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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 7, 1998 (March 30, 1998)
JAKKS PACIFIC, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-28104 95-4527222
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
22761 Pacific Coast Highway, Suite #226
Malibu, California 90265
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 456-7799
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ITEM 5. OTHER EVENTS
1. On March 30, 1998, all of the Company's outstanding shares of 4%
Redeemable Convertible Preferred Stock, par value $.001 per share, were
converted, upon demand of the respective holders thereof, into 939,998 shares of
the Company's common stock, par value $.001 per share (the "Common Stock"),
based on a conversion price of $7.50. On April 7, 1998, the Company filed a
Certificate of Elimination of all Shares of 4% Redeemable Convertible Preferred
Stock.
2. On April 1, 1998, the Company issued and sold 1,000 shares of Series
A Cumulative Convertible Preferred Stock, par value $.001 per share (the "Series
A Preferred Stock"), to two investment funds at a price of $5,000 per share. The
holders of the Series A Preferred Stock are entitled to receive preferential
dividends at an annual rate of $350 per share and to convert their shares into
Common Stock based on a conversion price of $8.95 (subject to adjustment for
certain dilutive events and specified transactions). The Series A Preferred
Stock is redeemable, in whole, but not in part, at par (together with all
accrued and unpaid dividends) at the Company's option if (a) the Common Stock is
then traded on the Nasdaq National Market or the New York Stock Exchange; (b)
the average Current Market Price (as defined) of the Common Stock over a period
of 20 Trading Days (as defined) equals or exceeds $20.00; and (c) the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock are
subject to a registration statement under the Securities Act of 1933 that has
become effective and permits the sale of such shares on a continuous or delayed
basis. The Series A Preferred Stock is also redeemable at par (together with
accrued and unpaid dividends) at the option of any holder thereof upon the
occurrence of certain specified Events of Redemption (as defined). The holders
of the Series A Preferred Stock have no voting rights, other than as required by
the Delaware General Corporation Law; class voting with respect to certain
amendments of the Company's Certificate of Incorporation or By-laws or the
authorization or issuance of certain shares; or in the event of the non-payment
of dividends for two quarters, in which case, the holders may designate or elect
two directors of the Company.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
NUMBER DESCRIPTION
3.1 Certificate of Elimination of all Shares of 4% Redeemable
Convertible Preferred Stock of the Registrant.
3.2 Certificate of Designation and Preferences of Series A Cumulative
Convertible Preferred Stock of the Registrant.
10.1 Series A Cumulative Convertible Preferred Stock Purchase Agreement
dated April 1, 1998 among the Registrant, Renaissance Capital Growth
& Income Fund III, Inc. and ProFutures Bridge Capital Fund, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: April 7, 1998
JAKKS PACIFIC, INC.
By: /s/ Jack Friedman
------------------------------------
Jack Friedman
Chairman and Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
3.1 Certificate of Elimination of all Shares of 4% Redeemable Convertible
Preferred Stock of the Registrant.
3.2 Certificate of Designation and Preferences of Series A Cumulative Convertible
Preferred Stock of the Registrant.
10.1 Series A Cumulative Convertible Preferred Stock Purchase Agreement dated April
1, 1998 among the Registrant, Renaissance Capital Growth & Income Fund III,
Inc. and ProFutures Bridge Capital Fund, L.P.
</TABLE>
4
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EXHIBIT 3.1
CERTIFICATE OF ELIMINATION OF ALL SHARES
OF
4% REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
JAKKS PACIFIC, INC.
UNDER SECTION 151(g)
OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned hereby certifies on behalf of JAKKS Pacific, Inc., a
Delaware corporation (the "Company"), as follows:
The Company having authorized and issued 3,525 shares of 4% Redeemable
Convertible Preferred Stock, par value $.001 per share (the 4% Preferred
Stock"); and all of such shares having been converted into shares of common
stock, par value $.001 per share, of the Company; and the Certificate of
Designation of the 4% Preferred Stock, as filed with the Secretary of State of
the State of Delaware on October 23, 1997, providing in Section 3(e) thereof
that, upon such conversion, all such shares of 4% Preferred Stock shall be
retired and resume the status of preferred stock of the Company without
designation;
To eliminate from the Restated Certificate of Incorporation of the
Company all matters pertaining to the 4% Preferred Stock, the Board of Directors
of the Company adopted the following resolution:
RESOLVED, that, none of the authorized shares of 4% Redeemable
Convertible Preferred Stock of the Company being outstanding, none of
such shares is to be issued, and the President and each Vice President
of the Company be, and each of them hereby is, authorized and directed,
in the name and on behalf of the Company, to execute and file, pursuant
to the Delaware General Corporation Law, and, in particular, Section
151(g) thereof, a Certificate setting forth this resolution to
eliminate from the Certificate of Incorporation of the Company all
provisions of the Certificate of Designation of the 4% Redeemable
Convertible Preferred Stock previously filed.
Dated April 6, 1998
/s/ Stephen G. Berman
-------------------------------
Stephen G. Berman
Executive Vice President
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EXHIBIT 3.2
JAKKS PACIFIC, INC.
---------------------------
CERTIFICATE OF DESIGNATION AND PREFERENCES OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
---------------------------
DATED AS OF MARCH 31, 1998
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JAKKS PACIFIC, INC.
---------------------
CERTIFICATE OF DESIGNATION AND PREFERENCES OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
----------------------
JAKKS PACIFIC, INC., a Delaware corporation, having its principal
office in Malibu, California (the "Corporation"), hereby certifies to the
Secretary of State of the State of Delaware that:
Pursuant to authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), the Board of Directors has duly adopted
resolutions authorizing the creation and issuance of up to One Thousand (1,000)
shares of Series A Cumulative Convertible Preferred Stock, $.001 par value, with
a liquidation preference of Five Thousand Dollars ($5,000.00) per share, and
determining the preferences, rights, powers, limitations, qualifications and
restrictions, as follows:
SECTION 1. NUMBER OF SHARES AND DESIGNATION. This series of Preferred
Stock, $.001 par value, shall be designated as Series A Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock"), and the number of shares which
shall constitute such series shall be 1,000 shares.
SECTION 2. DEFINITIONS. For purposes of the Series A Preferred Stock,
the following terms shall have the meanings indicated below:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" of a person means a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is
under common control with, the person specified.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series A
Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
"Call Date" shall have the meaning set forth in paragraph (b) of
Section 6 hereof.
"Common Stock" shall mean the common stock, $.001 par value, of the
Corporation or such shares of the Corporation's capital stock into
which such Common Stock shall be reclassified.
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"Current Market Price" of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the
Corporation or of any similar security of any other issuer for any day
shall mean the last reported sale price, regular way on such day, or,
if no sale takes place on such day, the reported closing bid price,
regular way on such day, in either case as reported on the NASDAQ
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or, if not quoted on NASDAQ, on
the principal national securities exchange on which such security is
listed or admitted for trading or, if such security is not listed or
admitted for trading on a national securities exchange or quoted on the
NASDAQ National Market, the closing bid price on such day in the
over-the-counter market as reported by NASDAQ, or, if the bid price for
such security on such day shall not have been reported through NASDAQ,
the bid price on such day as furnished by any NYSE member firm
regularly making a market in such security selected for such purpose by
the Chief Executive Officer or the Board of Directors or if any class
or series of securities are not publicly traded, the fair value of the
shares of such class as determined reasonably and in good faith by the
Board of Directors of the Corporation or other issuer.
"Dividend Payment Date" shall mean, with respect to each Dividend
Period, the last day of March, June, September and December, in each
year, commencing on June 30, 1998; provided, however, that if any
Dividend Payment Date falls on any day other than a Business Day, the
dividend payment due on such Dividend Payment Date shall be paid on the
Business Day immediately following such Dividend Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
January 1, April 1, July 1 and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding
Dividend Period (other than the initial Dividend Period, which shall
commence on the Issue Date and end on and include June 30, 1998).
"Fair Market Value" on any date shall mean the average of the daily
Current Market Price of a share of Common Stock during five (5)
consecutive Trading Days ending on the day before such date.
"Funds Available for Distribution" shall mean funds from operations
(net income, computed in accordance with generally accepted accounting
principles, excluding gains or losses from debt restructuring and sales
of property, plus depreciation and amortization) minus non-revenue
generated capital expenditures and debt principal amortization, as
determined by the Board of Directors on a basis consistent with the
policies and practices adopted by the Corporation for reporting
publicly its results of operations and financial condition.
"Issue Date" shall mean April 1, 1998.
"Junior Stock" shall have the meaning set forth in paragraph (c) of
Section 9 hereof.
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"NYSE" shall mean the New York Stock Exchange.
"Parity Stock" shall have the meaning set forth in paragraph (b) of
Section 9 hereof.
"Permitted Common Stock Cash Distributions" means cash dividends and
cash distributions paid on Common Stock after December 31, 1997 not in
excess of the sum of the Corporation's cumulative undistributed net
earnings at December 31, 1997, plus the cumulative amount of Funds
Available for Distribution after December 31, 1997, minus the
cumulative amount of dividends accumulated, accrued or paid on the
Series A Preferred Stock or any other class of Preferred Stock after
January 1, 1998.
"Person" shall mean any individual, partnership, corporation or other
entity and shall include the successor (by merger or otherwise) of such
entity.
"Redemption Date" shall have the meaning set forth in paragraph (b) of
Section 7 hereof.
"Series A Preferred Stock" shall have the meaning set forth in Section
1 hereof.
"Set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other distribution
by the Board of Directors, the allocation of funds to be so paid on any
series or class of capital stock of the Corporation; provided, however,
that if any funds for any class or series of Junior Stock or any class
or series of Parity Stock are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar
agent, then "set apart for payment" with respect to the Series A
Preferred Stock shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Trading Day," as to any securities, shall mean any day on which such
securities are traded on the NYSE or, if such securities are not listed
or admitted for trading on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted or,
if such securities are not listed or admitted for trading on any
national securities exchange, on the NASDAQ National Market or, if such
securities are not quoted on the NASDAQ National Market, in the
securities market in which such securities are traded.
SECTION 3. DIVIDENDS.
(a) The holders of Series A Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Series A Preferred Stock equal to $350.00 per annum. Such dividends
shall be cumulative from the Issue Date, whether or not in any Dividend Period
or Periods such dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such dividends, and shall be
payable
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quarterly on the Dividend Payment Dates, commencing on the first Dividend
Payment Date after the Issue Date. Each such dividend shall be payable to the
holders of record of the Series A Preferred Stock, as they appear on the stock
records of the Corporation at the close of business on a record date which shall
be not more than sixty (60) days prior to the applicable Dividend Payment Date.
Accumulated, accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time, without reference to any regular Dividend Payment
Date, to holders of record on such date, which date shall not precede by more
than forty-five (45) days the payment date thereof, as may be fixed by the Board
of Directors. The amount of accumulated, accrued and unpaid dividends on any
share of Series A Preferred Stock, or fraction thereof, at any date shall be the
amount of any dividends thereon calculated at the applicable rate to and
including such date, whether or not earned or declared, which have not been paid
in cash.
(b) The amount of dividends payable per share of Series A
Preferred Stock for each Dividend Period shall be computed by dividing the
annual dividend by four (4). The amount of dividends payable per share of Series
A Preferred Stock for the initial Dividend Period, or any other period shorter
or longer than a full Dividend Period, shall be computed ratably on the basis of
twelve (12) 30-day months and a 360-day year. Holders of Series A Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of cumulative dividends, as herein provided on the Series A
Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series A Preferred
Stock that may be in arrears.
(c) So long as any of the shares of Series A Preferred Stock
are outstanding, no dividends, except as described in the immediately following
sentence, shall be declared or paid or set apart for payment by the Corporation,
or other distribution of cash or other property declared or made directly or
indirectly by the Corporation or any affiliate or any person acting on behalf of
the Corporation or any of its affiliates with respect to any class or series of
Parity Stock for any period, unless dividends equal to the full amount of
accumulated, accrued and unpaid dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof have
been or contemporaneously are set apart for such payment on the Series A
Preferred Stock for all Dividend Periods terminating on or prior to the Dividend
Payment Date with respect to such class or series of Parity Stock. When
dividends are not paid in full or a sum sufficient for such payment is not set
apart, as aforesaid, all dividends declared upon the Series A Preferred Stock
and all dividends declared upon any other class or series of Parity Stock shall
be declared ratably in proportion to the respective amounts of dividends
accumulated, accrued and unpaid on the Series A Preferred Stock and accumulated,
accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Series A Preferred Stock
are outstanding, no dividends (other than dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, Junior Stock) shall be declared or paid or set apart for payment by the
Corporation, or other distribution of cash or other property declared or made
directly or indirectly by the Corporation or any affiliate or any person acting
on behalf of the Corporation or any of its affiliates with respect to any shares
of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or
otherwise acquired (other than a redemption,
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purchase or other acquisition of Common Stock made for purposes of an employee
incentive or benefit plan of the Corporation or any subsidiary) for any
consideration (or any moneys be paid to or made available for a sinking-fund for
the redemption of any shares of any such stock) directly or indirectly by the
Corporation or any affiliate or any person acting on behalf of the Corporation
or any of its affiliates (except by conversion into or exchange for Junior
Stock), nor shall any other cash or other property otherwise be paid or
distributed to or for the benefit of any holder of shares of Junior Stock in
respect thereof, directly or indirectly, by the Corporation or any affiliate or
any person acting on behalf of the Corporation or any of its affiliates unless
in each case (i) the full cumulative dividends (including all accumulated,
accrued and unpaid dividends) on all outstanding shares of Series A Preferred
Stock and any other Parity Stock of the Corporation shall have been paid or such
dividends have been declared and set apart for payment for all past Dividend
Periods with respect to the Series A Preferred Stock and all past Dividend
Periods with respect to such Parity Stock, and (ii) sufficient funds shall have
been paid or set apart for the payment of the full dividend for the current
Dividend Period with respect to the Series A Preferred Stock and the current
Dividend Period with respect to such Parity Stock.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Stock, the holders of shares
of Series A Preferred Stock shall be entitled to receive Five Thousand Dollars
($5,000.00) per share of Series A Preferred Stock, plus an amount equal to all
dividends (whether or not earned or declared) accumulated, accrued and unpaid
thereon to the date of final distribution to such holders. Until the holders of
the Series A Preferred Stock have been paid the liquidation preference in full,
no payment will be made to any holder of Junior Stock upon the liquidation,
dissolution or winding up of the Corporation. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of Series A Preferred Stock
shall be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on any other shares of any class or series of Parity Stock,
then such assets, or the proceeds thereof, shall be distributed among the
holders of Series A Preferred Stock and any such other Parity Stock ratably in
the same proportion as the respective amounts that would be payable on such
Series A Preferred Stock and any such other Parity Stock if all amounts payable
thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Corporation with one or more corporations, (ii) a
sale or transfer of all or substantially all of the Corporation's assets, or
(iii) a statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of the Corporation.
(b) Subject to the rights of the holders of any shares of Parity Stock,
upon any liquidation, dissolution or winding up of the Corporation, after
payment shall have been made in full to the holders of Series A Preferred Stock
and any Parity Stock, as provided in this Section 4, any other series or class
or classes of Junior Stock shall, subject to the respective terms thereof, be
entitled to receive any and all assets remaining to be paid or distributed, and
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the holders of the Series A Preferred Stock and any Parity Stock shall not be
entitled to share therein.
SECTION 5. CONVERSION RIGHTS. The holders of shares of Series A
Preferred Stock shall have the right, at their option, to convert such shares
into shares of Common Stock of the Corporation at any time on and subject to the
following terms and conditions:
(a) The shares of Series A Preferred Stock shall be
convertible at the office of the transfer agent for the Common Stock or the
principal executive office of the Corporation, into fully paid and
non-assessable shares (calculated as to each conversion to the nearest 1/100th
of a share) of Common Stock of the Corporation, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion, each
share of Series A Preferred Stock being taken at $5,000.00 for the purpose of
such conversion. The price at which shares of Common Stock shall be delivered
upon conversion (the "Conversion Price") shall initially be $8.95 per share of
Common Stock. The conversion price shall be adjusted in certain instances as
provided below.
(b) In order to convert shares of Series A Preferred Stock
into Common Stock, the holder thereof shall surrender at the office or offices
hereinabove mentioned the certificate or certificates therefor, duly endorsed or
assigned to the Corporation or in blank, and give written notice to the
Corporation at said office or offices that such holder elects to convert such
shares. Shares of Series A Preferred Stock surrendered for conversion during the
period from the close of business on any record date for the payment of a
dividend on the shares of Series A Preferred Stock to the opening of business on
the date for payment of such dividend shall (except in the case of shares of
Series A Preferred Stock which have been called for redemption on a redemption
date within such period) be accompanied by a payment of an amount equal to the
dividend declared and payable on such dividend payment date on the shares of
Series A Preferred Stock being surrendered for conversion. Except as provided in
the preceding sentence, no payment or adjustment shall be made upon any
conversion on account of any unpaid or accrued dividends on the shares of Series
A Preferred Stock surrendered for conversion or on account of any dividends on
the Common Stock issued upon conversion.
Shares of Series A Preferred Stock shall be deemed to have
been converted immediately prior to the close of business on the day of the
surrender of the certificates for such shares for conversion in accordance with
the foregoing provisions, and the person or persons entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Corporation shall issue and
shall deliver at such office a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion, together with payment
in lieu of any fraction of a share, as hereinafter provided, to the person or
persons entitled to receive the same. In case shares of Series A Preferred Stock
are called for redemption, the right to convert such shares shall cease and
terminate at the close of business on the date fixed for redemption, unless
default shall be made in payment of the redemption price.
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(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series A Preferred Stock, but, instead of any fraction
of a share which would otherwise be issuable, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the Closing Price (as hereinafter defined) on the date on which the
certificate or certificates for such shares were duly surrendered for
conversion, or, if such date is not a Trading Day (as hereinafter defined), on
the next Trading Day.
(d) The Conversion Price shall be adjusted from time to time
as follows:
(i) Adjustment for Issuance of Shares at Less Than
the Conversion Price. If at any time after the date of the first
issuance of Series A Preferred Stock, the Company shall issue any
shares of Common Stock, Convertible Securities (as hereinafter
defined), Rights (as hereinafter defined) or Related Rights (as
hereinafter defined; any such shares, Convertible Securities, Rights or
Related Rights, "Securities") without consideration or for a
consideration per share or unit less than the Conversion Price in
effect immediately prior to the issuance of such Securities, then the
Conversion Price in effect immediately prior to each such issuance
shall forthwith be reduced to the quotient obtained by dividing:
(A) an amount equal to the sum of (1) the
total number of shares of Common Stock outstanding immediately
prior to such issuance (including for this purpose the number
of shares of Common Stock into which the shares of Series A
Preferred Stock outstanding immediately prior to such issuance
are convertible on the date of such issuance in accordance
with Subsection 5(a) (without regard to Subsection 5(c)),
without giving effect to such issuance) multiplied by the
Conversion Price in effect immediately prior to such issuance,
and (2) the amount of consideration, if any, received by the
Company upon such issuance, by
(B) the total number of shares of Common
Stock (1) outstanding immediately after such issuance
(including the number of shares of Common Stock into which the
shares of Series A Preferred Stock outstanding immediately
prior to such issuance are convertible on the date of such
issuance in accordance with Subsection 5(a) (without regard to
Subsection 5(c)), without giving effect to such issuance) or
(2) into or for which any such newly issued Convertible
Securities are then convertible or exchangeable or (3)
issuable upon the exercise of any such Rights or Related
Rights).
(C) For the purpose of this Subsection 5(d),
the following definitions and procedures shall be applicable:
(1) In the case of the issuance of
options, warrants or other rights to
purchase or otherwise acquire Common Stock,
whether or not at the time exercisable
("Rights"), the total number of shares of
Common Stock issuable upon exercise of such
Rights shall be deemed to
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have been issued at the time such Rights are issued,
for a consideration equal to the sum of the
consideration, if any, received by the Company upon
the issuance of such rights and the minimum purchase
or exercise price payable upon the exercise of such
Rights for the Common Stock to be issued upon the
exercise thereof.
(2) In the case of the issuance of
any class or series of stock or any bonds,
debentures, notes or other securities or obligations
convertible into or exchangeable for Common Stock,
whether or not then convertible or exchangeable
("Convertible Securities"), or options, warrants or
other rights to purchase or otherwise acquire
Convertible Securities ("Related Rights"), the total
number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities
or exercise of such Related Rights shall be deemed to
have been issued at the time such Convertible
Securities or Related Rights are issued, for a
consideration equal to the sum of (I) the
consideration, if any, received by the Company upon
issuance of such Convertible Securities or Related
Rights (excluding any cash received on account of
accrued interest or dividends) and (II) (A) in the
case of Convertible Securities, the minimum
additional consideration, if any, to be received by
the Company upon the conversion or exchange of such
Convertible Securities or (B) in the case of Related
Rights, the sum of (x) the minimum purchase or
exercise price payable upon the exercise of such
Related Rights for Convertible Securities and (y) the
minimum additional consideration, if any, to be
received by the Company upon the conversion or
exchange of the Convertible Securities issued upon
the exercise of such Related Rights.
(3) On any change in the number of shares of
Common Stock issuable upon the exercise of Rights or
Related Rights or upon the conversion or exchange of
Convertible Securities or on any change in the
minimum purchase or exercise price of Rights, Related
Rights or Convertible Securities, including, but not
limited to, a change resulting from the anti-dilution
provisions of such Rights, Related Rights or
Convertible Securities, the Conversion Price to the
extent in any way affected by such Rights, Related
Rights or Convertible Securities shall forthwith be
readjusted to be thereafter the Conversion Price that
would have been obtained had the adjustment which was
made upon the issuance of such Rights, Related Rights
or Convertible Securities been made after giving
effect to such change. No further adjustment shall be
made in respect of such change upon the actual
issuance of Common Stock or any payment of
consideration upon the exercise of any such Rights or
Related Rights or the conversion or exchange of such
Convertible Securities.
(4) On the expiration or cancellation of any
such Rights, Related Rights or Convertible
Securities, if the Conversion Price shall
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have been adjusted upon the issuance thereof, the
Conversion Price shall forthwith be readjusted to
such Conversion Price as would have been obtained had
the adjustment made upon the issuance of such Rights,
Related Rights or Convertible Securities been made
upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the
exercise of such Rights or Related Rights or the
conversion or exchange of such Convertible
Securities.
(ii) Sale of Shares. In case of the issuance of
Securities for a consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to be the
gross amount of the cash paid to Corporation for such shares, before
deducting any underwriting compensation or discount in the sale,
underwriting or purchase thereof by underwriters or dealers or others
performing similar services or for any expenses incurred in connection
therewith. In case of the issuance of any Securities for a
consideration part or all of which shall be other than cash, the amount
of the consideration therefor, other than cash, shall be deemed to be
the then fair market value of the property received.
(iii) Reclassification of Shares. In case of the
reclassification of securities into shares of Common Stock, the shares
of Common Stock issued in such reclassification shall be deemed to have
been issued for a consideration other than cash. Securities issued by
way of dividend or other distribution on any class of stock of
Corporation shall be deemed to have been issued without consideration.
(iv) Stock Dividends, Stock Splits, Subdivisions or
Combinations. In the event of a stock dividend, stock split or
subdivision of shares of Common Stock into a greater number of shares,
the Conversion Price shall be proportionately decreased, and in the
event of a combination of shares of Common Stock into a smaller number
of shares, the Conversion Price shall be proportionately increased,
such increase or decrease, as the case may be, becoming effective at
the record date.
(v) Exceptions. The adjustments provided in
Subsection 5(d)(i) shall not apply to any (A) Common Stock issued upon
the conversion of any of the Series A Preferred Stock; (B) Common Stock
issued upon exercise of any outstanding warrants, options or
debentures; (C) Common Stock issued upon exercise of outstanding
employee stock options; and (D) up to 200,000 shares of Common Stock
issuable upon exercise of employee stock options to be granted
subsequent to the date hereof.
(vi) Adjustment for Mergers and Consolidations.
(A) In the event of distribution to all Common Stock
holders of any stock, indebtedness of the Corporation or
assets (excluding cash dividends or distributions from
retained earnings) or other rights to purchase securities or
assets, then, after such event, the shares of Series A
Preferred Stock will be convertible into the kind and amount
of securities, cash and other property which
9
<PAGE> 11
the holder of the shares of Series A Preferred Stock would
have been entitled to receive if the holder owned the Common
Stock issuable upon conversion of the shares of Series A
Preferred Stock immediately prior to the occurrence of such
event.
(B) In case of any capital reorganization,
reclassification of the stock of the Corporation (other than a
change in par value or as a result of a stock dividend,
subdivision, split up or combination of shares), the shares of
Series A Preferred Stock shall be convertible into the kind
and number of shares of stock or other securities or property
of the Corporation to which the holder of the shares of Series
A Preferred Stock would have been entitled to receive if the
holder owned the Common Stock issuable upon conversion of the
shares of Series A Preferred Stock immediately prior to the
occurrence of such event. The provisions of the immediately
foregoing sentence shall similarly apply to successive
reorganizations, reclassifications, consolidations, exchanges,
leases, transfers or other dispositions or other share
exchanges.
(C) The term "Fair Market Value," as used
herein, is the value ascribed to consideration other than cash
as determined by the Board of Directors of the Corporation in
good faith, which determination shall be final, conclusive and
binding. If the Board of Directors shall be unable to agree as
to such fair market value, then the issue of fair market value
shall be submitted to arbitration under and pursuant to the
rules and regulations of the American Arbitration Association,
and the decision of the arbitrators shall be final, conclusive
and binding, and a final judgment may be entered thereon;
provided, however, that such arbitration shall be limited to
determination of the fair market value of assets tendered in
consideration for the issue of Common Stock.
(e) Whenever the conversion price is adjusted as herein
provided:
(i) The Corporation shall compute the adjusted
conversion price in accordance with this Section 5 and shall cause to
be prepared a certificate signed by the Corporation's treasurer setting
forth the adjusted conversion price and showing in reasonable detail
the fact upon which such adjustment is based; and
(ii) A notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion price shall, as
soon as practicable, be mailed to the holders of record of outstanding
shares of Series A Preferred Stock.
(f) In case:
(i) The Corporation shall declare a dividend or other
distribution on its Common Stock payable otherwise than in
cash out of retained earnings;
10
<PAGE> 12
(ii) The Corporation shall authorize the issuance to
the holders of its Common Stock of rights or warrants
entitling them to subscribe for or purchase any shares of
capital stock of any class or any other subscription rights or
warrants; or
(iii) Of any reclassification of the capital stock of
the Corporation (other than a subdivision or combination of
its outstanding shares of Common Stock), or of any
consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation
is required, or of the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation; or
(iv) Of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
then the Corporation shall cause to be mailed to the holders
of record of the outstanding shares of Series A Preferred Stock, at least 20
days (or 10 days in any case specified in clause (i) or (ii) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date as of which the holders of record of Common Stock to be entitled to
such dividend, distribution, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
Common Stock shall be entitled to exchange their shares for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer, disposition, liquidation, dissolution or winding up, or the vote
on any action authorizing such.
(g) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of issuance upon conversion of shares of Series A
Preferred Stock, the full number of shares of Common Stock then deliverable upon
the conversion of all shares of Series A Preferred Stock then outstanding.
(h) The Corporation will pay any and all taxes that may be
payable in respect of the issuance of delivery of shares of Common Stock on
conversion of shares of Series A Preferred Stock pursuant thereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
Stock so converted were registered, and no such issuance or delivery shall be
made unless and until the person requesting such issuance has paid to the
Corporation the amount of any such tax or has established to the satisfaction of
the Corporation that such tax has been paid.
(i) The certificate of any independent firm of public
accountants of nationally recognized standing selected by the Board of Directors
shall be presumptive evidence of the correctness of any computation made under
this Section 5.
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<PAGE> 13
SECTION 6. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) On any Dividend Payment Date, and after prior irrevocable
notice of redemption as provided for below, the Series A Preferred Stock is
redeemable, in whole but not in part, at the option of the Corporation at 100%
of par, together with accrued and unpaid dividends through the Redemption Date,
by the Corporation, if all of the following conditions are satisfied: (i) the
Current Market Price for the Common Stock averages at least $20.00 per share for
the 20 consecutive Trading Days prior to the irrevocable notice and the Common
Stock is listed or quoted on the NASDAQ National Market or NYSE; and (ii) the
Corporation shall have filed a shelf registration statement covering the shares
of Common Stock issuable upon conversion of the Series A Preferred Stock, which
shall have become effective. The Corporation's right of redemption is subject to
the holders' prior right of conversion of the Series A Preferred Stock.
(b) Shares of Series A Preferred Stock shall be redeemed by
the Corporation on the date specified in the notice to holders required under
paragraph (d) of this Section 6 (the "Call Date"). The Call Date shall be
selected by the Corporation, shall be specified in the notice of redemption and
shall be thirty (30) days after the date notice of redemption is sent by the
Corporation. Immediately prior to authorizing any redemption of the Series A
Preferred Stock, and as a condition precedent for such redemption, the
Corporation, by resolution of its Board of Directors, shall declare a mandatory
dividend on the Series A Preferred Stock payable in cash on the Call Date in an
amount equal to all accumulated, accrued and unpaid dividends as of the Call
Date on the Series A Preferred Stock to be redeemed, which amount shall be added
to the redemption price. If the Call Date falls after a dividend payment record
date and prior to the corresponding Dividend Payment Date, then each holder of
Series A Preferred Stock at the close of business on such dividend payment
record date shall be entitled to the dividend payable on such shares on the
corresponding Dividend Payment Date, notwithstanding the redemption of such
shares prior to such Dividend Payment Date. Except as provided above, the
Corporation shall make no payment or allowance for accumulated or accrued
dividends on shares of Series A Preferred Stock called for redemption.
(c) Neither the Corporation nor any affiliate of the
Corporation may purchase or acquire shares of Series A Preferred Stock,
otherwise than pursuant to a purchase or exchange offer made on the same terms
to all holders of shares of Series A Preferred Stock.
(d) If the Corporation shall redeem shares of Series A
Preferred Stock pursuant to this Section 6, notice of such redemption shall be
given to each holder of record of the shares to be redeemed. Such notice shall
be provided by first class mail, postage prepaid, at such holder's address as
the same appears on the stock records of the Corporation thirty (30) days prior
to the Call Date. Neither the failure to mail any notice required by this
paragraph (d), nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or the validity of
the proceedings for redemption with respect to the other holders. Any notice
which was mailed in the manner herein provided shall be conclusively presumed to
have been duly given on the date mailed whether or not the holder receives the
notice. Each such mailed notice shall state, as appropriate: (1) the Call Date;
(2) the number
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<PAGE> 14
of shares of Series A Preferred Stock to be redeemed from such holder as shown
on the stock transfer records of the Corporation; (3) the place or places at
which certificates for such shares are to be surrendered; and (4) that dividends
on the shares of Series A Preferred Stock to be redeemed shall cease to accrue
on such Call Date, except as otherwise provided herein. Notice having been
mailed as aforesaid, from and after the Call Date (unless the Corporation shall
fail to issue and make available at the office of the transfer agent the amount
of cash necessary to effect such redemption, including all accumulated, accrued
and unpaid dividends to the Call Date, whether or not earned or declared), (i)
except as otherwise provided herein, dividends on the shares of Series A
Preferred Stock so called for redemption shall cease to accumulate or accrue on
the shares of Series A Preferred Stock called for redemption (except that, in
the case of a Call Date after a dividend record date and prior to the related
Dividend Payment Date, holders of Series A Preferred Stock on the dividend
record date will be entitled on such Dividend Payment Date to receive the
dividend payable on such shares), (ii) said shares shall no longer be deemed to
be outstanding, and (iii) all rights of the holders thereof as holders of Series
A Preferred Stock of the Corporation shall cease (except the rights to receive
the cash payable upon such redemption, without interest thereon, upon surrender
and endorsement of their certificates if so required and to receive any
dividends payable thereon). The Corporation's obligation to provide cash in
accordance with the preceding sentence shall be deemed fulfilled if, on or
before the Call Date, the Corporation shall deposit with a bank or trust company
(which may be an affiliate of the Corporation) that has an office in the Borough
of Manhattan, the City of New York, or in Dallas, Texas, and that has, or is an
affiliate of a bank or trust company that has, capital and surplus of at least
$25,000,000, such amount of cash as is necessary for such redemption, in trust,
with irrevocable instructions that such cash be applied to the redemption of the
shares of Series A Preferred Stock. No interest shall accrue for the benefit of
the holders of shares of Series A Preferred Stock to be redeemed on any cash so
set aside by the Corporation. Subject to applicable escheat laws, any such cash
unclaimed at the end of two (2) years from the Call Date shall revert to the
general funds of the Corporation, after which reversion the holders of shares of
Series A Preferred Stock so called for redemption shall look only to the general
funds of the Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance
with said notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require and if
the notice shall so state), such certificates shall be exchanged for cash
(without interest thereon) for which such shares have been redeemed in
accordance with such notice.
SECTION 7. REDEMPTION AT THE OPTION OF THE HOLDER.
(a) At any time after the date hereof, upon notice by the
Corporation of any proposed change of any provision of the Certificate of
Incorporation or Bylaws that relate to the Board of Directors or the election of
directors or any merger or consolidation involving the Corporation or a sale of
all or substantially all of the assets of the Corporation (collectively, "Events
of Redemption"), the Series A Preferred Stock is redeemable at the option of
each holder of Series A Preferred Stock at 100% of par, together with accrued
and unpaid dividends through the Redemption Date. Notice of an Event of
Redemption shall be given by the
13
<PAGE> 15
Corporation to each holder of record of Series A Preferred Stock by first class
mail, postage prepaid, at such holder's address as the same appears on the stock
records of the Corporation. Each holder may exercise his right to require the
Corporation to redeem all, but not less than all, of the shares of Series A
Preferred Stock owned by him of record by written notice to the Corporation at
the address specified in the notice of an Event of Redemption. Such notice shall
be sent by first class mail, postage prepaid, within thirty (30) days of receipt
by such holder of the notice of an Event of Redemption.
(b) Shares of Series A Preferred Stock may be redeemed at the
option of the holder by the Corporation on the date specified in the notice of
an Event of Redemption (the "Redemption Date"). The Redemption Date selected by
the Corporation shall be sixty (60) days after the date notice of an Event of
Redemption is sent by the Corporation. As a condition precedent for such
redemption, the Corporation, by resolution of its Board of Directors, shall
declare a mandatory dividend on the Series A Preferred Stock payable in cash on
the Redemption Date in an amount equal to all accumulated, accrued and unpaid
dividends as of the Redemption Date on the Series A Preferred Stock to be
redeemed, which amount shall be added to the redemption price. If the Redemption
Date falls after a dividend payment record date and prior to the corresponding
Dividend Payment Date, then each holder of Series A Preferred Stock at the close
of business on such dividend payment record date shall be entitled to the
dividend payable on such shares on the corresponding Dividend Payment Date,
notwithstanding the redemption of such shares prior to such Dividend Payment
Date. Except as provided above, the Corporation shall make no payment or
allowance for accumulated or accrued dividends on shares of Series A Preferred
Stock to be redeemed.
(c) Neither the failure to mail any notice required by
Subsection 7(a), nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or the validity of
the proceedings for redemption with respect to the other holders. Any notice
which was mailed in the manner herein provided shall be conclusively presumed to
have been duly given on the date mailed whether or not the holder receives the
notice. Each such mailed notice shall state, as appropriate: (1) the Redemption
Date; (2) the place or places at which certificates for such shares are to be
surrendered; and (3) that dividends on the shares of Series A Preferred Stock to
be redeemed shall cease to accrue on such Redemption Date, except as otherwise
provided herein. Notice having been mailed as aforesaid, from and after the
Redemption Date (unless the Corporation shall fail to issue and make available
at the office of the transfer agent the amount of cash necessary to effect such
redemption, including all accumulated, accrued and unpaid dividends to the
Redemption Date, whether or not earned or declared), (i) except as otherwise
provided herein, dividends on the shares of Series A Preferred Stock to be
redeemed shall cease to accumulate or accrue on the shares of Series A Preferred
Stock to be redeemed, (ii) said shares shall no longer be deemed to be
outstanding, and (iii) all rights of the holders thereof as holders of Series A
Preferred Stock of the Corporation shall cease (except the rights to receive the
cash payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to receive any dividends
payable thereon).
14
<PAGE> 16
As promptly as practicable after the surrender in accordance
with said notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require and if
the notice shall so state), such certificates shall be exchanged for cash
(without interest thereon) for which such shares have been redeemed in
accordance with such notice.
SECTION 8. SERIES A PREFERRED STOCK TO BE RETIRED. All shares of Series
A Preferred Stock which shall have been issued and reacquired in any manner by
the Corporation shall be restored to the status of authorized, but unissued
shares of Preferred Stock, without designation as to series. The Corporation may
also retire any unissued shares of Series A Preferred Stock, and such shares
shall then be restored to the status of authorized but unissued shares of
Preferred Stock, without designation as to series.
SECTION 9. RANKING. Any class or series of capital stock of the
Corporation shall be deemed to rank:
(a) prior or senior to the Series A Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Series A Preferred Stock;
(b) on a parity with the Series A Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share thereof be different from
those of the Series A Preferred Stock, if the holders of such class of stock or
series and the Series A Preferred Stock shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation, dissolution or winding
up in proportion to their respective amounts of accrued and unpaid dividends per
share or liquidation preferences, without preference or priority of one over the
other ("Parity Stock"); and
(c) junior to the Series A Preferred Stock, as to the payment
of dividends or as to the distribution of assets upon liquidation, dissolution
or winding up, if such stock or series shall be Common Stock or if the holder of
Series A Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may be,
in preference or priority to the holders of shares of such class or series
("Junior Stock").
SECTION 10. VOTING.
(a) The affirmative vote of the holders of sixty-six and
two-thirds percent (66 2/3%) of the votes entitled to be cast by holders of the
Series A Preferred Stock then outstanding, voting as a single class, in person
or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, will be required in order to amend the Certificate of
Incorporation or Bylaws to affect materially and adversely the rights,
preferences
15
<PAGE> 17
or voting power of the holders of the Series A Preferred Stock or to
authorize, create or increase the authorized amount of, any class of stock
having rights prior or senior to the Series A Preferred Stock with respect to
the payment of dividends or amounts upon liquidation, dissolution or winding up.
However, the Corporation may create additional classes, shares or series of
Parity Stock with the consent of the holders of a majority of the outstanding
shares of Series A Preferred Stock, and may create classes of Junior Stock,
increase the authorized number of shares of Junior Stock and issue additional
series of Junior Stock, without the consent of any holder of Series A Preferred
Stock.
(b) If and whenever two (2) quarterly dividends (whether or
not consecutive) payable on the Series A Preferred Stock shall be in arrears
(which shall, with respect to any such quarterly dividend, mean that any such
dividend has not been paid in full), whether or not earned or declared, the
number of directors then constituting the Board of Directors shall be increased
by two (2), and the directors then serving shall appoint to the Board of
Directors two (2) persons designated by the holders of a majority of the then
outstanding shares of Series A Preferred Stock; provided that if ProFutures
Bridge Capital Fund, L.P., a Delaware limited partnership ("ProFutures"), owns
in excess of twenty-five percent (25%) of the outstanding Series A Preferred
Stock, then one (1) such person shall be acceptable to ProFutures. The holders
of shares of Series A Preferred Stock shall thereafter be entitled to designate
or elect the two (2) additional directors to serve on the Board of Directors, by
the vote of a plurality of the votes cast by the holders of the Series A
Preferred Stock at an annual meeting of stockholders or special meeting held in
place thereof, or at a special meeting of the holders of the Series A Preferred
Stock called from time to time for the election of directors; provided that if
ProFutures owns in excess of twenty-five percent (25%) of the outstanding Series
A Preferred Stock, then one (1) such director shall be acceptable to ProFutures.
Whenever all arrears in dividends on the Series A Preferred Stock then
outstanding shall have been paid and dividends thereon for the current quarterly
dividend period shall have been paid or declared and set apart for payment, then
the right of the holders of the Series A Preferred Stock to elect such
additional two (2) directors shall cease (but subject always to the same
provision of the vesting of such voting rights in the case of any similar future
arrearage in two (2) quarterly dividends), and the terms of office of all
persons elected as directors by the holders of the Series A Preferred Stock
shall forthwith terminate and the number of the Board of Directors shall be
reduced accordingly. At any time after such voting power shall have been so
vested in the holders of Series A Preferred Stock, if the Board of Directors
fails to appoint the two designees of the holders of the Series A Preferred
Stock, as hereinabove provided, the Secretary of the Corporation shall, upon the
written request of any holder of Series A Preferred Stock (addressed to the
Secretary at the principal office of the Corporation), call a special meeting of
the holders of the Series A Preferred Stock for the election of the two (2)
directors to be elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation for a special
meeting of the stockholders or as required by law. If any such special meeting
required to be called, as above provided, shall not be called by the Secretary
within twenty (20) days after receipt of any such request, then any holder of
Series A Preferred Stock may call such meeting, upon the notice above provided,
and for that purpose shall have access to the stock books of the Corporation.
The directors elected at any such special meeting shall hold office until the
next annual meeting of the stockholders or special meeting held in lieu
16
<PAGE> 18
thereof if such office shall not have previously terminated as above
provided. If any vacancy shall occur among the directors elected by the holders
of the Series A Preferred Stock, a successor shall be elected by the Board of
Directors, upon the nomination of the then remaining directors elected by the
holders of the Series A Preferred Stock or the successors of such remaining
directors, to serve until the next annual meeting of the stockholders or special
meeting held in place thereof if such office shall not have previously
terminated as above provided. Notwithstanding the foregoing, the total number of
directors designated or elected by the holders of shares of Series A Preferred
Stock, as such, pursuant to this Section 10(b) or by such holders, as such, or
any affiliate of any of them pursuant to any other agreement or instrument will
not exceed two (2), unless such other agreement or instrument expressly provides
for a greater number.
So long as any shares of Series A Preferred Stock are
outstanding, the number of directors of the Corporation shall at all times be
such that the exercise by the holders of shares of Series A Preferred Stock of
the right to designate or elect directors under the circumstance provided in
this Section 10(b) will not contravene any provisions of the Corporation's
Certificate of Incorporation or Bylaws.
For purposes of the foregoing provisions of this Section 10,
each share of Series A Preferred Stock shall have one (1) vote per share. Except
as otherwise required by applicable law or as set forth herein, the holders of
the Series A Preferred Stock shall not have any voting rights and powers, and
the approval or consent of the holders thereof shall not be required for the
taking of any corporate action.
SECTION 11. RECORD HOLDERS. The Corporation may deem and treat
the record holder of any share of Series A Preferred Stock as the true and
lawful owner thereof for all purposes, and neither the Corporation nor the
Transfer Agent shall be affected by any notice to the contrary.
17
<PAGE> 19
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed as of March 31, 1998.
JAKKS PACIFIC, INC.
By: /s/ Jack Friedman
------------------------------------
Jack Friedman, President
<PAGE> 1
EXHIBIT 10.1
JAKKS PACIFIC, INC.
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
APRIL 1, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - PURCHASE AND SALE.................................................. 1
Section 1.1 Purchase and Sale; Purchase Price ................. 1
Section 1.2 Closing ........................................... 2
Section 1.3 Transactions at Closing ........................... 2
Section 1.4 Fees and Expenses ................................. 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................... 2
Section 2.1 Organization, Standing and Qualification .......... 2
Section 2.2 Capitalization .................................... 3
Section 2.3 Validity of Stock ................................. 3
Section 2.4 Subsidiaries ...................................... 3
Section 2.5 Financial Statements .............................. 3
Section 2.6 No Material Changes ............................... 4
Section 2.7 Permits ........................................... 5
Section 2.8 Insurance ......................................... 5
Section 2.9 Authorization; Approvals .......................... 5
Section 2.10 No Conflict with Other Instruments ................ 6
Section 2.11 Labor Agreements and Actions ...................... 6
Section 2.12 Title to Properties; Liens and Encumbrances ....... 6
Section 2.13 Compliance with Law and Other Instruments ......... 7
Section 2.14 Patents, Trademarks and Other Intangible Assets ... 7
Section 2.15 Taxes ............................................. 8
Section 2.16 Contracts ......................................... 8
Section 2.17 Litigation ........................................ 8
Section 2.18 Securities Laws ................................... 8
Section 2.19 Fees and Commissions .............................. 9
Section 2.20 Interested Party Transactions ..................... 9
Section 2.21 ERISA ............................................. 9
Section 2.22 Environmental and Safety Laws ..................... 9
Section 2.23 SEC Reports ....................................... 9
Section 2.24 Full Disclosure ................................... 10
ARTICLE III - REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASERS ........................................................... 10
Section 3.1 Authorization; Approvals; No Conflicts ............ 10
Section 3.2 Investment Representations ........................ 10
Section 3.3 Investment Experience; Access to Information ...... 10
Section 3.4 Restrictions on Transfer .......................... 11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 3.5 Transfer Instructions ............................. 11
Section 3.6 Fees and Commissions .............................. 11
ARTICLE IV - CONDITIONS TO CLOSING OF THE PURCHASERS .......................... 11
ARTICLE V - CONDITIONS TO CLOSING OF THE COMPANY .............................. 12
ARTICLE VI - REGISTRATION RIGHTS .............................................. 13
Section 6.1 Shelf Registration ................................ 13
Section 6.2 Obligations of the Company ........................ 13
Section 6.3 Expenses of Registration .......................... 14
Section 6.4 Indemnification Regarding Registration Rights ..... 14
Section 6.5 Reports Under the 1934 Act ........................ 17
Section 6.6 Assignment of Registration Rights ................. 17
ARTICLE VII - MISCELLANEOUS ................................................... 18
Section 7.1 Entire Agreement .................................. 18
Section 7.2 Survival of Representations and Warranties ........ 18
Section 7.3 Notices ........................................... 18
Section 7.4 Amendments ........................................ 19
Section 7.5 Waiver and Consent ................................ 20
Section 7.6 Successors and Assigns ............................ 20
Section 7.7 Rights of Purchasers .............................. 20
Section 7.8 Execution and Counterparts ........................ 20
Section 7.9 No Third Party Beneficiaries ...................... 20
Section 7.10 Severability ...................................... 20
Section 7.11 GOVERNING LAW ..................................... 21
</TABLE>
ii
<PAGE> 4
SCHEDULES
2.2 - Security Holders
2.5 - Financial Statements
2.6 - Material Changes
EXHIBITS
A - Form of Certificate of Designation and Preferences of Series
A Cumulative Convertible Preferred Stock
B - Form of Legal Opinion of the Company's Counsel
iii
<PAGE> 5
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This AGREEMENT (the "Agreement"), dated as of April 1, 1998, is entered
into by and among JAKKS PACIFIC, INC., a Delaware corporation (the "Company"),
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC., a Texas corporation, and
PROFUTURES BRIDGE CAPITAL FUND, L.P., a Delaware limited partnership
(individually referred to as Renaissance III and ProFutures, respectively, and
together with any permitted assignees or successors in interest individually
referred to as each or any "Purchaser" and collectively referred to as the
"Purchasers").
RECITAL
WHEREAS, the Purchasers desire to purchase 1,000 shares of Series A
Cumulative Convertible Preferred Stock, par value $.001 per share, of the
Company (the "Series A Preferred Stock"), having the rights, preferences,
privileges and restrictions set forth in the Company's Certificate of
Designation and Preferences of Series A Cumulative Convertible Preferred Stock
by resolution, substantially in the form attached hereto as EXHIBIT A (the
"Certificate of Designation"), and the Company desires to sell to the Purchasers
such shares of Series A Preferred Stock on the terms and subject to the
conditions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements hereinafter contained and for other good and valuable consideration,
the Company and the Purchasers hereby agree as follows:
ARTICLE I - PURCHASE AND SALE
Section 1.1 Purchase and Sale; Purchase Price. Subject to the
provisions of this Agreement, at Closing (as hereinafter defined), the Company
shall sell to the Purchasers, and the Purchasers shall purchase from the Company
1,000 shares of Series A Preferred Stock at the purchase price of $5,000,000
(the "Purchase Price"), as follows:
<TABLE>
<CAPTION>
PURCHASER PURCHASE PRICE NO. OF
--------- -------------- ------
SHARES
------
<S> <C> <C>
Renaissance Capital Growth & Income III, $3,000,000 600
Inc.
ProFutures Bridge Capital Fund, L.P. $2,000,000 400
</TABLE>
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Section 1.2 Closing. The purchase and sale of the Series A Preferred
Stock pursuant to Section 1.1 (the "Closing") shall each take place at the
offices of Renaissance Capital Group, Inc., 8080 North Central Expressway, Suite
210, Dallas, Texas or at such other place as may be agreed upon by the Company
and the Purchasers, at 10:00 a.m. local time on April 1, 1998 or at such other
time and date as may be agreed upon by the Company and the Purchasers (the
"Closing Date").
Section 1.3 Transactions at Closing. At the Closing, the Company shall
deliver to the Purchasers certificates for the shares of Series A Preferred
Stock to be issued and sold to the Purchasers hereunder duly registered in the
Purchasers' names, or in such other names as the Purchasers shall have specified
in writing to the Company, against payment in full by the Purchasers of the
Purchase Price by delivery of checks drawn or wire transfers of immediately
available funds payable to the order of the Company in the amount of the
Purchase Price.
Section 1.4 Fees and Expenses. At Closing:
(a) The Company shall pay to Renaissance Capital Group, Inc.
("RCG") a closing fee of $30,000.
(b) The Company shall pay $15,000 for legal fees and expenses
of RCG in connection with the preparation and negotiation of this Agreement and
the Closing.
(c) All unpaid fees and expenses required to have been paid
prior to the date hereof pursuant to the letter agreement dated March 12, 1998
among the parties.
(d) The Company shall pay to ProFutures closing and due
diligence fees of $45,000.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that:
Section 2.1 Organization, Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own, lease and operate its property and assets and to conduct its business as
presently conducted and as proposed to be conducted by it. The Company has all
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and to carry out the transactions contemplated
hereby. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its assets, properties, condition
(financial or otherwise), operating results, prospects or business. Complete and
correct copies of the Certificate of Incorporation and Bylaws of the Company
have been delivered to the Purchasers.
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Section 2.2 Capitalization. On the Closing Date, the authorized capital
stock of the Company will consist of (a) 5,000 shares of preferred stock, par
value $.001 per share, of which 1,000 shares will be designated "Series A
Cumulative Convertible Preferred Stock," and of which no shares are issued or
outstanding prior to the Closing and (b) 25,000,000 shares of common stock, par
value $.001 per share (the "Common Stock"), of which 5,882,092 shares are issued
and outstanding, a total of 2,340,603 shares are reserved for issuance pursuant
to outstanding options, warrants and debentures, and 558,660 shares are reserved
for issuance upon conversion of the Series A Preferred Stock. The outstanding
shares of Common Stock are duly authorized and validly issued, fully paid and
nonassessable and not subject to preemptive rights. Holders of shares of the
Company's capital stock have no preemptive rights or rights of first refusal.
Except for the transactions contemplated by this Agreement and as set forth in
its SEC Filings (as defined in Section 2.23 herein) or on Schedule 2.2, there
are (i) no outstanding warrants, options, convertible securities or rights to
subscribe for or purchase any capital stock or other securities from the
Company, (ii) no existing rights of security holders to require the Company to
register any securities of the Company or to participate with the Company in any
registration by the Company of its securities, (iii) to the best knowledge of
the Company, no agreements among stockholders providing for the purchase or sale
of the Company's capital stock and (iv) no obligations (contingent or otherwise)
of the Company to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. The Company is not a party or subject to any
agreement or understanding, and, to the best knowledge of the Company, there is
no agreement or understanding between any persons, that affects or relates to
the voting or giving of written consents with respect to any security or the
voting by a director of the Company.
Section 2.3 Validity of Stock. The Series A Preferred Stock, when
issued, sold and delivered in accordance with the terms of this Agreement, will
be duly authorized and validly issued, fully paid and nonassessable, and will be
free of restrictions on transfer, other than restrictions on transfer under
applicable state and federal securities laws, and not subject to preemptive
rights. The Common Stock issuable upon conversion of the Series A Preferred
Stock purchased under this Agreement has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Certification of
Designation, will be duly and validly issued, fully paid, and nonassessable and
will be free of restrictions on transfer other than restrictions on transfer
under applicable state and federal securities laws.
Section 2.4 Subsidiaries. Except as set forth in its SEC Filings or on
Schedule 2.4, the Company does not own or control, directly or indirectly, any
other corporation, partnership, association or business entity. The Company is
not a participant in any joint venture, partnership, or similar arrangement.
Section 2.5 Financial Statements. The Company has furnished the
Purchasers with the Company's (i) unaudited balance sheet as of December 31,
1997 (the "Balance Sheet") and (ii) unaudited statements of income for the
period then ended (the "Statements of Income" and, together with the Balance
Sheet, the "Financial Statements"). The Financial Statements are attached hereto
as Schedule 2.5. The Financial Statements are true and correct in all material
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<PAGE> 8
respects, are in accordance with the books and records of the Company and have
been prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied, and fairly and accurately present in all material
respects the financial position of the Company as of such date and the results
of its operations for the period then ended. Except as described in Schedule
2.5, the Company has no material liabilities, debts or obligations, whether
accrued, absolute or contingent, other than liabilities reflected or reserved
for in the Balance Sheet or disclosed in the notes to the Financial Statements.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP.
Section 2.6 No Material Changes. Since December 31, 1997, except as set
forth in Schedule 2.6, the Company has been operated in the ordinary and usual
course of business, and there has not been:
(a) any change in the (i) assets, liabilities, condition (financial or
otherwise) or business of the Company from that reflected in the Balance Sheet,
or (ii) operating results of the Company from that reflected in the Statements
of Income, in either case, except changes in the ordinary course of business
which have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, condition
(financial or otherwise), operating results, prospects or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted);
(c) any waiver or compromise by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and which is not individually or in the aggregate material to the
assets, properties, condition (financial or otherwise), operating results,
prospects or business of the Company (as such business is presently conducted
and as it is proposed to be conducted);
(e) any change or amendment to a material contract or arrangement by
which the Company or any of its assets or properties is bound or subject, other
than those that have not been, individually or in the aggregate, materially
adverse to the business of the Company;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder of the Company;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
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<PAGE> 9
(h) any resignation or termination of employment of any key officer of
the Company, and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Company;
(j) any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company with respect to any of its material properties or assets,
except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the benefit
of its employees, officers or directors or any members of their immediate
families, other than travel advances and other advances made in the ordinary
course of its business;
(1) any declaration, setting aside, or payment or other distribution in
respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(m) to the best knowledge of the Company, any other event or condition
of any character which might materially adversely affect the assets, properties,
condition (financial or otherwise), operating results, prospects or business of
the Company (as such business is presently conducted and as it is proposed to be
conducted); or
(n) any agreement or commitment by the Company to do any of the things
described in this Section 2.6.
Section 2.7 Permits. The Company has all franchises, permits, licenses
and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
assets, properties, condition (financial or otherwise), operating results,
prospects or business of the Company. The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.
Section 2.8 Insurance. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its material
properties that might be damaged or destroyed.
Section 2.9 Authorization; Approvals. All corporate action on the part
of the Company and its stockholders necessary for the authorization, execution,
delivery and performance of all its obligations under this Agreement and for the
authorization, issuance and delivery of the Series A Preferred Stock being sold
under this Agreement and of the Common Stock initially issuable upon conversion
of the Series A Preferred Stock has been (or will be) taken prior to the
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<PAGE> 10
Closing. This Agreement, when executed and delivered by or on behalf of the
Company, shall constitute the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The Company has
obtained or will obtain prior to the Closing Date all necessary consents,
authorizations, approvals and orders, and has made all registrations,
qualifications, designations, declarations or filings with all federal, state or
other relevant governmental authorities required on the part of the Company in
connection with the consummation of the transactions contemplated by this
Agreement, except for such filings as may be required to be made after the
Closing in order to comply with the requirements of Regulation D promulgated
under the Securities Act of 1933, as amended (the "Securities Act") and
applicable state laws.
Section 2.10 No Conflict with Other Instruments. The execution,
delivery and performance of this Agreement will not result in any violation of,
be in conflict with, or constitute, with or without the passage of time or
giving of notice or both, a default under any terms or provisions of (i) the
Certificate of Incorporation or Bylaws of the Company; (ii) any judgment, decree
or order of any court or government agency or body having jurisdiction over the
Company or its properties; (iii) any agreement, contract, understanding,
indenture or other instrument to which the Company is a party or by which it is
bound, the effect of which would have a material adverse effect on the assets,
properties, condition (financial or otherwise), operating results, prospects or
business of the Company; or (iv) any statute, rule or governmental regulation
applicable to the Company.
Section 2.11 Labor Agreements and Actions. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the best knowledge
of the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or, to the best knowledge of the Company, threatened, which
could have a material adverse effect on the assets, properties, condition
(financial or otherwise), operating results, prospects or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted), nor is the Company aware of any labor organization activity
involving its employees. The Company is not aware that any officer or key
employee, or that any group of key employees, intends to terminate such person's
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing persons.
Section 2.12 Title to Properties; Liens and Encumbrances. Set forth in
the SEC Filings is a description of the material real and personal property of
the Company owned, leased or licensed to or by the Company. Except as set forth
in the SEC Filings, (i) the Company has good and marketable title to all of the
properties and assets, both real and personal, tangible and intangible, that it
purports to own, including the properties and assets reflected on the Balance
Sheet (except as sold or disposed of after the date thereof in the ordinary
course of business and which in any event have not individually or in the
aggregate had a material adverse affect on the assets, properties, condition
(financial or otherwise), operating results, prospects or business of
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the Company), and they are not subject to any mortgage, pledge, lien, security
interest, conditional sale agreement, encumbrance or charge except routine
statutory liens securing liabilities not yet due and payable and minor liens,
encumbrances, restrictions, exceptions, reservations, limitations and other
imperfections which do not materially detract from the value of the specific
asset affected or the present use of such asset; and (ii) the Company is not in
default or in breach of any provision of its leases or licenses other than
provisions which would not permit acceleration or termination of any such lease
or license and holds a valid leasehold or licensed interest in (y) the material
property it leases or (z) the property that is licensed to it.
Section 2.13 Compliance with Law and Other Instruments. The Company is
not in violation of any provision of (i) the Certificate of Incorporation or its
Bylaws, or (ii) any judgment, decree, order, statute, rule or governmental
regulation applicable to it, the violation of which would materially and
adversely affect the assets, properties, condition (financial or otherwise),
operating results, prospects or business of the Company. The Company is not in
violation or default in any material respect of any provision of any mortgage,
indenture, agreement, instrument or contract to which it is a party or by which
it is bound. To the best knowledge of the Company, no employee of the Company is
in violation of any term of any employment contract, patent or other proprietary
information disclosure agreement or any other contract or agreement relating to
the employment of such employee with the Company.
Section 2.14 Patents, Trademarks and Other Intangible Assets. All
material patents, patent applications, trademarks, service marks, trade names
and copyrights, and licenses and rights to the foregoing presently owned or held
by the Company are disclosed in the SEC Filings, none of which is in dispute or
in any conflict with the right of any other person or entity where an adverse
outcome would have a material adverse affect on the assets, properties,
condition (financial or otherwise), operating results, prospects or business of
the Company. Except as disclosed in the SEC Filings, the Company (i) owns or has
the unrestricted right to use, free and clear of all liens, claims and
restrictions, all patents, trademarks, service marks, trade names, copyrights
and trade secrets, including know-how, inventions, designs, processes, works of
authorship, computer programs (with the exception of normal software purchased
and sold as such) and technical data and information (collectively, the
"Intellectual Property"), and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity, including former or current
consultants, or employees and former employers of its past and present employees
and (ii) is not obligated or under any liability whatsoever to make any payments
by way of royalties, fees or otherwise to any owner or licensee of, or other
claimant to, any patent, trademark, service mark, trade name, copyright or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise. There are no outstanding options, licenses
or agreements of any kind relating to the foregoing, nor is the Company bound by
or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks trade names, copyrights, trade secrets,
licenses, information and proprietary rights and processes of any other person
or entity. The Company has not received
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<PAGE> 12
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets or other proprietary rights or
processes of any other person or entity.
Section 2.15 Taxes. The Company has accurately and timely filed all
federal income tax returns and all state and municipal tax returns that are
required to be filed by it and has paid or made provision for the payment of all
amounts due pursuant to such returns. The federal income tax returns of the
Company have not been audited by the Internal Revenue Service, and there are no
waivers in effect of the applicable statute of limitations for any period. No
deficiency assessment or proposed adjustment of federal income taxes or state or
municipal taxes of the Company is pending and the Company has no knowledge of
any proposed liability for any tax to be imposed.
Section 2.16 Contracts. Except as set forth in its SEC Filings, the
Company is not a party to any contract, and has no obligation or commitment, in
each case (i) involving aggregate payments by the Company or having an aggregate
value of more than $25,000, or (ii) that is otherwise material to the business
of the Company, or (iii) that is, or is reasonably likely to be, materially
adverse to the assets, properties, condition (financial or otherwise), operating
results, prospects or business of the Company. Except as set forth in its SEC
Filings or on Schedule 2.6, the Company has no employment or consulting
contracts, deferred compensation agreements or bonus, incentive, profit-sharing
or pension plans currently in force and effect, or any understanding with
respect to any of the foregoing, or any non-competition and confidentiality
agreements between the Company and any employee of the Company, any consultant
to the Company or any other entity.
Section 2.17 Litigation. Except as set forth in its SEC Filings, there
is no action, proceeding or governmental inquiry or investigation pending or, to
the best knowledge of the Company, threatened against the Company or any of its
officers, directors or employees (in their capacity as such) or any of the
Company's assets or properties before any court, arbitration board or tribunal
or administrative or other governmental agency. The foregoing includes, without
limiting its generality, actions pending or known to the Company to be
threatened involving (i) the prior employment of any of the Company's employees
or use by any of them in connection with the Company's business of any
information, property or techniques allegedly proprietary to any of their former
employers or (ii) any prior employees of the Company in connection with rights
to the Intellectual Property or any portion thereof. The Company is not a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or governmental agency or instrumentality. There is no action, suit
or proceeding by the Company currently pending, or that the Company intends to
initiate.
Section 2.18 Securities Laws. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Article III
hereof, the offer, sale and issuance of the shares of Series A Preferred Stock
to the Purchasers as provided herein are and will be exempt from the
registration and prospectus delivery requirements of the Securities Act and have
been
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registered or qualified (or are exempt from registration or qualification)
under all applicable state registration or qualification requirements.
Section 2.19 Fees and Commissions. The Company has not retained any
finder, broker, agent, financial advisor or other intermediary (collectively
"Intermediary") in connection with the transactions contemplated by this
Agreement, and the Company shall indemnity and hold harmless the Purchasers from
liability for any compensation to any Intermediary and the fees and expenses of
defending against such liability or alleged liability.
Section 2.20 Interested Party Transactions. Except as disclosed in the
SEC Filings, no executive officer or director of the Company or holder of more
than five percent (5%) of the capital stock of the Company or, to the best of
the Company's knowledge, any "affiliate" or "associate" (as these terms are
defined in Rule 405 promulgated under the Securities Act) of any such person or
entity or the Company has or has had, either directly or indirectly, (a) an
interest in any person or entity which (i) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company, or (ii) purchases from or sells or furnishes to the Company any
goods or services, or (b) a beneficial interest in any material contract or
agreement to which the Company is a party or by which it may be bound or
affected. Except as disclosed in the SEC Filings, there are no existing material
arrangements or proposed material transactions between the Company and any
officer, director or holder of more than 5% of the capital stock of the Company,
or, to the best of the Company's knowledge, any affiliate or associate of any
such person.
Section 2.21 ERISA. The Company does not maintain, sponsor, or
contribute to any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan," or a "multi-employer plan", as those
terms are defined in Section s 3(2), 3(l), and 3(37) of the Employee Retirement
Income Security Act of 1974, as amended.
Section 2.22 Environmental and Safety Laws. To the best knowledge of
the Company, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
Section 2.23 SEC Reports. The Company has filed all reports,
registration or proxy statements, forms and documents with the SEC that it was
required to file since the date of the initial public offering of its Common
Stock (the "SEC Filings"), all of which have complied in all material respects
with all applicable requirements of the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). As of their respective
dates, each of the SEC Filings, including, without limitation, any financial
statements or schedules included therein, did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the Company's
subsidiaries is required to file any reports, statements, forms or other
documents with the SEC.
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Section 2.24 Full Disclosure. Neither the representations and
warranties or the schedules to this Agreement, contain or will contain, as of
the date thereon, any untrue statement of a material fact or omits or will omit
to state any material fact necessary to keep the statements contained herein or
therein from being misleading in any material respect.
ARTICLE III - REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASERS
The Purchasers represent and warrant to the Company that:
Section 3.1 Authorization; Approvals; No Conflicts. All corporate
action on the part of the Purchasers necessary for the authorization, execution,
delivery and performance of all their obligations under this Agreement has been
(or will be) taken prior to the Closing. This Agreement, when executed and
delivered by or on behalf of the Purchasers, shall constitute the valid and
binding obligation of the Purchasers, enforceable against the Purchasers in
accordance with its terms. The Purchasers have obtained or will obtain prior to
the Closing Date all necessary consents, authorizations, approvals and orders,
and have made all registrations, qualifications, designations, declarations or
filings with all federal, state or other relevant governmental authorities
required on the part of the Purchasers in connection with the consummation of
the transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement will not result in any violation of, be in
conflict with, or constitute, with or without the passage of time or giving of
notice or both, a default under any terms or provisions of (i) the respective
Certificates of Incorporation or Bylaws of the Purchasers; (ii) any judgment,
decree or order of any court or government agency or body having jurisdiction
over the Purchasers or their properties; (iii) any agreement, contract,
understanding, indenture or other instrument to which the Purchasers are a party
or by which they are bound, the effect of which would have a material adverse
effect on the assets, properties, condition (financial or otherwise), operating
results, prospects or business of the Purchasers; or (iv) any statute, rule or
governmental regulation applicable to the Purchasers.
Section 3.2 Investment Representations. The Purchasers are acquiring
the Series A Preferred Stock (and any Common Stock into which the Series A
Preferred Stock may be converted) for the Purchasers' own accounts, for
investment purposes and not with a view to, or for sale in connection with, any
distribution of such shares.
Section 3.3 Investment Experience; Access to Information. The
Purchasers are "accredited investors," as that term is defined in Rule 501(a)
promulgated under the Securities Act. The Purchasers have been afforded prior to
the Closing Date the opportunity to ask questions of, and to receive answers
from, the Company and to obtain any additional information, written and oral, to
the extent the Company has such information or could have acquired it without
unreasonable effort or expense, all as necessary for the Purchasers to make an
informed investment decision with respect to the purchase of the Series A
Preferred Stock.
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Section 3.4 Restrictions on Transfer. The Purchasers agree that (a)
they will not offer, sell, transfer, give, pledge, hypothecate or otherwise
dispose of the Series A Preferred Stock (or the Common Stock into which it may
be converted) or make any attempt to do the foregoing unless such offer, sale,
transfer, gift, pledge, hypothecation or other disposition is (i) registered
under the Securities Act and any applicable state securities law, or (ii) in
compliance with an opinion of counsel to the Purchasers, delivered to the
Company and reasonably acceptable to it, to the effect that such offer, sale,
pledge, hypothecation or other disposition thereof does not violate the
Securities Act or applicable state securities law, and (b) the certificate(s)
representing the Series A Preferred Stock (and any Common Stock into which it
may be converted) shall bear a legend stating in substance:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR OTHER TRANSFER, PLEDGE
OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS THEREOF.
Upon request of a holder of Series A Preferred Stock (or the Common
Stock into which it has been converted), the Company shall remove the legend set
forth above from the certificates evidencing such Series A Preferred Stock or
Common Stock or issue to such holder new certificates therefor free of such
legend, if with such request the Company shall have received an opinion of
counsel selected by the holder and reasonably satisfactory to the Company, in
form and substance reasonably satisfactory to the Company, to the effect that
such Series A Preferred Stock or Common Stock is not required by the Securities
Act to continue to bear the legend.
Section 3.5 Transfer Instructions. The Purchasers agree that the
Company may provide for appropriate transfer instructions to implement the
provisions of Section 3.4 hereof.
Section 3.6 Fees and Commissions. The Purchasers have retained no
Intermediary in connection with the transactions contemplated by this Agreement,
and the Purchasers agree to indemnify and hold harmless the Company from
liability for any compensation to any Intermediary and the fees and expenses of
defending against such liability or alleged liability.
ARTICLE IV - CONDITIONS TO CLOSING OF THE PURCHASERS
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The obligation of the Purchasers on the Closing Date to purchase the
Series A Preferred Stock shall be subject to each of the following conditions
precedent, any one or more of which may be waived by the Purchasers:
(a) Representations and Warranties. The representations and
warranties made by the Company herein shall be true and accurate in all material
respects on and as of the Closing Date as if made on the Closing Date.
(b) Performance. The Company shall have performed and complied
with all agreements and conditions contained herein and other documents incident
to the transactions contemplated by this Agreement required to be performed or
complied with by it prior to or at the Closing.
(c) Consents. The Company shall have secured all permits,
consents and authorizations that shall be necessary or required lawfully to
consummate the transactions contemplated by this Agreement, to issue the Series
A Preferred Stock to be purchased by the Purchasers and to issue the Common
Stock into which the Series A Preferred Stock may be converted.
(d) Compliance Certificates. The Company shall have delivered
to the Purchasers or their representative at the Closing an Officer's
Certificate to the effect that all conditions specified in subsections (a) to
(c), inclusive, have been fulfilled.
(e) Opinion of the Company's Counsel. The Purchasers shall
have received from counsel for the Company, a legal opinion, dated the Closing
Date and satisfactory in form and substance to the Purchasers, substantially in
the form attached hereto as EXHIBIT B.
(f) Certificate of Designation. The Certificate of Designation
shall have been duly filed with the Secretary of State of the State of Delaware.
(g) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers, and the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as the Purchasers may reasonably request.
ARTICLE V - CONDITIONS TO CLOSING OF THE COMPANY
The obligation of the Company on the Closing Date to issue and sell the
Series A Preferred Stock to be purchased under this Agreement shall be subject
to the representations and warranties made by the Purchasers herein being true
and accurate on and as of such Closing Date.
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ARTICLE VI - REGISTRATION RIGHTS
Section 6.1 Shelf Registration. The Company shall file a "shelf"
registration statement on an appropriate form under the 1933 Act (the "Shelf
Registration") covering all of the Common Stock into which the Series A
Preferred Stock is convertible (the "Registerable Securities") within one
hundred eighty (180) days from the Closing and shall use its best efforts to
cause the Shelf Registration to be declared effective and to keep the Shelf
Registration continuously effective until all of the Registerable Securities
registered therein cease to be Registrable Securities. The securities shall
cease to be Registrable Securities when (a) the Shelf Registration shall have
become effective under the 1933 Act and such securities shall have been disposed
of pursuant to the Shelf Registration, or (b) such securities shall have been
sold as permitted by Rule 144 under the 1933 Act. The Company agrees, if
necessary, to supplement or amend the Shelf Registration, as required by the
registration form utilized by the Company or by the instructions applicable to
such registration form or by the 1933 Act, and the Company agrees to furnish to
the holders of the Registrable Securities copies of any such supplement or
amendment prior to its being used.
Section 6.2 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities pursuant to this Agreement, the
Company shall, as expeditiously as reasonably possible:
(a) Furnish to the Purchasers such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them;
(b) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Purchasers, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify as a broker-dealer in any states
or jurisdictions or to do business or to file a general consent to service of
process in any such states or jurisdictions;
(c) Notify each Purchaser of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing; and
(d) In the event of the notification provided for in Section
6.2(c) above, the Company shall use its best efforts to prepare and file with
the SEC (and to provide copies
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thereof to the Purchasers) as soon as reasonably possible an amended prospectus
complying with the 1933 Act.
(e) Any other provision hereof notwithstanding, each
Purchaser's registration rights under this Section 6 are subject to the
conditions that, in the case of a Shelf Registration relating to an underwritten
offering of Registrable Securities, the underwriting agreement and other
documents to which the Company is a party or which purport to obligate the
Company with respect to any matter be reasonably satisfactory to the Company; no
public sales may be made by the Purchasers or by the Company at any time when
the Company does not have a class of equity securities (as defined in Section
3(a)(11) of the Exchange Act and Rule 3a11-1 thereunder) registered under
Section 12(b) or 12(g) of the Exchange Act; and, notwithstanding that a Shelf
Registration shall have been made, no Purchaser may publicly sell any
Registrable Securities for a period not in excess of ninety (90) days, if the
Board of Directors of the Company determines in good faith that any such sale(s)
would interfere with or adversely affect the prospects of consummating, or
result in terms or conditions materially less favorable to the Company relating
to, any material acquisition or disposition of assets (within the meaning and
scope of Item 2 of Form 8-K under the Exchange Act) or any public or private
financing as to which the Company has entered into a definitive agreement or is
engaged in substantive negotiations; provided that the Company may not require
the suspension of any such public sale(s) on more than one (1) occasion in any
period of twelve (12) consecutive months.
(f) For so long as any Purchaser holds beneficially or of
record (including shares issuable upon the conversion of the Series A Preferred
Stock) five percent (5%) or more of the shares of Common Stock from time to time
outstanding, such Purchaser shall agree to any restrictions on its resale of the
Registrable Securities, whether in public or non-public transactions, for a
period not in excess of ninety (90) days in any period of twelve (12)
consecutive months, as required by the managing underwriter, representative or
selling agent of any public or private offering of securities by the Company and
shall execute and deliver to the Company and such managing underwriter,
representative or selling agent an agreement to such effect, if each other
director and executive officer of the Company and holder of five percent (5%) or
more of the shares of Common Stock from time to time outstanding likewise agrees
to such restrictions on resale and executes and delivers such an agreement.
Section 6.3 Expenses of Registration. All expenses incurred in
connection with the registration of the Registerable Securities pursuant to this
Section , including, without limitation, all registration, filing and
qualification fees, printer's expenses, and accounting and legal fees and
expenses of the Company, shall be borne by the Company.
Section 6.4 Indemnification Regarding Registration Rights. If any
Registrable Securities are included in a registration statement under this
Section :
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Purchaser, the officers and directors of each Purchaser
and each person, if any, who controls such Purchaser or underwriter within the
meaning of the 1933 Act or the 1934 Act,
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against any losses, claims, damages, liabilities (joint or several) or any legal
or other costs and expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action to
which they may become subject under the 1933 Act, the 1934 Act or other federal
or state law, insofar as such losses, claims, damages, costs, expenses or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (each a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact with respect
to the Company or its securities contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements therein; (ii) the omission or alleged omission to
state therein a material fact with respect to the Company or its securities
required to be stated therein or necessary to make the statements therein not
misleading; or (iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any federal or state securities law or any rule or
regulation promulgated under the 1933 Act, the 1934 Act or any state securities
law. Notwithstanding the foregoing, the indemnity agreement contained in this
Section 6.4(a) shall not apply and the Company shall not be liable (i) in any
such case for any such loss, claim, damage, costs, expenses, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Purchaser, underwriter or
controlling person, or (ii) for amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
prior written consent of the Company, which consent shall not be unreasonably
withheld.
(b) To the extent permitted by law, each Purchaser who
participates in a registration pursuant to the terms and conditions of this
Agreement shall indemnify and hold harmless the Company, each of its directors
and officers who have signed the registration statement, each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act,
each of the Company's employees, agents, counsel and representatives, any
underwriter and any other Purchaser selling securities in such registration
statement, or any of its directors or officers, or any person who controls such
Purchaser, against any losses, claims, damages, costs, expenses, liabilities
(joint or several) to which the Company or any such director, officer,
controlling person, employee, agent, representative, underwriter, or other such
Purchaser, or director, officer or controlling person thereof, may become
subject, under the 1933 Act, the 1934 Act or other federal or state law, only
insofar as such losses, claims, damages, costs, expenses or liabilities or
actions in respect thereto arise out of or are based upon any Violation, in each
case to the extent and only to the extent that such Violation occurs in reliance
upon and in conformity with written information furnished by such Purchaser
expressly for use in connection with such. Each such Purchaser will indemnify
any legal or other expenses reasonably incurred by the Company or any such
director, officer, employee, agent representative, controlling person,
underwriter or other Purchaser, or officer, director or of any controlling
person thereof, in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 6.4(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, costs, expenses, liability or action
if such settlement is effected without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld.
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(c) Promptly after receipt by an indemnified party under this
Section 6.4 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6.4, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
of such counsel to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve the indemnifying party of its obligations under this Section 6.4, except
to the extent that the failure results in a failure of actual notice to the
indemnifying party and such indemnifying party is materially prejudiced in its
ability to defend such action solely as a result of the failure to give such
notice.
(d) If the indemnification provided for in this Section 6.4 is
unavailable to an indemnified party under this Section 6.4 in respect of any
losses, claims, damages, costs, expenses, liabilities or actions referred to
herein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, costs, expenses, liabilities or
actions in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand and of the Purchaser, on the other, in connection
with the Violation that resulted in such losses, claims, damages, costs,
expenses, liabilities or actions. The relative fault of the Company, on the one
hand, and of the Purchaser, on the other, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of the
material fact or the omission to state a material fact relates to information
supplied by the Company or by the Purchaser, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company, on the one hand, and the Purchasers, on the
other hand, agree that it would not be just and equitable if contribution
pursuant to this Section 6.4 were determined by a pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of losses, claims, damages,
costs, expenses, liabilities and actions referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses incurred by such indemnified
party in connection with defending any such action or claim. Notwithstanding the
provisions of this Section 6.4, neither the Company nor the Purchasers shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities were offered to the public exceeds the amount of
any damages which the Company or each such Purchaser has otherwise been required
to pay by reason of
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such Violation. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
Section 6.5 Reports Under the 1934 Act. So long as the Company has a
class of securities registered pursuant to Section 12 of the 1934 Act, with a
view to making available to the Purchasers the benefits of Rule 144 under the
1933 Act and any other rule or regulation of the SEC that may at any time permit
a Purchaser to sell securities of the Company to the public without registration
or pursuant to a shelf registration on Form S-3, if applicable, the Company
agrees to use its reasonable efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act;
(c) Use its best efforts to include, upon notice of issuance,
all Common Stock covered by such registration statement on NASDAQ National
Market if the Common Stock is then quoted on NASDAQ National Market; or list all
Common Stock covered by such registration statement on such securities exchange
on which any of the Common Stock is then listed; or, if the Common Stock is not
then quoted on NASDAQ National Market or listed on any national securities
exchange, use its best efforts to have such Common Stock covered by such
registration statement quoted on NASDAQ National Market or, at the option of the
Company, listed on a national securities exchange; and
(d) Furnish to any Purchaser, so long as the Purchaser owns
any Registrable Securities, (i) forthwith upon request a copy of the most recent
annual or quarterly report of the Company and such other SEC reports and
documents so filed by the Company, and (ii) such other information (but not any
opinion of counsel) as may be reasonably requested by any Purchaser seeking to
avail itself of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.
Section 6.6 Assignment of Registration Rights. Subject to the
terms and conditions of this Agreement, the right to cause the Company to
register Registrable Securities pursuant to this Agreement may be assigned by
Purchaser to any transferee or assignee of such securities; provided that said
transferee or assignee is a transferee or assignee of at least ten percent (10%)
of the Registrable Securities and provided that the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act; it being the intention that so long as Purchaser
holds any Registrable Securities hereunder, either Purchaser or its transferee
or assignee of at least ten percent may exercise the
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registration rights hereunder. Other than as set forth above, the
parties hereto hereby agree that the registration rights hereunder shall not be
transferable or assigned and any contemplated transfer or assignment in
contravention of this Agreement shall be deemed null and void and of no effect
whatsoever.
ARTICLE VII - MISCELLANEOUS
Section 7.1 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof. No party shall be liable or bound to any other party in
any manner by any warranties, representation, or covenants except as
specifically set forth herein or therein.
Section 7.2 Survival of Representations and Warranties. The warranties,
representations and covenants of the Company and the Purchasers contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing.
Section 7.3 Notices. All notices, requests, demands, consents and other
communications herein shall be in writing and shall be deemed, unless otherwise
specified herein, to have been duly given if personally delivered or mailed,
first-class certified mail, postage prepaid and return receipt requested or sent
by recognized overnight courier service or transmitted by telex or facsimile, as
follows:
(a) If to the Company:
JAKKS Pacific, Inc.
22761 Pacific Coast Hwy., Suite 226
Malibu, California 90265
Attention: President
Facsimile number: (310) 317-8527
with a copy to (which shall not constitute
effective notice to the Company):
Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, LLP
750 Lexington Avenue
New York, New York 10022-1200
Attention: Murray L. Skala, Esq.
Facsimile number: (212) 888-7776
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(b) If to Renaissance III:
Renaissance Capital Growth & Income Fund III, Inc.
8080 North Central Expressway, Suite 210-LB59
Dallas, Texas 75206
Attention: President
Facsimile number: (214) 891-8291
with a copy to (which shall not constitute
effective notice to Renaissance III):
Wolin, Ridley & Miller LLP
3100 Bank One Center
1717 Main Street
Dallas, Texas 75201
Attn: Norman R. Miller, Esq.
Facsimile number: (214) 939-4949
(c) If to ProFutures:
ProFutures Bridge Capital Fund, L.P.
5350 S. Roslyn Street, Suite 350
Englewood, Colorado 80111
Attention: President
Facsimile number: (303) 721-1190
with a copy to (which shall not constitute
effective notice to ProFutures):
Goins, Underkofler, Crawford & Langdon
1601 Elm Street, Suite 3300
Dallas, Texas 75201
Attn: Ira Levy, Esq.
Facsimile number: (214) 969-5902
or such other addresses as each of the parties hereto may provide from time to
time in writing to the party. For purposes of computing the time periods set
forth in this Section 7.3, the delivery date shall be deemed to be (i) three (3)
days after the date of mailing, (ii) the date personally delivered or sent by
telex or facsimile, or (iii) the business day after the date sent by recognized
overnight courier service.
Section 7.4 Amendments. Any term of this Agreement may be amended only
with the written consent of the Company and the holders of more than sixty-six
and two-thirds percent (66 2/3%) of the Common Stock issued or issuable upon
conversion of the Series A Preferred
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Stock not previously sold to the public. Any amendment effected in accordance
with this paragraph shall be binding upon each holder of Series A Preferred
Stock purchased under this Agreement at the time outstanding (including Common
Stock into which such Series A Preferred Stock have been converted), each future
holder of such securities, and the Company.
Section 7.5 Waiver and Consent. No action taken pursuant to this
Agreement, including any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any party hereto or a breach of any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach, and no failure by any party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
Section 7.6 Successors and Assigns. Except as otherwise expressly
provided in this Agreement, all of the terms of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto (including permitted transfers of any shares
of Series A Preferred Stock sold hereunder or any Common Stock issued upon
conversion thereof).
Section 7.7 Rights of Purchasers. The Purchasers shall have the
absolute right to exercise or refrain from exercising any right or rights that
the Purchasers may have by reason of this Agreement or any Series A Preferred
Stock, including the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into any agreement with the Company
for the purpose of modifying this Agreement or any agreement effecting any such
modification.
Section 7.8 Execution and Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original, and
all of which together shall constitute one instrument.
Section 7.9 No Third Party Beneficiaries. Except as otherwise provided,
this Agreement has been and is made solely for the benefit of and shall be
binding upon the Company and the Purchasers and no other person shall acquire or
have any rights under or by virtue of this Agreement.
Section 7.10 Severability. Any provision of this Agreement that is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or lack of authorization without invalidating the remaining
provisions hereof or affecting the validity, unenforceability or legality of
such provision in any other jurisdiction.
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Section 7.11 GOVERNING LAW. THIS AGREEMENT AND THE LEGAL RELATIONS
AMONG THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS CONFLICTS OF LAW DOCTRINE.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
COMPANY:
JAKKS PACIFIC, INC.
By: /s/ Jack Friedman
-----------------
Jack Friedman, President
PURCHASERS:
RENAISSANCE CAPITAL GROWTH & INCOME
FUND III, INC.
By: /s/ Vance M. Arnold
-------------------
Name: Vance M. Arnold
Title: Vice President
PROFUTURES BRIDGE CAPITAL FUND, L.P.
By: Bridge Capital Partners, Inc., General
Partner
By: /s/ James H. Perry
------------------
Name: James H. Perry
Title: President
