EXHIBIT 99.1
PENTHOUSE INTERNATIONAL, INC.
SHARES OF COMMON STOCK
SUBSCRIPTION AGREEMENT
April 13, 2004
Western Pacific Investment Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Gentlemen:
Penthouse International, Inc., a Florida corporation (the "COMPANY"), hereby
confirms its agreement with you (the "PURCHASER"), as set forth below.
1. THE SECURITIES. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to those specific designees of
the Purchaser set forth in Section 3 below (the "PURCHASE DESIGNEES") an
aggregate of 10,909,158 shares (the "SHARES") of its Common Stock, $0.0025 par
value per share (the "COMMON Stock").
The 10,909,158 Shares and the 2,424,242 additional shares of
Common Stock of the Company being purchased by the Purchaser Designees pursuant
to that certain Stock Purchase Agreement dated April 13, 2004, simultaneous with
the Closing under this Agreement, directly from The ▇▇▇▇▇▇-Vector Investment
Trust (the "Trust") are sometimes herein collectively referred to as the
"SECURITIES." This agreement ("Agreement") and the Common Stock Purchase
Agreement, dated of even date herewith, between the Purchaser and the Trust (the
"TRUST PURCHASE AGREEMENT") are sometimes herein collectively referred to as the
"TRANSACTION DOCUMENTS."
The Securities will be offered and sold to the Purchaser
Designees without such offers and sales being registered under the Securities
Act of 1933, as amended (together with the rules and regulations of the
Securities and Exchange Commission (the "SEC") promulgated thereunder, the
"SECURITIES ACT"), in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Company has
made available (including electronically via the Commission's ▇▇▇▇▇ system) to
Purchaser its periodic and current reports, forms, schedules, proxy statements
and other documents (including exhibits and all other information incorporated
by reference) filed with the SEC under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") since January 1, 2002. These reports,
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forms, schedules, statements, documents, filings and amendments, are
collectively referred to as the "DISCLOSURE DOCUMENTS."
All references in this Agreement to (a) financial statements
and schedules and other information which is "contained," "included" or "stated"
in the Disclosure Documents (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules, documents,
exhibits and other information which is incorporated by reference in the
Disclosure Documents, and (b) "Purchaser" shall be deemed to mean and include
all "PURCHASER DESIGNEES" (as specified in Section 3 hereof).
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with Purchaser as follows; PROVIDED,
HOWEVER, that Purchaser acknowledges that (a) the following direct and indirect
Subsidiaries of the Company; namely, General Media, Inc. and its direct and
indirect subsidiaries, General Media Art Holding, Inc., General Media
Communications, Inc., General Media Entertainment, Inc., General Media (UK),
Ltd., GMCI Internet Operations, Inc., GMI On-Line Ventures, Ltd., Penthouse
Images Acquisitions, Ltd. and Pure Entertainment Telecommunications, Inc.
(collectively the "GENERAL MEDIA GROUP"), are all debtors in a Chapter 11
bankruptcy case pending in the United States Bankruptcy Court for the Southern
District of New York (the "BANKRUPTCY CASE"), (b) the Purchaser and its
representatives have been furnished copies of Debtors' First Amended Joint Plan
of Reorganization, dated March 4, 2004 (the "Proposed Plan") and have had an
opportunity to ask questions of the Company and its bankruptcy counsel, and (c)
all representations and warranties of the Company, to the extent related to the
General Media Group, are qualified in their entirety by reference to the status
of the Bankruptcy Case:
(a) The Disclosure Documents as of their respective dates
did not, and will not (after giving effect to any updated disclosures therein)
as of the Closing Date as defined in Section 3 below, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The Disclosure Documents and the documents incorporated or
deemed to be incorporated by reference therein, at the time they were filed or
hereafter are filed with the Commission, complied and will comply, at the time
of filing, in all material respects with the requirements of the Securities Act
and/or the Exchange Act, as the case may be, as applicable.
(b) Each of the Company and its subsidiaries set forth on
SCHEDULE A attached hereto (the "SUBSIDIARIES") has been duly incorporated and
each of the Company and the Subsidiaries is validly existing in good standing as
a corporation under the laws of its jurisdiction of incorporation, with the
requisite corporate power and authority to own its properties and conduct its
business as now conducted as described in the Disclosure Documents and is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the business, condition (financial or other), properties, prospects or
results of operations of the Company and the Subsidiaries, taken as a whole
based on a reasonable person standard (any such event, a "MATERIAL ADVERSE
Effect"); as of the Closing Date, the Company will have the authorized, issued
and outstanding capitalization set forth in on SCHEDULE B attached hereto (the
"COMPANY CAPITALIZATION"); except as set forth in
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the Disclosure Documents or on SCHEDULE A, the Company does not have any
subsidiaries or own directly or indirectly any of the capital stock or other
equity or long-term debt securities of or have any equity interest in, or owner
of any indebtedness of any other person; all of the outstanding shares of
capital stock of the Company and the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights and are owned free and clear of
all liens, encumbrances, equities, and restrictions on transferability (other
than those imposed by the Securities Act and the state securities or "Blue Sky"
laws) or voting; except as set forth in the Disclosure Documents, all of the
outstanding shares of capital stock of the Subsidiaries are owned, directly or
indirectly, by the Company; except as set forth in the Disclosure Documents, no
options, warrants or other rights to purchase from the Company or any
Subsidiary, agreements or other obligations of the Company or any Subsidiary to
issue or other rights to convert any obligation into, or exchange any securities
for, shares of capital stock of or ownership interests in the Company or any
Subsidiary are outstanding; and except as set forth in the Disclosure Documents
or on SCHEDULE C, there is no agreement, understanding or arrangement among the
Company or any Subsidiary and each of their respective stockholders or any other
person relating to the ownership or disposition of any capital stock of the
Company or any Subsidiary or the election of directors of the Company or any
Subsidiary or the governance of the Company's or any Subsidiary's affairs, and,
if any, such agreements, understandings and arrangements will not be breached or
violated as a result of the execution and delivery of, or the consummation of
the transactions contemplated by, the Transaction Documents.
(c) The Company has the requisite corporate power and
authority to enter into and execute, deliver and perform its obligations under
the Transaction Documents, including, without limitation, to transfer and sell
the Shares to Purchaser. Each of the Transaction Documents has been duly and
validly authorized by the Company and, when executed and delivered by the
Company, will constitute a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms except as the
enforcement thereof may be limited by (A) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally or (B)
general principles of equity and the discretion of the court before which any
proceeding therefore may be brought (regardless of whether such enforcement is
considered in a proceeding at law or in equity) (collectively, the
"ENFORCEABILITY EXCEPTIONS").
(d) The Company has sole legal, nominal and beneficial
ownership and title to the Shares, free and clear of all adverse interests,
liens, claims and encumbrances, and has the sole right to vote or direct the
voting of the Shares. The delivery of the Certificate or certificates
representing the Shares owned by the Company, duly endorsed or accompanies by
duly executed stock ▇▇▇▇▇▇, ▇▇▇▇ transfer to Purchaser good and indefeasible
title to such shares, free and clear of all liens, proxies, encumbrances and
claims of every kind and the Company will forever warrant and defend (with
counsel acceptable to Purchaser) such title, and indemnify Purchaser for all
adverse claims, demands, or liability with respect to the validity of such title
or transfer thereof, against any claimants thereto. The Shares have been duly
authorized and, when issued upon payment thereof in accordance with this
Agreement, will have been validly issued, fully paid and nonassessable. The
Common Stock of the Company conforms to the description thereof contained in the
Disclosure Documents. The stockholders of the Company have no preemptive or
similar rights with respect to the Common Stock.
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(e) No consent, approval, authorization, license,
qualification, exemption or order of any court or governmental agency or body or
third party or other act is required for the performance of the Transaction
Documents by the Company or for the consummation by the Company of any of the
transactions contemplated thereby, or the application of the proceeds of the
issuance of the Securities as described in this Agreement, except for such
consents, approvals, authorizations, licenses, qualifications, exemptions or
orders (i) as have been obtained on or prior to the Closing Date, or (ii) as are
not required to be obtained on or prior to the Closing Date that will be
obtained when required.
(f) Except as set forth on SCHEDULE D, none of the Company
or the Subsidiaries or any of their operations, is (i) in material violation of
its articles of incorporation or bylaws (or similar organizational document),
(ii) in breach or violation of any statute, judgment, decree, order, applicable
law, rule or regulation applicable to it or any of its properties or assets, or
(iii) except as described in the Disclosure Documents, in default or breach (nor
has any event occurred which with notice or passage of time, or both, would
constitute a default or breach) in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate or agreement or instrument to which it
is a party or to which it is subject, which default or breach would,
individually or in the aggregate, have a Material Adverse Effect or which would
create any liability, obligation, cost or expense to for Purchaser after the
Closing.
(g) The execution, delivery and performance by the Company
of the Transaction Documents and the consummation by the Company of the
transactions contemplated thereby and the fulfillment of the terms thereof will
not (a) violate, conflict with or constitute or result in a breach of or a
default under (or an event that, with notice or lapse of time, or both, would
constitute a breach of or a default under) (b) result in the imposition of any
lien upon or with respect to any of the properties or assets now owned or
hereafter acquired by the Company or any of the Subsidiaries; (c) give any third
party the right to terminate or accelerate any obligation of Company under any
of (i) the terms or provisions of any contract, indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement, permit,
certificate or agreement or instrument to which any of the Company or the
Subsidiaries is a party or to which any of their respective properties or assets
are subject, (ii) the articles of incorporation or bylaws of any of the Company
or the Subsidiaries (or similar organizational document) or (iii) any statute,
judgment, decree, order, rule or regulation of any court or governmental agency
or other body applicable to the Company or the Subsidiaries or any of their
respective properties or assets or which violation, conflict, breach, default or
lien would, individually or in the aggregate, have a Material Adverse Effect.
(h) The audited consolidated financial statements included
in the Disclosure Documents are accurate and complete and present fairly the
consolidated financial position, results of operations, cash flows and changes
in shareholders' equity of the entities, at the dates and for the periods to
which they relate and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis; the interim unaudited
consolidated financial statements included in the Disclosure Documents are
accurate and complete and present fairly the consolidated financial position,
results of operations and cash flows of the entities, at the dates and for the
periods to which they relate subject to year-end audit
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adjustments and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis with the audited
consolidated financial statements included therein; the selected financial and
statistical data included in the Disclosure Documents are accurate and complete
and present fairly the information shown therein and have been prepared and
compiled on a basis consistent with the audited financial statements included
therein, except as otherwise stated therein; and each of the auditors previously
engaged by the Company or to be engaged in the future by the Company is an
independent certified public accountant as required by the Securities Act for an
offering registered thereunder.
(i) Except as described in the Disclosure Documents, there
is not pending or, to the knowledge of the Company, threatened any action, suit,
proceeding, inquiry or investigation, governmental or otherwise, to which any of
the Company or the Subsidiaries is a party, or to which their respective
properties or assets are subject, before or brought by any court, arbitrator or
governmental agency or body, or any other party that, if determined adversely to
the Company or any such Subsidiary, would, individually or in the aggregate,
have a Material Adverse Effect, would adversely effect the Company's performance
under the Agreement or which may result in an obligation or liability on
Purchaser after the closing of this transaction or which have created or might
in the future create a lien or adverse claim against the Shares, that have not
been corrected or disclosed in writing to Purchaser, nor are there any threats
thereof known to the Company, or that seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Securities to
be sold hereunder or the application of the proceeds therefrom or the other
transactions described in the Disclosure Documents.
(j) The Company and the Subsidiaries own or possess
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights and know-how that are necessary to conduct their
businesses as described in the Disclosure Documents. None of the Company or the
Subsidiaries has received any written notice of infringement of (or knows of any
such infringement of) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how that, if such
assertion of infringement or conflict were sustained, would, individually or in
the aggregate, have a Material Adverse Effect.
(k) Each of the Company and the Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals presently required or necessary
to own or lease, as the case may be, and to operate its respective properties
and to carry on its respective businesses as now or proposed to be conducted as
set forth in the Disclosure Documents ("PERMITS"), except where the failure to
obtain such Permits would not, individually or in the aggregate, have a Material
Adverse Effect and none of the Company or the Subsidiaries has received any
notice of any proceeding relating to revocation or modification of any such
Permit, except as described in the Disclosure Documents.
(l) Subsequent to the respective dates as of which
information is given in the Disclosure Documents and except as described
therein, (i) the Company and the Subsidiaries have not incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions not in the ordinary course of business or (ii) the Company
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and the Subsidiaries have not purchased any of their respective outstanding
capital stock, or declared, paid or otherwise made any dividend or distribution
of any kind on any of their respective capital stock or otherwise (other than,
with respect to any of such Subsidiaries, the purchase of capital stock by the
Company), (iii) there has not been any material increase in the long-term
indebtedness of the Company or any of the Subsidiaries, (iv) there has not
occurred any event or condition, individually or in the aggregate, that has a
Material Adverse Effect, and (v) the Company and the Subsidiaries have not
sustained any material loss or interference with respect to their respective
businesses or properties from fire, flood, hurricane, earthquake, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding.
(m) There are no legal or governmental proceedings nor are
there any contracts or other documents required by the Securities Act to be
described in a prospectus that are not described in the Disclosure Documents.
Except as described in the Disclosure Documents, none of the Company or the
Subsidiaries is in default or breach under any of the contracts described in the
Disclosure Documents, has received a notice or claim of any such default or
breach or has knowledge of any breach of such contracts by the other party or
parties thereto, except for such defaults or breaches as would not, individually
or in the aggregate, have a Material Adverse Effect.
(n) Each of the Company and the Subsidiaries has good and
marketable title to all real property described in the Disclosure Documents as
being owned by it and good and marketable title to the leasehold estate in the
real property described therein as being leased by it, free and clear of all
liens, charges, encumbrances or restrictions, except, in each case, as described
in the Disclosure Documents. All leases, contracts and agreements to which the
Company or any of the Subsidiaries is a party or by which any of them is bound
are valid and enforceable against the Company or any such Subsidiary, are, to
the knowledge of the Company, valid and enforceable against the other party or
parties thereto and are in full force and effect.
(o) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns, except
where the failure to so file such returns would not, individually or in the
aggregate, have a Material Adverse Effect, and has paid all taxes shown as due
thereon; and other than tax deficiencies which the Company or any Subsidiary is
contesting in good faith and for which adequate reserves have been provided in
accordance with generally accepted accounting principles, there is no tax
deficiency that has been asserted against the Company or any Subsidiary that
would, individually or in the aggregate, have a Material Adverse Effect.
(p) None of the Company or the Subsidiaries is, or
immediately after the Closing Date will be, required to register as an
"investment company" or a company "controlled by" an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the "INVESTMENT
COMPANY ACT").
(q) None of the Company or the Subsidiaries or, to the
knowledge of any of such entities' directors, officers, employees, agents or
controlling persons, has taken,
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directly or indirectly, any action designed, or that might reasonably be
expected, to cause or result in the stabilization or manipulation of the price
of the Common Stock.
(r) None of the Company, the Subsidiaries or any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under the
Securities Act) directly, or through any agent, engaged in any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) in connection with the offering of the Securities or
engaged in any other conduct that would cause such offering to be constitute a
public offering within the meaning of Section 4(2) of the Securities Act.
Assuming the accuracy of the representations and warranties of the Purchaser in
Section 6 hereof, it is not necessary in connection with the offer, sale and
delivery of the Securities to the Purchaser in the manner contemplated by this
Agreement to register any of the Securities under the Securities Act.
(s) Except as set forth in the Disclosure Documents, there
is no strike, labor dispute, slowdown or work stoppage with the employees of the
Company or any of the Subsidiaries which is pending or, to the knowledge of the
Company or any of the Subsidiaries, threatened.
(t) Each of the Company and the Subsidiaries carries
general liability insurance coverage comparable to other companies of its size
and similar business.
(u) Each of the Company and the Subsidiaries maintains
internal accounting controls which provide reasonable assurance that (A)
transactions are executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
material assets is permitted only in accordance with management's authorization
and (D) the values and amounts reported for its material assets are compared
with its existing assets at reasonable intervals.
(v) Except for a fee payable to ▇▇▇▇▇▇ Partners, LLP, the
Company does not know of any claims for services, either in the nature of a
finder's fee or financial advisory fee, with respect to the offering of the
Shares and the transactions contemplated by the Transaction Documents.
(w) The Common Stock is listed on the National Association
of Securities Dealers, Inc. OTC Bulletin Board (the "NASD OTC-BB"). Except as
described in the Disclosure Documents, the Company currently is not in violation
of, and the consummation of the transactions contemplated by the Transaction
Documents will not violate, any rule of the National Association of Securities
Dealers.
(x) The Company is eligible to use Form S-1 or SB-2 for
the resale of the Shares by Purchaser or its transferees. The Company has no
reason to believe that it is not capable of satisfying the registration or
qualification requirements (or an exemption therefrom) necessary to permit the
resale of the Shares under the securities or "blue sky" laws of any jurisdiction
within the United States that is the residence or domicile of the Purchaser.
(y) The Company has no reason to believe that the Proposed
Plan will not be approved within the twelve months of the date of this
Agreement.
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3. PURCHASE, SALE AND DELIVERY OF THE SHARES. On the basis of
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Purchaser Designees, and the Purchaser Designees agree to
purchase from the Company, an aggregate of 10,909,158 Shares of Common Stock,
for an aggregate purchase price for all of the Shares of $1,200,007.30 (the
"PURCHASE PRICE"). Such Purchase Price, being an average of $0.11 per share,
shall be payable in cash in immediately available funds on the Closing Date to
an account designated by the Company. The 10,909,158 Shares of Common Stock
shall be purchased by the following Purchaser Designees, at the respective
Purchase Prices allocable to each such Purchaser Designee, all as set forth
below:
H. ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust of 1983 - 3,110,700 Shares of Common Stock for
$594,143.95
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust of 1982 - 3,110,700 Shares of Common Stock for $594,143.95;
Elliot ▇▇▇▇▇ ▇▇▇▇▇▇ - 2,343,879 Shares of Common Stock for $5,859.70;
▇▇▇▇▇ May Essers - 1,171,939.5 Shares of Common Stock for $2,929.85;
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ - 1,171,939.5 Shares of Common Stock for $2,929.85.
One or more certificates in definitive form for the Shares that the
Purchaser Designees has agreed to purchase shall be delivered by or on behalf of
the Company, on a date which shall be not later than five business days
following the Closing Date, against payment by or on behalf of the Purchaser, of
the Purchase Price therefor by wire transfer of immediately available funds to
the account of the Company previously designated by it in writing. Such payment
for the Shares shall be made at the offices of the Purchaser, at not later than
12:00 noon (Los Angeles time) on or before April 15, 2004 (the "CLOSING"), or at
such date as the Purchaser and the Company may agree upon, such time and date of
delivery against payment being herein referred to as the "CLOSING DATE."
4. CERTAIN COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Purchaser as follows:
(a) None of the Company or any of its Affiliates will
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any "security" (as defined in the Securities Act) which could be integrated
with the sale of the Securities in a manner which would require the registration
under the Securities Act of the Securities.
(b) The Company will not become, at any time prior to the
expiration of three years after the Closing Date, an open-end investment
company, unit investment trust, closed-end investment company or face-amount
certificate company that is or is required to be registered under the Investment
Company Act.
(c) None of the proceeds of the Shares will be used to
reduce or retire any insider note or convertible debt held by an officer or
director of the Company.
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(d) Subject to Section 10 of this Agreement, the Shares
will be listed on the NASD OTC-BB, or such market on which the Company's shares
are subsequently listed or traded, immediately following their issuance.
(e) The Company shall ensure that no officer or director
of the Company sells any shares of Company Common Stock from the Closing Date
until the date that is 90 days following the effective date of the First
Registration Statement, as defined in Section 9 below.
(f) The Company will use its best efforts to do and
perform all things required to be done and performed by it under this Agreement
and the other Transaction Documents and to satisfy all conditions precedent on
its part to the obligations of the Purchaser to purchase and accept delivery of
the Securities.
5. CONDITIONS OF THE PURCHASER' OBLIGATIONS. The obligation of
the Purchaser to purchase and pay for the Securities is subject to the following
conditions unless waived in writing by the Purchaser:
(a) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all respects (other
than representations and warranties with a Material Adverse Effect qualifier,
which shall be true and correct as written) on and as of the Closing Date; the
Company shall have complied in all respects with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date.
(b) None of the issuance and sale of the Securities
pursuant to this Agreement or any of the transactions contemplated by any of the
other Transaction Documents shall be enjoined (temporarily or permanently) and
no restraining order or other injunctive order shall have been issued in respect
thereof; and there shall not have been any legal action, order, decree or other
administrative proceeding instituted or, to the Company's knowledge, threatened
against the Company or against the Purchaser relating to the issuance of the
Securities or the Purchaser's activities in connection therewith or any other
transactions contemplated by this Agreement, the other Transaction Documents or
the Disclosure Documents.
(c) The Purchaser shall have received certificates, dated
the Closing Date and signed by the Chief Executive Officer and the Chief
Financial Officer of the Company, to the effect of paragraphs 5(a) and (b).
(d) The Purchaser shall have received an opinion of
▇▇▇▇▇▇▇ Savage ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel to the Company, reasonably
satisfactory to the Purchaser, with respect to the authorization of the Shares
and other customary matters in the form attached hereto as EXHIBIT A.
(e) Prior to the close of this transaction, the Company
shall give Purchaser immediate notice of the occurrence of any event or the
receipt by the Company of any notice or knowledge the effect of which would be
to make a representation or warranty of the Company herein untrue or misleading
if made on or immediately following the occurrence of such event or the receipt
of such notice or knowledge. the Company hereby agrees to protect,
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indemnify, and defend Purchaser, and Purchaser's nominee, against and to hold
Purchaser, and Purchaser's nominee, harmless from any and all costs, claims,
losses, attorneys' fees, liabilities, and other expenses that Purchaser, or
Purchaser's nominee, may incur or to which Purchaser, or Purchaser's nominee,
may be exposed as a result of the Company's breach of or the falsity of any of
the Company's representations or warranties in this Agreement or as a result of
the Company's breach of or failure to perform or observe any of the Company's
covenants in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
(a) The Purchaser represents and warrants to the Company
that the Securities to be acquired by it hereunder are being acquired for its
own account for investment and with no intention of distributing or reselling
such Securities or any part thereof or interest therein in any transaction which
would be in violation of the securities laws of the United States of America or
any State. Notwithstanding the foregoing, the Purchaser may elect to assign all
or a portion of the Shares to its stockholder, to the relatives of such
stockholder or any trust established for the benefit of such persons; and the
Company does hereby consent to any such assignment(s). Nothing in this
Agreement, however, shall prejudice or otherwise limit a Purchaser's right to
sell or otherwise dispose of all or any part of such Shares under an effective
registration statement under the Securities Act and in compliance with
applicable state securities laws or under an exemption from such registration.
By executing this Agreement, the Purchaser further represents that such
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to any Person with respect
to any of the Securities.
(b) The Purchaser understands that the Securities
(including the Conversion Shares and the Warrant Shares that it may acquire upon
conversion or exercise thereof, as the case may be) have not been registered
under the Securities Act and may not be offered, resold, pledged or otherwise
transferred except (a) pursuant to an exemption from registration under the
Securities Act (and, if requested by the Company, based upon an opinion of
counsel acceptable to the Company) or pursuant to an effective registration
statement under the Securities Act and (b) in accordance with all applicable
securities laws of the states of the United States and other jurisdictions.
The Purchaser agrees to the imprinting, so long as
appropriate, of the following legend on the Securities:
The shares of stock evidenced by this certificate have not been
registered under the U.S. Securities Act of 1933, as amended, and may
not be offered, sold, pledged or otherwise transferred ("transferred")
in the absence of such registration or an applicable exemption
therefrom. In the absence of such registration, such shares may not be
transferred unless, if the Company requests, the Company has received a
written opinion from counsel in form and substance satisfactory to the
Company stating that such transfer is being made in compliance with all
applicable federal and state securities laws.
10
The legend set forth above may be removed if and when the
Securities are disposed of pursuant to an effective registration statement under
the Securities Act or in the opinion of counsel to the Company experienced in
the area of United States Federal securities laws such legends are no longer
required under applicable requirements of the Securities Act. The Securities
shall also bear any other legends required by applicable Federal or state
securities laws, which legends may be removed when in the opinion of counsel to
the Company experienced in the applicable securities laws, the same are no
longer required under the applicable requirements of such securities laws. The
Company agrees that it will provide the Purchaser, upon request, with a
substitute certificate, not bearing such legend at such time as such legend is
no longer applicable. The Purchaser agrees that, in connection with any transfer
of the Securities by it pursuant to an effective registration statement under
the Securities Act, such Purchaser will comply with all prospectus delivery
requirements of the Securities Act. The Company makes no representation,
warranty or agreement as to the availability of any exemption from registration
under the Securities Act with respect to any resale of the Securities.
(c) The Purchaser is an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. The Purchaser
did not learn of the opportunity to purchase Shares or any other security
issuable by the Company through any form of general advertising or public
solicitation.
(d) The Purchaser represents and warrants to the Company
that it has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, having been represented by counsel,
and has so evaluated the merits and risks of such investment and is able to bear
the economic risk of such investment and, at the present time, is able to afford
a complete loss of such investment.
(e) The Purchaser represents and warrants to the Company
that (i) the purchase of the Securities to be purchased by it has been duly and
properly authorized and this Agreement has been duly executed and delivered by
it or on its behalf and constitutes the valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser 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; (ii) the
purchase of the Securities to be purchased by it does not conflict with or
violate its charter, by-laws or any law, regulation or court order applicable to
it; and (iii) the purchase of the Securities to be purchased by it does not
impose any penalty or other onerous condition on the Purchaser under or pursuant
to any applicable law or governmental regulation.
(f) The Purchaser represents and warrants to the Company
that neither it nor any of its directors, officers, employees, agents, partners,
stockholders, or controlling persons has taken, directly or indirectly, any
actions designed, or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock.
(g) The Purchaser acknowledges it or its representatives
have reviewed the Disclosure Documents and further acknowledges that it or its
representatives have been afforded (i) the opportunity to ask such questions as
it has deemed necessary of, and to
11
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment in
the Securities; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy and completeness of the
information contained in the Disclosure Documents.
(h) The Purchaser represents and warrants to the Company
that it has based its investment decision solely upon the information contained
in the Disclosure Documents and such other information as may have been provided
to it or its representatives by the Company in response to their inquiries, and
has not based its investment decision on any research or other report regarding
the Company prepared by any third party ("THIRD PARTY Reports"). The Purchaser
understands and acknowledges that (i) the Company does not endorse any Third
Party Reports and (ii) its actual results may differ materially from those
projected in any Third Party Report.
(i) The Purchaser understands and acknowledges that (i)
any forward-looking information included in the Disclosure Documents supplied to
Purchaser by the Company or its management is subject to risks and
uncertainties, including those risks and uncertainties set forth in the
Disclosure Documents; and (ii) the Company's actual results may differ
materially from those projected by the Company or its management in such
forward-looking information.
(j) The Purchaser understands and acknowledges that (i)
the Securities are offered and sold without registration under the Securities
Act in a private placement that is exempt from the registration provisions of
the Securities Act and (ii) the availability of such exemption depends in part
on, and that the Company and its counsel will rely upon, the accuracy and
truthfulness of the foregoing representations and Purchaser hereby consents to
such reliance.
7. COVENANTS OF PURCHASER NOT TO SHORT STOCK. The Purchaser
and its affiliates and assigns agree: (i) not to short the Company Common Stock;
and (ii) to limit its sales of the Company's Common Stock in the open market to
approximately 25% of the Company's average dollar trading volume or less.
8. TERMINATION.
(a) This Agreement may be terminated in the sole
discretion of the Company by notice to the Purchaser if at the Closing Date:
(i) the representations and warranties made by the
Purchaser in Section 6 are not true and correct in all material respects; or
(ii) as to the Company, the sale of the Securities
hereunder (i) is prohibited or enjoined by any applicable law or governmental
regulation or (ii) subjects the Company to any penalty, or in its reasonable
judgment, other onerous condition under or pursuant to any applicable law or
government regulation that would materially reduce the
12
benefits to the Company of the sale of the Securities to the Purchaser, so long
as such regulation, law or onerous condition was not in effect in such form at
the date of this Agreement.
(b) This Agreement may be terminated in the sole
discretion of the Purchaser by notice to the Company given in the event that the
Company shall have failed, refused or been unable to satisfy all conditions on
its part to be performed or satisfied hereunder on or prior to the Closing Date,
or if after the execution and delivery of this Agreement and immediately prior
to the Closing Date, trading in securities of the Company or in securities
generally on the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National or Small Cap Market or the OTC Bulletin Board shall have been
suspended or minimum or maximum prices shall have been established on any such
exchange.
(c) This Agreement may be terminated by mutual written
consent of all parties.
9. REGISTRATION. Within 60 days from the Closing Date, the
Company shall prepare and file with the SEC a Registration Statement covering
the resale of all of the Shares purchased pursuant to this Agreement as well as
the shares purchased from The ▇▇▇▇▇▇-Vector Investment Trust under the Trust
Purchase Agreement (collectively, the "REGISTRABLE SECURITIES") for an offering
to be made on a continuous basis pursuant to Rule 415 (the "REGISTRATION
STATEMENT"). The Registration Statement required hereunder shall be on Form S-1
or SB-2. The Company shall use its best efforts to cause such Registration
Statement to become effective within 60 days after the initial filing with the
SEC. The Company shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until the date which is three
years after the date that such Registration Statement is declared effective by
the SEC or such earlier date when all Registrable Securities covered by such
Registration Statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to
a written opinion to such effect addressed and acceptable to the Company's
transfer agent. The Company shall use its best efforts to enable the holders of
Registrable Shares to sell the Registrable Shares legally under the state
securities or "blue sky" laws during all times during which the Registrable
Shares may be sold pursuant to the Registration Statement.
10. EVENT OF DEFAULT. If an Event of Default (as defined
below) occurs and remains uncured for a period of 5 days, the Company shall pay
liquidated damages to Purchaser equal to two percent (2.00%) of the
$1,200,007.30 purchase price for each complete month or partial month during
which such situation exists. Any amounts to be paid as liquidated damages shall
be paid in cash monthly in arrears on or before the 10th day following the end
of the month or partial month to which they relate. An "EVENT OF DEFAULT" shall
mean the commencement by the Company of a voluntary case or proceeding under the
bankruptcy laws or the Company's failure to: (i) discharge or stay a bankruptcy
proceeding within 60 days of such action being taken against the Company, (ii)
file the Registration Statement with the SEC within 90 days after the Closing
Date, other than due to a delay caused by the review process of the SEC and not
by the Company, (iii) the de-listing of the Company's Common Stock from the NASD
OTC-BB except for any periods when the stock is listed on the NASDAQ Small Stock
Market, the NASDAQ National Stock Market, the AMEX or the NYSE, or (iv) pay the
expenses referred to below or the Due Diligence Fee within five (5) days of the
Closing.
13
Notwithstanding the foregoing, Purchaser acknowledges that
General Media, Inc. (a 99.5% owned subsidiary of the Company) and subsidiaries
of General Media, Inc., are debtors in a Chapter 11 bankruptcy case currently
pending in the United States Bankruptcy Court for the Southern District of New
York.
11. NOTICES. All communications hereunder shall be in writing
and shall be hand delivered, mailed by first-class mail, couriered by next-day
air courier or by facsimile and confirmed in writing (i) if to the Company, at
the addresses set forth below, or (ii) if to a Purchaser, to the address set
forth for such party on the signature page hereto.
If to the Company: Penthouse International, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Gertsten Savage ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices and communications shall be deemed to have
been duly given: (i) when delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed
certified mail, return receipt requested; (iii) one business day after being
timely delivered to a next-day air courier guaranteeing overnight delivery; (iv)
the date of transmission if sent via facsimile to the facsimile number as set
forth in this Section or the signature page hereof prior to 6:00 p.m. on a
business day, or (v) the business day following the date of transmission if sent
via facsimile at a facsimile number set forth in this Section or on the
signature page hereof after 6:00 p.m. or on a date that is not a business day.
Change of a party's address or facsimile number may be designated hereunder by
giving notice to all of the other parties hereto in accordance with this
Section.
12. SURVIVAL CLAUSE. The respective representations,
warranties, agreements and covenants of the Company and the Purchaser set forth
in this Agreement shall survive until the third anniversary of the Closing.
13. FEES AND EXPENSES. Within five (5) days of Closing, the
Company agrees to pay Purchaser's out-of-pocket expenses (including legal fees
of Purchaser's legal counsel, incurred in connection with the preparation and
negotiation of the Transaction Documents up to a maximum of $10,000). If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party or parties shall be entitled to receive
from the other party or parties reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which the prevailing party or
parties may be entitled.
14
14. SUCCESSORS. This Agreement shall inure to the benefit of
and be binding upon the Purchaser and the Company and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person. Except as
otherwise provided in Section 6(a) of this Agreement, neither the Company nor
the Purchaser may assign this Agreement or any rights or obligation hereunder
without the prior written consent of the other party.
15. NO WAIVER; MODIFICATIONS IN WRITING. No failure or delay
on the part of the Company or the Purchaser in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company or the Purchaser at law or in
equity or otherwise. No waiver of or consent to any departure by the Company or
the Purchaser from any provision of this Agreement shall be effective unless
signed in writing by the party entitled to the benefit thereof, provided that
notice of any such waiver shall be given to each party hereto as set forth
below. Except as otherwise provided herein, no amendment, modification or
termination of any provision of this Agreement shall be effective unless signed
in writing by or on behalf of each of the Company and the Purchaser. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Company or the Purchaser from the terms of any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.
16. ENTIRE AGREEMENT. This Agreement, together with
Transaction Documents, constitutes the entire agreement among the parties hereto
and supersedes all prior agreements, understandings and arrangements, oral or
written, among the parties hereto with respect to the subject matter hereof and
thereof.
17. SEVERABILITY. If any provision of this Agreement is held
to be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby.
18. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
GIVING EFFECT TO PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE
PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN
STATE OR FEDERAL COURTS LOCATED IN ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇
▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ AND HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS FOR SUCH PURPOSE.
19. COUNTERPARTS. 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.
20. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation, or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, or take any action which would dilute or adversely affect the ownership
interest of Purchaser in the Company, but will at all times in good faith assist
in carrying out of all of the provisions of this Agreement, and to take all such
actions as may be necessary or appropriate in order to protect and insure the
rights of Purchaser against impairment.
[the balance of this page intentionally left blank]
16
If the foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
Agreement shall constitute a binding agreement among the Company and the
Purchaser.
Very truly yours,
PENTHOUSE INTERNATIONAL, INC.
By:
-----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
ACCEPTED AND AGREED:
WESTERN PACIFIC INVESTMENT CORP.
By:
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ PARTNERS, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Number of Shares Purchased at
Closing: 10,909,158
Purchase Price: $1,200,007.30
17
SCHEDULE A
Direct and Indirect Subsidiaries of Penthouse International, Inc.
General Media, Inc.
Del Sol Investments, LLC
PH Realty Associates
Media Billing LLC
SUBSIDIARIES OF GENERAL MEDIA, INC.:
General Media Art Holding, Inc., General Media
Communications, Inc., General Media Entertainment,
Inc., General Media (UK), Ltd., GMCI Internet
Operations, Inc., GMI On-Line Ventures, Ltd.,
Penthouse Images Acquisitions, Ltd. and Pure
Entertainment Telecommunications, Inc.
SUBSIDIARY OF DEL SOL INVESTMENTS, LLC:
Del Sol Investments SA de CV (Mexico)
SUBSIDIARY OF MEDIA BILLING, LLC
Internet Billing Company, LLC
18
EXHIBIT A
Form of Legal Opinion
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Florida, with corporate
power to own its properties and to conduct its business.
2. The Company has the corporate power to execute, deliver and perform
the Transaction Documents. The Transaction Documents have been duly authorized
by all requisite corporate action by the Company and constitute the valid and
binding obligations of the Company, enforceable in accordance with their terms
(subject to bankruptcy, equitable principles and other customary exceptions).
3.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Preferred Stock, and 750,000,000 shares of Common Stock.
(b) The shares of the Company's Common D Stock have been duly
authorized and, upon issuance, delivery, and payment therefor as described in
the Subscription Agreement, will be validly issued, fully paid and
nonassessable.
4. The Company's execution and delivery of the Transaction Documents
and the issue and sale of the Shares, on the terms and conditions set forth in
the Subscription Agreement, will not violate any law of the United States or the
State of Florida, any rule or regulation of any governmental authority or
regulatory body of the United States or the State of Florida or any provision of
the Company's Amended and Restated Articles of Incorporation or Bylaws.
5. No consent, approval, order or authorization of, and no notice to
or filing with, any governmental agency or body or any court is required to be
obtained or made by the Company for the issuance and sale of the Shares pursuant
to the Transaction Documents, except such as have been obtained or made and such
as may be required under applicable securities laws.
6. On the assumption that the representations of the Purchaser in the
Subscription Agreement are correct and complete, the offer and sale of the
Shares pursuant to the terms of the Subscription Agreement are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended.
7. We know of no pending or overtly threatened action, proceeding or
governmental investigation with respect to the Company's sale of Shares pursuant
to the Transaction Documents.
-1-