Exhibit 99.1
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT (the "Agreement") dated December 15, 2000, by
and among PARADISE MUSIC & ENTERTAINMENT, INC., a Delaware corporation (the
"Company"), and BAYSTAR CAPITAL, L.P., a Delaware limited partnership ("BayStar
Capital") and BAYSTAR INTERNATIONAL LTD., A British Virgin Islands corporation
("BayStar International," and together with BayStar Capital, the "Buyers", and
each individually a "Buyer").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement dated as of March 7,
2000 ("Securities Agreement"), by and among the Company and the Buyers, BayStar
Capital acquired a $2,000,000 Convertible Subordinated Note ("$2M Note") and
421,053 Warrants (the "BayStar Capital Warrants") as defined in the Securities
Agreement and BayStar International acquired a $1,000,000 Convertible
Subordinated Note ("$1M Note"), together with the $2 M Note (the "Notes") and
210,526 Warrants (the "BayStar International Warrants") and together with
BayStar Capital Warrants (the "Warrants") as defined in the Securities
Agreement;
WHEREAS, accrued interest has been added as principal to the Notes and all
references herein to the Notes includes such accrued interest;
WHEREAS, pursuant to a Purchase Agreement dated as of October 6, 1999, by
and between the Company and Eruptor Entertainment Inc. ("Eruptor") and the other
parties named therein (the "Eruptor Purchase Agreement"), the Company acquired
1,000,000 shares of Series A Convertible Preferred Stock of Eruptor (the
"Eruptor Shares");
WHEREAS, the parties hereto wish to set forth the terms pursuant to which
the Buyers will acquire from the Company (i) the Eruptor Shares, (ii) 1,000,000
shares of the Company's common stock, par value $.01 per share (the "Paradise
Shares") by converting the outstanding principal amount of the Notes, and (iii)
five year warrants in the form annexed hereto as Exhibit A to purchase 500,000
shares of the Company's common stock, par value $.01 per share, exercisable at
$2.00 per share (the "Paradise Warrants" and such shares of common stock issued
upon the exercise of the Paradise Warrants are herein referred to as the
"Warrant Shares") in consideration of the payment in full and cancellation of
the Notes;
WHEREAS, the parties hereto wish to set forth such further agreements and
understandings in connection with the purchase and sale described herein.
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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:
1. PURCHASE AND SALE OF ERUPTOR SHARES, PARADISE SHARES, PARADISE WARRANTS
AND NOTES
(a) Eruptor Shares. The Company shall transfer and deliver on the
closing date as defined below (the "Closing Date") to the Buyers free and clear
of all liens, claims and encumbrances 1,000,000 Eruptor Shares, in the
respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers annexed hereto as Exhibit B. The Company shall also deliver an assignment
of all rights of the Company received in connection with the acquisition of the
Eruptor Shares as well as any consent of Eruptor or any third party, required
with respect thereto subject to the Buyer becoming party to any requisite
agreement with respect to such rights.
(b) Paradise Shares. The Company shall issue to the Buyers for
delivery on the Closing Date certificates for 1,000,000 Paradise Shares
allocated in the respective amounts set forth opposite each Buyer's name on the
Schedule of Buyers.
(c) Warrants. The Company shall issue to the Buyers for delivery on
the Closing Date 500,000 Paradise Warrants allocated in the respective amounts
set forth opposite each Buyer's name on the Schedule of Buyers;
(d) Form of Payment. On the Closing Date the Buyers shall deliver
the Notes to the Company in full payment for the Eruptor Shares, the Paradise
Shares and the Paradise Warrants.
(e) Closing Date. The date and time of the Closing (the "Closing
Date") shall be 10:00 a.m. Eastern Standard Time on November 6, 2000, subject to
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below (or such later date as is mutually agreed to by
the Company and the Buyers). The Closing shall occur on the Closing Date at the
offices of Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
(a) Investment Purpose. Such Buyer is purchasing the Paradise
Shares, the Paradise Warrants and the Eruptor Shares and will, upon exercise of
the Paradise Warrants, acquire the Warrant Shares (together with the Paradise
Shares, the Paradise Warrants and the Eruptor Shares, the "Securities"), for its
own account for investment only and not with a present view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933
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Act; provided, however, that by making the representations herein, such Buyer
does not agree to hold any Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the 1933 Act.
(b) Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
(d) Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company relating to the offer and sale of the Securities which have been
specifically requested by such Buyer. Such Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. In addition, the
Buyers are investors in Eruptor and as such already have access to all relevant
information with respect to Eruptor. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below.
(e) No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in form and substance reasonably satisfactory to
the Company, to the effect that the Paradise Warrants, Paradise Shares or
Warrant Shares to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such
securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("Rule 144"); (ii) any sale of
such securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
such securities under circumstances in which the
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seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) except for Eruptor's obligation pursuant to the
Registration Rights Agreement dated October 6, 1999 by and among Eruptor and the
purchasers of the Series A Preferred Stock, neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
(g) Legends. Such Buyer understands that the certificates or other
instruments representing the Paradise Shares and Warrant Shares, and, until such
time as the sale of such Securities has been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Paradise Shares and the Warrant Shares, except as set forth
below, shall bear a restrictive legend in substantially the following form (and
a stop-transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
The legend set forth above with respect to the Paradise Shares and the Warrant
Shares, only, shall be removed and the Company shall issue a certificate without
such legend to the holder of any such Securities upon which it is stamped, if
(i) any such Securities are registered for sale under the 1933 Act, (ii) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in form and substance reasonably satisfactory to the
Company, to the effect that a public sale, assignment or transfer of any of such
Securities may be made without registration under the 1933 Act, or (iii) any of
such Securities can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold. Each Buyer acknowledges, covenants and agrees to sell any of
such Securities represented by a certificate(s) from which the legend has been
removed, only pursuant to (i) a registration statement effective under the 1933
Act, or (ii) advice of counsel that such sale is exempt from registration
required by Section 5 of the 1933 Act. In the event the above legend is removed
from any of such Securities, the Company may, upon reasonable advance notice to
the holder, require that the above legend be placed on any of
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such Securities that cannot then be sold pursuant to an effective registration
statement or Rule 144(k) under the 1933 Act (or any successor rule thereto).
(h) Authorization; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
(a) Organization and Qualification. The Company and its subsidiaries
(a complete list of which is set forth in Schedule 3(a)) are corporations duly
organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power to own their properties and to carry on their business as now being
conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect (and all of which
jurisdictions in which either the Company or its subsidiaries is or believes it
should be duly qualified is set forth on Schedule 3(a) hereto. "Material Adverse
Effect" means any material adverse effect on (i) the business, properties,
operations, condition (financial or otherwise), results of operations or
prospects of the Company and its subsidiaries, individually or taken as a whole,
(ii) on the ability of the Company to perform its obligations hereunder or under
the agreements or instruments to be entered into or filed in connection herewith
or therewith, or (iii) the Securities.
(b) Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement and the Registration Rights
Agreement, to issue, sell, transfer and perform its obligations with respect to
the Securities in accordance with the terms hereof, and to issue the Warrant
Shares upon the exercise of the Paradise Warrants, in accordance with the
Paradise Warrants, (ii) The execution and delivery of this Agreement, the
Securities and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance, transfer and/or delivery of the
Securities and the reservation for issuance and the issuance of the Warrant
Shares upon exercise of the Paradise Warrants have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board
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of Directors or its stockholders, (iii) This Agreement, the Registration Rights
Agreement and the Securities have been duly executed and delivered by the
Company, (iv) The Company owns the Eruptor Shares free and clear of all liens,
encumbrances and defects and can freely transfer the Eruptor Shares together
with all rights with respect to the Eruptor Shares owned by the Company to the
Buyers without the need for any consent or waiver that has not already been
obtained and (v) This Agreement, the Registration Rights Agreement and the
Securities constitute the valid and binding obligations of the Company, those of
Eruptor with respect to the Eruptor Shares, enforceable against the Company or
Eruptor, as appropriate, in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
(c) Capitalization and Indebtedness. As of the date hereof and
immediately prior to the issuance of the Paradise Shares and the Paradise
Warrants hereunder, the authorized capital stock of the Company consists of
75,000,000 shares of Common Stock, of which as of the date hereof, 9,658,841
shares are issued and outstanding, and 5,000,000 shares of Preferred Stock, par
value $.01 per share (the "Preferred Stock"), of which as of the date hereof no
shares are issued or outstanding. All of the outstanding shares have been
validly issued and are fully paid and nonassessable. No shares of Common Stock
or Preferred Stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company. Except as set
forth on Schedule 3(c), as of the date hereof, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, (ii) there are no outstanding debt
securities, notes, credit agreements, or other agreements, documents or
instruments evidencing indebtedness of the Company or any of its subsidiaries or
by which the Company or any of its subsidiaries is or may become bound and (iii)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement). There are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of any of the Securities as described in this
Agreement. The Company has furnished to the Buyer true and correct copies of the
Company's Certificate of Incorporation, as amended and as in effect on the date
hereof (the "Certificate of Incorporation"), and the Company's By-laws, as in
effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
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(d) Issuance and Transfer of Securities. The Paradise Shares and the
Paradise Warrants are duly authorized and, upon issuance and transfer and/or
delivery in accordance with the terms hereof, the Paradise Shares and the
Paradise Warrants shall be (i) validly issued, fully paid and non-assessable,
(ii) free from all taxes, liens and charges with respect to the issue thereof,
and shall not be subject to preemptive rights or other similar rights of
stockholders of the Company and (iii) entitled to the rights and preferences set
forth thereon, respectively. Not less than 100% of the number of shares of
Common Stock have been duly authorized and reserved for issuance upon exercise
of the Paradise Warrants. Upon exercise in accordance with the Paradise
Warrants, the Warrant Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, and the Paradise Warrants by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and or transfer
of the Paradise Shares and the Paradise Warrants, and the Eruptor Shares, as
applicable, will not (i) result in a violation of the Certificate of
Incorporation, and Certificate of Designations, Preferences and Rights of any
outstanding series of Preferred Stock of the Company or By-laws, or (ii) except
as disclosed in Schedule 3(e), violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party including the Eruptor Purchase Agreement and any other
agreement executed by the Company in connection therewith, or result in a
material violation of any law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations and the rules
and regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected. Neither the Company nor its subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of Preferred
Stock of the Company or By-laws or their organizational charter or by-laws,
respectively, or in violation of any term of or in default under any material
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its subsidiaries. The business of the Company and its subsidiaries is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except to the extent such violation would not have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as required
under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental or regulatory
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or self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by this Agreement, the Registration Rights
Agreement or the Paradise Warrants in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. Except as disclosed in
Schedule 3(e), the Company is not in violation of the listing requirements of
the NASDAQ SmallCap Market and the Company and its subsidiaries are unaware of
any facts or circumstances that might give rise to any of the foregoing.
(f) SEC Documents; Financial Statements. Since December 31, 1999 the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). The
Company (i) has delivered or made available to each Buyer or its representative
true and complete copies of the SEC Documents as each Buyer or its
representative has requested from the Company and (ii) agrees to deliver or make
available to each Buyer or its representative true and complete copies of any
additional SEC Documents, upon request. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to any Buyer which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d) of this Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they are
or were made, not misleading.
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(g) Absence of Certain Changes. Except as expressly set forth in
Schedule 3(g) since December 31, 1999, there has been no material adverse change
and no material adverse development in the business, properties, operations,
condition (financial or otherwise), results of operations or prospects of the
Company and its subsidiaries individually or taken as a whole. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or its
subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
(h) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or its subsidiaries or their respective directors or officers, or the Common
Stock, wherein an unfavorable decision, ruling or finding could individually or
in the aggregate have a Material Adverse Effect. Schedule 3(h) contains a
complete list and summary description of any pending, or to the knowledge of the
Company, threatened proceeding against or affecting the Company or any of its
subsidiaries, without regard to whether it could have a Material Adverse Effect.
(i) Acknowledgment Regarding Buyers' Purchase of the Securities. The
Company acknowledges and agrees that each of the Buyers is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that each
Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any of the Buyers or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's purchase
of the Securities. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its representatives. The Company has
not provided to any Buyer any nonpublic information that, in the opinion of the
Company, is material to a decision to purchase or sell Common Stock.
(j) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of any of
the Securities offered hereby.
(k) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause the offering of any of the Securities
to be integrated with prior offerings by the Company for purposes of the 1933
Act or any applicable shareholder approval
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provisions, including, without limitation, under the rules and regulations of
the National Association of Securities Dealers Automated Quotation System
("NASDAQ").
(l) Employment Matters; ERISA Matters. The Company and its
subsidiaries are in compliance with all federal, state, local and foreign laws
and regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours except where failure to be in
compliance would not have a Material Adverse Effect. There are no pending
investigations involving the Company or any of its subsidiaries by the U.S.
Department of Labor or any other governmental agency responsible for the
enforcement of such federal, state, local or foreign laws and regulations. There
is no unfair labor practice charge or complaint against the Company or any of
its subsidiaries pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
against or involving the Company or any of its subsidiaries. Except as set forth
in Schedule 3(l), no representation question exists respecting the employees of
the Company or any of its subsidiaries, and no collective bargaining agreement
or modification thereof is currently being negotiated by the Company or any of
its subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
its subsidiaries. No material labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is imminent.
The Company has no employee benefit plans subject to the Employee Retirement
Income Security Act of 1974, as amended.
(m) Intellectual Property Rights. The Company and its subsidiaries
own or possess the requisite rights or licenses to use all trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights (collectively "Intellectual Property
Rights") necessary to conduct their respective businesses as now conducted and
as presently contemplated to be operated in the future. None of the material
Intellectual Property Rights or other material intellectual property rights have
expired or terminated, or are expected to expire or terminate in the near
future. The Company and its subsidiaries do not have any knowledge of any event,
fact or circumstance relating to (i) any infringement by the Company or its
subsidiaries of any trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets or other similar
rights of others, or of any such development of similar or identical trade
secrets or technical information by others or (ii) any person or entity now
infringing any Intellectual Property Rights or other similar rights or any such
development of similar or identical trade secrets or technical information owned
or used by the Company or any of its subsidiaries and, there is no claim, action
or proceeding being made or brought against, or to the Company's knowledge,
being threatened against, the Company or its subsidiaries regarding any
trademarks, trade names, service marks,
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service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets or
other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others or (iii) any person
or entity now infringing any Intellectual Property Rights or other similar
rights or any such development of similar or identical trade secrets or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and its
subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights.
(n) Environmental Laws. (i) The Company and its subsidiaries (A) are
in compliance with any and all Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (C) are in
compliance with all material terms and conditions of any such permit, license or
approval. With respect to the Company and/or its subsidiaries (A) there are no
past or present releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under any Environmental Law and (B) neither the Company nor any of its
subsidiaries has received any notice with respect to the foregoing, nor is any
action pending or to the Company's knowledge, threatened in connection with the
foregoing. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(i) To the knowledge of the Company, other than those that are or were
stored, used or disposed of in compliance with applicable law, no Hazardous
Materials are contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous Materials were
released on or about any real property previously owned, leased or used by the
Company or any of its subsidiaries during the period the property was owned,
leased or used by the Company or any of its subsidiaries.
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(ii) To the knowledge of the Company, there are no underground storage
tanks on or under any real property owned, leased or used by the Company or any
of its subsidiaries that are not in compliance with applicable law.
(o) Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(o) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries. Any real property and facilities held under lease by the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its subsidiaries.
(p) Insurance. The Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as is prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not individually or in the aggregate have a
Material Adverse Effect.
(q) Regulatory Permits; Compliance. The Company and its subsidiaries
possess all franchises, grants, authorizations, licenses permits, easements,
consents, certificates, approvals and orders necessary to own, lease and operate
its properties and to conduct their respective businesses as currently being
conducted (collectively, the "Company Permits"). There is no action pending, or
to the knowledge of the Company, threatened regarding the suspension or
cancellation of any of the Company Permits the consequences of which would have
a Material Adverse Effect. Neither the Company nor any of its subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits.
Neither the Company nor any of its subsidiaries has received any notification
with respect to possible conflicts, defaults, or violations of applicable laws.
(r) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
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accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(s) No Materially Adverse Contracts, Etc. Neither the Company nor
any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which has or is
expected in the future individually or in the aggregate to have a Material
Adverse Effect. Neither the Company nor any of its subsidiaries is a party to
any contract or agreement which has or is expected to have a Material Adverse
Effect.
(t) Tax Status. Except as set forth on Schedule 3(t), the Company
and each of its subsidiaries has made or filed all federal, state and foreign
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any foreign,
federal, state or local tax. The Company has not been notified that any of its
tax returns is currently being audited by any taxing authority.
(u) Certain Transactions. Except as set forth on Schedule 3(u) and
except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors or employees
of the Company is presently a party to any transaction with the Company (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(v) S-3 Registration. The Company is currently eligible to register
securities, including the resale of the Warrant Shares, on a registration
statement on Form S-3 under the 1933 Act.
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(w) Disclosure. All information relating to or concerning the
Company or any of its subsidiaries set forth in this Agreement and provided to
the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its subsidiaries or its
or their business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company's reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).
(x) Investment Company Status. The Company is not and upon
consummation of the sale of the Securities will not be an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
(y) Foreign Corrupt Practices. Neither the Company nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(z) Year 2000. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of the Company's and its
subsidiaries' (i) computer systems and (ii) equipment containing imbedded
microchips (including systems and equipment supplied by others to the Company or
with which are sold as an integral part of Company's or any of its subsidiaries'
systems) and the testing of such systems and equipment, as so reprogrammed has
been completed. The cost to the Company and its subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of year
2000 to the Company and its subsidiaries with respect to the matters referred to
in the previous sentence (including without limitation, reprogramming errors and
the failure of systems or equipment supplied by others to the Company or which
are sold as an integral part of the Company's or any of its subsidiaries'
systems) will not have a Material Adverse Effect. The computer and management
information systems of the Company and each of its subsidiaries are and, with
ordinary course
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upgrading and maintenance, will continue to be, sufficient to permit the Company
and each subsidiary to conduct its business without a Material Adverse Effect.
(aa) Title to the Eruptor Shares. The Company and its subsidiaries
have good and marketable title to the Eruptor Shares free and clear of all
liens, encumbrances and defects.
(bb) Registration Rights Agreement Compliance. The Company has
complied and will continue to comply with all of its obligations under the
Registration Rights Agreement between the parties dated as of March 7, 2000.
(cc) Continued Effectiveness of Registration Statement. The
Registration Statement filed by the Company for the warrant shares underlying
the Warrants issued to the Buyers on March 7, 2000 continues to remain
effective.
3. COVENANTS AND AGREEMENTS.
(a) Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
of this Agreement.
(b) Form D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary to
qualify the Securities for, or obtain exemption for the Securities for, sale to
the Buyers at the Closing pursuant to this Agreement under applicable securities
or "Blue Sky" laws of the states of the United States, and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date.
(c) Reporting Status. Until the earlier of (i) six months after the
date as of which the Investors (as that term is defined in the Registration
Rights Agreement annexed hereto as Exhibit C) may sell all of the Paradise
Shares and the Warrant Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) or (ii) the date on which
(A) the Investors shall have sold all the Paradise Shares and the Warrant Shares
and (B) none of the Warrants are outstanding (the "Registration Period"), the
Company (x) shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would otherwise permit such termination and (y)
will use its best efforts and take all necessary action to maintain its ability
and eligibility to register securities on Form S-3.
(d) [omitted]
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(e) Financial Information. The Company agrees to file all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the 1934 Act. The financial
statements of the Company will be prepared in accordance with generally accepted
accounting principles, consistently applied, and will fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries and results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). The Company agrees to send the following to each
Investor (as that term is defined in the Registration Rights Agreement) during
the Registration Period: (i) within five (5) days after the filing thereof with
the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on
Form 10-Q, any Current Reports on Form 8-K and any registration statements or
amendments filed pursuant to the 1933 Act; (ii) within one (1) day after release
thereof, copies of all press releases issued by the Company or any of its
subsidiaries; and (iii) copies of any notices and other information made
available or given to the shareholders of the Company generally,
contemporaneously with the making available or giving thereof to the
shareholders. All documents available via the Securities and Exchange
Commission's EDGAR document retrieval system as of the dates required hereunder
shall be deemed to have been delivered to each Investor as of such date.
(f) Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 125% of the number of shares of Common Stock necessary to
provide for the issuance of the Warrant Shares.
(g) Listing. The Company shall promptly secure the listing of the
Paradise Shares and Warrant Shares upon the Nasdaq SmallCap Market ("NASDAQ")
(subject to official notice of issuance) and shall maintain, so long as any
Buyer owns any of the Paradise Shares and Warrant Shares, the listing of all
Warrant Shares from time to time issuable under the terms of this Agreement, and
the Paradise Warrants on each national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed. The
Company shall promptly provide to each Buyer copies of any notices it receives
from NASDAQ regarding the continued eligibility of the Common Stock for listing
on NASDAQ or other principal exchange or quotation system on which the Common
Stock is listed or traded except to the extend that such notices would
constitute material non public information which, according to applicable law,
rule or regulation should have been disclosed publicly by the Company but which
has not been so disclosed as of such date. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section 4(g).
(h) Expenses. Each of the Company and the Buyers shall each pay its
respective costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution, delivery and performance of
this Agreement, the
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Warrants and the Registration Rights Agreement, except that the Company shall
reimburse the Buyers for their costs and expenses up to a maximum of $10,000,
including legal fees, against the Company's receipt of itemized bills therefor.
In addition to the foregoing, the Company agrees to pay on demand all reasonable
costs and expenses (including without limitation reasonable fees and expenses of
counsel to the Buyers) incurred by the Buyers in connection with the enforcement
of the Buyers' rights under this Agreement, the Warrants or the Registration
Rights Agreement.
(i) Dilutive Effect. The Company understands and acknowledges that
the number of Warrant Shares issuable upon exercise of the Paradise Warrants,
will increase in certain circumstances. The Company further acknowledges and
agrees that its obligation to issue Warrant Shares upon exercise of the Paradise
Warrants, in accordance with this Agreement, and the Paradise Warrants is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
(j) Disclosure. Without the consent of the Buyers, from and after
the date hereof, the Company will not provide to any Buyer any material
non-public information which, according to applicable law, rule or regulation
should be disclosed publicly by the Company but which has not been so disclosed.
(k) Corporate Existence. So long as any Buyer beneficially owns any
Paradise Shares or Paradise Warrants, the Company shall maintain its corporate
existence in good standing under the laws of the jurisdiction in which it is
incorporated and shall not sell all or substantially all of the Company's
assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets for cash, or, if for securities, where
the surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose Common Stock
is listed for trading on the American Stock Exchange, NASDAQ or the New York
Stock Exchange.
(l) Solvency; Compliance with Law. The Company (both before and
after giving effect to the transactions contemplated by this Agreement) is
solvent (i.e., its assets have a fair market value in excess of the amount
required to pay its probable liabilities on its existing debts as they become
absolute and matured) and currently the Company has no information that would
lead it to reasonably conclude that the Company would not have, nor does it
intend to take any action that would impair, its ability to pay its debts from
time to time incurred in connection therewith as such debts mature. The Company
will conduct its business in compliance with all applicable laws, rules,
ordinances and regulations of the jurisdictions in which it is conducting
business, including, without limitation, all applicable local, state and federal
environment laws and regulations the failure to comply with which would have a
Material Adverse Effect.
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(m) Insurance. The Company shall maintain liability, casualty and
other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size to the Company.
(n) No Integration. The Company will not conduct any future offering
that will be integrated with the issuance of the Securities for purposes of the
rules promulgated by the SEC or NASDAQ.
4. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent (in substantially the form attached hereto as Exhibit D) to issue
certificates, or at a Buyer's request, to electronically issue such shares
(e.g., through DWAC or DTC), registered in the name of each Buyer or its
respective nominee(s), for the Warrant Shares in such amounts as specified from
time to time by each Buyer to the Company in accordance with the terms of and
upon exercise of the Paradise Warrants, (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Warrant Shares under the 1933 Act,
such certificates shall bear the restrictive legend specified in Section 2(g) of
this Agreement. The Company warrants that no instruction with respect to the
Securities other than (i) the Irrevocable Transfer Agent Instructions referred
to in first sentence of this paragraph and (ii) stop transfer instructions (a)
to give effect to Section 2(f) hereof (in the case of the Paradise Shares and
the Warrant Shares, prior to registration of the Paradise Shares and the Warrant
Shares under the 1933 Act), (b) to comply with any SEC or court order, or (c) to
suspend use of a then effective registration statement in the event an amendment
or supplement thereto is necessary, will be given by the Company to its transfer
agent and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement and the Warrants. Nothing in this
Section 5 shall affect in any way each Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of any of the Securities.
If a Buyer provides the Company with an opinion of counsel, reasonably
satisfactory in form and substance to the Company, that registration of a resale
by such Buyer of any of the Securities is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and
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requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Paradise Shares and the Paradise Warrants and to transfer the Eruptor Shares to
each Buyer at the Closing is subject to the satisfaction, with respect to each
Buyer, at or before the Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion:
(a) Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(b) Such Buyer shall have delivered to the Company the purchase
price for the Securities being purchased by such Buyer at the Closing by
delivery of the Notes to the Company.
(c) The representations and warranties of such Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.
6. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Eruptor
Shares, the Paradise Shares and Paradise Warrants at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:
(a) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to such Buyer along with
the Eruptor Shares, the Paradise Shares and the Paradise Warrants.
(b) The Common Stock shall be listed and authorized for trading on
the Nasdaq, SmallCap Market, and trading in the Common Stock issuable upon
exercise of the Warrants to be traded on the Nasdaq SmallCap Market shall not
have been suspended by the SEC or NASDAQ.
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(c) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such Buyer
shall have received a certificate, executed by the Chief Executive Officer or
Chief Financial Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer including, without limitation, an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
(d) The Company shall have executed and delivered to each Buyer the
Paradise Warrants being purchased by it at the Closing.
(e) Each Buyer shall have received the opinion of Davis & Gilbert,
LLP, counsel to Company, dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the form of
Exhibit E attached hereto.
(f) The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit F attached hereto.
(g) As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock solely for the purpose of effecting the
exercise of the Paradise Warrants, shares of Common Stock to provide for the
issuance of the Warrant Shares in accordance with the terms of this Agreement
and the Paradise Warrants.
(h) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(i) The transactions contemplated hereby shall not violate any law,
regulation or order then in effect and applicable to Buyers or the Company.
(j) The Company shall have executed and delivered to the Buyers the
Assignment of Rights (in the form of Exhibit G attached hereto) and the Waiver
and Consent (in the form of Exhibit H attached hereto).
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(k) The Company shall have delivered to the Buyers an Acknowledgment
Letter executed by each of the management stockholders of Eruptor in in the form
annexed hereto as Exhibit I.
7. INDEMNIFICATION.
In consideration of each Buyer's execution and delivery of this
Agreement and acquiring the Securities hereunder and in addition to all of the
Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of
Securities and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Buyer
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Buyer Indemnified
Liabilities"), incurred by any Buyer Indemnitee (and shall advance the same) as
a result of, or arising out of, or relating to (a) subject to Section 9(i), any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Warrants, the Registration Rights Agreement or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement, the Warrants or the Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or thereby, or (c)
the execution, delivery, performance or enforcement of this Agreement or any
other instrument, document or agreement executed pursuant hereto by any of the
Buyer Indemnitees, any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the Warrants
or the status of such Buyer or holder of any of the Securities as an investor in
the Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Buyer Indemnified Liabilities which
is permissible under applicable law.
8. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to its principles of conflict of laws.
(b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed
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signature pages to be physically delivered to the other party within five (5)
days of the execution and delivery hereof.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the documents referenced herein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this Agreement may
be waived or amended other than by an instrument in writing signed by the party
to be charged with enforcement.
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement shall be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile; (iii) three
days after being sent by U.S. certified mail, return receipt requested, or (iv)
one day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. For purposes
of consent under Section 4 (i)(ii), notice shall be delivered only by U.S.
certified mail, return receipt requested. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Paradise Music & Entertainment, Inc.
53 West 23rd Street
New York, NY 10010
Telephone: (212) 590-2100
Facsimile: (212) 845-6480
Attention: President
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With a copy to:
Davis & Gilbert, LLP
1740 Broadway
New York, NY 10019
Telephone: (212) 468-4800
Facsimile: (212) 468-4888
Attention: Walter M. Epstein, Esquire
If to the Transfer Agent:
Continental Stock & Transfer Company
2 Broadway
New York, NY 10004
Attention: Hank Drews
If to a Buyer, to its address and facsimile number on the Schedule
of Buyers, with copies to such Buyer's counsel as set forth on the
Schedule of Buyers:
Each party shall provide five days' prior written notice to the
other party of any change in address or facsimile number.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Securities. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Buyers. A Buyer may assign some or all of its rights hereunder
without the consent of the Company, provided, however, that (i) any such
assignment shall not release such Buyer from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption and (ii) no Buyer may assign its rights hereunder
in a manner that would cause the offering of Securities hereunder to be required
to be registered under the 1933 Act.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Survival. The representations and warranties of the Company and
the Buyers contained in Sections 3 and 2, respectively, shall survive the
Closing until two years after the Closing Date. The agreements and covenants set
forth in Sections 4, 5 and 7, shall survive the Closing. Each Buyer shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
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(j) Publicity. The Company and each Buyer shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof), but only to the extent required by such law or regulation.
(k) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
(m) Equitable Relief. The Company recognizes that in the event that
it fails to perform, observe, or discharge any or all of its obligations under
this Agreement, any remedy at law may prove to be inadequate relief to the
Buyers. The Company therefore agrees that the Buyers shall be entitled to seek
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
24
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
PARADISE MUSIC
& ENTERTAINMENT, INC.
By:________________________________
Richard J. Flynn,
Chief Financial Officer
BUYERS:
BAYSTAR CAPITAL, L.P.,
a Delaware limited partnership
BY: BayStar Capital Management LLC,
Its General Partner
By:________________________________
Name: Steven M. Lamar
Title: Vice President
1500 West Market Street, Suite 200
Mequon, WI 53092
Fax: (415) 835-3777
BAYSTAR INTERNATIONAL LTD.,
a British Virgin Islands corporation
BY: BayStar International Management LLC,
Its Investment Manager
By:________________________________
Name: Steven M. Lamar
<PAGE>
Title: Vice President
1500 West Market Street, Suite 200
Mequon, WI 53092
Fax: (415) 835-3777
<PAGE>
Exhibit B
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
Investor Address,
Telephone and Paradise
Investor Name Facsimile Number Shares Paradise Warrants Eruptor Shares
---------------------------- ------------------------ -------------- --------------------- -------------------
<S> <C> <C> <C> <C>
BayStar Capital, L.P. c/o BayStar Capital 666,667 333,333 666,667
Management, LLC
1500 West Market
Street
Mequon, Wisconsin
53092
Copy to:
Eleazer Klein, Esq.
Schulte Roth & Zabel LLP
New York, NY 10022
Fax: (212) 593-5955
BayStar International Ltd. c/o BayStar 333,333 166,666 333,333
International
Management, LLC
1500 West Market
Street
Mequon, Wisconsin
53092
Copy to:
Eleazer Klein, Esq.
Schulte Roth & Zabel LLP
New York, NY 10022
Fax: (212) 593-5955
</TABLE>
<PAGE>
List of Exhibits
Exhibit A Form of Warrant
Exhibit B Schedule of Buyers
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Transfer Agent Instructions
Exhibit E Form of Opinion of Davis & Gilbert LLP
Exhibit F Form of Resolutions of Board
Exhibit G Assignment of Rights
Exhibit H Waiver and Consent
Exhibit I Acknowledgment Letter
List of Schedules
3(a) List of Subsidiaries & Jurisdictions of Due Qualification
3(c) Capitalization and Indebtedness
3(e) No Conflicts
3(g) Certain Changes
3(h) Litigation
3(i) Employment; Erisa
3(o) Title
3(t) Tax Status
3(u) Certain Transactions
6(c) Officer's Certificate
