dependent on estimating and managing
budget costs. Picture Vision has produced music videos
and specials for many well-known artists and has
received numerous industry awards for its work.
ALL ACCESS
All Access provides a full range of management services
to music artists. The number of artists represented by
All Access is limited and consists of both well-known
artists such as Daryl Hall and John Oates and
developing artists such as Sheppard (with Mosh
Productions, an affiliate of Sony Music), Kim Sozzi, a
Columbia Records recording artist, and FAT, a DV8
Records recording artist. All Access receives its fees
as a fixed percentage of artist revenues. The fee
percentage charged varies based on an artist's prior
commercial success.
RAVE
Rave creates for use on television, radio and film:
o Original music scores, for the television shows
Pokemon, Mr. Men and Little Miss.
o Advertising themes for clients such as Downy
Fabric Softener, Pringles, JIF Peanut Butter and
Dominos Pizza.
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<PAGE>
Rave produces original music at its in-house studios
and uses independent musicians, singers and engineers
to produce final soundtracks. A substantial portion of
Rave's revenues are generated from television
commercials. Rave retains the future property rights
to its musical compositions.
PUSH
PUSH is a start-up record label launched by the Company
in early 1997. PUSH has the exclusive rights to records
by established artists such as Daryl Hall and John
Oates, Daryl Hall, Blessid Union of Souls, and by new
and emerging artists such as Luxx and kidneythieves.
Push has released three recordings to date through BMG
Music, a major distribution company.
Push has also negotiated joint ventures to share in the
distribution, marketing and promotion of various jazz
recordings by artists such as Paul Hardcastle,
Jazzmasters and others in exchange for a negotiated
percentage of every record sold.
Our Concept of We offer a broader range of services than most
Combined Services; independent music companies. This combination of
Expansion: services has been structured to foster synergies
between the operating companies, more efficient
business operations, lower costs and greater
convenience to customers. In addition, we intend to
expand through acquisitions in related businesses, if
sufficient capital can be raised to fund the
acquisition program.
Our History Involves The Company was incorporated in Delaware in July
Substantial Losses: 1996 and commenced operations in October 1996. We
originally combined the operations of three established
companies (Rave, Picture Vision and All Access) in
establishing the Company. Following our public offering
in 1997, we launched PUSH, our record label. We have
not yet become profitable on a combined basis and
cannot assure you that we will become profitable. In
the meantime, we have expended substantial capital to,
among other things, cover our operating losses.
Recent Developments: On December 11, 1998, investors represented by The
Cassandra Group, Inc., a registered investment advisor
("Cassandra"), purchased 500,000 shares of Common
Stock at a price of $1 per share or $500,000 in the
aggregate and on December 15, 1998 additional
investors represented by Cassandra purchased an
aggregate of 1,500,00 shares of Common Stock at a
purchase price of $1 per share or $1,500,000 in the
aggregate. The Company received the first payment of
$500,000 on December 11, 1998 and an additional
$100,000 on or about December 23, 1998. The payment
for the remaining 1,400,000 shares is due on the
effective date of this prospectus. See "Selling
Stockholders." The purchase price was higher than the
market price on NASDAQ and the book value on the date
of payment or date of irrevocable commitment.
We agreed with the Cassandra investors to file a
registration statement on Form S-3 registering for
resale the 2,000,000 shares promptly following the
initial funding of $500,000. We are required to have
the registration statement declared effective by the
SEC no later than the 90th day after its filing with
the SEC or the investors have the right to put back to
the Company at a price of $1.00 per share the 600,000
shares purchased and the sale of the remaining
1,400,000 shares could be voided. We also granted
Cassandra the right to designate three directors to
sit on our nine member Board. No directors have been
appointed yet.
5
<PAGE>
We raised an additional $100,000 through the sale of
100,000 shares to an unaffiliated investor. In
addition, certain trade vendors and professionals
agreed to convert $528,205 owed to them for 528,205
shares, the same price paid by the other investors. We
also agreed to register these shares for resale in this
S-3.
THE OFFERING
Securities Offered: 2,628,205 shares. The shares are being offered by the
selling stockholders. See "Plan of Distribution."
Shares Outstanding: There were 2,407,200 shares issued and outstanding
prior to the share issuances described in "Recent
Developments" (the "Investment"). Pursuant to the
Investment, a total of 2,628,205 shares have been
issued. Accordingly, there are 5,035,405 shares issued
and outstanding as of the date hereof (excluding
shares which can be purchased under existing warrants
and options).
Estimated Offering $35,000.
Expenses:
Risk Factors: Investing in our shares is very risky. Investors
should be able to bear the complete loss of their
investment.
Use of Proceeds: The proceeds of this offering will be paid to the
selling stockholders. None of the proceeds will be
paid to the Company. See "Use of Proceeds."
Trading Symbols: Nasdaq SCM BSE
---------- ---
Common Stock PDSE PMU
Warrants PDSEW PMUW
Special Note Regarding Forward-looking Statements
Some of the statements contained in this prospectus, including information
incorporated by reference, discuss future expectations, contain projections of
future results of operations or financial condition or state other
"forward-looking" information. Those statements are subject to known and unknown
risks, uncertainties and other factors that could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions.
Important factors that may cause actual results to differ from projections
include, for example:
o the relative success or failure of our efforts to implement our
business plans;
o our ability to raise sufficient capital to fully implement our business
plans, including the release and promotion of new albums on our record
label;
o our ability to provide music related services which appeal to the
current trends in the music industry;
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<PAGE>
o our ability to attract quality music artists and professionals;
o our ability to negotiate and maintain favorable distribution
arrangements for our record label;
o the effect of changing economic conditions;
o changes in government regulations, tax rates and similar matters;
o our ability to attract and retain quality employees; and
o other risks which may be described in our future filings with the SEC.
We do not promise to update forward-looking information to reflect
actual results or changes in assumptions or other factors that could
affect those statements.
RISK FACTORS
Investing in our shares is very risky. You should be able to bear a
complete loss of your investment. You should carefully consider the following
factors, among others, before making an investment decision.
Our Shares may be removed from Our tangible net asset value as of September
Nasdaq SmallCap. 30, 1998 was below the required Nasdaq SmallCap
requirements. On November 3, 1998, Nasdaq
notified us that they wanted to delist our
shares on November 10, 1998. Prior to November
10, 1998, we requested an oral hearing which is
scheduled for January 8, 1999. On December 15,
1998 we submitted a written business plan in
support of our request to continue to be listed
on Nasdaq. We cannot be sure that our plan will
be acceptable to Nasdaq or what the outcome
will be at the oral hearing. If our shares are
delisted, the price of the shares would be
harmed.
We have been experiencing The Company has for some time been experiencing
substantial cash shortages. a cash shortage. Because of this cash shortage,
there have been delays in making timely
payments which have hurt our relationship with
some of our suppliers. In addition, our
landlord has recovered certain rent concessions
that were previously granted based on our
payment delays.
We will need to raise more We have for some time been actively seeking
money in the future. additional financing for our business. We have
recently raised $2,100,000 in cash as described
above and an additional $528,205 in debt
conversions also as described above. To date
$700,000 has been paid in cash, all of the debt
conversions have taken place and the balance of
$1,400,000 in cash investments will be paid
promptly following the date of this Prospectus.
More funds will have to be obtained in order to
support our business plans. If we cannot get
more funds, we will have to curtail some of our
plans. We cannot assure you that we can obtain
more capital. We also don't know if the terms
requested by future financing sources will be
acceptable to us.
We are a recently combined While our operating companies other than the
business which has record label have been individually in business
experienced substantial for many years, we have only operated together
losses since the since October 1996. We have not yet operated
combination. the combined business on a profitable basis. We
cannot assure you when, if ever, the combined
business will be profitable.
7
<PAGE>
PUSH Records is a high risk Although large amounts of money have been
business which has never been invested in PUSH it has never been profitable.
profitable. PUSH must generate revenues from successful
releases which are sufficient to overcome any
losses from unsuccessful releases. PUSH must
also put out enough releases to support its
overhead and marketing activities. We have no
assurance that PUSH will achieve profitability.
PUSH's records are distributed through BMG
Music, one of the five largest music
distribution companies in the world. PUSH has
not met the sales levels required under its
distribution agreement with BMG. While BMG has
orally agreed not to terminate the distribution
agreement at this time, BMG could decide to
terminate at any time in the future. BMG's
termination would significantly harm the PUSH
business.
We depend on our Senior Our business depends on the skill, creativity
Management and Key Employees. and business relationships of our employees and
particularly our senior management. The loss of
members of our senior management, including
John Loeffler, Jon Small, Brian Doyle, Philip
G. Nappo III and Richard Flynn would be harmful
to us.
We are dependent on the Our artist management business and our record
success of independent artists label business have relationships with a
with whom we have limited number of artists. It is difficult to
relationships. secure these relationships. Once they have been
secured we depend on the success of these
artists, which success cannot be predicted, in
order to realize revenues.
Our acquisition program has Our acquisition program has yet to be
yet to be successful. successful. It will be difficult to fund and
finance acquisitions unless we raise more money
and our stock price rises. Even if we complete
acquisitions, we cannot be sure that these
acquisitions will benefit our operations.
Competition is intense in all Our record business competes with numerous
our businesses. other independent record labels, many of whom
have greater financial resources than us. In
addition, there are six major companies with
which our record label cannot compete directly
due to the substantial financial resources and
talent pool of their companies.
Our artist management, video production and
original score/production businesses also
compete with numerous other similar businesses,
many of whom have greater financial resources
than us.
We are dependent on some large One advertising agency/client generated
customers. $303,000 and $361,000 of commercial music
production revenues for the years ended June
30, 1998 and June 30, 1997, respectively.
Two music artists produced $750,000 and
$675,000 of music artist management revenues
for the years ended June 30, 1998 and June 30,
1997, respectively.
Video production for two music artists in 1998
and one music artist in 1997 generated
approximately $7,402,000 and $1,867,000, of
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<PAGE>
video production revenues for the years ended
June 30, 1998 and June 30, 1997, respectively.
The loss of a large customer or the loss of a
significant production would hurt our
businesses.
No dividends have been paid. We have never declared or paid a cash dividend
and we do not expect to have available cash
with which to pay cash dividends in the
foreseeable future.
A large block of shares can be Owners of a large block of shares which were
sold under Rule 144. previously restricted can be sold under Rule
144. The sale of a large number of these shares
could lower the price of our shares or make it
harder to attract new investors.
Additionally, the Company has granted warrants
and options to certain directors, officers,
employees and consultants of the Company to
purchase an aggregate of 329,000 shares of
Common Stock.
We must deal with Year 2000 We have conducted a review of our computer
Compliance Issues. systems to identify the "Year 2000" problem.
The year 2000 problem is the result of computer
programs being written using two digits rather
than four to define the applicable year. Any
programs that have time-sensitive software may
recognize a date using "00" as the year 1900
rather than the year 2000. This could result in
a major systems failure or miscalculations. We
believe that our computer systems and software
products are fully year 2000 compatible.
However, computer systems or software products
of our suppliers or customers may not accept
input of, store, manipulate and output dates in
the year 2000 or thereafter without error or
interruption. We have retained a consultant to
help us with compliance.
USE OF PROCEEDS
All of the shares which may be sold pursuant to this prospectus will be
sold from time to time by the selling stockholders for their own accounts or by
pledgees, donees, transferees or other successors in interest thereof. The
Company will receive no proceeds from any such sales of shares.
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the selling stockholders as of December 18, 1998,
the number of shares owned by them covered by this prospectus and the amount and
percentage of shares to be owned by each selling stockholder after the sale of
all of the shares offered by this prospectus. The number of shares indicated
includes the number of shares of Common Stock issuable upon exercise of
currently exercisable options and convertible debentures. The list of selling
stockholders includes Thomas J. Edelman, Paul Thomas Cohen, directors of the
Company, John Loeffler, Brian Doyle and Richard Flynn, directors and officers of
the Company, and Philip G. Nappo, III, an officer of the Company, each of whom
received their shares covered by this prospectus in exchange for amounts owed to
them. The selling stockholders also includes the law firm of Davis & Gilbert
LLP, counsel to the Company, who received its shares covered by this prospectus
in exchange for corporate legal services rendered to the Company. Except for
Messrs. Edelman, Cohen, Nappo, Loeffler, Doyle and Flynn and for other employees
marked with an "E" and trade vendors marked with a "V", none of the selling
shareholders has had any position, office or other material relationship with
the Company within the past three years other than as a result of the ownership
of the shares or other securities of the Company. The information included below
is based on information provided by the selling shareholders. Because the
selling stockholders may offer some or all of their shares, no definitive
estimate as to the number of shares that will be held by the selling
stockholders after such
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<PAGE>
offering can be provided and the following table has been prepared on the
assumption that all shares of Common Stock offered hereby will be sold.
Shares Percentage
Shares of Owned of Shares
Beneficially Shares After Owned After
Name Owned Offered Offering(1) Offering(1)(2)
- ---- ----- ------- -------- --------------
Big City 8,000 8,000 0 0
Entertainment, Inc.-V
Lawrence Bortoluzzi -E 8,500 8,500 0 0
Pamela Butler-E 1,000 1,000 0 0
Daniel Caldwell-E 12,500 12,500 0 0
P. Thomas Cohen(3) 45,489 23,960 21,529 *
Davis & Gilbert LLP-V 98,129 88,129 10,000 *
Brian Doyle 189,250 43,750 145,500 2.88
Thomas J. Edelman(4) 97,279 60,000 37,279 *
Richard Flynn 189,250 43,750 145,500 2.88
Jennifer J. 3,000 3,000 0 0
Haagen-Islami-E
Michael Jeon-E 1,000 1,000 0 0
Jacqueline Kotler-E 2,000 2,000 0 0
John Loeffler(5) 349,451 27,084 322,367 6.40
John Loeffler Music 18,600 15,000 3,600 *
Pension Plan Inc. (5)
Jonathan Love-E 2,000 2,000 0 0
Philip G. Nappo 96,882 88,852 8,000 *
Joseph Parker-V 2,000 2,000 0 0
Michael Rodriguez-E 15,000 15,000 0 0
April Taylor-E 1,650 1,650 0 0
Tiffany Towers-E 6,000 6,000 0 0
Robert Burke 100,000 100,000 0 0
Jesse Dylan 100,000 100,000 0 0
Akiva Goldsman 75,000 75,000 0 0
David Kuhn 25,000 25,000 0 0
Richard and Ann La 100,000 100,000 0 0
Gravenese
Stacey Shor 100,000 100,000 0 0
Margery Simkin 100,000 100,000 0 0
Benjamin Affleck 75,000 75,000 0 0
Allegra Productions 10,000 10,000 0 0
Trey Anasissio 70,000 70,000 0 0
Henry Bamberger 10,000 10,000 0 0
Soledad Bastiancich 10,000 10,000 0 0
Steve/Janet 10,000 10,000 0 0
Bergman/Surrey
Marianne Boesky 20,000 20,000 0 0
Broadcast Data 10,000 10,000 0 0
Systems, LP-V
Cecil Trust 75,000 75,000 0 0
Cornerstone Promotion, 10,000 10,000 0 0
Inc.-V
Dan Cortese 20,000 20,000 0 0
Dan Cortese Trust 20,000 20,000 0 0
Claudio Curzi 20,000 20,000 0 0
Matthew P. Damon 75,000 75,000 0 0
Benicio Del Toro 10,000 10,000 0 0
Dennis Gassner & 10,000 10,000 0 0
Associates, PR-SH
Cameron & Billie Diaz 20,000 20,000 0 0
Arthur Dielhenn 20,000 20,000 0 0
Dielhenne Productions 20,000 20,000 0 0
Profit
10
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Sharing
Dionysian Productions, 20,000 20,000 0 0
Inc.
Gabe Doppelt 10,000 10,000 0 0
Jay Faires 75,000 75,000 0 0
Alan Finkelstein 15,000 15,000 0 0
and Jay Finkelstein
Jonathan Fishman 20,000 20,000 0 0
Morgan Freeman 20,000 20,000 0 0
Brian Gibson 30,000 30,000 0 0
Mike Gordon 30,000 30,000 0 0
Lara Harris 75,000 75,000 0 0
Lauren Holly 75,000 75,000 0 0
Hopalong Company, Inc. 10,000 10,000 0 0
Ted Hope 10,000 10,000 0 0
James Yoahinobe Ina 30,000 30,000 0 0
Craig Kanarick 75,000 75,000 0 0
Kathy Sue Enterprises 10,000 10,000 0 0
Michelle Kydd 30,000 30,000 0 0
Law offices of Glinert 3,000 3,000 0 0
& Chidekel-V
Victoria Leacock 10,000 10,000 0 0
David Looner 10,000 10,000 0 0
Amir Malin 10,000 10,000 0 0
Margaret Martin 10,000 10,000 0 0
Menchel Family Trust 75,000 75,000 0 0
Amy Ness 25,000 25,000 0 0
Diarmuid Quinn 10,000 10,000 0 0
Tim Roth 20,000 20,000 0 0
David Salle 20,000 20,000 0 0
David Salle PR-SH 10,000 10,000 0 0
September Productions, 20,000 20,000 0 0
Inc. PR- SH
Sheldon Kahn 20,000 20,000 0 0
Retirement Fund
Shepard Family Trust 20,000 20,000 0 0
Rev. James Shepard 20,000 20,000 0 0
Trust
Leslie Simitch 20,000 20,000 0 0
Martin Spencer 10,000 10,000 0 0
Norman Steinberg 20,000 20,000 0 0
Ken Sunshine 10,000 10,000 0 0
T-Bone Films, Inc.-V 4,000 4,000 0 0
The Roland Trust 20,000 20,000 0 0
Tom Anthony 33,000 33,000 0 0
Woodworking-V
Jay Walkingshaw 20,000 20,000 0 0
Sally Wilcox 10,000 10,000 0 0
- ----------
* Less than 1%
(1) Assumes sale of all shares owned by the selling stockholders.
(2) Based on 5,035,405 shares of Common Stock outstanding on the date of this
prospectus.
(3) Includes options to purchase 15,000 shares.
(4) Includes options to purchase 30,000 shares.
(5) Includes options to purchase 5,000 shares, 18,600 shares owned by Mr.
Loeffler's Pension Plan and 3,800 shares owned by Mr. Loeffler's wife.
11
<PAGE>
PLAN OF DISTRIBUTION
The shares are being registered in order to facilitate their sale from
time to time by the selling stockholders, or by pledgees, donees, transferees or
other successors in interest thereof, as market conditions permit in one or more
transactions. No underwriting arrangements have been entered into by the selling
stockholders. In addition, as none of the selling stockholders have advised the
Company whether or not they have any current intention of selling any of the
shares, the Company is unable to predict whether or when any of the selling
stockholders will determine to proceed with sales of the shares, as such
determination will be made solely at the discretion of each selling stockholder.
The distribution of the shares by the selling stockholders and/or their
pledgees, donees, transferees or other successors in interest, may be effected
in one or more transactions that may take place on the Nasdaq SCM, the BSE, the
over-the-counter market, including ordinary brokers transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
the shares as principals, or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The shares may be sold by one or more of
the following methods, without limitation: (a) a block trade in which a broker
or dealer so engaged will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (d)
face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the selling
stockholder may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from the selling
stockholders in amounts to be negotiated immediately prior to the sale. The
selling stockholders and such brokers and dealers and any other participating
brokers or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act, in connection with such sales. The Company has agreed to bear
all expenses of registration of the shares.
The Company will receive no proceeds from any sales of the shares offered
hereby by the selling stockholders. The Company has agreed to pay the filing
fees, costs and expenses associated with the registration statement exclusive
of fees of counsel to the selling stockholders, or any of them, but inclusive
of fees relating to compliance with any state blue sky requirements, commissions
and discounts of underwriters, dealers or agents, if any, and any stock transfer
taxes.
The Company has agreed to indemnify the selling stockholders, or their
transferees or assignees against certain liabilities, including liabilities
under the Securities Act.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the General Corporation Law of Delaware grants each
corporation organized thereunder the power to indemnify its officers, directors,
employees and agents on certain conditions against liabilities arising out of
any action or proceeding to which any of them is a party by reason of being such
officer, director, employee or agent. The Certificate of Incorporation also
provides for the indemnification, to the fullest extent permitted by the General
Corporation Law of Delaware, of such persons. Insofar as indemnification for
liabilities arising under the Securities Act, may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
LEGAL MATTERS
The validity of the shares offered hereby is being passed upon for the
Company by Davis & Gilbert LLP, 1740 Broadway, New York, New York, 10019. Walter
M. Epstein, Esq., a member of the firm, owns 10,000 shares of Common Stock and
Davis & Gilbert LLP owns 88,129 shares of Common Stock.
12
<PAGE>
EXPERTS
The consolidated financial statements as of June 30, 1998 and 1997 and for
the years then ended incorporated by reference in this prospectus, have been
incorporated herein in reliance on the report, which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern, of
Rothstein, Kass & Company, P.C., independent accountants given on the authority
of that firm as experts in accounting and auditing.
13
<PAGE>
================================================================================
Until ___________, all dealers that effect transactions in these securities may
be required to deliver a prospectus.
We have not authorized any person to give any information or to make any
representations other than those contained in this prospectus. You must not rely
upon any information or representation not contained or incorporated by
reference in this prospectus as if we had authorized it. If any person does make
a statement that differs from what is in this prospectus, you should not rely on
it. This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which they relate nor
does this prospectus constitute an offer to sell or the solicitation of an offer
to buy securities in any state or other jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. The
information contained in this prospectus is accurate as of the date of its
cover. When we deliver this prospectus or make a sale pursuant to this
prospectus, we are not implying that the information is current as of the date
of the delivery of the sale.
----------------------------
TABLE OF CONTENTS
Page
----
Where You Can Find More Information ....................................... 2
Incorporation of Certain Information by Reference ......................... 2
Prospectus Summary ........................................................ 4
Risk Factors .............................................................. 7
Use of Proceeds ........................................................... 9
Selling Stockholders ...................................................... 10
Plan of Distribution ...................................................... 12
Disclosure of Commission Position on Indemnification For Securities Act
Liabilities .............................................................. 12
Legal Matters ............................................................. 13
Experts ................................................................... 13
================================================================================
================================================================================
2,628,205 Shares
PARADISE MUSIC
&
ENTERTAINMENT,
INC.
Common Stock
----------------
PROSPECTUS
----------------
December 23, 1998
================================================================================
<PAGE>
INFORMATION NOT REQUIRED IN THE PROSPECTUS
The Company will bear no expenses in connection with any sale or other
distribution by the selling stockholders of the shares being registered other
than the expenses of preparation and distribution of this registration statement
and the prospectus included in this registration statement. Such expenses are
set forth in the following table. All of the amounts are estimates except the
Securities and Exchange Commission filing fee.
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee .....................$1,375
Accounting fees and expenses..............$2,500
Legal fees and expenses..................$25,000
Printing expenses.........................$3,000
Miscellaneous.............................$3,125
--------
Total.................................$35,000
- -----------
Item 15. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law (the "DGCL"),
the Registrant has broad powers to indemnify its directors, officers and other
employees. This section (i) provides that the statutory indemnification and
advancement of expenses provisions of the DGCL are not exclusive, provided that
no indemnification may be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled, (ii) establishes procedures for
indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the stockholders or directors or an
agreement providing for indemnification and advancement of expenses, (iii)
applies a single standard for statutory indemnification for third-party and
derivative suits by providing that indemnification is available if the director
or officer acted in good faith, for a purpose which he reasonably believed to be
in the best interests of the corporation, and, in criminal actions, had no
reasonable cause to believe that his conduct was unlawful, and (iv) permits the
advancement of litigation expenses upon receipt of an undertaking to repay such
advance if the director or officer is ultimately determined not to be entitled
to indemnification or to the extent the expenses advanced exceed the
indemnification to which the director or officer is entitled. Section 145(g) the
DGCL permits the purchase of insurance to indemnify a corporation or its
officers and directors to the extent permitted.
As permitted by Section 145(e) of the DGCL, the Registrant's By-laws
provide that the Registrant shall indemnify its officers and directors, as such,
to the fullest extent permitted by applicable law, and that expenses reasonably
incurred by any such officer or director in connection with a threatened or
actual action or proceeding shall be advanced or promptly reimbursed by the
Registrant in advance of the final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of such officer or director to repay
such amount if and to the extent that it is ultimately determined that such
officer or director is not entitled to indemnification.
Article Seventh of the Registrant's Certificate of Incorporation provides
that no director of the Registrant shall be held personally liable to the
Registrant or its stockholders for damage for any breach of duty in his capacity
as a director unless a judgment or other final adjudication adverse to him
establishes that (1) he breached his duty of
II-1
<PAGE>
loyalty to the Registrant or its stockholders, or (2) his acts or omissions were
in bad faith or involved intentional misconduct or a knowing violation of law,
or (3) he personally gained in fact a financial profit or other advantage to
which he was not legally entitled, or (4) his acts violated Section 174 of the
DGCL.
The Registrant's By-Laws provide that the Registrant will indemnify its
directors, officers and employees against judgments, fines, amounts paid in
settlement and reasonable expenses.
The Registrant intends to obtain and maintain liability insurance for the
benefit of its directors and officers.
Item 16. Exhibits.
Exhibit Description
- ------- -----------
1 Not Applicable
2 Not Applicable
4 Instruments defining the rights of security holders, including
indentures:
(A) Certificate of Incorporation, as amended (Incorporated by
reference to the Company's registration statement on Form SB-2
(File No: 333-13941) effective January 22, 1997).
(B) By-Laws (Incorporated by reference to the Company's
registration statement on Form SB-2 (File No: 333-13941)
effective January 22, 1997).
(C) Specimen Common Stock Certificate (Incorporated by reference
to the Company's registration statement on Form SB-2 (File No:
333-13941) effective January 22, 1997).
(D) Specimen Warrant Certificate (Incorporated by reference to the
Company's registration statement on Form SB-2 (file No.
333-13941) effective January 22, 1997.
(E) Form of Warrant Agreement including form of Warrant
(Incorporated by reference to the Company's registration
statement on Form SB-2 (file No. 333-13941) effective January
22, 1997.
(F) Form of Warrant Agreement between the Company and Continental
Stock Transfer and Trust Company (Incorporated by reference to
the Company's registration statement on form SB-2 (file
No.333-13941) effective January 22, 1997).
(G) Form of Subscription Agreement between the Company and the
Cassandra investors, filed herewith.
5 Opinion of Davis & Gilbert LLP, filed herewith
8 Not Applicable
12 Not Applicable
15 Not Applicable
23.1 Consent of Rothstein, Kass & Company, P.C., filed herewith
II-2
<PAGE>
23.2 Consent of Davis & Gilbert LLP (included in the opinion
filed as Exhibit No. 5)
24 Reference is made to the signature page
25 Not Applicable
26 Not Applicable
27 Not Applicable
99 Investment Agreement dated December 3, 1998 by and between the
Company and the Cassandra Group, Inc., filed herewith
Item 17. Undertakings,
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any additional or changed material information
with respect to the plan of distribution:
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required in a post-effective amendment is incorporated by reference
from periodic reports filed with the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act").
(2) That, for the purpose of determining any liability under the
Securities Act, the undersigned will treat each such post-effective amendment as
a new registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to section 13(a) or section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company, pursuant to the provisions described in Item 15 above, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by any such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether or not
such indemnification is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be the initial bona fide
offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York in the State of
New York on December 22, 1998.
PARADISE MUSIC & ENTERTAINMENT, INC.
By /s/ JOHN LOEFFLER
-----------------------------------
John Loeffler
Chairman of the Board and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENT, that each whose signature appears below
hereby severally constitutes and appoints John Loeffler and Philip G. Nappo,
III, and each of them, his true and lawful attorneys-in-fact and agents, each
acting alone, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement
and all documents relating thereto, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, each
acting alone full power and authority to do and perform each and every act and
thing necessary or advisable to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/S/ JOHN LOEFFLER Chairman of the Board December 22, 1998
- ------------------------- and President
John Loeffler
/s/ BRIAN DOYLE Chief Executive Officer December 22, 1998
- ------------------------- (Principal Executive Officer)
Brian Doyle and Director
Executive Vice President December __, 1998
- ------------------------- and Director
Jon Small
/S/ RICHARD FLYNN Chief Operating Officer, December 22, 1998
- ------------------------- Treasurer Secretary and
Richard Flynn Director
<PAGE>
/s/ PAUL THOMAS COHEN Director December 22, 1998
- -------------------------
Paul Thomas Cohen
/s/ THOMAS J. EDELMAN Director December 22, 1998
- -------------------------
Thomas J. Edelman
/s/ PHILIP G. NAPPO III Chief Financial Officer December 22, 1998
- ------------------------- (Principal Financial and
Philip G. Nappo, III Accounting Officer)
Paradise Music & Entertainment, Inc.
SUBSCRIPTION AGREEMENT
Name of Subscriber: ______________________________
Dated: December ____, 1998
1. Subscription. The undersigned hereby subscribes for ______ shares of
Common Stock, $0.01 par value, of Paradise Music & Entertainment, Inc. (the
"Company") at a price of $1.00 per share for a total investment of $___________.
In satisfaction therefore, we have wired such amount to [an escrow account
maintained by The Cassandra Group, Inc.] which account will be disbursed upon
the effective registration of the shares of Common Stock being subscribed for
hereunder.
2. Risk Factors. The undersigned understands and acknowledges that the
purchase of the Common Stock is a highly speculative investment that involves a
high degree of risk of loss by it of its entire investment in the Company due to
a number of significant risk factors including, but not limited to, the fact
that the Company is in the developmental stage and has a limited operating
history.
3. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants to the undersigned as follows:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is not in violation of any of the
provisions of its Articles of Incorporation or By-Laws.
(b) The Company has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. No other
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company and constitutes the valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(c) The Common Stock has been duly authorized and, when issued and
delivered against payment therefor as provided in this Agreement, will be
validly issued, fully paid and nonassessable. No holder of any of the Common
Stock will be subject to personal liability solely be reason of being such a
holder.
(d) The Company agrees to promptly file a registration statement on Form
S-3 with the Securities Exchange Commission ("Commission") to register the
shares of Common Stock represented by this subscription promptly after
subscriptions in the amount of $1,500,000 in the aggregate have been subscribed
for by investors, such as yourself. In the event that investors have not
subscribed for $1,500,000 in Common Stock in the aggregate by December 15, 1998,
the Company reserves the right to cancel your subscription and instruct the
escrow agent to return any monies that you have deposited therewith in
furtherance of your subscription. In the event that the shares of Common Stock
evidenced by this subscription have not been effectively registered (i.e., so as
to become freely trading and unrestricted)
<PAGE>
by the 90th day after the S-3 registration statement has been filed with the
Commission, the Company agrees that you can cancel this subscription agreement,
the escrow agent will promptly return the proceeds of your subscription, with
interest, if any, and that you will have no further obligation to the Company.
4. Representations and Warranties of the Undersigned. The undersigned
represents and warrants to the Company as follows:
(a) The undersigned is an accredited investor as such term is defined in
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act) and has been supplied with or has sufficient access to all
information, including financial statements and other financial information of
the Company including, its most recent 10-KSB for the fiscal year ended June 30,
1998 and 10-QSB for the quarter ended September 30, 1998, and has been afforded
with an opportunity to ask questions of and receive answers from any officer of
the Company concerning information which a reasonable investor would attach
significance in making investment decisions.
(b) The undersigned agrees that, prior to the effectiveness of an S-3
registration statement registering the shares of Common Stock being purchased
hereunder, a legend may be placed on any certificate or other document
evidencing the Common Stock stating that they have not been registered under the
Securities Act (and a stop transfer order may be placed with respect thereto)
and that the Common Stock are subject to other transfer restrictions as set
forth in the By Laws of the Company.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as the
date first stated above.
SUBSCRIBER:
[NAME OF ENTITY MAKING INVESTMENT, IF RELEVENT]
- ------------------------------
Name:
Title:
This Subscription is accepted by Paradise Music & Entertainment, Inc. as of this
___ day of December, 1998.
PARADISE MUSIC & ENTERTAINMENT, INC.
By
---------------------------------
Name:
Title:
2
Exhibit 5.1
[Letterhead of Davis & Gilbert LLP]
December 23, 1998
VIA FEDERAL EXPRESS
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Paradise Music and Entertainment Inc.
Ladies and Gentlemen:
We have acted as counsel to Paradise Music & Entertainment, Inc., a
Delaware corporation (the "Company") in connection with the registration
pursuant to a Registration Statement on Form S-3 (the "Registration Statement")
under the Securities Act of 1933, as amended, of an aggregate of 2,628,205
shares of Common Stock of the Company, par value $.01 per share ("Common
Stock").
In connection with this opinion, we have examined originals, or
copies certified to our satisfaction, of the Certificate of Incorporation of the
Company, as amended, the By-Laws of the Company, as amended, the minutes and
other records of the proceedings of the Board of Directors and of the
stockholders of the Company, and such other documents, corporate and public
records, agreements, and certificates of officers of the Company and of public
and other officials, and we have considered such questions of law, as we have
deemed necessary as a basis for the opinions hereinafter expressed. In such
examination we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or photostatic
copies.
Based on and subject to the foregoing, we hereby advise you that, in
our opinion, the shares of Common Stock to be sold pursuant to the Registration
Statement have been duly authorized and validly issued, and following receipt of
the purchase price, will be fully-paid and nonassessable.
Please be advised that this law firm owns 88,129 shares, and Walter
Epstein, a partner of this firm, owns 10,000 shares, of the Company's Common
Stock.
We hereby consent to the use and filing of this opinion in
connection with the Registration Statement and to the reference to our firm
under the caption "Legal Matters" in the Registration Statement and in the
related Prospectus.
Very truly yours,
Davis & Gilbert LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Paradise Music & Entertainment, Inc. on Form S-3 of our report, which contains
an explanatory paragraph relating to the Company's ability to continue as a
going concern, dated July 28, 1998 except as to Notes 6 and 13 which are as of
August 6, 1998 and October 6, 1998, respectively, on our audits of the
consolidated financial statements of Paradise Music & Entertainment, Inc. as of
June 30, 1998 and 1997, and for the years then ended. We also consent to the
reference to our firm under the caption "Experts."
Rothstein, Kass & Company
Roseland,, New Jersey
December 23, 1998
[Letterhead of The Cassandra Group, Inc.]
December 3, 1998
Board of Directors
Paradise Music & Entertainment, Inc.
53 West 23rd Street - 11th Floor
New York, NY 10010
Gentlemen:
Re: Purchase of $2 million of Registered and Unrestricted Common Stock.
This letter contains a general recitation of the material business terms to be
incorporated into any definitive common stock subscription agreement(s) (the
"Definitive Agreement(s)") which we agree to negotiate, in good faith, pursuant
to which we have agreed to purchase, for the benefit of our clients, $2 million
in registered and unrestricted securities of Paradise Music & Entertainment,
Inc. ("Paradise"). This letter sets forth our mutual intent and understanding,
but is not meant to be binding upon either party (except for Sections 3(a) and
(b) which shall be binding) unless and until we both execute and deliver a
Definitive Agreement covering the subject matter discussed below. If either
party decides that it no longer wishes to pursue the transaction contemplated
hereunder for any reason, such terminating party shall give the other party
prompt written notice to such effect. We presently contemplate that the
Definitive Agreement will cover the following material terms:
Section 1: Sale of $2 Million Common Stock.
(a) The Definitive Agreement will provide that the Company, a Delaware
corporation, will sell us $2 million in common stock ("Equity") at a price of
$1.00 per share on such terms set forth in the term sheet annexed hereto which
is incorporated herein by reference with the same force and effect as if recited
here in its entirety. The Equity shall be denominated in such increments and in
the names of the investors as we otherwise direct. The Equity will be sold to
certain investors we represent pursuant to an exemption under Section 4(2) of
the Securities Act of 1933, as amended (the "Act"). As soon as we provide you
with the names of the subscribers, the amounts of their subscriptions, their
addressees and social security numbers, and their subscriptions for $2 million
(with an initial funding of $500,000) you will promptly file a registration
statement on Form S-3 relating to the Equity being sold hereunder.
(b) We agree to use our best efforts to cause the first $500,000 of
subscriptions (the "Initial Subscriptions") to be funded on or before December
4, 1998, but you acknowledge and understand that we cannot guaranty with any
certainty, the date of such first funding. In the event that we have not funded
the Initial Subscriptions on or before December 15, 1998, you reserve the right
to terminate this Agreement. We agree to fund the remaining $1.5 million in
Equity subscriptions (the "Remaining Equity Subscriptions") promptly upon the
effective date of the registration statement relating to the Equity.
(c) In the event that the S-3 registration statement relating to the $2
million in Equity is not effective by the 90th day after its filing with the
Securities Exchange Commission, we reserve the right to (i) put back to the
Company at a price of $1.00 per share the Equity represented by the Initial
Subscriptions, and (ii) cancel all Remaining Equity Subscriptions.
<PAGE>
Section 2: Employment Agreements and Board Representation. As a condition to
funding the Equity, a letter agreement in the form annexed hereto must be
executed by each of Messrs. Loeffler, Doyle, and Flynn and the current Board of
Directors must deliver resolutions in the form annexed hereto.
Section 3: Miscellaneous.
(a) The parties represent, warrant and covenant to each other that no
party is entitled to any broker's or finder's fee in connection with the
transaction contemplated hereby. Paradise (and each of its executive officers
and directors, regardless of whether they are executing counterparts of this
letter), agree that they will not, jointly or severally, undertake or engage in
any discussions or negotiations with any third party or otherwise solicit
interest with respect to the sale or financing of Paradise, its assets, its
businesses, or any transaction involving the sale of all or substantially all of
the stock or assets of Paradise, or any other arrangement or understanding which
would adversely effect the ability of Paradise to consummate the transaction as
contemplated hereunder or diminish the worth of its business or assets in any
way for a period of five (5) months from the date of the execution of this
letter agreement.
(b) The parties agree that they shall not issue any press releases or make
any public statements relating to the execution of this letter, or the
transactions contemplated hereby without first receiving the consent of the
other party hereto, such consent not to be unreasonably withheld. The content of
any such press release or statement shall be subject to the reasonable prior
review and comment by the other party and their counsel.
(c) Except as set forth in the attached term sheet, the parties agree to
bear all of their respective expenses in connection herewith and in consummating
the transactions contemplated hereby.
(d) This letter (including the term sheet annexed hereto) sets forth the
entire agreement among the parties with respect to the subject matter hereof,
and supersedes all prior consistent and inconsistent agreements, written or
oral, with respect thereto.
(e) This letter may be amended, modified, superseded, canceled, renewed or
extended, and the terms and conditions hereof may be waived, only by a written
instrument signed by each of the parties hereto, or in the case of a waiver,
signed by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
(f) This letter shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to principles of conflicts
of law.
(g) This letter is not assignable except by operation of law or as
specifically set forth herein.
(h) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person or persons
may required.
(i) This letter may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
If the above is satisfactory to you and adequately reflects our understanding,
please acknowledge by executing in the space below provided.
2
<PAGE>
THE CASSANDRA GROUP, INC..
By: /s/ Dana Giacchetto
-------------------------------
Dana Giacchetto, President
AGREED TO AND ACCEPTED BY:
PARADISE MUSIC & ENTERTAINMENT, INC.
By: /s/ John Loeffler
-------------------------------
Name: John Loeffler
Title: President
3
<PAGE>
Private Placement of
$2 Million in Common Stock (the "Equity")
to
Certain Clients of The Cassandra Group, Inc. ("Investors")
by
Paradise Music & Entertainment, Inc. ("Paradise")
- --------------------------------------------------------------------------------
Term Sheet
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Equity: $2,000,000 in unrestricted Common Stock at the price at a
price of $1.00 per share (the "Equity") issued pursuant to
Section 4(2) of the Securities Act of 1933.
Board Reps: Investors to gain three (3) Board Representatives with full
voting rights.
Closing and Initial Subscription of $500,000 on December 1, 1998 (or as
Funding: soon thereafter as practicable) with filing thereafter at the
earliest practicable opportunity of an S-3 registration
statement registering the shares underlying the full $2
million in Equity such that, upon registration, the full $2
million in Equity will be freely tradable and unrestricted;
The Remaining Equity Subscription balance of $1,500,000 will
be funded on the effective date of the S-3 registration
statement. In the event that the S-3 registration statement
relating to the $2 million in Equity is not effective by the
90th day after its filing with the Securities Exchange
Commission, you reserve the right to (i) put back to the
Company at a price of $1.00 per share the Equity represented
by the Initial Subscriptions, and (ii) cancel all Remaining
Equity Subscriptions.
-1-
<PAGE>
Use Of Proceeds: (a) up to $750,000 in trade and other short-term payables
booked as of November 20, 1998;
(b) $200,000 production advance to Blessid Union of Souls (in
fulfillment of existing contract terms);
(c) Up to $100,000 production/licensing advance for a Daryl
Hall solo album;
(d) funding of PUSH Records at an SG&A budget of $75,000 for
December, 1998, $100,000 for January, 1999, and $125,000 for
February of 1999;
(e) funding of various marketing expenses related to PUSH
Record's existing and planned releases in the amount of
$200,000 for the period beginning November 15, 1998 and
ending January 31, 1999; and
(f) balance for Paradise Music and subsidiaries working
capital.
Legal and Company to pay up to $10,000 of Investors' transaction costs;
Accounting Fees: The Company to bear the costs of outside counsel in preparing
the transaction documents and S-3 registration statement.
Buyer's o Paradise agrees to "no shopping" of deal for five months
Conditions: from date of execution of the letter agreement to which
this Term Sheet is annexed.
o Subject at all times to final terms, due diligence and
legal documentation satisfactory to in its sole and
absolute discretion.
Officers: The Investors are making the investment on the basis of the
following management team being in place prior to funding of
the Equity:
John Loeffler: Chairman and President ($25,000 per annum
stipend from Paradise) plus $225,000 base
from Rave with an earn up as per Employment
Modification Letter Agreement.
Brian Doyle: CEO ($50,000 per annum base from Paradise
with profit sharing to be negotiated plus
$100,000 base from each of All Access and
PUSH Records with an earn up as per
Employment Modification Letter Agreement).
Richard Flynn: Chief Operating Officer ($50,000 from
Paradise per annum plus $100,000 base from
each of All Access and PUSH with an earn up
as per Employment Modification Letter
Agreement).
Philip Nappo: Chief Financial Officer and VP of
Acquisitions ($100,000 per annum base (with
all benefits to which other executive
officers are entitled, as a consultant for
the first six months from Paradise with
profit sharing and future salary to be
negotiated).
-2-
<PAGE>
The Investors believe that the record label is an integral
component of Paradise and to incentivize the executives and
employees thereof, Paradise must issue an additional 180,000
shares of common stock to each of Messrs. Doyle and Flynn
(payable into a deferred compensation plan or as otherwise
directed by such executives), and the Board must adopt a
compensation plan pursuant to which key employees of
Paradise will receive an allocation of up to 5% of the
issued and outstanding shares of Paradise in the form of
restricted stock awards under a deferred compensation plan,
all to be awarded as the Board deems appropriate over
calendar year 1999.
-3-
