Exhibit 10.11
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the “Agreement”) effective June 30, 2009 (the “Closing Date”), is by and betweenPlatinum Studios, Inc., a California corporation ("Platinum" or “Purchaser”), having its principal offices at 11400 West Olympic Boulevard, 14thFloor, Los Angeles, California 90064;Wowio LLC, a Pennsylvania limited liability (“Wowio Penn”), having its offices at 11400 W. Olympic, 14thFloor, Los Angeles,Wowio LLC,a Texas limited liability company, with offices at 2525 Driscoll Street Houston, TX 77019 (“Wowio Texas”), and Brian Altounian (“Altounian”), an individual, and sole owner of Alliance Ac quisitions, Inc., which is the sole member (“ Alliance”) ofWowio Texas.
RECITALS:
A.ALTOUNIAN,through a newly-established Texas limited liability company,WOWIOTEXAS, which is owned 100% by Alliance, desires to obtain a controlling interest inWOWIOPENN, and will do so by causingWOWIOTEXASto acquire 100% of the issued and outstanding securities ofWOWIOPENNfromPlatinum.
B. It is the intention of the parties hereto that: (i)ALTOUNIAN,shall causeWOWIOTEXAS, to acquire all (100%) of the membership interests ofWOWIOPENN, in exchange for the assumption of liabilities and royalty agreement set forth below (the “Exchange”); and (ii) the Exchange shall qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933, as amended, and under the applicable securities laws of each state or jurisdiction where the Majority Interest Holders ofWOWIOTEXASreside.
C. Alliance, as the sole member ofWOWIOTEXASdeems it to be in the best interest ofWOWIOTEXASto acquire the membership interests ofWOWIOPENN.
D.Platinumdeems it to be in the best interests ofPlatinumto sell theWOWIOPENNmembership interests for the valuable consideration, as provided below.
NOW, THEREFORE,in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties hereto agree as follows:
SECTION 1. EXCHANGE OF SHARES
1.1Exchange of Membership Interests.WOWIOTEXASandPlatinumhereby agree that Platinum, shall, on the Closing Date (as hereinafter defined), exchange all of the issued and outstanding membership interests ofWOWIOPENN(the “WOWIOPENNMembership Interests”) for the total purchase consideration of $3,150,000. The total consideration shall be comprised of the following: (1) the assumption byWOWIOTEXASof an aggregate of $1,068,288.45 in debt
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owed byPlatinumto those individuals (the “Platinum Creditors”) set forth on Schedule A attached hereto (“Platinum Assumed Liabilities”); (2) debt ofWOWIOPENNexisting as of the Closing Date in the aggregate amount of $567,760.11, as more specifically set forth on Schedule B attached hereto (the “ExistingWOWIOPENNLiabilities”), and (3) an additional $1,513,936 to be paid via a royalty of 20% of gross revenues generated byWOWIOPENN,, its successors and assigns (the “Purchase Consideration Balance”) after which the royalty rate would decrease to 10%, and remain at 10% in per petuity. TheWOWIOPENNMembership Interests will be restricted against resale pursuant to the provisions of Federal and state securities laws. TheWOWIOPENNMembership Interests to be tendered will represent all of th e issued and outstanding capital interests ofWOWIOPENN.
1.2Delivery of Membership Interests.On the Closing Date, Platinum will deliver toWOWIOTEXASthe certificates representing theWOWIOPENNMembership Interests, to the extent such certificates exist, duly endorsed (or with executed assignments) so as to makeWOWIOTEXASthe sole owner thereof.
1.3Restricted Securities.TheWOWIOPENNMembership Interests have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be resold unless the resale thereof is registered under the Securities Act or an exemption from such registration is available. Each certificate representing theWOWIOPENNMembership Interests, to the extent such certificates exist, will have a legend thereon in substantially the following form:
The Interests represented by the certificate have not been registered under the Securities Act of 1933, as amended (the "Act"). The Interests have been acquired for investment and may not be sold or transferred in the absence of an effective Registration Statement for the resale of the Interests under the Act unless in the opinion of counsel satisfactory to the Company, registration is not required under the Act.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF PLATINUMAND WOWIOPENN
The Sole Member ofWOWIOPENN,Platinum, hereby represents and warrants as follows:
2.1Organization and Good Standing.WOWIOPENNis a limited liability company duly organized, validly existing and, to the knowledge ofPlatinumis in good standing under the laws of the State of Pennsylvania.WOWIOPENNhas the corporate power and authority to carry on its business as presently conducted.WOWIOPENNis qualified to do business in all jurisdictions where the failure to be so qualified would have a material adverse effect on its business.
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2.2Corporate Authority.WOWIOPENNhas the power to operate as a limited liability company and to perform any corporate obligations hereunder. The execution and delivery of this Agreement byPlatinum,, and the consummation of the transaction contemplated hereby, are not in violation of any restrictions governing member transactions. The execution and performance of this Agreement will not violate or conflict with any provision of the Articles of Organization or the Operating Agreement ofWOWIOPENN.
2.3Ownership of Interests.Platinumis the owner of record and beneficially of all of the issued and outstanding membership interests ofWOWIOPENN.Platinumrepresents and warrants that it owns such membership interests free and clear of all rights, claims, liens and encumbrances, and the membership interests have not been sold, pledged, assigned or otherwise transferred except pursuant to this Agreement.
2.4Approvals. ToPlatinum’sknowledge, no approval, authorization, consent, order or other action of, or filing with, any person, firm or corporation or any court, administrative agency or other governmental authority is required in connection with the execution and delivery of this Agreement byWOWIOPENNorPlatinumfor the consummation of the transactions described herein.
2.5No Breach.The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not:
(i) violate any provision of the Articles of Organization or the Operating Agreement ofWOWIOPENN;
(ii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon,WOWIOPENNor upon the properties or business ofWOWIOPENN;or
(iv) violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a material, adverse effect on the business or operations ofWOWIOPENN.
2.6Litigation.Except for the pending lawsuit filed by Paul Franz againstWOWIOPENNandPlatinum, there are no pending lawsuits filed against WOWIOPENN.
2.7Access to Records.The corporate financial records, minute books and other documents and records ofWOWIOPENNhave been made available toWOWIOTEXASandAltounianprior to the Closing hereof.
2.8Capitalization.The authorized capital ofWOWIOPENNconsists of one membership interest, held byPlatinum.
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2.9No Other Disclosures; “As Is” Transaction.The managing member ofWOWIOTEXAS,Altounian, is also the senior officer ofPlatinumwho has been responsible for day-today activities ofWOWIOPENNsince its acquisition byPlatinumand, therefore,WOWIOTEXASthrough its managing member,Altounian,has sufficient knowledge ofWOWIOPENN,its business, operations, liabilities and assets, to consummate this acquisition ofWOWIOPENN“as is and where is” without any further representations or warranties fromPlatinum.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF WOWIOTEXAS
Altounian,as the sole owner of Alliance, which is the sole member ofWOWIOTEXAS,together withWOWIOTEXAShereby represent and warrant as follows:
3.1Organization and Good Standing.WOWIOTEXASis a corporation duly organized, validly existing and in good standing under the laws of the State of Texas.
3.2Investment Representation.WOWIOTEXASis not relying upon any representation or warranty by Sellers with respect to the value of the Interests, except as specifically set forth in this Agreement, and accordingly, no such representations or warranties are made.
3.3Corporate Authority.WOWIOTEXAShas the power to operate as a limited liability company and to perform any corporate obligations hereunder. The execution and delivery of this Agreement byWOWIOTEXAS, and the consummation of the transaction contemplated hereby, are not in violation of any restrictions governing member transactions. The execution and performance of this Agreement, will not constitute a material breach of any agreement, indenture, mortgage, license or other instrument or document to whichWOWIOTEXASis a party and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable toWOWIOTEXASor its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the Articles of Organization or the Operating AgreementofWOWIOTEXAS.
3.4Ownership.Altounian, together with his company Alliance Acquisitions, Inc., constitute a majority of the voting interests ofWOWIOTEXAS.
3.5Approvals. No approval, authorization, consent, order or other action of, or filing with, any person, firm or corporation or any court, administrative agency or other governmental authority is required in connection with the execution and delivery of this Agreement byWOWIOTEXASfor the consummation of the transactions described herein.
3.6No Breach.The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not:
(i) violate any provision of the Articles of Organization or the Operating Agreement ofWOWIOTEXAS;
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(ii) violate, conflict with or result in the breach under any contract or other agreement to whichWOWIOTEXASis a party or by or to which it or any of its assets or properties may be bound or subject;
(iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon,WOWIOTEXASor upon the properties or business ofWOWIOTEXAS;or
(iv) violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a material, adverse effect on the business or operations ofWOWIOTEXAS.
SECTION 4A. CONDITIONS PRECEDENT
4.1Conditions Precedent to the Obligation of Sellers.All obligations ofPlatinumunder this Agreement are subject to the fulfillment, prior to or as of the Closing Date, as indicated below, of each of the following conditions:
(a) The assumption byWOWIOTEXASof the Platinum Liabilities pursuant to an assignment and assumption agreement in a form acceptable toPlatinum(the “Assignment and Assumption Agreement”) and receipt byPlatinumof releases executed by each of the Platinum Creditors irrevocably releasingPlatinumfrom the Platinum Liabilities in a form acceptable toPlatinum(the “Creditor Releases”); and
(b)WOWIOTEXASshall have performed and complied in all material respects, with all covenants, agreements, and conditions set forth in, and shall have executed and delivered all documents required by this Agreement to be performed or complied with or executed and delivered by them prior to or at the Closing.
4.2Conditions Precedent to the Obligations ofWOWIOTEXASAll obligations ofWOWIOTEXASunder this Agreement are subject to the fulfillment, prior to or at Closing, of each of the following conditions:
(a) The representations and warranties byWOWIOPENN, contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof shall be true in all material respects at and as of the Closing as though such representations and warranties were made at and as of such time;
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(b)Platinumshall have performed and complied with, in all material respects, all covenants, agreements, and conditions set forth in, and shall have executed and delivered all documents required by this Agreement to be performed or complied or executed and delivered by them prior to or at the Closing;
SECTION 4B. CONDITIONS SUBSEQUENT
Within 30 days following the Closing,WOWIOPENNshall execute and deliver toPlatinuma royalty agreement providing for the payment of two distinct royalty percentage: 20% untilPlatinumreceives the Purchase Considerati on Balance and 10% thereafter in perpetuity, as more specifically set forth in Schedule C attached hereto (the “Royalty Agreement”);
SECTION 5. COVENANTS
5.1Corporate Examinations and Investigations.Prior to the Closing Date, the parties acknowledge that they have been entitled, through their employees and representatives, to make such investigation of the assets, properties, business and operations, books, records and financial condition of the other as they each may reasonably require. No investigations, by a party hereto shall, however, diminish or waive any of the representations, warranties, covenants or agreements of the party under this Agreement.
5.2Further Assurances.The parties shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby. Each such party shall use its best efforts to fulfill or obtain the fulfillment of the conditions to the Closing, including, without limitation, the execution and delivery of any documents or other papers, the execution and delivery of which are necessary or appropriate to the Closing.
SECTION 6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Notwithstanding any right of either party to investigate the affairs of the other party and its members, each party has the right to rely fully upon representations, warranties, covenants and agreements of the other party and its members contained in this Agreement or in any document delivered to one by the other or any of their representatives, in connection with the transactions contemplated by this Agreement. All such representations, warranties, covenants and agreements shall survive the execution and delivery hereof and the closing hereunder for one year following the Closing.
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SECTION 7. INDEMNIFICATION
7.1Indemnification byWOWIOTEXASandWOWIOPENN. From and after the Closing Date,WOWIOTEXASandWOWIOPENN,jointly and seve rally, on their own behalf and on behalf of their successors and assigns hereby agree to indemnify, defend and hold harmlessPlatinum,its affiliates, subsidiaries, officers, directors, shareholders, employees, agents and other representatives (each, a “Platinum Affiliate”) from and against any and all claims, losses, damages of any kind, liabilities, obligations, actions, deficiencies, demands, costs, and expenses (whether or not arising out of third party claims), including, without limitation, all interest, fines, penalties, amounts paid in settlement, costs of mitigation, reasonable attorneys’ fees, court costs and all amounts paid in investigation, defense or settlement of any of the foregoing (collectively, “Damages”) imposed upon, incur red or sustained by any Platinum Affiliate arising out of or in connection with or as a result of or incident to (i) any misrepresentation made under Section 3 hereof,, (ii) the Platinum Assumed Liabilities, or (ii) the business and/or operation ofWOWIOPENN,both prior and subsequent to the Closing Date, including (without limitation) theWOWIOPENNExisting Liabilities.
7.2Indemnification byPlatinum. From and after the Closing Date,Platinum, on its own behalf and on behalf of its successors and assigns hereby agree to indemnify, defend and hold harmlessWOWIOTEXASandWOWIOPENN,and their respective affiliates, subsidiaries, officers, directors, shareholders, employees, agents and other representatives (each, a “Wowio Affiliate”) from and against any and all Damages imposed upon, incurred or sustained by any Wowio Affiliate arising out of or in connection with or as a result of or incident to any misrepresentation made under Section 2.1 through 2.8 hereof.
7.3Indemnification of Former Members ofWOWIOPENN.Platinumpreviously acquired theWOWIOPENNMembership Interests from the former members ofWOWIOPENNpursuant to a Membership Acquisition Agreement dated July 15, 2008 (the “Previous Acquisition Agreement”) which included indemnification provisions given toPlatinumandWOWIOPENNby the former members ofWOWIOPENN.In the event thatWOWIOPENNand/orWOWIOTEXASshould incur any liability or cost that would otherwise be covered by the indemnification provisions of the Previous Acquisition Agreement, thenPlatinumhereby assigns toWOWIOPENNandWOWIOTEXASsuch rights to indemnification as a successor-in-interest toPlatinum’srights under the Previous Acquisition Agreement; provided, however, nothing herein shall prevent, proscribe or circumscribePlatinum’srights to indemnification under the Previous Acquisition Agreement to the extentPlatinumincurs any liability or cost that would subject to indemnification thereunder.
SECTION 8. DOCUMENTS AT CLOSING AND THE CLOSING
8.1Documents at Closing. At the Closing, the following transactions shall occur, all of such transactions being deemed to occur simultaneously:
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(a)WOWIOPENNwill deliver, or will cause to be delivered, toWOWIOTEXASthe following:
(i) Certificates, if any exist, representing theWOWIOPENNMembership Interests to be delivered toWOWIOTEXASwill be delivered, along with duly executed powers transferring such certificates toWOWIOTEXAS.
(ii) all other items, the delivery of which is a condition precedent to the obligations ofWOWIOTEXAS, as set forth in Section 4.
(iii) resignation of the Manager;
(iv) corporate resolutions approving sale ofWOWIOPENNMembership Interests pursuant to this Agreement; and
(v) all available corporate records ofWOWIOPENN;
(b)WOWIOTEXASwill deliver, or cause to be delivered:
(i) the Assignment and Assumption Agreement;
(ii) the Creditor Releases; and
(iii) resolution of members approving the acquisition of theWOWIOPENNMembership Interests pursuant to this Agreement.
8.2The Closing.The Closing shall take place on the Closing Date at the offices ofPlatinum. At the Closing, the parties shall provide each other with such documents as may be necessary.
SECTION 9. MISCELLANEOUS
9. 1Waivers.The waiver of a breach of this Agreement or the failure of any party hereto to exercise any right under this Agreement shall in no way constitute waiver as to future breach whether similar or dissimilar in nature or as to the exercise of any further right under this Agreement.
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9.2Amendment.This Agreement may be amended or modified only by an instrument of equal formality signed by the parties or the duly authorized representatives of the respective parties.
9.3Assignment.This Agreement is not assignable except by operation of law.
9.4Notice.Until otherwise specified in writing, the mailing addresses and fax numbers of the parties of this Agreement shall be as follows:
To:WOWIOTEXAS:
Brian Altounian
11400 W. Olympic Blvd, Suite 1400
Los Angeles, California 90064
(310) 807-8181 direct
(310) 276-2799 fax
To:WOWIOPENN/PLATINUM:
Scott Rosenberg, CEO
Platinum Studios, Inc.
11400 West Olympic Boulevard, Suite 1400
Los Angeles, California 90064
with copy to:
Dieterich & Mazarei
11300 W. Olympic Boulevard, Suite 800
Los Angeles, California 90064
Any notice or statement given under this Agreement shall be deemed to have been given if sent by registered mail addressed to the other party at the address indicated above or at such other address which shall have been furnished in writing to the addressor.
9.5Governing Law.This Agreement shall be construed, and the legal relations between the parties determined, in accordance with the laws of the State of California, thereby precluding any choice of law rules which may direct the application of the laws of any other jurisdiction.
9.6Publicity.No publicity release or announcement concerning this Agreement or the transactions contemplated hereby shall be issued by either party hereto at any time from the signing hereof without advance approval in writing of the form and substance by the other party.
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9.7Entire Agreement.This Agreement (including the Exhibits and Schedules to be attached hereto) and the collateral agreements executed in connection with the consummation of the transactions contemplated herein contain the entire agreement among the parties with respect to the exchange and issuance of theWOWIOPENNInterests and theWOWIOTEXASInterests and related transactions, and supersede all prior agreements, written or oral, with respect thereto.
9.8Headings.The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
9.9Severability of Provisions.The invalidity or unenforceability of any term, phrase, clause, paragraph, restriction, covenant, agreement or provision of this Agreement shall in no way affect the validity or enforcement of any other provision or any part thereof.
9.10Counterparts.This Agreement may be executed in any number of counterparts, each of which when so executed, shall constitute an original copy hereof, but all of which together shall consider but one and the same document.
9.11Binding Effect.This Agreement shall be binding upon the parties hereto and inure to the benefit of the parties, their respective heirs, administrators, executors, successors and assigns.
9.12Tax Treatment.WOWIOTEXASandPlatinumacknowledge that they each have been represented by their own tax advisors in connection with this transaction; that none of them has made a representation or warra nty to any of the other parties with respect to the tax treatment accorded this transaction, or the effect individually or corporately on any party under the applicable tax laws, regulations, or interpretations; and that no opinion of counsel or private revenue ruling has been obtained with respect to the effects of this transaction under the Code.
9.13Press Releases. The parties will mutually agree as to the wording and timing of any informational releases concerning this transaction prior to and through Closing.
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IN WITNESS WHEREOF,the parties have executed this Agreement on the date first above written.
WOWIOTEXASLLC
a Texas limited liability company
By: Alliance Acquisitions, Inc., Sole Member
By:
_______________________________
Brian Altounian, CEO
WOWIO, LLC,
a Pennsylvania limited liability company
By: Platinum Studios, Inc., sole member
By:
____________________________
Scott Mitchell Rosenberg, CEO
PLATINUMSTUDIOS, INC.
| By: | |
| | Scott Mitchell Rosenberg, CEO |
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