EXHIBIT 99.1
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "AGREEMENT"),
dated as of April 25, 2002, is entered into by and among J2 COMMUNICATIONS, a
California corporation (the "COMPANY"), National Lampoon Acquisition Group, LLC,
a California limited liability company ("NLAG"), and those parties set forth on
the Schedule of Purchasers attached hereto (collectively, the "PURCHASERS"). The
Company, NLAG and the Purchasers (individually, a "PARTY" and, collectively, the
"PARTIES") agree as follows:
ARTICLE 1. AUTHORIZATION; SALE OF SHARES AND WARRANTS; OPTION GRANT
SECTION 1.1 AUTHORIZATION OF THE SHARES AND WARRANTS. Subject to the
approval of the shareholders of the Company becoming effective in accordance
with Section 1.4, the Company has authorized the issuance and sale pursuant to
this Agreement of up to Sixty Four Thousand Five Hundred (64,500) shares (the
"SHARES") of its Series B Convertible Preferred Stock, no par value per share
(the "SERIES B PREFERRED"), having the preferences and rights set forth in the
Company's proposed Second Amended and Restated Articles of Incorporation (the
"AMENDED AND RESTATED ARTICLES"), the form of which are attached hereto as
Exhibit A, together with warrants to purchase up to One Million Eight Hundred
Sixteen Thousand Nine Hundred One (1,816,901) shares of no par value Common
Stock of the Company (as hereinafter defined, the "COMMON STOCK") at a purchase
price (subject to adjustment as provided in the Warrant Agreement) of Three
Dollars and Fifty-Five Cents ($3.55) per share until the second anniversary of
the date of issuance thereof and Five Dollars ($5.00) per share on and after
such date (the "WARRANTS") in accordance with the form of Common Stock Warrant
attached hereto as Exhibit O (the "WARRANT AGREEMENT"). The Shares and the
Warrants being sold hereunder are being sold in units consisting of (a) one
Share of Series B Preferred and (b) a Warrant to purchase 28.169 shares of
Common Stock (together, and subject to adjustment as provided herein or in the
Warrant Agreement, a "UNIT"). The number of Units that will be sold at the
Closing as contemplated by Section 1.2 hereof will be Thirty-Five Thousand Two
Hundred Forty-Four (35,244) Units (the "PURCHASED UNITS") and the remaining
Twenty-Nine Thousand Two Hundred Fifty-Six (29,256) Units (the "OPTION Units")
may be sold in the manner described in Section 1.3 hereof.
SECTION 1.2 SALE OF THE UNITS. Subject to the approval of the
shareholders of the Company becoming effective in accordance with Section 1.4
and the other terms and conditions hereof, and in reliance upon the
representations, warranties and agreements contained herein, the Company will
issue and sell to each Purchaser, and each Purchaser will purchase from the
Company at the Closing (as hereinafter defined) the number of Units set forth
opposite such Purchaser's name on the Schedule of Purchasers attached hereto
(the "SCHEDULE OF PURCHASERS"), in each case at a purchase price per Unit of
$100.00 and for the aggregate purchase price set forth opposite such Purchaser's
name on the Schedule of Purchasers.
SECTION 1.3 OPTION TO PURCHASE ADDITIONAL UNITS. Subject to the approval
of the shareholders of the Company becoming effective in accordance with Section
1.4, the Company has authorized and hereby grants to NLAG, or NLAG's designees,
effective upon the Closing, an option (the "OPTION") to purchase from the
Company for cash up to all or any of the Option Units for a purchase price of
$100.00 per Unit, subject to adjustment as provided in this Section. The Option
may be exercised in whole or in part at any time, and from time to time, prior
to the
PAGE 1
earliest of (a) January 25, 2003, or (b) ninety (90) days after the
Company's shares are relisted for trading on the NASDAQ Small Cap Market or
listed on any other national exchange or quotation system. The Option shall be
deemed exercised when the Company has received (i) written notice of such
exercise from NLAG or NLAG's designees and (ii) payment of the option purchase
price for all Option Units as to which this Option is exercised. Upon (and as a
part of) exercise of all or any part of the Option as provided in this Section,
the Company shall promptly issue and deliver to each purchaser a certificate or
certificates for the number of Shares and a Warrant Agreement for the number of
Warrants to be issued upon such exercise. The Option shall be deemed to be
exercised at the close of business on the date the Option is exercised and the
purchaser of the Option Units shall be treated for all purposes as the record
holder of the Shares being purchased on such date. Holders of Warrants shall
have no rights with respect to shares of Common Stock issuable upon exercise of
such Warrants until such Warrants have been duly exercised pursuant to the terms
and conditions thereof. The Company shall make or provide for such adjustments
in the numbers of Option Units, in the price per Option Unit applicable to the
Option, and in the kind and number of Shares and Warrants covered by the Option,
as is equitably required to prevent dilution or enlargement of the rights of
NLAG or its designees that otherwise would result from any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company or any other corporate transaction or event having a
similar effect. Upon exercise of all or any part of the Option and before any
Shares or Warrants are issued pursuant to such exercise, the purchasers of the
Option Units (the "OPTION PURCHASERS") shall make representations and warranties
to the Company substantially similar to those made by each Purchaser in Article
4 of this Agreement and agree to indemnify the Company for breaches thereof
pursuant to an indemnity substantially similar to that contained in Section 9.2
of this Agreement, in each case in a form reasonably satisfactory to the Company
and its legal counsel.
SECTION 1.4 SHAREHOLDER CONSENT AND INFORMATION STATEMENT. Concurrently
with the execution of this Agreement, shareholders of the Company entitled to
vote in excess of a majority of the outstanding shares of the Company's Common
Stock have acted by written consent to approve (i) the issuance of the Units and
the Option Units, (ii) the grant of the Option, (iii) the adoption of the
Amended and Restated Articles of the Company (as defined in Section 5), (iv) the
adoption of the Amended and Restated Bylaws of the Company (as defined in
Section 5), (v) the Second Amended and Restated 1999 Stock Option, Deferred
Stock and Restricted Stock Plan, which plan was approved by the Company's Board
of Directors on January 30, 2002, (vi) the grant to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("JIMIRRO")
of an option to purchase 400,000 shares of the Company's Common Stock, which
grant was approved by the disinterested members of the Company's Board of
Directors on January 30, 2002 and was made as of such date (the "Jimirro
Option") with vesting subject, among other things, to approval of the Company's
shareholders, and (vii) the terms and the Company's entry into of the Jimirro
Employment Agreement, the Jimirro Security Agreement, the Jimirro Registration
Rights Agreement, and the Jimirro Indemnity Agreement (each as defined in
Section 5) (collectively, the "SHAREHOLDER CONSENT"). The Shareholder Consent is
conditioned upon the consummation of the transactions contemplated by this
Agreement. The Shareholder Consent has been delivered to the Secretary of the
Company. The Shareholder Consent shall become effective on the date 21 days
after the mailing of the Definitive Information Statement (as defined below) to
the shareholders of the Company as provided below. In connection with the
Shareholder Consent, the Company shall prepare and file an amendment to the
preliminary information statement submitted to the
PAGE 2
Securities and Exchange Commission (the "SEC") relating to the matters covered
by the Shareholder Consent (the "PRELIMINARY INFORMATION STATEMENT AMENDMENT")
with the SEC and shall use its best efforts to respond to comments of the
members of the SEC's staff and to cause a definitive information statement to be
mailed to the Company's shareholders (the "DEFINITIVE INFORMATION STATEMENT"),
all as soon as reasonably possible; provided that prior to the filing of each of
the Preliminary Information Statement Amendment and the Definitive Information
Statement, the Company shall consult with NLAG and the Purchasers with respect
to such filings and shall afford NLAG and the Purchasers a reasonable
opportunity to comment thereon. The Company shall promptly notify NLAG and the
Purchasers of the receipt of the comments of the members of the SEC's staff and
of any request from the members of the SEC's staff for amendments or supplements
to the Preliminary Information Statement or the Definitive Information Statement
or for additional information, and will promptly supply NLAG and the Purchasers
with copies of correspondence between the Company or its representatives, on the
one hand, and the SEC or members of the SEC's staff, on the other hand, with
respect to the Preliminary Information Statement, the Definitive Information
Statement or this Agreement. If at any time prior to the effectiveness of the
Shareholder Consent any event should occur which is required by applicable law
to be set forth in an amendment of, or a supplement to, the Definitive
Information Statement, the Company will promptly inform NLAG and the Purchasers
of such event. In such case the Company will, upon learning of such event,
promptly prepare and mail such amendment or supplement; provided, that prior to
such mailing the Company shall consult with NLAG and the Purchasers with respect
to such amendment or supplement and shall afford NLAG and the Purchasers a
reasonable opportunity to comment thereon. The Company will notify NLAG and the
Purchasers at least 24 hours prior to the mailing of the Definitive Information
Statement, or any amendment or supplement thereto, to the shareholders of the
Company.
SECTION 1.5 PURCHASER DESIGNEE. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, one of the
Purchasers, may allocate the right and obligation to purchase up to 2,500 of the
Units he is obligated to purchase at the Closing to one or more persons or
entities who, prior to or at the Closing, must become a party or parties to and
be bound by (a) this Agreement as a Purchaser or Purchasers, and (b) all
agreements and instruments to be executed and delivered by the Purchasers as
contemplated by this Agreement. This Agreement (including without limitation
Schedule 4.9) and all other agreements and instruments to be executed and
delivered by the Purchasers will be revised as necessary to accommodate the
addition of such new Purchaser(s) and to add appropriate information as to any
such additional Purchasers designated by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
ARTICLE 2. CLOSING; DELIVERY
SECTION 2.1 CLOSING. The closing of the purchase and issuance of the
Shares and Warrants and the grant of the Option hereunder (the "CLOSING") shall
be held at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ in Los Angeles at 10 A.M., P.S.T., on
the business day after all of the conditions to the respective obligations of
the Parties set forth in Article 5 shall have been satisfied or waived or on
such other business day thereafter on or prior to the Termination Date (as
defined below) as may be agreed upon by the Parties (the "CLOSING DATE"). Each
Party shall use commercially reasonable efforts to (i) take or cause to be taken
all actions, and do or cause to be done all things, which are necessary, proper
or advisable to cause any other Party's conditions set forth in Article 5 to be
fully satisfied (but not waived) (including, without limitation, executing and
delivering the documents provided for therein to which it is a party in the
forms
PAGE 3
attached hereto as Exhibits) and (ii) consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
SECTION 2.2 DELIVERY. At the Closing, in addition to each Party making
such deliveries and taking such actions as are required to satisfy its
obligations under Section 2.1 or elsewhere in this Agreement, the Company will
deliver to each of the Purchasers a certificate or certificates and Warrant
Agreement(s) (in definitive form) in such denominations and registered in each
Purchaser's name, as set forth in the Schedule of Purchasers, representing,
respectively, the number of Shares of Series B Preferred and the number of
Warrants to be purchased by each of the Purchasers from the Company against
payment of the purchase price therefor by wire transfer of immediately available
funds, or such other form of payment as shall be mutually agreed upon by the
Purchasers and the Company. As noted on the Schedule of Purchasers, the purchase
price for $450,000 of the Units to be purchased pursuant to this Agreement has
previously been paid to the Company as fees for extensions of the Letter
Agreement, dated March 5, 2001, among the Company and certain of the Purchasers
(the "MARCH LETTER AGREEMENT"). In addition, each of the Purchasers may take
credit against the purchase price owed for such Purchaser's Units for expenses
paid directly by such Purchaser which the Company is obligated to pay under
Section 10.12 in the amounts shown on the Schedule of Purchasers (the "PURCHASER
EXPENSES"). The value of the Purchaser Expenses being credited to each Purchaser
against the purchase price for the Units being purchased (or to be purchased) by
such Purchaser shall be the amount set forth next to the name of such Purchaser
in the appropriate section of the Schedule of Purchasers attached hereto. The
amounts of Purchaser Expenses shown on the Schedule of Purchasers have been
approved by the Company and no further approval of such amounts shall be
necessary.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except to the extent set forth on the Company's Schedule of Exceptions
attached hereto with respect to only those sections of this Agreement specified
therein (the "SCHEDULE OF EXCEPTIONS"), which Schedule of Exceptions contains,
with respect to each matter disclosed therein, a specific reference to the
representation and warranty to which such matter is an exception, the Company
hereby represents and warrants to NLAG, the Purchasers and the Option Purchasers
as follows:
SECTION 3.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California. The Company has furnished the Purchasers with
complete and correct copies of its Articles of Incorporation and Bylaws as in
effect immediately prior to the date of this Agreement.
SECTION 3.2 CORPORATE POWER; AUTHORITY. The Company has all requisite
corporate power and authority to enter into this Agreement, the NLAG
Registration Rights Agreement, the Jimirro Registration Rights Agreement, the
Note Termination Agreement, the Termination Agreement, the Release Agreement,
the Jimirro Employment Agreement, the Jimirro Indemnity Agreement, the Jimirro
Security Agreement, and the ▇▇▇ ▇▇▇▇▇▇ Assignment Documents (in each case, as
defined in Article 5) and the Company will have at the Closing Date all
requisite corporate power to issue and sell the Shares and the Warrants, to
issue the Common Stock (as defined in Section 3.3) initially issuable upon
conversion of the Shares and the Option Shares (as defined below) (the
"CONVERSION SHARES") or upon exercise of the Warrants (the "WARRANT SHARES"), to
grant the Option, to issue the shares of Series B Preferred issuable upon
exercise of
PAGE 4
the Option (the "OPTION SHARES"), to issue the Warrants issuable upon the
exercise of the Option, and to carry out and perform its obligations under the
terms of this Agreement, the NLAG Registration Rights Agreement, the Jimirro
Registration Rights Agreement, the Note Termination Agreement, the Termination
Agreement, the Release Agreement, the Jimirro Employment Agreement, the Jimirro
Indemnity Agreement, the Jimirro Security Agreement, each Warrant Agreement and
the ▇▇▇ ▇▇▇▇▇▇ Assignment Documents and all other agreements contemplated hereby
to which the Company is to be a party (collectively, the "COMPANY RELEVANT
DOCUMENTS"). All corporate action on the part of the Company, its directors and
shareholders necessary for the due authorization, execution, delivery and
performance by the Company of the Company Relevant Documents, the approval,
adoption and filing with the Secretary of State of the State of California of
the Amended and Restated Articles and the approval and adoption of the Amended
and Restated Bylaws and the consummation of the transactions contemplated herein
and therein, and for the grant of the Option and the due authorization, issuance
and delivery of the Warrants, the Shares, the Option Shares, the Warrant Shares
and the Conversion Shares, has been taken or will be taken prior to the Closing.
Each Company Relevant Document is a legal, valid and binding obligation of the
Company, enforceable in accordance with its respective terms, subject to
applicable bankruptcy, insolvency, reorganization and moratorium laws and other
laws of general application affecting enforcement of creditors' rights
generally.
SECTION 3.3 CAPITALIZATION. As of the Closing and immediately
thereafter, the Company's authorized capital stock shall consist of: (a)
15,000,000 shares of Common Stock, no par value per share (the "COMMON STOCK"),
of which 1,382,483 shares shall be issued and outstanding, 1,500,000 shares
shall be reserved for issuance upon exercise of stock options, 1,926,929 shares
shall be reserved for issuance upon conversion of the Series B Preferred, and
1,816,901 shares shall be reserved for issuance upon exercise of the Warrants
and (b) 68,406 shares of Series B Preferred, of which the Purchased Shares shall
be issued and outstanding, a number of shares equal to the number of the Option
Units shall be reserved for issuance upon exercise of the Option, and 3,906
shares shall be reserved for issuance upon exercise of the warrants contemplated
by the ▇▇▇▇▇▇▇▇▇ Warrant Agreement and the GTH Warrant Agreement (each as
defined below). All the aforesaid issued and outstanding shares are duly
authorized and validly issued, fully paid and nonassessable and have been
offered, issued, sold and delivered by the Company in compliance with all
applicable federal and state securities laws. Except as disclosed on the
Schedule of Exceptions and except for the ▇▇▇▇▇▇▇▇▇ Warrant Agreement, the GTH
Warrant Agreement, the Option Units and the Warrants, there are no outstanding
(i) preemptive, conversion or other rights, options, warrants or agreements
granted or issued by or binding upon the Company or any subsidiary of the
Company for the purchase or acquisition of any shares of its capital stock,
except with respect to the Series B Preferred in accordance with the provisions
of this Agreement and the Amended and Restated Articles, (ii) phantom equity,
equity appreciation or similar rights which permit the holder thereof to
participate in the residual equity value of, or appreciation in the equity value
of, the Company, (iii) any securities, instruments or rights which permit the
holder thereof, under any circumstances, to vote for the election of members of
the Company's Board of Directors or (iv) any securities, instruments or rights
which are, directly or indirectly, convertible into or exercisable or
exchangeable for any of the securities, instruments or rights described in
clause (i), (ii) or (iii) above. The Administrator (as defined therein) has not
elected to cash out by payment of cash or other property any outstanding stock
options, restricted stock or deferred stock awards under Section 10.1(c) of the
PAGE 5
Company's 1999 Stock Option, Deferred Stock and Restricted Stock Plan as a
result of the consummation of the transactions contemplated by this Agreement
and the other agreements entered into in connection herewith and there are no
outstanding rights to any such payments on the part of any holders of stock
options, restricted stock or deferred stock awards under such Plan. As of the
Closing, the Board of Directors of the Company has the right under the Rights
Agreement of the Company, dated as of July 15, 1999, as amended (the "RIGHTS
PLAN") to redeem all outstanding Rights (as defined therein) without the
approval, consent or waiver of any person or entity. As of the Closing, the
Company has taken all action necessary under the Rights Plan to redeem all
outstanding Rights (as defined therein). As of the Closing, all Rights issued
under the Rights Plan have been redeemed and the Rights Plan terminated, and the
only remaining right of any shareholder of the Company or any person who held
Rights immediately prior to their redemption in connection with the Rights Plan
will be the right to receive the Redemption Price (as defined in the Rights
Plan). No Common Shares or Preferred Shares (each as defined in the Rights Plan)
have been issued or following the redemption of the Rights and the termination
of the Rights Plan will be issuable under the Rights Plan. Since July 15, 1999,
no Trigger Event, Distribution Date or Share Acquisition Date (each as defined
in the Rights Plan) has occurred and at no time has any person become an
Acquiring Person (as defined in the Rights Plan). The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby or
in connection herewith will not result in or cause (i) a breach of the Rights
Plan, (ii) the occurrence of a Trigger Event, Distribution Date or Share
Acquisition Date or (iii) any person to become an Acquiring Person.
SECTION 3.4 VALIDITY OF THE SHARES, OPTION SHARES, CONVERSION SHARES,
WARRANTS AND WARRANT SHARES; NO CONFLICT. The Shares, the Option Shares, the
Conversion Shares, the Warrants and the Warrant Shares, when issued in
compliance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable, and will be free of any liens, claims, preemptive rights
or any other encumbrances of any kind or nature whatsoever, except for any
applicable restrictions imposed by federal or state securities laws. The
Conversion Shares, the Option Shares and the Warrant Shares have been duly
authorized and validly reserved, are not subject to any preemptive rights or
rights of first refusal and, upon payment of the purchase price therefor and
issuance in conformity with the Amended and Restated Articles, this Agreement
and the applicable Warrant Agreement, as applicable, will be validly issued,
fully paid and nonassessable, and will be free of any liens, claims, preemptive
rights or any other encumbrances of any kind or nature whatsoever, except for
any applicable restrictions imposed by federal or state securities laws. The
execution, delivery and performance by the Company of each Company Relevant
Document will not result in any violation of, or be in conflict with, or result
in a breach of, or constitute a default under, (a) any term or provision of any
state or Federal law or regulation to which the Company is subject and which are
generally applicable to transactions of the type contemplated by this Agreement,
or (b) the Company's Articles of Incorporation or Bylaws, as amended and
restated and in effect on the date hereof, or (c) any material agreement to
which the Company is a party or by which it is bound, except, in the case of
clause (a) and (c) above, for violations, conflicts, breaches or defaults which
would not have a material adverse effect on the business, operations,
properties, financial condition, assets or liabilities of the Company.
SECTION 3.5 FINANCIAL INFORMATION. The audited consolidated financial
statements of the Company and its subsidiaries (including the notes to such
financial statements) included in the Company's Annual Report on Form 10-K for
the year ended July 31, 2001 (the "FORM 10-K")
PAGE 6
and the unaudited interim financial statements of the Company and it
subsidiaries included in the Company's Quarterly Report on Form 10-Q for the six
month period ended October 31, 2001 (the "FORM 10-Q") filed pursuant to the
Securities Exchange Act of 1934, as amended, present fairly the financial
condition and operating results of the Company and it subsidiaries at the dates
and for the periods to which they relate (subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments and any other
adjustments described therein), have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently followed throughout the
periods involved (except as may be indicated therein or in the notes thereto).
SECTION 3.6 SEC REPORTS. Other than as specified in the Schedule of
Exceptions, the Form 10-K and Form 10-Q did not, on the dates of their
respective filing, 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, in light of the circumstances under which they were made,
not misleading.
SECTION 3.7 AFFILIATE ARRANGEMENTS. Except as set forth in the Schedule
of Exceptions, there are no contractual or other arrangements, whether written
or oral, between the Company, or any subsidiary of the Company, and any officer
or director of the Company or any of their respective spouses or relatives (or
any entity controlled by any such persons).
ARTICLE 4. REPRESENTATIONS, WARRANTIES OF NLAG AND PURCHASERS
NLAG, with respect to information about itself only, and each of the
Purchasers, with respect to information about themselves only, represent and
warrant to the Company as follows:
SECTION 4.1 ORGANIZATION AND STANDING. NLAG is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of California.
SECTION 4.2 POWER. NLAG has all requisite power and authority to enter
into this Agreement, the Release Agreement and all other agreements contemplated
hereby to which NLAG is to be a party (collectively, the "NLAG RELEVANT
DOCUMENTS"). Each of the Purchasers has all requisite power and authority to
enter into this Agreement, the Release Agreement and all other agreements
contemplated hereby to which such Purchaser is to be a party (collectively, the
"PURCHASER RELEVANT DOCUMENTS").
SECTION 4.3 NLAG AUTHORIZATION. NLAG has taken, or at the Closing will
have taken, all actions necessary to authorize it (i) to perform all of its
obligations under the NLAG Relevant Documents and (ii) to consummate the
transactions contemplated hereby and thereby. The NLAG Relevant Documents are
legally valid and binding obligations of NLAG enforceable against it in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
application affecting enforcement of creditors' rights generally.
SECTION 4.4 PURCHASER AUTHORIZATION. Such Purchaser has taken, or at the
Closing will have taken, all actions necessary to authorize it (i) to perform
all of its obligations under the Purchaser Relevant Documents and (ii) to
consummate the transactions contemplated hereby and thereby. The Purchaser
Relevant Documents are legally valid and binding obligations of such Purchaser
enforceable against it in accordance with their respective terms, subject to
applicable
PAGE 7
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally.
SECTION 4.5 KNOWLEDGE. Such Purchaser is an "accredited investor" as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "SECURITIES ACT") and has such knowledge
and experience in financial business matters as to be capable of evaluating the
merits and risks of its investment, has no need for liquidity in its investment
and has the ability to bear the economic risks of its investment.
SECTION 4.6 INVESTMENT. Such Purchaser is acquiring the Shares, the
Option Shares, the Conversion Shares, the Warrants and the Warrant Shares to be
purchased by it for investment for its own account and not with the view to, or
for resale in connection with, any public distribution thereof. Such Purchaser
understands that the Shares, the Option Shares, the Conversion Shares, the
Warrants and the Warrant Shares have not been registered under the Securities
Act or under any state securities laws by reason of a specified exemption from
the registration provisions of the Securities Act and such state securities laws
which depends upon, among other things, the bona fide nature of such Purchaser's
investment intent as expressed herein.
SECTION 4.7 RESALE RESTRICTIONS. Such Purchaser acknowledges that the
Shares, the Option Shares, the Conversion Shares, the Warrants and the Warrant
Shares acquired by it must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available.
SECTION 4.8 EXEMPTION FROM THE SECURITIES ACT. The offer and sale by the
Company of the Shares, the Option Shares, the Conversion Shares, the Warrants
and the Warrant Shares to the Purchasers, as contemplated by this Agreement,
qualifies for exemption from the registration requirements of the Securities
Act, without limitation, pursuant to the requirements of Rule 506 promulgated
thereunder insofar as such requirements apply to the purchasers of securities in
a transaction relying on such rule for an exemption from the registration
requirements of the Securities Act.
SECTION 4.9 OWNERSHIP. NLAG and each Purchaser represents and warrants
that except as otherwise provided on Schedule 4.9 attached hereto the number of
Common Shares of the Company reported as beneficially owned by it in the
Schedule 13D/A filed collectively on January 31, 2002 was accurate on the date
of the filing of such schedule and remains accurate as of the date hereof (or as
updated prior to the Closing on account of additional Common Shares acquired as
permitted by Section 10.10).
ARTICLE 5. CONDITIONS
SECTION 5.1 CONDITIONS TO CLOSING OF NLAG AND PURCHASERS. Each
Purchaser's obligation to purchase the Units to be purchased by it at the
Closing and NLAG's obligation to sign the Release Agreement are subject to the
fulfillment to their respective satisfaction on or prior to the Closing of each
of the following conditions:
5.1.1 REPRESENTATIONS AND WARRANTIES CORRECT. The
representations and warranties made by the Company herein and pursuant
hereto shall have been true and correct in all respects when made and
shall be true and correct in all material respects on the Closing Date
with the same force and effect as if they had been made at and as of the
Closing Date.
PAGE 8
5.1.2 PERFORMANCE. The Company shall have materially complied
with all covenants, agreements and conditions contained in this
Agreement to be performed or complied with by the Company on or prior to
the Closing and at such time the Company shall not be in default in the
performance of or compliance with any of the provisions of this
Agreement.
5.1.3 NO ADVERSE PROCEEDINGS. No action, suit or proceeding
before any court, tribunal, arbitrator, authority, agency, commission or
other instrumentality of the United States or any state, county, city or
other political subdivision ("GOVERNMENTAL AUTHORITY") shall have been
commenced, no investigation by any Governmental Authority shall have
been commenced, and no action, suit or proceeding by any Governmental
Authority shall have been threatened, against any of the Parties, in
each case which remains unresolved wherein an unfavorable judgment,
order, decree, stipulation, ruling, charge or injunction would (i)
prevent consummation of any of the transactions contemplated by this
Agreement, the NLAG Registration Rights Agreement, the Note Termination
Agreement, the Termination Agreement, the Release Agreement, the Jimirro
Employment Agreement, the Jimirro Indemnity Agreement and the Voting
Agreement (each as defined below), or (ii) cause any of the transactions
contemplated by such documents to be rescinded following consummation
(and no such judgment, order, decree, stipulation, ruling, charge or
injunction shall be in effect).
5.1.4 DEFINITIVE INFORMATION STATEMENT. Twenty-one (21) days
shall have elapsed since the mailing of the Definitive Information
Statement to the shareholders of the Company.
5.1.5 OPINION OF COMPANY'S COUNSEL. Purchasers shall have
received from ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to the Company, an
opinion addressed to the Purchasers, dated the date of the Closing, and
in substantially the form attached as Exhibit B hereto (which opinion
shall provide that each Option Purchaser shall be permitted to rely
thereon).
5.1.6 NLAG REGISTRATION RIGHTS AGREEMENT. The Company, NLAG and
the Purchasers shall have duly executed and delivered the NLAG
Registration Rights Agreement substantially in the form of Exhibit C
hereto (the "NLAG REGISTRATION RIGHTS AGREEMENT").
5.1.7 NOTE TERMINATION AGREEMENT. The Company and Jimirro shall
have entered into the agreement (the "NOTE TERMINATION AGREEMENT")
substantially in the form attached to the Jimirro Employment Agreement
as Exhibit A thereto.
5.1.8 JIMIRRO EMPLOYMENT AGREEMENT. The Company and Jimirro
shall have duly executed and delivered the Amended and Restated
Employment Agreement substantially in the form of Exhibit D hereto (the
"JIMIRRO EMPLOYMENT AGREEMENT").
5.1.9 TERMINATION AGREEMENT. The Company, Jimirro, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ ("LAIKIN") and ▇▇▇▇ ▇▇▇▇▇▇ ("SKJODT") shall have duly executed
and delivered the Termination Agreement (the "TERMINATION AGREEMENT"),
substantially in the form of Exhibit E hereto, terminating the March
Letter Agreement.
5.1.10 RELEASE AGREEMENT. The Company, NLAG, Jimirro, Laikin,
Skjodt, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Samerian LLP, Diamond Investments, LLC,
▇▇▇▇▇▇▇▇▇▇▇ ▇.
PAGE 9
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇ Leasing Company, LLC and ▇▇▇▇ ▇. ▇▇▇▇▇▇
shall have duly executed and delivered the Mutual Release Agreement
substantially in the form of Exhibit F hereto (the "RELEASE AGREEMENT").
5.1.11 VOTING AGREEMENT. Jimirro, Laikin, Skjodt, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Samerian LLP, Diamond Investments, LLC, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇ Leasing Company, LLC, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and the
Purchasers shall have duly executed and delivered the Voting Agreement
substantially in the form of Exhibit G hereto (the "VOTING AGREEMENT").
5.1.12 AMENDED AND RESTATED ARTICLES. The Amended and Restated
Articles shall have been duly adopted by the Board of Directors and the
shareholders of the Company, shall have been duly filed with the
Secretary of State of the State of California, shall be in full force
and effect and shall not have been amended.
5.1.13 AMENDED AND RESTATED BYLAWS. The Amended and Restated
Bylaws of the Company, in the form attached hereto as Exhibit H (the
"AMENDED AND RESTATED BYLAWS"), shall have been duly adopted by the
Board of Directors and the shareholders of the Company, shall be in full
force and effect and shall not have been amended.
5.1.14 ▇▇▇▇▇▇▇▇▇ WARRANT AGREEMENT. The Company and ▇▇▇▇▇▇▇▇▇
Traurig, LLP shall have duly executed and delivered the Warrant
Agreement substantially in the form of Exhibit I hereto (the "▇▇▇▇▇▇▇▇▇
WARRANT AGREEMENT").
5.1.15 GTH WARRANT AGREEMENT. The Company and GTH Capital, Inc.
shall have duly executed and delivered the Warrant Agreement
substantially in the form of Exhibit J hereto (the "GTH Warrant
Agreement").
5.1.16 GOOD STANDING CERTIFICATE. The Company shall have
delivered to the Purchasers evidence of its good standing as a domestic
corporation in the State of California.
5.1.17 COMPLIANCE CERTIFICATE. The Company shall certify to the
Purchasers that the conditions in Sections 5.1.1, 5.1.2, 5.1.4, 5.1.12
and 5.1.13 have been satisfied.
5.1.18 RESIGNATIONS. ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇ ▇▇▇▇▇ shall have
each resigned as Directors of the Company.
5.1.19 EXPENSES. Each of ▇▇▇▇▇▇ & Watkins, Gibson, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇ LLP and ▇▇▇▇▇▇▇▇▇▇ & Partners, Inc.,
and each of the persons who employed those advisors, shall have
acknowledged in writing that all fees incurred by such advisors through
the Closing that are payable by the Company under Section 10.12 have
been paid in full, subject to payment when due of the amount of the
promissory note (and interest thereon) issued by the Company to any such
advisor at Closing in accordance with Schedule 10.12.
5.1.20 ▇▇▇ ▇▇▇▇▇▇ ASSIGNMENT DOCUMENTS. The Company shall have
duly executed and delivered an Absolute Assignment substantially in the
form attached as Exhibit L-1 hereto and the Company and each applicable
account debtor shall have duly executed and delivered a Notice of
Assignment and Irrevocable Direction to Pay and Account substantially in
the form attached as Exhibit L-2 hereto or otherwise reasonably
PAGE 10
satisfactory to NLAG, the Company and Jimirro (collectively, the "▇▇▇
▇▇▇▇▇▇ ASSIGNMENT DOCUMENTS").
SECTION 5.2 CONDITIONS TO CLOSING OF THE COMPANY. The Company's
obligations to sell the Units to be purchased by each Purchaser and to grant the
Option at the Closing are subject to the fulfillment to the their respective
satisfaction on or prior to the Closing Date of the following conditions:
5.2.1 REPRESENTATIONS AND WARRANTIES CORRECT. The
representations and warranties made by such Purchaser and NLAG herein
and pursuant hereto shall have been true and correct in all respects
when made and shall be true and correct in all material respects on the
Closing Date with the same force and effect as if they had been made at
and as of the Closing Date.
5.2.2 PERFORMANCE. Such Purchaser and NLAG shall have materially
complied with all covenants, agreements and conditions contained in this
Agreement to be performed or complied with by such Purchaser or NLAG on
or prior to the Closing and at such time such Purchaser and NLAG shall
not be in default in the performance of or compliance with any of the
provisions of this Agreement.
5.2.3 NO ADVERSE PROCEEDINGS. No action, suit or proceeding
before any Governmental Authority shall have been commenced, no
investigation by any Governmental Authority shall have been commenced,
and no action, suit or proceeding by any Governmental Authority shall
have been threatened, against any of the Parties, in each case which
remains unresolved wherein an unfavorable judgment, order, decree,
stipulation, ruling, charge or injunction would (i) prevent consummation
of any of the transactions contemplated by this Agreement, the Jimirro
Employment Agreement, the Jimirro Indemnity Agreement, the ▇▇▇ ▇▇▇▇▇▇
Assignment Documents, the Jimirro Security Agreement (as defined below),
the Jimirro Registration Rights Agreement, the Note Termination
Agreement, the Termination Agreement, and the Release Agreement, or (ii)
cause any of the transactions contemplated by such documents to be
rescinded following consummation (and no such judgment, order, decree,
stipulation, ruling, charge or injunction shall be in effect).
5.2.4 DEFINITIVE INFORMATION STATEMENT. Twenty-one (21) days
shall have elapsed since the mailing of the Definitive Information
Statement to the shareholders of the Company.
5.2.5 NOTE TERMINATION AGREEMENT. The Company and Jimirro shall
have duly executed and delivered the Note Termination Agreement.
5.2.6 JIMIRRO EMPLOYMENT AGREEMENT. The Company and Jimirro
shall have duly executed and delivered the Jimirro Employment Agreement.
5.2.7 TERMINATION AGREEMENT. The Company, Jimirro, Laikin and
Skjodt shall have duly executed and delivered the Termination Agreement.
5.2.8 RELEASE AGREEMENT. The Company, NLAG, Jimirro, Laikin,
Skjodt, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Samerian LLP, Diamond Investments, LLC,
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇ Leasing Company, LLC and
▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have duly executed and delivered the Release
Agreement.
PAGE 11
5.2.9 AMENDED AND RESTATED ARTICLES. The Amended and Restated
Articles of the Company shall have been duly adopted by the Board of
Directors and the shareholders of the Company, shall have been duly
filed with the Secretary of State of the State of California, shall be
in full force and effect and shall not have been amended.
5.2.10 AMENDED AND RESTATED BYLAWS. The Amended and Restated
Bylaws of the Company shall have been duly adopted by the Board of
Directors and the shareholders of the Company, shall be in full force
and effect and shall not have been amended.
5.2.11 ▇▇▇▇▇▇▇▇▇ WARRANT AGREEMENT. The Company and ▇▇▇▇▇▇▇▇▇
Traurig, LLP shall have duly executed and delivered the ▇▇▇▇▇▇▇▇▇
Warrant Agreement.
5.2.12 GTH WARRANT AGREEMENT. The Company and GTH Capital, Inc.
shall have duly executed and delivered the GTH Warrant Agreement.
5.2.13 JIMIRRO SECURITY AGREEMENT. The Company and Jimirro shall
have duly executed and delivered the Security Agreement substantially in
the form of Exhibit K hereto (the "JIMIRRO SECURITY AGREEMENT").
5.2.14 ▇▇▇ ▇▇▇▇▇▇ ASSIGNMENT DOCUMENTS. The Company shall have
duly executed and delivered an Absolute Assignment substantially in the
form attached as Exhibit L-1 hereto and the Company and each applicable
account debtor shall have duly executed and delivered a Notice of
Assignment and Irrevocable Direction to Pay and Account substantially in
the form attached as Exhibit L-2 hereto or otherwise reasonably
satisfactory to NLAG, the Company and Jimirro (collectively, the "▇▇▇
▇▇▇▇▇▇ ASSIGNMENT DOCUMENTS").
5.2.15 JIMIRRO REGISTRATION RIGHTS AGREEMENT. The Company and
Jimirro shall have duly executed and delivered the Jimirro Registration
Rights Agreement substantially in the form of Exhibit M hereto (the
"JIMIRRO REGISTRATION RIGHTS AGREEMENT").
5.2.16 JIMIRRO INDEMNITY AGREEMENT. The Company and Jimirro
shall have duly executed and delivered the Indemnity Agreement attached
to the Jimirro Employment Agreement as Exhibit B thereto (the "JIMIRRO
INDEMNITY AGREEMENT").
5.2.17 GOOD STANDING CERTIFICATE. NLAG shall have delivered to
the Company evidence of its good standing as a limited liability company
in the State of California.
5.2.18 COMPLIANCE CERTIFICATE. NLAG, as representative of the
Purchasers, shall certify to the Company that the conditions in Sections
5.2.1 and 5.2.2 have been satisfied.
5.2.19 EXPENSES. Each of the advisors listed on Schedule 10.12,
and each of the persons who employed those advisors, shall have
acknowledged in writing that all fees incurred by such advisors through
the Closing that are payable by the Company under Section 10.12 have
been paid in full, subject to payment when due of the amount of the
promissory note (and interest thereon) issued by the Company to any such
advisor at Closing in accordance with Schedule 10.12.
ARTICLE 6. POST-CLOSING COVENANTS
PAGE 12
Each of the Parties agree to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws, rules and regulations to
cause the following to occur immediately following the Closing:
SECTION 6.1 BOARD ACTIONS.
6.1.1 APPOINTMENTS. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Skjodt and an independent
director to be designated pursuant to the Voting Agreement shall be appointed to
the Board of Directors of the Company.
6.1.2 RATIFICATION. The new Board of Directors of the Company shall
ratify the transactions contemplated by this Agreement (including, without
limitation, the documents attached as exhibits hereto) and all prior actions of
the Company's Board of Directors and officers taken as of the Closing.
6.1.3 OFFICER ELECTIONS. Laikin shall be elected as Chief Operating
Officer of the Company, reporting solely to the Board of Directors of the
Company as a whole.
6.1.4 ANNUAL MEETING AND RECORD DATE. The Board of Directors shall call
the annual meeting (the "ANNUAL MEETING") of the shareholders of the Company to
be held on a date selected by the Chairman of the Board of Directors, but not
later than June 15, 2002. The record date for determining shareholders entitled
to vote at the annual meeting will be a date that is subsequent to but not later
than two days after the Closing. In connection with such annual meeting the
Company will request all record holders of the Company's voting securities who
are nominees for other beneficial owners to certify as of the record date the
number of shares and addresses of all beneficial owners whose shares are held by
such nominees in accordance with Rules 14b-1(b)(3) and 14b-2(b)(3) promulgated
under the Securities and Exchange Act of 1934.
6.1.5 LAIKIN EMPLOYMENT AGREEMENT. The new Board of Directors of the
Company shall approve, and the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall execute and
deliver, the Employment Agreement substantially in the form of Exhibit N hereto
(the "LAIKIN EMPLOYMENT AGREEMENT").
SECTION 6.2 LITIGATION. The Parties shall use their respective best
efforts to have all outstanding litigation involving the parties dismissed with
prejudice as to all parties thereto.
SECTION 6.3 NASDAQ LISTING. The Company will continue to involve ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ and his counsel in discussions with NASDAQ regarding the possible
appeal of the revocation of the Company's NASDAQ listing and any efforts by the
Company to relist its shares for trading on NASDAQ.
ARTICLE 7. RESTRICTIVE LEGEND
Each certificate representing (i) the Shares (including the Option
Shares and the Warrant Shares), (ii) the Conversion Shares or (iii) any other
securities issued in respect of such securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act or sold pursuant
to Rule 144 or Regulation A thereunder) be stamped or otherwise imprinted with a
legend in the following form (in addition to any legend required under
applicable state securities laws):
PAGE 13
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
EXEMPTION FROM SUCH REGISTRATION UNDER SAID ACT.
Upon request of a holder of such a certificate, the Company shall remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefor free of any transfer legend, if, with such request, the Company shall
have received a written opinion of legal counsel who shall be reasonably
satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
such legend is not required in order to establish compliance with any provisions
of the Securities Act.
ARTICLE 8. TERMINATION
SECTION 8.1 GROUNDS FOR TERMINATION. This Agreement may, by written
notice given prior to or at the Closing, be terminated:
8.1.1 By NLAG, if a breach of any provision of this Agreement
has been committed by the Company and such breach has not been waived or
has not been cured within five days of the date the Company receives
written notice of such breach from NLAG or the Purchasers;
8.1.2 By the Company, if a breach of any provision of this
Agreement has been committed by NLAG or any of the Purchasers and such
breach has not been waived or has not been cured within five days of the
date the breaching Party receives written notice of such breach from the
Company;
8.1.3 By NLAG, if any of the conditions in Section 5.1 becomes
impossible to satisfy (other than through the failure of NLAG or the
Purchasers to comply with their obligations under this Agreement);
8.1.4 By the Company, if any of the conditions in Section 5.2
becomes impossible to satisfy (other than through the failure of the
Company to comply with its obligations under this Agreement);
8.1.5 By mutual consent of NLAG, the Company and the Purchasers;
or
8.1.6 By the Company, NLAG or the Purchasers, if the Closing has
not occurred (other than through the failure of any Party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before the date thirty (30) days from the date of this
Agreement (the "TERMINATION DATE").
SECTION 8.2 EFFECT OF TERMINATION. Each Party's right of termination
under this Article 8 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to this
Article 8, all further obligations of the Parties under this Agreement will
terminate; provided, however, that if this Agreement is terminated by a Party
because of the breach of this Agreement by another Party or because one or more
of the conditions to the terminating Party's obligations under this Agreement is
not satisfied as a result of another Party's failure to comply with its
obligations under this Agreement, the terminating Party's right to
PAGE 14
pursue its legal remedies against the breaching or failing Party will survive
such termination unimpaired.
ARTICLE 9. INDEMNIFICATION
SECTION 9.1 INDEMNIFICATION BY COMPANY. If the Closing occurs, the
Company hereby agrees to indemnify the Purchasers, NLAG and the Option
Purchasers against and hold them harmless from any and all liabilities, losses,
deficiencies, damages, expenses and costs (including, without limitation,
reasonable counsel fees and costs and expenses incurred in the investigation,
defense or settlement of any claims covered by this indemnity or incurred in
connection with successfully asserting, proving or collecting indemnity payments
pursuant to this Section with respect to matters not involving defense of
third-party claims) accruing from or arising at any time as a result of or out
of (a) any inaccuracies in or breaches of the representations, warranties,
covenants, obligations or agreements made or to be complied with or performed by
the Company pursuant to this Agreement or (b) any claims made by claimants who
are not Parties to this Agreement alleging facts which, if true, would
constitute a breach of or inaccuracy in a representation or warranty made by
such Party herein.
SECTION 9.2 INDEMNIFICATION BY PURCHASERS AND NLAG. If the Closing
occurs, each of the Purchasers, NLAG and each of the Option Purchasers hereby
severally but not jointly agrees to indemnify the Company against and hold it
harmless from any and all liabilities, losses, deficiencies, damages, expenses
and costs (including, without limitation, reasonable counsel fees and costs and
expenses incurred in the investigation, defense or settlement of any claims
covered by this indemnity or incurred in connection with successfully asserting,
proving or collecting indemnity payments pursuant to this Section with respect
to matters not involving defense of third-party claims) accruing from or arising
at any time as a result of or out of (a) any inaccuracies in or breaches of the
representations, warranties, covenants, obligations or agreements made or to be
complied with or performed by such Party pursuant to this Agreement or (b) any
claims made by claimants who are not Parties to this Agreement alleging facts
which, if true, would constitute a breach of or inaccuracy in a representation
or warranty made by such Party herein.
SECTION 9.3 NONEXCLUSIVE. The remedies provided in this Article 9 will
not be exclusive of or limit any other remedies that may be available to the
Parties.
SECTION 9.4 KNOWLEDGE. The right to indemnification or other remedy
based upon representations, warranties, covenants, or obligations in this
Agreement will not be affected by any investigation conducted, or any knowledge
acquired (or capable of being acquired), at any time with respect to the
accuracy or inaccuracy of, or compliance with, any such representation,
warranty, covenant, or obligation.
SECTION 9.5 SURVIVAL. The Parties agree that all of their respective
representations and warranties contained in this Agreement shall survive the
Closing (even if the damaged Party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and shall
continue in full force and effect for a period of eighteen (18) months.
ARTICLE 10. MISCELLANEOUS
SECTION 10.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California, without giving effect to its
principles or rules of conflicts of laws,
PAGE 15
to the extent that such principles or laws would require the application of the
law of another jurisdiction.
SECTION 10.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions of this Agreement shall inure to the benefit of,
and be binding upon, the successors, heirs, executors and administrators of the
Parties. Except as otherwise expressly provided herein and subject to the
conditions hereof, no Party may assign such Party's rights or obligations under
this Agreement.
SECTION 10.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and thereof and supersede any prior
understandings, agreements, or representations by or among the Parties, written
or oral, to the extent they relate in any way to the subject matter hereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated, except by a written instrument signed by the Company, NLAG and the
holders of seventy percent (70%) or more of the Common Stock issued or issuable
upon conversion of the Shares, but in no event shall the obligations of any
Purchaser hereunder be increased, except upon such Purchaser's written consent.
SECTION 10.4 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be deemed effectively
given: (i) upon personal delivery to the party to be notified, (ii) when sent by
confirmed telex or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day, (iii) five days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid, or (iv) one day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt. All
notices shall be addressed to the Company at its principal office, to NLAG at
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, to each Purchaser at the
addresses set forth on the Schedule of Purchasers attached hereto, or to such
other address as the Company, NLAG or each Purchaser shall have furnished to the
other in writing, or if to any other holder of any Shares or any Common Stock
issued upon conversion of Shares, to such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder thereof
who has so furnished an address to the Company.
SECTION 10.5 UNDERSTANDING AMONG PURCHASERS. The determination by each
of the Purchasers to purchase the Units pursuant to this Agreement has been made
by such Purchaser independent of the other Purchasers and independent of any
statements or opinions as to the advisability of such purchase or as to the
properties, business, prospects or condition (financial or otherwise) of the
Company which may have been made or given by the other Purchasers or by any
agent or employee of the other Purchasers. In addition, it is acknowledged by
each of the Purchasers that the other Purchasers have not acted as such
Purchaser's agent in connection with making its investment hereunder and that
the other Purchasers will not be acting as such Purchaser's agent in connection
with monitoring such Purchaser's investment hereunder.
SECTION 10.6 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares or Warrants or the
Option, upon any breach or default of the Company under this Agreement, shall
impair any such right, power or remedy of such holder nor shall it be construed
to be a waiver of any such breach or default, or an
PAGE 16
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
SECTION 10.7 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in the manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in the jurisdiction as if the invalid, illegal or unenforceable provision had
never been contained herein.
SECTION 10.8 TITLES AND SUBTITLES. The titles of the articles, sections
and subsections of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
SECTION 10.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
SECTION 10.10 STANDSTILL AGREEMENT. NLAG and each Purchaser agrees that
until the earlier of (a) the Closing Date or (b) five (5) days after the
termination of this Agreement pursuant to Article 8 hereof, other than with
respect to the transactions contemplated by this Agreement, without the prior
written consent of the Company, such Party will not, directly or indirectly: (i)
acquire, offer to acquire, or agree to acquire, by purchase or otherwise, any
voting securities or direct or indirect rights or options to acquire any voting
securities of the Company exceeding, in the aggregate, on an as-exercised or
as-converted basis if applicable, 50,000 shares of voting Common Stock of the
Company; (ii) except at the specific written request of the Company, propose to
enter into any merger or business combination involving the Company or to
purchase a material portion of the assets of the Company; (iii) make, or in any
way participate, in any "SOLICITATION" of "PROXIES" to vote (as such terms are
used in the proxy rules of the ▇▇▇▇ ▇▇▇) or seek to advise or influence any
person with respect to the voting of, any voting securities of the Company; (iv)
solicit or permit any person or entity to join their "GROUP" (within the meaning
of Section 13(d)(3) of the ▇▇▇▇ ▇▇▇) with respect to any voting securities of
the Company; (v) otherwise act, alone or in concert with others, to seek to
control or influence the management, Board of Directors or policies of the
Company (other than in Laikin's fiduciary capacity as a director of the
Company); (vi) publicly announce or refer to any proposal for an extraordinary
corporate transaction involving the Company, or take any action for the purpose
of requiring the Company to make a public announcement regarding the possibility
of any such extraordinary corporate transaction; (vii) disclose any intention,
plan or arrangement inconsistent with the foregoing or advise, assist or
encourage any other persons in connection with the foregoing, or request that
the Company amend or waive any of the terms of this Section 10.10; (viii) sell
or transfer more than one percent (1%) of the total outstanding voting
securities of the Company to any person, entity or "group" (within the meaning
of Section 13(d)(3) of the 1934
PAGE 17
Act), or sell or transfer any such voting securities to any such person, entity
or group who or which, after the consummation of such sale or transfer, would
beneficially own more than fourteen and nine-tenths percent (14.9%) of the total
outstanding voting securities of the Company; or (ix) permit any of such Party's
affiliates or associates or members of such Party's "GROUP" (within the meaning
of Section 13(d)(3) of the ▇▇▇▇ ▇▇▇) to do any of the foregoing. The Parties
agree and acknowledge that the provisions of this Section 10.10 shall be in
addition to the standstill provisions contained in Section 14(a) of the March
Letter Agreement to the extent it is in force (NLAG and the Purchasers assert
that it is not, the Company asserts that it is) and to the extent it binds any
of the Parties (NLAG and the Purchasers take the position that, if it is in
force, it binds only the parties who executed it, the Company takes the position
that the parties who executed the March Letter Agreement are responsible for
causing their affiliates and associates to abide by it); provided, however, that
the right of NLAG and the Purchasers contained in clause (i) of the first
sentence of this Section 10.10 to purchase in the aggregate 50,000 shares of
voting Common Stock shall be deemed to supercede any restriction to the contrary
contained in Section 14(a) of the March Letter Agreement with respect only to
purchases of Common Stock made or committed to be made prior to the termination
of this Agreement; provided, further, however, that in the event this Agreement
is validly terminated, Section 14(a) of the March Letter Agreement shall apply
to the Parties (if it has remained in force) to the extent such Parties were
subject to the provisions of the March Letter Agreement as if Section 14(a) of
the March Letter Agreement is no longer superceded as described herein with
respect to any purchases of Common Stock committed to be made after the
termination of this Agreement.
SECTION 10.11 NO PERSONAL LIABILITY OF REPRESENTATIVES. No officer,
director, principal, attorney, agent or other representative (collectively, a
"REPRESENTATIVE") of any Party shall be personally liable for the
representations, warranties, covenants and agreements of such Party contained in
this Agreement and the other agreements and certificates contemplated hereby or
for any action taken on behalf of such Party in connection therewith. Without
limiting the foregoing, no Representative of the Company shall have any personal
liability as a result of executing and delivering this Agreement, the other
Company Relevant Documents and the certificate provided for in Section 5.1.17 on
behalf of the Company. Each Representative of the Company (including, without
limitation, Jimirro) and NLAG shall be a third-party beneficiary of this Section
10.11.
SECTION 10.12 EXPENSES. The Company shall pay all legal, accounting,
advisory and other fees, and other out-of-pocket expenses incurred by the
Company, Jimirro, NLAG and the Purchasers in connection with the transactions
contemplated by this Agreement (including, without limitation, the documents
attached as exhibits hereto), including, without limitation, the proxy
solicitation commenced by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ on or about August 11, 2000, the
March Letter Agreement, and all other matters regarding the Company prior to the
Closing and related litigation. Jimirro shall be a third-party beneficiary of
this Section 10.12. Without limiting the foregoing, the parties agree and
acknowledge that, other than advisors who have been paid as part of the
Purchaser Expenses, the advisors listed on Schedule 10.12 are all of the
advisors whose fees the Company is obligated to pay pursuant to this Section
10.12 and that each of the advisors listed on Schedule 10.12 shall have had
their respective fees paid by the Company on or prior to the Closing, including,
if not paid previously, by wire transfer of immediately available funds in an
amount equal to such advisor's respective "Closing Cash" amount set forth on
Schedule 10.12 and the issuance of the Company's unsecured one-year promissory
notes in the
PAGE 18
form of Exhibit P attached hereto in an amount equal to such advisor's
respective "Closing Note" amount set forth on Schedule 10.12, all in connection
with and as part of the Closing. The Purchasers and the Company have approved
the amounts listed on Schedule 10.12 and the amounts of Purchaser Expenses
listed on the Schedule of Purchasers attached hereto and no further approval of
such amounts shall be necessary. The amounts listed on Schedule 10.12 may be
increased prior to Closing subject to approval by the Company and the
Purchasers, each acting in good faith with respect thereto.
[remainder of this page intentionally left blank]
PAGE 19
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
J2 COMMUNICATIONS
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
NATIONAL LAMPOON ACQUISITION GROUP, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Managing Member
"PURCHASERS"
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
[Designee of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇]
PAGE 20
SCHEDULE OF EXCEPTIONS
None.
PAGE 21
SCHEDULE OF PURCHASERS
NAME ADDRESS # OF UNITS AGGREGATE PRICE
---- ------- ---------- ---------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ [Address] 17,864 $1,786,400(1)
[Address]
▇▇▇▇ ▇▇▇▇▇▇ [Address] 5,000 $750,000
[Address]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ [Address] 12,380 $988,000(2)
[Address]
[Designee of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇]
------ ----------
TOTAL 35,244 3,524,400
====== ==========
Purchaser Expenses
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $386,400
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ $188,000
--------
Total $574,400
--------
(1) $400,000 of such price has previously been paid to the Company as fees paid
for extensions of the Letter Agreement, dated March 5, 2001, among the Company
and certain of the Purchasers. $386,400 such price has been paid as Purchaser
Expenses paid by ▇▇. ▇▇▇▇▇▇.
(2) $50,000 of such price has previously been paid to the Company as fees paid
for extensions of the Letter Agreement, dated March 5, 2001, among the Company
and certain of the Purchasers. $188,000 of such price has been paid as Purchaser
Expenses paid by ▇▇. ▇▇▇▇▇▇.
PAGE 22