EXHIBIT 10.1
Stock Purchase Agreement
NATIONAL MEDIA CORPORATION
Series E Preferred Stock
STOCK PURCHASE AGREEMENT
Dated as of
August 11, 1998
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS................................................. 1
Section 1.1 Definitions.......................................................................... 1
Section 1.2 Accounting Terms and Determinations.................................................. 9
Section 1.3 Computation of Time Periods.......................................................... 9
Section 1.4 Construction......................................................................... 9
Section 1.5 Exhibits and Schedules............................................................... 9
Section 1.6 No Presumption Against Any Party..................................................... 9
ARTICLE II
THE PURCHASES................................................ 10
Section 2.1 Initial Purchase..................................................................... 10
Section 2.2 Further Purchase..................................................................... 10
Section 2.3 Transaction Initiation Fee........................................................... 11
Section 2.4 Register of Securities............................................................... 11
Section 2.5 Restrictions on Transfer............................................................. 11
Section 2.6 Removal of Transfer Restrictions..................................................... 13
Section 2.7 Additional Representations and Warranties by ACO..................................... 13
Section 2.8 No Brokers or Finders................................................................ 14
Section 2.9 Information in Proxy Statement....................................................... 14
ARTICLE III
CONDITIONS.................................................. 15
Section 3.1 Conditions to Each Party's Obligation to Effect the Purchase......................... 15
Section 3.2 Further Conditions to ACO's Obligation to Purchase................................... 16
Section 3.3 Conditions to the Company's Obligations to Effect the Purchase....................... 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY THE COMPANY................................ 19
Section 4.1 Organization of the Company.......................................................... 19
Section 4.2 The Company Capital Structure........................................................ 19
Section 4.3 Authority; No Conflict; Required Filings and Consents................................ 21
Section 4.4 SEC Filings; Financial Statements.................................................... 22
Section 4.5 No Undisclosed Liabilities........................................................... 23
Section 4.6 Absence of Certain Changes or Events................................................. 23
Section 4.7 Taxes................................................................................ 23
Section 4.8 Properties........................................................................... 24
Section 4.9 Intellectual Property................................................................ 24
Section 4.10 Agreements, Contracts and Commitments................................................ 25
Section 4.11 Litigation and Regulatory Matters.................................................... 25
Section 4.12 Environmental Matters................................................................ 25
Section 4.13 Employee Benefit Plans............................................................... 26
Section 4.14 Compliance With Laws................................................................. 29
Section 4.15 Registration Statement; Proxy Statement.............................................. 29
Section 4.16 Labor Matters........................................................................ 30
Section 4.17 Insurance............................................................................ 30
Section 4.18 Broker Fees, etc..................................................................... 30
Section 4.19 No Existing Discussions.............................................................. 30
Section 4.20 Section 203 of the DGCL and Sections 2538, 2555 and 2564 of the Pennsylvania
Business Corporation Law Not Applicable.............................................. 30
Section 4.21 The Company Rights Plan.............................................................. 31
Section 4.22 Board Recommendation................................................................. 31
Section 4.23 Required Company Vote................................................................ 31
Section 4.24 Full Disclosure...................................................................... 31
ARTICLE V
COVENANTS.................................................. 31
Section 5.1 Information.......................................................................... 32
Section 5.2 Fiscal Plans......................................................................... 34
Section 5.3 Payment of Obligations............................................................... 34
Section 5.4 Maintenance of Property; Insurance................................................... 34
Section 5.5 Books and Records; Inspection........................................................ 34
Section 5.6 Conduct of Business; Maintenance of Subsidiaries; Compliance with Law................ 35
Section 5.7 Debt................................................................................. 35
Section 5.8 Consolidations, Mergers and Sales of Assets.......................................... 35
Section 5.9 Restricted Payments.................................................................. 36
Section 5.10 Limitations on Investments........................................................... 36
Section 5.11 Transactions with Affiliates......................................................... 36
Section 5.12 Replacement of Certificates.......................................................... 36
Section 5.13 Compensation of Board................................................................ 36
Section 5.14 Organizational Documents............................................................. 37
Section 5.15 Securities Law Filings............................................................... 37
Section 5.16 Compliance With Certificate and Bylaws............................................... 37
Section 5.17 Use of Proceeds...................................................................... 37
Section 5.18 Employees............................................................................ 37
Section 5.19 Transition........................................................................... 38
Section 5.20 Exclusivity.......................................................................... 38
Section 5.21 Registration......................................................................... 38
Section 5.22 Reasonable Best Efforts.............................................................. 39
Section 5.23 Public Announcements................................................................. 39
ARTICLE VI
DEFAULTS................................................... 39
Section 6.1 Defaults............................................................................. 39
ARTICLE VII
TERMINATION................................................. 40
Section 7.1 Termination.......................................................................... 40
Section 7.2 Effect of Termination................................................................ 41
ARTICLE VIII
MISCELLANEOUS................................................ 42
Section 8.1 Notices.............................................................................. 42
Section 8.2 No Waivers........................................................................... 42
Section 8.3 Cumulative Remedies.................................................................. 42
Section 8.4 Expenses; Documentary Taxes; Indemnification......................................... 42
Section 8.5 Amendments and Waivers............................................................... 43
Section 8.6 Successors and Assigns............................................................... 43
Section 8.7 Survival of Representations and Warranties........................................... 43
Section 8.8 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial...................... 43
Section 8.9 Counterparts; Facsimile Signatures................................................... 44
Section 8.10 Entire Agreement..................................................................... 44
Section 8.11 Confidentiality...................................................................... 45
Schedule 1 Company Disclosure Schedule................................................................... 47
Exhibit A Amendment No. 7 to Rights Agreement........................................................... 48
Exhibit B Certificate of Designation of Series E Stock.................................................. 49
Exhibit C Compliance Certificate........................................................................ 50
Exhibit D Stockholders Voting Agreement................................................................. 51
Exhibit E Consulting Agreement.......................................................................... 52
Exhibit F Xxxxxxxx Waiver Agreement..................................................................... 53
Exhibit G Hammer Waiver Agreement....................................................................... 54
Exhibit H Registration Rights Agreement................................................................. 55
Exhibit I Series D Stock Purchase Agreement............................................................. 56
Exhibit J VVI Agreement................................................................................. 57
Exhibit K Xxxxxxxx Waiver Agreement..................................................................... 58
Exhibit L Form of Opinion of Company Counsel............................................................ 59
Exhibit M Series B Consent Agreement.................................................................... 60
Exhibit N First Union Bank Consent Agreement............................................................ 61
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of August 11, 1998 is between
NATIONAL MEDIA CORPORATION, a Delaware corporation (the "Company") and NM
ACQUISITION CO., LLC, a Delaware limited liability company ("ACO").
In consideration of the covenants contained herein, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section a Definitions. As used herein, the following capitalized terms
have the following meanings (the following definitions being applicable in both
singular and plural forms):
"Accredited Investor" has the meaning set forth in Rule 501 of
Regulation D promulgated under the Securities Act.
"ACO Board Nominees" means Xxxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxxx Xxxxxx,
and any other person ACO nominates from time to time as a director by written
notice to the Company who is reasonably acceptable to the Company's outside
directors.
"Acquisition Proposal" means any offer or proposal for, or indication
of interest in, any acquisition of, any interest in the Company, whether by way
of a merger, consolidation or other transaction involving any equity interest
in, or substantial portion of the assets of, the Company or the acquisition of
any capital stock of the Company other than (a) pursuant to any Investment
Document; or (b) through the exercise or conversion of any shares of preferred
stock, options, warrants or other equity or debt securities of the Company which
are outstanding at the date of this Agreement or pursuant to any existing option
plan.
"Affiliate" means as to any Person (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person, (ii) any spouse, immediate family member or other
relative who has the same principal residence of any Person described in (i)
above, (iii) any trust in which any such Persons described in clauses (i) or
(ii) above has a beneficial interest in excess of 10% of the total beneficial
interests in either the principal or income or both of such trust, and (iv) any
corporation or other organization of which any such Persons described in clause
(i), (ii) or (iii) above collectively own more than 50% of the equity of such
entity. For purposes of this definition, (x) the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise and (y) beneficial ownership of
10% or more of the voting common equity (on a fully diluted basis) or warrants
or
other rights to purchase such equity (whether or not currently exercisable)
of a Person shall be deemed to be control of such Person.
"Agreement" means this Stock Purchase Agreement.
"Amendment No. 7 to Rights Agreement" means an agreement between the
Company and Xxxxx Xxxxxx Shareholder Services, Inc. in the form of Exhibit A.
"Bankruptcy and Equity Exception" means (a) bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors rights and (b) general
equitable principles.
"Base Financials" means the consolidated balance sheet of the Company
and its Subsidiaries as of March 31, 1998, and the related consolidated
statements of income, shareholders' equity and cash flows for the fiscal year
then ended, reported on by Ernst & Young LLP on June 29, 1998.
"Business Day" means any day except a Saturday, Sunday, or other day on
which commercial banks in New York City are authorized by law to close.
"Certificate of Designations for Series E Stock" means the Company's
Certificate of Designation in the form of Exhibit B.
"Closing Date" has the meaning set forth in Section 2.1.
"Commission" means the Securities and Exchange Commission or any other
Federal agency administering the Securities Act at the time.
"Common Stock" means the Company's currently authorized class of common
stock, $.01 par value, and stock of any other class or other consideration into
which such currently authorized common stock may hereafter have been changed.
"Company" has the meaning set forth in the introduction to this
Agreement.
"Company Rights Plan" means the Rights Agreement dated January 3, 1994
(as amended by Amendments Nos. 1 through 6 to Rights Agreement and Amendment No.
7 to Rights Agreement) between the Company and ChaseMellon Shareholder Services,
Inc.
"Company Disclosure Schedule" means Schedule 1.
"Compliance Certificate" means a certificate in the form of Exhibit C.
"Consolidated Capital Expenditures" means, for any period, the capital
expenditures of the Company and its Subsidiaries for such period, as the same
are (or would in accordance with GAAP applied on a basis consistent with the
Company's historical financial statements be) set forth in a consolidated
statement of cash flows of the Company and its Subsidiaries for such period.
"Consulting Agreement" means an agreement between the Company and TMC,
in the form of Exhibit E.
"Conversion Stock" means the unissued Common Stock: (a) into which the
Series E Stock may be converted; (b) into which the Company's Series D Preferred
Stock held by ACO may be converted; (c) which is subject to the TMC Option; or
(d) which is subject to the TMC Warrant.
"Xxxxxxxx Waiver Agreement" means an agreement between the Company and
Xxxxxxxxxxxx Xxxxxxxx, substantially in the form of Exhibit F.
"CVI" means Capital Ventures International, a Cayman Islands partnership.
"Debt" of any Person means at any date, without duplication and without
regard to whether matured or unmatured, absolute or contingent: (i) all
obligations of such Person for borrowed money, including unpaid, accrued
interest thereon; (ii) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business; (iv) all
obligations of such Person as lessee under capital leases; (v) all obligations
of such Person to reimburse or prepay any bank or other Person in respect of
amounts paid under a letter of credit, banker's acceptance, or similar
instrument, whether drawn or undrawn; (vi) all obligations of such Person to
purchase securities other than shares of the Company's Series D Preferred Stock
which arise out of or in connection with the sale of the same or substantially
similar securities; (vii) all obligations of such Person in connection with any
agreement to purchase, redeem (other than shares of the Company's Series D
Preferred Stock), exchange, convert or otherwise acquire for value any capital
stock of such Person or any warrants, rights or options to acquire such capital
stock, now or hereafter outstanding, except to the extent that such obligations
remain performable solely at the option of such Person; (viii) all obligations
to repurchase assets previously sold (including any obligation to repurchase any
accounts or chattel paper under any factoring, receivables purchase, or similar
arrangement); (ix) obligations of such Person under hedging facilities and
foreign exchange or forward sale contracts or similar arrangements; and (x) all
Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DGCL" means the Delaware General Corporation Law.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Equity Security" means any stock or similar security of the Company or
any security (whether stock or Debt) convertible or exchangeable, with or
without consideration, into any stock or similar security, or any security
(whether stock or Debt) with an attached warrant, stock appreciation right or
right to subscribe to or purchase any stock or similar security, or any such
warrant or right.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Group" means all members of a controlled group of corporations
and all trades or businesses (whether incorporated) under common control which,
together with the Company, are treated as a single employer under Section 414 of
the IRC.
"ERISA Material Plan" means any ERISA Plan or ERISA Plans having
aggregate ERISA Unfunded Liabilities in excess of $100,000.
"ERISA Plan" means, at any time, an employee pension benefit plan of
the Company or any member of the ERISA Group which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the IRC.
"ERISA Unfunded Liabilities" means, with respect to any ERISA Plan at
any time, the amount (if any) by which: (i) the present value of all vested
nonforfeitable benefits under such ERISA Plan exceeds, (ii) the fair market
value of all ERISA Plan assets allocable to such benefits (exclusive of accrued
but unpaid contributions), all determined as of the then most recent valuation
date for such ERISA Plan, but only to the extent that such excess represents a
potential liability of a member of the ERISA Group to the PBGC or the ERISA Plan
under Title IV of ERISA.
"Event of Default" has the meaning set forth in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"First Union National Bank Consent Agreement" means the Letter
Agreement, dated July 15, 1995 by and between ACO and First Union National Bank,
attached as Exhibit N (as such may be amended from time to time).
"GAAP" means generally accepted accounting principles in the United
States consistently applied.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing, securing, or
otherwise providing assurances of the payment of any Debt of any other Person
and includes: (a) any Lien or any asset of such Person securing any such Debt
(and without regard to whether such Person has assumed personal liability with
respect thereto), and (b) any obligation, direct or indirect, contingent or
otherwise, of such Person: (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt (whether arising by virtue of
partnership arrangements, by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial condition, or
otherwise); or (ii) entered into for the purpose of assuring in any other manner
the holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part); provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hammer Waiver Agreement" means an agreement between the Company and
Xxxxxxxxx Xxxxxx substantially in the form of Exhibit G.
"Investment" means any investment by any Person in any other Person,
whether by means of share purchase, capital contribution, loan, time deposit, or
otherwise.
"Investment Documents" means this Agreement, the Consulting Agreement,
the Amendment No. 7 to Rights Agreement, the Xxxxxxxx Waiver Agreement, the
Hammer Waiver Agreement, the Xxxxxxxx Waiver Agreement, the Series B Consent
Agreement, the First Union National Bank Consent Agreement, the Registration
Rights Agreement, the Series D Stock Purchase Agreement, the Certificate of
Designation of Series E Stock and the ValueVision Agreement.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, or encumbrance of any kind in respect of such asset
(or any agreement to give any of the foregoing, whether or not contingent on the
occurrence of any future event). For the purposes of this Agreement, the Company
or any Subsidiary of the Company shall be deemed to own an asset subject to a
Lien when it has acquired or holds such asset subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease, or other
title retention agreement relating to such asset.
"Material Adverse Change" means a material adverse change in the
financial condition, business or properties of the Company and its Subsidiaries,
taken as a whole, not including any such change which is the result of any
action taken by or at the instruction of Xxxxx Xxxxxx, as acting CEO of the
Company, or TMC.
"Notice of Assignment" has the meaning set forth in Section 7.5.
"Permitted Liens" shall mean (a) Liens for taxes and assessments or
governmental charge or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by appropriate
proceedings; (b) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation, carriers', warehousemen's, mechanics',
laborers' and materialmen's and similar Liens, if the obligations secured by
such Liens are not then delinquent or are being contested in good faith by
appropriate proceedings; (c) Liens incidental to the conduct of the business of
the Company or any Subsidiary (including leases of property, real and personal)
which were not incurred in connection with the borrowing of money or the
obtaining of advance or credits and which do not in the aggregate materially
detract from the value of its property or materially impair the use thereof in
the operation of its business; and (b) any Liens related to any Debt owed by the
Company (or any of its Subsidiaries) to First Union National Bank or Barclays
Bank.
"Person" means an individual, a limited liability company, a
corporation, a partnership, an unincorporated association, a trust, or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Proxy Statement" means the information furnished by the Company to its
stock holders, pursuant to Rules 14a-3 and 4 under the Exchange Act, which
pertains to the transactions contemplated by the Investment Documents.
"Qualification" means, with respect to any report made by the Company's
independent auditors covering financial statements, a qualification to such
report (such as an explanatory paragraph or emphasis paragraph therein setting
forth adverse or qualifying language): (i) resulting from a limitation on the
scope of examination of such financial statements or the underlying data, or
(ii) which could be eliminated by changes in financial statements or notes
thereto covered by such report (such as by the creation of or increase in a
reserve or a decrease in the carrying value of assets) and which if so
eliminated by the making of any such change and after
giving effect thereto would occasion a Default; provided that neither of the
following shall constitute a Qualification: (a) a consistency exception relating
to a change in accounting principles with which the independent public
accountants for the Person whose financial statements are being certified have
concurred, or (b) a qualification relating to the outcome or disposition of
threatened litigation, pending litigation being contested in good faith, pending
or threatened claims or other contingencies, the impact of which litigation,
claims or contingencies cannot be determined with sufficient certainty to permit
quantification in such financial statements.
"Registration Rights Agreement" means an agreement between the Company
and ACO in the form of Exhibit H.
"Restricted Payment" means: (a) any dividend or other distribution on
or payment in respect of any shares of the Company's capital stock (except
dividends payable in respect of capital stock solely in shares of its capital
stock and payment of any premium in respect of the Company's Series D Preferred
Stock), or (b) any payment or other distribution on account of the purchase,
redemption (other than with respect to the Company's Series D Preferred Stock),
retirement, acquisition, or obligations in respect of: (i) any shares of the
Company's capital stock or (ii) any option, warrant, or other right to acquire
shares of the Company's capital stock. Notwithstanding the foregoing, any
distribution or payment pursuant to the Company's 401(k) Plan or any issuance or
exercise of options pursuant to an existing option plan shall not be deemed to
be a Restricted Payment.
"Restricted Stock" means (a) Conversion Stock and (b) any securities
issued or issuable with respect to such Conversion Stock by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger or consolidation or reorganization; provided that
shares of Common Stock shall only be treated as Restricted Stock if and so long
as they have not been (i) sold to or through a broker or dealer or underwriter
in a public distribution or a public securities transaction, or (ii) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect to such Common Stock are removed upon the
consummation of such sale and the seller and purchaser of such Common Stock
receive an opinion of counsel for the Company, which shall be in form and
content reasonably satisfactory to the seller and buyer and their respective
counsel, to the effect that such Common Stock in the hands of the purchaser is
freely transferable without restriction or registration under the Securities Act
in any public or private transaction.
"RGC" means RGC International Investors LDC, a Cayman Islands limited
duration company.
"Securities Act" means the Securities Act of 1933, or any successor
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such successor Federal
statute.
"Series D Stock Purchase Agreement" means an agreement between the
Company, ACO, CVI and RGC in the form of Exhibit I.
"Series E Stock" means the Series E Convertible Preferred Stock of the
Company, having the rights, preferences, and privileges set forth in the
Certificate of Designation for Series E Stock.
"Shareholders' Voting Agreement" means an agreement among ACO and each
of the Company's directors substantially in the form of Exhibit D.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Tax" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, gains,
franchise, withholding, payroll, recapture, employment, excise, unemployment
insurance, social security, business license, occupation, business organization,
stamp, environmental and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts. For purposes of this
Agreement, "Tax" also includes any obligations under any agreements or
arrangements with any other Person with respect to Taxes of such other Person
(including pursuant to Treas. Reg. ss. 1.1502.5 or comparable provisions of
state, local or foreign tax law) and including any liability for Taxes of any
predecessor entity.
"TMC" means Temporary Media Co., LLC, a Delaware limited liability
company.
"TMC Option" means an option in the form of Exhibit A to the Consulting
Agreement.
"TMC Warrant" means a warrant in the form of Exhibit B to the
Consulting Agreement.
"Transaction Initiation Fee" means cash in the amount of (i) ACO's
reasonable expense arising directly out of the negotiating of this Agreement,
and its investigations regarding the Company and its legal and accounting advice
with respect to the transactions contemplated hereby, up to a maximum of
$500,000 in aggregate; (ii) plus 4.9% of the difference, if any, between the
aggregate equity value attributed to the Company for the purposes of the
Acquisition Proposal and the aggregate equity value attributed to the Company
for the purposes of this Agreement up to a maximum amount of $2,500,000 for both
(i) and (ii). For the purposes of this Agreement, such
difference between the "aggregate equity values" shall be calculated by: (a)
determining the final price per share of Common Stock contemplated by the
Acquisition Proposal; (b) subtracting the mean price per share of Common Stock
on July 10, 1998 and (c) multiplying that difference by the total number of
shares of Common Stock issued or issuable on that day on a fully diluted basis,
but excluding therefrom all shares of Common Stock issuable pursuant to the TMC
Option or the TMC Warrant the exercise price of which is less than the purchase
price of a share of Common Stock on that day.
"Xxxxxxxx Waiver Agreement" means an agreement between the Company and
Xxxxxx Xxxxxxxx substantially in the form of Exhibit K.
"VVI" means ValueVision International, Inc., a Minnesota corporation.
"VVI Agreement" means an agreement between the Company, VVI and ACO in
the form of Exhibit J.
"Wholly-Owned Subsidiary" means as to any Person or Subsidiary, all of
the shares of capital stock or other equity interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
such Person.
Section b Accounting Terms and Determinations. Unless otherwise
specified herein (a) all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with GAAP
and (b) references to fiscal periods are to those of the Company. When used
herein, the term "financial statements" shall include the notes and schedules
thereto.
Section c Computation of Time Periods. In this Agreement, with respect
to the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding." Periods of days referred to in this Agreement
shall be counted in calendar days unless otherwise stated.
Section d Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and to the
singular include the plural, references to any gender include any other gender,
the part includes the whole, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article, section, subsection,
clause, exhibit and schedule references are to this Agreement, unless otherwise
specified. Any reference to this Agreement or the other Investment Documents
includes any and all permitted alterations, amendments, changes, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.
Section e Exhibits and Schedules. Any reference to an exhibit or
schedule shall be deemed to be a reference to an exhibit or schedule hereto.
Section f No Presumption Against Any Party. Neither this Agreement nor
any other Investment Document nor any uncertainty or ambiguity herein or therein
shall be construed or resolved using any presumption against any party hereto or
thereto, whether under any rule of construction or otherwise. On the contrary,
this Agreement and the other Investment Documents have been reviewed by each of
the parties and their counsel and, in the case of any ambiguity or uncertainty,
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
ARTICLE II
THE PURCHASES
Section 1. Initial Purchase. Subject to the terms and conditions of
this Agreement:
(a) The Company hereby agrees to sell to ACO and ACO hereby agrees to
purchase from the Company, 20,000 shares of Series E Stock, at a purchase price
equal to $1,000 per share (the "Initial Purchase"), provided that ACO shall be
entitled to set off against the purchase price any amounts payable by the
Company pursuant to Section 8.4, as reasonably substantiated by ACO to the
Company on or before the Closing Date; and
(b) Contemporaneously with the execution of the Consulting Agreement,
the Company shall issue the TMC Option and the TMC Warrant to TMC, without any
additional consideration to be paid therefor by TMC.
The closing of the Initial Purchase shall be held at the office of Buchalter,
Nemer, Fields & Younger, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx, as soon as practicable after all conditions to Closing have been
satisfied or waived (the "Closing Date"). On the Closing Date, the Company will
deliver to ACO one or more Series E Stock certificates, registered in ACO's name
in any denominations as ACO may specify by timely notice to the Company (or, in
the absence of such notice, one such share certificate registered in ACO's
name), duly executed and dated as of the Closing Date, against payment of the
purchase price therefor by wire transfer of immediately available funds to the
account of the Company at such bank or other financial institution as the
Company shall notify ACO. Contemporaneously with the execution of the Consulting
Agreement, the Company shall deliver to TMC the TMC Warrant and the TMC Option,
registered in its name, as duly executed and dated the Closing Date.
Section 2 Further Purchase. Subject to the terms and conditions of this
Agreement, the Company shall have the right to sell to ACO and ACO hereby agrees
to purchase from the Company at the request of the Company, up to 2,000 shares
of Series E Stock, at a purchase price equal to $1,000 per share (the "Further
Purchase"), provided that: (a) such request is made prior to the date on which
the Proxy Statement is first mailed to the Company's Stockholders; (b) the
Initial Purchase has been consummated; and (c) ACO shall be entitled to set off
against the purchase price any amounts payable by the Company pursuant to
Section 8.4, as reasonably substantiated by ACO to the Company on or before the
Closing Date.
The closing of the Further Purchase shall be held at the office of Buchalter,
Nemer, Fields & Younger, 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx, on the date requested by the Company, provided that such date is 60
days or more after such request is made (the "Further Closing Date"). On the
Further Closing Date, the Company will deliver to ACO one or more Series E Stock
certificates, registered in ACO's name in any denominations as ACO may specify
by timely notice to the Company (or, in the absence of such notice, one such
share certificate registered in ACO's name), duly executed and dated as of the
Further Closing Date, against payment of the purchase price therefor by wire
transfer of immediately available funds to the account of the Company at such
bank or other financial institution as the Company shall notify ACO.
Section 3 Transaction Initiation Fee. If the Company enters into any
understanding or agreement with any Person pursuant to an Acquisition Proposal,
during the term hereof or within four months after the termination of this
Agreement pursuant to Section 7.1(d) or (e), the Company shall promptly pay the
Transaction Initiation Fee to ACO. The Company acknowledges and agrees that (a)
ACO has expended and will expend a considerable amount of time and effort in
connection with the transactions contemplated by this Agreement, (b) ACO has
incurred and will incur significant expenses in connection with the transactions
contemplated by this Agreement, (c) the relationship of the parties is not
marked by any self-dealing, (d) the Transaction Initiation Fee provides ACO with
a reasonable incentive to make the offer contained in the transactions
contemplated by this Agreement, and (e) ACO's costs described above are and will
be difficult to predict and ascertain and that the Transaction Initiation Fee is
a good faith attempt by ACO to estimate the amount of such costs.
Section 4 Register of Securities. The Company or its duly appointed
agent shall maintain a separate register for the shares of Series E Stock and
Common Stock, in which it shall register any issuance or subsequent sale of any
such shares accomplished in accordance with the terms of the Investment
Documents. All transfers of the Series E Stock shall be recorded on the register
maintained by the Company or its agent, and the Company shall be entitled to
regard the registered holder of the Series E Stock as the actual holder of the
Securities so registered until the Company or its agent is required to record a
transfer of such Series E Stock on its register. Subject to Section 2.4(c), the
Company or its agent shall be required to record any such transfer when it
receives the Security to be transferred duly and properly endorsed by the
registered holder thereof or by its attorney duly authorized in writing.
Section 5 Restrictions on Transfer.
(i) ACO understands and agrees that the Series E Stock it will be
acquiring have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and that accordingly they will not be fully transferable
except as permitted under various exemptions contained in the Securities Act, or
upon satisfaction of the registration and prospectus delivery requirements of
the Securities Act. ACO acknowledges that it must bear the economic risk of its
investment in the Series E Stock for an indefinite period of time (subject,
however, to the Company's obligation to effect the registration of the
Conversion Stock under the Securities Act in accordance with the Registration
Rights Agreement) since they have not been registered under the Securities Act
and therefore cannot be sold unless they are subsequently registered or an
exemption from registration is available.
(ii) ACO hereby represents and warrants to the Company that it is
acquiring the Series E Stock it has agreed to purchase for investment purposes
only, for its own account, and not as nominee or agent for any other Person, and
not with the view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act.
(iii) ACO hereby agrees with the Company as follows:
(A) The certificates evidencing the Series E Stock it has
agreed to purchase, and each certificate issued in transfer thereof, will bear
the following legend:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933 and have been
acquired for investment purposes only and not with a view to
the distribution thereof, and such securities may not be
sold, pledged or transferred unless there is an effective
registration statement or Regulation A notification under
such Act covering such securities or the Company receives an
opinion of counsel (which may be counsel for the Company),
reasonably satisfactory in form and content to the Company,
stating that such sale or transfer is exempt from the
registration and prospectus delivery requirements of such
Act."
(B) The certificates representing such Securities, and each
certificate issued in transfer thereof, will also bear any legend required under
any applicable state securities law.
(C) Absent an effective Conversion Stock registration
statement under the Securities Act, covering the disposition of the Conversion
Stock which ACO acquires, ACO will not sell, transfer, assign, pledge,
hypothecate or otherwise dispose of any or all of the Conversion Stock without
first providing the Company with an opinion of counsel (which may be counsel for
the Company), reasonably satisfactory in form and content to the Company, to the
effect that such sale, transfer, assignment, pledge, hypothecation or other
disposition will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable state securities laws, except that no such
opinion shall be required with respect to a sale or transfer effected in
accordance with Rule 144(k) under the Securities Act.
(D) ACO consents to the Company's making a notation on its
records or giving instructions to any transfer agent of the Common Stock or
Series E Stock in order to implement the restrictions on transfer of the Series
E Stock mentioned in this subsection (c).
Section 6 Removal of Transfer Restrictions. Any legend endorsed on a
certificate evidencing a Security pursuant to Section 2.4(c)(i) hereof and the
stop transfer instructions and record notations with respect to such Security
shall be removed and the Company shall issue a certificate without such legend
to the holder of such Security (a) if such Security is registered under the
Securities Act, or (b) if such Security may be sold under Rule 144(k) of the
Commission under the Securities Act or (c) if such holder provides the Company
with an opinion of counsel (which may be counsel for the Company) reasonably
acceptable to the Company to the effect that a public sale or transfer of such
Security may be made without registration under the Securities Act.
Section 7 Additional Representations and Warranties by ACO. ACO
represents and warrants to the Company as follows:
(i) ACO is a limited liability company duly organized, validly existing
and in good standing under the laws of Delaware, and is qualified to do business
as a foreign corporation in each jurisdiction in which the failure to be so
qualified would be a Material Adverse Change (if ACO were the Company) with
respect to ACO's business, condition or results of operations. ACO has all
required legal power and authority to carry on its business as presently
conducted, to enter into and perform this Agreement and the agreements
contemplated hereby to which it is a party and to carry out the transactions
contemplated hereby and thereby.
(ii) This Agreement constitutes the legal, valid and binding obligation
of ACO and is enforceable against ACO in accordance with its terms, except as
such enforcement is limited by bankruptcy, insolvency, and other similar laws
affecting the enforcement of creditors' rights generally.
(iii) ACO is an Accredited Investor and is experienced in evaluating
companies such as the Company, is able to fend for itself in the transactions
contemplated by this Agreement and has
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of its investment. It has had access, during
the course of the transaction and prior to its purchase of Series E Stock, to
such information as is sufficient to make an informed decision with respect to
its purchase of the Series E Stock and it has had, during the course of the
transaction and prior to its purchase of Series E Stock, the opportunity to ask
questions of and receive answers from the Company concerning the terms and
conditions of the offering and to obtain additional information necessary to
verify the accuracy of any information furnished to it or to which it had
access.
(iv) ACO knows of no public solicitation or advertisement of an offer
in connection with the Series E Stock; ACO's jurisdiction of formation or
incorporation and the principal place of business as set forth in the signature
page hereof are accurate.
(v) Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxxx and a Nevada corporation controlled
by Xxxx Xxxxx are the only members of TMC. TMC is the only Manager of ACO. The
provisions of ACO's Operating Agreement regarding the management of ACO shall be
substantially as disclosed in the draft operating agreement delivered to the
Company on August 10, 1998.
(vi) Xxxxxxx Xxxxxx, Jacor Communications and Xxxxxx XxXxxx are and
through the Closing will be the only members of ACO holding a membership
interest of 10% or greater therein.
(vii) ACO has or has arranged for sufficient funds to consummate the
transactions contemplated by the Investment Documents.
(viii) ACO will hold and will not transfer, encumber or otherwise
dispose of any shares of the Company's Series D Preferred Stock (or Common Stock
received in connection with the conversion thereof) until after the Closing
Date.
Section 8 No Brokers or Finders. ACO represents and warrants to the
Company that, as a result of ACO's actions, no person other than BT Alex. Xxxxx
Incorporated has, or as a result of the transaction as contemplated herein will
have, any right or valid claim against the Company for any commission, fee or
other compensation as a finder or broker, or in any similar capacity.
Section 9 Information in Proxy Statement. The information to be
supplied by ACO or about ACO by ACO's agents for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to
stockholders of the Company, at the time of the Company stockholders' meeting to
approve the transactions contemplated by this Agreement (the "Stockholders'
Meeting") and as of the Closing Date, contain any statement which, at such time
and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, omit to state any material fact
necessary in order to make the statements made in such proxy
statement not false or misleading, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders' Meeting which has become false or
misleading. If at any time prior to the Closing Date any event relating to ACO
or any of its Affiliates, officers or directors should be discovered by ACO
which should be set forth in a supplement to the Proxy Statement, then ACO shall
promptly inform the Company. Such information shall include all necessary
information regarding the ACO Board Nominees.
ARTICLE III
CONDITIONS
Section 1 Conditions to Each Party's Obligation to Effect the Purchase.
The respective obligations of each party to this Agreement to effect the Initial
Purchase and (if applicable) the Further Purchase (collectively, the
"Purchases") shall be subject to the satisfaction or waiver in writing by each
of the Company and ACO prior to the Closing Date of the following conditions:
(i) Receipt by each party hereto of counterparts hereof signed by
each of the other parties hereto;
(ii) The transactions contemplated by this Agreement (and other matters
contained in the Proxy Statement) shall have been approved in the manner
required under the rules of the New York Stock Exchange and the DGCL, as the
case may be, by the holders of the issued and outstanding shares of capital
stock of the Company.
(iii) The waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 as amended (the "HSR Act") shall have expired
or been terminated, provided that ACO and the Company shall use best efforts to
make any necessary filings under the HSR Act within 45 days after the date of
this Agreement.
(iv) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expiration of waiting periods imposed by, any
court, administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") the failure to which to file, obtain or
occur is reasonably likely to cause a Material Adverse Change, shall have been
filed or obtained or have occurred.
(v) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any order, executive order, stay, decree, judgment or
injunction or statute, rule, regulation which is
in effect and which has the effect of making the transactions contemplated by
this Agreement illegal or otherwise prohibiting consummation of the transactions
contemplated by this Agreement.
(vi) The Company shall have received, on or prior to the date of the
Proxy Statement, an opinion, from an investment banking firm chosen by the
Company, and reasonably acceptable to ACO, to the effect that the transactions
contemplated by this Agreement are fair to the holders of Common Stock from a
financial point of view (the "Fairness Opinion") and such opinion shall be
confirmed as of the Closing Date.
Section 2 Further Conditions to ACO's Obligation to Purchase. The
obligation of ACO to purchase and pay for the Series E Stock in the Purchases is
subject to the following conditions having been satisfied on or before the
Closing Date or Further Closing Date (as applicable):
(i) Receipt by ACO of an opinion of Klehr, Harrison, Xxxxxx, Xxxxxxxxx
& Xxxxxx LLP, counsel to the Company, dated as of the Closing Date or the
Further Closing Date (as applicable), and substantially to the effect of Exhibit
L;
(ii) Receipt by ACO of a fully completed and duly executed Compliance
Certificate;
(iii) On the Closing Date or the Further Closing Date (as applicable),
the Company shall have duly issued and delivered to ACO a certificate evidencing
the Series E Stock purchased by ACO as provided by Section 2.1;
(iv) The Certificate of Designation for Series E Stock shall have been
filed with the Delaware Secretary of State and a copy of the Certificate
certified by such Secretary of State shall have been delivered to ACO;
(v) The Company shall have obtained all material registrations,
qualifications, permits and approvals required under applicable state securities
laws for the lawful execution, delivery and performance of this Agreement and
the performance of the Certificate, including without limitation the offer,
sale, issue and delivery of the Securities;
(vi) Receipt by ACO from the Company of a payment in such amount as ACO
may reasonably request on account of expenses incurred by ACO and its attorneys
in connection with the negotiation and preparation of this Agreement and related
matters and for which ACO is entitled to reimbursement pursuant to Section 7.3;
(vii) Receipt by ACO on the Closing Date or the Further Closing Date
(as applicable) of all documents it may reasonably request relating to the
existence, status, and capacity of the Company and the corporate authority for,
and the validity, force, and effect of the Investment
Documents and any other matters relevant hereto or thereto, all in form and
substance satisfactory to ACO;
(viii) Receipt by ACO of evidence reasonably satisfactory to ACO that
the purchase price for the Series E Stock will be applied pursuant to Section
5.17;
(ix) The fact that, immediately before and after giving effect to the
consummation of such Purchase, no material Default shall have occurred and be
continuing;
(x) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date or the Further Closing Date (as applicable) unless expressly made
as of another date;
(xi) The Company shall have performed in all material respects all
material obligations required to be performed by it under this Agreement on or
prior to the Closing Date or the Further Closing Date (as applicable);
(xii) Each of the following shall have been executed by all of the
parties named therein (other than ACO or TMC (as appropriate)) and shall not
have been terminated or purported to have been terminated by any of the parties
named therein (other than ACO or TMC (as appropriate)):
(A) the Amendment No. 7 to Rights Agreement;
(B) the Stockholders Voting Agreement;
(C) the Consulting Agreement;
(D) the Xxxxxxxx Waiver Agreement;
(E) the Hammer Waiver Agreement;
(F) the Series D Stock Purchase Agreement;
(G) the VVI Agreement;
(H) the Xxxxxxxx Waiver Agreement;
(I) the Registration Rights Agreement;
(J) the Series B Consent Agreement; and
(K) the First Union National Bank Consent Agreement.
(xiii) The Company's Common Stock shall not have been delisted by the
New York Stock Exchange, Inc.; and
(xiv) The ACO Board Nominees shall constitute a majority of the
Company's directors and Xxxxxxx Xxxxxx shall be the Company's acting Chief
Executive Officer and Xxxx Xxxxx shall not have been removed by the Company as a
Company director without cause.
Section 3 Conditions to the Company's Obligations to Effect the
Purchase. The obligation of the Company to sell and issue the Series E Stock in
the Purchase is subject to the following conditions having been satisfied on or
before the Closing Date or the Further Closing Date (as applicable):
(i) The Company shall have received the Purchase Price for the Series E
Stock as provided by Sections 2.1 and/or 2.2, as the case may be;
(ii) The representations and warranties of ACO contained in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date or the Further Closing Date (as applicable), unless expressly made
as of another date;
(iii) ACO shall have performed in all material respect all material
obligations required to be performed by it under this Agreement at or prior to
the Closing Date or the Further Closing Date (as applicable); and
(iv) Each of the following shall have been executed by all of the
parties named therein (other than the Company) and shall not have been
terminated or purported to have been terminated by any of the parties named
therein (other than the Company):
(A) the Amendment No. 7 to Rights Agreement;
(B) the Stockholders Voting Agreement;
(C) the Consulting Agreement;
(D) the Xxxxxxxx Waiver Agreement;
(E) the Hammer Waiver Agreement;
(F) the Series D Stock Purchase Agreement;
(G) the VVI Agreement;
(H) the Xxxxxxxx Waiver Agreement;
(I) the Registration Rights Agreement;
(J) the Series B Consent Agreement; and
(K) the First Union Bank Consent Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY THE COMPANY
The Company represents and warrants to ACO that the statements
contained in this Article IV are true and correct, except as set forth on the
disclosure schedule delivered by the Company to ACO on or before the date of
this Agreement (the "Company Disclosure Schedule") or as disclosed in the
Company SEC Reports (as defined in Section 4.4). The Company Disclosure Schedule
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article IV and the disclosure in any paragraph
shall qualify other paragraphs in this Article IV only to the extent that it is
reasonably apparent from a reading of such document that it also qualifies or
applies to such other paragraphs.
Section 1 Organization of the Company. Each of the Company and the
Company's Material Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would cause a Material Adverse Change. Except as
set forth on the Company Disclosure Schedule or in the Company SEC Reports (as
defined in Section 4.4) filed prior to the date hereof, neither the Company nor
any of its Subsidiaries directly or indirectly owns (other than ownership
interests in the Company or in one or more of its Subsidiaries) any equity or
similar interest in, or any interest that is mandatorily convertible into or
exchangeable or exercisable for, any corporation, partnership, joint venture or
other business association or entity, excluding securities in any publicly
traded company held for investment by the Company and comprising less than five
percent (5%) of the outstanding stock of such company. A true, correct and
complete copy of the Certificate of Incorporation and other similar
organizational documents of the Company and each of the Company's Material
Subsidiaries (as defined below) has been delivered to ACO. "The Company's
Material Subsidiaries" shall mean those subsidiaries of the Company set forth on
the Company Disclosure Schedule, which
Subsidiaries constitute all of the Company's "significant subsidiaries" as
defined in Rule 1-02 of Regulation S-X under the Securities Act.
Section 2 The Company Capital Structure.
(i) The authorized capital stock of the Company consists of 75,000,000
shares of Common Stock, $.01 par value, and 10,000,000 shares of Preferred
Stock, $.01 par value. As of the date of this Agreement, (i) 25,453,752 shares
of Common Stock are issued and outstanding, all of which are validly issued,
fully paid and nonassessable, and (ii) 887,229 shares of Common Stock which are
held in the treasury of the Company or by Subsidiaries of the Company. The
Company Disclosure Schedule shows the number of shares of Common Stock reserved
for future issuance pursuant to stock options granted and outstanding as of the
date hereof, the plans under which such options were granted and award
agreements pursuant to which "non-plan" options were granted (collectively, the"
Company Stock Plans"), and the entities or persons to whom such options were
granted. The Company Disclosure Schedule also shows the agreements under which
the warrants to purchase an aggregate of 7,093,413 shares of Common Stock
granted and outstanding as of the date hereof were issued and to whom such
warrants were granted. As of the date hereof, the only convertible securities of
the Company which are issued and outstanding are: (i) the TMC Warrant and the
TMC Option, (ii) an aggregate number of 81,250 shares of Series B Convertible
Preferred Stock, par value $.01 per share, of the Company, which are currently
convertible into 812,500 shares of Common Stock and which are currently entitled
to vote on all matters submitted to the stockholders of the Company (with the
exception of the election of directors) on an "as converted" basis (the "Series
B Convertible Preferred Stock") (iii) 19,900 shares of Series D Convertible
Preferred Stock, par value $.01 per share, of the Company which are currently
convertible into a minimum of 18,543,972 shares of Common Stock, plus the number
of shares of Common Stock equal to the quotient of the Accrued Premium (as
defined in the Certificate of Designations (as defined below)) divided by
$1.073125 (the "Series D Convertible Preferred Stock" and, together with the
Series B Convertible Preferred Stock the "Company Convertible Preferred Stock")
and (iv) such other convertible securities as are disclosed on the Company
Disclosure Schedule. Based on the Certificate of Designations, the amount of the
Accrued Premium (as defined in the Certificate of Designations) is $392,547.94
as at the date of this Agreement. All shares of Common Stock, into which Series
D Convertible Preferred Stock is convertible, or which are issuable upon
exercise of the Revised National Media Stock Purchase Warrant - C or the
National Media Stock Purchase Warrant - D are duly registered with the
Commission. All shares of Common Stock subject to issuance as specified above
shall be, when issued, validly issued, fully paid and nonassessable. Except as
set forth on the Company Disclosure Schedule and with respect to the Series D
Preferred Stock, there are no obligations, contingent or otherwise, of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any material investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity other than
guarantees of bank obligations of Subsidiaries entered into in the ordinary
course of business. Except as set forth on
the Company Disclosure Schedule, all of the outstanding shares of capital stock
of each of the Company's Subsidiaries are duly authorized, validly issued, fully
paid for and nonassessable and all such shares (other than directors' qualifying
shares in the case of foreign Subsidiaries) are beneficially owned by the
Company or another Subsidiary free and clear of all security interests, liens,
claims, pledges, agreements, limitations of the Company's voting rights, charges
or other encumbrances of any nature other than Permitted Liens.
(ii) Except as set forth in this Section 4.2 or as reserved for future
grants of options under the Company Stock Plans, the TMC Warrant or the TMC
Option, and except for the Series A Junior Participating Preferred Stock issued
and issuable under the Company Rights Plan, or as disclosed on the Company
Disclosure Schedule, (i) there are no equity securities of any class of the
Company or any of its Subsidiaries, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding; (ii) except as set forth in the Certificate of Designations,
Preferences and Rights of the Series D Convertible Preferred Stock (the
"Certificate of Designations") and the Registration Rights Agreement dated as of
September 4, 1997, as amended, by Amendment No. 1 thereto, dated April 14, 1998
among the Company and the holders of the Series D Convertible Preferred Stock,
there are no options, warrants, equity securities, stock appreciation rights,
calls, rights, commitments or agreements of any character to which the Company
or any of its Subsidiaries is a party or by which it is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the Company or
any of its Subsidiaries or obligating the Company or any of its Subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security, call, right, commitment or agreement; and (iii) to the best
knowledge of the Company, there are no voting trusts, proxies or other voting
agreements or understandings with respect to the shares of capital stock of the
Company.
Section 3 Authority; No Conflict; Required Filings and Consents.
(i) The Company has all requisite corporate power and authority to
enter into this Agreement and each of the Investment Documents to which it is a
party and to consummate the transactions contemplated by this Agreement and each
of the Investment Documents to which it is a party. The execution and delivery
of this Agreement and each of the Investment Documents to which it is a party
and the consummation of the transactions contemplated by this Agreement and each
of the Investment Documents to which it is a party by the Company have been duly
authorized by all necessary corporate action on the part of the Company, subject
only to the approval and adoption of this Agreement by the Company's
stockholders under the DGCL and the rules of the New York Stock Exchange. This
Agreement and each of the Investment Documents to which it is a party have been
duly executed and delivered by the Company and constitute the valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
to the Bankruptcy and Equity Exception.
(ii) Except as set forth on the Company Disclosure Schedule, the
execution and delivery of this Agreement and each of the Investment Documents to
which it is a party by the Company does not, and the consummation of the
transactions contemplated by this Agreement and each of the Investment Documents
to which it is a party will not, (i) conflict with, or result in any violation
or breach of, any provision of the Certificate of Designation for Series E
Stock, the Certificate of Incorporation or Bylaws of the Company or any of its
Subsidiaries, (ii) result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound (including the Series D Convertible Preferred Stock), or
(iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of its or their properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which are not,
individually or in the aggregate, reasonably likely to cause a Material Adverse
Change.
(iii) Except as set forth on the Company Disclosure Schedule, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity (as defined above) is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement and each of the Investment Documents to
which it is a party or the consummation of the transactions contemplated hereby
or thereby, except for (i) the filing of the pre-merger notification report
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act, (ii) the Proxy Statement
requirements imposed pursuant to the Exchange Act or by the Commission, (iii)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state or foreign securities
laws, and (iv) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
cause a Material Adverse Change.
Section 4 SEC Filings; Financial Statements.
(i) The Company has filed and made available to ACO all forms, reports
and documents filed or required to be filed by the Company with the SEC since
January 1, 1995 (collectively, the "Company SEC Reports"). The Company SEC
Reports (i) except as set forth on the Company Disclosure Schedule, at the time
filed, complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such Company SEC Reports or omit to state a material fact necessary in order to
make the statements in such Company SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of the Company's
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(ii) Except as disclosed on the Company Disclosure Schedule, each of
the consolidated financial statements (including, in each case, any related
notes) contained in the Company SEC Reports complied as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, in
conformity with the requirements of Form 10-Q under the Exchange Act) and fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the applicable dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
Section 5 No Undisclosed Liabilities. Except as disclosed in the
Company SEC Reports filed prior to the date hereof or on the Company Disclosure
Schedule, and except for normal or recurring liabilities incurred since March
31, 1998 in the ordinary course of business consistent with past practices, the
Company and its Subsidiaries do not have any liabilities, either accrued,
contingent or otherwise (whether or not required to be reflected in financial
statements in accordance with GAAP, and whether due) or to become due, which
individually or in the aggregate, are reasonably likely to cause a Material
Adverse Change.
Section 6 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Reports filed prior to the date hereof or on the Company
Disclosure Schedule, since the date of the Base Financials, the Company and its
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
(i) any Material Adverse Change (other than changes that are the effect or
result of economic factors affecting the economy as a whole or the industry (as
described in the Company's Form 10-K for the fiscal year ended March 31, 1998 as
amended (the "Company 10-K") in which the Company competes) or any development
or combination of developments of which the management of the Company is aware
that, individually or in the aggregate has caused or is reasonably likely to
cause a Material Adverse Change (other than changes that are the effect or
result of economic factors affecting the economy as a whole or the industry (as
described in the Company 10-K) in which the Company competes); (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to the
Company or any of its Subsidiaries having a Material Adverse Change; (iii) any
material change by the Company or its Subsidiaries in their respective
accounting methods, principles or practices to which ACO has not previously
consented in writing; or (iv) any revaluation by the Company or its Subsidiaries
of any of their assets having a Material Adverse Change.
Section 7 Taxes.
(i) Except as set forth on the Company Disclosure Schedule or the
Company SEC Reports, the Company and each of its Subsidiaries have (i) filed all
federal, state, local and foreign Tax returns and reports required to be filed
by them prior to the date of this Agreement (taking into account all applicable
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clauses (i), (ii) or (iii) for any such
filings, payments or accruals that are not reasonably likely, individually or in
the aggregate, to cause a Material Adverse Change. There are no audits in
process or known by the Company to be pending or contemplated with respect to
the Company's Tax returns. Neither the Internal Revenue Service ("IRS") nor any
other taxing authority has asserted any claim for Taxes, or to the actual
knowledge of the executive officers of the Company, is threatening to assert any
claims for Taxes, which claims, individually or in the aggregate, are reasonably
likely to cause a Material Adverse Change. The Company and each of its
Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all Taxes
required by law to be withheld or collected, except for amounts that are not
reasonably likely, individually or in the aggregate, to cause a Material Adverse
Change. Neither the Company nor any of its Subsidiaries has made an election
under Section 341(f) of the IRC, except for any such elections that are not
reasonably likely, individually or in the aggregate, to cause a Material Adverse
Change. There are no liens for Taxes upon the assets of the Company or any of
its Subsidiaries (other than liens for Taxes that are not yet due or that are
being contested in good faith by appropriate proceedings), except for liens that
are not reasonably likely, individually or in the aggregate, to cause a Material
Adverse Change. No extension of a statute of limitations relating to any Taxes
is in effect with respect to the Company and its Subsidiaries.
(ii) Neither the Company nor any of its Subsidiaries has been a member
of an affiliated group of corporations filing a consolidated federal income tax
return (or a group of corporations filing a consolidated, combined or unitary
income tax return under comparable provisions of state, local or foreign tax
law) for any taxable period beginning on or after April 1, 1991, other than a
group the common parent of which was the Company or any Subsidiary of the
Company.
(iii) Neither the Company nor any of its Subsidiaries has any
obligation under any agreement or arrangement with any other person with respect
to Taxes of such other person (including pursuant to Treas. Reg. Section
1.1502-6 or comparable provisions of state, local or foreign tax law) and
including any liability for Taxes of any predecessor entity, except for
obligations that are not reasonably likely, individually or in the aggregate, to
cause a Material Adverse Change.
(iv) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section 897(c)(2)
of the IRC during the applicable period specified in Section 897(c)(1)(A)(ii) of
the IRC.
Section 8 Properties.
(i) Neither the Company nor any of its Subsidiaries is in default under
any of their respective leases for real property, except where the existence of
such defaults, individually or in the aggregate, is not reasonably likely to
cause a Material Adverse Change.
(ii) Neither the Company nor any of its Subsidiaries owns any real
property.
Section 9 Intellectual Property. Other than as set forth on the Company
Disclosure Schedule, each of the Company and its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
trademarks, trade names, service marks, copyrights, and any applications for
such trademarks, trade names, service marks and copyrights, know-how, computer
software programs or applications, and tangible or intangible proprietary
information or materials that are necessary to conduct the business of each of
the Company and its Subsidiaries as currently conducted, subject to such
exceptions that would not be reasonably likely to cause a Material Adverse
Change. Other than as set forth on the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has any knowledge of any assertion or claim
challenging the validity of any of such intellectual property, except such
assertions or claims that, individually or in the aggregate, are not reasonably
likely to cause a Material Adverse Change.
Section 10 Agreements, Contracts and Commitments. Except as set forth
on the Company Disclosure Schedule or the Company SEC Reports, neither the
Company nor any of its Subsidiaries has breached, or received in writing any
claim or notice that it has breached, any of the terms or conditions of any
material agreement, contract or commitment filed or required to be filed as an
exhibit to the Company SEC Reports (the "Company Material Contracts") in such a
manner as, individually or in the aggregate, is reasonably likely to cause a
Material Adverse Change. To the Company's knowledge, each Company Material
Contract that has not expired by its terms is in full force and effect.
Section 11 Litigation and Regulatory Matters. Except as described in
the Company SEC Reports filed prior to the date hereof or as set forth on the
Company Disclosure Schedule, there is no action, suit or proceeding, claim,
arbitration or investigation against the Company or any of its Subsidiaries
pending or as to which the Company or any of its Subsidiaries has received any
written notice of assertion, which, individually or in the aggregate, is
reasonably likely to cause a Material Adverse Change or a material adverse
effect on the ability of the Company to consummate the transactions contemplated
by this Agreement.
Section 12 Environmental Matters. To the knowledge of the Company and
its Subsidiaries, except as disclosed in the Company SEC Reports filed prior to
the date hereof and except for such matters that, individually or in the
aggregate, are not reasonably likely to cause a Material Adverse Change: (i) the
Company and its Subsidiaries are in material compliance with all applicable
Environmental Laws; (ii) the properties currently owned or operated by the
Company and its Subsidiaries (including soils, groundwater, surface water,
buildings, equipment or other structures) are not contaminated with any
hazardous substances; (iii) the properties formerly owned or operated by the
Company or any of its Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by the Company or any of
its Subsidiaries; (iv) neither the Company nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither the Company nor any of its Subsidiaries has been
associated with any release or threat of release of any hazardous substance;
(vi) neither the Company nor any of its Subsidiaries has received any written
notice, demand, letter, claim or request for information alleging that the
Company or any of its Subsidiaries may be in violation of or liable under any
Environmental Law; (vii) neither the Company nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity (as defined above) or is subject to any indemnity or other
agreement with any third party relating to liability under any Environmental Law
or relating to hazardous substances; and (viii) there are no circumstances or
conditions involving the Company or any of its Subsidiaries that could
reasonably be expected to result in any claims, liability, investigations, costs
or restrictions on the ownership, use or transfer of any property of the Company
pursuant to any Environmental Law.
Section 13 Employee Benefit Plans.
(i) The Company has listed on the Company Disclosure Schedule all
employee benefit plans and all benefit arrangements, (i) which are maintained,
contributed to or required to be contributed to by the Company or any entity
that, together with the Company as of the relevant measuring date under ERISA,
is or was required to be treated as a single employer under Section 414 of the
IRC ("Company ERISA Affiliate") or under which the Company or any the Company
ERISA Affiliate may incur any liability, and (ii) which cover the employees,
former employees, directors or former directors of the Company or any Company
ERISA Affiliate ("Company Employee Plans").
(ii) A true and complete copy of each written Company Employee Plan
that covers employees or former employees of the Company or any Subsidiary of
the Company, including each amendment thereto and any trust agreement, insurance
contract, collective bargaining agreement, or other funding or investment
arrangements for the benefits under such Company Employee Plan, has been
delivered to ACO. In addition, with respect to each such Company Employee Plan
to the extent applicable, the Company has delivered to ACO the most recently
filed Federal Forms 5500 (solely with respect to the Company 401(k) Plan), the
most recent summary plan description (including any summaries of material
modifications), the most recent IRS determination letter, if
applicable, the most recent actuarial report or valuation, if applicable, and
all material employee communications with respect to each such Company Employee
Plan.
(iii) Except as set forth on the Company Disclosure Schedule:
(A) Neither the Company nor any Company ERISA Affiliate
sponsors, maintains, contributes to, or has any obligation to contribute to any
Employee Benefit Plan regulated under Title IV of ERISA, other
than a "multiemployer plan," as defined in Sections 3(37) and 4001(a)(3) of
ERISA, ("Pension Plan"); with respect to any Pension Plan previously sponsored,
maintained or contributed to by the Company or any Company ERISA Affiliate or
with respect to which the Company or any Company ERISA Affiliate previously
incurred an obligation to contribute:
(1) As of the last day of the last plan year of
each such Pension Plan and as of the Closing Date, the "amount of unfunded
benefit liabilities" as defined in Section 4001(a)(18) of ERISA (but excluding
from the definition of "current value" of "assets" of such Pension Plan, accrued
but unpaid contributions) did not and will not exceed zero.
(2) No such Pension Plan has been terminated so as to
subject, directly or
indirectly, the Company or any Company ERISA Affiliate to any liability,
contingent or otherwise, or the imposition of any lien under Title IV of ERISA;
(3) No proceeding has been initiated by any
person, including the Pension Benefit Guarantee Corporation ("PBGC"), to
terminate any such Pension Plan;
(4) No liability to PBGC exists or is reasonably
expected to be incurred with
respect to any such Pension Plan that could subject, directly or indirectly, the
Company or any Company ERISA Affiliate to any liability, contingent or
otherwise, or the imposition of any lien under Title IV of ERISA, whether to the
PBGC or to any other person;
(5) No "reportable event," as defined in Section
4043 of ERISA (to the extent the reporting of such event to PBGC has not been
waived) has occurred and is continuing with respect to any such Pension Plan;
(6) No such Pension Plan which is subject to
Section 302 of ERISA or Section 412 of the IRC has incurred an "accumulated
funding deficiency," within the meaning of Section 302 of ERISA and 412 of the
IRC, whether or not such deficiency has been waived;
(7) Neither the Company nor any Company ERISA
Affiliate has, at any time, (i) ceased operations at a facility so as to become
subject to the provisions of Section 4068(e) of ERISA, (ii) withdrawn as a
substantial employer so as to become subject to the provisions of Section 4063
of ERISA, or (iii) ceased making contributions on or before the Closing Date to
any
Pension Plan subject to Section 4064(a) of ERISA to which the Company or any
Company ERISA Affiliate made contributions during the five years prior to the
Closing Date.
(B) neither the Company nor any Company ERISA Affiliate
sponsors has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any "multiemployer plan," as defined in Sections
3(37) and 4001(a)(3) of ERISA;
(C) neither the Company nor any Company ERISA Affiliate
sponsors has previously sponsored, maintained, contributed to or incurred an
obligation to contribute to any employee benefit plan that provides or will
provide benefits described in Section 3(1) of ERISA to any former employee or
retiree of the Company or any Company ERISA Affiliate, except as required under
Part 6 of Title I of ERISA and Section 4980B of the IRC;
(D) all Company Employee Plans that cover or have covered
employees or former employees of the Company have been maintained and operated,
and currently are, in compliance in all material respects with their terms, the
requirements prescribed by any and all applicable laws (including ERISA and the
IRC), orders, or governmental rules and regulations in effect with respect
thereto, and the Company and the Company ERISA Affiliates have performed all
material obligations required to be performed by them thereunder, are not in any
material respect in default under or in violation of, and have no knowledge of
any default or violation by any other party to, any of the Company Employee
Plans;
(E) each Company Employee Plan that covers or has covered
employees or former employees of the Company and is intended to qualify under
Section 401(a) of the IRC and each trust established pursuant to each such
Company Employee Plan that is intended to qualify under Section 501(a) of the
IRC is the subject of a favorable determination letter from the IRS, a copy of
which has been delivered to ACO, and, to the Company's knowledge, nothing has
occurred which may reasonably be expected to impair such determination or
otherwise adversely affect the tax-qualified status of such Company Employee
Plan;
(F) the Company and the Company ERISA Affiliates have made
full and timely payment of all amounts required to be contributed under the
terms of each Company Employee Plan and applicable law or required to be paid as
expenses under such Company Employee Plan; and
(G) other than claims for benefits in the ordinary course,
there is no claim, suit, action, dispute, arbitration or legal, administrative
or other proceeding or governmental investigation or audit pending, or, to the
knowledge of the Company, threatened, alleging any breach of the terms of any
Company Employee Plan or of any fiduciary duty thereunder or violation of any
applicable law with respect to any such Company Employee Plan.
(iv) With respect to the Company Employee Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
could be subject to any liability that is reasonably likely to cause a Material
Adverse Change under ERISA, the IRC or any other applicable law.
(v) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement or on the Company Disclosure Schedule, and except as
provided for in this Agreement, neither the Company nor any of its Subsidiaries
is a party to any oral or written (i) agreement with any officer or other key
employee of the Company or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company of the nature contemplated by this
Agreement, (ii) agreement with any officer of the Company providing any term of
employment or compensation guarantee extending for a period longer than one year
from the date hereof and for the payment of compensation in excess of $100,000
per annum, or (iii) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. None of the execution or delivery of this Agreement or any of the
Transaction Documents to which it is a party or the consummation of the
transactions contemplated hereunder or thereunder will trigger any "change in
control" or similar provisions resulting in an acceleration of benefits or
compensation thereunder with respect to any agreements with any officer or other
key employee of the Company or any of its Subsidiaries except for such
applicable agreements as set forth on the Company Disclosure Schedule (the"
Company Parachute Agreements"). Except as set forth on the Company Disclosure
Schedule or pursuant to the Xxxxxxxx Waiver Agreement, the Hammer Waiver
Agreement and the Xxxxxxxx Waiver Agreement, there are no amounts payable under
the Company Parachute Agreements as a result of the transactions contemplated by
this Agreement.
Section 14 Compliance With Laws. Except as disclosed on the Company
Disclosure Schedule, each of the Company and its Subsidiaries has complied with,
is not in violation of, and has not received any notices of violation with
respect to, any federal, state or local statute, foreign law or regulation with
respect to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which, individually or in
the aggregate, have not caused and are not reasonably likely to cause a Material
Adverse Change.
Section 15 Registration Statement; Proxy Statement. The information to
be supplied by the Company or its Subsidiaries or about the Company or its
Subsidiaries by the Company's agents for inclusion in the Registration Statement
(as defined in the Registration Rights Agreement) shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated in the Registration Statement
or necessary in order to make the statements in the Registration Statement, in
light of the circumstances under which they were made, not misleading. The
information to be supplied by the Company or its Subsidiaries or about the
Company or its Subsidiaries by the Company's agents for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to
stockholders of the Company, at the time of the Company stockholders' meeting to
approve the transactions contemplated by this Agreement (the "Stockholders'
Meeting") and as of the Closing Date, contain any statement which, at such time
and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, omit to state any material fact
necessary in order to make the statements made in such proxy statement not false
or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which has become false or misleading. If
at any time prior to the Closing Date any event relating to the Company or any
of its Affiliates, officers or directors should be discovered by the Company
which should be set forth in a supplement to the Proxy Statement, the Company
shall promptly inform ACO.
Section 16 Labor Matters. Except as disclosed in the Company Disclosure
Schedule or the Company SEC Reports filed prior to the date hereof, neither the
Company nor any of its Subsidiaries is a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization, nor, as of the date hereof, is the
Company or any of its Subsidiaries the subject of any material proceeding
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization nor, as of the date of this Agreement, is there pending or,
to the knowledge of the executive officers of the Company, threatened, any
material labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving the Company or any of its Subsidiaries.
Section 17 Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of the Company and its Subsidiaries
and their respective properties and assets, and are in character and amount at
least equivalent to that carried by persons engaged in similar businesses and
subject to the same or similar perils or hazards, except for any such failures
to maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to cause a Material Adverse Change.
Section 18 Broker Fees, etc. Other than (i) any amounts claimed by
Xxxxxx Brothers pursuant to arrangements previously disclosed to ACO and (ii)
amounts paid in respect of the Fairness Opinion (as defined in Section 3.1(f)),
no broker, investment banker, financial advisor or other person is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement.
Section 19 No Existing Discussions. As of the date hereof, neither the
Company nor any of its Affiliates is engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to an Acquisition
Proposal.
Section 20 Section 203 of the DGCL and Sections 2538, 2555 and 2564 of
the Pennsylvania Business Corporation Law Not Applicable. The Board of Directors
of the Company has taken all actions necessary under the DGCL and the
Pennsylvania Business Corporation Law ("PBCL"), including approving the
transactions contemplated by this Agreement and each of the Investment Documents
to which it is a party, to ensure that Section 203 of the DGCL applicable to a
"business combination" (as defined in Section 203 of the DGCL) and Sections
2538, 2555 and 2564 of the PBCL applicable to a "business combination", "control
share transactions" and "transactions with interested shareholders" do not, and
will not, apply to the transactions contemplated hereunder and thereunder. No
other "fair price," "moratorium," "control share acquisition" or other similar
anti-takeover statute or regulation is applicable to the Company or (by reason
of the Company's participation therein) the transactions contemplated by this
Agreement or the other Investment Documents to which it is a party.
Section 21 The Company Rights Plan. Under the terms of the Company
Rights Plan, the transactions contemplated by this Agreement will not cause a
Distribution Date to occur or in any other way cause the rights issued pursuant
to the Company Rights Plan to become exercisable.
Section 22 Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has (i) determined that this Agreement and
the transactions contemplated hereby, taken together, are fair to and in the
best interests of the stockholders of the Company, and (ii) resolved to
recommend that the stockholders of the Company approve and adopt this Agreement
and the transactions contemplated herein.
Section 23 Required Company Vote. Assuming the execution of all
Investment Documents, the affirmative vote of the majority of the outstanding
shares of Common Stock is the only vote of the holders of any class or series of
the Company's securities necessary to approve and adopt this Agreement and the
transactions contemplated hereby.
Section 24 Full Disclosure. All written information heretofore
furnished by the Company or any Subsidiary of the Company to ACO for purposes of
or in connection with this Agreement or any transaction contemplated hereby was,
as of the time such information was furnished, or the date of such information,
as the case may be, and all such information hereafter furnished by the Company
or any Subsidiary of the Company to ACO will be as of the time such information
is furnished, or the date of such information, as the case may be, true and
accurate in all material respects or, in the case of forecasts or projections,
based on reasonable expectations and estimates believed by the Company to be
accurate. Other than as disclosed in the Company SEC Reports, the Company has
disclosed to ACO any and all facts known to any executive officer of the Company
which will or are likely to (to the extent the Company can now reasonably
foresee) cause a Material Adverse Change.
ARTICLE V
COVENANTS
The Company agrees that, so long as ACO or TMC continues to be the
beneficial owner (within the meaning of Rule 13d-3 under the Securities Act) of
at least 1,000 shares of Series E Stock or 100,000 shares of Restricted Stock,
unless ACO otherwise consents in writing (which consent shall not, in the case
of Sections 5.2, 5.6(a), 5.7, 5.8, 5.9, 5.10, 5.11, and 5.12 be unreasonably
withheld or delayed):
Section 1 Information. The Company will deliver the following
information to ACO:
(i) As soon as available and in any event within 105 days after the end
of each fiscal year, an audited consolidated balance sheet of the Company and
its Subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, of cash flows, and of changes in stockholders' equity for
such fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and reported on without
Qualification by Ernst & Young LLP or other public accountants of nationally
recognized standing reasonably acceptable to ACO;
(ii) Simultaneously with the delivery of each set of financial
statements referenced in subsection (a) of this Section 5.1, a consolidating
balance sheet in reasonable detail of the Company and its Subsidiaries as of the
end of such fiscal year and the related consolidating statement of income for
such fiscal year, setting forth, in each case, in comparative form the figures
for the previous fiscal year, all certified by the chief financial officer, the
treasurer, or chief accounting officer of the Company.
(iii) As soon as available and in any event within 50 days after the
end of each of the first three fiscal quarters of each fiscal year, a
consolidated and/or consolidating balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter, and the related consolidated
and consolidating statements of income, cash flows, changes in stockholders'
equity for such fiscal quarter and/or for the portion of the fiscal year ended
at the end of such fiscal quarter, setting forth in each case in comparative
form the figures for the corresponding fiscal quarter and the corresponding
portion of the previous fiscal year, all certified (subject to normal year-end
audit adjustments) as to fairness of presentation and consistency by the chief
financial officer, the treasurer, or the chief accounting officer of the
Company;
(iv) Within 60 days after the beginning of each fiscal year, a
financial forecast, budget, cash flow projection and general business plan for
the Company and its Subsidiaries for such fiscal year, as approved by the
Company's board of directors and certified by the chief financial officer, the
treasurer, or chief accounting officer of the Company;
(v) Simultaneously with the delivery of each set of financial
statements referenced in subsections (a) and (c) of this Section 5.1, a fully
completed Compliance Certificate of the chief financial officer, the treasurer,
or chief accounting officer of the Company;
(vi) Simultaneously with the delivery of each set of financial
statements referenced in subsection (a) of this Section 5.1, a statement of the
firm of independent public accountants that reported on such statements;
(vii) Forthwith upon an executive officer of the Company learning of
the occurrence of any Default, a certificate of the chief financial officer, the
treasurer, or the chief accounting officer of the Company setting forth the
details thereof and the action that the Company is taking or proposes to take
with respect thereto;
(viii) Promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) that the Company or any of its Subsidiaries shall have filed with
the Commission;
(ix) Within 14 days after any member of the ERISA Group (i) gives or is
required to give notice to PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any ERISA Material Plan which might constitute
grounds for a termination of such ERISA Plan under Title IV of ERISA, or knows
that the plan administrator of any such ERISA Plan has given or is required to
give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to PBGC, (ii) receives notice of
complete or partial withdrawal liability in a material amount under Title IV of
ERISA, a copy of such notice, or (iii) receives notice from PBGC under Title IV
of ERISA of an intent to terminate or appoint a trustee to administer any ERISA
Material Plan, a copy of such notice;
(x) As soon as reasonably practicable after an executive officer of the
Company obtains knowledge of the commencement of, or of a threat (with respect
to which there is a reasonable possibility of assertion) of the commencement of,
an action, suit, or proceeding against the Company or any of its Subsidiaries
before any court or arbitrator or any governmental body, agency, or official in
which there is a reasonable possibility of an adverse decision which could
reasonably be expected to cause a Material Adverse Change, or which in any
manner questions the validity of any Investment Document or any of the
transactions contemplated hereby, information as to the nature of such pending
or threatened action, suit, or proceeding;
(xi) Promptly upon receipt thereof, copies of each report submitted to
the Board of Directors (or the Audit Committee thereof) of the Company by
independent public accountants in connection with any annual, interim, or
special audit made by them of the consolidated financial statements of the
Company and its Subsidiaries including each report submitted to the Board of
Directors (or the Audit Committee thereof) of the Company concerning its
accounting practices and systems and any final "management letter" submitted by
such accountants to management in connection with the annual audit of the
Company and its Subsidiaries; and
(xii) From time to time, such additional information regarding the
business, properties, financial position, results of operations, or prospects of
the Company or any of its Subsidiaries as ACO may reasonably request.
Section 2 Fiscal Plans. On or before the earlier of the Closing Date
and termination of this Agreement, the Board of Directors of the Company will
not adopt any budget or other fiscal plan for the Company without the prior
written approval of such budget or other fiscal plan by ACO.
Section 3 Payment of Obligations. Except where failure to do so will
not cause a Material Adverse Change, the Company will, and will cause each of
its Subsidiaries to, pay and discharge, as the same shall become due and
payable, all their respective material obligations and liabilities, including:
(i) all claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords, and other like Persons which, in any such case, if unpaid, might by
law give rise to a Lien upon any of its material assets, (ii) all material
lawful taxes, assessments, and governmental charges or levies upon it or its
assets, except to the extent that any such obligation or liability may be
diligently contested in good faith by appropriate proceedings, and the Company
will maintain, and will cause each of its Subsidiaries to maintain, in
accordance with GAAP, appropriate reserves for the accrual of any such
obligation or liability; and (iii) all Debts as and when due.
Section 4 Maintenance of Property; Insurance.
(i) Except where failure to do so will not cause a Material Adverse
Change, the Company will keep, and will cause each of its Subsidiaries to keep,
all material property useful and necessary in its business in good working order
and condition, reasonable wear and tear excepted.
(ii) Except where failure to do so will not cause a Material Adverse
Change, maintain adequate reserves (consistent with past practices) in order to
provide for any potential patent infringement actions involving the Company.
(iii) Except where failure to do so will not cause a Material Adverse
Change, the Company will, and will cause each Subsidiary of the Company to,
maintain or cause to be maintained with financially sound and reputable
insurance companies insurance (including insurance against claims and
liabilities arising out of the manufacture or distribution of any products) with
respect to its properties and business against such casualties and contingencies
and of such types and in such amounts as is customary in the case of similar
businesses.
Section 5 Books and Records; Inspection. The Company will keep, and
will cause each of its Subsidiaries to keep, proper books of record and account
in which full, true, and correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to its business and activities. The
Company will permit ACO and its representatives to have access to and to examine
its properties, books and records (and to copy and make extracts therefrom) at
such reasonable times and intervals as ACO may request and to discuss its
affairs, finances and accounts with its officers and auditors, all to such
reasonable extent and at such reasonable times and intervals as ACO may request.
Section 6 Conduct of Business; Maintenance of Subsidiaries; Compliance
with Law.
(i) On or before the earlier of the Closing Date and termination of
this Agreement, subject to this Section 5, the Company will, and will cause each
of its Subsidiaries to, engage in its business in the same general manner as now
conducted by the Company and its Subsidiaries, will conduct its operations so as
to implement the most recent Annual Operating Plan adopted by the Company and
provided to ACO.
(ii) On or before the earlier of the Closing Date and termination of
this Agreement, the Company will preserve, renew, and keep in full force and
effect, and will cause each of its Subsidiaries to preserve, renew, and keep in
full force and effect, its corporate existence and all material rights,
privileges, and franchises necessary or desirable in the normal conduct of
business.
(iii) On or before the earlier of the Closing Date and termination of
this Agreement, except for any minority interest existing on the Closing Date
and disclosed on the Company Disclosure Schedule, the Company will cause each of
its Subsidiaries to be a Wholly-Owned Subsidiary.
(iv) The Company will comply, and will cause each Subsidiary of the
Company to comply, in all material respects with all material applicable laws,
ordinances, rules, regulations and requirements of governmental authorities
(including environmental laws and ERISA and the rules and regulations
thereunder).
Section 7 Debt. On or before the earlier of the Closing Date and
termination of this Agreement, the Company will not, and will not permit any of
its Subsidiaries to, incur or at any time be liable with respect to any Debt
except:
(i) Debt identified in the Company Disclosure Schedule including any
extension, renewal, refunding, or refinancing thereof, provided that (x) such
extension, renewal, refunding, or refinancing is on terms no less favorable, in
the reasonable opinion of the management of the
Company, than the Debt so extended, renewed, refunded or refinanced and (y) the
amount of such Debt shall not be increased;
(ii) Debt of a Subsidiary of the Company owing to the Company or to
a Wholly-Owned Subsidiary; and
(iii) Additional Debt, not otherwise permitted under this Section, in
an aggregate principal amount outstanding at any time not in excess of
$2,000,000.
Section 8 Consolidations, Mergers and Sales of Assets.
(i) On or before the earlier of the Closing Date and termination of
this Agreement, the Company will not, and will not permit any Subsidiary of the
Company to, consolidate with or merge with or into any other Person, unless: (i)
(A) the Company is the surviving corporation, (B) immediately after giving
effect thereto, no Default shall have occurred and be continuing, and (C) ACO
consents in writing, which consent shall not unreasonably be withheld; or (ii)
the Company pays the Transaction Initiation Fee to ACO.
(ii) On or before the earlier of the Closing Date and termination of
this Agreement, neither the Company nor any of its Subsidiaries will make any
Disposition of any material part of their consolidated assets.
Section 9 Restricted Payments. On or before the earlier of the Closing
Date and termination of this Agreement, the Company will not declare or make, or
permit any of its Subsidiaries to declare or make, any Restricted Payment.
Section 10 Limitations on Investments. On or before the earlier of the
Closing Date and termination of this Agreement, the Company will not, and will
not permit any of its Subsidiaries to, make or acquire any Investment in any
Person other than:
(i) Investments in Persons which immediately before and after
giving effect to such Investment are Wholly-Owned Subsidiaries; and
(ii) Investments made by the Company or any Subsidiary of the Company
in connection with its cash management policies and practices conducted in the
ordinary course of business, consistent with reasonable business practice,
provided that, in each case, such Investment matures within one year from the
date of acquisition thereof by the Company or such Subsidiary.
Section 11 Transactions with Affiliates. Except as set forth on the
Company Disclosure Schedule, pursuant to any Investment Document, or as required
under any contract or obligation entered into before the date of this Agreement,
the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly: (i) make any Investment in an Affiliate
of the Company; (ii) sell, lease, or otherwise transfer any assets to an
Affiliate of the Company; (iii) purchase or acquire assets from an Affiliate of
the Company; or (iv) enter into any other transaction directly or indirectly
with or for the benefit of an Affiliate of the Company (including Guarantees and
assumptions of obligations of an Affiliate); provided that the Company and any
Wholly-Owned Subsidiary may enter into any such transaction with each other.
Section 12 Replacement of Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of any certificate representing any of the Securities, and in the
case of loss, theft or destruction, upon receipt of indemnity in reasonable form
and scope, the Company will issue a new certificate representing such Securities
in lieu of such lost, stolen, destroyed, or mutilated certificate.
Section 13 Compensation of Board. The Company shall compensate the ACO
Board Nominees consistently with other Company directors providing similar
services.
Section 14 Organizational Documents. On or before the earlier of the
Closing Date and termination of this Agreement, other than pursuant to this
Agreement, the Company will not make any change in its Certificate of
Incorporation, the Certificate or its bylaws, including without limiting the
foregoing, any change in the authorized number of directors.
Section 15 Securities Law Filings. The Company will make any filings
necessary to perfect in a timely fashion exemptions from (i) the registration
and prospectus delivery requirements of the Securities Act and (ii) the
registration or qualification requirements of all applicable securities or blue
sky laws of any state or other jurisdiction, for the issuance of the Securities
to ACO.
Section 16 Compliance With Certificate and Bylaws. The Company will
perform and observe all of its obligations to the holders of Securities set
forth in the Certificate and the Company's Bylaws.
Section 17 Use of Proceeds. Concurrently with the Closing, the Company
will apply the proceeds received by it from the Purchase as follows:
(i) Approximately $16.5 million (as specified in First Union National
Bank Consent Agreement) to First Union National Bank, in repayment of the
Company's line of credit, including interest and fees, pursuant to the First
Union National Bank Consent Agreement;
(ii) all payments to be made pursuant to Section 8.4;
(iii) payment of costs and fees payable by the Company in connection
with the transactions contemplated by the Investment Documents as provided
herein and therein; and
(iv) the balance to be used for working capital and for general
corporate purposes not inconsistent with the provisions of this Agreement.
Section 18 Employees.
(i) On or before the earlier of the Closing Date and termination of
this Agreement, without the written consent of ACO (which consent will not be
unreasonably withheld), neither the Company nor any of its Subsidiaries shall
(except as set forth in any Investment Document) adopt or amend (except as may
be required by law) any bonus, profit sharing, compensation, stock option
(including by accelerating of altering the vesting thereof) pension, retirement,
deferred compensation, severance, change-in-control, fringe benefits, employment
or other employee benefit plan, agreement, trust, fund or other arrangement for
the benefit or welfare of any employee, director or former director or employee,
increase the compensation, bonus or fringe benefits of any director, employee or
former director or employee or pay any benefit not required by any existing
plan, arrangement or agreement, except that the Company will be permitted to (i)
provide for any payment deemed necessary by management to certain employees on
terms reasonably acceptable to ACO and (ii) grant merit increases in salaries of
employees (other than officers) at regular scheduled times in customary amounts
consistent with past practices.
(ii) On or before the earlier of the Closing Date and termination of
this Agreement, neither the Company nor any of its Subsidiaries shall grant any
new or modified severance or termination arrangement or increase or accelerate
any benefits payable under its severance or termination pay policies in effect
on the date of this Agreement.
Section 19 Transition. On or before the earlier of the Closing Date and
termination of this Agreement, in order to permit the coordination of their
related operations on a timely basis, the Company shall consult with ACO on all
strategic and material operational matters. The Company shall make available to
ACO at the Company's facilities office space in order to assist it in observing
all operations and reviewing all matters concerning the Company's affairs.
Without in any way limiting the foregoing sentence, ACO, its officers,
employees, counsel, financial advisors and other representatives shall, upon
reasonable notice to the Company, be entitled to review the operations and visit
the facilities of the Company and its Subsidiaries at all times as may be deemed
reasonably necessary by ACO.
Section 20 Exclusivity. On or before the earlier of the Closing Date
and termination of this Agreement, the Company agrees that, the Company and its
officers, directors, employees, representatives and agents shall not, and each
of them shall cause their Affiliates and representatives to not, directly or
indirectly, (x) take any action to encourage, solicit or initiate any
Acquisition Proposal or (y) respond to, continue, initiate or engage in
discussions or negotiations concerning any Acquisition Proposal with, or
disclose in connection with any Acquisition Proposal any non-public information
relating to the Company or its assets or afford access to the properties, books
or records
of the Company or any of its Subsidiaries to any Person (except ACO and its
representatives), except that the Company may engage in negotiations with, or
disclose such non-public information to, or provide such access to any person
who has made an unsolicited Acquisition Proposal if the Board of Directors of
the Company, after consultation with outside counsel to the Company, determines
that its fiduciary duties under applicable law require such actions. Subject to
such fiduciary duties, the Company shall, and shall cause its Affiliates and
representatives to, immediately discontinue and not resume or otherwise continue
any discussions with respect to any Acquisition Proposal existing on or
commenced prior to the date hereof (other than, in each case, with ACO and its
representatives). In addition, the Company shall provide ACO with notice of any
Acquisition Proposal received by the Company not later than 24 hours after
receipt.
Section 21 Registration. The Company shall use best efforts to ensure
that all Conversion Stock held by ACO is continuously registered with the
Commission in accordance with the terms and conditions of the Registration
Rights Agreement.
Section 22 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other party in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this
Agreement. The parties shall use their reasonable best efforts and cooperate
with one another (i) in promptly determining whether any filings are required to
be made or consents, approvals, waivers, permits or authorizations are required
to be obtained (or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
and (ii) in promptly making any such filings, in furnishing information required
in connection therewith and in timely seeking to obtain any such consents,
approvals, permits or authorizations. ACO and the Company shall mutually
cooperate in order to facilitate the achievement of the benefits reasonably
anticipated from the transactions contemplated by this Agreement. Following the
execution of this Agreement, ACO and the Company shall cooperate to prepare,
file, cause to be approved by the SEC and mail to the Company's stockholders, in
as expeditious manner as possible, the Proxy Statement in accordance with
Regulation 14A of the Securities Exchange Act of 1934, as amended, which Proxy
Statement shall contain proposals related to, at a minimum, (i) an increase in
the number of authorized shares of Common Stock of the Company; (ii) approval of
the transactions contemplated by this Agreement pursuant to the rules of the New
York Stock Exchange, Inc. and (iii) such other matters as the Company shall
determine.
Section 23 Public Announcements. ACO and the Company shall consult with
each other before holding any press conferences or analyst calls and before
issuing any press releases. The parties will provide each other the opportunity
to review and comment upon any press release with
respect to the transactions contemplated by this Agreement, and shall not issue
any such press release prior to such consultation, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.
ARTICLE VI
DEFAULTS
Section 1 Defaults. If one or more of the following events ("Events of
Default") shall have occurred and be continuing other than as a result of any
action caused or taken by ACO, its affiliates (including TMC) or the ACO Board
Nominees:
(i) The Company shall fail to observe or perform any of its material
covenants or agreements contained in this Agreement or any other Investment
Document;
(ii) Any material representation, warranty, certification, or statement
made by or on behalf of the Company in any Investment Document, or in any
certificate, financial statement or other document delivered pursuant thereto,
shall have been incorrect or misleading in any material adverse respect when
made (or deemed made);
(iii) The Company or any Subsidiary of the Company shall commence a
voluntary case or other proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(iv) An involuntary case or other proceeding shall be commenced against
the Company or any Subsidiary of the Company seeking liquidation,
reorganization, or other relief with respect to it or its debts under any
bankruptcy, insolvency, or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian, or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed for a period of 60
days; or an order for relief shall be entered against the Company or any
Subsidiary of the Company under the Federal bankruptcy laws as now or hereafter
in effect;
then, and in every such event, (x) ACO may, by notice to the Company, terminate
any outstanding obligation of ACO to Purchase, and any such obligation to
Purchase shall thereupon terminate, and (y) ACO may proceed to protect and
enforce its rights by suit in equity or action at law, whether for
the specific performance of any term contained in this Agreement or the
Certificate or for an injunction against the breach of any such term or in aid
of the exercise of any power granted in this Agreement or the Certificate, or to
enforce any other legal or equitable right of ACO or to take any one or more of
such actions.
ARTICLE VII
TERMINATION
Section 1 Termination. This Agreement may be terminated at any time
prior to the Closing Date (with respect to Sections 7.1(b) through 7.1(f), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the transactions
contemplated by this Agreement by the stockholders of the Company:
(i) by mutual written consent of ACO and the Company; or
(ii) by either ACO or the Company if the transactions contemplated by
this Agreement shall not have been consummated by November 15, 1998 or, upon
receipt of a letter from NMC to ACO extending the termination date of the
Transaction because NMC is awaiting regulatory or shareholder approval, by
December 31, 1998 (the "Outside Date"); provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulting in the failure of the Purchase to occur on or before such
date;
(iii) by either ACO or the Company if a court of competent jurisdiction
or other Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement;
(iv) by ACO, if there has been a material breach of any representation,
warranty, covenant or agreement under this Agreement by the Company, which
breach shall not have been cured within 20 business days following receipt by
the Company of written notice of such breach from ACO; provided that such breach
was not caused by Xxxxx Xxxxxx, as acting CEO of the Company, TMC or an ACO
Board Nominee;
(v) by the Company if the Company accepts an Acquisition Proposal (and
pays to ACO the Transaction Initiation Fee pursuant to Section 2.2); or
(vi) by the Company, if there has been a material breach of any
representation, warranty, covenant or agreement under this Agreement by the ACO,
which breach shall not have been cured
within 20 business days following receipt by the ACO of written notice of such
breach from the Company.
Section 2 Effect of Termination.
(i) In the event of a termination of this Agreement pursuant to Section
7.1(d) or (e), there shall be no liability or obligation on the part of ACO, the
Company or their respective officers, directors, or stockholders or members,
except as set forth in Sections 8.4 (Expenses; Documentary Taxes;
Indemnification) and 2.2 (Transaction Initiation Fee), provided that any such
termination shall not limit liability for a wilful breach of this Agreement.
(ii) In the event of a termination of this Agreement by the Company
pursuant to Section 7.1(f), (i) TMC shall forfeit the TMC Option and the TMC
Warrant and such shall be cancelled and of no further force and effect; and (ii)
the fixed "floor" conversion price of $1.073125 per share shall remain in full
force and effect with respect to all shares of Series D Preferred Stock and
warrants over shares of Series D Stock purchased by ACO.
(iii) Other than as set forth in Section 7.2(a) and in Section 8.8,
neither party hereto shall be limited in pursuing any and all remedies available
to such party at law or in equity.
ARTICLE VIII
MISCELLANEOUS
Section 1 Notices. All notices, requests, and other communications to
any party under this Agreement shall be in writing and shall be given to such
party at its address or facsimile number set forth on the signature pages hereof
or such other address facsimile number as such party may hereafter specify for
the purpose by notice to the other parties. Each such notice, request or other
communication shall be effective: (a) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in accordance with this Section
8.1 and the party sending the facsimile has telephonically confirmed its
receipt, (b) if given by registered or certified mail, return receipt requested,
72 hours after such communication is deposited in the mails with postage
prepaid, addressed as aforesaid or (c) if given by any other means, when
delivered at the address specified in accordance with this Section 8.1.
Section 2 No Waivers. No failure or delay by ACO or the Company in
exercising any right, power, or privilege under this Agreement shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power, or
privilege.
Section 3 Cumulative Remedies. None of the rights, powers or remedies
conferred upon ACO or the Company pursuant to this Agreement shall be mutually
exclusive, and each such right, power or remedy shall be cumulative and in
addition to every other right, power or remedy, whether conferred hereby or by
the Certificate of Designation for Series E Stock (as to ACO) or now or
hereafter available at law, in equity, by statute or otherwise.
Section 4 Expenses; Documentary Taxes; Indemnification.
(i) Subject to Section 7.4(c), the Company shall pay: (A) all
reasonable fees and disbursements of ACO's counsel in connection with the
negotiation and preparation of this Agreement and all related documents, (B) all
other reasonable out-of-pocket expenses of ACO, and (iii) upon any Event of
Default, all out-of-pocket expenses incurred by ACO, including reasonable fees
and disbursements of counsel, in connection with the such Event of Default and
enforcement proceedings resulting therefrom.
(ii) Subject to Section 7.4(c), the Company shall indemnify ACO against
any transfer taxes, documentary taxes, assessments, or charges made by any
governmental authority by reason of the execution and delivery of the Investment
Documents.
(iii) The Company shall not be required to make any payment to ACO
pursuant to this Section 8.4 if the Company has paid the Transaction Initiation
Fee to ACO pursuant to Section 2.2.
Section 5 Amendments and Waivers. Any provision of this Agreement and
the obligations or rights of the Company or ACO in respect of the Common Stock,
Series E Stock or Series D Stock of the Company may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the party or
parties whose performance is conditional with respect such right or obligation,
whereupon such amendment or waiver shall be binding on the Company and ACO.
Section 6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Company may not assign or transfer any of its
rights or obligations hereunder without the consent of ACO. ACO may not assign
its rights or obligations under this Agreement except (a) with the consent of
the Company or (b) to TMC only after the Closing Date. Upon any such assignment,
ACO shall notify the Company, which notice shall specify the precise nature of
the rights which have been so assigned.
Section 7 Survival of Representations and Warranties. All
representations and warranties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement and the
Purchase.
Section 8 Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.
(i) GOVERNING LAW. THIS AGREEMENT AND THE OTHER INVESTMENT DOCUMENTS
(EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY SET FORTH THEREIN) SHALL BE DEEMED TO
HAVE BEEN MADE IN THE STATE OF DELAWARE AND THE VALIDITY, CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES HERETO AND THERETO, SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(ii) JURISDICTION AND VENUE. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT OR THE OTHER INVESTMENT DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE DELAWARE COURT OF CHANCERY, COUNTY OF NEW CASTLE,
DELAWARE, OR, IF JURISDICTION IS NOT AVAILABLE IN SUCH COURT, IN ANY OTHER
DELAWARE STATE COURT. TO THE EXTENT THEY MAY LEGALLY DO SO, THE PARTIES HERETO
HEREBY WAIVE ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SUBSECTION (b) AND STIPULATE THAT SUCH COURTS SHALL HAVE IN
PERSONAM JURISDICTION AND VENUE OVER EACH SUCH PARTY FOR THE PURPOSE OF
LITIGATING ANY SUCH DISPUTE, CONTROVERSY, OR PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT, OR THE OTHER INVESTMENT DOCUMENTS. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, SERVICE OF PROCESS SUFFICIENT FOR PERSONAL JURISDICTION
IN ANY ACTION AGAINST THE COMPANY MAY BE MADE BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO ITS ADDRESS SPECIFIED FOR NOTICES PURSUANT TO
SECTION 8.1.
(iii) WAIVER OF TRIAL BY JURY. TO THE MAXIMUM EXTENT THEY MAY LEGALLY
DO SO, THE PARTIES TO THIS AGREEMENT HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING
UNDER OR WITH RESPECT TO THIS AGREEMENT, OR THE OTHER INVESTMENT DOCUMENTS, OR
IN ANY WAY CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE
PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, THE OTHER INVESTMENT DOCUMENTS,
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE. TO THE EXTENT THEY MAY LEGALLY DO SO, THE PARTIES TO THIS AGREEMENT
HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING
SHALL BE DECIDED BY A
COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SUBSECTION (c) WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO WAIVER OF ITS OR THEIR
RIGHT TO TRIAL BY JURY.
Section 9 Counterparts; Facsimile Signatures. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. Delivery of an executed counterpart of the signature page to this
Agreement by facsimile shall be effective as delivery of a manually executed
counterpart of this Agreement, and any party delivering an executed counterpart
of the signature page to this Agreement by facsimile to any other party shall
thereafter also promptly deliver a manually executed counterpart of this
Agreement to such other party, but the failure to deliver such manually executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
Section 10 Entire Agreement. This Agreement and the other Investment
Documents (a) integrate all the terms and conditions set forth in or incidental
to the Investment Documents, (b) supersede all oral negotiations and prior
writings (including, without limiting the foregoing, the letter of intent dated
July 10, 1998 between ACO and the Company together with the Annexes thereto)
with respect to the subject matter hereof, and (c) are intended by the parties
as the final expression of the agreement with respect to the terms and
conditions set forth in the Investment Documents and as the complete and
exclusive statement of the terms agreed to by the parties.
Section 11 Confidentiality. Each of the Company and ACO agree to
maintain confidentiality of the terms of this Agreement and all information
disclosed in connection herewith including, without limitation, pursuant to
Article 5 hereof, subject to the applicable rules and regulations under the
Securities Act of 1933 and the Securities Exchange Act of 1934; provided,
however, that the Company and ACO may disclose such information to its legal and
financial advisors and lenders and to the parties to the Investment Documents,
provided that such advisors, lenders and parties to the Investment Documents
are, prior to receipt of such information, informed
of the confidential nature of such information and agree to be bound by the
nondisclosure provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the day and year
first above written.
COMPANY: NATIONAL MEDIA CORPORATION,
a Delaware corporation
By
------------------------------------------
Name:
Title:
Address for Notices:
Attn: General Counsel
Eleven Penn Center
Suite 1100
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
ACO: NM ACQUISITION CO., LLC,
a Delaware limited liability company
By its Manager,
TEMPORARY MEDIA, CO., LLC,
a Delaware limited liability company
By
-----------------------------------------
Name: Xxxx Xxxxx
Title: Managing Member
Address for Notice:
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
Buchalter, Nemer, Fields & Younger
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
