EXHIBIT 10.8
DISTRIBUTION AND PAYMENT AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of August 12,
2002, by and among Ziff ▇▇▇▇▇ Holdings Inc., a Delaware corporation (the
"Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners III, L.P., ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Dutch
III-A, L.P., ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Dutch III-B, L.P. and ▇▇▇▇▇▇ ▇▇▇▇▇ &
Partners III-C, L.P. (collectively, the "▇▇▇▇▇▇ ▇▇▇▇▇ Funds").
WHEREAS, the board of directors of the Company (the "Board")
has adopted the 2002 Ziff ▇▇▇▇▇ Holdings Inc. Employee Stock Option Plan (as
amended, supplemented or restated from time to time, the "Plan") pursuant to
which the Company may issue, inter alia, options to purchase an aggregate of
14,100 shares of its Series D Redeemable Preferred Stock, $.01 par value per
share (the "Series D Preferred").
WHEREAS, as part of a restructuring of the Company and its
principal operating subsidiary, Ziff ▇▇▇▇▇ Media Inc. ("Ziff ▇▇▇▇▇ Media"),
certain holders (the "Exchanging Holders") of the 12% Senior Subordinated Notes
due 2010 of Ziff ▇▇▇▇▇ Media (the "Senior Notes") are exchanging their Senior
Notes for a combination of cash, new senior subordinated compounding notes of
Ziff ▇▇▇▇▇ Media, shares of the Company's Series E Redeemable Preferred Stock,
$.01 par value per share (the "Series E Preferred"), and warrants with an
exercise price of $0.001 per share to purchase shares of the Company's common
stock (the "Exchange").
WHEREAS, pursuant to the Company's Fifth Amended and Restated
Certificate of Incorporation (as amended, supplemented or restated from time to
time, the "Charter"), if the assets of the Company are insufficient on a
liquidation, dissolution or winding up of the Company to permit payment to
holders of the Company's preferred stock of the aggregate amounts which they are
entitled to be paid, then all of the assets of the Company are to be distributed
to the holders of Series D Preferred until the holders thereof are entitled to
receive the entire amount which they are entitled to be paid in respect of their
Series D Preferred prior to any payment being made in respect of the Series E
Preferred.
WHEREAS, pursuant to the Charter, the Company may not redeem,
purchase or otherwise acquire any Series E Preferred, and may not directly or
indirectly pay or declare any dividend or make any distribution upon any Series
E Preferred as long as any Series D Preferred remains outstanding.
WHEREAS, pursuant to the terms and conditions set forth
herein, the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds shall not be entitled to receive any
distributions or payments from the Company as set forth in the Charter or from a
third-party with respect to the Escrowed Shares (as hereinafter defined) held by
such ▇▇▇▇▇▇ ▇▇▇▇▇ Funds until the earliest of (i) such time as of which the
outstanding shares of Series E Preferred have been redeemed, repurchased, or
otherwise acquired by the Company, or have been converted into common stock of
the Company, or (ii) such time as of which all of the outstanding shares of
Series E Preferred have been acquired by or transferred to a third party or
third parties in connection with a transaction in which a person or group of
persons (other than the ▇▇▇▇▇▇ ▇▇▇▇▇
Funds) acquires the power (whether by contract, acquisition of voting securities
or otherwise) to elect a majority of the Company's board of directors (the
earlier of such events, the "Termination Time").
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
Section 1. Mechanics. Solely for purposes of satisfying its
obligations hereunder, each of the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds agrees that on the date on
which the Exchange is consummated (the "Closing"), it shall deliver to the
Company for deposit into escrow, its Pro Rata Share of [_____] shares of Series
D Preferred. The Escrowed Shares shall at all times be not less than the number
of Option Shares and if at any time, the number of Option Shares exceeds the
Escrowed Shares, each of the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds shall promptly deliver to the
Company for deposit into escrow a number of shares of Series D Preferred equal
to its Pro Rata Share of such excess. If in complying with its obligations
pursuant to this Section 1, any of the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds delivers a certificate
which represents more shares than its Pro Rata Share of the aggregate number of
shares of Series D Preferred then required to be delivered into escrow by all
▇▇▇▇▇▇ ▇▇▇▇▇ Funds, the Company shall promptly, but not later than the third
(3rd) business day after delivery by such ▇▇▇▇▇▇ ▇▇▇▇▇ Fund of its certificate,
(x) issue a new certificate to such ▇▇▇▇▇▇ ▇▇▇▇▇ Fund representing the shares of
Series D Preferred delivered by such ▇▇▇▇▇▇ ▇▇▇▇▇ Fund to the Company which are
not required to be delivered into escrow and (y) issue a new certificate
representing the Escrowed Shares for such ▇▇▇▇▇▇ ▇▇▇▇▇ Fund in the name of such
▇▇▇▇▇▇ ▇▇▇▇▇ Fund for delivery into escrow. In the event that at any time the
number of Escrowed Shares exceeds the number of Option Shares issuable pursuant
to the Plan (such excess, the "Excess Shares"), the Company shall release and
deliver to each of the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds such ▇▇▇▇▇▇ ▇▇▇▇▇ Fund's Pro Rata
Share of the Excess Shares. Notwithstanding anything else herein to the
contrary, the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds (or their transferees) shall, at all times, be
deemed for all purposes to be the beneficial and record owners of the Escrowed
Shares. When used herein, (a) "Escrowed Shares" means the number of shares of
Series D Preferred actually delivered by the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds into escrow
pursuant to this Agreement and not subsequently released therefrom, (b) "Option
Shares" means the number of shares of Series D Preferred which were granted
pursuant to, plus the number of shares of Series D Preferred issuable upon
exercise of options issued pursuant to, the Plan and which remain outstanding
and, (c) "Pro Rata Share" means, for any ▇▇▇▇▇▇ ▇▇▇▇▇ Fund, the percentage
determined by dividing the number of shares of Series D Preferred issued to such
▇▇▇▇▇▇ ▇▇▇▇▇ Fund divided by the number of shares of Series D Preferred issued
to all ▇▇▇▇▇▇ ▇▇▇▇▇ Funds.
Section 2. Delay of Receipt of Distributions or Payments.
2A. Dividends; Distributions. Unless the Termination Time has
already occurred as of such date, in the event that the Company pays any cash
dividend or makes any cash distribution in respect of the Series D Preferred,
such dividend or distribution in respect of the Escrowed Shares shall be held by
the Company in a separate interest-bearing escrow account for the benefit of the
▇▇▇▇▇▇ ▇▇▇▇▇ Funds (the "Escrow Account").
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2B. Liquidation; Dissolution; Winding Up; Redemption. Unless
the Termination Time has already occurred as of such date, in the event that (i)
the Company makes any payment or distribution to the holders of Series D
Preferred upon any liquidation, dissolution or winding up of the Company or
redeems, repurchases or otherwise acquires any Series D Preferred, or (ii) any
third party acquires Escrowed Shares, all payments or other distributions to be
paid in respect of the Escrowed Shares shall be paid to the Escrow Account (and
the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds covenant to direct any third-party transferee or acquirer
to pay such amounts into the Escrow Account).
2C. Exceptions. Notwithstanding anything in paragraph 2A or 2B
to the contrary, if at the time of any payment or distribution referenced in
paragraph 2A or 2B, (i) the number of Escrowed Shares exceeds the number of
Option Shares entitled to participate in such payment or distribution (including
as a result of all or any portion of an option to acquire Option Shares not then
being issued or having been forfeited and not reissued or all or any portion of
any option to acquire any Option Shares not then being exercisable or exercised
in connection with such event), the Company shall make, and the ▇▇▇▇▇▇ ▇▇▇▇▇
Funds may direct any third-party to make, such payment or distribution in
respect of such excess number of shares directly to the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds or
(ii) any payment made in respect of options to acquire Series D Preferred is
reduced by the aggregate exercise price for then unexercised options, the
Company shall make, and ▇▇▇▇▇▇ ▇▇▇▇▇ may direct any third-party to make, a
payment or distribution in an amount equal to such aggregate exercise price
directly to the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds; provided that the aggregate amount payable
pursuant to clause (ii) foregoing shall not exceed the aggregate Liquidation
Value plus accrued and unpaid dividends of the Escrowed Shares.
2D. Payments from Escrow Account.
(1) Subject to paragraph 2D(2), if the Termination Time
has not theretofore occurred, upon any liquidation,
dissolution or winding up of the Company (whether voluntary or
involuntary), the Company shall pay (and the ▇▇▇▇▇▇ ▇▇▇▇▇
Funds shall take such actions as may be necessary such that
the Company may pay) all amounts in the Escrow Account (other
than amounts attributable to option exercise proceeds placed
in the Escrow Account pursuant to paragraph 2E) to the holders
of Series E Preferred (ratably among such holders on the basis
of the number of shares of Series E Preferred held by each
such holder); provided that the amounts distributed to the
holders of Series E Preferred pursuant to this paragraph 2D(1)
upon such liquidation, dissolution or winding up shall in no
event exceed the excess of the aggregate Liquidation Value
plus accrued and unpaid dividends with respect to shares of
Series E Preferred then outstanding over other amounts or
assets available for distribution to the holders of Series E
Preferred then outstanding upon a liquidation, dissolution or
winding up of the Company and amounts previously paid with
respect to the shares of Series E Preferred then outstanding.
(2) As of the Termination Time, the Company shall pay all
amounts in the Escrow Account (including amounts remaining in
the Escrow Account after payments pursuant to paragraph 2D(1))
to the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds; provided that any amounts paid into
the Escrow Account in respect of paragraph 2A shall be paid to
the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds
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(ratably based on each ▇▇▇▇▇▇ ▇▇▇▇▇ Fund's Pro Rata Share
thereof) upon and after such time as all accrued but unpaid
dividends in respect of the Series E Preferred have been paid
in full.
2E. Option Exercise Price. In the event that any person or
entity exercises an option to acquire any Series D Preferred under the Plan, the
Company shall place the option exercise proceeds in connection therewith into
the Escrow Account. In the event that any payment is made to the holders of
Series E Preferred pursuant to paragraph 2D(1), any portion of the Escrow
Account allocable to such option exercise proceeds pursuant to this paragraph 2E
shall be paid to the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds; provided that the amounts payable
pursuant to this sentence shall not exceed the amounts actually made to the
holders of Series E Preferred pursuant to paragraph 2D(1). Furthermore, (i) if
(x) the Company makes any payment or distribution to the holders of Series D
Preferred or redeems, repurchases or otherwise acquires any Series D Preferred
or (y) any third party acquires Escrowed Shares and (ii) if the ▇▇▇▇▇▇ ▇▇▇▇▇
Funds are required to place proceeds of any transaction contemplated in the
foregoing clause (i) into the Escrow Account to satisfy its obligations
hereunder or any Escrowed Shares are not entitled to participate in a
transaction contemplated by the foregoing clause (i), any portion of the Escrow
Account allocable to option exercise proceeds placed in the Escrow Account
pursuant to this paragraph 2E shall be paid to the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds; provided
that the amounts payable pursuant to this sentence shall not exceed the proceeds
of the particular transaction contemplated in clause (i) foregoing.
Section 3. Miscellaneous.
3A. Consent to Amendments. The provisions of this Agreement
may be amended only by the written consent of the Company and each ▇▇▇▇▇▇ ▇▇▇▇▇
Fund; provided that if any amendment to this Agreement were to adversely effect
the holders of Series E Preferred in a manner different than the Company or the
▇▇▇▇▇▇ ▇▇▇▇▇ Funds, then such amendment shall not be effective until consented
to in writing by the holders of a majority of Series E Preferred who are not
affiliates of the Company (the "Majority Holders").
3B. Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto, and the respective transferees of any shares of Series D Preferred held
by the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds or any shares of Series E Preferred, whether so
expressed or not.
3C. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
3D. Third Party Beneficiaries. The holders of Series E
Preferred shall be third party beneficiaries to this Agreement; provided that
upon the written request of the Majority Holders, the Company shall take such
actions as may be reasonably requested by the Majority Holders in furtherance of
its obligations hereunder and to enforce the obligations of the ▇▇▇▇▇▇ ▇▇▇▇▇
Funds hereunder for the ratable benefit of all holders of Series E Preferred,
unless the Company determines
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in the exercise of its good faith discretion that the actions requested by the
Majority Holders to be taken would require the Company to act in breach of this
Agreement or applicable law or that the action requested by the Majority Holders
to be enforced against the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds is not required of the ▇▇▇▇▇▇
▇▇▇▇▇ Funds pursuant to this Agreement. Except as set forth in the immediately
preceding sentence, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person other than the parties hereto and
their respective permitted successors and assigns, any rights or remedies under
or by reason of this Agreement.
3E. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
3F. Descriptive Headings; Interpretation. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a substantive part of this Agreement. The use of the word "including"
in this Agreement shall be by way of example rather than by limitation.
3G. Governing Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New York. In furtherance of the foregoing, the internal law of the State of
New York shall control the interpretation and construction of this Agreement,
even though under that jurisdiction's choice of law or conflict of law analysis,
the substantive law of some other jurisdiction would ordinarily apply.
3H. No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
3I. Several Liability. Notwithstanding anything else to the
contrary set forth herein, the liability of each of the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds shall
be several and not joint.
3J. Termination. Except for obligations of the Company to
return the Escrowed Shares to the ▇▇▇▇▇▇ ▇▇▇▇▇ Funds or make payments or
distributions in accordance with the terms of this Agreement at such time, the
obligations of the parties hereto shall terminate as of the Termination Time.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
ZIFF ▇▇▇▇▇ HOLDINGS INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------
Its: Chief Operating Officer and
Chief Financial Officer
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS III, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS DUTCH III-A, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS DUTCH III-B, L.P.
▇▇▇▇▇▇ ▇▇▇▇▇ & PARTNERS III-C, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Management III, L.P.
Its: General Partner
By: ▇▇▇▇▇▇ ▇▇▇▇▇ & Partners Management III,
L.L.C.
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------
Its: Member
