EXHIBIT 2
AGREEMENT
AGREEMENT, dated as of October 27, 1994 (the "Agreement"), by and among
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P., a Delaware limited
partnership, BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P., a Cayman Islands
limited partnership (collectively, the "Purchasers"), Xxxxxxx Xxxxxxxx and
Xxxxxx Xxxxxxxx (collectively, the "Oristanos") and People's Choice TV Corp., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Oristanos and their Affiliates (as defined herein) currently
own shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), constituting approximately 11.3% of the outstanding Common Stock; and
WHEREAS, pursuant to the Stock Purchase Agreement, dated the date hereof
(the "Stock Purchase Agreement"), by and between the Company and Purchasers,
Purchasers have agreed to purchase 500,000 shares of the Company's Convertible
Cumulative Pay-in-Kind Preferred Stock, par value $.01 per share (the "Preferred
Stock"); and
WHEREAS, to induce Purchasers to purchase the Preferred Stock, the
Oristanos have agreed to enter into this Agreement for the purpose of governing
certain aspects of their relationship with the Purchasers, as holders of
Preferred Stock; and
WHEREAS, the execution and delivery of this Agreement is a condition to the
obligation of the Purchasers to purchase the Preferred Stock as set forth in
Section 5.01 of the Stock Purchase Agreement; and
WHEREAS, it is in the best interests of such stockholders that such aspects
of their relationship be so governed;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows: Section 8. Definitions.
As used in this Agreement, the following terms shall have the meanings set forth
below:
"Affiliate" or "affiliate" shall mean, with respect to any Person, any
other Person which directly or indirectly controls or is controlled by or is
under common control with such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise). To the extent that any such term is used
in relation to or in connection with any statute and the definition of such term
in such statute is broader or different, then, in such context, such term shall
have both the meaning set forth in the preceding sentence as well as the meaning
set forth in such statute.
"Calculation Date" shall have the meaning set forth in the Stock Purchase
Agreement.
"Certificate of Designations" shall mean the Company's Certificate of
Designations relating to the Preferred Stock.
"Designated Transferee" shall have the meaning set forth in the Certificate
of Designations.
"Minimum Interest" shall have the meaning set forth in the Certificate of
Designations.
"Nominees" shall have the meaning set forth in Section 3(a) hereof.
"Outstanding Interest" shall mean, with respect to any Person, the
percentage of the aggregate voting power of the outstanding Voting Securities
(other than voting power with respect to the election of specified directors or
a class vote on specified matters) represented by the Voting Securities
beneficially owned by such Person.
"Person" shall mean any individual, corporation, association, partnership,
group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended), trust, joint venture, business trust or unincorporated organization,
or a government or any agency or political subdivision thereof.
"Voting Securities" shall mean the Common Stock, the Preferred Stock and
any other securities of the Company having the voting power under ordinary
circumstances with respect to the election of directors of the Company.
Section 2. Ownership Interest.
(a) Each Oristano represents and warrants to, and agrees with, the
Purchasers that as of the date hereof, such Oristano and his affiliates
beneficially own the number of shares of Common Stock set forth on Exhibit A
hereto.
(b) Prior to September 30, 1999, each of the Oristanos will not, and the
Oristanos will cause each of their Affiliates not to, sell, assign, transfer,
convey, pledge, hypothecate or otherwise dispose of any of his or its Voting
Securities so as to
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reduce his or its Outstanding Interest from the level existing on the date
of this Agreement, other than pursuant to the terms set forth in Exhibit B
hereto, without the prior written consent of the Purchasers.
(c) The Oristanos covenant that they will deliver to Purchasers (i)
annually not later than 90 days after the end of each fiscal year a true,
correct and complete statement of all purchases and sales of Common Stock by the
Oristanos and their Affiliates during such fiscal year and (ii) within 5 days of
filing thereof, all reports and forms filed with the Securities and Exchange
Commission as well as any other information relevant in determining compliance
with the provisions of the Agreement and this terms of Exhibit B hereto.
(d) The provisions of this Section 2 shall terminate from and after such
time following the Calculation Date as Purchasers and their Affiliates own less
than the Minimum Interest in the aggregate.
Section 3. Directors.
(a) From and after the date hereof, the Oristanos shall and shall cause
each of their Affiliates to, use their best efforts (i) at all times to take
such action as is necessary to ensure that the nominating committee of the Board
of Directors of the Company shall nominate and recommend to stockholders of the
Company the election of the nominees to which Purchasers are then entitled to
designate pursuant to the provisions of Section 4.13 of the Stock Purchase
Agreement (the "Nominees") (including any replacement Nominees as contemplated
by Section 3(b) hereof), (ii) to vote their shares of Voting Securities
(including any shares of Voting Securities hereafter acquired), at any regular
or special meeting of the stockholders of the Company called for the purpose of
filling positions on the Board of Directors of the Company, or in any written
consent executed in lieu of such a meeting of stockholders, in favor of the
election of the Nominees (including any such replacement Nominees), and take all
such action as is necessary to cause the election of the Nominees (including any
such replacement Nominees) to the Board of Directors of the Company and (iii) to
take all such action as is necessary to cause the Nominees (including any
replacement Nominees) to serve on the compensation committee of the Board of
Directors of the Company.
(b) If, prior to his or her election to the Board of Directors of the
Company pursuant to Section 3(a) hereof, any Nominee shall be unable or
unwilling to serve as a director of the Company, the Purchasers shall be
entitled to nominate a replacement who shall then be a Nominee for purposes of
this Section 3. If, following election to the Board of Directors of the Company
pursuant to Section 3(a) hereof, any Nominee shall resign or be removed or be
unable to serve for any reason prior to the expiration of his or her term as a
director of the Company, the Purchasers shall within 30 days of such event
notify the Board of Directors of the Company in writing of a
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replacement Nominee who shall then be a replacement Nominee for purposes of
this Section 3.
(c) Each of the Oristanos hereby agrees, and will cause each of their
Affiliates to agree, not to vote as a director or stockholder in favor of, and
not to take any other action in support of, the removal of any Nominee director
without cause. For the purposes of this Section 3(c), "Cause" shall mean the
commission by a director of an act of fraud or embezzlement against the Company
or any of its subsidiaries or a conviction for a felony of, or a plea of guilty
or nolo contendere thereto by, such Nominee director.
(d) In order to effectuate the provisions of this Section 3 and Section 4
hereof, each of the Oristanos hereby agrees, and will cause each of their
Affiliates to agree, that when any action or vote is required to be taken
pursuant to this Agreement, such Person shall use his or its best efforts to
call, or cause the appropriate officers and directors of the Company to call, a
special or annual meeting of stockholders of the Company, as the case may be, to
effectuate such stockholder action. (e) The provisions of this Section 3 shall
terminate upon the termination of the Company's obligations under Section 4.13
of the Stock Purchase Agreement.
Section 4. Certificate of Incorporation; By-Laws.
From and after the date hereof, each of the Oristanos shall, and shall
cause each of their Affiliates to, vote their shares of Voting Securities, at
any regular or special meeting of stockholders of the Company or in any written
consent executed in lieu of such a meeting of stockholders, and shall take all
action; as is necessary, to ensure that (i) the Certificate of Incorporation and
By-Laws of the Company do not at any time conflict with the provisions of this
Agreement and (ii) the agreements of the Company set forth in Section 4.14 of
the Stock Purchase Agreement are given effect.
Section 5. Specific Performance.
The Oristanos acknowledge that the rights granted to Purchasers in this
Agreement are of a special, unique and extraordinary character, and that any
breach of this Agreement by the Oristanos could not be compensated for by
damages. Accordingly, if the Oristanos breach any of their obligations under
this Agreement, Purchasers shall be entitled, in addition to any other remedies
that they may have, to enforcement of this Agreement by a decree of specific
performance requiring the Oristanos to fulfill their obligations under this
Agreement. The Oristanos consent to personal jurisdiction in any such action
brought in the United States District Court for the Southern District of New
York or New York State Supreme Court and to service of process upon them in the
manner set forth in Section 7 hereof.
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Section 6. Headings.
The headings in this Agreement are for convenience of reference only and
shall not control or affect the meaning or construction of any provisions
hereof.
Section 7. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given, if delivered personally, by telecopier
or sent by overnight courier as follows: (i) if to Purchasers, to the persons
and at the addresses set forth in the Stock Purchase Agreement and (ii) if to
the Oristanos to:
Xxxxxxx Xxxxxxxx
People's Choice TV Corp.
Xxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Xxxxxxx Xxxxxxxx
00 Xxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Phone/Fax: (000) 000-0000
Xxxxxx Xxxxxxxx
000 Xxxxx Xxxxx Xxxx
Xxxx Xxxxx, XX 00000
Fax: (000) 000-0000
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
Section 8. Applicable Law.
This Agreement shall be governed by, and interpreted in accordance with,
the Laws of the State of New York applicable to contracts made and to be
performed in that State.
Section 9. Severability.
Should any part of this Agreement for any reason be declared invalid, such
decision shall not affect the validity of any remaining portion, which remaining
portion shall remain in full force and effect as if this Agreement had been
executed with the invalid portion thereof eliminated, and it is hereby declared
the intention of the parties hereto that
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they would have executed the remaining portion of this Agreement without
including therein any such part or parts which may, for any reason, be hereafter
declared invalid.
Section 10. Successors and Assigns, Transferees.
The provisions of this Agreement shall be binding upon and accrue to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Either Purchaser may assign its rights under this Agreement
in whole or in part to any Affiliate and/or to any Designated Transferee. The
Oristanos may not delegate any of their duties under this Agreement without the
prior written consent of Purchasers. Any purported assignment in violation of
this Section shall be void. Section 18. Amendments; Waivers.
This Agreement may not be amended, modified or supplemented and no waivers
of or consents to departures from the provisions hereof may be given, unless
consented to in writing by the Purchasers and the Oristanos. Section 19.
Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
Agreement. Section 20. Termination. This Agreement shall terminate and be of no
further force and effect if the Stock Purchase Agreement shall be terminated
prior to the Closing (as defined in the Stock Purchase Agreement) pursuant to
Section 6.01 thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
XXXXXXX XXXXXXXX
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxxx
XXXXXX XXXXXXXX
By:
--------------------------------
Name:
PEOPLE'S CHOICE TV CORP.
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By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice Chairman
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
By: Blackstone Management
Associates II L.P., its
General Partner
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title: General Partner
BLACKSTONE OFFSHORE CAPITAL
PARTNERS II L.P.
By: Blackstone Management
Associates II L.P., its
General Partner
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxxx
Title: General Partner
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EXHIBIT A
OWNERSHIP OF SHARES
Number of Shares of
Name Common Stock Owned
Xxxxxx Xxxxxxxx
Xxxx Communications Corp. 664,521
Xxxxxxx Xxxxxxxx
Xxxx Multichannels Ltd. 437,227
EXHIBIT B
EXCEPTIONS TO TRANSFER RESTRICTIONS
A. Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx and their Affiliates
(collectively, the "Oristanos") may, without limitation, each sell
5,000 shares of the Company's Common Stock owned beneficially by them
per quarter, for an aggregate of 10,000 shares of Common Stock per
quarter (as adjusted for stock splits and stock dividends payable to
holders of Common Stock generally).
B. The Oristanos may sell up to a percentage of their current total
beneficial ownership of Common Stock, inclusive of any Common Stock
sold under paragraph A above, pursuant to certain Common Stock
appreciation targets as outlined in the table below:
A B C D
Stock % Stock %
Date Price Sellable Price Sellable
9/30/96 any 0% any 0%
10/1/96 $32.40 4% $38.02 6%
10/1/97 $38.88 12% $49.43 18%
10/1/98 $46.66 16% $64.26 24%
10/1/99 $55.99 20% $83.54 30%
10/2/99 any 100% any 100%
The percentages listed above shall be prorated for sales of Common
Stock that occur between the dates and/or stock prices listed above.
All stock prices are averages for the 30 trading days prior to the date
listed. Columns A and C above refer to an annual appreciation of 20%
and 30% respectively. In the event that the annual appreciation is
between those figures, then the sellable percentage will be prorated
between Columns B and D. Likewise, if the sale is to be made on a date
between those above, the annual appreciation target will be calculated
as of that date, and the sellable percentage prorated by date as well.
In addition, should the annualized appreciation of the Common Stock
(based on the price of the Common Stock on the date of closing of the
sale of the Preferred Stock to Purchasers) as of the date of any sale
on or after 10/1/97 be 40%, the Oristanos may sell 18% of their Common
Stock, increasing each month on a pro rata basis to a maximum of 30% of
their shares by 9/30/98. The parties agree that all percentages
discussed in this paragraph B are cumulative with regard to all sales
of Common Stock by the
Oristanos. The prices set forth in columns A and C shall be
adjusted for stock splits, reclassifications and similar events in the
manner described in Section 9(g)(i) of the Certificate of Designations
relating to the Preferred Stock.
C. Notwithstanding any other terms herein, the Oristanos may at any time
transfer shares to entities controlled by the Oristanos, which
transfers (i) would result in the shares continuing to be listed as
beneficially owned by the Oristanos for federal securities law
reporting purposes or (ii) are to the Oristano Foundation in existence
as of the date of this Agreement.
D. If Xxxxxxx Xxxxxxxx shall be relieved of his position as Chairman and
CEO of the Company or Xxxxxx Xxxxxxxx shall be relieved of his
position as Vice-Chairman of the Company by the action of the Board of
Directors or the shareholders of the Company, the Oristanos will be
released from the restrictions contained in paragraphs A and B above,
unless their terminations are related to the Company being in
financial distress. The Company shall be deemed to be in financial
distress if either (i) the average price of the Common Stock for 30
consecutive trading days shall be less than 60% of the price of the
Common Stock on the day of closing of the sale of the Preferred Stock
to Purchasers or (ii) the Company shall have defaulted in the payment
of any interest on, or of any principal payment of, any indebtedness.
E. The Oristanos may pledge up to 40% of their beneficial ownership in
the Company provided that the extent of beneficial ownership in the
Company pledged and the amount of beneficial ownership in the Company
sold exceed 40%.
F. The restrictions specified in this Exhibit B shall lapse and no longer
be of any effect from and after such time as Purchasers and their
Affiliates own less than the Minimum Interest in the aggregate.
B-2
