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CUSIP NO. 000000000 PAGE 12 OF 20 PAGES
EXHIBIT 1.2
OAKTREE CAPITAL
MANAGEMENT LLC
XXXXXXX X. XXXXXX 000 XXXXX XXXX XXXXXX, 00xx XXXXX
Xxxxxxxxx XXX XXXXXXX, XXXXXXXXXX
TEL: (000) 000-0000
FAX: (000) 000-0000
January 7, 1998
Xxxxxxx X. Xxxxxxxx
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Dear Xxx:
This letter sets forth our binding agreement relating to existing and proposed
investments currently under consideration (the "Investments") in Xxxxxxx Radio
Corporation and its subsidiaries including Sport Supply, Inc. ("Xxxxxxx Radio")
or such entities' securities in which the OCM Principal Opportunities Fund, L.P.
including any affiliate ("Oaktree") may invest.
1. Oaktree and Xxxxxxx X. Xxxxxxxx, P.C. ("Xxxxxxxx") will form a
partnership, limited liability company, or other entity, the form of
which will be mutually determined taking into account the nature of
the transaction and each parties tax concerns (the "Joint Venture"),
for the purpose of making an investment in Xxxxxxx Radio including,
but not limited to, the purchase of 8.5% Senior Subordinated
Convertible Debentures due 2002 of Xxxxxxx Radio (the "Convertible
Notes"). The likely nature of the Joint Venture will be for each party
to hold the securities it purchases in its own account with this
letter governing the distributions and rights of each party. Both
parties will devote such time and resources to the Joint Venture as
required. Specifically Xxx Xxxxxxxx will devote such time as is
necessary to oversee the purchase, structure, and management of the
Investments and will operate at the direction of Oaktree as set forth
in paragraph 9 hereof.
2. The Joint Venture will be capitalized by Oaktree contributing **%(1)
of all capital needed and Xxxxxxxx or its designee contributing **% of
all capital needed; provided that Xxxxxxxx shall not be obligated to
contribute more than $** to the Joint Venture but at its option
Xxxxxxxx may contribute more than $** at the above percentages. Each
party will also contribute any Convertible Notes it owns to the Joint
Venture, the cost basis of which will be credited to such party's
capital contribution. The Joint Venture shall have the option to
purchase, as a single block, the Xxxxxxx Radio common shares owned by
Xxxxxxxx. The exercise price, which will be credited to Grossman's
capital contribution,
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(1) Portions of this document marked as ** have been omitted pursuant to a
request for confidential treatment.
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CUSIP NO. 000000000 PAGE 13 OF 20 PAGES
shall be the average market price for the ten trading days prior to
the options exercise date. All reasonable out of pocket costs and
expenses incurred by either party relating to the Xxxxxxx Radio
investment will be paid or reimbursed by Oaktree. Xxx Xxxxxxxx will
not incur out of pocket expenses or costs in excess of $** without the
express approval of Oaktree.
3. Distributions from the Joint Venture, or if the Joint Venture is not
formed, distributions from the Investments, shall be made when
realized in accordance with the percentage of capital contributed by
each party; provided that once Oaktree receives distributions from the
Joint Venture in order for Oaktree to realize a ** rate of return on
its total invested capital (the "IRR") equal to **% per annum (the
"Preferred Distributions"), Oaktree shall transfer to Xxxxxxxx
additional distributions equal to **% of the distributions payable to
Oaktree beyond the Preferred Distributions in consideration for
Grossman's introducing and structuring the transaction. The IRR shall
be determined using all cash disbursements (including direct expenses)
and cash receipts by or to Oaktree related to the Joint Venture.
Oaktree will not allocate any indirect expenses (including salaries,
rent, insurance or similar items) to the Joint Venture for the
purposes of calculating the IRR. Neither party will receive any other
compensation in connection with the Xxxxxxx Radio investment;
provided, however, that each party shall be able to collect fees or
other compensation in connection with any board of director
responsibilities.
4. In the event that Oaktree obtains voting control of Xxxxxxx'x board of
directors (the "Board"), it will make reasonable efforts to cause
Xxxxxxxx or its designee to be elected to the Board and to receive
compensation in connection with this role no less favorable than any
other non-management director; provided, however, that in such
capacity Xxxxxxxx or its designee must act at the direction of
Oaktree.
5. Oaktree and Xxxxxxxx xxxxxx agrees that both parties will keep the
terms of this letter and proposed transaction confidential and shall
not disclose to any third party except to their respective attorneys,
accountants and advisers who need to know and agrees to keep such
information confidential. Xxxxxxxx agrees to cease any discussions
regarding the Xxxxxxx Radio investment or Convertible Notes, which are
not in furtherance of the interests of the Joint Venture, with any
other party immediately.
6. The parties will execute mutually acceptable definitive documents that
Oaktree will prepare as soon as possible.
7. Xxxxxxxx represents and warrants to Oaktree that ** has no interest in
the Joint Venture and hereby indemnifies and holds Oaktree harmless
from any claim of ** relating to the activities of the joint venture.
8. Xxxxxxxx further represents and warrants to Oaktree that it owns
$650,000 face value of Convertible Notes and 100,000 shares of Xxxxxxx
common stock. Oaktree represents and warrants to Xxxxxxxx that it owns
$1 million face value of Convertible Notes.
9. Oaktree shall have complete discretion and control over the
investments of the Joint Venture including the price paid for any
securities or assets purchased by the Joint
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CUSIP NO. 000000000 PAGE 14 OF 20 PAGES
Venture, the timing and price of the sale of such securities and
assets and all strategy decisions in connection therewith. Xxxxxxxx
shall have the right to review and to have his counsel review any 13-D
or other filings with the Securities and Exchange Commission in
connection with the Investments not less than three days in advance of
such filings.
10. It is the parties' intention that this letter agreement be binding and
conclusive as between them even if no further documentation evidencing
the Joint Venture is executed.
If the foregoing is acceptable to you, please sign a copy of this letter and fax
it to me at (000) 000-0000, and I will then have the attorneys start preparing
more definitive documents to structure the Joint Venture and the Xxxxxxx Radio
investment. We look forward to working with you.
Should you have any questions, please feel free to give me a call at (213)
000-0000.
OCM Principal Opportunities Fund, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
/s/ Xxxxxxx X. Xxxxxx
By: Xxxxxxx X. Xxxxxx
Agreed and accepted to:
Xxxxxxx X. Xxxxxxxx, P.C.
/s/ Xxxxxxx X. Xxxxxxxx
By: Xxxxxxx X. Xxxxxxxx
Its: President
