<PAGE>
As filed with the Securities and Exchange Commission on September , 1999
Registration No. 333-
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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ANTRA HOLDINGS GROUP, INC.
(Name of small business issuer in its charter)
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<CAPTION>
<S> <C> <C>
Delaware 7389-1106 22-3517670
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1515 Locust Street
Philadelphia, Pennsylvania 19102
215-732-1300
(Address and telephone number of principal executive offices and
place of business)
JOSEPH M. MARRONE, President
Antra Holdings Group, Inc.
1515 Locust Street
Philadelphia, Pennsylvania 19102
215-732-1300
(Name, address and telephone number of agent for service)
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Copies to:
MICHAEL D. DIGIOVANNA, Esq.
PARKER DURYEE ROSOFF & HAFT
529 Fifth Avenue
New York, New York 10017
(212) 599-0500
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Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
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. [ ]
<PAGE>
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, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Title of Each Class of Proposed Maximum Proposed Maximum
Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered(1) Per Security(2) Offering Price(2) Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.001 per share (3) 6,870,000 $5.625 $38,643,750 $10,742.96
- ----------------------------------------------------------------------------------------------------------------------------------
Totals 6,870,000 --- $38,643,750 $10,742.96
==================================================================================================================================
</TABLE>
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(1) Pursuant to Rule 416(a), the Registration Statement also relates to an
indeterminate number of additional shares of the Registrant's Common
Stock, issuable upon the conversion of notes or the exercise of
warrants pursuant to anti-dilution provisions contained therein, which
shares of Common Stock are registered hereunder.
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended (the
"Securities Act"). Estimated offering price based on the average of the
bid and asked price as of September 15, 1999.
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>
PROSPECTUS
6,870,000 SHARES
ANTRA HOLDING GROUP, INC.
Common Stock
-----------
Stockholders of Antra Holdings Group, Inc. named under the caption
"Selling Security Holders" may offer and sell up to 6,870,000 shares of our
common stock.
Investing in Antra Holdings's common stock is risky. See "Risk Factors"
on page 6.
Our common stock current trades on the NASD OTC Bulletin Board under
the symbol "RECD."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is September __, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PROSPECTUS SUMMARY........................................................................................................3
RISK FACTORS..............................................................................................................6
Antra Holdings has limited operating revenues and an accumulated deficit. .......................................6
The recorded-music industry has special risks....................................................................6
Talent development has special risks.............................................................................7
We have significant capital requirements and may need to raise additional capital. .............................7
Antra must retain key personnel..................................................................................7
Future sales of shares could adversely affect the market price of our stock. ...................................8
Our directors enjoy limited liability............................................................................8
We face intense competition......................................................................................8
The market for our common stock is thin..........................................................................8
This prospectus contains forward-looking statements..............................................................9
CAPITALIZATION............................................................................................................9
USE OF PROCEEDS..........................................................................................................10
SELECTED FINANCIAL DATA..................................................................................................10
MARKET INFORMATION.......................................................................................................11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................................11
BUSINESS ................................................................................................................13
SELLING SECURITY HOLDERS.................................................................................................20
PLAN OF DISTRIBUTION.....................................................................................................22
MANAGEMENT...............................................................................................................24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...........................................................26
DESCRIPTION OF SECURITIES................................................................................................26
CERTAIN TRANSACTIONS.....................................................................................................27
LEGAL MATTERS............................................................................................................29
EXPERTS ................................................................................................................29
ADDITIONAL INFORMATION ABOUT ANTRA HOLDINGS..............................................................................29
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
This summary does not contain all of the information that may be
important. You should read the detailed information appearing elsewhere in this
prospectus.
Antra Holdings Group, Inc. is a holding company. Through our wholly
owned subsidiary, Antra Music Group, Inc., we produce, acquire, license and
distribute high-quality recorded music. Antra Music was formed in 1997 and
entered into an agreement with Ricardo Brown, the urban recording artist known
as "Kurupt". We primarily focus on urban music, the area of the industry that
includes hip-hop, rap and rhythm and blues. We believe, based on industry
sources and census data, that this area offers significant growth and profit
potential.
Hip-Hop or Urban Music was the most dynamic segment of the contemporary
music industry in 1997. The Recording Industry Association of America (RIAA)
figures, compiled by Chilton Research Services, show Hip-Hop or Urban with the
largest percentage increase in consumer record purchases, accounting for 10.1%
of total shipments or $1.23 billion. This figure represents an increase of more
than 250% over ten years.
The music business consists of several functions: publishing,
production, manufacturing, licensing, distribution and promotion. Antra is
involved in these areas.
On July 26, 1999, Antra and Teltran International Group Ltd. announced
a joint venture, Recordstogo.com. We are equal co-owners with Teltran in this
joint venture. We expect it to begin operations in Fall 1999. Recordstogo.com
will market records on its website.
Antra Music was formed in 1997 as a New Jersey corporation named Wall
Street Records, Inc. On April 24, 1998, it changed its name to Antra Music.
Antra Holdings was formerly known as Opell, Inc. Opell was formed as a
Utah corporation on October 7, 1981 with the name "Summit Race Horse, Inc." In
January 1995, it merged with Opell, Inc., a Nevada corporation, solely to change
its domicile to Nevada. Opell had no operations or substantial assets until it
acquired all the outstanding shares of Antra Music in June 1997. In January
1998, Opell was reincorporated in Delaware by merger into its wholly owned
subsidiary, Wall Street Records, Inc., a Delaware corporation. In April 1998,
Wall Street Records, Inc. changed its name to Antra Holdings.
When we refer to "Antra," "we," "our" and "us" in this prospectus, we
mean Antra Holdings Group, Inc. including its subsidiary, Antra Music Group,
Inc., unless otherwise indicated by the context.
Our offices are located at 1515 Locust Street, Philadelphia,
Pennsylvania 19102 and our telephone number is 215-732-1300.
3
<PAGE>
The Offering
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<CAPTION>
<S> <C> <C>
Shares 11,544,620 Does not include shares subject to outstanding convertible
outstanding notes or warrants, some of which shares may be sold under
before the offering this prospectus after conversion of these notes or the exercise
of these warrants.
Maximum 6,870,000 Includes shares subject to (1) outstanding convertible notes
number of shares and warrants and (2) convertible notes and warrants that may
offered be issued after the effectiveness of the Registration Statement.
Shares to be 18,414,620 Includes shares subject to outstanding convertible notes and
outstanding after warrants that may be issued after the effectiveness of the
the offering Registration Statement and sold under this prospectus.
The terms of our notes require us to register more shares than may
be actually issued and sold under this prospectus. The actual
number of shares that will be issued depends upon the price of
Antra's common stock at the time of conversion
Use of Proceeds ---- Except upon exercise of warrants, Antra will not receive
proceeds. Any proceeds will be used for working capital
purposes.
Symbol for RECD
common stock
</TABLE>
4
<PAGE>
Summary Financial Information
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<CAPTION>
YEAR ENDING SIX MONTHS
DECEMBER 31, ENDING JUNE 30,
------------------------ -------------------------
1998 1997 1999 1998
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Income ...................................... 20,000 0 56,120 0
Expenses .................................... 1,415,107 592,369 354,562 323,970
Income (loss) from operations ............... (1,395,107) (592,369) (298,442) (323,970)
Net income (loss) ........................... (1,595,107) (592,369) 426,558 (323,970)
Income (loss) per share ..................... (0.17) (0.28) 0.04 (0.04)
--------- --------- ---------- ---------
Shares used in computing net
income (loss) per share ..................... (9,268,030) 2,130,593 10,527,635 8,987,008
BALANCE SHEET DATA:
Working capital (deficit) ................... (75,030) 81,314 6,567,323 435,056
Total assets ................................ 122,286 127,913 6,698,239 553,577
Total long-term debt ........................ 1,217,079 597,333 1,451,163 437,364
--------- --------- ---------- ---------
Total stockholders' equity (deficit) ........ (1,205,321) (470,314) 5,221,237 65,816
</TABLE>
5
<PAGE>
RISK FACTORS
Before you decide to invest in Antra Holdings's common stock, you
should be aware that there are various risks, including those described below.
You should carefully consider these risks as well as the more detailed
information contained in this prospectus and in other documents we file with the
Securities and Exchange Commission before making your decision. You should be in
a position to risk losing your entire investment.
Antra Holdings has limited operating revenues and an accumulated deficit.
Our activities since inception have been primarily limited to
development of the artists and the joint venture and the initial release. Our
accumulated deficit at June 30, 1999 was approximately $1,777,963. We incurred a
loss in 1998 of $1,595,107 and a loss from operations of $298,442 for the first
six months of 1999. There can be no assurance that Antra will be able to operate
profitably.
The recorded-music industry has special risks.
As a recent entrant into the recorded-music business, we will be
subject to all the risks of establishing a new business. Additionally, there are
particular risks common in the recorded music industry. For example:
o Each recording is an individual artistic work. Commercial
success is primarily determined by consumer taste, which is
unpredictable and constantly changing. Accordingly, we cannot
assure you as to the financial success of any particular
release, the timing of such success or the popularity of any
particular artist.
o Changes in the timing of new releases can cause significant
fluctuations in quarterly operating results. We cannot assure
you that we will be able to generate sufficient revenues from
successful releases to cover the costs of unsuccessful
releases.
o It is industry practice to sell recorded music products on a
returnable basis. We will primarily follow this practice in
the future. We may have to establish reserves for future
returns of products based on our return policies and return
experience. If more of our product gets returned that we
anticipate in these reserves, it could adversely affect our
results of operations.
o The business of manufacturing records can be transformed as
new technologies affect the formats used to make copies of
recordings. The development of new formats often positively
impacts growth. Sales of vinyl LP records have been nearly
extinguished by cassettes and CDs. We expect that new formats
employing digital technology -- for example, digital audiotape
and downloadable MP3 -- will gain wider acceptance in the near
future. Digital formats offer the ability to make nearly
perfect copies of recordings.
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<PAGE>
Therefore, while we believe the development of these formats
should have a positive overall effect on our industry, we are
concerned that unauthorized reproduction of recordings using
these technologies could have a negative effect.
Talent development has special risks.
o Antra Music has entered into recording contracts with several
artists. We cannot assure you that we will be able to attract
additional artists. We may not be able to develop our talent
successfully or in such a manner that produces significant
sales.
o To secure the services of music artists, we will have to pay
advances consistent with industry standards. If an artist's
album does not sell well, or if the artist fails to produce an
album, a producer generally cannot recover the amount of the
advance already paid to the artist. We cannot assure you that
any of the artists to whom we make advances will produces
sales revenues for us. Even if they do, the revenue may not be
sufficient to recoup any advances we have made to them.
o Any artist developed by Antra Music might request a release
from his or her agreement with us. The artist's contractual
obligations are highly personal and creative in nature, so it
is not feasible to force an unwilling artist to perform the
terms of his or her contract. If we sign an artist and later
lose that artist, it could have a materially adverse effect on
the company.
We have significant capital requirements and may need to raise additional
capital.
We have significant capital requirements in connection with our
continuing business plan. We can provide no assurance as to when, if ever, we
will generate sufficient sales to fund our operations. We believe our current
funding should be sufficient for our immediate operations, but we may need
additional financing. If we do need additional financing, we cannot assure you
that we will be able to arrange acceptable terms. If we have to issue shares to
obtain financing, it could dilute the existing stockholders' investment. Debt
financing often includes provisions that restrict a company's ability to incur
additional indebtedness and to pay dividends. If we fail to raise capital on
acceptable terms when we need it, our business could be seriously affected.
Antra must retain key personnel.
The personal efforts and abilities of Antra Holdings's Chairman, Joseph
M. Marrone, and our other senior management and key consultants play a large
role in the success of our company. If we lose the services of Mr. Marrone,
there could be a serious negative effect on our business, financial condition
and results of operations. Our success will also depend upon our ability to
attract and retain additional highly qualified management personnel as our
business grows. If we cannot obtain other key employees when we need them, there
could be a material adverse effect on our business.
7
<PAGE>
Future sales of shares could adversely affect the market price of our stock.
The sale of a substantial number of shares of common stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for the common stock. In addition, any such sale or perception could make
it more difficult for Antra Holdings to sell equity securities or equity related
securities in the future at a time and price that Antra Holdings deems
appropriate. Antra Holdings has a total of approximately 11,544,620 shares of
common stock outstanding, of which 5,000,000 shares may now be sold in the
public market without restriction under the Securities Act unless they are held
by "affiliates" of Antra within the meaning of Rule 144 under the Securities
Act. The holders of 2,500,000 shares of common stock have agreed that they will
not directly or indirectly offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of these shares of common stock until June 2000.
Our directors enjoy limited liability.
Antra Holdings's certificate of incorporation provides that a director
will not be personally liable to the company or its stockholders for monetary
damages for breach of the fiduciary duty of care as a director, including
breaches which constitute gross negligence, subject to certain limitations
imposed by the Delaware General Corporation Law. Thus, under certain
circumstances, neither Antra Holdings nor the stockholders will be able to
recover damages even if directors take actions which harm Antra Holdings.
We face intense competition in our industry.
Antra will face intense competition for discretionary consumer spending
from numerous other record companies and other forms of entertainment offered by
film companies, video companies and others. Antra will compete directly with
other recorded music companies, including the six major recorded music
companies, which distribute contemporary music, as well as with other record
companies for signing artists and acquiring music catalogs. Many of these
competitors have significantly longer operating histories, greater financial
resources and larger music catalogs than ours. Our ability to compete
successfully in the recorded music business will be largely dependent upon its
ability to sign and retain artists who will prove to be successful and to
introduce music products which are accepted by consumers.
The market for our common stock is thin.
Our common stock does not trade on any U.S. securities exchange.
Moreover, trading volume is very limited on the electronic bulletin boards of
the over-the-counter market. The market price is affected more significantly by
transactions and news than similar stocks in a more liquid market. If the
Selling Security Holders elect to sell all of their shares at one time, the
market price of our shares could be depressed. The market price of our stock
could also be subject to significant fluctuations in response to a number of
factors, not all of which relate directly to our performance. Some of these
factors are: public announcements by Antra and its competitors; investor
8
<PAGE>
perception of Antra and the music industry; publicity surrounding our music
artists; and general economic and other conditions. Accordingly, you may not be
able to sell your investment in our common stock for the price you paid to
acquire your shares.
This prospectus contains forward-looking statements.
We intend to identify forward-looking statements in this prospectus
using words such as "believes," "intends," "expects," "may," "will," "should,"
"plan," "projected," "contemplates," "anticipates," or similar statements. These
statements are based on our beliefs as well as assumptions we made using
information currently available to us. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus.
Because these statements reflect our current views concerning future
events, these statements involve risks, uncertainties and assumptions. Actual
future results may differ significantly from the results discussed in the
forward-looking statements. Some, but not all, of the factors that may cause
these differences include those discussed in the Risk Factors section beginning
on page 6 of this prospectus. These include, among others,
o acceptance of the artist and the style of music
o ability to produce and release records
o ability to promote products
o ability to sign new artists
o need for additional financing
o the success of our Recordstogo.com joint venture.
CAPITALIZATION
The following table sets forth our capitalization at June 30, 1999,
retroactively adjusted to reflect the issuance of the secured convertible notes
and the exchange of outstanding subordinated convertible notes for new
convertible notes. This section should be read in conjunction with the financial
statements and related notes appearing elsewhere in this prospectus.
9
<PAGE>
6/30/99
As Adjusted
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Long-Term Liabilities:
Secured Convertible Notes .................................... $2,766,666
Convertible Notes ............................................ $1,000,000
Other long-term indebtedness ................................. $ 451,163
----------
Total long-term indebtedness......................... $4,217,829
==========
Preferred Stock, $.001 par value; 5,000,000 authorized;
none issued and outstanding .................................. $ 0
Common Stock, $.001 par value; 50,000,000 shares
authorized; 11,544,210 shares issued and outstanding ......... $ 11,544
Additional paid-in capital.................................... $6,987,656
Accumulated deficit........................................... ($1,777,963)
-----------
Total stockholders' equity .......................... $5,221,237
===========
USE OF PROCEEDS
Antra Holdings will not receive proceeds from the sale of the shares
offered hereby. Any proceeds received upon exercise of warrants will be utilized
as working capital.
SELECTED FINANCIAL DATA
The following selected financial information is derived from the
audited financial statements of Antra Holdings. This information should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
YEAR ENDING SIX MONTHS
DECEMBER 31, ENDING JUNE 30,
------------------------ -------------------------
1998 1997 1999 1998
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Income ...................................... 20,000 0 56,120 0
Expenses .................................... 1,415,107 592,369 354,562 323,970
Income (loss) from operations ............... (1,395,107) (592,369) (298,442) (323,970)
Net income (loss) ........................... (1,595,107) (592,369) 426,558 (323,970)
Income (loss) per share ..................... (0.17) (0.28) 0.04 (0.04)
--------- --------- ---------- ---------
Shares used in computing net
income (loss) per share ..................... 9,268,030 2,130,593 10,527,635 8,987,008
BALANCE SHEET DATA:
Working capital (deficit) ................... (75,030) 81,314 6,567,323 435,056
Total assets ................................ 122,286 127,913 6,698,239 553,577
Total long-term debt ........................ 1,217,079 597,333 1,451,163 437,364
--------- --------- ---------- ---------
Total stockholders' equity (deficit) ........ (1,205,321) (470,314) 5,221,237 65,816
</TABLE>
10
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MARKET INFORMATION
Our common stock is currently quoted on the OTC Bulletin Board under
the symbol "RECD."
Set forth below are the high and low closing bid quotations for our
common stock for the periods indicated as reflected on the electronic bulletin
board. Such quotations reflect interdealer prices without retail mark-up,
mark-down or commissions, and may not reflect actual transactions.
Period Ending High Low
-------------- ---- ---
June 30, 1999 4.50 1.25
March 31, 1999 3.75 1.75
December 31, 1998 5.125 1.50
September 30, 1998 5.875 4.25
June 30, 1998 5.875 5.00
March 31, 1998 6.00 4.50
December 31, 1997 5.00 3.25
September 30, 1997 5.75 2.625
June 30, 1997 5.75 0.50
March 31, 1997 1.50 1.125
As of September 15, 1999, there were approximately 92 recordholders of
the our common stock, although we believe that there are more than five hundred
beneficial owners of our common stock. There are no shares of preferred stock
currently outstanding.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and related notes contained elsewhere in this
prospectus.
General
Prior to October 1998, we were essentially a development-stage company.
Therefore comparisons between 1998 and 1997 are of limited value.
11
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During the balance of 1999 and early 2000 our Plan of Operation is to
release Kurupt's new album in November 1999 and 3 to 5 records in 2000. We plan
to continue to sign new artists, to produce and release additional records and
to operate our Recordstogo.com joint venture. We also plan to develop our
publishing business.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
(unaudited)
We had net income during the six months ended June 30, 1999 of
$426,558, compared to a net loss in the first six months of 1998 of $323,970.
The increase was primarily a result of the $725,000 payment we received as part
of the settlement of our joint venture with A&M.
Our net loss from operations for the six-month period in 1999 was
$298,442, which improved from the $323,970 net loss from operations we had in
the same period of 1998. Our revenue was $56,120 for the six months ended June
30, 1999 while we received no revenue in the comparable period of 1998.
Our operating expenses during the first half of 1999 were approximately
$354,562 compared to approximately $323,970 during the same period in the prior
year. However, a significant amount of overhead expenses were reimbursed in
1998. Factoring out these reimbursed expenses, there would have been a decrease
in operating expenses primarily as a result of reduced promotional costs.
Since Antra did not commence income producing operations until the
second half of 1998, we do not believe that the data for the six months ended
June 30, 1998 are any indication of our future operations.
Fiscal Year 1998 Compared to Fiscal Year 1997
Our revenue was approximately $20,000 for 1998 while we received no
revenue in 1997.
Our operating expenses during 1998 were approximately $1,415,107
compared to approximately $592,369 during the prior year. In both 1998 and 1997,
we incurred substantial expenses as Antra Music negotiated agreements and
arrangements with various artists. In 1998, we incurred expenses in setting up
our joint venture with A&M. The joint venture incurred expenses in connection
with the signing of the artist, Kurupt, and with the recording, production,
promotion and distribution of his album, Kuruption. All expenses were written
off as incurred, in accordance with industry practice.
Since Antra did not commence income producing operations until 1998, we
do not believe that either 1997 or 1998 are any indication of our future
operations.
12
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Liquidity
Antra had a working capital deficit of $75,030 at December 31, 1998 and
working capital of $6,587,323 at June 30, 1999. The increase in working capital
resulted from payments received upon the termination of its joint venture with
A&M. In July 1999, Antra received $2,766,666 in gross proceeds from the sale of
secured convertible notes. Antra used net cash of $1,441,633 in its operating
activities for 1998 and $5,813,897 for the six months ended June 30, 1999. Antra
has used cash primarily to fund the recording, production, promotion and
distribution of its first record.
We require significant working capital to produce, manufacture, promote
and distribute our music. To date we have satisfied our working capital
requirements through borrowing including our borrowing through the private
placement in July 1999. We believe we will require additional working capital in
connection with our album to be released in November 1999 and our other album to
be released thereafter. We anticipate that we will receive additional funding by
exercising our option to require the investors in the July private placement to
lend additional amounts. Our option to require the loan of additional funds is
subject to certain conditions. If these conditions are not met we may be
compelled to seek funding elsewhere. There is no assurance we will be able to
do so.
Our need for working capital for our next two records has been reduced
by services and funding provided by our distributor under our distribution
agreement. Under this agreement, the distributor agreed to advance funds for the
manufacture of our records and to provide personnel for the marketing and
promotion of these records. While we have benefitted from these terms, our
percentage participation in revenues derived from these albums is reduced by the
degree to which the distributor advances additional funding. Unless our working
capital position improves, we may be compelled to rely on our relationship with
the distributor.
BUSINESS
Introduction
Antra Holdings Group, Inc. is a holding company. Through our wholly
owned subsidiary, Antra Music Group, Inc., we produce, acquire, license and
distribute high-quality recorded music. Antra Music was formed in 1997 to
promote urban contemporary music. Also in 1997, Antra Music entered into an
agreement with Ricardo Brown, the urban recording artist known as "Kurupt". We
primarily focus on urban music, the area of the industry that includes hip-hop,
rap and rhythm and blues. We believe, based industry sources and census data,
that this area offers significant growth and profit potential.
Hip-Hop or Urban Music was the most dynamic segment of the contemporary
music industry in 1997. The Recording Industry Association of America (RIAA)
figures, compiled by Chilton Research Services, show Hip-Hop or Urban with the
largest percentage increase in consumer record purchases,
13
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accounting for 10.1% of total shipments or $1.23 billion. This figure represents
an increase of more than 250% over ten years.
Through a joint venture with A&M Records, we released our first
recording in October 1998. This was a two-CD set by our primary artist, Kurupt,
entitled "Kuruption." Kuruption sold approximately 400,000 copies. A&M
terminated the joint venture after its parent company, Polygram Holding Group,
merged with Seagrams. A&M transferred to us all of its rights in the former
joint venture's agreements with Kurupt and Baby S, but retained exclusive
ownership of all rights to recordings made prior to the termination.
We entered into an agreement with Artemis Records on July 28,1999. The
distribution agreement replaces our former joint venture and enables us to
retain exclusive ownership of all of our master recordings.
Kuruption was Kurupt's initial album. We plan to release a second
Kurupt album entitled "Streetz Iz A Mutha," with tracks produced by Daz
Dillinger, and Dr. Dre. The release is currently scheduled for November 2, 1999.
We also plan a release in the first quarter of 2000 and expect to release 3 to 5
albums during the calendar year 2000.
We have recording contracts with several other artists including The
Spooks, El-Drex and Baby S. El-Drex also signed a co-publishing agreement.
Additionally, we have various arrangements with other artists, including Roscoe,
Dawna, Sloppy Joe and Crush.
Antra plans to enter into or has commenced several different ancillary
businesses:
o We have established a publishing subsidiary to receive revenues
generated from the publication of our artists.
o We are in the process of establishing a "Recordstogo.com" joint
venture. See page 17 below.
o We may in the future produce and sell music videos.
Structure of the Music Industry
The music business consists of several functions: publishing,
production, manufacturing, licensing, distribution and promotion.
Publishing. The process begins when a songwriter writes a piece of
music and agrees with a publishing company to market the work to the industry.
By contracting for the rights to music written by different songwriters, the
publishing company builds a library of music, known as a catalog. The
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<PAGE>
publishing company markets its music catalog to producers, artists and record
companies, and collects royalties on each recording of the music that is sold.
Antra currently has co-publishing agreements with several artists.
Under these publishing agreements, Antra and the artist jointly own certain
compositions, in equal shares. Antra can exploit the compositions in any
commercial manner. Antra is entitled to all gross receipts earned by a
composition, but must pay fifty percent (50%) of the net income to the artist.
Antra recently established a publishing subsidiary.
Production. Once the record company decides to record a song with a
performing artist, the record company underwrites the costs associated with
producing a market-ready recording (master recording) of the song. This entails
paying for recording studio time, hiring studio musicians and paying sound
mixers to edit the tape. The artist is responsible for delivering satisfactory
master recordings to the record company.
Antra's joint venture with A&M produced Kurupt's initial album,
"Kuruption" Antra plans to release a second Kurupt album entitled "Streetz Iz A
Mutha," with tracks produced by Daz Dillinger, and Dr. Dre. The release is
currently scheduled for November 2, 1999. We also plan a release in the first
quarter of 2000 and expect to release 3 to 5 albums during the calendar year
2000.
Manufacturing. Once a master is completed, the record company contracts
with a manufacturer or duplicator of recording formats to make multiple copies.
Antra contracts with others to manufacture its records or arranges for
manufacturing through an agreement with its distributor. Amounts advanced by the
distributor for the manufacture of Antra's next album will be repaid out of the
revenues from the sale of this album.
Licensing. Antra, like many other recorded music ventures, will license
the musical works it intends to sell. This means that Antra will purchase the
right to reproduce and sell the musical works in exchange for royalties paid to
the music publisher and artist.
Distribution. Once copies have been completed, the record company's
distribution system stocks, sells or markets, takes orders for and delivers the
copies of the recording to distribution outlets. In many ways, distribution is
the most critical function in the record business, since distributors provide
the access to, and thereby control, the marketplace. Distribution can be divided
into two distinct categories: Traditional and Non-traditional.
Traditional outlets include small independent record stores, leased
departments of large retail stores, and large chain record stores.
Non-traditional outlets are also known as alternative distribution.
Independent retail outlets not served by traditional distributors, direct
response marketing and Internet sales comprise the bulk of non-traditional
sales. Non-traditional outlets are a rapidly growing area of distribution.
15
<PAGE>
Promotion. Once the record is ready for market it must be promoted to
ensure sales upon distribution. The traditional and most effective means of
promoting recorded music is by radio airplay. Obtaining radio air play for a new
release is an extremely competitive process. As radio stations increasingly
focus on specific music formats, it is becoming easier for independent producers
to target the stations that are most likely to air a particular new recording.
In a number of markets, hiring independent regional promoters can be quite
effective in gaining airplay for a release. Public and college radio stations
are useful venues for promoting lesser-known artists. Music video air play on
MTV or VH-1, or other video stations or programs, is essential to the commercial
success of recording music artists and their records. Promoting urban
contemporary music may involve more-direct promotional efforts in urban
communities. For example, albums may be promoted at local dance clubs.
Songs that are aired on a major radio station are chosen by the program
director, often in conjunction with a format consultant. Once a recording is
aired, the amount of repeat play it receives depends on listener requests and
feedback, as well as actual sales data. Since listener response and sales depend
in large measure how often a release is aired, building a commercial hit depends
on an ongoing cycle of air play and sales. Nurturing this cycle requires
constant marketing attention and careful coordination with advertising, concert
schedules and other promotional activities. Other promotional tools include
print advertising, retail promotions and concert tours.
The key to finding an audience for new for new artists is to properly
coordinate all these promotional activities to maximize awareness and exposure.
Antra will, where possible, use its in-house expertise to direct, coordinate or
assist with the promotional activities of its artists in order to keep its costs
down. In conjunction with its first release with its distributor, Artemis, Antra
will utilize the promotional and marketing personnel of Artemis and its
affiliates. By coordinating or providing assistance with these activities, to
the extent practicable, in-house, costs will be further kept under control.
Our joint venture with A&M and its termination
On April 1, 1998, Antra Music and A&M Records, a division of Polygram,
formed a joint venture called Wall Street Records LLC. A&M and Antra each owned
50% of the joint venture. The joint venture was intended to be a vehicle by
which Antra Music and A&M could produce, manufacture and distribute recordings
and related materials through Polygram's worldwide distribution channels.
However, A&M terminated the joint venture after Polygram merged with Seagrams.
A&M was to be responsible for significant periodic contributions
towards the joint venture's operating budget for expenses associated with new
recording albums produced by the joint venture's recording artists. The joint
venture was to cover significant costs of promotion and production that Antra
would otherwise have to bear alone.
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<PAGE>
In accordance with the agreement that terminated the joint venture:
o Antra transferred to A&M all of its interest in the joint
venture's limited liability company;
o A&M paid Antra $725,000;
o A&M transferred to us all of its rights in the former joint
venture's agreements with Kurupt and Baby S, but retained
exclusive ownership of all rights to recordings made prior to
the termination;
o A&M disclaimed any rights to several artists previously
submitted to the joint venture by Antra.
New Distribution Agreement
On July 29, 1999 Antra Music entered into a three-year distribution
agreement with Artemis Records. The distribution agreement replaces Antra's
former joint venture and enables it to retain exclusive ownership of all of its
master recordings. Artemis further distributes records though RED Distribution,
Inc., a division of Sony.
The distribution agreement makes Artemis the exclusive distributor of
one album by Kurupt and one other album by an Antra artist to be determined.
Artemis will advance funds for the manufacture of the first album to be produced
under this agreement. The advance will be repaid out of the proceeds of the sale
of the record. To secure the repayment of these advances, Antra has granted
Artemis a security interest in inventory, production parts and components and
accounts receivable from Artemis under the agreement.
In general, Artemis will receive a distribution fee based upon a
percentage of total sales under the agreement, less returns, credits, rebates
and reserves. The percentage is reduced if net sales exceed $10,000,000 in any
given contract year. The percentage is further reduced if net sales exceed
$20,000,000 in any given contract year.
Under our distribution agreement, the distributor agreed to advance
funds for the manufacture of our records and to provide personnel for the
marketing and promotion of these records. While we have benefitted from these
terms, our percentage participation in revenues derived from these albums is
reduced by the degree to which the distributor advances additional funding.
Artemis will warehouse Antra's inventory of these records and will
fulfill orders and distribute these records through the industry's normal retail
channels in the United States. Artemis will also handle all returns of the
applicable records.
Recordstogo.com
On July 26, 1999, Antra Holdings and Teltran International Group Ltd.
announced a joint venture, Recordstogo.com. We are equal co-owners with Teltran
in this joint venture. We expect it to begin operations in Fall 1999.
Recordstogo.com will market records on its website and where visitors can:
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<PAGE>
o Buy records and CDs from a database of music titles ranging from
the early days of vinyl recordings to present-day CDs. At first
this database will contain approximately 360,000 titles,
although we expect it to grow significantly by year-end 1999;
o Download music in MP3 and other formats;
o Purchase "hard-to-find" records and CDs and sell used records
and CDs to others in our auction house;
o Buy music memorabilia and possibly other entertainment products,
including videos;
o Listen to interviews with musical artists from all generations;
and
o Discuss music and the music industry in our interactive chat
rooms.
Recording Agreements
Antra has recording agreements with four artists: Kurupt, The Spooks,
Baby S and El-Drex. These provide for initial terms of twelve months, with
additional twelve-month options exercisable by Antra. The Recording Agreement
provides that during the term of the agreements, Antra owns all right, title and
interest in all musical recordings recorded under the agreements. Antra's rights
under these agreements will survive even after they terminate. Under these
agreements, Antra also has the right to use and publish each artist's name and
likeness in connection with video and commercial purposes. According to the
agreements, the artist receives a royalty for sales of recording albums and
singles in line with industry norms, which typically range from five to ten
percent.
Exclusive Production Recording Agreements
Antra currently has exclusive production recording agreements with
Kurupt. Kurupt has agreed to provide Antra with his exclusive personal services
as a phonograph-recording artist for a period of twelve (12) months. Antra has
the option to extend the contract by additional one-year options, subject to
certain terms and conditions. Antra is required by the agreement to seek
agreements with third-party record companies who will manufacture and distribute
the artist's recordings. Antra has the right to select the producer and musical
composition for any albums produced by the artist under the recording agreement.
Antra also has the exclusive right to the artist's name and likeness and owns
all right, title and interest in all recordings produced under the agreement.
Relationship with Artists
Our plan is to sign and develop new or emerging urban or hip-hop
oriented music artists and, to the extent practicable, sign established artists.
We intend to recruit new and emerging artists and to
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<PAGE>
enter into exclusive, long-term recording contracts (expected to cover an
initial album, with options to record four to seven additional albums, at
Antra's discretion). Antra will concentrate its resources on a small number of
artists, developing a tailored marketing and promotion plan for each. There can
be no assurance that Antra will be able to attract new and emerging music talent
or established artists, or, if Antra is able to attract such talent, that Antra
will be able to develop that talent successfully or in such a manner so as to
commercially exploit.
If Antra develops commercially successful music artists, there can be
no assurance that Antra will be able to maintain its relationships with such
artists even if it has entered into exclusive recording contracts with them.
Furthermore, performing artists occasionally request releases form their
exclusive recording agreements. Among the reasons that may cause an artist to
engage in so-called "label jumping" are expectations of greater income, advances
or promotional support by a competing label. There can be no assurance that any
given artist developed by Antra will not determine to request a release form his
or her agreement with Antra. Because of the highly personal and creative nature
of the artist's contractual obligations to Antra, it is not feasible to force an
unwilling artist to perform the terms of his or her contract with Antra.
Copyrights
Antra's recorded music business, like that of other companies involved
in recorded music, will primarily rest on ownership and or control and
exploitation of musical works and sound recordings. Antra's music products,
including its commercial music, are and will be protected under applicable
domestic and international copyright laws.
Although circumstances vary from case to case, rights and royalties
relating to a particular recording typically operate as follows: When a
recording is made, copyright in that recording vests either in the recording
artist (and is licensed to the record company) or in the record company itself,
depending on the terms of the agreement between them. Similarly, when a musical
composition is written, copyright in the composition vests either in the writer
(and is licensed to a music publishing company) or in a publishing company. A
public performance of a record will result in money being paid to the writer and
publisher. The rights to reproduce songs on sound carriers results in mechanical
royalties being payable by the record company to the recording artists for the
use of the recording. Antra operates in an industry which revenues are adversely
affected by the unauthorized reproduction of recordings for commercial sale,
commonly referred to as "piracy", and by home taping for personal use.
Potential publishing revenues may be derived from Antra's ownership
interest in musical compositions, written in whole or in part by artists.
Management anticipates securing an ownership position in the copyright to any
compositions written by its recording artists, where such rights are available
and have not been previously sold or assigned. Generally, revenues from
publishing are generated in the form of: (1) mechanical royalties, paid by the
record company to the publisher for the mechanical duplication of the copyright
to a particular composition (as distinct from the copying of the artist's
performance of that composition); (2) performance royalties, collected and paid
by performing
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rights entities such as ASCAP and BMI for the actual public performance of the
composition as represented by radio airplay, Musak, or as a theme or jingle
broadcast in synchronization with a visual image via television; (3)
sub-publishing revenues derived from copyright earnings in foreign territories,
and publishers in those territories acting as designated collection agents for
Antra; and (4) licensing fees derived from printed sheet music, uses in
synchronization with images as in video or film scores, computer games and other
software applications, and any other use involving the composition.
Competition
Antra will face intense competition for discretionary consumer spending
from numerous other record companies and other forms of entertainment offered by
film companies, video companies and others. Antra will compete directly with
other recorded music companies, including the major recorded music companies,
which distribute contemporary music, as well as with other record companies for
signing artists and acquiring music catalogs. Many of these competitors have
significantly longer operating histories, greater financial resources and larger
music catalogs than Antra. Antra's ability to compete successfully in the
recorded music business will be largely dependent upon its ability to sign and
retain artists who will prove to be successful and to introduce music products
which are accepted by consumers.
Employees/Independent Contractors
As of September 1, 1999, Antra had six employees, all of whom were
located at our Philadelphia offices. None of our employees is represented by a
labor union. We have not experienced any work stoppage and considers relations
with our employees to be good.
As is customary in the music business, Antra also utilizes the services
of artists, performers, producers, engineers, roadies, booking agents and others
who are independent contractors. These independent contractors hire out their
services on an as needed basis and receive a set fee from Antra per assignment.
Independent contractors are utilized because the individuals providing these
services do so only on this basis, the services performed by these independent
contractors are less expensive than having full time employees perform these
services.
Properties
Antra's executive offices are located at 1515 Locust Street,
Philadelphia, Pennsylvania 19102, where it subleases approximately 10,400 square
feet. This sublease expires on September 30, 2003. The annual base rental for
this space is approximately $104,000.
Dividends
We have not paid any dividends on our common stock since the formation
of our company and we do not expect to pay any cash or other dividends in the
foreseeable future. If we have any earnings in
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the future from our operations, we plan to retain those earnings to help finance
our future operations and growth. Any decision on the future payment of
dividends is solely at the discretion of the board of directors and will depend
on various factors including the results of our operations and our financial
condition.
Legal Proceedings
Antra and some of its stockholders are defendants in a legal action.
Plaintiffs allege that Antra or the stockholders failed to convey 100,000 shares
of Antra's common stock. Antra believes that it was incorrectly named as a party
to this lawsuit and denies any liability. Antra's motion to dismiss the action
was denied by the court. If the outcome of this case is unfavorable, Antra's
exposure would depend on the price of its stock. Assuming $5 per share is the
price of the stock, the liability could be approximately $500,000. If treble
damages were to be awarded, Antra's exposure could be approximately $1,500,000.
SELLING SECURITY HOLDERS
The shares of common stock being registered for the account of selling
security holders may be sold by those security holders or their transferees
commencing on the date of this prospectus. These shares may only be sold if the
holder of a convertible note first converts it into shares or a holder of a
warrant first exercises it to purchase shares.
The following table sets forth, as of September 1, 1999, certain
information with respect to the beneficial ownership of our common stock by each
selling security holder. The table assumes that all of the shares being offered
will be sold. Because the selling security holders may sell all, some or none of
the shares that he, she or it holds, the actual number of shares held by the
selling security holder before or after this offering may vary.
The selling security holders may have sold, transferred or otherwise
disposed of all or a portion of their convertible notes and warrants in
transactions exempt from the registration requirements of the Securities Act. If
this is the case and Antra has not been informed, the information below may not
be up-to-date. If necessary, additional information concerning the selling
security holders will be set forth in prospectus supplements.
The columns under the heading "Before the Offering" include all shares
currently outstanding, shares issuable upon conversion of convertible notes
currently outstanding and shares issuable upon exercise of warrants currently
outstanding. They do not include shares issuable upon conversion of additional
convertible notes or exercise of additional warrants that may be issued after
the effectiveness of our registration statement. Under specific conditions after
the effectiveness of the registration statement, Antra can compel some holders
of outstanding convertible notes and warrants to purchase a specified number of
additional convertible notes and warrants. The noteholders and warrantholders
currently do not have the right to purchase the shares issuable upon conversion
or exercise of these
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<PAGE>
additional convertible notes and warrants. Unless the required conditions are
met and Antra chooses to compel these noteholders and warrantholders to purchase
the additional convertible notes and warrants, these noteholders and
warrantholders will not acquire this right within 60 days of the date of this
prospectus.
The column labeled "Shares Offered" includes all of the shares from the
"Before the Offering" columns plus the additional shares described in the
immediately preceding paragraph. Accordingly, the number of shares in the column
labeled "Shares Offered"may exceed the number of shares in the column entitled
"Before the Offering - Shares Beneficially Owned."
Furthermore, the number of shares in the columns entitled "Before the
Offering - Shares Beneficially Owned"and "Shares Offered" reflect the maximum
number of shares Antra is required to register under its agreement with the
holders of the convertible notes and warrants. Depending on the price of Antra's
common stock at the time of conversion, the actual number of shares that Antra
will issue to holders of convertible notes is expected to be lower than as
reflected in these columns.
In the column entitled "Before the Offering - Percent of Shares
Outstanding," we have indicated an ownership percentage of 4.99% for some of the
selling security holders. Their percentages are not entered as calculated,
because of agreements between Antra and each of these security holders. These
security holders have agreed that their ownership interest of Antra's equity
will be at all times less than 5.00% and that they will not exercise or convert
their warrants or convertible notes to the extent that their equity ownership
would exceed that limit.
<TABLE>
<CAPTION>
Before the Offering After the Offering
------------------- ------------------
Identity of Stockholder Shares Percent of Shares Percent of
or Group (and Beneficially Shares Shares Beneficially Shares
relationship, if any) Owned Outstanding Offered Owned Outstanding
- --------------------- ----- ----------- ------- ----- -----------
<S> <C> <C> <C> <C> <C>
Austost Anstalt Schaan 1,150,000 4.99% 1,725,000 0 0
Balmore Funds S.A. 1,150,000 4.99% 1,725,000 0 0
Berkeley Group Ltd. 200,000 1.22% 300,000 0 0
Castlebay Ltd. 400,000 2.43% 400,000 0 0
Coastal Provinces Ltd. 407,240 2.47% 407,240 0 0
Craighouse Limited 192,760 1.17% 192,760 0 0
Ellis Enterprises, Ltd. 46,666 * 70,000 0 0
Nesher, Inc. 133,333 * 200,000 0 0
United Securities 100,000 * 150,000 0 0
Services, Inc.
Libra Finance S.A. 920,000 4.99% 1,380,000 0 0
Hyett Capital Ltd. 80,000 * 60,000 0 0
Talbiya B. Investments 133,333 * 100,000 0 0
Ltd.
</TABLE>
* Less than one percent.
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PLAN OF DISTRIBUTION
Sales of shares of the common stock may be made from time to time by
the selling security holders, or, subject to applicable law, by pledgees,
donees, distributees, transferees or other successors in interest. These sales
may be made on the over-the-counter market or foreign securities exchanges, in
privately negotiated transactions or otherwise or in a combination of
transactions at prices and at terms then prevailing or at prices related to the
then current market price, or at privately negotiated prices. In addition, any
shares covered by this prospectus which qualify for sale pursuant to Section
4(1) of the Securities Act or Rule 144 under the Securities Act may be sold
under those provisions rather than by this prospectus. Without limiting the
generality of the foregoing, the shares may be sold in one or more of the
following types of transactions:
o a block trade in which the broker-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;
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of such
exchange;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the selling
security holders may arrange for other brokers or dealers to participate in the
resales.
In connection with distributions of the shares or otherwise, the
selling security holders may enter into hedging transactions with
broker-dealers. In connection with such transactions, broker-dealers may engage
in short sales of the shares registered under this prospectus in the course of
hedging the positions they assume with the selling security holders. The selling
security holders may also sell shares short and deliver the shares to close out
such short positions. The selling security holders may also enter into option or
other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares registered under this prospectus, which the
broker-dealer may resell by this prospectus. The selling security holders may
also pledge the shares registered hereunder to a broker or dealer and upon a
default, the broker or dealer may effect sales of the pledged shares by this
prospectus.
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Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from the selling security holders in
amounts to be negotiated in connection with the sale. These brokers or 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 and any such commission, discount or concession may be deemed to be
underwriting discounts or commissions under the Securities Act.
Information as to whether underwriters who may be selected by the
selling security holders, or any other broker-dealer, is acting as principal or
agent for the selling security holders, the compensation to be received by
underwriters who may be selected by the selling security holders, or any
broker-dealer, acting as principal or agent for the selling security holders and
the compensation to be received by other broker-dealers, in the event the
compensation of such other broker-dealers is in excess of usual and customary
commissions, will, to the extent required, be set forth in a supplement to this
prospectus. Any dealer or broker participating in any distribution of the shares
may be required to deliver a copy of this prospectus, including a prospectus
supplement, if any, to any person who purchases any of the shares from or
through such dealer or broker.
Each of the selling security holders have executed an agreement in
which they confirm the method of distribution described in this section and
agree not to sell the shares if the registration statement is not current.
Antra Holdings has advised the selling security holders that if at any
time they may be engaged in a distribution of the shares, they are required to
comply with Regulation M under the Exchange Act. The selling security holders
have acknowledged such advice by separate agreement and also agreed in that
agreement to comply with the regulation. In general, Regulation M precludes the
selling security holders, any affiliated purchasers and any broker-dealer or
other person who participates in such distribution from bidding for or
purchasing, or attempting to induce any person to bid for or purchase any
security which is the subject of the distribution until the entire distribution
is complete. A "distribution" is defined in the rules as an offering of
securities that is distinguished from ordinary trading activities and depends on
the "magnitude of the offering and the presence of special selling efforts and
selling methods." Regulation M also prohibits any bids or purchases made in
order to stabilize the price of a security in connection with the distribution
of that security.
It is anticipated that the selling security holders will offer all of
the shares for sale. Further, because it is possible that a significant number
of shares could be sold at the same time hereunder, such sales, or the
possibility thereof, may have a depressive effect on the market price of the
common stock.
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MANAGEMENT
The following are the officers and directors of Antra Holdings:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------ --------- --------------------------------------------------------------
<S> <C> <C>
Joseph M. Marrone, Jr. 34 Chairman of the Board,
Chief Executive Officer and Director
Thomas R. Kessler 61 Director
Arthur G. Rosenberg 61 Director
Henry Siegel 55 Director
</TABLE>
Joseph M. Marrone, Jr. formed Antra Music in 1997 and now devotes
substantially all of his time to Antra's business. He has been engaging in
private law practice in the Philadelphia area since 1993, although his practice
is no longer accepting new matters. He previously served as a City Solicitor for
the City of Philadelphia and worked as a campaign strategist for the current
Mayor, Ed Rendell, in the 1991 election. Mr. Marrone successfully negotiated the
release of Kurupt from his previous contract and has since managed Kurupt's
career. He has been a director of Antra Holdings since 1997.
Thomas R. Kessler has extensive experience in the banking and
securities businesses. From 1961 to 1993, Mr. Kessler held various positions at
Euro Canadian Bank, Continental Bank International, and Compass Bank & Trust
Company Ltd,. Since 1994, he has been a managing director of Montaque Securities
International Limited. Mr. Kessler received his law degree from Cleveland
Marshall College of Law, Cleveland State University. He has been a director of
Antra Holdings since 1998.
Arthur G. Rosenberg has been a principal of The Associated Companies, a
real estate development firm, since 1987 and became a principal of Millinnium
Development Group LLC in 1998. Prior to that, Mr. Rosenberg was a practicing
lawyer in Huntington, New York and served as general counsel for ITT Levitt &
Sons, Inc., an international builder. Mr. Rosenberg currently serves on the
boards of directors of Mike's Original, Inc. and Phar Mor Inc. He has been a
director of Antra Holdings since 1997.
Henry Siegel is Chairman and Chief Executive Officer of Kaleidoscope
Media Group, Inc. He has held these positions since 1995. He has also been an
officer of Siegel Entertainment, Inc., which is now a subsidiary of
Kaleidoscope, since 1994. Mr. Siegel started his career at Grey Advertising
where he directed media operations. He pioneered the concept of barter
syndication, advertiser supported TV, for which the Advertising Age recognized
him as one of the 50 top television pioneers. He launched, in association with
MGM, the first monthly barter movie network and "Fame" TV. He has produced
Return to Titanic, and relaunched Baywatch, that has become the most watched
television program in the world. He has been a director of Antra Holdings since
1998.
Directors are elected to serve until the next annual meeting of
stockholders of Antra Holdings or until their successors are elected and
qualified. There are no audit, compensation or other committees of the board of
directors.
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Executive Compensation
The following table sets forth information concerning compensation paid
or accrued by Antra Holdings or its subsidiaries for services rendered during
fiscal years 1998 and 1997 to our chief executive officer. No other executive
officer's compensation exceeded $100,000 during either of these fiscal years.
Summary Compensation Table
Name and Principal Position Year Salary
- --------------------------- ---- ------
Joseph M.Marrone, Chairman and Chief Executive Officer 1998 $130,769
1997 $ 0
Employment Agreement
Antra Holdings entered into an employment agreement with Joseph M.
Marrone on March 12, 1998. The agreement expires on March 29, 2001, which will
be automatically renewed annually unless terminated by either party. Mr. Marrone
is required by the agreement to oversee, develop, produce and manage music
products for Antra Music and to participate and oversee all entertainment
projects of Antra Music. Mr. Marrone agreed to act as an executive of Antra
Music and Antra Holdings and to provide services to other affiliates of ours.
Mr. Marrone's base salary for the first year of his employment
agreement is $200,000. He may be awarded an increase in base salary or a bonus,
in either case solely at the discretion of the board of directors based upon a
review of Antra's performance in the prior year. He is also entitled to all
benefits generally offered to Antra's other executives, if any, and to an
automobile allowance. Since November 1998, all of Mr. Marrone's salary payments
and accruals ceased with his consent.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the date of
this prospectus regarding the ownership of Antra Holdings's common stock by:
each person we know owns 5% or more of our outstanding shares; each of our
directors; and all officers and directors of Antra Holdings as a group. Each
owner of the common stock has sole voting and investment power for all shares
listed below, except as otherwise indicated.
As discussed in the section entltled "Selling Security Holders" above,
some of the selling security holders have agreed that their ownership interest
of Antra's equity will be at all times less than 5.00% and that they will not
exercise or convert their warrants or convertible notes to the extent that their
equity ownership would exceed that limit. Because of their agreements, these
security holders are not included in the table below.
26
<PAGE>
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of Percent
Title of Beneficial Beneficial of
Class Owner Ownership Class
- ----- ----- --------- -----
<S> <C> <C> <C>
Common Stock, Joseph Marrone 1,900,000 16.46%
par value $.001 Antra Holdings Group, Inc.
per share 1515 Locust Street
Philadelphia, Pennsylvania 19102
Teltran International Group, Ltd. 2,000,000 17.32%
One Penn Plaza, Suite 4632
New York, New York 10119
All directors and officers 1,900,000 16.46%
as a group (4 persons)
</TABLE>
DESCRIPTION OF SECURITIES
Antra Holdings is currently authorized to issue 50,000,000 shares of
common stock, $.001 par value and 5,000,000 shares of preferred stock, par value
$.001 per share.
Common Stock
Each share of common stock entitles the holder thereof to one vote on
all matters submitted to a vote of the stockholders. Since the holders of common
stock do not have cumulative voting rights, holders of more than 50% of the
outstanding shares can elect all of the directors of Antra Holdings and holders
of the remaining shares by themselves cannot elect any directors. The holders of
common stock do not have preemptive rights or rights to convert their common
stock into other securities. In the event of a liquidation, dissolution or
winding up of Antra Holdings, holders of the common stock have the right to a
ratable portion of the assets remaining after payment of liabilities. All of the
outstanding shares of common stock are duly authorized, validly issued, fully
paid and non-assessable.
The holders of shares of common stock are entitled to dividends when
and as declared by the board of directors from funds legally available therefor.
Antra Holdings has never declared or paid cash dividends on its common stock.
Antra Holdings intends to retain its net income, if any, to increase its capital
base and, accordingly, does not currently anticipate paying cash dividends.
Preferred Stock
Antra Holdings's certificate of incorporation authorizes the issuance
of "blank check" preferred stock with whatever designation, rights and
preferences as may be determined by the board of directors. Accordingly, the
board is empowered, without stockholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of common stock. The
preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of Antra. Although we
do not currently intend to issue any shares of preferred stock, there can be no
assurance that we will not do so.
27
<PAGE>
CERTAIN TRANSACTIONS
Teltran
In April 1999, Antra Holdings and Teltran International Group Ltd.
exchanged shares of our respective companies. We thus now own 2,100,000 shares
of Teltran's common stock and Teltran owns 2,000,000 shares of our common stock.
As a result of the transaction Teltran may be deemed a principal stockholder of
our company. Teltran is a publicly traded company engaged in the
telecommunications business.
We have entered into an agreement with Teltran that requires an
adjustment in the shares delivered in connection with the exchange described
above. On the first business day of the year 2000, if either Teltran's shares or
our shares are trading less than 20% below the market price of the other
company's shares, the company whose shares are trading lower must issue
additional shares to the other.
Antra Holdings and Teltran formed a corporation, Recordstogo.com. We
will have equal interest with Teltran in this joint venture corporation and will
act as partners. We expect it to begin operations in Fall 1999. The initial
primary activity of Recordstogo.com will be to market records on its website,
where visitors can buy records and CDs from a database of music titles ranging
from the early days of vinyl recordings to present-day CDs.
Secured Convertible Notes
On July 20, 1999, Antra sold $2,766,666 of secured convertible notes.
These notes bear interest at 10% per annum. The notes mature on July 20, 2002,
unless accelerated to any date after July 20, 2000 at the option of the holder
of the note. Under limited conditions and at limited times, Antra Holdings may
redeem the notes.
The notes are convertible into shares of our common stock. The
conversion price is equal to 50% of the average of the closing bid prices for
shares of our common stock over the preceding 5 trading days, but is limited to
$3.25 per share. For example, if a note holder elects to convert $500,000 of
notes into shares and the average closing bid price of our common stock is
$6.25, the converting holder will receive 160,000 shares.
As security for our obligations under the notes, we deposited 1,000,000
of our Teltran shares with a collateral agent.
For two weeks following the effectiveness of the registration statement
filed in connection with this prospectus, Antra Holdings has the option to
require all of the noteholders to purchase additional notes (the "Put Option").
We can only exercise this option if the trading volume of our common stock is
more than 75,000 shares per day on each of the ten previous trading days. You
should be aware that the daily trading volume of our common stock has exceeded
75,000 shares only twice between since July 1998 and July 1999.
28
<PAGE>
Antra Holdings paid an aggregate of $343,999 as cash commissions to
several placement agents in connection with the issuance of the notes. Some of
these placement agents also received warrants to purchase an aggregate of
1,146,666 shares of our common stock at $2.00 per share. If we exercise the Put
Option, these placement agents will receive $172,000 in cash and an additional
573,334 warrants.
Antra Holdings agreed to file a registration statement on Form SB-2
with the Securities and Exchange Commission by September 18, 1999 to register
the shares that can be acquired by the conversion of the notes and the exercise
of the warrants. Antra Holdings also agreed to file Form 10-SB with the
commission so that it can become subject to the periodic reporting requirements
of the federal securities laws.
The conversion price of the notes and the exercise price of the
warrants were determined in arm's-length negotiations between representatives of
Antra Holdings and the investors. These prices are not based on Antra Holdings's
net worth or any other established valuation criteria.
Refinancing of Subordinated Convertible Notes
On July 31, 1999, Antra refinanced $1,000,000 of its outstanding
subordinated convertible notes. The new notes bear interest at 10% per annum and
mature on January 15, 2002. The notes may be prepaid, in whole or in part, at
any time without penalty.
The notes are convertible into shares of our common stock at the same
conversion price as the secured convertible notes described in the previous
section. These notes also have registration rights similar to those of the
secured convertible notes.
LEGAL MATTERS
Certain legal matters in connection with the shares of common stock
being offered hereby will be passed upon for Antra Holdings by Parker Duryee
Rosoff & Haft, P.C., New York, New York.
EXPERTS
The financial statements included in this prospectus have been audited
by Liebman Goldberg & Drogin LLP, Garden City, New York, independent certified
public accountants, as indicated in their report.
29
<PAGE>
ADDITIONAL INFORMATION ABOUT ANTRA HOLDINGS
Antra Holdings has filed with the Securities and Exchange Commission
("SEC") a Registration Statement on Form SB-2 with respect to the common stock
being offered. Antra Holdings has also filed with the SEC a Form 10-SB. In the
future, Antra Holdings will file with the SEC our annual, quarterly and special
reports, proxy statements and other information that the SEC requires.
This prospectus is only part of the registration statement and does not
contain all of the information included in the registration statement. Whenever
a reference is made in this prospectus to any contract or other document , the
reference may not be complete and you should refer to the exhibits that are a
part of the registration statement for a copy of the contract or document.
You may read and copy any of the information on file with the SEC at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549 You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. Filed documents are also available to the
public at the SEC's website at http://www.sec.gov.
30
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONTENTS
Page #
Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the years
ended December 31, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Deficit for
the years ended December 31, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7 -- F-11
Consolidated Financial Statements:
Consolidated Balance Sheets at June 30, 1999 and 1998 F-12
Consolidated Statements of Operations for the six months
ended June 30, 1999 and 1998 F-13
Consolidated Statements of Stockholders' Equity for
the six months ended June 30, 1999 and 1998 F-14
Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 and 1998 F-15
Notes to Consolidated Financial Statements F-16
F-1
<PAGE>
LIEBMAN GOLDBERG & DROGIN LLP [Letterhead]
The Board of Directors
Antra Holdings Group, Inc.
We have audited the accompanying consolidated balance sheets of Antra Holdings
Group, Inc. as of December 31, 1998 and 1997, and the related consolidated
statement of operations and stockholders' deficit, and cash flows for the years
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Antra Holdings
Group, Inc. as of December 31, 1998 and 1997 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
May 26, 1999
Garden City, New York
F-2
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
Assets
<TABLE>
<CAPTION>
December 31,
------------
Current Assets: 1998 1997
----------- -----------
<S> <C> <C>
Cash in bank $ 13,121 $ 16,576
Prepaid expenses 22,377 65,632
----------- -----------
Total current assets 35,498 82,208
Property and Equipment, Net 67,777 37,048
Other Assets:
Security deposits 13,024 2,670
Other 987 987
Goodwill 5,000 5,000
----------- -----------
Total assets $ 122,286 $ 127,913
=========== ===========
Liabilities and Stockholders' Deficit
Current Liabilities:
Accrued expenses payable $ 109,633 $ --
Payroll taxes payable 895 894
----------- -----------
Total current liabilities 110,528 894
----------- -----------
Long-Term Liabilities:
Loan payable 388,505 575,000
Loan payable - subordinated 807,240 --
Officer loan payable 21,334 22,333
----------- -----------
Total long-term liabilities 1,217,079 597,333
----------- -----------
Total liabilities 1,327,607 598,227
----------- -----------
Commitments and Contingencies
Stockholders' Deficit:
Common stock, par value $.001; 50,000,000 shares
authorized 9,544,210 shares issued and outstanding 9,544 7,824
Additional paid in capital 989,656 131,276
Deficit (2,204,521) (609,414)
----------- -----------
Total stockholders' deficit (1,205,321) (470,314)
----------- -----------
Total liabilities and stockholders' deficit $ 122,286 $ 127,913
=========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended
December 31,
------------
1998 1997
----------- -----------
Income:
<S> <C> <C>
Show income $ 20,000 $ --
----------- -----------
Expenses:
Recording and production expenses 476,199 190,060
Studio expenses 14,163 27,317
Bodyguards 32,750 --
Publicity and promotion 342,302 41,732
Contributions 16,320 --
Professional fees 246,210 114,228
Consulting expenses 159,765 89,850
Salaries 331,239 11,575
Payroll taxes 24,055 1,216
Rent 29,623 5,917
Auto expenses 208,279 26,764
Insurance expense 40,530 --
Travel and entertainment 298,728 24,472
Telephone 53,423 20,164
Office 49,329 15,797
Miscellaneous expenses 32,040 7,263
Registration expense 18,950 --
Repairs and maintenance 2,143 8,352
Dues and subscriptions 434 3,187
Postage and delivery 24,608 3,305
Depreciation expense 10,939 1,170
Reimbursed overhead (996,922) --
----------- -----------
Total expenses 1,415,107 592,369
----------- -----------
Net operating loss (1,395,107) (592,369)
Other (income) expense:
Loss on investment in Joint Venture 200,000 --
----------- -----------
Net loss for the year $(1,595,107) $ (592,369)
=========== ===========
Net loss per share of common stock based
upon 9,268,030 and 2,130,593 weighted average
shares, respectively $ (0.17) $ (0.28)
=========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Additional Total
Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Deficit
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance -
January 1, 1997 324,210 $ 324 $ 17,776 $ (17,045) $ 1,055
June 1, 1997 Reverse
Acquisition 5,000,000 5,000 -- -- 5,000
Shares purchased 2,500,000 2,500 113,500 -- 116,000
Net loss for the year -- -- -- (592,369) (592,369)
----------- ----------- ----------- ----------- -----------
Balance -
December 31, 1997 7,824,210 7,824 131,276 (609,414) (470,314)
Shares issued as
repayment of loans 1,720,000 1,720 858,380 -- 860,100
Net loss for the year -- -- -- (1,595,107) (1,595,107)
----------- ----------- ----------- ----------- -----------
Balance -
December 31, 1998 9,544,210 $ 9,544 $ 989,656 $(2,204,521) $(1,205,321)
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended
December 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,595,107) $ (592,369)
----------- -----------
Adjustments to Reconcile Net Loss to
Net Cash (Used in) Operating Activities:
Depreciation 10,939 1,170
Changes in Assets and Liabilities:
Decrease (Increase) in prepaid expenses 43,255 (65,632)
(Increase) in other assets (10,354) (11,657)
Increase in accrued expenses 109,633 --
Increase in payroll taxes payable 1 894
----------- -----------
Total adjustments 153,474 (75,225)
----------- -----------
Net cash (used in) operating activities (1,441,633) (667,594)
----------- -----------
Cash Flows from Investing Activities:
Acquisition of property and equipment (41,668) (38,218)
----------- -----------
Cash Flows from Financing Activities:
Borrowings from stockholders' and
related parties (net of repayment) 619,746 597,333
Capital contributions -- 124,000
Issuance of stock for notes payable 860,100 --
----------- -----------
Net cash provided by financing activities 1,479,846 721,333
----------- -----------
Net (decrease) increase in cash (3,455) 15,521
Cash - beginning of year 16,576 1,055
----------- -----------
Cash - end of year $ 13,121 $ 16,576
=========== ===========
Supplemental Disclosures:
Income tax $ -- $ --
=========== ===========
Interest paid $ -- $ --
=========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 1 - Operations:
- --------------------
Opell, Inc., now known as Antra Holdings Group, Inc. ("the Company"),
was formed as a Nevada Corporation and through June 1997 was not
engaged in any business activity and had nominal assets. On June 10,
1997, the Company acquired all the shares of Wall Street Records,
Inc. a New Jersey Corporation ("the Subsidiary"). The Subsidiary was
formed on March 20, 1997 to engage in various aspects of the music
business, including the production and distribution of recorded
music. In connection with the acquisition of the Subsidiary, the
Company issued 5,000,000 shares of its Common Stock to stockholders
of the Subsidiary, who then owned a majority of the outstanding
shares of the Company. The acquisition was treated as a purchase and
as a reverse acquisition so that the historical financials of the
Subsidiary represent the financials of the Company. Subsequent to
December 31, 1997, the Company reincorporated in Delaware and in
April 1998, the Company changed its name to Antra Holdings Group,
Inc. and the Subsidiary changed its name to Antra Music Group, Inc.
The Subsidiary's activities, consisted of negotiating agreements and
arrangements with artists, and thereby incurred substantial expenses.
In April 1998, the Subsidiary and A & M Records formed an LLC
(Limited Liability Corporation) (the "Joint Venture") for the purpose
of promoting, recording and distributing records or videos of certain
of the Subsidiary's recording artists. The Joint Venture released its
first recording in October 1998. Revenues were recognized in 1998.
All expenses, incurred in 1998, were written off as incurred, since
the Company's recording artist had no history of producing profitable
albums, and in such circumstances, the recording industry anticipates
marginal success for albums. Subsequent to 1998, as discussed in
Notes 7 and 8, the joint venture was terminated.
Note 2 - Summary of Significant Accounting Policies:
- ----------------------------------------------------
Principles of Consolidation:
----------------------------
The consolidated financial statements include the accounts of the
company and its wholly-owned subsidiary. Intercompany balances and
transactions have been eliminated.
Property and Equipment:
-----------------------
Property and equipment are stated at cost, less accumulated
depreciation and amortization. Depreciation is computed on a
straight-line basis over the estimated useful lives of the related
assets, which range from five to seven years. Leasehold improvements
are amortized over the shorter of the lease term or the useful life
of the asset.
F-7
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 2 - Summary of Significant Accounting Policies (Continued):
- ----------------------------------------------------------------
Development Stage Activities and Operations:
--------------------------------------------
Prior to October 1998, the Company was a development stage activity.
Since the Company now has continuing business revenues, financial
information does not include losses accumulated during the
development stage period not part of the financial statement period.
Going Concern:
--------------
As shown in the accompanying financial statements, the Company
incurred a net loss of $1,595,107 during the year ended December 31,
1998, and as of that date, the Company's current liabilities exceeded
its current assets by $75,030. Also, the uncertainty of future record
sales and the previously discussed factors, create an uncertainty
about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
Loan Payable - Subordinated:
----------------------------
As of December 31, 1998 the Company received loans from Millport
Limited amounting to $1,195,745. Of this amount, the Company has
agreed to subordinate $807,240 to Coastal Provinces Ltd., a company
managed by Millport Limited.
Income Taxes:
-------------
At December 31, 1998, the Company has an operating loss carryforward
of approximately $2,200,000 after limitations based on changes in
ownership.
Earnings Per Common Share:
--------------------------
Earnings per common share are computed on the basis of the weighted
average number of common shares outstanding during the period.
In 1998, the Company issued 1,250,000 shares and 470,260 shares
respectively of common stock as repayment of $860,100 loans
previously received.
F-8
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 2 - Summary of Significant Accounting Policies (Continued):
- ----------------------------------------------------------------
Use of Estimates:
-----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those amounts.
Fair Value of Financial Instruments:
------------------------------------
SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments", requires disclosure of the fair value information,
whether or not recognized in the balance sheet, where it is
practicable to estimate that value. The carrying value of cash, cash
equivalents and accounts receivable approximates fair value.
Impairment of Long-Lived Assets:
--------------------------------
The Company has not completed it's evaluation of the adoption of SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." However, management believes
any such effect will not be material.
Accounting Pronouncements:
--------------------------
The Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income", which is effective for
financial statements with fiscal years beginning after December 15,
1997. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of
general-purpose financial statements. The Company does not expect
adoption of SFAS No. 130 to have a material effect, if any, on its
financial position or results of operations.
The FASB issued SFAS 131, "Disclosure about Segments of an Enterprise
and Related Information", issued by FASB, which is effective for
financial statements with fiscal years beginning after December 31,
1998. This statement establishes standards for the way that public
entities report selected information about operating segments,
products, and services, geographic areas, and major customers in
interim and annual financial reports. The Company does not expect
adoption of SFAS No. 131 to have a material effect, if any, on its
financial position or results of operations.
F-9
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 3 - Prepaid Recording Costs:
- ---------------------------------
In accordance with FASB Statement No. 50, "Financial Reporting in the
Record and Music Industry", advances to artists and producers are
capitalized as an asset when the current popularity and past
performance of the artist or producer provides a sound basis for
estimating the probable future recoupment of such advances from
earnings otherwise payable to the artist or producer. Any portion of
such advances not deemed to be recoupable from future royalties is
reserved at the balance sheet date. All other significant advances
which do not meet the above criteria are fully reserved when paid.
The Company in anticipation of completion of record production makes
various advances and payments on behalf of the recording artist.
These payments are prepaid and will be expensed when the record
production is completed and the record issued.
Note 4 - Loan Payable:
- ----------------------
During the period July 15, 1997 to December 31, 1998, the Company
received various loans totaling $2,055,845. Additionally, in 1998,
1,720,000 shares of common stock were issued as repayment of $860,100
of these loans.
The president of the company has made various loans to the Company
amounting to $21,334. At the present time, there is no repayment
schedule.
Note 5 - Stockholders' Deficit:
- -------------------------------
The Company has 50,000,000 shares of common stock, par value $.001
authorized. During the year, the Company issued 1,720,000 shares of
common stock to various investors.
Note 6 - Commitments and Contingencies:
- ---------------------------------------
The Company and certain stockholders are defendants in a legal
action, whereby plaintiffs allege the failure of the Company or those
stockholders to convey 100,000 shares of the Company's common stock.
Attorneys for the Company filed a motion to dismiss the action on
behalf of the Company. Should there be an unfavorable decision, the
Company's liability at a current stock market value of $5 per share
could be between $500,000 and $1,500,000 (assuming treble damages).
The Company denies any liability.
F-10
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
Note 6 - Commitments and Contingencies (Continued):
- ---------------------------------------------------
The Company subleases office space expiring September 30, 2003. The
annual rental commitments are as follows:
1999 $ 75,429
2000 107,942
2001 120,947
2002 127,449
2003 101,439
--------
$533,206
========
Note 7 - Investment in Joint Venture:
- -------------------------------------
On March 13, 1998, the Company formed Wall St. Records, LLC, a
Delaware limited liability corporation. The Company contributed
$200,000 of capital in accordance with the limited liability company
agreement.
In April 1998, the Subsidiary and A & M Records formed an LLC
(Limited Liability Corporation) (the "Joint Venture") for the purpose
of promoting, recording and distributing records or videos of certain
of the Subsidiary's recording artists. The Joint Venture released its
first recording in October 1998. Revenues were recognized in 1998.
All expenses, incurred in 1998, were written off as incurred, since
the company's recording artist had no history of producing profitable
albums, and in such circumstances, the recording industry anticipates
marginal success for albums.
As of December 31, 1998, the Company has realized a loss on its
investment in the joint venture of $200,000, representing its entire
investment.
Note 8 - Subsequent Events:
- ---------------------------
In April 7, 1999, the Company agreed to terminate the joint venture
agreement with A & M Records in exchange for the future rights to the
artists that were assigned to the LLC, release of all liability and
debt incurred by the LLC and payment of $725,000. The Company has
released all claims to any revenue or profits of the LLC that may
arise from the release of recording of the artists while assigned to
the LLC.
F-11
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
June 30,
Assets
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash in bank $ 206,072 $ 82,816
Investment in Joint Venture -- 200,000
Investment 6,000,000 --
Prepaid recording costs 387,090 202,637
----------- -----------
6,593,162 485,453
Property and Equipment, Net 86,066 60,606
Other Assets:
Security deposits 13,024 1,531
Other 987 987
Goodwill 5,000 5,000
----------- -----------
Total assets $ 6,698,239 $ 553,577
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accrued expenses payable $ 24,678 $ --
Payroll taxes payable 1,161 50,397
----------- -----------
Total current liabilities 25,839 50,397
----------- -----------
Long-Term Liabilities:
Loan payable 429,829 416,030
Loan payable - subordinated 1,000,000 --
Officer loan payable 21,334 21,334
----------- -----------
Total long-term liabilities 1,451,163 437,364
----------- -----------
Total liabilities 1,477,002 487,761
----------- -----------
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $.001; 50,000,000 shares
authorized, 11,544,210 and 9,544,210 shares
issued and outstanding, respectively 11,544 9,544
Additional paid in capital 6,987,656 989,656
Accumulated Deficit (1,777,963) (933,384)
----------- -----------
Total stockholders' equity 5,221,237 65,816
----------- -----------
Total liabilities and stockholders' equity $ 6,698,239 $ 553,577
=========== ===========
</TABLE>
F-12
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Income:
Show fees $ 10,044 $ --
Royalties 46,076 --
--------- ---------
56,120 --
--------- ---------
Expenses:
Recording and production expenses 12,748 54,705
Studio expenses 3,022 7,288
Publicity and promotion 28,207 99,341
Professional fees 104,484 155,145
Consulting expenses 22,625 102,065
Salaries 52,640 118,925
Payroll taxes 5,568 8,652
Rent 37,417 8,323
Equipment lease 15,495
Auto expenses 18,075 105,242
Travel and entertainment 51,387 164,183
Telephone 30,330 18,701
Office 3,095 9,676
Miscellaneous expenses 6,813 2,996
Insurance expense 38,769 13,149
Interest expense 773 --
Repairs and maintenance 7,515 1,078
Dues and subscriptions 568 334
Postage and delivery 5,432 7,382
Depreciation expense 8,947 5,260
Registration Expense -- 15,040
Reimbursed overhead (99,348) (573,515)
--------- ---------
Total expenses 354,562 323,970
--------- ---------
Net loss from operations (298,442) (323,970)
Other Income:
Settlement of Joint Venture 725,000 --
--------- ---------
Net income (loss ) $ 426,558 $(323,970)
========= =========
Net income (loss) per share of common stock based
upon 10,527,635 and 8,987,008 weighted average shares,
respectively $ 0.04 $ (0.04)
========= =========
</TABLE>
F-13
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss ) $ 426,558 $ (323,970)
----------- -----------
Adjustments to Reconcile Net income (loss) to
Net Cash (Used in) Operating Activities:
Depreciation 8,947 5,260
Changes in Assets and Liabilities:
(Increase) in prepaid expenses (364,713) (137,005)
Decrease (Increase) in investment in Joint Venture 200,000 (200,000)
(Increase) in investment (6,000,000) --
Decrease in other assets -- 1,139
(Decrease) in accrued expenses payable (84,955) --
Increase in payroll taxes payable 266 49,503
----------- -----------
Total adjustments (6,240,455) (281,103)
----------- -----------
Net cash (used in) operating activities (5,813,897) (605,073)
----------- -----------
Cash Flows from Investing Activities:
Acquisition of property and equipment (27,236) (28,818)
----------- -----------
Cash Flows from Financing Activities:
Borrowings (Repayments) from/to stockholders' and
related parties 234,084 (159,969)
Investment in Joint Venture (200,000) --
Investment 6,000,000 --
Capital Contributions -- 860,100
----------- -----------
Net cash provided by financing activities 6,034,084 700,131
----------- -----------
Net increase in cash 192,951 66,240
Cash - January 1 13,121 16,576
----------- -----------
Cash - June 30, $ 206,072 $ 82,816
=========== ===========
</TABLE>
F-14
<PAGE>
ANTRA HOLDINGS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the six months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1998 7,824,210 $ 7,824 $ 131,276 $ (609,414) $ (470,314)
Shares purchased 1,720,000 1,720 858,380 -- 860,100
Net loss for the period (323,970) (323,970)
---------- ----------- ----------- ----------- -----------
Balance - June 30, 1998 9,544,210 $ 9,544 $ 989,656 $ (933,384) $ 65,816
========== =========== =========== =========== ===========
Balance -January 1, 1999 9,544,210 $ 9,544 $ 989,656 $(2,204,521) $(1,205,321)
Investment 2,000,000 2,000 5,998,000 6,000,000
Net income for the period 426,558 426,558
---------- ----------- ----------- ----------- -----------
Balance - June 30, 1999 11,544,210 $ 11,544 $ 6,987,656 $(1,777,963) $ 5,221,237
========== =========== =========== =========== ===========
</TABLE>
F-15
<PAGE>
ANTRA HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
Note 1 - Basis of Presentation:
- -------------------------------
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The results of operations for the six month period ended June 30,
1999 are not necessarily indicative of the results to be expected for
the full year.
Note 2 - Material Events:
- -------------------------
During the six months ended June 30, 1999, the following events
occurred:
a. The Company issued 2,000,000 shares of its common stock as an
investment to a related party whereby each owns 50% of a joint
venture.
F-16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Articles Sixth and Seventh of the Certificate of Incorporation of
the Company provides with respect to the indemnification of directors and
officers that the Company shall indemnify to the fullest extent permitted by
Sections 102(b)(7) and 145 of the Delaware General Corporation Law, as amended
from time to time, each person that such Sections grant the Company the power to
indemnify. Article Seventh of the Certificate of Incorporation of the Company
also provides that no director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of Delaware General Corporation Law, as
amended from time to time.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth various expenses, other than
underwriting discounts, which will be incurred in connection with this offering.
Other than the SEC registration fee amounts set forth below are estimates:
SEC registration fee............................................
Blue sky legal fees ............................................
Printing and engraving expenses.................................
Legal fees............................................ *
Accounting fees.......................................
Miscellaneous expenses................................
----------
$
==========
Item 26. Recent Sales of Unregistered Securities
The following sets forth information relating to all unregistered securities of
the Company sold by it in the last 3 years. There were no reportable
transactions prior to June 1997.
On June 10, 1997, Opell, Inc. ("Opell"), a Nevada corporation,
issued 5,000,000 shares to the stockholders of Wall Street Records, Inc. ("Wall
Street"), a New Jersey corporation, in exchange for all
II-1
<PAGE>
of the outstanding capital stock of Wall Street. Opell subsequently merged with
a subsidiary corporation formed in Delaware and the surviving entity changed its
name to Antra Holdings Group, Inc.
On July 11, 1997, the Company issued 2,500,000 shares to various
investors in a private placement transaction in accordance with Regulation 504
of the Securities Act of 1933 for $100,000.
Between January 9, 1998 and March 3, 1998, the Company issued
1,720,260 shares to various investors in a private placement transaction in
accordance with Regulation 504 of the Securities Act of 1933 for $860,130.
On October 2, 1998, the Company issued a Subordinated Convertible
Note in exchange for existing indebtedness in the amount of $807,240. The
Company believes the issuance of such note is exempt from the registration
requirements pursuant to Section 4(2) of the Securities Act.
In November 1998, the Company issued an additional Subordinated
Convertible Note in exchange for existing indebtedness in the amount of
$192,760. The Company believes the issuance of such note is exempt from the
registration requirements pursuant to Section 4(2) of the Securities Act.
On July 20, 1999, the Company sold $2,766,666 of secured
convertible notes. The Company paid an aggregate of $343,999 as cash commissions
to several placement agents in connection with the issuance of the notes. Some
of these placement agents also received warrants to purchase an aggregate of
1,146,666 shares of our common stock at $2.00 per share. If the Company is able
to exercise a put option granted in connection with the foregoing transaction,
these placement agents will receive an additional $172,000 in cash and an
additional 573,334 warrants in a transaction exempt pursuant to Rule 504.
On July 31, 1999, the Company issued new notes to the holders of
its outstanding subordinated convertible notes.
Item 27. Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation
3.2 By-laws
5.1 Opinion of Parker Duryee Rosoff & Haft
10.1 Employment Agreement between Joseph M. Marrone and Registrant
10.2 Distribution Agreement between Sheridan Square Entertainment,
L.L.C. d/b/a Artemis Records and the Registrant
II-2
<PAGE>
10.3 Form of Subscription Agreement for Secured Convertible Notes and
Common Stock Purchase Warrants
10.4 Form of Secured Convertible Notes
10.5 Form of Common Stock Purchase Warrants
10.6 Form of Security Agreement
21.1 Subsidiary List
23.1 Consent of Leibman Goldberg & Drogin LLP
23.2 Consent of Parker Duryee Rosoff & Haft (included in Exhibit 5.1
hereof)
24 Power of Attorney (included in the Signature page of Part II of
this Registration Statement)
27 Financial Data Schedule
Item 28. Undertakings
Registrant hereby undertakes:
(1) That 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 contained in
a form of Prospectus filed by Registrant pursuant to 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) That 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
deemed to be the initial bona fide offering thereof.
(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any Prospectus required by Section 10(a)(3)
of the Securities Act;
(b) To reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement;
(c) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement.
II-3
<PAGE>
(4) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Registrant pursuant to Item 24 of this Part II to the Registration Statement,
or otherwise, Registrant 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 Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Registrant 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 whether such
indemnification by it is against the public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Philadelphia, State of Pennsylvania, on the day of September 1999.
ANTRA HOLDINGS GROUP, INC.
By: /s/ Joseph M. Marrone, Jr.
---------------------------------
Chairman of the Board, Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints JOSEPH M. MARRONE, his true and lawful
attorney-in-fact and agent, 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 to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite or necessary 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 attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed by the following persons in the
capacities and on the dates stated:
Signature Title Date
Chairman of the Board, Chief
/s/Joseph M. Marrone, Jr. Executive Officer, Director September 16, 1999
- ------------------------ (Principal Executive Officer)
Joseph M. Marrone, Jr.
/s/Thomas R. Kessler Director September 16, 1999
- ------------------------
Thomas R. Kessler
/s/Arthur Rosenberg Director September 16, 1999
- ------------------------
Arthur Rosenberg
/s/Henry Siegel Director September 16, 1999
- ------------------------
Henry Siegel
II-5
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
3.1 Certificate of Incorporation
3.2 By-laws
5.1 Opinion of Parker Duryee Rosoff & Haft
10.1 Employment Agreement between Joseph M. Marrone and Registrant
10.2 Distribution Agreement between Sheridan Square Entertainment,
L.L.C. d/b/a Artemis Records and the Registrant
10.3 Form of Subscription Agreement for Secured Convertible Notes and
Common Stock Purchase Warrants
10.4 Form of Secured Convertible Notes
10.5 Form of Common Stock Purchase Warrants
10.6 Form of Security Agreement
21.1 Subsidiary List
23.1 Consent of Leibman Goldberg & Drogin LLP
23.2 Consent of Parker Duryee Rosoff & Haft (included in Exhibit 5.1
hereof)
24 Power of Attorney (included in the Signature page of Part II of
this Registration Statement)
27 Financial Data Schedule
<PAGE>
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
CERTIFICATE OF INCORPORATION OF "WALL STREET RECORDS INC.", FILED IN
THIS OFFICE ON THE SIXTEENTH DAY OF JANUARY, A.D. 1998, AT 9 O'CLOCK A.M.
[GRAPHIC OMITTED]
/s/Edward J. Freel, Secretary of State
--------------------------------------
2847653 8100 AUTHENTICATION: 8874205
981020725 DATE: 01-20-98
1
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/16/1998
981020725 - 2847653
CERTIFICATE OF INCORPORATION
OF
WALL STREET RECORDS INC.
The undersigned, being of legal age, in order to form a corporation under
and pursuant to the laws of the State of Delaware, does hereby set forth as
follows:
FIRST: The name of the corporation is Wall Street Records Inc.
SECOND: The address of the initial registered and principal office of the
Corporation in this state is c/o United Corporate Services, Inc., 15 East North
Street, in the City of Dover, County of Kent, State of Delaware 19901 and the
name of the registered agent at said address is United Corporate Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the corporation laws of
the State of Delaware.
FOURTH: (a) The corporation shall be authorized to issue the following
shares:
Class Number of Shares Par Value
----- ---------------- ---------
Common Stock 50,000,000 $.001
Preferred Stock 5,000,000 $.001
(b) The Board of Directors is hereby empowered to authorize by resolution
or resolutions from time to time the issuance of one or more classes or series
of Preferred Stock and to fix the voting powers, full or limited or no voting
powers, and such designations, powers, preferences and relative, participating,
optional or other rights, if any, and the qualifications, limitations or
restrictions thereof, if any, with respect to each such class or series of
Preferred Stock (including, without limitation, liquidation preferences,
dividend rates, conversion rights and redemption provisions), and the number of
shares constituting each such class or series, and to increase or decrease the
number of shares of any such class or series to the extent permitted by the
Delaware General Corporation Law.
FIFTH: The name and address of the incorporator are as follows: Rachel S.
Lerner, Parker Duryee Rosoff & Haft, 529 Fifth Avenue, 8th Floor, New York, New
York 10017.
<PAGE>
SIXTH: a) The Corporation shall, to the full extent permitted by Section
145 of the Delaware General Corporation law, as amended, from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
b) A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the directors
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
c) Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights that said law permitted
this Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided however, that, except as provided in paragraph d)
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in the Paragraph SIXTH
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not
2
<PAGE>
entitled to be indemnified under this Paragraph SIXTH or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
d) If a claim under sub-paragraph (c) of this Paragraph SIXTH is not paid
in full by the Corporation within thirty (30) days after a written claim has
been received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard or conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
e) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Paragraph SIXTH shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
f) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
g) The Corporation's obligation, if any, to indemnify any person who was or
is serving as a director, officer, employee, or agent of any direct or indirect
subsidiary of the Corporation or, at the request of the Corporation, of any
other corporation or of a partnership, joint venture, trust, or other enterprise
shall be reduced by any amount such person may collect as indemnification from
such other corporation, partnership, joint venture, trust or other enterprise.
3
<PAGE>
h) Any repeal or modification of the foregoing provisions of this Paragraph
SIXTH shall not adversely affect any right or protection hereunder of any person
in respect of any act or omission occurring prior to the time of such repeal or
modification.
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify. Each person who serves as a
director of the Corporation while this Paragraph SEVENTH is in effect shall be
deemed to be doing so in reliance on the provisions of this Paragraph SEVENTH,
and neither the amendment or repeal of this Paragraph SEVENTH, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Paragraph SEVENTH, shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for, arising out of, based upon, or
in connection with any acts or omissions of such director occurring prior to
such amendment, repeal, or adoption of an inconsistant provision. The provisions
of this Paragraph SEVENTH are cumulative and shall be in addition to and
independent of any and all other limitations on or eliminations of the
liabilities of directors of the Corporation, as such, whether such limitations
or eliminations arise under or are created by any law, rule, regulation, by-law,
agreement, vote of stockholders or disinterested directors, or otherwise.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement,
4
<PAGE>
the said compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be binding
on all the creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of this corporation, as the case may be, and also on this
corporation.
NINTH: The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
TENTH: The Board of Directors is authorized to adopt, amend, or repeal the
By-laws of the Corporation except as and to the extent provided in the By-laws.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of perjury
this 16th day of January, 1998.
/s/Rachel S. Lerner
--------------------------------------
Rachel S. Lerner, Incorporator
5
<PAGE>
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF OWNERSHIP,
WHICH MERGES: "OPELL INC.", A NEVADA CORPORATION, WITH AND INTO "WALL STREET
RECORDS INC." UNDER THE NAME OF "WALL STREET RECORDS INC.", A CORPORATION
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND
FILED IN THIS OFFICE THE TWENTY-THIRD DAY OF JANUARY, A.D. 1998, AT 9 O'CLOCK
A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
[GRAPHIC OMITTED]
/s/Edward J. Freel, Secretary of State
--------------------------------------
2847653 8100M AUTHENTICATION: 8887461
981029160 DATE: 01-27-98
1
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/23/1998
981029160 - 2847653
CERTIFICATE OF OWNERSHIP AND MERGER
OF
OPELL INC.
BY
WALL STREET RECORDS INC.
Pursuant to Section 253 of the
General Corporation Law of the State of Delaware
Opell Inc., a corporation organized and existing under the laws of the
State of Nevada (the "Corporation")
DOES HEREBY CERTIFY:
FIRST: That it was organized pursuant to the provisions of the Nevada
General Corporation Law, on the 20th day of January, 1995.
SECOND: That it owns all of the outstanding shares of the capital stock of
Wall Street Records Inc. ("Wall Street"), a corporation organized pursuant to
the provisions of the General Corporation Law of the State of Delaware, on the
16th day of January, 1998.
THIRD: That its Board of Directors, pursuant to a unanimous written consent
as of the 20th day of January 1998, determined to merge the Corporation with
Wall Street pursuant to a certain Agreement and Plan of Merger (the "Merger
Agreement") and did adopt the following resolutions:
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed, in the name
and on behalf of the Corporation, to form a wholly-owned
subsidiary of the Corporation, which subsidiary shall be
incorporated in the state of Delaware under the name of Wall
Street Records Inc.(the "Subsidiary"):
<PAGE>
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed, in the name
and on behalf of the Corporation, to enter into the Merger
Agreement, pursuant to which the Corporation shall be merged
with and into the Subsidiary and the Subsidiary shall be
the surviving corporation;
RESOLVED, the shares shall be distributed pro rata of the
Surviving Corporation to holders of the stock of Parent
Corporation upon the surrender of any certificate, therefore.
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed, in the name and on
behalf of the Corporation, to submit the Merger Agreement to the
Corporation's stockholders for approval in accordance with the
Nevada General Corporation Law,
RESOLVED, that the officers of the Corporation be, and each
hereby is authorized, empowered and directed, in the name and on
behalf of the Corporation as the sole stockholder of the
Subsidiary, to approve the Merger Agreement in accordance with
the Delaware General Corporation Law;
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed, in the name and on
behalf of the Corporation, to file with the State of Delaware and
the State of Nevada all necessary documents to reflect the
transactions contemplated by the Merger Agreement and
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized, empowered and directed to take all such
action and to do such things as may be necessary or advisable or
convenient and proper to effectuate the foregoing resolutions and
the intent and purposes thereof.
FOURTH. That the merger has been adopted, approved, certified, executed and
acknowledged by the Board of Directors and the shareholders of the Corporation,
in accordance with the laws of the State of Nevada.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Ownership and Merger is hereby
executed on this 20th day of January, 1998.
OPELL INC.
By: /s/Joseph Marrone
-----------------------------------------
Joseph Marrone, President
WALL STREET RECORDS INC.
By: /s/Joseph Marrone
-----------------------------------------
Joseph Marrone, President
<PAGE>
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "WALL STREET RECORDS INC.", CHANGING ITS NAME FROM "WALL STREET RECORDS INC."
TO "ANTRA HOLDINGS GROUP, INC.", FILED IN THIS OFFICE ON THE SEVENTEENTH DAY OF
APRIL, A.D. 1998, at 9 O'CLOCK A.M.
[GRAPHIC OMITTED]
/s/Edward J. Freel
--------------------------------------
Edward J. Freel, Secretary of State
2847653 8100 AUTHENTICATION: 9871653
991295041 DATE: 07-19-99
1
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/17/1998
981147914 - 2847653
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WALL STREET RECORDS, INC.
The undersigned corporation, in order to amend its Certificate of
Incorporation, hereby certifies as follows:
FIRST: The name of the corporation is:
WALL STREET RECORDS, INC.
SECOND: The corporation hereby amends its Certificate of Incorporation as
follows:
Paragraph FIRST of the Certificate of Incorporation, relating to the name
of the corporation, is hereby amended to read as follows:
"FIRST: The name of the corporation is:
Antra Holdings Group, Inc."
THIRD: The amendment effected herein was authorized by the consent in
writing, setting forth the action so taken, signed by the holders of
at least a majority of the outstanding shares entitled to vote
thereon, and due notice so taken will be given to those shareholders
who have not consented in writing pursuant to Section 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this 16th day of
April, 1998.
By: /s/ Joseph M. Marrone, Jr.
-------------------------------
Name: Joseph M. Marrone, Jr.
-----------------------------
Title: CEO/Chairman
----------------------------
<PAGE>
EXHIBIT 3.2
ANTRA HOLDINGS GROUP, INC.
BY-LAWS
ARTICLE I - STOCKHOLDERS
SECTION 1. ANNUAL MEETING.
An annual meeting of the stockholders, for the election of
directors to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting, shall be held at such
place, on such date, and at such time as the Board of Directors shall each year
fix, which date shall be within thirteen months subsequent to the later of the
date of incorporation or the last annual meeting of stockholders.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or
purposes prescribed in the notice of the meeting, may be called by the Board of
Directors or the chief executive officer and shall be held at such place, on
such date, and at such time as they or he or she shall fix.
SECTION 3. NOTICE OF MEETINGS.
Written notice of the place, date, and time of all meetings of
the stockholders shall be given, not less than ten nor more than sixty days
before the date on which the meeting is to be held, to each stockholder entitled
to vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the Delaware
General Corporation Law or the Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
<PAGE>
SECTION 4. QUORUM.
At any meeting of the stockholders, the holders of a majority
of all of the votes entitled to be voted at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of
the meeting or the holders of a majority of the votes who are present, in person
or by proxy, may adjourn the meeting to another place, date, or time.
If a notice of any adjourned special meeting of stockholders
is sent to all stockholders entitled to vote thereat, stating that it will be
held with those present constituting a quorum, then except as otherwise required
by law, those present at such adjourned meeting shall constitute a quorum, and
all matters shall be determined by a majority of the votes cast at such meeting.
SECTION 5. ORGANIZATION.
Such person as the Board of Directors may have designated or,
in the absence of such a person, the Chairman of the Board of Directors or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
SECTION 6. CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine
the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seem to him
or her in order.
SECTION 7. PROXIES AND VOTING.
At any meeting of the stockholders, every stockholder entitled
to vote may vote in person or by proxy authorized by an instrument in writing
filed in accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock
entitled to vote which is registered in his or her name on the record date for
the meeting, except as otherwise provided herein or in the Corporation's
Certificate of Incorporation or as required by law.
<PAGE>
All voting, including on the election of directors but
excepting where otherwise required by law, may be by a voice vote; provided,
however, that upon demand therefor by a stockholder entitled to vote or his or
her proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballots, each of which shall state the name of the stockholder or proxy voting
and such other information as may be required under the procedure established
for the meeting. Every vote taken by ballots shall be counted by an inspector or
inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes
cast, and except as otherwise required by law, all other matters shall be
determined by a majority of the votes cast.
SECTION 8. STOCK LIST.
A complete list of stockholders entitled to vote at any
meeting of stockholders, arranged in alphabetical order for each class of stock
and showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting
during the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
Any action required to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which may be taken at
any annual or special meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be made by hand or by
certified or registered mail, return receipt requested.
<PAGE>
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
date the earliest dated consent is delivered to the Corporation, a written
consent or consents signed by a sufficient number of holders to take action are
delivered to the Corporation in the manner prescribed in the first paragraph of
this Section.
ARTICLE II - BOARD OF DIRECTORS
SECTION 1. NUMBER AND TERM OF OFFICE.
The number of directors who shall constitute the whole Board
shall be such number as the Board of Directors shall from time to time have
designated, except that in the absence of any such designation, such number
shall be five (5). Each director shall be elected for a term of one year or
until his or her successor is elected and qualified, except as otherwise
provided herein or required by law.
Whenever the authorized number of directors is increased
between annual meetings of the stockholders, a majority of the directors then in
office shall have the power to elect such new directors for the balance of a
term and until their successors are elected and qualified. Any decrease in the
authorized number of directors shall not become effective until the expiration
of the term of the directors then in office unless, at the time of such
decrease, there shall be vacancies on the board which are being eliminated by
the decrease.
SECTION 2. VACANCIES.
If the office of any director becomes vacant by reason of
death, resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his or her successor is elected and
qualified.
<PAGE>
SECTION 3. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at
such place or places, on such date or dates, and at such time or times as shall
have been established by the Board of Directors and publicized among all
directors. A notice of each regular meeting shall not be required.
SECTION 4. SPECIAL MEETINGS.
Special meetings of the Board of directors may be called by
one-third of the directors then in office (rounded up to the nearest whole
number) or by the Chairman of the Board or by the President and shall be held at
such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
each director by whom it is not waived by mailing written not less than five
days before the meeting or by telegraphing the same not less than twenty-four
hours before the meeting. Unless otherwise indicated in the notice thereof, any
and all business may be transacted at a special meeting.
SECTION 5. QUORUM.
At any meeting of the Board of Directors, one-third of the
total number of the whole Board (rounded up to the nearest whole number) shall
constitute a quorum for all purposes. If a quorum shall fail to attend any
meeting, a majority of those present may adjourn the meeting to another place,
date, or time, without further notice or waiver thereof.
SECTION 6. PARTICIPATION IN MEETINGS BY CONFERENCE
TELEPHONE.
Members of the Board of Directors, or of any committee
thereof, may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.
SECTION 7. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be
transacted in such order and manner as the Board may from time to time
determine, and all matters shall be determined by the vote of a majority of the
directors present, except as otherwise provided herein or required by law.
Action may be taken by the Board of Directors without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board of Directors.
<PAGE>
SECTION 8. POWERS.
The Board of Directors may, except as otherwise required by
law, exercise all such powers and do all such acts And things as may be
exercised or done by the Corporation, including, without limiting the generality
of the foregoing, the unqualified power:
(1) To declare dividends from time to time in
accordance with law;
(2) To purchase or otherwise acquire any property,
rights or privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance,
in such form as it may determine, of written obligations of
every kind, negotiable or non-negotiable, secured or
unsecured, and to do all things necessary in conjunction
therewith;
(4) To remove any officer of the Corporation with or
without cause, and from time to time to devolve the powers and
duties of any officer upon any other person for the time
being;
(5) To confer upon any officer of the corporation the
power to appoint, remove and suspend subordinate officers,
employees and agents;
(6) To adopt from time to time such stock option,
stock purchase, bonus or other compensation plans for
directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance.,
retirement, and other benefit plans for directors, officers,,
employees and agents of the Corporation and its subsidiaries
as it may determine; and,
(8) To adopt from time to time regulations, not
inconsistent with these By-Laws, for the management of the
Corporation's business and affairs.
SECTION 9. COMPENSATION OF DIRECTORS.
Directors, as such, may receive, pursuant to resolution of
the Board of Directors, fixed fees and other compensation for their services as
directors, including, without limitation, their services as members of
committees of the Board of Directors.
<PAGE>
SECTION 10. DIVISION AND DEPARTMENTS.
The Board of Directors may cause the business and operations
of the Corporation to be divided into divisions based upon such basis of
division as the Board of Directors may from time to time determine to be
advisable, and may cause the business and operations of any such division to be
further divided into sub-divisions or departments if deemed advisable by the
Board of Directors and upon such basis of subdivision as the Board may
determine.
ARTICLE III - COMMITTEES
SECTION 1. COMMITTEE OF THE BOARD OF DIRECTORS.
The Board of Directors, by a vote of a majority of the whole
Board, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any committee
so designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
SECTION 2. CONDUCT BUSINESS.
Each committee may determine the procedural rules for meeting
and conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the members shall constitute
a quorum unless the committee shall consist of one or two members, in which
event one member shall constitute a quorum; and all matters shall be determined
by a majority vote of the members present. Action may be taken by any committee
without a meeting if all members thereof consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of such
committee.
<PAGE>
ARTICLE IV - OFFICERS
SECTION 1. GENERALLY.
The officers of the Corporation shall consist of a Chairman of
the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer
and such other officers as may from time to time be appointed by the Board of
Directors. officers shall. be elected by the Board of Directors. Each officer
shall hold office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. Any number of offices may be held by
the same person.
SECTION 2. CHAIRMAN OF THE BOARD.
The Chairman of the Board of Directors shall be the chief
executive officer of the Corporation. He or she shall preside at all meetings of
the Board of Directors and all meetings of stockholders. Subject to the
provisions of these By-Laws and to the discretion of the Board of Directors, he
or she shall have the responsibility for the general management and control of
the business and affairs of the Corporation and shall perform all duties which
are commonly incident to the office of chief executive officer or which are
delegated to him or her by the Board of Directors. The Chairman of the Board
shall be a member of the Board of Directors of the Corporation. He or she shall
have power to sign all stock certificates, contracts and other instruments of
the Corporation which are authorized.
SECTION 3. PRESIDENT.
The President shall be the chief operating officer of the
Corporation. Subject to the provisions of these By-Laws and to the direction of
the Board of Directors, he or she shall have the responsibility for the general
management and control of the operating divisions of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of chief operating officer or which are delegated to him or her by the Board of
Directors or the Chairman of the Board. He or she shall have power to sign all
stock certificates, contracts and other instruments of the Corporation which are
authorized and shall have general supervision and direction of all of the other
officers, employees and agents of the Corporation.
<PAGE>
SECTION 4. VICE PRESIDENT.
Each Vice President shall have such powers and duties as may
be delegated to him or her by the Board of Directors. One Vice President shall
be designated by the Board to perform the duties and exercise the powers of the
President in the event of the President's absence or disability.
SECTION 5. TREASURER.
The Treasurer shall have the responsibility for maintaining
the financial records of the Corporation. He or she shall make such
disbursements of the funds of the Corporation as are authorized and shall render
from time to time an account of all such transactions and of the financial
condition of the Corporation. The Treasurer shall also perform such other duties
as the Board of Directors may from time to time prescribe.
SECTION 6. SECRETARY.
The Secretary shall issue all authorized notices for, and
shall keep minutes of, all meetings of the stockholders and the Board of
Directors. He or she shall have charge of the corporate books and shall perform
such other duties as the Board of Directors may from time to time prescribe.
SECTION 7. DELEGATION OF AUTHORITY.
The Board of Directors may from time to time delegate the
powers or duties of any officer to any other officers or agents, notwithstanding
any provision hereof.
SECTION 8. REMOVAL.
Any officer of the Corporation may be removed at any time,
with or without cause, by the Board of Directors.
SECTION 9. ACTION WITH RESPECT TO SECURITIES OF OTHER
CORPORATIONS.
Unless otherwise directed by the Board of Directors, the
Chairman of the Board, the President or any officer of the Corporation
authorized by the Chairman of the Board or the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other corporation.
<PAGE>
ARTICLE V - STOCK
SECTION 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed
by, or in the name of the Corporation by, the President or a Vice President,
and by the Secretary or an Assistant Secretary, or the Treasurer or an
Assistant Treasurer, certifying the number of shares owned by him or her. Any
or all of the signatures on the certificate may be facsimile.
SECTION 2. TRANSFERS OF STOCK.
Transfers of stock shall be made only upon the transfer books
of the Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-Laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE.
In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders, or to receive
payment of any dividend or other distribution or allotment of any rights or to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted and which record date shall not be
more than sixty nor less than ten days before the date of any meeting of
stockholders, nor more than sixty days prior to the time for such other action
as hereinbefore described; provided, however, that if no record date is fixed by
the Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stock holders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held, and, for determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of rights or to
exercise any rights of change, conversion or exchange of stock or for any other
purpose, the record date shall be at the close of business on the day on which
the Board of Directors adopts a resolution relating thereto.
<PAGE>
A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall be not more than ten days after the date upon which the
resolution fixing the record date is adopted. If no record date has been fixed
by the Board of Directors and no prior action by the Board of Directors is
required by the Delaware General Corporation Law, the record date shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation in the manner prescribed by
Article I, Section 9 hereof. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by the Delaware
General Corporation Law with respect to the proposed action by written consent
of stockholders, the record date for determining stockholders entitled to
consent corporate action in writing shall be at the close of business on the day
on which the Board of Directors adopts the resolution taking such prior action.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any
certificate of stock, another may be issued in its place pursuant to such
regulations as the Board of Directors may establish concerning proof of such
loss, theft or destruction and concerning the giving of a satisfactory bond or
bonds of indemnity.
SECTION 5. REGULATIONS.
The issue, transfer, conversion and registration of
certificates of stock shall be governed by such other regulations as the Board
of Directors may establish.
ARTICLE VI - NOTICES
SECTION 1. NOTICES.
Except as otherwise specifically provided herein or required
by law, all notices required to be given to any stockholder, director, officer,
employee or agent shall be in writing and may in every instance by effectively
given by hand delivery to the recipient thereof, by depositing such notice in
the mails, postage paid, or by sending such notice by prepaid telegram or
mailgram. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram, shall be the time of the giving of the notice.
<PAGE>
SECTION 2. WAIVERS.
A written waiver of any notice, signed by a stockholder,
director, officer, employee or agent, whether before or after the time of the
event for which notice is to be given, shall be deemed equivalent to the notice
required to be given to such stockholder, director, officer, employee or agent.
Neither the business nor the purpose of any meeting need be specified in such a
waiver.
ARTICLE VII - MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these By-Laws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board of Directors or a committee thereof.
SECTION 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal, containing
the name of the Corporation, which seal shall be in the charge of the Secretary.
If and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by an Assistant
Secretary or Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the
Board of Directors, and each officer of the Corporation shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or committees of the Board of Directors so designated, or
by any other person as to matters the director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
<PAGE>
SECTION 4. FISCAL YEAR.
The fiscal year of the Corporation shall be as fixed by the
Board of Directors.
SECTION 5. TIME PERIODS.
In applying any provision of these By-Laws which require that
an act be done or not done a specified number of days prior to an event or that
an act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
SECTION 6. PLACE OF BUSINESS.
The principal place of business of the Corporation shall be
1515 Locust Street, Philadelphia, Pennsylvania or such other location that in
the determination of the Board of Directors is advantageous to the Corporation.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. RIGHT TO INDEMNIFICATION.
Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director or an
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 3 hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
<PAGE>
SECTION 2. RIGHT TO ADVANCEMENT OF EXPENSES.
The right to indemnification conferred in Section 1 of this
Article shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires an advancement of expenses incurred by
an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) such
advancement of expenses shall be made only upon delivery to the Corporation of
an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under this Section or otherwise. The rights
to indemnification and to the advancement of expenses conferred in Sections 1
and 2 of this Article shall be contract rights and such rights shall continue as
to an indemnitee who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators.
SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT.
If a claim under Section 1 or 2 of this Article is not paid in
full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article or otherwise shall be on the Corporation.
<PAGE>
SECTION 4. NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification and to the advancement of
expenses conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, By-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
SECTION 5. INSURANCE.
The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SECTION 6. INDEMNIFICATION OF EMPLOYEES OF THE
CORPORATION.
Except to the extent that rights to indemnification and
advancement of expenses of employees of the Corporation may be required by any
statute, the Certificate of Incorporation, this Article VIII or any other
By-Law, agreement, vote of stockholders or disinterested directors or otherwise,
the Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee of the Corporation to the fullest extent of the provisions of this
Article with respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
<PAGE>
ARTICLE IX - AMENDMENTS
These By-laws may be amended or repealed by the Board of
Directors at any meeting or by the stockholders at any meeting.
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") made and entered into as of March
12, 1998 by and between Wall Street Records, Inc. formed under the laws of New
Jersey (the "Company") having an office at 1080 Delaware Avenue, Philadelphia,
Pennsylvania and Joseph M. Marrone, Jr., residing at 3 Brookwood Road, Mount
Laurel, New Jersey 08054 (the "Executive").
INTRODUCTION
The Company desires to employ Executive. The parties desire to enter
into an employment agreement and to set forth herein the terms and conditions of
the Executive's employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and the mutual benefits to be derived herefrom, the Company and
the Executive agree as follows:
1. Employment.
a. Duties. The Company shall employ the Executive, on the
terms set forth in this Agreement, to procure and promote musical products of
the Company and in connection therewith Executive shall oversee, develop,
produce and manage music products for the Company and participate and oversee
all entertainment projects of the Company. The Executive accepts such employment
with the Company. For no additional consideration Executive agrees to act as an
executive of the Company and Wall Street Records, Inc., a Delaware corporation,
the parent of the Company and provide services to other affiliates of the
Company at such times and places as requested by the Company including Wall
Street Records, LLC (the "LLC"). Unless otherwise indicated by the context the
term "Company" shall include affiliates of the Company for which Executive is
providing services
b. Place of Performance. In connection with his employment by
the Company, the Executive shall be based at the Company's principal place of
business in the Philadelphia Pennsylvania area, except when required for travel
on Company business from time to time.
c. Exclusivity. Executive shall perform its duties (as defined
herein) on a full time exclusive basis.
2. Term. The Executive's employment under this Agreement shall commence
as of the date hereof (the "Commencement Date") and shall, unless sooner
terminated in accordance with the provisions hereof, continue uninterrupted
until March 29, 2001 ("Term"). As used herein "Year" shall refer to a twelve
consecutive month period during the term ending March 29th. Unless notice of
nonrenewal is given by either party at least thirty (30) days prior to the end
of the Term or prior to the end of any Year of the term the Term of this
Agreement shall be automatically extended for an additional period of one year.
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3. Compensation.
a. Base Salary. During the first Year the Term, the Executive
shall be entitled to receive an annual compensation of two hundred thousand
Dollars ($200,000) payable in equal installments at such times as the Company
customarily pays its other executive officers (but in no event less often than
monthly). Each year after the first year Base Salary shall be increased by the
Board of Directors based on performance of the Company in the prior year. The
Base Compensation shall not be less than $200,000 in any Year.
b. Benefits. During the Term, the Executive shall be entitled
to all employee benefits generally offered by the Company to its executive
officers and key management employees including but not limited to life
insurance, disability insurance, health insurance, pension plans and any
"salaries" plans (e.g. 401K). In addition Executive will receive a monthly
automobile allowance to be determined by mutual agreement.
c. Discretionary Bonus. Each year the Board of Directors of
the Company shall review the Company's performance in the prior year and may in
its decretion award executive a bonus.
4. Reimbursement of Expenses. The Executive shall be reimbursed for all
items of travel, entertainment and miscellaneous expenses that the Executive
reasonably incurs in connection with the performance of his duties hereunder,
provided the Executive submits to the Company such statements and other evidence
supporting said expenses as the Company may reasonably require.
5. Vacation. The Executive shall be entitled to not less than four (4)
weeks of paid vacation in any calendar year.
6. Termination of Employment.
a. Death or Total Disability. In the event of the death of the
Executive during the Term, this Agreement shall terminate as of the date of the
Executive's death. In the event that Executive is incapacitated or prevented
from fully performing thereunder by reason of mental, physical or other
disability of the Executive for three (3) consecutive months during any
consecutive nine (9) month period during the Term or nine (9) months in the
aggregate, the Company shall have the right to terminate this Agreement by
giving the Executive forty-five (45) days prior written notice thereof, and upon
the expiration of such forty-five (45) day period, the Executive's employment
under this Agreement shall terminate. If the Executive shall resume his duties
within thirty (30) days after receipt of such a notice of termination and
continue to perform such duties for four (4) consecutive weeks thereafter, this
Agreement shall continue in full force and effect, without any reduction in Base
Salary and other benefits, and the notice of termination shall be considered
null and void and of no effect. Upon termination of this Agreement under this
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Paragraph 6(a), the Company shall have no further obligations or liabilities
under this Agreement, except to pay to the Executive's estate or the Executive,
as the case may be, (i) accrued and unpaid salary, expenses reimbursable in
accordance with Paragraph 4 above, (ii) any amounts due under any Company
benefit, welfare or pension plan and; (iii) any accrued bonuses.
b. Discharge for Cause. The Company may discharge the
Executive for "Cause" upon notice and thereby immediately terminate his
employment under this Agreement. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment if the Executive, in
the reasonable good faith judgment of the Company, (i) materially breaches any
of his agreements, duties or material obligations under this Agreement and has
not cured such breach or commenced in good faith to correct such breach within
thirty (30) days after notice; (ii) embezzles or converts to his own use any
funds of the Company or any client or customer of the Company; (iii) converts to
his own use or unreasonably destroys, intentionally, any property of the
Company, without the Company's consent or ; (iv) is adjudicated (non-appealable)
an incompetent
c. Termination by Executive. Executive may terminate this
Agreement for the failure by the Company to comply with the material provisions
of this Agreement which failure is not cured within thirty (30) days after
notice ("Good Reason").
d. Termination Dispute. All disputes respecting termination
pursuant to this paragraph 6 shall be resolved by arbitration in accordance with
paragraph 7.
e. No Mitigation. The Executive shall not be required to
mitigate the amount of any payment or benefit provided for in this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for in this Agreement be reduced by any compensation earned by the
Executive as the result of his employment by another employer.
7. Arbitration
(a) Any and all other disputes, controversies and claims
arising out of or relating to this Agreement, or with respect to the
interpretation of this Agreement, or the rights or obligations of the parties
and their successors and permitted assigns, whether by operation of law or
otherwise, shall be settled and determined by arbitration in Philadelphia,
Pennsylvania pursuant to the then existing rules of the American Arbitration
Association ("AAA") for commercial arbitration.
(b) Any proceeding referred to in paragraph 7(a) or (b) shall
also determine Executive's entitlement to legal fees as well as all other
disputes between the parties relating to Executive's employment.
(c) The parties covenant and agree that the decision of the
AAA shall be final and binding and hereby waive their right to appeal therefrom.
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8. Indemnity. The Company shall indemnify and hold Executive harmless
from all liability to the full extent permitted by the laws of its state of
incorporation.
9. Miscellaneous.
a. Notices. Any notice, demand or communication required or
permitted under this Agreement shall be in writing and shall either be
hand-delivered to the other party or mailed to the addresses set forth below by
registered or certified mail, return receipt requested or sent by overnight
express mail or courier or facsimile to such address, if a party has a facsimile
machine. Notice shall be deemed to have been given and received when so
hand-delivered or after three (3) business days when so deposited in the U.S.
Mail, or when transmitted and received by facsimile or sent by express mail
properly addressed to the other party. The addresses are:
To the Company:
Wall Street Records, Inc.
1080 Delaware Avenue
Philadelphia, Pennsylvania 19121
Copy to:
Parker Duryee Rosoff & Haft, P.C.
529 Fifth Avenue
New York, New York 10017-4608
Attention: Michael D. DiGiovanna, Esq.
To the Executive:
Mr. Joseph M. Marrone, Jr.
3 Brookwood Road
Mount Laurel, New Jersey 08054
Copy to:
Davis & Shapiro, LLP
689 Fifth Avenue
New York, New York 10022
Attention: Fred Davis, Esq.
The foregoing addresses may be changed at any time by notice given in the manner
herein provided.
b. Integration; Modification. This Agreement constitutes the
entire understanding and agreement between the Company and the Executive
regarding its subject matter
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and supersedes all prior negotiations and agreements, whether oral or written,
between them with respect to its subject matter. This Agreement may not be
modified except by a written agreement signed by the Executive and a duly
authorized officer of the Company.
c. Enforceability. If any provision of this Agreement shall be
invalid or unenforceable, in whole or in part, such provision shall be deemed to
be modified or restricted to the extent and in the manner necessary to render
the same valid and enforceable, or shall be deemed excised from this Agreement,
as the case may require, and this Agreement shall be construed and enforced to
the maximum extent permitted by law as if such provision had been originally
incorporated herein as so modified or restricted, or as if such provision had
not been originally incorporated herein, as the case may be.
d. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties, including and their respective heirs,
executors, successors and assigns, except that this Agreement may not be
assigned by the Executive.
e. Waiver of Breach. No waiver by either party of any
condition or of the breach by the other of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one (1) or more
instances shall be deemed or construed as a further or continuing waiver of any
such condition or breach or a waiver of any other condition, or the breach of
any other term or covenant set forth in this Agreement. Moreover, the failure of
either party to exercise any right hereunder shall not bar the later exercise
thereof with respect to other future breaches.
f. Governing Law. This Agreement shall be governed by the
internal laws of the State of New York.
g. Headings. The headings of the various sections and
paragraphs have been included herein for convenience only and shall not be
considered in interpreting this Agreement.
h. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
i. Due Authorization. The Company represents that all
corporate action required to authorize the execution, delivery and performance
of this Agreement has been duly taken.
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IN WITNESS WHEREOF, this Agreement has been executed by the Executive
and, on behalf of the Company, by its duly authorized officer on the day and
year first above written.
WALL STREET RECORDS INC.
By:
--------------------------------------
--------------------------------------
Joseph M. Marrone, Jr.
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EXHIBIT 10.2
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 28th day of July, 1999, by and between
SHERIDAN SQUARE ENTERTAINMENT, L.L.C. D/B/A ARTEMIS RECORDS, of 130 Fifth
Avenue, 7th Floor, New York, New York 10011 ("Distributor") and Antra Music
Group, Inc., d/b/a ANTRA RECORDS, of 1515 Locust Street, 4th Floor,
Philadelphia, Pennsylvania 19102 ("you").
1. TERM.
1.01. The term of this Agreement (the "Term"), with respect to an album
by Korupt and an album by either Rosco or by Korupt and Daz (each an "Applicable
Album" and, collectively, the "Applicable Albums"), all master recordings
contained on the Applicable Albums and all Records derived in their entirety
from any Applicable Album (collectively, "Related Records") shall be a period of
three (3) years commencing on the date hereof, and unless terminated or extended
as provided herein, ending on July 27, 2002.
1.02. You shall have the right to release (or license to third parties)
up to two (2) Master Recordings embodied on each of the Applicable Albums for
inclusion in compilation albums and/or soundtrack albums, provided that such
Master Recordings shall only be used by you or your licensee within nine (9)
months after such Master Recording has commenced being commercially distributed
hereunder.
1.03 As used herein, "Contract Year" shall mean the twelve month period
commencing on the date of the initial commercial release of an Applicable Album
and ending on the same day and month of the following year.
2. APPOINTMENT.
2.01. (a) You hereby appoint Distributor as your sole and exclusive
distributor of the Applicable Albums and Related Records through all channels
and methods of distribution now or hereafter known, including, but not limited
to, Normal Retail Channels, throughout the Territory, during the Term, and grant
Distributor the exclusive right and license to distribute and sell the
Applicable Albums and Related Records through such channels and methods in the
Territory during the Term.
(b) During the Term, neither you nor any Affiliate shall,
directly or indirectly, distribute the Applicable Albums or Related Records in
the Territory, or otherwise license, authorize or permit any other Person other
than Distributor to so distribute the Applicable Albums or Related Records.
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2.02. Notwithstanding anything to the contrary contained herein,
Distributor shall not be obligated to distribute (or, if distribution has
already commenced, may cease to distribute) any Applicable Album or Related
Record embodying any Recording or other material which, in Distributor's good
faith judgment: (i) infringes upon the rights of any other Person or is in
contravention of law or advocates illegal activity; (ii) constitutes a breach by
you of any warranty, representation or covenant contained herein; (iii)
denigrates a given race, religion, ethnic background or sexual orientation in a
manner not subject to excuse or explanation by virture of the fact that the
performer shares the same race, religion, ethnic background or sexual
orientation, or (iv) is rejected for distribution by RED Distribution, Inc.
(`RED") based on any of the foregoing criteria. If Distributor so elects not to
distribute (or to cease to distribute) a Record, it shall promptly notify you
and you shall have the right to distribute, or cause a third party to
distribute, such Record; provided, however, with respect to any Record which
Distributor elects not to distribute pursuant to clauses (i) or (ii) above,
prior to distributing or authorizing a third party to distribute such Record,
you shall first make a good faith effort to remove or modify the Recording or
other material in question in order to satisfy Distributor's objections, and you
shall re-submit such Record (as modified) to Distributor hereunder.
Distributor's distribution of a Record shall not constitute approval of or a
waiver with respect to the Recordings or other material embodied therein.
2.03. During the Term, Distributor shall have the right to publicly
perform, and to authorize the public performance of, the Recordings and Records
hereunder, for the purpose of promoting and marketing such Recordings and
Records.
3. DISTRIBUTOR'S SERVICES.
3.01. During the Term, Distributor will solicit and fulfill orders and
distribute Records on your behalf through Normal Retail Channels in the
Territory. Without limiting the generality of the foregoing, Distributor's
services shall include the following: billing and collecting from Distributor's
customers, warehousing of your inventory of Records, acceptance and processing
of returns of Records distributed hereunder and such other customary
distribution services, if any, as Distributor provides for its other distributed
labels.
3.02. Distributor will bear the credit risk for its customers, it being
agreed that the decision as to whether or not to extend credit to any customer
(and the amount of credit so extended) shall be determined by Distributor in its
sole discretion.
3.03. At your request, Distributor will administer coop advertising for
your Records hereunder up to an amount mutually approved by you and Distributor.
You hereby request and irrevocably authorize Distributor to pay third parties on
your behalf up to four (4%) percent of Gross Sales hereunder on coop advertising
for Records hereunder. You agree to pay Distributor for all costs incurred in
connection with such coop advertising.
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3.04. (a) Distributor shall accept and store at its (or its designee's)
warehouse(s) all Records ordered by Distributor for distribution hereunder. The
risk of loss due to obsolescense for such Records shall be yours. Distributor
shall not be responsible for inventory shrinkage of up to two (2%) percent of
the number of Records received in any year of the Term (determined on an overall
basis and not on a title-by-title basis). With respect to shrinkage in excess of
that amount, Distributor's liability shall be limited to the replacement cost of
such Records.
(b) Within twenty (20) days after Distributor's request, you
shall, at your sole cost, remove from Distributor's (or its designee's)
warehouses, or order the destruction of, any "surplus" Records (i.e., that
amount of Records in excess of Distributor's then-current generally applicable
retention policy). All Records so removed shall be defaced or otherwise marked
by you, at your expense, in a manner subject to Distributor's reasonable
approval in order to ensure that they are not returned to Distributor. If you do
not timely so remove surplus Records, you shall be deemed to have ordered the
destruction of such surplus, and Distributor may so destroy such Records, at
your sole cost.
(c) During the Term, you may, at your sole cost and expense
and no more than once in any twelve-month period, conduct your own physical
inventory of Records in Distributor's (or its designee's) warehouse(s). Any such
physical inventory shall be conducted on reasonable notice to Distributor and
during Distributor's regular business hours.
3.05. During the Term, Distributor will accept and process returns of
Records in accordance with its then-current policies and practices (which you
acknowledge may include the scrapping of certain Records, such as "single"
Records within twenty (20) days after giving you notice to remove such Records
from Distributor's (or its designees) warehouses at your sole cost). Following
the expiration or earlier termination of the Term, Distributor shall not be
obligated to accept or process returns of Records distributed hereunder or
otherwise. You shall at all times during and after the Term, remain solely
financially responsible for all returns of Records distributed hereunder.
3.06. Distributor shall furnish you with monthly sales and inventory
reports regarding your Records and such other periodic reports as Distributor
generally makes available to its other distributed labels and to its own
label(s).
3.07. Intentionally deleted
3.08. You shall at all times retain title to the Records delivered
hereunder until sold. As between you and Distributor, all Recordings, artwork,
trademarks (other than Distributor's trademarks) and other material embodied on
or in the Records, including the copyrights therein, shall remain your property.
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3.09. Distributor shall have the right to cause some or all of its
services hereunder to be performed on its behalf by one or more third parties
(each, a "Subdistributor"). You hereby acknowledge that, as of the commencement
of the Term, certain of Distributor's services (including, without limitation,
fulfillment of orders, billing and collecting) are being performed on its behalf
by RED Distribution, Inc.
4. YOUR OBLIGATIONS.
4.01. You solely shall be responsible for, and shall pay all costs in
connection with, each of the following:
(a) The creation and production of all Recordings embodied in
the Records and all artwork and other materials embodied in the packaging for
all Records, and the acquisition of all rights in connection therewith.
(b) The securing, in writing, of all necessary licenses,
consents and permissions required for the distribution of Records hereunder,
including, without limitation, from recording artists, producers, other
performers, music publishers, unions and guilds, and other Persons rendering
services or granting rights in connection with the Recordings and the Records.
(c) The marketing, advertisement and promotion of the Records
and the Recordings including, without limitation, the payment of independent
promotion fees and costs related to so-called "street teams", the preparation of
all materials used in connection with such activities, and special programs in
connection with the Records hereunder.
(d) The payment of all property taxes relating to the Records,
where applicable, and any sales, use, excise, VAT or similar taxes which may now
be or hereafter become applicable to the services rendered by Distributor
hereunder or to the transactions contemplated by this Agreement. If any such
taxes are assessed to Distributor, then the amount thereof shall be added to the
charges to be paid by you.
(e) The payment and accounting of all advances and royalties
with respect to the Records hereunder.
(f) The production of any and all audiovisual recordings
related to the Records.
4.02. You will prepare and submit in a timely manner, from
time-to-time, material for inclusion in Distributor's sales publications.
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4.03. You shall, at your sole cost and expense, procure from a
nationally recognized insurance carrier and maintain in full force and effect at
all times during the Term a liability (errors and omissions) insurance policy
having a limit of at least $1,000,000 per claim and $3,000,000 in the aggregate,
covering claims arising in connection with Distributor's distribution of Records
hereunder. Such policy shall cover claims, regardless of when raised, based on
occurrences or claims made relating in any way to the Records distributed
hereunder. You shall cause Distributor to be named as an additional insured
under such policy. You shall deliver to Distributor upon execution of this
Agreement evidence satisfactory to Distributor of such coverage in the form of a
valid insurance certificate. Your failure to obtain or maintain such a policy
shall constitute a material breach hereof.
4.04. If you are not a member of the Recording Industry Association of
America ("RIAA") throughout the Term hereof and Distributor is required to pay
dues to the RIAA (or Distributor is charged by another member for a share of
such other member's dues) based on sales of the Records, then Distributor shall
have the right to charge you with a proportionate share of Distributor's dues
(or its share of such other member's dues).
5. SALE OF RECORDS.
5.01. (a) Subject to Distributor's reasonable approval, you shall
determine the retail list price (or, if with respect to a particular
configuration, Distributor does not maintain a retail list price, then the
wholesale list price) category (the "List Price Category") for each Record from
among the List Price Categories then being offered by Distributor to its
customers. You may change the List Price Category for a particular Record on at
least ninety (90) days notice to Distributor (which change shall be subject to
Distributor's reasonable approval). With respect to Records for which
Distributor does not have a standard List Price Category (such as a "box set"),
you and Distributor shall mutually determine the List Price Category.
(b) Distributor and you shall mutually determine the selling
price of Records to its customers, based upon the designated List Price
Category, which selling price shall be consistent with the selling price for
other records distributed by Distributor in the same List Price Category.
5.02. Distributor shall determine the terms of sale of Records to its
customers, including, without limitation, cash discounts, discounts and free
goods, credit and dating, returns policy and advertising allowances. Without
limiting the generality of the foregoing, Distributor shall have the right to
sell Records at such discounts as Distributor and you shall mutually determine.
Distributor shall have the right to change its discount policies from time to
time, but it shall advise you of any changes. In addition to any regular,
"standard" discount programs, Distributor shall have the right, with your
approval (such approval not to be unreasonably withheld), to offer non-standard
discount programs of limited duration, but the dollar amount of discounts
pursuant to such a discount program shall not be deducted in calculating "Net
Sales" unless you have consented to such program.
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5.03. If you and Distributor agree to extend to Distributor's customers
any "special dating" program (i.e., the granting of payment terms beyond
Distributor's then-current terms), Distributor shall charge you for the cost
thereof (which cost shall be equal to interest accrued on the aggregate Gross
Sales subject to the special dating at the rate of one (1%) percent above the
prime rate of interest as announced by Citibank, N.A. in New York City, for the
period of time that Distributor's standard payment terms are extended [the
"Interest Rate"]).
5.04. You and Distributor shall mutually determine the release date of
each title hereunder.
5.05. (a) You shall have the right, by notice to Distributor, to delete
Records from your catalog in accordance with Distributor's standard policies
relating to deletions. Distributor shall cease manufacturing any Records which
have been deleted. Any remaining inventory of Records that have been deleted may
be scrapped or sold by you as "closeouts" or "cutouts" only, and all such
Records shall be defaced at your expense in order to prevent their return to
Distributor. All costs incurred in connection with such scrapping, defacing
and/or sale shall be your sole responsibility. If you request and Distributor
agrees, Distributor shall arrange for the sale of such "closeouts" or "cutouts"
on your behalf, and Distributor shall charge you its standard fees and charges
therefor.
(b) Upon your deletion of a Record from your catalog,
Distributor may notify customers that they have sixty (60) days (or such longer
period of time as Distributor may elect) to return such deleted Records for
credit; provided, Distributor may, if it so elects, continue to accept such
returns after such date.
(c) At any time after the date of deletion of a particular
title, Distributor may, by notice to you, require you, at your sole cost, to
remove from Distributor's (or its designee's) warehouses, or order the
destruction of, your remaining inventory of such deleted Records. All Records so
removed shall be defaced or otherwise marked by you, at your expense, in a
manner subject to Distributor's reasonable approval in order to ensure that they
are not returned to Distributor. If you do not timely so remove such Records,
you shall be deemed to have ordered their destruction, and Distributor may so
destroy such Records, at your sole cost.
(d) This paragraph 5.05 will not apply: (1) to any Record
which has not been commercially distributed hereunder for at least one (1) year;
and (2) to any Record which in the six month period immediately preceding your
notice to Distributor to delete such Record from distribution has "soundscanned"
(as that term is generally understood in the record industry) at least 3,000
units.
5.06. You acknowledge that the sale and distribution of Records is
speculative and you agree that, subject to the other provisions of this
Agreement, the judgment of Distributor with respect to matters affecting the
sale and distribution of Records will be binding upon you. Distributor has not
made, and does not hereby make, any representation or warranty with respect to
the quantities of Records that may be sold or returned, or the proceeds that may
be derived therefrom. You shall not make any claim, nor shall any liability be
imposed upon Distributor based upon any claim, that more sales could or should
have been made than were made by Distributor, or that returns were excessive.
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6. DISTRIBUTOR'S FEES.
6.01. In respect of Records distributed hereunder, you shall pay to
Distributor (and Distributor may retain for its own benefit from proceeds
hereunder) a distribution fee (the "Distribution Fee") equal to twenty-five
(25%) percent of Net Sales. Notwithstanding anything in the preceding sentence,
on a Contract Year by Contract Year basis, the Distribution Fee with respect to
those cumulative Net Sales in any such Contract Year that are in excess of Ten
Million ($10,000,000) Dollars shall be twenty-three (23%) percent of those Net
Sales rather than twenty-five (25%) percent, and the Distribution Fee with
respect to those cumulative Net Sales in any such Contract Year that are in
excess of Twenty Million ($20,000,000) Dollars shall be twenty-one (21%) percent
of those Net Sales rather than twenty-three (23%) percent.
6.02. If Distributor performs additional services related to the
distribution of your Records ( including, without limitation, returns handling,
scrapping, special mailing, the distribution of your promotional copies of
Records to radio stations, reviewers and other customary recipients and the
distribution of merchandising material to retail customers, etc., but excluding
those services referred to in Article 16 below), you shall pay Distributor's
actual out-of-pocket costs incurred in connection therewith (such as freight,
postage, manufacturing costs, etc.). Subject to paragraph 16.01, such services
are provided by a Subdistributor (whether because a Subdistributor does such
services for Distributor for Distributor's Records and/or Distributor does not
customarily engage in rendering such services) and if such Subdistributor
charges a separate fee for such service, then the amount which you are required
to pay to Distributor therefor shall be equal to the amount charged to
Distributor by such Subdistributor, in lieu of any other fee. The Distributor
warrants and represents that such fees are customary and reasonable. (An example
of the fees charged by RED to Distributor is) annexed hereto as Exhibit A.)
6.03. Notwithstanding the foregoing, you shall also pay to Distributor
a "returns handling" charge equal to the "returns handling" charge payable by
Distributor to RED Distribution, Inc. ("RED") with respect to the Records;
provided, Distributor shall have the right from time to time, on notice to you,
to increase the "returns handling" charge payable by you upon RED's increase to
Distributor of such "returns handling" charge.
6.04. You shall be solely responsible for paying all "Manufacturing
Charges" in connection with the manufacture of your Records. As used herein
"Manufacturing Charges" include: (a) the actual prices paid by Distributor to
its manufacturers of your Records as well as any freight charges and any service
charges incurred by Distributor (e.g. shrinkwrapping, stickering, inserts,
etc.), collectively the "Fee"; and (b) interest on the Fee from the date the Fee
is disbursed by Distributor, at a rate per annum equal to the Interest Rate (as
defined in paragraph 5.03 above), until the Fee is paid. You shall pay
Distributor all Manufacturing Charges within ninety (90) business days after
your receipt of Distributor's invoice therefore. If you fail to so pay, then,
without limiting its rights and remedies, Distributor shall have the right to
deduct the outstanding amounts from any monies otherwise due you hereunder.
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7. PAYMENTS BY DISTRIBUTOR/ACCOUNTINGS.
7.01. (a) Distributor will account to you for Records sold hereunder no
later than ten (10) business days after Distributor's receipt of the relevant
accounting from RED. Each statement shall set forth in reasonable detail the
amount of Gross Sales, Net Sales, returns, reserves, Distributor's Distribution
Fee and other fees and charges which Distributor has deducted, as well as the
amount of Net Proceeds payable to you. In general net proceeds are payable by
RED to Distributor ninety (90) days after the last day of the calendar month
during which the record(s) from which such net proceeds are derived are shipped
to customer.
(b) Distributor, RED, or a third party which has been approved
in writing by you, shall pay you, within ten (10) business days of Distributor's
receipt of monies from RED, the amount of "Net Proceeds" shown to be due on each
such accounting statement rendered by Distributor to you. As used herein, "Net
Proceeds" shall mean all Net Sales less each of the following: (a) Distributor's
Distribution Fee; (b) reserves in accordance with Article 8 below; (c) all
returns handling and other service fees and charges which Distributor is
entitled to charge or which you are required to pay hereunder; and (d) any and
all other costs, fees or charges which Distributor is entitled to charge or
which you are required to pay hereunder, including, without limitation,
manufacturing charges, the cost of coop advertising and retail marketing (to the
extent not placed and paid for by you), the cost of extended dating, scrapping
and defacing charges, etc.
7.02. With respect to any accounting period as to which there is a net
amount due from you to Distributor (i.e., Net Proceeds are a negative amount),
you shall promptly pay that amount to Distributor after receiving notice
thereof. Your failure to make such payment will be deemed a material breach of
this agreement.
7.03. Notwithstanding anything which may be to the contrary contained
herein and without limiting Distributor's rights and remedies, Distributor shall
have the right at all times to offset and deduct from any Net Proceeds or other
sums due you hereunder any and all charges payable by you, fees payable by you
and other amounts which you are required to pay to Distributor pursuant to this
Agreement.
7.04. All statements rendered by Distributor hereunder shall be
conclusively binding upon you and not subject to objection by you unless
specific objection in writing, stating the basis thereof, is given to
Distributor within two (2) years from the date rendered. You will not have the
right to sue Distributor in connection with any accounting, or to sue
Distributor for any monies due in respect of the period an accounting covers,
unless you commence such suit in a court of competent jurisdiction within three
(3) years after the date such accounting was rendered.
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7.05. You shall have the right at your own expense to commence an audit
of Distributor's books and records with regard to statements rendered hereunder
but only within one (1) year after such statement was rendered. Your audit shall
be conducted on no less than thirty (30) days notice, during Distributor's
regular business hours, at the place where such books and records are regularly
maintained and only once with respect to a particular statement. You may not
conduct more than one (1) such audit in any twelve-month period, and you may not
commence an audit between November 1 and February 28 of any year. Your audit
shall be conducted by an independent Certified Public Accountant who is not then
engaged in an outstanding examination of Distributor's books and records on
behalf of another Person. Such Certified Public Accountant will act only under a
letter of confidentiality that provides that any information derived from such
audit or examination will not be knowingly released, divulged or published to
any person, firm or corporation, other than to you or to a judicial or
administrative body in connection with any proceeding relating to this
Agreement.
8. RESERVES.
8.01. Distributor shall have the right to establish and maintain a
reserve against returns, credits and rebates in the same manner that RED
establishes and maintains reserves pursuant to paragraph 4(d) of the agreement
dated July 1, 1999 between Distributor and RED, which provision is attached
hereto as Exhibit "B" and incorporated herein by referenced.
9. TERMINATION/POST-TERM PROCEDURES.
9.01. In the event of (a) your breach of any of your material
representations, warranties, covenants or obligations hereunder; or (b) your
dissolution, the liquidation of your assets, the filing of a petition in
bankruptcy or insolvency or for an arrangement or reorganization by, for or
against you, the appointment of a receiver or a trustee for all or a portion of
your property, or in the event you shall make an assignment for the benefit of
creditors or commit any act for, or in, bankruptcy or become insolvent, then, in
addition to any other remedies which may be available: (i) Distributor shall
have the right and option to terminate the Term hereof upon notice to you,
and/or (ii) all outstanding amounts owed by you to Distributor hereunder or
otherwise in connection with this Agreement (including, without limitation, any
advances or loans) which are not otherwise yet due and payable shall, upon
notice to you, be accelerated and shall immediately become due and payable by
you to Distributor.
9.02. Upon the expiration or termination of the Term, Distributor may
continue to accept returns from its customers but is not obligated to do so. You
shall continue to be financially responsible for all returns of Records accepted
by Distributor.
9.03. Within fifteen (15) days following the expiration or termination
of the Term, you shall remove all inventory of Records from Distributor's (or
its designee's) warehouses (and you shall thereafter remove subsequently
returned Records within five (5) days following Distributor's notice to you
thereof). All Records so removed shall be defaced or otherwise marked by you, at
your expense, in a manner subject to Distributor's reasonable approval in order
to ensure that they are not returned to Distributor. Distributor shall have the
right to scrap any Records not timely removed by you, and you shall be
responsible for all costs in connection therewith.
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9.04. You shall use reasonable efforts to cause your next distributor
of Records to accept from Distributor's customers all returns of Records
hereunder and to issue full credit to such customers, provided that absent such
an agreement Distributor may hold back monies otherwise due you on the
termination of this agreement, in a commercially reasonable amount, to satisfy
itself that it will be compensated for all returns of Records.
10. WARRANTIES, REPRESENTATIONS AND INDEMNIFICATION.
10.01. You hereby warrant and represent that:
(a) You are a corporation duly organized, validly existing and
in good standing under the laws of the State of New Jersey. You have the full
right, power and authority to enter into and fully perform this Agreement and to
grant the rights herein granted.
(b) Throughout the Term hereof, you shall continue to function
as a record label, to sign new recording artists and to record, release and
market new recordings in a manner and at a level comparable to that existing at
the time of execution hereof and during the one year period prior thereto.
(c) The Material embodied in the Records, the Recordings and
the packaging therefor and all other items supplied by you for use by
Distributor hereunder will not violate any law or infringe upon the rights of
any other Person. As used herein, "Material" shall mean and include, without
limitation, all Recordings and other recorded material, all musical
compositions, names, logos, trademarks, service marks and trade names,
biographical information, photographs and likenesses, artwork and packaging
materials, and all other musical, dramatic, artistic and literary materials,
ideas and intellectual properties.
(d) All costs of producing the Recordings have been or will be
paid in full prior to the release hereunder of Records derived therefrom. All
recording artists, performers, producers and other Persons rendering services or
granting rights in respect of the Recordings were free to render such services
or grant such rights and have been or will timely be paid all sums due them.
(e) You have, or prior to release hereunder shall have, and
shall at all times thereafter continue to have in effect a valid and enforceable
grant of rights or license for the Territory with respect to each Recording,
each musical composition and all other copyrightable materials embodied in or on
the Records (including, without limitation, mechanical licenses for all musical
compositions and licenses for so-called "samples"). You shall timely pay all
royalties and other compensation due under such licenses. At Distributor's
request, you shall furnish Distributor with copies of any or all of such
licenses.
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(f) All Recordings have been or will be made in accordance
with the rules and regulations of all unions (if any) having jurisdiction over
the recording thereof. Without limiting the generality of the foregoing, you
shall pay all sums required to be paid to any such unions or guilds, or any
trustee pursuant to any such union or guild agreement (including any so-called
"per record" royalties payable in connection with AFM and AFTRA).
(g) Distributor will not be required to make any payments of
any nature for, or in connection with, the acquisition, exercise or exploitation
of the rights granted to Distributor hereunder, except as specifically provided
herein.
(h) You have not sold, assigned, transferred, leased, conveyed
or granted a security interest in, or otherwise disposed of, and will not sell,
assign, transfer, lease, convey or grant a security interest in, or otherwise
dispose of, the Recordings or the Records hereunder, or any of them, adverse to
or derogatory of the rights granted to Distributor herein, and you have not
authorized and will not authorize any other Person to distribute Records in the
Territory in contravention of Distributor's exclusive rights hereunder.
(i) There presently are no liens, levies, judgments,
garnishments, encumbrances (collectively, "Liens"), claims, demands, disputes or
litigation or other judicial or regulatory proceedings pending or threatened
(collectively, "Claims") upon, concerning or affecting the Recordings or the
Records, or on any of your other property (except for Liens or Claims relating
to office furniture and equipment), and there shall be no such Claims or Liens
during the Term. If any Lien or Claim shall arise during the Term, you shall
take whatever steps are necessary to defend any such Claim or eliminate any such
Lien.
10.02. You agree to and do hereby indemnify, save and hold Distributor,
its affiliates, officers, agents, employees and Subdistributors harmless from
and against any and all loss, damages, liabilities, costs and expenses
(including court costs and reasonable attorneys' fees) arising out of or
connected with any material breach or alleged material breach of this Agreement
or any claim, if reduced to a final, non-appealable judgment, or a settlement
entered into with your consent, that is inconsistent with any of the warranties,
representations or covenants made by you in this Agreement. You agree to
reimburse Distributor on demand for any payment made or incurred by Distributor
with respect to the foregoing sentence and, without limiting Distributor's
rights or remedies, Distributor may deduct any amount not so reimbursed by you
from any monies Distributor owes you. Pending the determination of any claim in
respect of which Distributor is entitled to be indemnified, Distributor may
withhold monies otherwise payable to you hereunder in an amount not to exceed
your potential liability to Distributor, which amount shall be mutually
determined by you and Distributor subject to the following. In the event you and
Distributor cannot agree on the amount to be withheld Distributor will, in no
event, withhold more than seventy-five thousand dollars ($75,000) without court
approval or the decision of a mutually approved arbitrator. Distributor shall
give you prompt notice of any written claim as to which the foregoing
indemnification applies and you shall have the right to participate with counsel
of your own choice at your own expense.
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11. FORCE MAJEURE.
11.01. If because of an act of God; inevitable accident; fire; lockout;
strike or other labor dispute; riot or civil commotion; act of public enemy;
enactment, rule, order or act of any government or governmental instrumentality;
failure of technical facilities; failure or delay of transportation facilities;
shortage of raw materials; or other cause not reasonably within your or
Distributor's control (a "Force Majeure Event"), either party to this Agreement
is materially hampered in the performance of its obligations under this
Agreement or its normal business operations are materially delayed or become
impossible or commercially impracticable (the "Force Majeure Party"), then the
other party shall have the option, by giving the Force Majeure Party, to suspend
its obligations hereunder for the duration of any such contingency.
12. SECURITY INTEREST.
12.01. To secure the prompt and complete payment and performance of any
and all present and future indebtedness, obligations and liabilities of you to
Distributor pursuant to this Agreement (the "Obligations"), you hereby grant to
Distributor a first-priority security interest (the "Security Interest") in and
to each of the following, whether now owned or hereafter acquired (collectively,
the "Collateral"): (a) all existing and after-acquired inventory of the
Applicable Albums and Related Records (including finished goods and components),
wherever located, now or hereafter held by you, Distributor or a Subdistributor
or other Person; (b) all production parts and components owned by you that are
used or intended for use in the manufacture of the Applicable Albums and Related
Records or packaging; (c) all accounts receivables due from Distributor to you
under this Agreement; and (d) all proceeds and products of any or all of the
foregoing. Distributor shall be entitled to all right and remedies of a secured
party under the Uniform Commercial Code as in effect from time to time in the
State of New York or any other applicable law or jurisdiction.
12.02. You warrant, represent and covenant that you have not granted
and will not grant any rights to any Person other than Distributor that would be
superior to the rights granted to Distributor hereunder with respect to the
Collateral. Without Distributor's prior written consent, you shall not sell,
transfer, lease or otherwise dispose of any of the Collateral, other than
Distributor's sale of Records in the ordinary course.
12.03. You agree to execute and deliver to Distributor all financing
statements and/or other documents (including UCC-1 forms) that Distributor
reasonably requires to protect its interest in the Collateral. If you fail to so
execute and deliver any such document within ten (10) business days after your
receipt, then Distributor may execute such documents in your name, and you
hereby irrevocably grant to Distributor a limited power-of-attorney solely for
such purpose. Distributor shall have the right to file such documents in any
jurisdictions Distributor deems appropriate. The Security Interest shall
terminate when the Term hereof has expired or terminated and all of the
Obligations have been completely performed and indefeasibly paid in full. At
such time and at your request, Distributor shall execute and deliver to you such
documentation as you reasonably require to evidence the termination of such
Security Interest. Each party shall bear its own filing fees and expenses.
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13. DEFINITIONS.
13.01. "Territory"--the United States, its territories and possessions,
and all military bases and Armed Forces Post Exchanges throughout the world.
13.02. "Normal Retail Channels"--distribution of Records through Normal
Retail Channels shall mean distribution or sale of Records through: (a)
sub-distributors, one-stops, rack jobbers, retailers and/or dealers for ultimate
sale to the consumer in retail record and other retail stores (including,
without limitation, book stores and computer software stores); (b) direct
digital distribution; (c) direct response, direct mail and mail order, including
fulfillment or orders solicited and/or received through Internet sites and/or
other "on-line" services (but not through so-called "record clubs" distributing
Records through mail order); and (d) other channels of trade that are considered
to be "normal retail channels" as such term is now or hereafter during the Term
generally understood in the United States record industry.
13.03. "Record" or "Records"-- all forms of reproductions,
transmissions or communications of Recordings now or hereafter known,
manufactured, distributed, transmitted or communicated primarily for home or
personal use (whether embodying sound alone, sound accompanied by visual images,
or sound accompanied by graphic material and/or text in an interactive format).
Records include, without limitation, vinyl discs, cassette tapes, compact discs,
video cassettes, videodiscs, "enhanced CDs" and CD-ROM devices.
13.04. "Recording" or "Recordings"-- all recordings in any form
(including audio and audiovisual) of the Applicable Albums or Related Records
from which Records may be derived, now or hereafter owned or controlled by, or
licensed to, you or any Affiliate or as to which you or any Affiliate have the
right to distribute Records derived therefrom in the Territory.
13.05. (a) "Affiliate"-each Principal and any Person which, directly or
indirectly, owns or controls, is owned or controlled by, or is under common
ownership or control with, you or any Principal or in which your or any
Principal have a direct or indirect interest.
(b) "Principal"--Joe Marrone.
(c) "Person"--any natural person, firm, corporation,
partnership or other entity recognized by law.
13.06. (a) "Net Sales"--Gross Sales less the dollar amount of all
returns, credits, rebates and adjustments, and less reserves withheld in
accordance with the terms hereof, plus liquidated reserves.
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(b) "Gross Sales"--The dollar amount invoiced to and payable
by Distributor's customers for your Records distributed hereunder, determined
after the deduction of all applicable discounts. Notwithstanding the foregoing,
Gross Sales shall not include, and Distributor may retain for its own account,
any separately stated handling charges charged to customers for special services
rendered to such customers, such as any special handling charge for fulfilling
orders in less than full box-lot quantities.
14. MISCELLANEOUS.
14.01. This Agreement contains the entire understanding of the parties
hereto relating to the subject matter hereof and cannot be changed or modified
except by an instrument signed by the party to be charged. A waiver by either
party of any term or condition of this Agreement in any instance shall not be
deemed or construed as a waiver of such term or condition for the future or of
any subsequent breach hereof.
14.02. Distributor may, at its election, assign this Agreement to any
parent, subsidiary or affiliate or to any Person who acquires all or a
substantial portion of Distributor's stock or assets, and this Agreement may be
so assigned by such assignee. You shall not have the right to assign this
Agreement or any of your rights or obligations, and any purported assignment by
you in contravention hereof shall be null and void.
14.03. Neither party to this Agreement shall be deemed to be in breach
of any of its obligations hereunder unless and until the other party shall have
given such party specific written notice of such default and the alleged
breaching party shall have failed to cure such default within thirty (30) days
after receipt of such notice.
14.04. In entering into this Agreement, you and Distributor each shall
have the status of an independent contractor and nothing herein contained shall
constitute the parties as partners, fiduciaries, agents or employees of each
other.
14.05. This Agreement 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.
14.06. All notices hereunder shall be in writing and shall be given by
personal delivery or by registered or certified mail, return receipt requested,
at the addresses shown above or such other address or addresses as may be
designated by the applicable party. Notices shall be deemed given when
personally delivered or when mailed, except that notice of change of address
shall be effective only from the date of its receipt. Each notice sent to
Distributor shall be directed to the attention of the Executive V.P. Business
and Legal Affairs, Sheridan Square Entertainment, 130 Fifth Avenue, 7th Floor,
New York, New York 10011. You shall also send a copy of each notice to
Distributor to Grubman, Indursky & Schindler, P.C., 152 West 57th Street, New
York, New York 10019, Attention: Jonathan F. Horn, Esq.
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14.07. THIS AGREEMENT HAS BEEN ENTERED INTO IN THE STATE OF NEW YORK,
AND THE VALIDITY, INTERPRETATION AND LEGAL EFFECT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS ENTERED
INTO AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK. ALL CLAIMS, DISPUTES
OR DISAGREEMENTS WHICH MAY ARISE OUT OF THE INTERPRETATION, PERFORMANCE OR
BREACH OF THIS AGREEMENT SHALL BE SUBMITTED EXCLUSIVELY TO THE JURISDICTION OF
THE STATE COURTS OF THE STATE OF NEW YORK OR THE FEDERAL DISTRICT COURTS LOCATED
IN NEW YORK CITY; PROVIDED, HOWEVER, IF DISTRIBUTOR IS SUED OR JOINED IN ANY
OTHER COURT OR FORUM IN RESPECT OF ANY MATTER WHICH MAY GIVE RISE TO A CLAIM BY
DISTRIBUTOR HEREUNDER, YOU CONSENT TO THE JURISDICTION OF SUCH COURT OR FORUM
OVER ANY SUCH CLAIM WHICH MAY BE ASSERTED BY DISTRIBUTOR.
15. MANUFACTURING.
15.01. You and Distributor agree that Distributor shall arrange for the
manufacture of all Records (including all components) intended for distribution
hereunder during the Term. Distributor shall place all orders for the
manufacture of Records and/or components with those Persons which regularly
manufacture Distributor's own records (or those of its other distributed
labels). Distributor and you shall mutually determine the size of all
manufacturing orders; provided, however, Distributor shall have the right to
unilaterally order the manufacture of Records and/or components as may be
reasonably required to meet demand. All Records shall be in satisfactory
condition and shall bear an appropriate bar code reflecting a Universal Price
Code Manufacturer Number (and you shall be responsible for all fees and charges
in connection therewith, and Distributor shall have the right to place a legend
in customary size and location identifying Distributor as the Distributor.
16. ADDITIONAL SERVICES OF DISTRIBUTOR.
16.01. Distributor will render, without charging a fee or any costs
(accept the costs set forth in paragraph 6.02), the following additional
services in connection with the Applicable Albums:
(a) Services of JRB Sales & Marketing Innovations, Inc. for national
sales.
(b) Services of Wayman Jones as "quarterback" for R&B promotion.
(c) Services of a national pop promotion person as "quarterback" for
pop promotion.
(d) Services of the national publicity department of Distributor.
(e) Periodic advice from Danny Goldberg and other Artemis executives,
via telephone, subject to their reasonable prior professional
commitments and schedules.
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It will not be deemed a breach of this agreement if Wayman Jones and/or
JRB Sales and Marketing Innovations, Inc. are no longer associated with
Distributor and are unable to render such services provided that the such
services are rendered by other persons or entities affiliated with Distributor.
16.02 Distributor, upon its request, will be listed by you as
"distributor" in advertisements, press, Soundscan, and other similar materials
created or authorized by you in connections with Records distributed hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
SHERIDAN SQUARE
ENTERTAINMENT, L.L.C.
D/B/A ARTEMIS RECORDS
By:___________________________
An Authorized Signatory
ACCEPTED AND AGREED:
ANTRA RECORDS
By:_________________________
An Authorized Signatory
<PAGE>
Exhibit 10.3
SUBSCRIPTION AGREEMENT
Dear Subscriber:
You (the "Subscriber") hereby agree to purchase, and Antra Holdings
Group, Inc., a Delaware corporation (the "Company") hereby agrees to issue and
to sell to the Subscriber, 10% Secured Convertible Notes (the "Notes")
convertible in accordance with the terms thereof into shares of the Company's
$.001 par value common stock (the "Company Shares") as set forth on the
signature page hereof for the aggregate consideration as set forth on the
signature page hereof ["Purchase Price"]. The form of Convertible Note is
annexed hereto as Exhibit A. (The Company Shares are sometimes referred to
herein as the "Shares" or "Common Stock"). (The Notes, the Company Shares, and
Common Stock Purchase Warrants issuable to the Placement Agents ("Placement
Warrants"), identified on Schedule B hereto, and the Common Stock issuable upon
exercise of the Placement Warrants are collectively referred to herein as, the
"Securities"). Upon acceptance of this Agreement by the Subscriber, the Company
shall issue and deliver to the Subscriber the Note against payment, by federal
funds (U.S.) wire transfer of the Purchase Price.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with
and has read the Company's audited financial statements for the year ended
December 31, 1998, and unaudited financial statements for the period ended March
31, 1999, and a pro-forma compilation for the period ended June 30, 1999
(hereinafter referred to as the "Reports"). In addition, the Subscriber has
received from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested, and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities (such information in writing is
collectively, the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited
investor", as such term is defined in Regulation D promulgated by the Commission
under the Securities Act of 1933, as amended, is experienced in investments and
business matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in private placements in
the past and, with its representatives, has such
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knowledge and experience in financial, tax and other business matters as to
enable the Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a speculative
investment. The Subscriber has the authority and is duly and legally qualified
to purchase and own the Securities. The Subscriber is able to bear the risk of
such investment for an indefinite period and to afford a complete loss thereof.
(c) Purchase of Company Shares. On the Closing Date, the Subscriber
will purchase the Note for its own account and not with a view to any
distribution thereof.
(d) Compliance with Securities Act. The Subscriber understands and
agrees that the Securities have not been registered under the Securities Act of
1933, as amended (the "1933 Act") by reason of their issuance in a transaction
that does not require registration under the 1933 Act, and that such Securities
must be held unless a subsequent disposition is registered under the 1933 Act or
is exempt from such registration.
(e) Company Shares Legend. The Company Shares and the shares of
Common Stock issuable upon the exercise of the Placement Warrants shall bear the
following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ANTRA HOLDINGS GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(f) Warrants Legend. The Placement Warrants shall bear the following
legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND
THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ANTRA HOLDINGS GROUP, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
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(g) Note Legend. The Note shall bear the following legend:
"THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ANTRA HOLDINGS GROUP, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED."
(h) Communication of Offer. The offer to sell the Securities was
directly communicated to the Subscriber. At no time was the Subscriber presented
with or solicited by any leaflet, newspaper or magazine article, radio or
television advertisement, or any other form of general advertising or solicited
or invited to attend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.
(i) Correctness of Representations. The Subscriber represents that
the foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date (as hereinafter defined), shall be true and correct as of the
Closing Date. The foregoing representations and warranties shall survive the
Closing Date.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective jurisdictionss of their incorporation and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the
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business, operations or prospects or condition (financial or otherwise) of the
Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its subsidiaries has been duly authorized and
validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder and all other agreements entered into by the Company relating hereto.
(d) Additional Issuances. There are no outstanding agreements or
preemptive or similar rights affecting the Company's common stock or equity and
no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of any shares of common stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company,
except as described in the Reports or Other Written Information.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its affiliates, the NASD, NASDAQ or the Company's
Shareholders is required for execution of this Agreement, and all other
agreements entered into by the Company relating thereto, including, without
limitation issuance and sale of the Securities, and the performance of the
Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance of its obligations under
this Agreement and all other agreements entered into by the Company relating
thereto by the Company will:
(i) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default) under (A) the articles
of incorporation, charter or bylaws of the Company, or any of its affiliates,
(B) to the Company's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to the Company, or any
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of its affiliates of any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates or over the
properties or assets of the Company, or any of its affiliates, (C) the terms of
any bond, debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which the Company, or any of its affiliates is a
party, by which the Company, or any of its affiliates is bound, or to which any
of the properties of the Company, or any of its affiliates is subject, or (D)
the terms of any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company, or any of its affiliates is a party; or
(ii) result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company, or any of
its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances, subject to restrictions upon transfer under
the 1933 Act and State laws;
(ii) have been, or will be, duly and validly authorized and on
the date of issuance and on the Closing Date, as hereinafter defined, and the
date the Note is converted, and the Placement Warrants are exercised, the
Securities will be duly and validly issued, fully paid and nonassessable (and if
registered pursuant to the 1933 Act, and resold pursuant to an effective
registration statement will be free trading and unrestricted);
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company;
(iv) will not subject the holders thereof to personal liability
by reason of being such holders; and
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under this Agreement, and all
other agreements entered into by the Company relating hereto.
(i) Publicly Held Company. The Company is a publicly-held company.
The Company's Common Stock is trading on the NASD OTC Bulletin Board. Pursuant
to the provisions of the Securities Exchange Act of 1934 (the "1934 Act"), the
Company has timely filed all reports and other materials required to be filed
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thereunder with the Securities and Exchange Commission during the preceding
twelve months.
(j) No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the
Securities or affect the price at which the Securities may be issued.
(k) Information Concerning Company. The Reports and Other Written
Information contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date of the financial
statements included in the Reports, and except as modified in the Other Written
Information, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports and Other Written Information do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(l) Dilution. The number of Shares issuable upon conversion (as
hereinafter defined) may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to conversion of the Note. The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Note and exercise of the Placement
Warrants is binding upon the Company and enforceable, except as otherwise
described in this Subscription Agreement, regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company.
(m) Stop Transfer. The Securities are restricted securities as of
the date of this Agreement. The Company will not issue or continue any stop
transfer order or other order impeding the sale and delivery of the Securities
at such time as the Securities are registered for public sale or an exemption
from registration is available.
(n) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or ByLaws. Neither the Company nor
any of its subsidiaries is (i) in default under or in violation of any other
material agreement or
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instrument to which it is a party or by which it or any of its properties are
bound or affected, which default or violation would have a material adverse
effect on the Company, (ii) in default with respect to any order of any court,
arbitrator or governmental body or subject to or party to any order of any court
or governmental authority arising out of any action, suit or proceeding under
any statute or other law respecting antitrust, monopoly, restraint of trade,
unfair competition or similar matters, or (iii) to its knowledge in violation of
any statute, rule or regulation of any governmental authority material to its
business.
(o) 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 cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act which would prevent the Company from
selling the Securities under Section 4(2) of the 1933 Act, or any applicable
stockholder approval provisions. Nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
(p) Use of Proceeds. The proceeds of the Subscriber funds to be
released to the Company will be used for, approximately $500,000 for joint
development, design and commercialization by the Company and Teltran
International, Inc. of "Records-To-Go" website; approximately $1,750,000 for
distribution and production of three albums anticipated to be released in fourth
quarter; and working capital and for expenses of this offering.
(q) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, 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 Act) in connection with the offer or sale of
the Securities.
(r) Listing. The Company's common stock is listed for trading on
NASD OTC Bulletin Board. The Company has not received any notice that its common
stock will be delisted from the OTC Bulletin Board or that the common stock does
not meet all requirements for the continuation of such listing.
(s) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects and, unless the Company otherwise notifies the
Subscriber prior to the Closing Date, shall be true and correct in all material
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<PAGE>
respects as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion acceptable to Subscriber from
the Company's legal counsel opining on the availability of the Regulation D
exemption as it relates to the offer and issuance of the Securities. A form of
the legal opinion is annexed hereto as Exhibit C. The Company will provide, at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Note and exercise of the Placement Warrants.
4. Reissuance of Securities. The Company agrees to reissue certificates
representing the Securities without the legends set forth in Sections 1(e) and
1(f) above at such time as (a) the holder thereof is permitted to dispose of
such Securities pursuant to Rule 144(k) under the Act, or (b) upon resale
subject to an effective registration statement after the Securities are
registered under the Act. The Company agrees to cooperate with the Subscriber in
connection with all resales pursuant to Rule 144(d) and Rule 144(k) and furnish
legal opinions necessary to allow such resales provided the Company and its
counsel receive reasonably requested certifications from the Subscriber and
selling broker, if any.
5. Redemption. Except as described herein, the Company may not redeem
the Securities without the consent of the holder of the Securities.
6. Legal Fees/Commissions. The Company shall pay to counsel to the
Subscriber its fee of $45,000 for services rendered to the Subscriber in
reviewing this Agreement and other subscription agreements for the aggregate
subscription amounts of up to $2,866,666 and acting as escrow agent. The Company
will pay a cash commission and unaccountable expense allowance, in the
aggregate, of twelve percent (12%) of the Purchase Price designated on the
signature page hereto to certain Placement Agents identified on Schedule B
hereto. The cash commissions and legal fees will be payable out of funds held
pursuant to a Funds Escrow Agreement to be entered into by the Company,
Subscriber and an Escrow Agent. The Company will also issue and deliver to the
Placement Agents as additional compensation Placement Warrants designated on
Schedule B hereto. The cash commissions and Placement Warrants will be issued to
the Placement Agents only when, as, and if the corresponding subscription amount
is released from escrow to the Company. All the representations, covenants,
warranties, undertakings, and indemnification including but not limited to
registration rights made or granted to or for the benefit of the
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<PAGE>
Subscriber are hereby also made and granted to the Placement Agents in respect
of the Placement Warrants and common stock issuable upon exercise of the
Placement Warrants.
7.1. Covenants of the Company. The Company covenants and agrees with
the Subscriber as follows:
(a) The Company will advise the Subscriber, promptly after it
receives notice of issuance by the Securities and Exchange Commission, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the common stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.
(b) The Company shall promptly secure the listing of the Company
Shares, and common stock issuable upon the exercise of the Placement Warrants
upon each national securities exchange, or automated quotation system, if any,
upon which shares of common Stock are then listed (subject to official notice of
issuance) and shall maintain such listing so long as any other shares of common
stock shall be so listed. The Company will use its best efforts to maintain the
listing and trading of its common stock on the NASD OTC Bulletin Board, and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company will provide the
Subscriber copies of all notices it receives notifying the Company of the
threatened and actual delisting of the common stock on any exchange or quotation
system on which the common stock is listed.
(c) The Company shall notify the SEC, NASD and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Subscriber
and Placement Agents and promptly provide copies thereof to Subscriber.
(d) Until at least two (2) years after the effectiveness of the
Registration Statement on Form SB-2 or such other Registration Statement
described in Section 10.1(iv) hereof, the Company will (i) cause its Common
Stock to be registered under Sections 12(b) or 12(g) of the Exchange Act, (ii)
comply in all respects with its reporting and filing obligations under the
Exchange Act, and (iii) comply with all requirements related to any registration
statement filed pursuant to this Agreement. The Company will not take any action
or file any document (whether or not permitted by the Act or the Exchange Act or
the rules thereunder) to terminate or suspend such registration or to
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<PAGE>
terminate or suspend its reporting and filing obligations under said Acts until
the later of (i) two (2) years after the effective date of the Registration
Statement on Form SB-2 or such other Registration Statement described in Section
10.1(iv) hereof, or (ii) the sale by the Subscribers and Placement Agents of all
the Company Shares issuable by the Company pursuant to this Agreement. Until at
least two (2) years after the Placement Warrants have been exercised, the
Company will use its commercial best efforts to continue the listing or trading
of its Common Stock on NASD OTC Bulletin Board and will comply in all respects
with the Company's reporting, filing and other obligations under the bylaws or
rules of the NASD and NASDAQ, as appropriate.
(e) The Company undertakes to use the proceeds of the Subscriber's
funds for, approximately $500,000 for joint development, design and
commercialization by the Company and Teltran International, Inc. of
"Records-To-Go" website; approximately $1,750,000 for distribution and
production of three albums anticipated to be released in fourth quarter; and
working capital and for expenses of this offering. The Company represents and
warrants that the Purchase Price of the Notes and the Put Purchase Price will
not be used directly or indirectly to pay any outstanding debts or monetary
obligations of the Company.
8. Covenants of the Company and Subscriber Regarding Idemnifications.
(a) The Company agrees to indemnify, hold harmless, reimburse and
defend Subscriber, Subscriber's officers, directors, agents, affiliates, control
persons, and principal shareholders, against any claim, cost, expense,
liability, obligation, loss or damage (including reasonable legal fees) of any
nature, incurred by or imposed upon Subscriber which results, arises out of or
is based upon (i) any misrepresentation by Company or breach of any warranty by
Company in this Agreement or in any Exhibits or Schedules attached hereto, or
Reports or other Written Information; or (ii) any breach or default in
performance by Company of any covenant or undertaking to be performed by Company
hereunder, or any other agreement entered into by the Company and Subscribers
relating hereto.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is based
upon (a) any misrepresentation by Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto; or (b) any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder, or any other agreement entered into by the Company and
Subscribers relating hereto.
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9.1. Conversion of Note.
(a) Upon the conversion of the Note or part thereof, the Company
shall, at its expense, take all necessary action (including the issuance of an
opinion of counsel) to assure that the Company's transfer agent shall issue
stock certificates in the name of Subscriber (or its nominee) or such other
persons as designated by Subscriber and in such denominations to be specified at
conversion representing the number of shares of common stock issuable upon such
conversion, as applicable. The Company warrants that no instructions other than
these instructions have been or will be given to the transfer agent of the
Company's common stock and that the Company Shares will be unlegended,
free-trading, and freely transferable, and will not contain a legend restricting
the resale or transferability of the Company Shares provided the Company Shares
are included in an effective registration statement or are otherwise exempt from
registration.
(b) Subscriber will give notice of its decision to exercise its
right to convert the Note or part thereof by telecopying an executed and
completed notice of Conversion to the Company. The Subscriber will not be
required to surrender the Note until the Note has been fully converted or
satisfied. Each date on which a Notice of Conversion is telecopied to the
Company in accordance with the provisions hereof shall be deemed a Conversion
Date. The Company will or cause the transfer agent to transmit the Company's
common stock certificates representing the Company Shares issuable upon
conversion of the Note (and a Note representing the balance of the Note not so
converted, if requested by Subscriber) to the Subscriber via express courier for
receipt by such Subscriber within five business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date"). To the extent that a
Subscriber elects not to surrender a Note for reissuance upon partial payment or
conversion, the Subscriber hereby indemnifies the Company against any and all
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.
9.2. Liquidated Damages.
(a) The Company understands that a delay in the delivery of the
Shares in the form required pursuant to Section 9 hereof, or the Mandatory
Redemption Amount described in Section 9.3 hereof, beyond the Delivery Date or
Mandatory Redemption Payment Date (as hereinafter defined) could result in
economic loss to the Subscriber. As compensation to the Subscriber for such
loss, the Company agrees to pay late payments to the Subscriber for late
issuance of Shares in the form required pursuant to Section 9 hereof upon
Conversion of the Note or late payment of the Mandatory Redemption Amount, in
the amount of $100 per business day after the Delivery Date or Mandatory
Redemption Payment Date, as the case may be, for each $10,000 of Note principal
amount being converted or
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redeemed. The Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Furthermore, in addition to any other
remedies which may be available to the Subscriber, in the event that the Company
fails for any reason to effect delivery of the Shares by the Delivery Date or
make payment by the Mandatory Redemption Payment Date, the Subscriber will be
entitled to revoke all or part of the relevant Notice of Conversion or rescind
all or part of the notice of Mandatory Redemption by delivery of a notice to
such effect to the Company whereupon the Company and the Subscriber shall each
be restored to their respective positions immediately prior to the delivery of
such notice, except that late payment charges described above shall be payable
through the date notice of revocation or rescission is given to the Company.
(b) Nothing contained herein or in any document referred to herein
or delivered in connection herewith shall be deemed to establish or require the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest or dividends
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Subscriber and thus refunded to the Company.
9.3. Mandatory Redemption. In the event the Company may not issue
Shares on a Delivery Date or at any time when the Note is convertible, for any
reason then at the Subscriber's election, the Company must pay to the Subscriber
five (5) business days after request or on the Delivery Date a sum of money
determined by multiplying the principal of the Note not convertible by 150%,
together with accrued but unpaid interest thereon ("Mandatory Redemption
Payment"). The Mandatory Redemption Payment must be received by the Subscriber
on the same date as the Company Shares otherwise deliverable or within five (5)
business days after request, whichever is sooner ("Mandatory Redemption Payment
Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note
principal and interest will be deemed paid and no longer outstanding.
9.4. Optional Redemption. The Company will have the option of redeeming
the Note and Put Note (as hereinafter defined) ("Optional Redemption") by paying
to the Subscriber a sum of money determined by multiplying the principal amount
of the Note or Put Note by 130% together with accrued but unpaid interest
thereon ("Redemption Amount") outstanding on the day the date notice of
redemption ("Notice of Redemption) is given to a Subscriber ("Redemption Date").
A Notice of Redemption may not be given in connection with any portion of Note
or Put Note for which notice of conversion has been given by the Subscriber at
any time before receipt of a Notice of Redemption. The Subscriber may elect
within three (3) business days after receipt of a Notice of Redemption to
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give the Company Notice of Conversion in connection with some or all of the Note
and Put Note principal which was the subject of the Notice of Redemption. A
Notice of Redemption must be accompanied by a certificate signed by the chief
executive officer or chief financial officer of the Company stating that the
Company has on deposit and segregated ready funds equal to the Redemption
Amount. The Redemption Amount must be paid in good funds to the Subscriber no
later than the fifth business day after the Redemption Date. In the event the
Company fails to pay the Redemption Amount by such date, then the Redemption
Notice will be null and void and the Company will thereafter have no further
right to effect an Optional Redemption. Such failure will also be deemed an
Event of Default under the Note and Put Note. Any Notice of Redemption must be
given to all holders of Notes and Put Notes issued in the Company's offering of
up to $2,866,666 of Notes and up to $1,433,334 of Put Notes to which this
Subscription Agreement relates, in proportion to their holdings of Note and Put
Note principal on a Redemption Date. A Notice of Redemption may be given by the
Company only during the seven (7) business day period commencing on the 181st
day after the Effective Date (defined in Section 10.1(iv) hereof, provided (i)
no Event of Default, as described in the Note shall have occurred or be
continuing; (ii) the average closing bid price of the Company's common stock on
the NASD OTC Bulletin Board shall have been not less than $3.00 for each of the
twenty trading days prior to the Redemption Date; and (iii) the average daily
trading volume of the Company's common stock on the NASD OTC Bulletin Board
shall have been not less than 100,000 common shares for each of the twenty
trading days prior to the Redemption Date. Only one Notice of Redemption may be
given to the Subscriber.
9.5. Maximum Conversion. The Subscriber shall not be entitled to
convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of Common Stock beneficially owned by the Subscriber and its
affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this proviso is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its affiliates of more than 9.99% of
the outstanding shares of Common Stock of the Company on such Conversion Date.
For the purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 9.99%. The Subscriber may revoke the restriction described
in this paragraph upon 75 days prior notice to the Company.
9.6. Injunction - Posting of Bond. In the event a Subscriber shall
elect to convert a Note or part thereof, the Company may not refuse conversion
based on any claim that such
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Subscriber or any one associated or affiliated with such Subscriber has been
engaged in any violation of law, or any other reason unless, an injunction from
a court, on notice, restraining and or enjoining conversion of all or part of
said Note shall have been sought and obtained and the Company posts a surety
bond for the benefit of such Subscriber in the amount of 150% of the amount of
the Note, which is subject to the injunction, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent it obtains judgment.
9.7. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if after the
Delivery Date the Subscriber purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Subscriber of the Common Stock which the Subscriber anticipated receiving upon
such conversion (a "Buy-In"), then the Company shall pay in cash to the
Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (B) the aggregate principal and/or interest amount of the Note
for which such conversion was not timely honored, together with interest thereon
at a rate of 15% per annum, accruing until such amount and any accrued interest
thereon is paid in full (which amount shall be paid as liquidated damages and
not as a penalty). For example, if the Subscriber purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of $10,000 of note principal and/or interest, the
Company shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company written notice indicating the amounts
payable to the Subscriber in respect of the Buy-In.
10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.
(i) On one occasion, for a period commencing 91 days after the
Closing Date, but not later than three years after the Closing Date, the
Company, upon a written request therefor from any record holder or holders of
more than 50% of the aggregate of the Company's Shares issued and issuable upon
Conversion of the Note and Put Notes defined in Section 11.1(a) hereof, if
actually issued, being offered in the Company's aggregate offering of $2,866,666
of Notes principal and $1,433,334 of Put Note principal on identical terms (the
Securities and securities issued or issuable by virtue of ownership of the
Securities, and the Put Securities, defined in Section 11.1(a) hereof, if
actually issued, being, the "Registrable Securities"), shall prepare and file
with the SEC a registration statement under the Act covering the
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Registrable Securities which are the subject of such request, unless such
Registrable Securities are the subject of an effective registration statement.
In addition, upon the receipt of such request, the Company shall promptly give
written notice to all other record holders of the Registrable Securities that
such registration statement is to be filed and shall include in such
registration statement Registrable Securities for which it has received written
requests within 10 days after the Company gives such written notice. Such other
requesting record holders shall be deemed to have exercised their demand
registration right under this Section 10.1(i). As a condition precedent to the
inclusion of Registrable Securities, the holder thereof shall provide the
Company with such information as the Company reasonably requests. The obligation
of the Company under this Section 10.1(i) shall be limited to one registration
statement.
(ii) If the Company at any time proposes to register any of its
securities under the Act for sale to the public, whether for its own account or
for the account of other security holders or both, except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the Subscriber
or Holder pursuant to an effective registration statement, each such time it
will give at least 30 days' prior written notice to the record holder of the
Registrable Securities of its intention so to do. Upon the written request of
the holder, received by the Company within 30 days after the giving of any such
notice by the Company, to register any of the Registrable Securities, the
Company will cause such Registrable Securities as to which registration shall
have been so requested to be included with the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
required to permit the sale or other disposition of the Registrable Securities
so registered by the holder of such Registrable Securities (the "Seller"). In
the event that any registration pursuant to this Section 10.1(ii) shall be, in
whole or in part, an underwritten public offering of common stock of the
Company, the number of shares of Registrable Securities to be included in such
an underwriting may be reduced by the managing underwriter if and to the extent
that the Company and the underwriter shall reasonably be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
by the Company therein; provided, however, that the Company shall notify the
Seller in writing of any such reduction. Notwithstanding the forgoing
provisions, the Company may withdraw any registration statement referred to in
this Section 10.1(ii) without thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is
received by the Company pursuant to Section 10.1(i), the Company has determined
to proceed with the actual
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preparation and filing of a registration statement under the 1933 Act in
connection with the proposed offer and sale for cash of any of its securities
for the Company's own account, such written request shall be deemed to have been
given pursuant to Section 10.1(ii) rather than Section 10.1(i), and the rights
of the holders of Registrable Securities covered by such written request shall
be governed by Section 10.1(ii) except that the Company or underwriter, if any,
may not withdraw such registration or limit the amount of Registrable Securities
included in such registration.
(iv) The Company shall file with the Commission within 30 days of
the Closing Date (the "Filing Date"), and use its reasonable commercial efforts
to cause to be declared effective Form SB-2 registration statement to be filed
with the Commission, (or such other form that it is eligible to use) within 60
days of the Closing Date in order to register the Registrable Securities for
resale and distribution under the Act. The registration statement described in
this paragraph must be declared effective by the Commission within 150 days of
the Closing Date (as defined herein) ("Effective Date"). The Company will
register not less than 25,000 shares of Common Stock in the aforedescribed
registration statement for each $25,000 of Note principal subscribed for and Put
Note principal and one share of Common Stock for each common share issuable upon
exercise of the Placement Warrants and Put Commission Warrants. The Registrable
Securities shall be reserved and set aside exclusively for the benefit of the
Subscriber and Placement Agents, as the case may be, and not issued, employed or
reserved for anyone other than the Subscriber and Placement Agents. Such
registration statement will be promptly amended or additional registration
statements will be promptly filed by the Company as necessary to register
additional Company Shares to allow the public resale of all Common Stock
included in and issuable by virtue of the Registrable Securities. No securities
other than the Registrable Securities will be included for registration in the
registration statement described in this Section 10.1(iv).
10.2. Registration Procedures. If and whenever the Company is required
by the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly
provide to the holders of Registrable Securities copies of all filings and
Commission letters of comment;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the
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prospectus used in connection therewith (including post-effective amendments) as
may be necessary to keep such registration statement effective until the earlier
of the (A) public sale of all the Registrable Securities or (B) the Registrable
Securities becoming capable of full and complete public sale without
registration under the Act, and comply with the provisions of the Act with
respect to the disposition of all of the Registrable Securities covered by such
registration statement in accordance with the Seller's intended method of
disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller and in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which the Common Stock of the Company
is then listed;
(f) immediately notify the Seller and each underwriter under such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
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10.3. Provision of Documents.
(a) At the request of the Seller, provided a demand for
registration has been made pursuant to Section 10.1(i) or a request for
registration has been made pursuant to Section 10.1(ii), the Registrable
Securities will be included in a registration statement filed pursuant to this
Section 10. In the event of a firm commitment underwritten public offering in
which the Registrable Securities are so included, the lockup, if any, requested
by the managing underwriter may not exceed ninety (90) days after the effective
date thereof.
(b) In connection with each registration hereunder, the Seller
will furnish to the Company in writing such information and representation
letters with respect to itself and the proposed distribution by it as reasonably
shall be necessary in order to assure compliance with federal and applicable
state securities laws. In connection with each registration pursuant to Section
10.1(i) or 10.1(ii) covering an underwritten public offering, the Company and
the Seller agree to enter into a written agreement with the managing underwriter
in such form and containing such provisions as are customary in the securities
business for such an arrangement between such underwriter and companies of the
Company's size and investment stature.
10.4. Non-Registration Events. The Company and the Subscriber agree
that the Seller will suffer damages if any registration statement required under
Section 10.1(i) or 10.1(ii) above is not filed within 60 days after request by
the Holder and not declared effective by the Commission within 120 days after
such request [or the Filing Date and Effective Date, respectively, in reference
to the Registration Statement on Form SB-2 or such other form described in
Section 10.1(iv)], and maintained in the manner and within the time periods
contemplated by Section 10 hereof, and it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if (i) the Registration
Statement described in Sections 10.1(i) or 10.1(ii) is not filed within 60 days
of such request, or is not declared effective by the Commission on or prior to
the date that is 120 days after such request, or (ii) the registration statement
on Form SB-2 or such other form described in Section 10.1(iv) is not filed on or
before the Filing Date or not declared effective on or before the sooner of the
Effective Date, or within five days of receipt by the Company of a communication
from the Commission that the registration statement described in Section
10.1(iv) will not be reviewed, or (iii) any registration statement described in
Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by an
additional registration statement filed and declared effective) for a period of
time which shall exceed 30 days in the aggregate per year but not more than 20
consecutive calendar days (defined as a period of 365 days commencing on the
date the
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Registration Statement is declared effective) (each such event referred to in
clauses (i), (ii) and (iii) of this Section 10.4 is referred to herein as a
"Non-Registration Event"), then, for so long as such Non-Registration Event
shall continue, the Company shall pay in cash as Liquidated Damages to each
holder of any Registrable Securities an amount equal to three (3%) percent for
each thirty (30) days or part thereof, of the Purchase Price of the Note,
whether or not converted, and the aggregate amount of the exercise prices of the
Placement Warrants, whether or not exercised, then owned of record by such
holder as of the occurrence of such Non-Registration Event. Payments to be made
pursuant to this Section 10.4 shall be due and payable immediately upon demand
in immediately available funds. In the event a Mandatory Redemption payment is
demanded from the Company by the Holder of a Note, pursuant to Section 9.2 of
this Subscription Agreement, then the Liquidated Damages described in this
Section 10.4 shall no longer accrue from and after the date the Holder receives
the Mandatory Redemption Payment. It shall be deemed a Non-Registration Event
to the extent the Shares into which a Note is convertible assuming complete
conversion of all sums due under the Note are not included in an effective
registration statement as of and after the Effective Date at the Conversion
Price in effect from and after the Effective Date.
10.5. Expenses. All expenses incurred by the Company in complying with
Section 10, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including reasonable counsel
fees) incurred in connection with complying with state securities or "blue sky"
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, fee of one counsel, if any, to
represent all the Sellers, and costs of insurance are called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and disbursements of any
special counsel to the Seller, are called "Selling Expenses". The Seller shall
pay the fees of its own additional counsel, if any.
The Company will pay all Registration Expenses in connection with
the registration statement under Section 10. All Selling Expenses in connection
with each registration statement under Section 10 shall be borne by the Seller
and may be apportioned among the Sellers in proportion to the number of shares
sold by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.
10.6. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities
under the Act pursuant to Section 10, the
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Company will indemnify and hold harmless the Seller, each officer of the Seller,
each director of the Seller, each underwriter of such Registrable Securities
thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Registrable Securities was registered under the Act pursuant to
Section 10, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by any such
Seller, the underwriter or any such controlling person in writing specifically
for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any
20
<PAGE>
such loss, claim, damage, liability or action, provided, however, that the
Seller will be liable hereunder in any such case if and only to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
Seller, as such, furnished in writing to the Company by such Seller specifically
for use in such registration statement or prospectus, and provided, further,
however, that the liability of the Seller hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the public offering price of the Registrable Securities
sold by the Seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the gross proceeds received by the Seller from the sale of Registrable
Securities covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.6(c) if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 10.6(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate
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counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in
the event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 10.6 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
provided under this Section 10.6; then, and in each such case, the Company and
the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (A) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
11.1. Obligation To Purchase.
(a) The Subscriber agrees to purchase from the Company
convertible notes in up to the principal amount ("Put Note") set forth on the
signature page hereof for up to the aggregate consideration designated on the
signature page hereof (the "Put"). Collectively the Put Notes, Put Warrants (as
hereinafter defined) and the common stock issuable upon exercise of the Put
Warrants are referred to as the "Put Securities". Except for the issue date, the
Put Notes will be identical to the Notes and have the same Maturity Date. The
Holders of the Put Securities are granted all the rights, remedies, liquidated
damages and indemnification granted to the Subscriber in connection with the
Note, including but not limited to, the rights and procedures set forth in
Sections 9.1, 9.2, 9.3, 9.5, 9.6 the registration rights described in Section 10
hereof and security interest described in Section 13(g) hereof.
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<PAGE>
(b) The agreement to purchase the Put Notes is contingent on the
following (any, some or all of which may be waived by the Subscriber):
(i) The timely filing and timely effectiveness of the
registration statement described in Section 10.1(iv) hereof relating to all the
Registrable Securities.
(ii) As of the Put Date (defined in Section 11.2(b) hereof),
and Put Closing Date, the Company will be a full reporting company with the
class of Shares registered pursuant to Section 12(g) of the Securities Exchange
Act of 1934.
(iii) The closing bid price of the Company's common stock on
the OTC Bulletin Board ("Closing Bid Price") for each of the ten trading days
prior to the giving of a Put Notice and prior to the Put Closing Date will not
be less than $2.00, nor will the aggregate trading volume in the Company's
Common Stock be fewer than 75,000 shares per day for each of the ten trading
days prior to the giving of a Put Notice and prior to the Put Closing Date.
(iv) No material adverse change in the Company's business or
business prospects shall have occurred after the date of the most recent
financial statements included in the Reports. Material adverse change is defined
as any effect on the business, operations, properties, prospects, or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries and affiliates, taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement, or any other agreement entered into or to be entered into in
connection herewith, in any material respect.
(v) The non-occurrence (whether or not continuing) of an Event
of Default under the Note.
(vi) The execution and delivery to the Subscriber of a
certificate signed by its chief executive officer representing the truth and
accuracy of all the Company's representations and warranties contained in this
Subscription Agreement as of the Put Date and Put Closing Date, confirming the
undertakings contained herein, and representing the satisfaction of all
contingencies and conditions required for the exercise of the Put.
(vii) The Company's compliance after the date hereof with the
listing requirements of the NASD OTC Bulletin
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Board, and the Company's not having received notice from the NASD OTC Bulletin
Board (or any principal market on which the Company's Common Stock is listed for
trading) that the Company is not in compliance with the requirements for
continued listing.
(viii) The execution by the Company and delivery to the
Subscriber of all documents reasonably necessary to memorialize the rights and
obligations of each of the parties in relation to the Put.
(c) The exercise of the Put is expressly contingent on the
declaration of effectiveness by the Securities and Exchange Commission and the
continued effectiveness of the Registration Statement on Form SB-2 or such other
form as described in Section 10.1(iv) hereof relating to the Registrable
Securities and the Company's ability to issue common stock upon conversion
and/or exercise of the Put Securities, pursuant to an effective registration
statement, with such common stock, upon resale, being unlegended freely
transferable common stock.
11.2. Exercise of Put.
(a) The Company's right to exercise the Put expires two weeks
after the declaration of effectiveness of the registration statement described
in Section 10.1(iv) of this Subscription Agreement relating to all the
Registrable Securities ("Put Exercise Period").
(b) The Put may be exercised by the Company by the giving to the
Subscriber of a written notice of exercise ("Put Notice") during the Put
Exercise Period in relation to all the subject Put Securities. The date a Put
Notice is given is a "Put Date." Each Put Notice must be accompanied by the (i)
officer's certificate described in Section 11.1(b)(vi) above; (ii) a copy of the
filed registration statement; (iii) notice of declaration of effectiveness; (iv)
five copies of the final prospectus; and (v) a legal opinion relating to the Put
Securities in form reasonably acceptable to Subscriber.
(c) Unless otherwise agreed to by the Subscribers, Put Notices
must be given to all Subscribers in proportion to the amounts agreed to be
purchased by all Subscribers undertaking to purchase Put Shares in the
$2,866,666 offering to which this Subscription Agreement relates. The aggregate
amount of all such Put Notices may not exceed $1,433,334. In the event the
Company does not exercise the Put during the Put Exercise Period, then the
Subscriber may exercise the Put on behalf of the Company, by giving notice to
the Company of such exercise during the fourteen (14) business days following
the Put Exercise Period.
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(d) Payment by the Subscriber in relation to a Put Notice
relating to the First Put must be made within thirty (30) days of receipt of a
Put Notice and items set forth in Section 11.2(b) above. Payment will be made
against delivery to the Subscriber or an escrow agent to be agreed upon by the
Company and Subscriber, of the Put Securities, and delivery to the Placement
Agents of the Put Commissions relating to the Put being exercised.
11.3. Put Placement Warrants. Except for the issue date, the Put
Commission Warrants (as defined herein) payable in connection with the Put will
be identical to the Placement Warrants.
11.4. Put Commissions. The Placement Agents identified on Schedule B
hereto shall receive aggregate commissions in connection with the closing of the
Put as follows: (i) cash equal to twelve (12%) percent of the Put Consideration
paid for the Put Notes, as set forth on the signature page hereto; and (ii) one
Put Warrant for each $2.50 of Put purchase price paid by a Subscriber in
connection with the Put. Collectively, the foregoing are referred to as Put
Commissions. The Put Commissions are set forth on Schedule B hereto. Put
Commissions shall be payable only in connection with the Put Purchase Price
actually paid by a Subscriber. The attorney for the Subscriber shall receive a
payment at the Closing of each Put equal to one and six-tenths (1.6%) percent of
the Put purchase price for each Put.
12. (a) Right of First Refusal. Until 120 days after the effective date
of the Registration Statement described in Section 10.1(iv) hereof, the
Subscriber shall be given not less than ten (10) business days prior written
notice of any proposed sale by the Company of its common stock or other
securities or debt obligations except as disclosed in the Reports or Other
Written Information. The Subscriber shall have the right during the ten (10)
business days following the notice to agree to purchase an amount of such
offered securities or debt obligations in the same proportion as Put Notes being
purchased in the aggregate offering to which this Subscription Agreement relates
(i.e. $2,866,666 in the aggregate), in accordance with the terms and conditions
set forth in the notice of sale. In the event such terms and conditions are
modified during the notice period, the Subscriber shall be given prompt notice
of such modification and shall have the right during the original notice period
or for a period of ten (10) business days following the notice of modification,
whichever is longer, to exercise such right. In the event the right of first
refusal described in this Section is exercised by the Subscriber and the Company
thereby receives net proceeds from such exercise, then commissions and fees will
be paid by the Company to the
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Placement Agents in the same amounts as specified in the notice of sale.
(b) Offering Restrictions. The Company agrees not to issue any
equity, convertible debt or other securities which are or could be (by
conversion, registration, or exemption) free-trading securities prior to the
complete conversion and payment of all sums due or payable under the Note and
Put Note, unless the per common shares equivalent price of such issued
instruments is greater than $3.25.
13. Miscellaneous.
(a) Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being telecopied (provided that a copy is
delivered by first class mail) to the party to receive the same at its address
set forth below or to such other address as either party shall hereafter give to
the other by notice duly made under this Section: (i) if to the Company, to
Antra Holdings Group, Inc., 1515 Locust Street, 4th Floor, Philadelphia, PA
19102, telecopier number: (215) 732-7979, with a copy by telecopier only to
Parker Duryee Rosoff & Haft, 529 Fifth Avenue, New York, New York 10017-4608,
Attn: Michael DiGiovanna, Esq., telecopier number: (212) 972-9487, and (ii) if
to the Subscriber, to the name, address and telecopy number set forth on the
signature page hereto, with a copy by telecopier only to Grushko & Mittman, 277
Broadway, Suite 801, New York, New York 10007, telecopier number: (212)
227-5865. Any notice that may be given pursuant to this Agreement, or any
document delivered in connection with the foregoing may be given by the
Subscriber on the first business day after the observance dates in the United
States of America by Orthodox Jewry of Rosh Hashanah, Yom Kippur, the first two
days of the Feast of Tabernacles, Shemini Atzeret Simchat Torah, the first two
and final two days of Passover and Pentecost, with such notice to be deemed
given and effective, at the election of the Subscriber on a holiday date that
precedes such notice. Any notice received by the Subscriber on any of the
aforedescribed holidays may be deemed by the Subscriber to be received and
effective as if such notice had been received on the first business day after
the holiday.
(b) Closing. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & Mittman, 277 Broadway, Suite
801, New York, New York 10007, upon the satisfaction of all conditions to
Closing set forth in this Agreement. The closing date shall be the date that
subscriber funds representing the net amount due the Company from the Purchase
Price are transmitted by wire transfer to the Company (the "Closing
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Date"). The closing date for the Put shall be the date on which Subscriber funds
representing the net amount due the Company from the Put Purchase Price is
transmitted to or on behalf of the Company ("Put Closing Date").
(c) Entire Agreement; Assignment. This Agreement represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No right
or obligation of either party shall be assigned by that party without prior
notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
transmission, and in counterparts, each of which will be deemed an original.
(e) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the
individuals executing this Agreement and other agreements on behalf of the
Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
(f) Specific Enforcement, Consent to Jurisdiction. The Company
and Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 13(e) hereof, each of the Company and Subscriber
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the
27
<PAGE>
suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(g) Security Interest. As a condition of Closing, the Company
will deliver 1,000,000 common shares ($.001 par value) of Teltran International
Group, Ltd., a Delaware corporation ("Security Shares") to a Collateral Agent to
be held by the Collateral Agent on behalf of the Subscriber pursuant to a
Collateral Agent Agreement and Security Agreement. The Security Shares will be
held on behalf of all Subscribers in the Company's offering of $2,866,666
principal Note amount and $1,433,334 Put Note amount on terms nearly identical
to the terms in this Subscription Agreement and related documents. The
Subscriber will be granted a security interest in the Security Shares to be
memorialized in a Security Agreement. The Company will execute Forms UCC-1 to be
filed with such states and counties designated by the Subscriber. The Company
will also execute all such documents reasonably necessary to memorialize and
further protect the security interest described above.
(h) Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the tenth (10th) business day following the date this
Agreement is accepted by the Subscriber.
[THIS SPACE INTENTIONALLY LEFT BLANK]
28
<PAGE>
SCHEDULE B TO SUBSCRIPTION AGREEMENT
================================================================================
PLACEMENT
PLACEMENT AGENT CASH COMMISSION WARRANTS
- --------------------------------------------------------------------------------
LIBRA FINANCE S.A. $ 67,000.00 920,000
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
- --------------------------------------------------------------------------------
HYETT CAPITAL LTD. 36,666.66 80,000
1510 51st Street
Brooklyn, New York 11219
Fax: 718-972-6196
- --------------------------------------------------------------------------------
INTERNATIONAL GLOBAL 143,333.30 -0-
COMMUNICATIONS, INC.
142 Mineola Avenue, Suite 2D
Roslyn Heights, New York
Fax: 212-643-1998
- --------------------------------------------------------------------------------
J. HAYUT 82,333.32 -0-
1116 Potomac Road
Atlanta, GA 30338
Fax: 404-636-0501
- --------------------------------------------------------------------------------
ELLIS ENTERPRISES, LTD. 1,333.32 13,333
42A Waterloo Road
London, England
NW2, 7UF
Fax: 011-441-014509004
- --------------------------------------------------------------------------------
TALBIYA B. INVESTMENTS, INC. 13,333.32 133,333
Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1, 4L2, United Kingdom
Fax: 011-972-36120639
- --------------------------------------------------------------------------------
TOTALS $343,999.92 1,146,666
================================================================================
29
<PAGE>
PUT COMMISSION SCHEDULE
================================================================================
PLACEMENT
PLACEMENT AGENT CASH COMMISSION WARRANTS
- --------------------------------------------------------------------------------
LIBRA FINANCE S.A. $ 71,000.00 460,000
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
- --------------------------------------------------------------------------------
HYETT CAPITAL LTD. 18,333.34 40,000
1510 51st Street
Brooklyn, New York 11219
Fax: 718-972-6196
- --------------------------------------------------------------------------------
INTERNATIONAL GLOBAL 71,666.70 -0-
COMMUNICATIONS, INC.
142 Mineola Avenue, Suite 2D
Roslyn Heights, New York
Fax: 212-643-1998
- --------------------------------------------------------------------------------
J. HAYUT 3,666.68 -0-
1116 Potomac Road
Atlanta, GA 30338
Fax: 404-636-0501
- --------------------------------------------------------------------------------
ELLIS ENTERPRISES, LTD. 666.68 6,667
42A Waterloo Road
London, England
NW2, 7UF
Fax: 011-441-014509004
- --------------------------------------------------------------------------------
TALBIYA B. INVESTMENTS, INC. 6,666.68 66,667
Ragnall House
18 Peel Road
Douglas, Isle of Man
1M1, 4L2, United Kingdom
Fax: 011-972-36120639
- --------------------------------------------------------------------------------
TOTALS $172,000.08 573,334
================================================================================
30
<PAGE>
EXHIBIT 10.4
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND
THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO ANTRA HOLDINGS
GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE NOTE
FOR VALUE RECEIVED, ANTRA HOLDINGS GROUP, INC., a Delaware
corporation (hereinafter called "Borrower"), hereby promises to pay to AUSTOST
ANSTALT SCHAAN, 7440 Fuerstentum, Lichenstein Landstrasse 163, Fax No.:
011-431-534532895 (the "Holder") or order, without demand, the sum of One
Million One Hundred and Fifty Thousand Dollars ($1,150,000.00), with simple
interest accruing at the annual rate of 10%, on July 20, 2002 (the "Maturity
Date"), as such date may be accelerated by the Holder or extended by agreement
of the parties hereto. At the Holder's election, the Maturity Date may be
accelerated to any date after July 20, 2000 upon ten days prior notice to the
Borrower from the Holder.
The following terms shall apply to this Note:
ARTICLE I
DEFAULT RELATED PROVISIONS
1.1 Payment Grace Period. Except for monetary amounts due on
the Maturity Date, accelerated or otherwise, the Borrower shall have a ten (10)
day grace period to pay any monetary amounts due under this Note, after which
grace period a default interest rate of 16% per annum shall apply to the amounts
owed hereunder.
1.2 Conversion Privileges. The Conversion Privileges set forth
in Article II shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full.
1.3 Interest Rate. At the election of the Holder, on or after
the earlier of each Conversion Date (as hereinafter defined), or on the Maturity
Date, accelerated or otherwise, the Borrower shall pay interest at the annual
rate of 10% per annum.
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<PAGE>
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to convert the principal
amount and interest due under this Note into Shares of the Borrower's Common
Stock as set forth below.
2.1. Conversion into the Borrower's Common Stock.
(a) The Holder shall have the right from and after the
issuance of this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note of $10,000 or
greater amount, or any lesser amount representing the full remaining outstanding
and unpaid principal portion and at the Holder's election, the interest accrued
on the Note, (the date of giving of such notice of conversion being a
"Conversion Date") into fully paid and nonassessable shares of Common Stock of
Borrower as such stock exists on the date of issuance of this Note, or any
shares of capital stock of Borrower into which such stock shall hereafter be
changed or reclassified (the "Common Stock") at the conversion price as defined
in Section 2.1(b) hereof (the "Conversion Price"), determined as provided
herein. Upon delivery to the Borrower of a notice ("Notice of Conversion")
pursuant to the terms of the subscription agreement entered into between the
Borrower and Holder relating to this Note (the "Subscription Agreement") of the
Holder's written request for conversion, Borrower shall issue and deliver to the
Holder within five business days from the Conversion Date that number of shares
of Common Stock for the portion of the Note converted in accordance with the
foregoing. At the Holder's election, the Borrower will deliver accrued but
unpaid interest on the Note through the Conversion Date directly to the Holder
on or before the Delivery Date as defined in the Subscription Agreement. The
number of shares of Common Stock to be issued upon each conversion of this Note
shall be determined by dividing that portion of the principal and/or interest on
the Note to be converted, by the Conversion Price.
(b) Subject to adjustment as provided in Section 2.1(c)
hereof, the Conversion Price per share shall be the lower of (i) fifty (50%) of
the average closing bid prices for the Common Stock on the NASD OTC Bulletin
Board, or on any securities exchange or other securities market on which the
Common Stock is then being traded, for the five (5) trading days immediately
preceding the Conversion Date, or (ii) $3.25 ("Maximum Base Price").
2
<PAGE>
(c) The Maximum Base Price described in Section 2.1(b)(ii)
above and number and kind of shares or other securities to be issued upon
conversion determined pursuant to Section 2.1(a) and 2.1(b), shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
A. Merger, Sale of Assets, etc. If the Borrower at any
time shall consolidate with or merge into or sell or convey all or substantially
all its assets to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any time
shall, by reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, this Note, as to
the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase such number and kind of
securities as would have been issuable as the result of such change with respect
to the Common Stock immediately prior to such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the shares
of Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Conversion Price shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.
D. Share Issuance. Subject to the provisions of this
Section, if the Borrower at any time shall issue any shares of Common Stock
prior to the conversion of the entire principal amount of the Note (otherwise
than as: (i) provided in Sections 2.1(c)A, 2.1(c)B or 2.1(c)C or this
subparagraph D; (ii) pursuant to options, warrants, or other obligations to
issue shares,
3
<PAGE>
outstanding on the date hereof as described in the Reports and Other Written
Information, as such terms are defined in the Subscription Agreement (which
agreement is incorporated herein by this reference); [(i) and (ii) above, are
hereinafter referred to as the "Existing Option Obligations"] for a
consideration less than the Conversion Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Conversion Price shall be reduced as follows: (i) the number of shares of Common
Stock outstanding immediately prior to such issue shall be multiplied by the
Conversion Price in effect at the time of such issue and the product shall be
added to the aggregate consideration, if any, received by the Borrower upon such
issue of additional shares of Common Stock; and (ii) the sum so obtained shall
be divided by the number of shares of Common Stock outstanding immediately after
such issue. The resulting quotient shall be the adjusted conversion price.
Except for the Existing Option Obligations and options that may be issued under
any employee incentive stock option and/or any qualified stock option plan
adopted by the Borrower, for purposes of this adjustment, the issuance of any
security of the Borrower carrying the right to convert such security into shares
of Common Stock or of any warrant, right or option to purchase Common Stock
shall result in an adjustment to the Conversion Price upon the issuance of
shares of Common Stock upon exercise of such conversion or purchase rights.
(d) During the period the conversion right exists, Borrower
will reserve from its authorized and unissued Common Stock a sufficient number
of shares to provide for the issuance of Common Stock upon the full conversion
of this Note. Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable. Borrower agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
2.2 Method of Conversion. This Note may be converted by the
Holder in whole or in part as described in Section 2.1(a) hereof and the
Subscription Agreement. Upon partial conversion of this Note, a new Note
containing the same date and provisions of this Note shall be issued by the
Borrower to the Holder for the principal balance of this Note and interest which
shall not have been converted or paid.
4
<PAGE>
ARTICLE III
EVENT OF DEFAULT
The occurrence of any of the following events of default
("Event of Default") shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, all without demand, presentment
or notice, or grace period, all of which hereby are expressly waived, except as
set forth below:
3.1 Failure to Pay Principal or Interest. The Borrower fails
to pay any installment of principal or interest hereon when due and such failure
continues for a period of ten (10) days after written notice to the Borrower
from the Holder, except for monetary amounts due on the Maturity Date,
accelerated or otherwise, for which no notice is required.
3.2 Breach of Covenant. The Borrower breaches any material
covenant or other term or condition of this Note and if such breach is capable
of cure such breach continues for a period of seven (7) days after written
notice to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any
representation or warranty of the Borrower made herein, in the Subscription
Agreement and Security Agreement entered into by the Holder and Borrower in
connection with this Note, or in any agreement, statement or certificate given
in writing pursuant hereto or in connection herewith shall be false or
misleading.
3.4 Receiver or Trustee. The Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final
process shall be entered or filed against Borrower or any of its property or
other assets for more than $50,000, and shall remain unvacated, unbonded or
unstayed for a period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower.
5
<PAGE>
3.7 Delisting. Delisting of the Common Stock from the NASD OTC
Bulletin Board or such other principal exchange on which the Common Stock is
listed for trading, or notification that the Borrower is not in compliance with
the conditions for such continued listing.
3.8 Concession. A concession by the Borrower or a default
under any one or more obligations in an aggregate monetary amount in excess of
$50,000.
3.9 Stop Trade. An SEC stop trade order or NASDAQ trading
suspension.
3.10 Failure to Deliver Common Stock or Replacement Note.
Borrower's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and Section 9 of the Subscription Agreement,
or if required a replacement Note.
3.11 Registration Default. The occurrence of a Registration
Default as described in Section 10.4 of the Subscription Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on
the part of Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
4.2 Notices. Any notice herein required or permitted to be
given shall be in writing and may be personally served or sent by fax
transmission (with copy sent by regular, certified or registered mail or by
overnight courier). For the purposes hereof, the address and fax number of the
Holder is as set forth on the first page hereof. The address and fax number of
the Borrower shall be Antra Holdings Group, Inc., 1515 Locust Street, 4th Floor,
Philadelphia, PA 19102, telecopier number: (215) 732-7979. Both Holder and
Borrower may change the address and fax number for service by service of notice
to the other as herein provided. Notice of Conversion shall be deemed given when
made to the Escrow Agent pursuant to the Escrow Agreement.
6
<PAGE>
4.3 Amendment Provision. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented.
4.4 Assignability. This Note shall be binding upon the
Borrower and its successors and assigns, and shall inure to the benefit of the
Holder and its successors and assigns, and may be assigned by the Holder.
4.5 Cost of Collection. If default is made in the payment of
this Note, Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
4.6 Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of New
York or in the federal courts located in the state of New York. Both parties and
the individual signing this Agreement on behalf of the Borrower agree to submit
to the jurisdiction of such courts. The prevailing party shall be entitled to
recover from the other party its reasonable attorney's fees and costs.
4.7 Maximum Payments. Nothing contained herein shall be deemed
to establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
4.8 Prepayment. This Note may not be paid prior to the
Maturity Date without the consent of the Holder.
4.9 Security Interest/ Waiver of Automatic Stay. This Note is
secured by a security interest granted to Holder pursuant to a Security
Agreement delivered by Borrower to Holder. The Borrower acknowledges and agrees
that should a proceeding under any bankruptcy or insolvency law be commenced by
or against the Borrower, or if any of the Collateral (as defined in the Security
Agreement) should become the subject of any bankruptcy or insolvency proceeding,
then the Holder should be entitled to, among other relief to which the Holder
may be entitled under the Note, Security Agreement, Subscription Agreement and
any other agreement to which the Borrower and Holder are parties, (collectively
"Loan Documents") and/or applicable law, an order from the court granting
immediate relief from the automatic stay pursuant to 11 U.S.C. Section 362 to
permit the Holder to exercise all of its rights and
7
<PAGE>
remedies pursuant to the Loan Documents and/or applicable law. THE BORROWER
EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION
362. FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11
U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE
OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE HOLDER TO
ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR
APPLICABLE LAW. The Borrower hereby consents to any motion for relief from stay
which may be filed by the Holder in any bankruptcy or insolvency proceeding
initiated by or against the Borrower and, further, agrees not to file any
opposition to any motion for relief from stay filed by the Holder. The Borrower
represents, acknowledges and agrees that this provision is a specific and
material aspect of the Loan Documents, and that the Holder would not agree to
the terms of the Loan Documents if this waiver were not a part of this Note. The
Borrower further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Holder nor any
person acting on behalf of the Holder has made any representations to induce
this waiver, that the Borrower has been represented (or has had the opportunity
to be represented) in the signing of this Note and the Loan Documents and in the
making of this waiver by independent legal counsel selected by the Borrower and
that the Borrower has had the opportunity to discuss this waiver with counsel.
The Borrower further agrees that any bankruptcy or insolvency proceeding
initiated by the Borrower will only be brought in courts within the geographic
boundaries of New York State.
[THIS SPACE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be signed
in its name by its Chief Executive Officer on this _____ day of July, 1999.
ANTRA HOLDINGS GROUP, INC.
By:________________________________
WITNESS:
_______________________________
9
<PAGE>
Exhibit 10.5
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ANTRA HOLDINGS GROUP, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
Right to Purchase 920,000 Shares of
Common Stock of Antra Holdings Group,
Inc. (subject to adjustment as provided
herein)
COMMON STOCK PURCHASE WARRANT
No. 1 Issue Date: July 20, 1999
ANTRA HOLDINGS GROUP, INC., a corporation organized under the laws of
the State of Delaware (the "Company"), hereby certifies that, for value
received, LIBRA FINANCE, S.A., or assigns, is entitled, subject to the terms set
forth below, to purchase from the Company after the Issue Date set forth above
at any time or from time to time before 5:00 p.m., New York time, through five
(5) years after the Issue Date (the "Expiration Date"), up to 920,000 fully paid
and nonassessable shares of Common Stock (as hereinafter defined), $.001 par
value per share, of the Company, at a purchase price of $2.00 per share (such
purchase price per share as adjusted from time to time as herein provided is
referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term Company shall include Antra Holdings Group, Inc. and any
corporation which shall succeed or assume the obligations of Antra Holdings
Group, Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Agreement, (b) any
other capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
1
<PAGE>
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the holder hereof shall
be entitled to receive, upon exercise of this Warrant in whole in accordance
with the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
2
<PAGE>
1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean the Fair Market
Value of a share of the Company's Common Stock. Fair Market Value of a share of
Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is
traded in the over-the-counter market, then the mean of the closing bid and
asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules then
standing of the American Arbitration Association, before a single arbitrator to
be chosen from a panel of persons qualified by education and training to pass on
the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
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and duties of a warrant agent appointed pursuant to Section 10 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct in compliance with
applicable Securities Laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such holder is entitled
upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
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3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants after the effective date
of such dissolution pursuant to this Section 3 to a bank or trust company having
its principal office in New York, NY, as trustee for the holder or holders of
the Warrants.
3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3.3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 4. In the
event this Warrant does continue in full force and effect after the consummation
of the transaction described in this Section 3.3, then only in such event will
the Company's securities and property (including cash, where applicable)
receivable by the holders of the Warrants be delivered to the Trustee as
contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.
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<PAGE>
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable Securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered holder hereof (a "Transferor") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached hereto (the
Transferor Endorsement Form") and together with evidence reasonably satisfactory
to the Company demonstrating compliance with applicable Securities Laws, the
Company at its expense but with payment by the Transferor of any applicable
transfer taxes) will issue and deliver to or on the order of the Transferor
thereof a new Warrant or Warrants of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.
6
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8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Subscription Agreement entered into by the Company and Subscribers of
the Company's Convertible Notes at or about the issue date of this Warrant. The
terms of the Subscription Agreement are incorporated herein by this reference.
Upon the occurrence of a Non-Registration Event as described in the Subscription
Agreement, in the event the Company is unable to issue upon exercise of this
Warrant Common Stock that is then included in an effective Registration
Statement as described in Section 10.1(iv) of the Subscription Agreement, (which
Registration Statement must comply with the provisions of Section 10 of the
Subscription Agreement), then upon receipt by the Company of notice that the
Holder of this Warrant would exercise this Warrant but for the Company's
inability to issue such Common Stock upon exercise of this Warrant, then the
Company will pay to the Holder of this Warrant, in lieu of delivering Common
Stock, a sum equal to the closing ask price of the Company's Common Stock on
NASD OTC Bulletin Board or such other principal trading market for the Company's
Common Stock on the trading date immediately preceding the date notice is given
by the Holder, less the exercise price of this Warrant, for each share of Common
Stock designated in such notice from the Holder.
10. Warrant Agent. The Company may, by written notice to the each
holder of the Warrant, appoint an agent for the purpose of issuing Common Stock
(or Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
11. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
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12. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
13. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as
of the date first written above.
ANTRA HOLDINGS GROUP, INC.
By:_____________________________________
Witness:
________________________________________
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Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Antra Holdings Group, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, ________________ shares
of Common Stock of Antra Holdings Group, Inc. and herewith makes payment of
$______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to ________________________ whose address
is __________________________________________ .
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________
__________________________________
(Signature must conform to name of
holder as specified on the face of
the Warrant)
__________________________________
(Address)
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Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of Antra Holdings Group, Inc. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of Antra
Holdings Group, Inc. with full power of substitution in the premises.
================================================================================
Transferees Percentage Number
Transferred Transferred
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Dated:________________, 19___ _______________________________
(Signature must conform to name
of holder as specified on the
face of the warrant)
Signed in the presence of:
_____________________________ _______________________________
(Name) (address)
_______________________________
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
_____________________________
(Name)
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<PAGE>
Exhibit 10.6
SECURITY AGREEMENT
1. Identification.
This Security Agreement (the "Agreement"), dated for identification
purposes only July 20, 1999, is entered into by and between Antra Holdings
Group, Inc., a Delaware corporation ("Debtor") and Barbara Mittman, as
collateral agent [acting in the manner and to the extent described in the
Collateral Agent Agreement defined below] (the "Collateral Agent"), for the
benefit of Austost Anstalt Schaan, 7440 Fuerstentum, Lichenstein Landstrasse
163, Fax No.: 011-431-534532895, Balmore Funds S.A., P.O. Box 4603, Zurich,
Switzerland, Fax No.: 011-411-201-6262, Berkeley Group Ltd., P.O. Box N-1836,
Suite A-096, Nassau, Bahamas, Fax No.: 415-449-3490, Nesher, Inc., Ragnall
House, 18 Peel Road, Douglas, Isle of Man 1M1 4L2, United Kingdom, Fax No.:
011-972-36120639, United Securities Services, Inc., 135 West 50th Street, New
York, New York, Fax No.: 212-541-4410, B.B.Y. Enterprises, Inc., 135 West 50th
Street, New York, New York, Fax No.: 212-541-4410, and Ellis Enterprises, Ltd.,
42A Waterloo Road, London, England NW2, 7UF, Fax No.: 011-441-014509004
(collectively, the "Lenders").
2. Recitals.
2.1 The Lenders have made loans to Debtor (the "Loans").
2.2 The Loans are evidenced by those certain Secured Convertible Notes
("Notes"), dated as of July 20, 1999 and executed by Debtor as the "Borrower"
thereof, for the benefit of each individual Lender as the "Holder" thereof.
2.3 In order to induce Lenders to make the Loans, and as security for
Debtor's performance of its obligations under the Notes and as security for the
repayment of the Loans and any and all other sums due from Debtor to Lender
whether arising under the Notes or pursuant to other written instruments and
agreements entered into by the Debtor and a Lender, whether before or after the
date hereof, and specifically including Put Notes that may be issued to the
Lenders pursuant to a Subscription Agreement entered into between Debtor and
each Lender relating to the Notes and further specifically including all of the
Debtor's obligations arising under such Subscription Agreement (collectively,
the "Obligations"), Debtor has agreed to grant to the Collateral Agent, for the
benefit of the Lenders, a security interest in certain property specified in
this Agreement, on the terms and conditions hereinafter set forth.
2.4 The Lenders have appointed Barbara Mittman as Collateral Agent pursuant
to that certain Collateral Agent Agreement dated as of July 20, 1999, among the
Lenders.
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Defined Terms. The following defined terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, General
Intangibles, Instruments, Inventory and Proceeds.
3. Grant of General Security Interest in Collateral.
3.1 As security for the Obligations, Debtor hereby grants the Collateral
Agent, for the benefit of the Lenders, a security interest in 1,000,000 common
shares of Teltran International Group, Ltd., a Delaware corporation, $.001 par
value common stock registered in Debtor's name ("Security Shares") (the
"Collateral"). Such Collateral shall include, but not be limited to, all the
Debtor's right, title and interest in and to the Collateral, together with the
proceeds of any sale, exchange, liquidation or other disposition, whether
voluntary or involuntary, and including but not limited to any securities,
instruments, and all benefits and entitlements evidenced by or arising out of
the Collateral and all other securities, instruments and other property (whether
real or personal, tangible or intangible) issued or accepted in substitution
for, or in addition to, the foregoing, and all dividends, interest, cash,
instruments, distributions, income, securities and any other property (whether
real or personal, tangible or intangible) at any time received, receivable or
otherwise distributed in respect of, or in exchange for, the foregoing, whether
now owned or hereafter acquired, and any and all improvements, additions,
replacements, substitutions and any and all proceeds arising out of or derived
from the foregoing. The Collateral Agent is hereby specifically authorized to
transfer any Collateral into the name of the Collateral Agent and to take any
and all action deemed advisable to the Collateral Agent to remove any transfer
restrictions affecting the Collateral.
4. Perfection of Security Interest.
Debtor shall execute and deliver to the Collateral Agent UCC-1 Financing
Statements ("Financing Statements") assigning to the Collateral Agent security
interests in Debtor's right, title and interest in and to the Collateral. Debtor
hereby authorizes the Collateral Agent to file such Financing Statements in the
appropriate filing locations.
5. Distribution on Liquidation of Subsidiary.
5.1 If any sum is paid as a liquidating distribution on or with respect to
the Collateral, Debtor shall accept same in trust for the Lenders and shall
deliver same to the Collateral Agent to be applied to the Obligations then due,
in accordance with the terms of the Notes, and Put Notes, if applicable.
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5.2 Prior to any Event of Default (as defined herein), Debtor shall be
entitled to exercise all voting power pertaining to any of the Collateral.
6. Further Action By Debtor: Covenants and Warrants.
6.1 Collateral Agent at all times shall have a perfected security interest
in the Collateral which shall be prior to any other unperfected interest
therein. Debtor has and will continue to have full title to the Collateral free
from any liens, leases, encumbrances, judgments or other claims and Collateral
Agent's security interest in the Collateral constitutes and will continue to
constitute a first, prior and indefeasible security interest in favor of
Collateral Agent. Debtor will do all acts and things, and will execute and file
all instruments (including, but not limited to, security agreements, financing
statements, continuation statements, etc.) reasonably requested by Collateral
Agent to establish, maintain and continue the perfected security interest of
Collateral Agent in the Collateral, and will promptly on demand, pay all costs
and expenses of filing and recording, including the costs of any searches deemed
necessary by Collateral Agent from time to time to establish and determine the
validity and the continuing priority of the security interest of Collateral
Agent, and also pay all other claims and charges that in the opinion of
Collateral Agent might prejudice, imperil or otherwise affect the Collateral or
its security interest therein.
6.2 Debtor will not sell, transfer, assign or pledge those items of
Collateral (or allow any such items to be sold, transferred, assigned or
pledged), without the prior written consent of Collateral Agent. Although
proceeds of Collateral are covered by this Security Agreement, this shall not be
construed to mean that Collateral Agent consents to any sale of the Collateral.
6.3 Debtor will, at all reasonable times, allow Collateral Agent or its
representatives free and complete access to all of Debtor's records which in any
way relate to the Collateral, for such inspection and examination as Collateral
Agent deems necessary.
6.4 Debtor, at its sole cost and expense, will protect and defend this
Security Agreement, all of the rights of Collateral Agent hereunder, and the
Collateral against the claims and demands of all other parties.
6.5 Debtor will promptly notify Collateral Agent of any levy, distraint or
other seizure by legal process or otherwise of any part of the Collateral, and
of any threatened or filed claims or proceedings that might in any way affect or
impair any of the rights of Collateral Agent under this Security Agreement.
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6.6 Debtor, at its expense, will obtain and maintain in force insurance
policies covering losses or damage to those items of Collateral which constitute
physical personal property. The insurance policies to be obtained by Debtor
shall be in form and amounts acceptable to Collateral Agent and Debtor shall
make the Collateral Agent a loss payee thereon. Collateral Agent is hereby
irrevocably appointed Debtor's attorney-in-fact to endorse any check or draft
that may be payable to Debtor, alone or jointly with other payees, so that
Collateral Agent may collect the proceeds payable for any loss under such
insurance. The proceeds of such insurance, less any costs and expenses incurred
or paid by Collateral Agent in the collection thereof, shall be applied either
toward the cost of the repair or replacement of the items damaged or destroyed,
or on account of any sums secured hereby, whether or not then due or payable.
6.7 Collateral Agent may, at its option, and without any obligation to do
so, pay, perform and discharge any and all amounts, costs, expenses and
liabilities herein agreed to be paid or performed by Debtor, and all amounts
expended by Collateral Agent in so doing shall become part of the Obligations
secured hereby, and shall be immediately due and payable by Debtor to Collateral
Agent upon demand and shall bear interest at 18% per annum from the dates of
such expenditures until paid.
6.8 Upon the request of Collateral Agent, Debtor will furnish within five
(5) days thereafter to Collateral Agent, or to any proposed assignee of this
Security Agreement, a written statement in form satisfactory to Collateral
Agent, duly acknowledged, certifying the amount of the principal and interest
then owing hereunder, whether any claims, offsets or defenses exist there
against or against this Security Agreement, or any of the terms and provisions
of any other agreement of Debtor securing the services. In connection with any
assignment by Collateral Agent of this Security Agreement, Debtor hereby agrees
to cause the insurance policies required hereby to be carried by Debtor, to be
endorsed in form satisfactory to Collateral Agent or to such assignee, with loss
payable clauses in favor of such assignee, and to cause such endorsements to be
delivered to Collateral Agent within ten (10) calendar days after request
therefor by Collateral Agent.
6.9 The Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports and
other assurances or instruments and take further steps relating to the
Collateral and other property or rights covered by the security interest hereby
granted, as the Collateral Agent may reasonable require.
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<PAGE>
6.10 The Debtor represents and warrants that it is the true and lawful
exclusive owner of the Collateral, free and clear of any liens and encumbrances.
6.11 The Debtor hereby agrees not to divest itself of any right under the
Collateral absent prior written approval of the Collateral Agent.
7. Power of Attorney.
Debtor hereby irrevocably constitutes and appoints the Collateral Agent as
the true and lawful attorney of Debtor, with full power of substitution, in the
place and stead of Debtor and in the name of Debtor or otherwise, at any time or
times, in the discretion of the Collateral Agent, to take any action and to
execute any instrument or document which the Collateral Agent may deem necessary
or advisable to accomplish the purposes of this Agreement which Debtor fails to
take or fails to execute within five (5) business days of the Collateral Agent's
reasonable request therefor. This power of attorney is coupled with an interest,
is irrevocable and shall not be affected by any subsequent disability or
incapacity of Debtor.
8. Performance By The Collateral Agent.
If Debtor fails to perform any material covenant, agreement, duty or
obligation of Debtor under this Agreement, the Collateral Agent may, at any time
or times in its discretion, take action to effect performance of such
obligation. All expenses of the Collateral Agent incurred in connection with the
foregoing authorization shall be payable by Debtor as provided in Paragraph 12.1
hereof. No discretionary right, remedy or power granted to the Collateral Agent
under any part of this Agreement shall be deemed to impose any obligation
whatsoever on the Collateral Agent with respect thereto, such rights, remedies
and powers being solely for the protection of the Collateral Agent.
9. Event of Default.
An event of default ("Event of Default") shall be deemed to have occurred
hereunder upon the occurrence of any event of default under the Notes. Upon and
after any Event of Default, after the applicable cure period, if any, any or all
of the Obligations shall become immediately due and payable at the option of the
Collateral Agent, for the benefit of the Lenders, and the Collateral Agent may
dispose of Collateral as provided below.
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10. Disposition of Collateral.
Upon and after any Event of Default which is then continuing,
10.1 The Collateral Agent may exercise its rights with respect to the
Collateral, without regard to the existence of any other security or source of
payment for the Obligations. In addition to other rights and remedies provided
for herein or otherwise available to it, the Collateral Agent shall have all of
the rights and remedies of a lender on default under the Uniform Commercial Code
("Code") then in effect in the State of New York.
10.2 If any notice to Debtor of the sale or other disposition of Collateral
is required by then applicable law, five (5) days' prior notice (or, if longer,
the shortest period of time permitted by then applicable law) to Debtor of the
time and place of any public sale of Collateral or of the time after which any
private sale or any other intended disposition is to be made, shall constitute
reasonable notification.
10.3 The Collateral Agent is authorized, at any such sale, if the
Collateral Agent deems it advisable to do so, in order to comply with any
applicable securities laws, to restrict the prospective bidders or purchasers to
persons who will represent and agree, among other things, that they are
purchasing the Collateral for their own account for investment, and not with a
view to the distribution or resale thereof, or otherwise to restrict such sale
in such other manner as the Collateral Agent deems advisable to ensure such
compliance. Sales made subject to such restrictions shall be deemed to have been
made in a commercially reasonable manner. The Collateral Agent shall comply in
good faith with all applicable securities laws.
10.4 All cash proceeds received by the Collateral Agent, for the benefit of
the Lenders, in respect of any sale, collection or other enforcement or
disposition of Collateral, shall be applied (after deduction of any amounts
payable to the Collateral Agent pursuant to Paragraph 12.1 hereof) against the
Obligations in such order as is specified in the Notes and Put Notes, if
applicable. Upon payment in full of all Obligations, Debtor shall be entitled to
the return of all Collateral, including cash, which has not been used or applied
toward the payment of Obligations or used or applied to any and all costs or
expenses of the Collateral Agent incurred in connection with the liquidation of
the Collateral (unless another person is legally entitled thereto). Any
assignment of Collateral by the Collateral Agent to Debtor shall be without
representation or warranty of any nature whatsoever and wholly without recourse.
The Lenders may purchase the Collateral and pay for such purchase by offsetting
any sums owed to Lender by Debtor arising under the Note, Put Note, Subscription
Agreement, or any other source.
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10.5 No exercise by the Collateral Agent of any right hereby given it, no
dealing by the Collateral Agent with Debtor or any other person, and no change,
impairment or suspension of any right or remedy of the Collateral Agent shall in
any way affect any of the obligations of Debtor hereunder or any Collateral
furnished by Debtor or give Debtor any recourse against the Collateral Agent.
11. Waiver of Automatic Stay. The Debtor acknowledges and agrees that should a
proceeding under any bankruptcy or insolvency law be commenced by or against the
Debtor, or if any of the Collateral (as defined in the Security Agreement)
should become the subject of any bankruptcy or insolvency proceeding, then the
Collateral Agent should be entitled to, among other relief to which the
Collateral Agent may be entitled under the Note (Put Note, if applicable),
Security Agreement, Subscription Agreement and any other agreement to which the
Debtor and Collateral Agent are parties, (collectively "Loan Documents") and/or
applicable law, an order from the court granting immediate relief from the
automatic stay pursuant to 11 U.S.C. Section 362 to permit the Collateral Agent
to exercise all of its rights and remedies pursuant to the Loan Documents and/or
applicable law. THE DEBTOR EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, THE DEBTOR EXPRESSLY ACKNOWLEDGES
AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE
BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11
U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY
WAY THE ABILITY OF THE COLLATERAL AGENT TO ENFORCE ANY OF ITS RIGHTS AND
REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. The Debtor hereby
consents to any motion for relief from stay which may be filed by the Collateral
Agent in any bankruptcy or insolvency proceeding initiated by or against the
Debtor and, further, agrees not to file any opposition to any motion for relief
from stay filed by the Collateral Agent. The Debtor represents, acknowledges and
agrees that this provision is a specific and material aspect of this Agreement,
and that the Collateral Agent would not agree to the terms of this Agreement if
this waiver were not a part of this Agreement. The Debtor further represents,
acknowledges and agrees that this waiver is knowingly, intelligently and
voluntarily made, that neither the Collateral Agent nor any person acting on
behalf of the Collateral Agent has made any representations to induce this
waiver, that the Debtor has been represented (or has had the opportunity to be
represented) in the signing of this Agreement and in the making of this waiver
by independent legal counsel selected by the Debtor and that the Debtor has had
the opportunity to discuss this waiver with counsel. The Debtor further agrees
that any bankruptcy or insolvency proceeding initiated by the Debtor will only
be brought in courts within the geographic boundaries of New York State.
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<PAGE>
12. Miscellaneous.
12.1 Expenses. Debtor shall pay to the Collateral Agent, on demand, the
amount of any and all reasonable expenses, including, without limitation,
attorneys' fees, legal expenses and brokers' fees, which the Collateral Agent
may incur in connection with (a) sale, collection or other enforcement or
disposition of Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any or
all of the Obligations; or (c) failure by Debtor to perform and observe any
agreements of Debtor contained herein which are performed by the Collateral
Agent.
12.2 Waivers, Amendment and Remedies. No courses of dealing by the
Collateral Agent and no failure by the Collateral Agent to exercise, or delay by
the Collateral Agent in exercising, any right, remedy or power hereunder shall
operate as a waiver thereof, and no single or partial exercise thereof shall
preclude any other or further exercise thereof or the exercise of any other
right, remedy or power of the Collateral Agent. No amendment, modification or
waiver of any provision of this Agreement and no consent to any departure by
Debtor therefrom, shall, in any event, be effective unless contained in a
writing signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. The rights, remedies and powers of the Collateral Agent, not only
hereunder, but also under any instruments and agreements evidencing or securing
the Obligations and under applicable law are cumulative, and may be exercised by
the Collateral Agent from time to time in such order as the Collateral Agent may
elect.
12.3 Notices. All demands, notices and other communications hereunder shall
be in writing and shall be deemed effective on the first business day following
the date of transmission by confirmed telecopier (with copy mailed by First
Class Mail the same day as telecopier transmission); when delivered in hand, or
three (3) days after being mailed, by certified or registered mail, postage
prepaid, return receipt requested, addressed as follows:
To Debtor: Antra Holdings Group, Inc.
1515 Locust Street, 4th Floor
Philadelphia, PA 19102
Fax: (215) 732-7979
To the Collateral Agent: Barbara R. Mittman
Grushko & Mittman
277 Broadway, Suite 801
New York, New York 10007
Fax: (212) 227-5865
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<PAGE>
Any party may change its address by written notice in accordance with this
paragraph.
12.4 Term: Binding Effect. This Agreement shall (a) remain in full force
and effect until payment and satisfaction in full of all of the Obligations; (b)
be binding upon Debtor and its successors and assigns; and (c) inure to the
benefit of the Collateral Agent, for the benefit of the Lenders and their heirs,
legal representatives, successors in title and assigns.
12.5 Captions. The captions of Paragraphs, Articles and Sections in this
Agreement have been included for convenience of reference only, and shall not
define or limit the provisions hereof and have no legal or other significance
whatsoever.
12.6 Governing Law; Venue; Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to principles of conflicts or choice of law, except to the extent that
the perfection of the security interest granted hereby in respect of any item of
Collateral may be governed by the law of another jurisdiction. Any legal action
or proceeding against the Debtor with respect to this Agreement may be brought
in the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, Debtor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. The Debtor hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement brought in the aforesaid courts and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable and the remaining, valid provisions shall remain of full force and
effect.
12.7 Counterparts/Execution. This Agreement may be executed in any number
of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.
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<PAGE>
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Security Agreement, as of the date first written above.
"DEBTOR"
ANTRA HOLDINGS GROUP, INC.
a Delaware corporation
By: _______________________________
Its: ______________________________
"THE COLLATERAL AGENT"
BARBARA MITTMAN
-----------------------------------
APPROVED:
-----------------------------------
AUSTOST ANSTALT SCHAAN
-----------------------------------
BALMORE FUNDS S.A.
-----------------------------------
BERKELEY GROUP LTD.
-----------------------------------
NESHER, INC.
-----------------------------------
UNITED SECURITIES SERVICES, INC.
-----------------------------------
B.B.Y. ENTERPRISES, INC.
----------------------------------
ELLIS ENTERPRISES, LTD.
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<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Corporation Jurisdiction where organized
Antra Music Group, Inc New Jersey
Antra Publishing, Inc. Pennsylvania
<PAGE>
Exhibit 23.1
Liebman Goldberg & Drogin, LLP
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the inclusion of our report dated May 26, 1999
with respect to Antra Holdings Group, Inc. for the year ended December 31, 1998
in this Registration Statement on Form SB-2 and to the reference to our firm
under the caption"Experts" in the Prospectus.
/s/ Liebman Goldberg & Drogin, LLP
----------------------------------
Liebman Goldberg & Drogin, LLP
Garden City, New York
September 15, 1999
