STOCK PURCHASE AGREEMENT
EXHIBIT 99.2
STOCK PURCHASE AGREEMENT (“Agreement”) dated as of September 10, 2002, between Image
Entertainment, Inc., a California corporation (“Company”) and Standard Broadcasting Corporation
Limited, a Canadian corporation (“Investor”).
WHEREAS, Company is issuing and selling shares of its common stock, no par value
(“Common Stock”) to Investor subject to the terms and conditions set forth herein; and
WHEREAS, the shares of Common Stock being purchased by Investor hereunder (“Shares”)
are being issued in a private placement without registration under the Securities Act of 1933, as
amended (the “Act”), in reliance on one or more exemptions from the registration requirements under
the Act;
NOW THEREFORE, in consideration of the foregoing recitals and the respective covenants
and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Sale and Closing.
1.1 Closing. The closing of the transactions contemplated hereby (“Closing”) will
take place on September 25, 2002, at the offices of Xxxxxxxxx Xxxxxxx, LLP, 0000 Xxxxxxxx Xxxxxx,
Xxxxx 000X, Xxxxx Xxxxxx, Xxxxxxxxxx 00000, or at such other time and place as Investor and Company
mutually agree in writing.
1.2 Total Purchase Price. The purchase price for the Shares to be paid by Investor at
Closing is Two Million Dollars (US$2,000,000.00) in United States currency (“Purchase Price”).
1.3 Closing Price per Share. The price per Share to be paid by Investor (“Closing
Price”) will be One Dollar and Eleven and Three One Hundreds Cents (US$1.1103).
1.4 Purchase and Sale. Upon the basis of the representations, warranties and
covenants, and subject to the terms and conditions set forth in this Agreement, Investor agrees to
purchase, and Company agrees to sell, issue and deliver to Investor at the Closing, One Million
Eight Hundred One Thousand Three Hundred Fifteen (1,801,315) Shares of Common Stock.
1.5 Related Agreements. At the Closing, Company will execute and deliver to Investor
a Warrant in the form attached hereto as Exhibit A (“Warrant”), and Company and Investor will
execute and deliver a Registration Rights Agreement in the form attached hereto as Exhibit B and a
Distribution Agreement in the form attached hereto as Exhibit C, (collectively, the “Related
Agreements”).
1.6 Delivery and Payment.
(a) Deliveries By Company. At Closing, Company will deliver to Investor: (i) a
stock certificate or certificates evidencing the number of Shares to be purchased by
Investor hereunder, (ii) an original of each of the Related Agreements fully executed by
Company, and (iii) all other documents, instruments and writings required to be delivered by
Company to Investor hereunder or otherwise required in connection herewith.
(b) Deliveries By Investor. As soon as practicable after the execution hereof
and before the Closing, Investor will deliver to Company: (i) the Purchase Price, by wire
transfer of immediately available funds to the account designated by Company, (ii) an
original of each of the Related Agreements fully executed by Investor, and (iii) all other
documents, instruments and writings required to be delivered by Investor to Company
hereunder or otherwise required in connection herewith.
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2. Representations and Warranties of Company. Company represents and warrants to Investor that,
except as described in Company’s reports filed with the Securities and Exchange Commission (“SEC”)
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, (the
“Reports”):
2.1 Corporate Power and Authority. Company has the corporate power and authority to
enter into this Agreement and the Related Agreements and to perform its obligations hereunder and
thereunder. The execution and delivery by Company of this Agreement and the Related Agreements, and
the consummation by Company of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action on the part of Company. This Agreement and the Related
Agreements have been duly executed and delivered by Company and constitute valid and binding
obligations of Company enforceable against it in accordance with their respective terms, subject to
the effects of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally and to the application of equitable principles in any
proceeding (legal or equitable).
2.2 Organization and Qualification. Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of California, and has corporate power
to carry on its business as it is now being conducted or proposed to be conducted. Company is duly
qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified will not have a
material adverse effect on Company.
2.3 Capitalization. The authorized capital stock of Company as of August 5, 2002,
consists of 30,000,000 shares of Common Stock, no par value per share, and 3,366,000 shares of
preferred stock, par value $1.00 per share. As of August 5, 2002, there were 15,848,137 shares of
Common Stock issued and outstanding, and no shares of preferred stock were outstanding. Since
August 5, 2002, no shares of Company’s capital stock have been issued, except shares issued as
dividends or upon the exercise of director or employee stock options.
2.4 Shares. Upon issuance, sale and delivery as contemplated hereunder, the Shares
will be duly authorized, validly issued, fully paid and non-assessable, free of all preemptive and
similar rights and other restrictions on transfer, other than those arising under applicable state
and federal securities laws.
2.5 Absence of Certain Changes or Events. Except as set forth in Exhibit D, there has
been no material adverse change in the capitalization, assets, liabilities or income of Company
since the issuance of the financial statements as reflected in Company’s Annual Report on Form 10-K
for the fiscal year ended March 31, 2002 and Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002, as filed with the SEC.
2.6 Compliance. Company is in material compliance with all applicable laws,
regulations, judgments, decrees and orders material to the conduct of its business.
2.7 No Litigation. There is no pending, or, to the knowledge of Company, threatened,
judicial, administrative or arbitral action, claim, suit, proceeding or investigation which might
affect the validity or enforceability of this Agreement or the Related Agreements, or which
involves Company and which if adversely determined could reasonably be expected to have a material
adverse effect on Company’s ability to perform hereunder or thereunder.
2.8 No Consents. Except for filings that may be required under federal or state
securities laws, no consent or approval of, or exemption by, or filing with, any party or
governmental or public body or authority is required in connection with the execution, delivery and
performance under this Agreement or the Related Agreements or the taking of any action contemplated
hereunder or thereunder.
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2.9 Non-Contravention. The execution, delivery and performance by Company of this
Agreement and the Related Agreements and the consummation of the transactions contemplated hereby
and thereby will not: (a) violate any provision of Company’s articles of incorporation or bylaws,
each as currently in effect, (b) violate, conflict with or result in the breach of any of the terms
of, result in a material modification of the effect of, otherwise, give any other contracting party
the right to terminate, or constitute (or with notice or lapse of time or both constitute) a
default under, any material contract or other agreement to which Company is a party or by or to
which Company or any of Company’s assets or properties may be bound or subject, (c) violate any
order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory
body by which Company, or the assets or properties of Company are bound, or (d) to Company’s
knowledge, violate any statute, law or regulation.
No Brokers or Finders. No person, entity, broker, finder, investment banker or other
intermediary, has been retained by or is authorized to act on behalf of Company, or is entitled to
or could reasonably be expected to be entitled to any brokerage, finder’s or other fee or
commission from Company in connection with the negotiation, preparation, execution or delivery of
this Agreement or the transactions contemplated hereby.
3. Representations and Warranties of Investor. Investor hereby represents and warrants to
Company that:
3.1 Authority Relative to Agreement. Investor has all requisite power and authority
to enter into this Agreement and the Related Agreements and to perform its obligations hereunder
and thereunder. The execution and delivery by Investor of this Agreement and such Related
Agreements and the consummation by Investor of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of Investor. This Agreement and the
Related Agreements have been duly executed and delivered by Investor and constitute valid and
binding obligations of Investor, enforceable against it in accordance with their respective terms.
3.2 Accredited Investor Status. Investor is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D promulgated under the Act. Investor is acquiring the Shares
and the shares of common stock issuable upon exercise of the Warrant (collectively, the
“Securities”) for its own account, for investment purposes only and without a view toward the
further distribution of the Securities. Investor acknowledges that it has made an independent due
diligence investigation of Company and has reviewed each of the Reports at a reasonable time prior
to the execution of this Agreement. Investor has had the opportunity to ask questions and receive
answers concerning the business and affairs of Company and the terms and conditions of the sale of
the Securities and to obtain any additional information (which Company possesses or can acquire
without unreasonable effort or expense) as may be necessary to verify the accuracy of information
furnished to Investor. Investor is highly sophisticated in business and financial matters, and
fully understands the transactions described in this Agreement and the Related Agreements.
Investor: (a) is able to bear the loss of the entire principal amount of its investment in the
Securities without any material adverse effect on its business, operations or prospects, (b) has
such knowledge and experience in financial and business matters that it is capable of evaluating
the merits and risks of making its investment in the Securities, (c) realizes that Company has a
significant need for additional financing, (d) realizes that its investment in the Securities is
highly speculative and subject to significant risks, including those risks identified in the
Reports, and (e) understands that the documents, including the Reports, provided to Investor in
connection with the transactions contemplated hereby may contain forward-looking statements that
involve risk and uncertainties that could cause actual results to differ materially from those
stated.
3.3 Foreign Investor Status. Investor is not a “U.S. person” as that term is defined
in Rule 902(k) of Regulation S promulgated under the Act, and is not purchasing the Securities for
the account or benefit of a U.S. person. Investor acknowledges and agrees that: (a) the Securities
have not been registered under the Act and may not, and will not, be offered or sold in the United
States or to U.S.
persons unless the Securities are registered under the Act, or an exemption from the registration
requirements under the Act and applicable state law is available, (b) Investor will resell the
Securities only in accordance with the provisions of Regulation S, registration under the Act or an
available exemption from registration, and (c) hedging transactions involving the Securities may
not, and will not, be conducted unless in compliance with the Act.
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3.4 Restricted Securities. Investor understands that the Shares and the Warrant
Shares are characterized as “restricted securities” under the federal securities laws inasmuch as
they are being or will be acquired from Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be resold without
registration under the Act and applicable state law only in certain limited circumstances. In this
regard, Investor represents that it is familiar with Rule 144 of the Act, as presently in effect,
and understands the resale limitations imposed thereby and by the Act. Investor understands that it
is accepting the Securities for investment purposes only and without the view toward the further
distribution of such securities except pursuant to a registration statement that may be effective
permitting the public offer or sale of such securities, or pursuant to an exemption from
registration under federal and applicable state laws. In the event Investor does attempt to offer
or sell the Securities in the circumstances contemplated by the preceding sentence, Investor will
do so only in accordance with the requirements of federal and applicable state laws and
interpretations thereof.
3.5 Restrictive Legends. Until such time, if ever, a registration statement covering
the Securities is filed and declared effective by the SEC, or the distribution compliance period
under Rule 903 and the holding period requirement under Rule 144 under the Act expire, Investor
understands that the certificates evidencing the Securities will bear a legend substantially in
form provided under Section 6.2 of this Agreement.
3.6 No Non-Public Information. Investor is not in possession of, nor has Company or
its agents disclosed to Investor, any material non-public information (not including the
information relating to the negotiations for, and the transaction contemplated by, this Agreement
which could be considered “material” and which have not yet been publicly announced) that if
disclosed, would reasonably be expected to have a materially adverse effect on the price of the
Common Stock, or which the Company would be required to disclose according to applicable law, rule
or regulation.
3.7 No Brokers or Finders. No person, entity, broker, finder, investment banker or
other intermediary, has been retained by or is authorized to act on behalf of Investor, or is
entitled to or could reasonably be expected to be entitled to any brokerage, finder’s or other fee
or commission from Company or Investor in connection with the negotiation, preparation, execution
or delivery of this Agreement or the transactions contemplated hereby.
4. Director. The parties agree that for so long as Investor continues to own at least one-half
of the number of Shares purchased hereunder, Investor will be entitled to nominate one (1) director
to Company’s Board of Directors, and the Company will use its best efforts to cause such nominee to
be elected as a director.
5. Closing Conditions.
5.1 Conditions to Closing of Investor. Investor’s obligation to purchase the Shares
at the Closing is subject to the satisfaction, or waiver by Investor, of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Company set forth in this Agreement will be true and correct in all material respects
(except for those qualified as to materiality to the extent that such representation or
warranty speaks of an earlier date) as though made on and as of the Closing.
(b) Related Agreements. Company will have executed and delivered to Investor
this Agreement and each of the Related Agreements.
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5.2 Conditions to Closing of Company. Company’s obligation to issue and sell the
Shares at the Closing is subject to the satisfaction, or waiver by Company, of the following
conditions:
(a) Representations and Warranties. The representations and warranties of each
Investor set forth in this Agreement will be true and correct in all material respects as of
the date of this Agreement and as of the Closing (except to the extent that such
representation or warranty speaks of an earlier date) as though made on and as of the
Closing.
(b) Receipt of Purchase Price. Company will have received the Purchase Price,
by wire transfer of immediately available funds to the account designated by Company.
(c) Related Agreement. Investors will have executed and delivered to Company
this Agreement and each of the Related Agreements.
6. Restrictions on Transfer of Shares.
6.1 Restrictions on Transferability. The Shares may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the Act and any other
applicable securities laws, or pursuant to an exemption therefrom. Company is required to refuse to
register any transfer of the Securities not made in accordance with the provisions of Regulation S,
pursuant to registration under the Act, or pursuant to an available exemption from registration,
and shall give stop transfer orders to its transfer agent with respect to the Securities if
necessary in order to enforce the foregoing restrictions.
6.2 Restrictive Legend. Each certificate representing the Shares will contain a
legend substantially to the following effect (in addition to any legends required under applicable
securities laws).
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION, OR THE SECURITIES COMMISSION OF ANY STATE, IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE ACT, PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE ACT, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
6.3 State Securities Law. The sale of the securities which are the subject of this
agreement has not been qualified with the commissioner of corporations of the State of California
and the issuance of the securities or the payment or receipt of any part of the consideration
therefor prior to the qualification is unlawful, unless the sale of securities is exempt from the
qualification by section 25100, 25102 or 25105 of the California Corporations Code. The rights of
all parties to this agreement are expressly conditioned upon the qualification being obtained
unless the sale is so exempt.
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7. General.
7.1 Amendments and Waivers. No modifications or amendments to, or waivers of, any
provision of this Agreement may be made, except pursuant to a document signed by Company and the
holders of a majority of the outstanding Shares issued in the Placement.
7.2 Successors and Assigns. The provisions of this Agreement will inure to the
benefit of and be binding upon the successors and assigns of each of the parties hereto.
Notwithstanding the foregoing, neither Investor nor Company will assign or delegate any of its rights or obligations under this
Agreement.
7.3 No Third-Party Beneficiaries. No person or entity not a party to this Agreement
will be deemed to be a third-party beneficiary hereunder or entitled to any rights hereunder. All
representations, warranties or agreements of Investor contained in this Agreement will inure to the
benefit of Company.
7.4 Interpretation. The words “include,” “includes,” and “including” when used herein
will be deemed in each case to be followed by the words “without limitation.” This Agreement has
been negotiated by the respective parties hereto and their attorneys and the language hereof will
not be construed for or against any party. The words “hereof,” “herein,” “herewith,” “hereby” and
“hereunder” and words of similar import will, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this Agreement.
7.5 Severability. If any provision of this Agreement is held to be illegal, invalid
or unenforceable under present or future laws, then, if possible, such illegal, invalid or
unenforceable provision will be modified to such extent as is necessary to comply with such present
or future laws and such modification will not affect any other provision hereof; provided that if
such provision may not be so modified, such illegality, invalidity or unenforceability will not
affect any other provision, but this Agreement will be reformed, construed and enforced as if such
invalid, illegal or unenforceable provision had never been contained herein.
7.6 Descriptive Headings. The descriptive headings used in this Agreement are
inserted for convenience of reference and are not intended to be part of or to affect the meaning
or interpretation of this Agreement.
7.7 Expenses. Each party will pay all costs and expenses incurred by it in connection
with the execution and delivery of this Agreement and the transactions contemplated hereby,
including fees of legal counsel.
7.8 Further Assurances. Each party to this Agreement will do and perform or cause to
be done and performed all such further acts and things and will execute and deliver all such
agreements, certificates, instruments and documents as the other party hereto may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
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7.9 Notices. All notices, requests, claims, demands and other communications under
this Agreement will be in writing and will be deemed given if delivered personally, by facsimile
(with oral confirmation) or sent by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as will be specified by like notice):
If to Company:
|
Image Entertainment, Inc. | |
| 0000 Xxx Xxxxxx | ||
| Xxxxxxxxxx, Xxxxxxxxxx 00000 | ||
| Attn.: Xxxx X. Xxxxxx, CFO | ||
| Phone: (000) 000-0000 | ||
| Fax: (000) 000-0000 | ||
with a copy to:
|
Xxxxxxxxx Xxxxxxx, LLP | |
| 0000 Xxxxxxxx Xxxxxx, Xxxxx 000X | ||
| Xxxxx Xxxxxx, Xxxxxxxxxx 00000 | ||
| Attn.: Xxxx X. Xxxxxxxx, Esq. | ||
| Phone: (000) 000-0000 | ||
| Fax: (000) 000-0000 | ||
If to Investor:
|
Standard Broadcasting Corporation Limited | |
| 0 Xx. Xxxxx Xxxxxx Xxxx, Xxxxx 0000 | ||
| Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 | ||
| Attn.: Xxxxx Xxxxxx, EVP | ||
| Phone: (000) 000-0000 | ||
| Fax: (000) 000-0000 |
7.10 Arbitration. Any controversy, dispute or claim of any nature whatsoever arising
out of, in connection with or in relation to this Agreement or the Related Agreements, including
the issue of arbitrability of any such disputes, must be brought only in Los Angeles, California
and will be resolved by final and binding arbitration in accordance with the UNCITRAL Commercial
Arbitration Rules by a retired judge at JAMS. JAMS will be the appointing authority, and the
hearing will be held in Los Angeles, California. The prevailing party in any dispute will be
entitled to recover all attorney’s fees, costs and expenses in addition to other allowable costs.
7.11 Governing Law. This Agreement and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto will be governed by, and construed in accordance
with, the internal law of the United States and the State of California, without regard to
conflicts of laws.
7.12 Counterparts. This Agreement may be executed in counterparts, each of which will
be an original and all of which together will constitute one and the same instrument.
7.13 Entire Agreement. This Agreement and its Exhibits and the Related Agreements
collectively constitute the entire agreement among the parties with respect to the transactions
contemplated hereby, thereby and related matters and collectively supersede any prior or
contemporaneous negotiations, understandings or agreements, both oral and written, with respect
hereto or thereto.
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The parties have executed this Agreement as of the date first set forth above.
| COMPANY: IMAGE ENTERTAINMENT, INC. |
||||
| By: | /s/ Xxxx X. Xxxxxx | |||
| Xxxx X. Xxxxxx | ||||
| Its Chief Financial Officer | ||||
| INVESTOR: STANDARD BROADCASTING CORPORATION LIMITED |
||||
| By: | /s/ Xxxxx Xxxxxx | |||
| Xxxxx Xxxxxx | ||||
| Its Executive Vice President | ||||
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