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