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EXHIBIT 2.1
March 18, 1998
Via Facsimile
Xx. Xxxxx X. Xxxxxx
Renaissance Capital Group, Inc.
Xx. Xxxxxxx Xxxxx
The Xxxxxx-Xxxxx Co.
c/o Xxxxxxx Xxxxxxx, Esq.
Xxxxx, Xxxxxxxx & Xxxxx
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
c/o Xxxxxxx Xxxxx, Esq.
Xxxxx & Xxxxx
00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
This letter outlines a proposal by which Next Generation Media
Corp. (the "Buyer") will acquire:
- all of the issued and outstanding shares of Series C Preferred stock (the
"Preferred C Shares") of UNICO, Inc., a Delaware corporation (the
"Company"), and
- all of (1) the promissory notes issued pursuant to the Subordinated Loan
agreement with an outstanding principal balance of $300,000 dated June 30, 1995
among the Company, Cal-Central Marketing Corporation and the Xxxxxx Xxxxx
Fentriss Trust, Xxxxxx Xxxxxxxxxx, Xx., RHOJOAMT Partnership Ltd., CITCAM Stock
Co., Xxxxxxx Xxxxxxx and Goose Creek, (2) the subordinated debentures having an
outstanding principal balance of $460,000 issued pursuant to an Indenture and
placed by The Xxxxxx-Xxxxx Company with various investors and (3) the promissory
note(s) issued to Renaissance Capital pursuant to an interim financing agreement
between with the Company with an aggregate principal balance of $274,000
(collectively, the "Subordinated Debt").
The holders of the Preferred C Shares and the Subordinated Debt are collectively
referred to herein as the "Sellers." The proposed acquisition is subject to and
encompasses the following terms and conditions:
1. The effective date of this acquisition (the "Series C/Sub Debt
Purchase") will be as of the date on which Buyer and the Company execute a
definitive agreement providing for the
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acquisition by Buyer of all of the outstanding shares of United (the "United
Purchase"). The closing will be at Washington, D.C. at a time selected by the
Buyer and the Sellers' representatives upon execution of the definitive
agreement. The Buyer shall endeavor to effect the closing of the Series C/Sub
Debt Purchase and the execution of the definitive agreement for the United
Purchase by March 31, 1998, but in no case will the closing take place later
than May 1, 1998, unless mutually agreed by the parties.
Buyer will pay $1,350,000 (the "Purchase Price") for the Preferred C
Shares and the Subordinated Debt in the form of (1) $100,000 cash and (2)
250,000 shares of its Callable Cumulative Convertible Preferred stock ("NexGen
Preferred").(1/) Each 1-1/2 shares of NexGen Preferred will be accompanied by
one stock purchase warrant that will entitle the holder to purchase one share of
the Buyer's common stock at an exercise price of $0.16, valid for five years
from the date of issue.
The number of warrants to be provided to Sellers will be subject to
adjustment based on the price per share at which the Buyer effects a private
placement or initial public offering of its common stock following the Buyer's
acquisition of United (the "NexGen Placement/Offering"). If the NexGen
Placement/Offering is made at a price up to $3.50 per share, Sellers will
receive a total of 250,000 warrants; if the NexGen Placement/Offering is made at
a price in the range $3.51 - $4.00 per share, Sellers will receive a total of
200,000 warrants; if the NexGen Placement/Offering is made at a price in the
range $4.01 -$4.50 per share, Sellers will receive a total of 185,000 warrants;
and if the NexGen Placement/Offering is made at a price of $4.51 per share or
higher, there will be no adjustment to the warrants issued to Sellers. The Buyer
shall endeavor to ensure that the NexGen Placement/Offering will result in the
receipt of a minimum of $2,000,000 of net proceeds to Buyer. Buyer agrees to use
(1) 35% of the first $1,000,000 and (2) 50% of any net proceeds in excess of
$1,000,000 from the NexGen Placement/Offering to redeem NexGen Preferred stock.
In the event the proceeds of more than one placement or offering at different
prices are used to redeem the NexGen Preferred Stock, the warrant adjustment
contemplated by this paragraph will be applied on a weighted average basis of
the various offering prices in the placements or offerings, the proceeds of
which are used to effect such redemption. The balance of the net proceeds from
the NexGen Placement/Offering shall be used to provide a capital infusion to
Buyer's newly acquired subsidiary, United, except for payments of obligations of
Buyer approved by Buyer's board of directors after the United Purchase.
2. As part of the transaction, the Sellers represent and
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(1/) Buyer will not issue fractional shares and will issue NexGen Preferred
shares to each Seller by rounding up or down to the nearest whole number of
shares.
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warrant to Buyer, among other things, that the Preferred C Shares and
Subordinated Debt they are selling represent all of the Preferred C Shares or
Subordinated Debt of the Company. In addition, the Sellers shall agree to
execute powers of attorney to provide for the authority of one or more
representatives of Sellers to effect the sale of the Preferred C Shares and the
Subordinated Debt to Buyer at the closing.
3. At the closing, the Sellers shall deliver to Buyer stock
certificates endorsed in blank for all of the Class C Preferred Shares as well
as the promissory notes endorsed to the order of Buyer. Sellers represent and
warrant that they have good title to the Class C Preferred Stock and the
promissory notes, that the Class C Preferred Stock is validly issued, fully paid
and nonassessable, that the Class C Preferred Stock and promissory notes are
free and clear of liens and encumbrances, and that the Sellers can transfer them
without the consent of any third parties. As part of these transactions, Sellers
shall convey to Buyer all right, title and interest in and to any claims or
causes of action they may have against the Company, its affiliates or any member
of its board of directors (the "Unico Board"), in their capacity as Sellers,
creditors or as common shareholders in the Company, from the beginning of time
to the date of these transactions, as a result of any past actions taken or not
taken by the Unico Board or the Unico Board's decision to enter into the United
Purchase. Buyer agrees that it will assert no claims or bring no actions against
the Sellers or any of them as a result of any actions by the Unico Board from
the beginning of time to the date of these transactions, including without
limitation any action or failure to act by the Unico Board with respect to the
acquisition of United by NexGen.
4. Upon the approval by Unico's Board of the purchase of United by
Buyer, you will not discuss or negotiate with any other corporation, firm or
other person, or entertain or consider any inquiries or proposals relating to
the possible disposition of the Preferred C Shares, the Subordinated Debt or the
business of the Company, including United.
5. The Xxxxxx-Xxxxx Co. shall recommend to and undertake their best
efforts to obtain the approval of all Sellers to the Series C/Sub Debt Purchase.
To facilitate the foregoing approval, the Company will send a copy of this
letter and an outline of the terms of agreement to the other Sellers together
with such other information as may be required by law or determined by the
Company to be necessary in order to obtain the consent of the holder of the
Series C Preferred Stock and the Subordinated Debt. This offer and the closing
herein contemplated is contingent upon Buyer's acquiring one hundred percent
(100%) of the Preferred C Shares and the Subordinated Debt free and clear of all
options, liens and other claims.
6. The closing hereunder is subject, among other things,
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to the following:
a. Approval by the board of directors of Buyer;
b. Approval by the Board and shareholders of the Company of
the United Purchase;
c. Any necessary approvals required under all loan agreements,
indentures or other debt documents of the Company, including without limitation
with BancFirst;
d. Approval by any necessary governmental authorities; and
e. Receipt of all necessary third party consents.
7. Any and all expenses incurred on behalf of the Sellers in connection
with the Series C/Sub Debt Purchase hereunder, including, but not limited to,
attorney's fees, accounting fees and other services and expenditures on their
behalf, shall be borne by the Sellers and shall not be paid by or incurred for
the account of the Company.
The Series C/Sub Debt Purchase and the United Purchase are
further described in the term sheet attached hereto as Annex A. The terms of
agreements between Xx. Xxxx Xxxx, majority shareholder of Buyer, and Xx. Xxxxxx
Xxxxxxx, President of United, are described in the term sheet attached hereto as
Annex B.
This letter agreement shall terminate upon the earliest of (a)
Wednesday, March 25, 1998 at 5:00 p.m. if the Unico Board has failed to elect by
that time to enter into the United Purchase; (b) the closing of the Series C/Sub
Debt Purchase and execution of a definitive agreement for the United Purchase
and (c) May 1, 1998, unless the parties hereto otherwise agree in writing. No
public announcement of the matters contemplated herein shall be made by any
party hereto without the prior consent of the other parties hereto.
Very truly yours,
BUYER:
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
Title: President
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AGREED AND ACCEPTED:
Renaissance Capital
By: /s/ Xxxxx Xxxxxx
-------------------
Name: Xxxxx X. Xxxxxx
Title:
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Xxxxxx-Xxxxx Company
By: /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
Title:
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A. Annex A
UNICO - NEXT GENERATION MEDIA CORP. TRANSACTION
TERM SHEET
TRANSACTION: A purchase of the preferred stock and subordinated
debt of UNICO, Inc. ("Unico") with preferred stock of Next
Generation Media Corp. ("NexGen") and cash followed by a
merger between United Marketing Solutions, Inc., formerly
known as United Coupon Corporation ("United"), a subsidiary of
Unico, and a newly formed subsidiary ("MergerCo") of NexGen,
in which MergerCo will be merged into United with United as
the surviving entity. NexGen will acquire 100% of the
securities in United making it a wholly-owned subsidiary of
NexGen.
PROPOSED TERMS
1. SERIES C PREFERRED STOCK AND SUBORDINATED DEBT
Unico's existing subordinated debt and Series C Preferred
stock holders will receive 250,000 shares of NexGen's newly issued Callable
Cumulative Convertible Preferred Stock, par value $0.01 per share ("NexGen
Preferred"). The shares will have a $5.00 per share preference on liquidation or
dissolution after corporation. In addition, NexGen will issue one common stock
purchase warrant for each 1.5 shares of NexGen Preferred with an exercise price
of $0.16 per share, valid for five years.(2/) The number of warrants issued by
NexGen in conjunction with the NexGen Preferred will be subject to adjustment
upon the completion of private place or initial public offerings of NexGen's
common stock following the acquisition of United (the "NexGen
Placement/Offering") based on the per share price of NexGen common stock in the
NexGen Placement/Offering.
The NexGen Preferred will be callable, in whole or in part, at
the sole option of NexGen at any time. Upon a call by NexGen, NexGen Preferred
shareholders will have twenty (20) days to elect to convert their NexGen
Preferred to NexGen common stock or be redeemed. If the NexGen Preferred is
called within the first six months after the closing(3/) it will have a
redemption price of $5.00 per share plus all accrued but unpaid dividends up
through the date ten days following the call date. If the NexGen Preferred is
called more than six months after the closing, the
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(2/) This results in the issuance of 166,667 stock purchase warrants to the
NexGen Preferred shareholders.
(3/) "Closing" means the closing of the merger transaction between MergerCo and
United.
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redemption price will be $6.00 per share plus all accrued but unpaid dividends
up through the date ten days following the call date. The NexGen Preferred will
pay a cumulative dividend of $.30 per share per annum for the first six months
and $.50 per share per annum thereafter. Dividends will accrue and not be
payable until eighteen months following the closing. Dividends will become
payable provided that the indebtedness to BancFirst is current, in accordance
with the restructuring agreement to be reached with BancFirst.
The NexGen Preferred will be redeemable, at the sole option of
the holder, five years from their date of issuance at a price of $6.00 per share
plus all accrued but unpaid dividends.
The holders of NexGen Preferred shares will vote on equal
terms with the holders of NexGen common shares with the exception that the
NexGen Preferred shareholders, as a class, will be entitled to elect one member
to the NexGen board of directors (the "NexGen Board"). Additionally, in the
event that the NexGen Preferred shares are not called for redemption, or
converted into commons stock within nine (9) months of the Closing, the holders
of the NexGen Preferred Shares, as a class, will be entitled to elect one
additional member to the NexGen Board and the independent director (hereinafter
defined) designated by the other directors shall be replaced in that event.
Approval by the NexGen Preferred shareholders, as a class, will be necessary for
certain extraordinary transactions, including a sale of substantially all of
NexGen's assets, a change in NexGen's primary line of business, incurrence of
more than $5 million of indebtedness and an acquisition of property out of the
ordinary course of business in excess of $5 million. NexGen shall enact a bylaw
restricting the number of NexGen Board seats to five, including the director
selected by the NexGen Preferred. Two of the current directors shall remain on
the NexGen Board. One director will be selected by Xx. Xxxxxx Xxxxxxx. The fifth
director shall be an independent director nominated by the other four directors.
The conversion price for NexGen Preferred will be affected by
whether or not NexGen has filed a preliminary Form S-1 (or other applicable
registration statement form for an initial public offering) with the Securities
and Exchange Commission for an offering of NexGen's common stock (an "IPO")
prior to the expiration of six months after the closing of the proposed
transaction.
NexGen Stock Sale Before Six Months
The NexGen Preferred will be convertible into NexGen common
stock, at the holder's option, beginning six months after the closing at a
conversion price which is the lesser of (a) $5.00 and (b) 110% of the price for
common stock issued in a private placement or initial public offering of NexGen
securities ("NexGen Stock Sale"). For example, if the NexGen Stock Sale
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occurs at $6.00 per share, the conversion price used will be $5.00 and the
250,000 shares of NexGen Preferred would be convertible into 250,000 shares of
NexGen common stock. If the NexGen Stock Sale occurs at $4.50 per share, the
conversion price would be $4.95 (110%), and the 250,000 shares of NexGen
Preferred would be convertible into approximately 252,525 shares of NexGen
common stock.(4/)
No NexGen Stock Sale Before Six Months
The NexGen Preferred will be convertible into NexGen common
stock at a conversion price which is the lesser of (a) $4.50 and (b) 110% of the
price for the stock, in the NexGen Stock Sale. For example, if the NexGen Stock
Sale occurs at $5.00 per share of NexGen Common, the conversion price used will
be $4.50 and the 250,000 shares of NexGen Preferred would be convertible into
approximately 300,000 shares of NexGen common stock. If the NexGen Stock Sale
occurs at $3.00 per share, the conversion price would be $3.30 (110%), and the
270,000 shares of NexGen Preferred would be convertible into approximately
409,091 shares of NexGen common stock.
2. COMMON STOCK
Unico will receive 200,000 shares of NexGen common stock in
exchange for all the stock of United. Alternatively, NexGen has agreed to pay
cash consideration equal to Unico for each Unico shareholder that affirmatively
elects, at the time of the Unico shareholder vote concerning the transactions
described herein, to receive a cash dividend from Unico in lieu of NexGen common
stock (the total number of such Unico common shares, the "electing shares"). In
the event that there are any electing shares, (1) the amount of NexGen common
stock paid to Unico will be reduced by the nearest whole number equal to 200,000
multiplied by a fraction, the numerator of which is the number of electing
shares and the denominator of which is the number of issued and outstanding
common shares of Unico and (2) NexGen will also pay Unico in cash $0.10
multiplied by the number of electing shares. The merger and exchange of common
stock will follow appropriate filings by Unico and NexGen with the Securities
Exchange Commission and a shareholder vote by the Unico common shareholders.
NexGen will vote its Unico Series C Preferred in favor of the transaction and
will agree to allow those shares to be retired by Unico for nominal
consideration. NexGen will also agree to allow the cancellation of the Unico
subordinated debt and associated warrants. NexGen will pay additional cash
consideration to the extent necessary to extinguish additional debt of
approximately $150,000 of Unico to the extent that creditors holding such debt
do not consent to the assignment of
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(4/) No fractional shares will be issued. Fractional shares of .5 and above will
be rounded up to the nearest whole share; fractional shares below .5 will be
rounded down.
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such debt to NexGen and release of Unico within ninety (90) days of closing.
3. NO OTHER SECURITIES
No other securities (i.e., outstanding warrants and options)
will be exchanged by NexGen.
4. MISCELLANEOUS
The acquisition of the Unico subordinated debt and Series C
Preferred shares and the common shares of United by NexGen is contingent upon a
satisfactory restructuring of Unico's debt to BancFirst. The balance of the
proceeds of the any IPO or private placement of NexGen common stock, not used to
redeem NexGen Preferred or to pay obligations of NexGen agreed to by its board
of directors after the merger transaction, will be used to provide a capital
infusion to United. So long as NexGen Preferred shares are outstanding, Xx. Xxxx
Xxxx will not be an officer or director of NexGen.
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