DIGITAL CREATIVE DEVELOPMENT CORPORATION
67 Irving Place North
4th Floor
New York, New York 10003
September 15, 2000
CONFIDENTIAL
Laser-Pacific Media Corporation
809 North Cahuenga Boulevard
Hollywood, California 90038
Ladies and Gentlemen:
The purpose of this letter (this "Letter of Intent") is to confirm the
general understanding we have reached with respect to the proposed acquisition
by Digital Creative Development Corporation, a Delaware corporation, or its
designated affiliate ("Digital") of Laser-Pacific Media Corporation (the
"Company").
Subject to all of the provisions hereof and to the negotiation,
execution and delivery of mutually acceptable definitive documents, all as more
particularly described in this Letter of Intent, Digital and the Company have
preliminarily agreed that such acquisition (the "Transaction") will be upon the
following general terms and conditions:
1. Structure. Digital will acquire the Company in a manner mutually agreed upon,
intended to achieve for those stockholders of the Company exchanging Common
Stock, par value $.0001, of the Company ("Company Common Stock") for Common
Stock, par value $.001, of Digital ("Digital Common Stock"), a non-taxable
exchange under applicable provisions of the Internal Revenue Code of 1986, as
amended. Digital and the Company contemplate that the Transaction will be
effected through a merger (the "Merger") of the Company with a wholly-owned
subsidiary of Digital, with the Company surviving as a wholly-owned subsidiary
of Digital, all pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") in form satisfactory to the Company and Digital. The Merger shall be
effected by a conversion and exchange of that number of shares of Digital Common
Stock having an aggregate value of $4.25 (based upon the Closing Price of
Digital Creative Development Corporation, a Utah corporation ("Digital-Utah"))
for each outstanding share of Company Common Stock. The term "Closing Price"
shall mean the average of the last sale price of Digital-Utah as reported on the
NASDAQ Bulletin Board for the twenty trading days prior to the Closing (as
defined below). The Digital Common Stock shall be convertible into shares of
Digital-Utah on a share-for-share basis.
2. Securities Filings. As soon as practicable after the execution and delivery
of the Merger Agreement and prior to the Closing, the shares of Digital Common
Stock to be received by the stockholders of the Company will be registered under
the Securities Act of 1933, as amended, pursuant to a Registration Statement on
Form S-4 (or other appropriate form) to be filed by Digital with the Securities
and Exchange Commission (the "SEC"). The parties shall cooperate in preparing a
joint proxy statement to be filed with the SEC. The Company will use reasonable
efforts to have its stockholders execute a lock-up agreement in form
satisfactory to Digital with respect to the Digital Common Stock; provided,
however, that it shall be a condition to Closing that all stockholders of the
Company who shall receive Digital Common Stock constituting more than 5% of the
Digital Common Stock outstanding (after giving effect to the Merger) execute
such lock-up agreement.
3. Conditions. The following, among others, shall be additional conditions to
the consummation of the closing under the Merger Agreement (the "Closing"):
3.1 The terms of the transactions contemplated by the Merger Agreement shall
have received the approval of the Boards of Directors and the stockholders of
the Company and Digital.
3.2 The parties shall have received the consent of all courts and governmental
bodies and agencies whose consent or approval is necessary or advisable, in the
opinion of counsel to the Company or Digital, as appropriate, for the
consummation of the Closing.
3.3 James R. Parks, Emory M. Cohen and Leon D. Silverman shall have executed an
agreement in form, scope and substance satisfactory to Digital by which they
agree to vote for the Merger and to exchange their shares of Company Common
Stock pursuant to the Merger Agreement.
3.4 Emory M. Cohen, Randolph D. Blimi and Robert McClain shall have executed and
delivered with Digital or such affiliate as Digital may designate mutually
satisfactory Employment Agreements providing for a term of not less than three
(3) years and including, inter alia, non-compete provisions operative during
such term except only in the event of a termination of such Employment Agreement
by the Executive for cause (as such term shall be defined in the definitive
Employment Agreement).
3.5 The business of the Company shall be conducted only in the ordinary course
from and after the date hereof through the Closing.
3.6 There shall have been no material adverse change in the assets, methods of
operation, financial condition, capital structure or business of the Company or
Digital since its most recent fiscal year end, including, without limitation,
its competitive position and its sales and earnings.
3.7 No proceeding or investigation shall be pending or threatened before or by a
court or governmental body or agency to prevent the consummation of the
transactions contemplated hereby or which might affect Digital's right to own or
operate the assets or business of the Company.
3.8 The Company shall not have paid any dividends or made any distributions with
respect to its capital stock, granted any additional employee stock options,
instituted or substantially amended any employee benefit plans or materially
increased the compensation paid to officers or other employees of the Company,
subsequent to the date hereof and prior to the Closing.
3.9 The Merger Agreement shall include appropriate provisions with respect to
the assumption by Digital of all options, warrants, convertible securities and
other rights (together "Convertibles") to acquire securities of the Company
outstanding immediately prior to the Merger, so that such Convertibles shall
become exercisable or exchangeable for, or convertible into, the kind and amount
of Digital Common Stock which the holder thereof would have been entitled to
receive had such Convertibles been exercised, exchanged or converted immediately
prior to the Merger.
3.10 The parties shall have received fairness opinions in form, scope and
substance satisfactory to them in their discretion.
4. Filings. As soon as practicable after the date hereof, Digital and the
Company will make all necessary governmental filings, including, without
limitation, those required to be made under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, in connection with the consummation of the
transactions contemplated hereby, and the parties shall cooperate in making any
such filings promptly. All specified waiting periods thereunder shall expire
without challenge as a condition to the Closing.
5. No Commitment. This Letter of Intent is only a statement of intent and does
not constitute the contractual commitment of Digital or the Company. Each
party's obligation to proceed with the Transaction contemplated hereby is
subject, inter alia, to the execution and delivery of definitive documents, in
form and substance satisfactory to each party and its respective counsel,
containing customary and appropriate representations and warranties, covenants
and conditions.
6. Public Announcement. The parties will make an appropriate public announcement
of the Transaction, the form and substance of which shall have been agreed to by
the Company and Digital and their respective counsel, promptly after the
execution of this Letter of Intent. Thereafter, until the termination (if any)
of this Letter of Intent, neither Digital nor the Company shall make any public
announcement, issue any press release or other publicity or confirm any
statements by third parties concerning the Transaction without the prior written
consent in advance of the other party.
7. Confidentiality. Each party hereto hereby agrees that it will hold in
confidence all non-public documents and materials (the "Documents") received by
it from any other party in connection with the Transaction, whether received
before or after the date of this Letter of Intent; except (i) that any of such
information may be disclosed to directors, officers, employees, counsel, agents
and representatives of such party who reasonably require such information for
the purpose of evaluating and consummating the Transaction (it being understood
that such directors, officers, employees, agents and representatives will be
informed by such party of the confidential nature of such information and will
be directed by such party to treat such information confidentially and that such
party will be responsible for any disclosure made by such directors, officers,
employees, agents and representatives); (ii) to the extent necessary to comply
with law or the valid order or requirement of a governmental agency or court of
competent jurisdiction or otherwise in connection with any court action or
administrative proceeding, provided, however, that the other party will make all
reasonable efforts to seek confidential treatment of such Documents and
information; or (iii) in order to enforce or exercise its rights and perform its
obligations in connection with the Transaction. All information shall be
returned to the party providing such information upon any termination of this
Letter of Intent. The provisions of this Section 7 shall survive any such
termination.
8. Restriction on Solicitation. (a) From the date hereof until November 15, 2000
(the "Restricted Period"), the Company and its subsidiaries will not, and will
cause their respective officers, directors, employees or other agents not to,
directly or indirectly, (i) take any action to solicit, initiate or encourage
any Company Acquisition Proposal (as hereinafter defined) or (ii) engage in
negotiations with, or disclose any nonpublic information relating to the Company
or its subsidiaries, respectively, or afford access to their respective
properties, books or records to any person that may be considering making, or
has made, a Company Acquisition Proposal. Nothing contained in this Section 8
shall prohibit the Company and its Board of Directors from (i) taking and
disclosing positions with respect to a tender offer by a third party pursuant to
Rules 14d-9 and 14e-2(a) promulgated by the SEC under the Securities Exchange
Act of 1934, or (ii) furnishing information, including without limitation
nonpublic information to, or entering into negotiations with, any person or
entity that has indicated its willingness to make an unsolicited bona fide
proposal to acquire the Company pursuant to a merger, consolidation, share
exchange, purchase of a substantial portion of the assets, business combination
or other similar transaction, if, and only to the extent that, (A) such
unsolicited bona fide proposal relating to a Company Acquisition Proposal is
made by a third party that the Board of Directors of the Company determines in
good faith has the good faith intent to proceed with negotiations to consider,
and financial capability to consummate, such Company Acquisition Proposal, (B)
the Board of Directors of the Company, after duly considering the written advice
of outside legal counsel to the Company, determines in good faith that such
action is required for the Board of Directors of the Company to comply with its
fiduciary duties to stockholders imposed by applicable law, (C) contemporaneous
with furnishing such information to, or entering into discussion or negotiations
with, such person or entity the Company provides written notice to Digital to
the effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity and (D) the Company uses all reasonable
efforts to keep Digital informed in all material respect of the status and terms
of any such negotiations or discussions (including without limitation the
identity of the person or entity with whom such negotiations or discussions are
being held) and provides Digital copies of such written proposal and any
amendments or revisions thereto or correspondence related thereto; provided,
that Digital agrees to execute a confidentiality agreement, in form reasonably
acceptable to it, with respect to any such information delivered to Digital
pursuant to this clause (D), which confidentiality agreement shall be subject to
Digital's disclosure obligations arising under applicable law or securities
exchange regulations. In the event the Company accepts a Company Acquisition
Proposal, the Company shall pay to Digital the amount in cash equal to 3.5% of
the equity value of the Company as of the date of any such acceptance, plus the
reasonably documented expenses of Digital incurred in connection with this
Letter of Intent and the Transaction.
(b) The term "Company Acquisition Proposal" as used herein means any offer or
proposal for, or any indication of interest in, a merger or other business
combination directly or indirectly involving the Company or any subsidiary or
the acquisition of a substantial equity interest in, or a substantial portion of
the assets of, any such entity, other than the transactions contemplated by this
Letter of Intent.
9. Due Diligence. During the Restricted Period, Digital shall conduct
appropriate and customary legal, business and financial due diligence
investigations of the Company's business and the Company shall conduct
appropriate and customary legal, business and financial due diligence
investigations of Digital's business. Each party ("such party") shall make
available to the other party all of such party's books, records and financial
statements, including, but not limited to, all corporate documents, financial
statements, regulatory filings, marketing studies, material agreements and
technology for examination and its key employees for interview, and shall
cooperate in providing information and access to its facilities. Each party
shall be satisfied with its due diligence investigation of the other party as a
condition to the Closing.
10. Miscellaneous. This Letter of Intent supersedes any prior or contemporaneous
agreements and understandings of the parties with respect to the subject matter
covered in this Letter of Intent. This Letter of Intent may be signed in
counterparts (including by facsimile signature), each of which will be
considered an original, but all of which taken together will constitute one and
the same instrument. This Letter of Intent shall be governed by New York law
without regard to that State's principles of conflicts of laws. In no event may
either party assign any rights or obligations hereunder without the prior
written consent of the other party, and any purported assignment without such
consent shall be null and void. Each party will pay for its own legal and other
expenses incurred in connection with this Letter of Intent and the Transaction
whether or not the Transaction is consummated. This Letter of Intent may be
amended and the terms hereof waived only by a written agreement signed by each
of the parties hereto.
11. Termination. Unless terminated earlier by written agreement of the parties,
this Letter of Intent shall terminate in the event that a definitive Merger
Agreement has not been executed on or before October 5, 2000.
12. Binding Agreements. The purpose of this Letter of Intent is to set forth our
preliminary mutual understandings regarding the Transaction and the other
transactions contemplated herein. The parties understand and agree that this
Letter of Intent expresses our preliminary understandings and good faith
intentions only and does not create a binding obligation upon any party hereto
except that Sections 5, 6, 7 and 8 of this Letter of Intent are intended to be
and are binding obligations of the parties.
If the foregoing properly sets forth our understanding, please so indicated by
signing the copy of this Letter of Intent in the space provided below and
returning such copy to us.
Very truly yours,
DIGITAL CREATIVE DEVELOPMENT
CORPORATION, Delaware corporation
By: /s/
AGREED:
LASER-PACIFIC MEDIA CORPORATION
By:_________________________________
Name:
Title:
Laser-Pacific Media Corporation
September 15, 2000
Page -5-
Document #: 13070
