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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
April 5, 2000
Date of Report (date of Earliest Event Reported)
NATIONAL AUTO CREDIT, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-11601 34-1816760
(State or Other Jurisdiction of (Commission File No.) (I.R.S. Employer
Incorporation or Organization) Identification No.)
30000 AURORA ROAD, SOLON, OHIO 44139
(Address of principal executive offices and zip code)
(440) 349-1000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed from last report)
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ITEM 5. OTHER EVENTS
On April 10, 2000, a wholly-owned subsidiary of National Auto
Credit, Inc. ("NAC") purchased a 50% Membership Interest in the Angelika Film
Center, LLC ("AFC") from Reading Entertainment, Inc. ("Reading"). AFC is the
owner and operator of the Angelika Film Center, consisting of a multiplex cinema
and cafe complex, located in the Soho District of Manhattan in New York City.
The 50% Membership Interest was purchased for 8,999,900 shares of the Common
Stock of NAC and 100 shares of Series A Preferred Stock (representing 100% of
the Class of Series A Convertible Preferred Stock outstanding). As a result of
the transfer, AFC is now owned 50% by NAC, 33.33% by Reading and 16.67% by
Sutton Hill Associates. The Angelika will continue to be managed by the City
Cinemas Chain. The foregoing is merely a summary description of the acquisition
of a 50% Membership Interest in AFC by NAC. It is subject to the more complete
description set forth in the Purchase Agreement among National Auto Credit,
Inc., National Cinemas, Inc., FA, Inc. and Reading Entertainment, Inc. dated as
of April 5, 2000, attached hereto as Exhibit 10.1, and incorporated herein by
reference. Reference is also made to that certain Registration Rights Agreement
attached hereto as Exhibit 10.2, and incorporated herein by reference, pursuant
to which demand registration rights were granted to Reading.
The NAC Series A Convertible Preferred Stock is convertible into
shares of NAC Common Stock on a one for one basis, subject to traditional
antidilution adjustment; it votes share for share with the Common Stock as a
single class, provided that as a class the Series A Preferred must separately
approve any NAC charter or bylaw amendments; it has a liquidation value of $1.50
per share; and is entitled to a dividend preference equal to any dividends
declared on the NAC Common Stock (determined on a per share basis). The
foregoing is merely a summary description of the Series A Convertible Preferred
Stock. It is subject to the more complete description set forth in the
Certificate of Designation, Number, Powers, Preferences and Relative,
Participating, Optional and Other Special Rights and the Qualifications,
Limitations, Restrictions, and Other Distinguishing Characteristics of the
Series A Convertible Preferred Stock of National Auto Credit, Inc., attached
hereto as Exhibit 10.3, and incorporated herein by reference.
NAC also purchased from Reading two separate and independent
options to acquire additional cinema assets owned by Reading in the United
States. Under the first option, NAC has the right to acquire the remaining
33.33% Membership Interest in AFC owned by Reading in exchange for the issuance
of an additional 6 million shares of NAC Common Stock. To the extent authorized
but unissued shares of NAC Common Stock are not available for such purpose, NAC
has the right to substitute cash for such shares at the rate of $1.50 per share.
The option can be exercised for a period of 45 days, through and including
May 20, 2000. The remaining 16.67% interest would continue to be owned by Sutton
Hill Associates, and the Angelika would continue to be managed by the City
Cinemas Chain. The foregoing is merely a summary description of an option to
acquire the remaining 33.33% Membership Interest in AFC by NAC. It is subject
to the more complete description set forth in the Option Letter, attached hereto
as Exhibit 10.4, and incorporated herein by reference.
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Under the second option, which is independent of the first option,
NAC has the right to acquire the remainder of Reading's domestic cinema
exhibition assets for cash (including Reading's rights to acquire the City
Cinemas Chain of cinemas and related real estate in Manhattan), and, if NAC has
not previously exercised its option to acquire Reading's 33.33% interest in AFC
for stock, Reading's remaining interest in AFC. If NAC exercises this right, it
is required to give to Reading's affiliate, Citadel Holding Corporation, a right
to participate in such transaction on a 50/50 basis with NAC. The option can be
exercised for a period of 60 days, through and including June 5, 2000. NAC has
paid to Reading $500,000 in consideration of this option. NAC has the right to
extend the option for two 30 day periods by payment of an additional $100,000
for each such 30 day extension period. The purchase price would be based on a
value of $27,000,000 for Angelika and the lower of the historical cost or fair
value for the remainder of Reading's assets. The decision whether or not to
proceed with the exercise of either or both of such options rests with NAC and
not with Reading. The foregoing is merely a summary description of NAC's option
to acquire Reading's remaining domestic cinema exhibition assets. It is subject
to the more complete description set forth in the second of the two Option
Letters attached hereto as Exhibit 10.5, and incorporated herein by reference.
NAC's Board of Directors elected former NAC directors William S.
Marshall and John A. Gleason to fill the two vacancies on the Board of Directors
that resulted from the prior resignations of Allen D. Rice and Richard M. Cohen.
The Board of Directors is assessing its strategic business
alternatives and will announce the direction it intends to take in its business
when the Board has fully weighed the available alternatives and has reached a
decision.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
10.1 Purchase Agreement among National Auto Credit,
Inc., National Cinemas, Inc., FA, Inc. and Reading
Entertainment, Inc., dated as of April 5, 2000.
10.2 Registration Rights Agreement, dated as of
April 5, 2000.
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10.3 Certificate of Designation, Number, Powers,
Preferences and Relative, Participating, Optional
and Other Special Rights and the Qualifications,
Limitations, Restrictions, and Other
Distinguishing Characteristics of the Series A
Convertible Preferred Stock of National Auto
Credit, Inc., dated as of April 5, 2000.
10.4 Option Letter 1, dated as of April 5, 2000.
10.5 Option Letter 2, dated as of April 5, 2000.
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SIGNATURE
---------
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NATIONAL AUTO CREDIT, INC.
Date: April 20, 2000 By: /s/ David L. Huber
-------------- ------------------------------------
David L. Huber
Chairman
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EXHIBIT INDEX
-------------
Exhibit Page
------- -------
10.1 Purchase Agreement among National Auto 5
Credit, Inc., National Cinemas, Inc., FA, Inc.
and Reading Entertainment, Inc.,
dated as of April 5, 2000.
10.2 Registration Rights Agreement, dated as of 54
April 5, 2000.
10.3 Certificate of Designation, Number, 72
Powers, Preferences and Relative,
Participating, Optional and Other Special
Rights and the Qualifications,
Limitations, Restrictions, and Other
Distinguishing characteristics of the
Series A Convertible Preferred Stock of
National Auto Credit, Inc., dated as of
April 5, 2000.
10.4 Option Letter 1, dated as of April 5, 80
2000.
10.5 Option Letter 2, dated as of April 5, 85
2000.
5
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Exhibit 10.1
================================================================================
PURCHASE AGREEMENT
AMONG
NATIONAL AUTO CREDIT, INC.,
NATIONAL CINEMAS, INC.
FA, INC.
AND
READING ENTERTAINMENT, INC.
------------------------------
DATED AS OF APRIL 5, 2000
------------------------------
================================================================================
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TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I. DEFINITIONS............................................................................1
Section 1.1. Definitions...................................................................1
ARTICLE II. PURCHASE AND SALE......................................................................6
Section 2.1. Transfer of Shares............................................................6
Section 2.2. Closing.......................................................................6
Section 2.3. Purchase Price................................................................6
Section 2.4. Certain Indemnitees...........................................................7
Section 2.5. Newco.........................................................................7
Section 2.6. Option Letters................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PARENT............................7
Section 3.1. Organization..................................................................7
Section 3.2. Capitalization; Title to the Interests........................................8
Section 3.3. Subsidiaries and Investments..................................................8
Section 3.4. Authorization and Validity of Agreement.......................................8
Section 3.5. No Conflict or Violation......................................................8
Section 3.6. Consents and Approvals........................................................9
Section 3.7. Financial Statements..........................................................9
Section 3.8. Absence of Certain Changes or Events..........................................9
Section 3.9. Tax Matters..................................................................11
Section 3.10. Intentionally Omitted........................................................12
Section 3.11. Intellectual Property........................................................12
Section 3.12. Personal Property............................................................12
Section 3.13. Real Property................................................................12
Section 3.14. Licenses, Permits and Governmental Approvals.................................14
Section 3.15. Compliance with Law..........................................................14
Section 3.16. Contracts....................................................................14
Section 3.17. Intentionally Omitted........................................................15
Section 3.18. Litigation...................................................................15
Section 3.19. Insurance....................................................................16
Section 3.20. Employee Plans...............................................................16
Section 3.21. Labor Matters................................................................16
Section 3.22. Environmental Matters........................................................16
Section 3.23. Brokers and Finders..........................................................17
Section 3.24. Year 2000 Compliance.........................................................17
Section 3.25. Intentionally Omitted........................................................17
Section 3.26. Change in Ownership..........................................................17
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Section 3.27. Intentionally Omitted........................................................17
Section 3.28. Absence of Undisclosed Liabilities...........................................17
Section 3.29. Purchase for Investment......................................................18
Section 3.30. Restricted Securities........................................................18
Section 3.31. Due Diligence................................................................18
Section 3.32. Survival.....................................................................19
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO.................................19
Section 4.1. Corporate Organization.......................................................19
Section 4.2. Subsidiaries and Investments.................................................19
Section 4.3. Authorization and Validity of Agreement......................................20
Section 4.4. Capitalization...............................................................20
Section 4.5. No Conflict or Violation.....................................................21
Section 4.6. Consents and Approvals.......................................................21
Section 4.7. Financial Statements.........................................................21
Section 4.8. Absence of Certain Changes or Events.........................................21
Section 4.9. Tax Matters..................................................................22
Section 4.10. Real Property................................................................23
Section 4.11. Litigation...................................................................25
Section 4.12. Employee Plans...............................................................25
Section 4.13. Labor Matters................................................................28
Section 4.14. Environmental Matters........................................................28
Section 4.15. Purchase for Investment......................................................29
Section 4.16. Brokers and Finders..........................................................29
Section 4.17. Due Diligence................................................................29
Section 4.18. Survival.....................................................................29
ARTICLE V. COVENANTS OF THE PARTIES..............................................................30
Section 5.1. Consents and Approvals Required on Closing Date..............................30
Section 5.2. Further Assurances...........................................................30
Section 5.3. Best Efforts.................................................................30
Section 5.4. Nondisclosure................................................................30
Section 5.5. Tax Matters..................................................................30
Section 5.6. Cooperation on Tax Matters...................................................31
Section 5.7. Amendment to Management Agreement............................................31
Section 5.8. Amendment to Trademark License Agreement.....................................31
Section 5.9. Notification and Put Rights..................................................31
Section 5.10 Amendment to Certificate of Incorporation....................................32
Section 5.11 Board Representation.........................................................32
ARTICLE VI. INDEMNIFICATION.......................................................................32
Section 6.1. Indemnification by the Seller and the Parent.................................32
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Section 6.2. Procedures for Indemnification by the Seller and the Parent..................33
Section 6.3. Indemnification by the Buyer and Newco.......................................34
Section 6.4. Procedures for Indemnification by the Buyer and Newco........................35
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF THE SELLER AND THE PARENT................................36
Section 7.1. Representations and Warranties of the Buyer and Newco........................36
Section 7.2. Performance of the Obligations of the Buyer and Newco........................36
Section 7.3. Consents and Approvals.......................................................36
Section 7.4. No Violation of Orders.......................................................36
Section 7.5. Registration Rights Agreement................................................36
Section 7.6. Buyer Closing Documents......................................................36
Section 7.7. Legal Matters................................................................37
ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF THE BUYER AND NEWCO......................................37
Section 8.1. Representations and Warranties of the Seller and the Parent..................37
Section 8.2. Performance of the Obligations of the Seller and the Parent..................37
Section 8.3. Consents and Approvals.......................................................37
Section 8.4. No Violation of Orders.......................................................37
Section 8.5. Sellers Closing Documents....................................................38
Section 8.6. Legal Matters................................................................38
ARTICLE IX. TERMINATION...........................................................................38
Section 9.1. Conditions of Termination....................................................38
Section 9.2. Effect of Termination........................................................38
Section 9.3. Intentionally Omitted........................................................39
ARTICLE X. MISCELLANEOUS.........................................................................39
Section 10.1. Successors and Assigns.......................................................39
Section 10.2. Governing Law; Jurisdiction..................................................39
Section 10.3. Service of Process...........................................................39
Section 10.4. Expenses; Fees...............................................................39
Section 10.5. Severability.................................................................39
Section 10.6. Notices......................................................................39
Section 10.7. Amendments; Waivers..........................................................40
Section 10.8. Public Announcements.........................................................41
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Section 10.9. Entire Agreement.............................................................41
Section 10.10. Parties in Interest..........................................................41
Section 10.11. Scheduled Disclosures........................................................41
Section 10.12. Specific Performance.........................................................41
Section 10.13. Section and Paragraph Headings...............................................41
Section 10.14. Counterparts.................................................................41
</TABLE>
Exhibits
- --------
Exhibit A - Form of Amendment and Waiver
Exhibit B - Option Letters
Exhibit C - Company Financial Statements
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Form of Amendment to Trademark License Agreement
Exhibit F - Certificate of Designation, Number, Powers, Preferences and
Relative, Participating, Optional and Other Special Rights and the
Qualifications, Limitations, Restrictions, and Other
Distinguishing Characteristics of the Series A Convertible
Preferred Stock of National Auto Credit, Inc.
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of this 4th day of April, 2000, by and among National Auto Credit, Inc., a
Delaware corporation (the "Buyer"), National Cinemas, Inc. ("Newco"), FA, Inc.
(d/b/a FA of Delaware), a Delaware corporation (the "Seller"), and Reading
Entertainment, Inc., a Nevada corporation (the "Parent").
PRELIMINARY STATEMENT
WHEREAS, Angelika Film Centers LLC, a Delaware limited liability
company (the "Company"), owns and operates the Angelika Film Center, consisting
of a multiplex cinema and cafe complex, located at 18 W. Houston Street,
New York, New York, in the SOHO District of Manhattan;
WHEREAS, the Seller owns an 83.34% membership interest in the Company
which, together with the remaining 16.66% membership interest in the Company
owned by Sutton Hill Associates, a California general partnership ("SUTTON
HILL"), constitutes all of the outstanding membership interests in the Company
(the "INTERESTS"); and
WHEREAS, the Parent owns indirectly all of the issued and outstanding
shares of capital stock of the Seller and Buyer owns all of the issued and
outstanding capital stock of Newco; and
WHEREAS, the Buyer desires to enter into the motion picture exhibition
business in the United States and to purchase a 50% membership interest in the
Company from the Seller (the "PURCHASED INTERESTS"), and the Seller desires to
sell the Purchased Interests to the Buyer, on the Closing Date (as hereinafter
defined), upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINITIONS. As used in this Agreement (including the
recitals and Schedules hereto), the following terms shall have the following
meanings (such meanings to be applicable equally to both singular and plural
forms of the terms defined):
"AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of the power to direct or cause
the direction of management, policies or investments (whether through ownership
of securities or partnership or other ownership interests, by management or
advisory contract or otherwise) of such Person.
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"AGREEMENT" shall have the meaning set forth in the preamble hereto.
"AMENDED TRADEMARK LICENSE AGREEMENT" shall have the meaning set forth
in Section 5.9 hereof.
"AMENDMENT AND WAIVER" means the Amendment and Waiver to the Limited
Liability Company Agreement between the Seller and Sutton Hill to be entered
into among the Seller and Sutton Hill on or prior to the Closing Date in the
form attached hereto as Exhibit A.
"BENEFIT ARRANGEMENT" shall have the meaning set forth in Section 3.20
hereof.
"BUYER" shall have the meaning set forth in the preamble hereto.
"BUYER COMMON STOCK" means the Common Stock, par value $.05 per share,
of the Buyer.
"BUYER SERIES A PREFERRED STOCK" means the Series A Convertible
Preferred Stock, par value $.05 per share, of the Buyer, described on Exhibit F
hereto.
"BUYER EMPLOYEE PLANS" shall have the meaning set forth in Section 4.12
hereof.
"BUYER ERISA AFFILIATE" shall have the meaning set forth in Section
4.12 hereof.
"BUYER EVENTS OF BREACH" shall have the meaning set forth in Section
6.3 hereof.
"BUYER INDEMNITEES" shall have the meaning set forth in Section 6.1
hereof.
"BUYER LEASED PROPERTY" shall have the meaning set forth in Section
4.10(b) hereof.
"BUYER LEASES" shall have the meaning set forth in Section 4.10(b)
hereof.
"BUYER LOSSES" shall have the meaning set forth in Section 6.1 hereof.
"BUYER MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the business, operations, assets, properties or condition (financial or
otherwise) of the Buyer and its subsidiaries, taken as a whole.
"BUYER MULTIEMPLOYER PLAN" shall have the meaning set forth in Section
4.12(b) hereof.
"BUYER OWNED REAL PROPERTY" shall have the meaning set forth in Section
4.10(a) hereof.
"BUYER PENSION PLANS" shall have the meaning set forth in Section 4.12
hereof.
"BUYER PLANS" shall have the meaning set forth in Section 4.12 hereof.
"BUYER FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 4.7 hereof.
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"CERCLA" shall have the meaning set forth in Section 3.22(b) hereof.
"CERTIFICATE OF DESIGNATION" shall mean that Certificate of
Designation, Number, Powers, Preferences and Relative, Participating, Optional
and Other Special Rights and the Qualifications, Limitations, Restrictions, and
Other Distinguishing Characteristics of the Series A Convertible Preferred Stock
of National Auto Credit, Inc., the form of which is attached hereto as Exhibit
F.
"CLOSING" shall have the meaning set forth in Section 2.2 hereof.
"CLOSING DATE" shall have the meaning set forth in Section 2.2 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
all regulations promulgated thereunder, as in effect from time to time.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" shall have the meaning set forth in the preliminary statement
hereof.
"COMPANY BALANCE SHEET" shall have the meaning set forth in Section 3.7
hereof.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 3.7 hereof.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the business, operations, assets, properties or condition (financial or
otherwise) of the Company.
"COMPANY PERMITS" shall have the meaning set forth in Section 3.14
hereof.
"COMPANY UNAUDITED FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 3.7 hereof.
"CONTRACTS" shall have the meaning set forth in Section 3.16 hereof.
"EMPLOYEE PLANS" shall have the meaning set forth in Section 3.20(a)
hereof.
"EMPLOYMENT AND LABOR AGREEMENTS" shall have the meaning set forth in
Section 4.13(a) hereof.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in Section
3.22(a) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and all regulations promulgated thereunder, as in effect from time
to time.
"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date on which the document or calculation to
which it refers relates, applied on a consistent basis throughout the periods
covered thereby.
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"GOVERNMENT" shall mean any agency, division, subdivision, audit group
or procuring office of the Government of the United States, any state of the
United States or any foreign government, including the employees or agents
thereof.
"HAZARDOUS MATERIALS" shall have the meaning set forth in Section
3.22(c) hereof.
"INCOME TAX" or "INCOME TAXES" shall mean all Taxes based upon,
measured by, or calculated with respect to (i) gross or net income or gross or
net receipts or profits (including, but not limited to, any capital gains,
minimum taxes and any Taxes on items of tax preference, but not including sales,
use, goods and services, real or personal property transfer or other similar
Taxes), (ii) multiple bases (including, but not limited to, corporate franchise,
doing business or occupation Taxes) if one or more of the bases upon which such
Tax may be based upon, measured by, or calculated with respect to, is described
in clause (i) above or (iii) withholding taxes measured by, or calculated with
respect to, any payments or distributions (other than wages).
"INDEBTEDNESS" shall mean all loan and credit agreements, indentures,
debentures, promissory notes and other evidences of indebtedness, and all
guarantees related thereto, of the Company.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
3.11 hereof.
"INTERESTS" shall have the meaning set forth in the Preliminary
Statement hereof.
"LEASES" shall have the meaning set forth in Section 3.13(b) hereof.
"LEASED PROPERTY" shall have the meaning set forth in Section 3.13(b)
hereof.
"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien (statutory or other) or conditional sale agreement.
"MANAGEMENT AGREEMENT" shall mean the Management Agreement, dated as of
August 27, 1996, by and between the Company and City Cinemas Corporation, a New
York corporation.
"NEWCO" shall have the meaning set forth in the preamble hereto.
"NLRB" shall have the meaning set forth in Section 4.13(b) hereof.
"OPTION LETTERS" shall have the meaning set forth in Section 2.6
hereof.
"PARENT" shall have the meaning set forth in the preamble hereto.
"PBGC" shall have the meaning set forth in Section 4.12(e) hereof.
"PERMITS" shall mean licenses, permits, franchises, authorizations and
approvals issued or granted by the Government, any state or local government,
any foreign national or local
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government, or any department, agency, board, commission, bureau or
instrumentality of any of the foregoing.
"PERSON" shall mean and include any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, any other unincorporated organization or Government.
"PLANS" shall have the meaning set forth in Section 3.20(a) hereof.
"PROCEEDING" shall have the meaning set forth in Section 6.2 hereof.
"PURCHASED INTERESTS" shall have the meaning set forth in the
Preliminary Statement hereof.
"READING INVESTMENT" shall have the meaning set forth in Section 5.9
hereof.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
to be entered into among the Buyer and the Seller on the Closing Date in the
form attached hereto as Exhibit D.
"SEC REPORTS" means the registration statements, reports and proxy
statements filed with the Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLER EVENTS OF BREACH" shall have the meaning set forth in Section
6.1 hereof.
"SELLER INDEMNITEES" shall have the meaning set forth in Section 6.3
hereof.
"SELLER LOSSES" shall have the meaning set forth in Section 6.3 hereof.
"SELLER" shall have the meaning set forth in the preamble hereto.
"SHARE CONSIDERATION" shall have the meaning set forth in Section 2.3
hereof.
"SUTTON HILL" shall have the meaning set forth in the Preliminary
Statement hereof.
"TAXES" shall mean any and all federal, state, local, foreign and other
taxes, levies, fees, imposts, duties and charges of whatever kind (including any
interest, penalties or additions to the tax imposed in connection therewith or
with respect thereto), whether or not imposed on the Company, including, without
limitation, taxes imposed on, or measured by, income, franchise, profits or
gross receipts, and also ad valorem, value added, sales, use, service, real or
personal property, capital stock, license, payroll, withholding, employment,
social security, workers' compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premium, windfall profits,
transfer and gains taxes and customs duties.
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"TAX RETURNS" shall mean returns, reports, information statements and
other documentation (including any additional or supporting material) filed or
maintained, or required to be filed or maintained, in connection with the
calculation, determination, assessment or collection of any Tax and shall
include any amended returns required as a result of examination adjustments made
by the Internal Revenue Service or other Tax authority.
"TRANSACTION DOCUMENTS" shall mean this Agreement and the Exhibits and
Schedules hereto, the Registration Rights Agreement, the Option Letters, the
Amendment and Waiver, the Amended Trademark License Agreement and all other
agreements, instruments, certificates and other documents to be entered into or
delivered by any party in connection with the transactions contemplated to be
consummated pursuant to any of the foregoing.
ARTICLE II.
PURCHASE AND SALE
SECTION 2.1. TRANSFER OF INTERESTS. On the Closing Date and upon the
terms and subject to the conditions set forth in this Agreement, the Seller
shall sell, assign, transfer, convey and deliver the Purchased Interests, free
and clear of any liens, claims, charges, security interests or other legal or
equitable encumbrances, limitations or restrictions, to the Buyer, and the Buyer
shall purchase and accept the Purchased Interests from the Seller.
SECTION 2.2. CLOSING. The closing of the sale and purchase of the
Purchased Interests (the "Closing") shall take place on the 5th day of April,
2000, or at such other time and date as the parties hereto shall agree in
writing (the "CLOSING DATE"), at the offices of De Martino Finkelstein Rosen &
Virga, 1818 N Street, N.W., Suite 400, Washington, D.C. 20036, or at such other
place as the parties hereto shall agree. At the Closing, the Seller shall
deliver to the Buyer or its designees instruments of transfer reasonably
acceptable to the Buyer transferring the Purchased Interests, with all stamp or
other taxes attributable to the transfer of such Purchased Interests paid or
provided for as contemplated herein, and the Seller and the Parent shall execute
and deliver the Transaction Documents to which each of them is a party. In full
consideration and exchange for the Purchased Interests, the Buyer shall
thereupon pay to the Seller the purchase price as provided in Section 2.3
hereof, and the Buyer and Newco shall execute and deliver the Transaction
Documents to which each of them is a party.
SECTION 2.3. PURCHASE PRICE. Upon the terms and subject to the
conditions set forth in this Agreement, in reliance on the representations,
warranties, covenants and agreements of the parties contained herein, the
consideration for the sale and transfer of the Purchased Interests on the
Closing Date shall consist of (i) 8,999,900 shares of Buyer Common Stock (the
"COMMON SHARE CONSIDERATION") and (ii) 100 shares of Buyer Series A Preferred
Stock (the "PREFERRED SHARE CONSIDERATION"). The Buyer shall deliver to the
Seller the certificates representing the Common Share Consideration on the
Closing Date, and the Buyer shall deliver to the Seller the certificates
representing the Preferred Share Consideration promptly following the acceptance
for filing under the Delaware General Corporation Law of the Certificate of
Designation. In the event that the Certificate of Designation for the Buyer's
Series A Preferred Stock has not been filed with the appropriate Delaware
authorities at the Closing Date, the parties will nevertheless
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close the transaction, based upon Buyer's covenant to file such Certificate of
Designation and to issue the Buyer Series A Preferred Stock immediately
thereafter. In such case, stock certificates representing such Buyer Series A
Preferred Stock will be conditionally delivered to Seller at the Closing to be
effective immediately upon the filing of the Certificate of Designation. The
failure to file the Certificate of Designation within 48 hours of the Closing
will give to Seller the right, at its election, either (a) to rescind the
transactions provided for in this Agreement or (b) to surrender to Buyer the
Buyer Common Stock received and its rights to receive the Buyer Series A Common
Stock in exchange for cash in the amount of $13.5 million.
SECTION 2.4. CERTAIN INDEMNITEES. Reference is made to that certain
Guarantee dated August 28, 1996 by Parent in favor of Cable Building Associates,
pursuant to which Parent has guaranteed the obligations of the Company under the
lease between Cable Building Associates and the Company (the "Cable Guarantee").
Effective upon the Closing, NAC agrees to indemnify Parent for 50% of any
liability that Parent may incur under the Cable Guarantee other than any
liability resulting solely from the breach by Parent of its obligations under
the Cable Guarantee. Upon the request of Parent, NAC and Parent will cooperate
and work in good faith to separately document such indemnity, with the intention
that Parent and NAC be, in effect, each responsible for 50% of the obligations
of the guarantor under such guarantee.
SECTION 2.5. NEWCO. On the Closing Date, the Buyer shall transfer to
Newco the Purchased Interests. Seller hereby consents to the transfer of the
Purchased Interests to Newco. The parties acknowledge and agree that other than
Newco's obligations pursuant to this Agreement, ownership and management of the
Purchased Interests, ownership of any distributions received from the Company
and obligations pursuant to the operating agreement with respect to the Company,
Newco shall not incur any liabilities or obligations or conduct any business.
Buyer hereby covenants and agrees that it will not take, and will cause Newco
not to take, any action that would foreseeably cause Newco to be unable to
satisfy its obligations hereunder or would foreseeably render such obligations
unenforceable, including, without limitation, any action with respect to the
sale or other disposition by Newco of any of its assets, the declaration of
dividends by Newco, the repurchase, redemption or other acquisition by Newco of
any of its stock, the incurrence of indebtedness by Newco, the creation of any
liens or encumbrances by Newco on any of its assets, or the merger,
consolidation, liquidation or dissolution of Newco.
SECTION 2.6. OPTION LETTERS. The Buyer and the Parent acknowledge that
they are executing and delivering simultaneously with this Agreement the Option
Letters in the form set forth as Exhibits B-1 and B-2 hereto (the "OPTION
LETTERS").
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PARENT
The Seller and the Parent (jointly and severally) represent and warrant
to the Buyer as follows:
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SECTION 3.1. ORGANIZATION. The Company is a limited liability company
duly formed, validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority and all governmental
licenses, authorizations, permits, consents and approvals to own its properties
and assets and to conduct its businesses as now conducted and as proposed to be
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority will not, in the aggregate, have a
Company Material Adverse Effect. The Company is duly qualified to do business as
a foreign company and is in good standing in every jurisdiction where the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified would not have a Company Material Adverse Effect. The Company is
qualified to do business only in the State of New York. Copies of the Limited
Liability Company Agreement, the Management Agreement of the Company and other
formation documents of the Company, with all amendments thereto to the date
hereof, have been furnished by the Parent to the Buyer or its representatives,
and such copies are accurate and complete as of the date hereof.
SECTION 3.2. CAPITALIZATION; TITLE TO THE INTERESTS. The authorized and
outstanding capitalization of the Company is as set forth in SCHEDULE 3.2. All
of the Purchased Interests are issued and outstanding as of the date of this
Agreement and are owned of record and beneficially by the Seller as set forth in
SCHEDULE 3.2. The Purchased Interests have been duly authorized and validly
issued and no personal liability attaches to the ownership thereof. The
Purchased Interests represent 50% of the issued and outstanding Interests of the
Company. Except for this Agreement and as set forth on SCHEDULE 3.2, there are
no outstanding options, warrants, agreements, conversion rights, preemptive
rights or other rights to subscribe for, purchase or otherwise acquire the
Interests, any unissued or treasury shares of capital stock or interests of the
Company, any outstanding obligations of the Company to repurchase, redeem or
otherwise acquire outstanding Interests or any securities convertible into or
exchangeable for any shares of capital stock or interests of the Company. The
Seller owns beneficially and of record and has all of the ownership interests
in, all of the Purchased Interests, free and clear of any mortgage, pledge,
hypothecation, rights of others, claim, security interest, charge, encumbrance,
title defect, title retention agreement, voting trust agreement, interest,
option, lien, charge or similar restriction or limitation (including any
restriction on the right to vote, sell or otherwise dispose of the Purchased
Interests).
SECTION 3.3. SUBSIDIARIES AND INVESTMENTS. The Company does not,
directly or indirectly, own, of record or beneficially, any outstanding voting
securities or other equity interests in or control any corporation, limited
liability company, partnership, trust, joint venture or other entity.
SECTION 3.4. AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of the
Seller and the Parent has all requisite corporate or other authority to enter
into the Transaction Documents to which it is a party and to carry out its
obligations thereunder. The execution and delivery of the Transaction Documents
to which the Seller and Parent are parties by the Seller and the Parent and the
performance by the Seller and the Parent of their respective obligations
thereunder have been duly authorized by all necessary action on the part of the
Seller and the Parent, and no other
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proceedings on the part of the Seller and the Parent are necessary to authorize
such execution, delivery and performance. The Transaction Documents to which the
Seller and Parent are parties have been duly and validly executed and delivered
by each of the Seller and the Parent and constitute a valid and binding
obligation of each of the Seller and the Parent, enforceable against each of
them in accordance with their terms, except as may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws of general application
relating to or affecting creditors' rights generally and except for the
limitations imposed by general principles of equity.
SECTION 3.5. NO CONFLICT OR VIOLATION. Assuming the consents and
approvals listed on SCHEDULE 3.6 are obtained or waived, the execution, delivery
and performance by each of the Seller and the Parent of the Transaction
Documents to which it is a party (i) does not and will not violate or conflict
with the Limited Liability Company Agreement, Operating Agreement, Management
Agreement or any formation documents of the Company, (ii) does not and will not
violate any provision of law, or any order, judgment or decree of any court or
other governmental or regulatory authority binding on the Company, the Seller or
the Parent except which individually or in the aggregate would not have a
Company Material Adverse Effect, (iii) does not violate and will not result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any contract, lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Seller, the Parent or
the Company is a party or by which the Seller, the Parent or the Company is
bound or to which any of their respective properties or assets is subject,
except which in the aggregate would not have a Company Material Adverse Effect,
(iv) will not result in the creation or imposition of any Lien upon any of the
Purchased Interests, and (v) will not result in the cancellation, modification,
revocation or suspension of any of the licenses, franchises, Permits,
authorizations or approvals referred to on Schedule 3.14, except which in the
aggregate would not have a Company Material Adverse Effect.
SECTION 3.6. CONSENTS AND APPROVALS. Except as set forth on SCHEDULE
3.6, no consent, waiver, authorization or approval of, or declaration or filing
with, any governmental or regulatory authority, domestic or foreign, or other
Person is required in connection with the execution and delivery of the
Transaction Documents by the Seller and the Parent or the performance by the
Seller and the Parent of their respective obligations thereunder.
SECTION 3.7. FINANCIAL STATEMENTS. The Parent has heretofore furnished
to the Buyer copies of (i) the unaudited consolidated balance sheet of the
Company as of December 31, 1999 (the "COMPANY BALANCE SHEET"), together with the
related statements of operations, members' equity and cash flows for the twelve
month period then ended and the notes thereto, if any (the "COMPANY UNAUDITED
FINANCIAL STATEMENTS"); and (ii) the unaudited consolidated balance sheet of the
Company as of December 31, 1998, together with the related statement of
operations, members' equity and cash flows for the twelve month period then
ended and the notes thereto, if any and (iii) the audited consolidated balance
sheet of the Company as of the fiscal years ended January 1, 1998 and December
31, 1996, together with the related statements of operations, members' equity
and cash flows for the periods then ended and the notes thereto, if any, (the
financial statements listed in clause (i) (ii) and (iii) above being hereinafter
referred to as the "COMPANY FINANCIAL STATEMENTS"). Except as set forth therein,
the Company Financial
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Statements: (i) were prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby; (ii) present fairly in all
material respects the financial position, results of operations and cash flow of
the Company as of such dates and for the periods then ended, except for
customary audit adjustments which are not material to the financial position or
results of operations of the Company; and (iii) are in accordance with the books
of account and records of the Company. The Company Financial Statements are
attached hereto as Exhibit C.
SECTION 3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
contemplated by this Agreement, or as set forth in SCHEDULE 3.8, since December
31, 1999, the business of the Company has been conducted in the ordinary course
consistent with past practices and, other than any of the following actions
taken in the ordinary course of business, there has not been any:
(a) Event that has had or is reasonably likely to have a Company
Material Adverse Effect, and no factor or condition exists and no event has
occurred that would be likely to result in a Company Material Adverse Effect;
(b) Destruction of, damage to, or loss of, any material asset of
the Company (whether or not covered by insurance);
(c) Change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization methods, policies, or
rate) by the Company;
(d) Declaration or making of, or agreement to declare or make,
any payment of dividends or distribution of any asset of any kind whatsoever in
respect to any of the Company's interests, nor any purchase, redemption, or
other acquisition or agreement to purchase, redeem, or otherwise acquire, any of
such outstanding interests;
(e) Borrowing of, or agreement to borrow, any funds by the
Company, and the Company has not incurred or become subject to any material
obligation or liability (whether absolute, accrued, contingent or otherwise);
(f) Payment of any obligation or liability (absolute or
contingent), by the Company other than current liabilities reflected in or shown
on the Company Financial Statements and current liabilities incurred in the
ordinary course of business;
(g) Mortgage, pledge, or subjection to lien, charge, or other
encumbrance, of any of the assets, properties, or rights (tangible or
intangible) of the Company, except for mechanics lien and Liens for taxes, in
each case, not yet due and payable;
(h) Sale, transfer or disposal of any of the assets, properties,
or rights (tangible or intangible) of the Company;
(i) Agreement entered into granting any preferential rights to
purchase any of the assets, properties, or rights (tangible or intangible) of
the Company (including management and control thereof), or requiring the consent
of any party to the transfer and
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assignment of any such assets, properties, or rights (including management and
control thereof);
(j) Amendment, modification, or termination of any contract,
lease, license, promissory note, commitment, indenture, mortgage, deed of trust,
collective bargaining agreement, employee benefit plan, or any other agreement,
instrument, indebtedness, or obligation to which the Company is a party, or by
which it or any of its assets or properties are bound, except those agreements,
amendments, or terminations effected in the ordinary course of business
consistent with past practices;
(k) Capital expenditure by the Company exceeding $25,000, or
additions to property, plant and equipment used in the operations of the Company
other than ordinary repairs and maintenance;
(l) Citation received by the Company from any governmental entity
or agency for any violations of any act, law, rule, regulation, or code of any
governmental entity or agency, which citations in the aggregate would be
reasonably likely to result in a Company Material Adverse Effect;
(m) Claim against the Company for damages or alleged damages for
any actual or alleged negligence or other tort or breach of contract (whether or
not fully covered by insurance) except as would not have a Company Material
Adverse Effect; or
(n) Agreement by the Seller, the Parent or the Company to do any
of the things described in the preceding clauses.
SECTION 3.9. TAX MATTERS. Except as otherwise disclosed in SCHEDULE
3.9, (i) the Company has filed (or joined in the filing of) when due all Tax
Returns required by applicable law to be filed with respect to the Company and
all Taxes shown to be due on such Tax Returns have been paid; (ii) all such Tax
Returns were true, correct and complete in all material respects as of the time
of such filing; (iii) all Taxes relating to periods ending on or before the
Closing Date, owed by the Company (whether or not shown on any Tax Return) at
any time on or prior to the Closing Date, if required to have been paid, have
been paid (except for Taxes which are being contested in good faith); (iv) any
liability of the Company for Taxes not yet due and payable, or which are being
contested in good faith, has been provided for on the financial statements of
the Company in accordance with and to the extent required by GAAP; (v) there is
no action, suit, proceeding, investigation, audit or claim now pending against,
or with respect to, the Company in respect of any Tax or assessment, nor is any
claim for additional Tax or assessment asserted by any Tax authority; (vi) no
material claim has been made by any Tax authority in a jurisdiction where the
Company does not currently file a Tax Return that it is or may be subject to Tax
by such jurisdiction, nor to the Company's knowledge is any such assertion
threatened; (vii) there is no outstanding request for any extension of time
within which to pay any Taxes or file any Tax Returns; (viii) there has been no
waiver or extension of any applicable statute of limitations for the assessment
or collection of any Taxes of the Company; (ix) no property of the Company is
"tax-exempt use property" within the meaning of Section 168(h) of the Code; (x)
the Company is not a party to any lease made pursuant to former Section
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168(f)(8) of the Internal Revenue Code of 1954; (xi) the Company is currently
and for all periods since its formation has qualified as a "partnership" within
the meaning of Section 7701(a)(2) of the Code; (xii) the Company has a valid
election in effect under Section 754 of the Code or, at the request of Buyer,
will make a timely election under Section 754 of the Code with respect to the
Purchased Interests; (xiii) Seller is not a "foreign person" within the meaning
of Section 1445 of the Code; (xiv) the Company is not a party to any agreement,
whether written or unwritten, providing for the payment of Taxes, payment for
Tax losses, entitlements to refunds or similar Tax matters; and (xiv) the
Company has withheld and paid all material Taxes required to be withheld in
connection with any amounts paid or owing to any employee, creditor, independent
contractor or other third party.
SECTION 3.10. INTENTIONALLY OMITTED.
SECTION 3.11. INTELLECTUAL PROPERTY. SCHEDULE 3.11 sets forth a true
and complete list of all domestic and foreign trademarks, trademark
applications, patents, registered copyrights (except copyrighted software and
theatrical films and film trailers licensed to the Company in its ordinary
course of business) and patent applications owned by, registered in the name of
or licensed to or from the Company as of the date hereof. The Company owns or
possesses adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names or other intellectual property (collectively,
"INTELLECTUAL PROPERTY") necessary to carry on its business as presently
conducted. Except as set forth on SCHEDULE 3.11, the Company has not received
any notice of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or circumstances which
would render any Intellectual Property invalid or inadequate to protect the
interest of the Company, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
individually or in the aggregate, would result in a Company Material Adverse
Effect.
SECTION 3.12. PERSONAL PROPERTY. Except as set forth in SCHEDULE 3.12,
the Company owns and has good and marketable title, free and clear of all title
defects and objections, security interests, Liens, charges and encumbrances of
any nature whatsoever to each item of personal property owned or leased by the
Company and reflected on the Company Balance Sheet and all such property
acquired or leased since the date thereof, except for sales and dispositions in
the ordinary course of business since such date. The property owned, leased or
used by the Company is sufficient and adequate to carry on its business as
presently conducted and all items thereof are in good operating condition and
repair. Except as set forth in SCHEDULE 3.12, the Company holds good and
transferable leaseholds under valid and enforceable leases in all of the
personal property leased by it, and none of the property leased by the Company
is subject to any sublease, license or other agreement granting to any person
any right to use such personal property. Except as set forth in SCHEDULE 3.12,
the Company is not in breach of or default (and no event has occurred which,
with due notice or lapse of time or both, may constitute such a lapse or
default) of any provision of any of its personal property leases. Except as
disclosed in SCHEDULE 3.12, and except for the personal property of the Seller
located at 950 Third Avenue,
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New York, New York, the Company does not hold any personal property of the
Seller or any of their respective Affiliates or any other Person.
SECTION 3.13. REAL PROPERTY.
(a) The Company does not own any real property.
(b) SCHEDULE 3.13(b) contains a list of all leases and subleases,
together with any amendments thereto and any subordination, nondisturbance and
attornment agreements (the "LEASES"), with respect to all real property leased
by the Company (the "LEASED PROPERTY"). Each Lease is in full force and effect.
The Company has performed all material obligations required to be performed by
it to date under each of the Leases and neither the Company nor, to the best
knowledge of the Parent or the Seller, any other party thereto is (except as set
forth on SCHEDULE 3.13(b)) in material default under any of the Leases (and,
except as set forth on SCHEDULE 3.13(b), no event has occurred which, with due
notice or lapse of time or both, would constitute such a lapse or default).
Except as set forth on SCHEDULE 3.13(b), no amount due under the Leases remains
unpaid and no material controversy, claim, dispute or disagreement exists
between the parties to any of the Leases. The Company has delivered to the Buyer
a copy of each Lease, and all amendments thereto, listed in SCHEDULE 3.13(b),
except to the extent otherwise noted therein.
(c) To the knowledge of the Parent and the Seller, the covenants,
conditions, restrictions, encroachments, encumbrances, easements, rights of way,
licenses, grants, building or use restrictions, exceptions, reservations,
limitations or other impediments affecting the Leased Property do not and will
not, with respect to each Leased Property, materially impair the Company's
ability to use any such Leased Property in the operation of the Company's
business as presently conducted. There are no pending or, to the knowledge of
the Company, threatened condemnation or similar proceedings affecting the Leased
Property. The Company has access to public roads, streets or the like or valid
easements over private streets, roads or other private property for such ingress
to and egress from the Leased Property, except as would not materially impair
the Company's ability to use any such Leased Property in the operation of the
Company's business as presently conducted.
(d) All brokerage commissions and other compensation and fees
payable by reason of the Leases have been paid in full or are reflected in the
Company Financial Statements except for such commissions and other compensation
related to options or extensions in the Leases which are not yet exercised.
(e) No notices of violations have been received with respect to
the improvements on the Leased Property and the operations therein conducted,
including without limitation, health, fire, environmental, safety, zoning and
building laws, ordinances and administrative regulations, except as set forth on
SCHEDULE 3.13(e).
(f) There are no outstanding requirements or recommendations by
any insurance company which has issued to the Company a policy covering the
Leased Property, or
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by any board of fire underwriters or other body exercising similar functions,
requiring or recommending any repairs or work to be done on such property.
(g) All public utilities required for the operation of the Leased
Property, as it is currently operated, and necessary for the conduct of the
business of the Company, as it is presently conducted, are installed and
operating, and all installation and connection charges are paid in full.
(h) Except as set forth in SCHEDULE 3.13(b), the Leased Property
is not subject to any lease, sublease, license or other agreement granting to
any person any right to the use, occupancy or enjoyment of such property or any
portion thereof.
(i) The plumbing, electrical, heating, air conditioning,
elevator, ventilating and all other mechanical or structural systems for which
the Company is responsible under the Leases in the buildings or improvements
are, to the knowledge of the Company, in good working order and condition, and
the roof, basement and foundation walls of such buildings and improvements for
which the Company is responsible under said Leases are, to the knowledge of the
Company, in good condition and free of leaks and other material defects. All
such mechanical and structural systems and such roofs, basement and foundation
walls for which others are responsible under said Leases are, to the knowledge
of the Company, in good working order and condition and free of leaks and other
material defects.
SECTION 3.14. LICENSES, PERMITS AND GOVERNMENTAL APPROVALS. SCHEDULE
3.14 sets forth a true and complete list of all material Permits issued or
granted to the Company (the "COMPANY PERMITS"), and all pending applications
therefor. Such list contains a summary description of each such item and, where
applicable, specifies the date issued, granted or applied for, the expiration
date and the current status thereof. Except as set forth in Schedule 3.14, each
Company Permit has been duly obtained, is valid and in full force and effect,
and is not subject to any pending or threatened administrative or judicial
proceeding to revoke, cancel or declare such Company Permit invalid in any
respect. The Company Permits have never been suspended, revoked or otherwise
terminated, subject to any fine or penalty, or subject to judicial or
administrative review, for any reason other than the renewal or expiration
thereof nor has any application of any of the Company for any Company Permit
ever been denied. The Company Permits are sufficient and adequate in all
material respects to permit the continued lawful conduct of the Company's
business in the manner now conducted, and none of the operations of the Company
are being conducted in a manner that violates any of the terms or conditions
under which any Company Permit was granted, except for such Company Permits the
absence of which would not have a Company Material Adverse Effect or any
non-compliance which will not have a Company Material Adverse Effect. Except as
set forth in SCHEDULE 3.14, no such Company Permit will in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by the
Transaction Documents.
SECTION 3.15. COMPLIANCE WITH LAW. Except as set forth in Schedule 3.15
or as would not reasonably be expected to have a Company Material Adverse
Effect, the operations of the Company have been conducted in accordance with all
applicable laws, regulations, orders and
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other requirements of all courts and other governmental or regulatory
authorities having jurisdiction over the Company and its assets, properties and
operations. Except as set forth in SCHEDULE 3.15 or as would not reasonably be
expected to have a Company Material Adverse Effect, the Company has not received
notice of any violation of any such law, regulation, order or other legal
requirement binding on it, and the Company is not in default with respect to any
order, writ, judgment, award, injunction or decree of any federal, state or
local court or governmental or regulatory authority or arbitrator, domestic or
foreign, applicable to it or any of its assets, properties or operations. The
Company does not have knowledge of any proposed change in any such laws, rules
or regulations (other than laws of general applicability) that would materially
and adversely affect the transactions contemplated by the Transaction Documents
or all or a material part of the Company's business.
SECTION 3.16. CONTRACTS.
(a) SCHEDULE 3.16 sets forth (subject to the dollar amount
limitations of clause (i) below) a true and complete list of all material
contracts, agreements, instruments, commitments and other arrangements to which
the Company is a party or to which the Parent or the Seller is a party and which
otherwise relate to or affect in a material way any of the Company's assets,
properties or operations including, without limitation, all written or oral,
express or implied, (i) contracts, agreements and commitments for the purchase
or sale of products or services which involve a consideration in excess of
$25,000; (ii) contracts, loan agreements, letters of credit, repurchase
agreements, mortgages, security agreements, guarantees, pledge agreements, trust
indentures, promissory notes and other documents or arrangements relating to the
borrowing or lending of money or for lines of credit (including intercompany
Indebtedness); (iii) personal property leases, agreements relating to intangible
assets; (iv) agreements and other arrangements for the sale, pledge, transfer
of, or placing of a Lien on any Interests of the Company, any material assets,
property or rights or for the grant of any options or preferential rights to
purchase any assets, property or rights; (v) documents granting any power of
attorney with respect to the affairs of the Company; (vi) suretyship contracts,
performance bonds, working capital maintenance or other forms of guaranty
agreements; (vii) contracts or commitments limiting or restraining the Company
from engaging or competing in any lines of business or with any person, firm, or
corporation; (viii) partnership or joint venture agreements; (ix) shareholder or
membership agreements or agreements relating to the issuance of any securities
of the Company or the granting of any registrations rights with respect thereto;
and (x) all amendments, modifications, extensions or renewals of any of the
foregoing (the foregoing contracts, agreements and documents are hereinafter
referred to collectively as the "CONTRACTS" and individually as a "CONTRACT").
(b) Each Contract is valid, binding and enforceable against
the Company in accordance with its terms, and in full force and effect on the
date hereof. The Seller, the Parent and the Company have performed all material
obligations, including, but not limited to, the timely making of any rental or
other payments, required to be performed by it under, and is not in default or
in breach of in respect of, any Contract, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default. To the
Company's knowledge, no other party to any Contract is in default in respect
thereof, and no event has
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occurred which, with due notice or lapse of time or both, would constitute such
a default. The Parent has delivered to the Buyer or its representatives true and
complete originals or copies of all the Contracts.
SECTION 3.17. INTENTIONALLY OMITTED.
SECTION 3.18. LITIGATION. Except as set forth in SCHEDULE 3.18, there
are no claims, actions, suits, proceedings, labor disputes or investigations
pending or, to the knowledge of the Seller or the Parent, threatened, before any
federal, state or local court or governmental or regulatory authority, domestic
or foreign, or before any arbitrator of any nature, brought by or against any of
the Seller, Parent or, to their knowledge after due inquiry, the Company or any
of its respective officers, directors, employees, agents or Affiliates, except
as would not have a Company Material Adverse Effect. SCHEDULE 3.18 sets forth a
list and a summary description of all such pending actions, suits, proceedings,
disputes or investigations. None of the Seller, the Parent nor the Company is
subject to any order, writ, judgment, award, injunction or decree which of any
national, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, which would have a Company Material Adverse
Effect, or that would interfere with the transactions contemplated by the
Transaction Documents.
SECTION 3.19. INSURANCE. SCHEDULE 3.19 sets forth a complete and
accurate list of the insurance policies of the Company as in effect on the date
hereof, including in each case the applicable coverage limits, deductibles and
the policy expiration dates. No notice of any termination or threatened
termination of any of such policies has been received by the Company and such
policies are in full force and effect.
SECTION 3.20 EMPLOYEE PLANS.
The Company has no employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974) covering former and
current employees of the Company, or under which the Company has any obligation
or liability. SCHEDULE 3.20 lists all material plans, contracts, bonuses,
commissions, profit-sharing, savings, stock options, insurance, deferred
compensation, or other similar fringe or employee benefits covering former or
current employees of the Company or under which the Company has any obligation
or liability (each, a "BENEFIT ARRANGEMENT"), if any. The Benefit Arrangements
are and have been administered in substantial compliance with their terms and
with the requirements of applicable federal, state and local laws.
SECTION 3.21. LABOR MATTERS.
The Company is in material compliance with all laws, if applicable,
regarding employment, wages, hours, equal opportunity, collective bargaining and
payment of social security and other taxes. The Company is not engaged in any
unfair labor practice or discriminatory employment practice and no complaint of
any such practice against the Company has been filed or, to the best of the
Company's knowledge, threatened to be filed with or by the National Labor
Relations Board, the Equal Employment Opportunity Commission or any other
administrative agency, federal or state, that regulates labor or
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employment practices. The Company is in compliance with all applicable federal,
state and local laws and regulations regarding occupational safety and health
standards.
SECTION 3.22 ENVIRONMENTAL MATTERS. Notwithstanding anything to the
contrary contained in this Agreement and in addition to the other
representations and warranties contained herein:
(a) The Company and its operations are in material compliance
with all applicable laws, regulations and other requirements of governmental or
regulatory authorities or duties under the common law relating to Hazardous
Materials (as defined below) or to the protection of health, safety or the
environment (collectively, "ENVIRONMENTAL LAWS") and has obtained, maintained in
effect and complied in all material respects with all licenses, permits and
other authorizations or registrations required under Environmental Laws except
where such noncompliance or such failure to obtain, maintain in effect or comply
with such licenses, permits and other authorizations or registrations would not
give rise to a Material Adverse Effect.
(b) The Company has not performed any act which would reasonably
be expected to give rise to, and has not otherwise incurred, liability to any
person (governmental or not) under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. ("CERCLA"), or
any similar state or municipal law, except in either case where such liability
would not constitute a Material Adverse Effect. nor has the Company received
notice of any such liability or any claim therefor or submitted notice pursuant
to Section 103 of CERCLA to any governmental agency.
(c) To the knowledge of James A. Wunderle or Robert F. Smerling,
no asbestos, lead, petroleum, hazardous substance, hazardous waste, contaminant,
pollutant or toxic substance (as such terms may be defined in any Environmental
Law and collectively referred to herein as "HAZARDOUS MATERIALS") has been
released, placed, dumped or otherwise come to be located on, at, beneath or
near, and no storage tank containing any Hazardous Materials is located at, any
of the real property and/or improvements currently or formerly owned or leased
by the Company which could subject the Company to a claim or claims pursuant to
Environmental Laws.
SECTION 3.23. BROKERS AND FINDERS. None of the Seller, the Parent, the
Company or any of their respective officers, directors or employees has employed
any broker or finder and none of the Seller, the Parent, the Company or any of
their respective officers, directors or employees has incurred any liability for
any investment banking fees, brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
SECTION 3.24. YEAR 2000 COMPLIANCE. To the knowledge of the Seller and
the Parent after due inquiry, the software used by the Company will be year 2000
compliant, which, for purposes of this Agreement, shall mean that the data
outside the range 1900-1999 will be correctly processed.
SECTION 3.25. INTENTIONALLY OMITTED.
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SECTION 3.26. CHANGE IN OWNERSHIP. Neither the purchase of the Purchase
Interests by the Buyer nor the consummation of the transactions contemplated by
the Transaction Documents are reasonably likely to result in any material
adverse change in the business operations of the Company or in the loss of the
benefits of any servicing relationship.
SECTION 3.27. INTENTIONALLY OMITTED.
SECTION 3.28. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth
in SCHEDULE 3.28, the Company has no indebtedness or liability, absolute or
contingent, direct or indirect, which is not shown or provided for on the
balance sheets of the Company included in the Company Financial Statements other
than liabilities incurred or accrued in the ordinary course of business
(including liens of current taxes and assessments not in default) since December
31, 1999 and other than liabilities which GAAP does not require to be shown or
provided for and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such a liability.
Except as shown in such balance sheets or in the Company Financial Statements,
the Company is not, directly or indirectly, liable upon or with respect to (by
discount, repurchase agreements or otherwise), or obligated in any other way to
provide funds in respect of, or to guarantee or assume, any debt, obligation or
dividend of any person.
SECTION 3.29. PURCHASE FOR INVESTMENT. Each of the Seller and the
Parent is an accredited investor as defined under Rule 501(a) of the Securities
Act. The Share Consideration will be acquired for investment for the Seller's
own account and not with a view to the resale or distribution of any part
thereof, except in compliance with the registration provisions of the Securities
Act or an exemption therefrom.
SECTION 3.30. RESTRICTED SECURITIES. Each of the Seller and the Parent
understands that the Share Consideration is characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Buyer in a transaction not involving a public offering and
that under such laws and applicable regulations the Share Consideration may be
resold without registration under the Securities Act only in certain limited
circumstances.
Each of the Seller and the Parent further agrees that each certificate
representing the Share Consideration shall be stamped or otherwise imprinted
with a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SUCH
SECURITIES HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if the Seller shall have
delivered to the Buyer an opinion of counsel reasonably satisfactory to the
Buyer to the effect that the securities being sold may be publicly sold without
registration under the Securities Act. The foregoing shall not be deemed to
affect the obligations of the Buyer under the Registration Rights Agreement.
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SECTION 3.31. DUE DILIGENCE. Each of the Seller and the Parent has
sufficient knowledge and experience in investing in companies similar to the
Buyer and is capable of evaluating the merits and risks of its investment in the
Buyer as contemplated by this Agreement and is able to bear the economic risk of
such investment for an indefinite period of time. Each of the Seller and the
Parent has been given access to full and complete information regarding the
Buyer and has utilized such access to its satisfaction for the purpose of
obtaining information each of the Seller and the Parent desires or deems
relevant to its decision to acquire the Share Consideration. Each of the Seller
and the Parent has had the opportunity to ask questions of and receive answers
from management and representatives of the Buyer, including the Buyer's
accountants, to discuss the Buyer's business, management and financial affairs
and to obtain any additional information each of the Seller and the Parent
desires or deems relevant. Each of the Seller and the Parent has obtained, to
the extent it has deemed necessary, professional advice with respect to the
risks inherent in the acquisition of the Share Consideration, including, without
limitation, the matters relating to the Buyer's business and financial condition
set forth in the Buyer's internal reports and public filings.
SECTION 3.32. SURVIVAL. Except where a representation or warranty
expressly refers to another date, in which case such representation or warranty
need be true and correct only as of such date, each of the representations and
warranties set forth in this Section 3 shall be deemed represented and made by
the Seller and the Parent at the Closing as if made at such time and shall
survive the Closing for a period terminating on the later of (a) the date 6
months after the Closing Date, and (b) with respect to claims asserted pursuant
to Section 6.1 of this Agreement before the expiration of the applicable
representation or warranty, on the date such claim is finally liquidated or
otherwise resolved; PROVIDED, HOWEVER, that (x) the representations and
warranties in Sections 3.22 hereof shall survive until the third anniversary of
the Closing Date and (y) the representations and warranties in Sections 3.2 and
3.9 hereof shall survive until the applicable statute of limitations for third
party or governmental actions has expired.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO
The Buyer and Newco represent and warrant (jointly and severally) to
the Seller as follows:
SECTION 4.1. CORPORATE ORGANIZATION. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted, except
where the failure to be so organized, existing and in good standing or to have
such power or authority will not, in the aggregate, have a Buyer Material
Adverse Effect. The Buyer is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the character
of the properties owned or leased by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure to be so
qualified would not have a Buyer Material Adverse Effect. Newco is a corporation
duly organized, validly existing and in good standing under the laws of the
State of
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Delaware, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted.
SECTION 4.2. SUBSIDIARIES AND INVESTMENTS. Except as set forth in
SCHEDULE 4.2, the Buyer does not, directly or indirectly, own, of record or
beneficially, any outstanding voting securities or other equity interests in or
control any corporation, limited liability company, partnership, trust, joint
venture or other entity.
SECTION 4.3. AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of the Buyer
and Newco has all requisite power and authority to enter into the Transaction
Documents to which it is a party and to carry out its obligations thereunder.
The execution and delivery of the Transaction Documents to which Buyer and Newco
are parties and the performance of the Buyer's and Newco's obligations
thereunder have been duly authorized by all necessary corporate action by the
Buyer and Newco, respectively, and no other proceedings on the part of the Buyer
or Newco are necessary to authorize such execution, delivery and performance.
The Transaction Documents to which the Buyer and Newco are parties have been
duly executed by the Buyer and Newco, respectively, and constitute a valid and
binding obligation of each of them, enforceable against each of them in
accordance with their terms, except as may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws of general application relating to or
affecting creditors' rights generally and except for the limitations imposed by
general principles of equity. The Buyer has authorized the issuance and delivery
of the Share Consideration in accordance with this Agreement. For purposes of
Section 203 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Buyer, prior to the execution and delivery of this Agreement
by the Buyer, and as a condition to the parties' reaching agreement hereunder,
has approved the transactions that are the subject hereof as contemplated by
subsection (a)(1) of said Section 203.
SECTION 4.4. CAPITALIZATION. The authorized and outstanding capital
stock of the Buyer is as set forth in SCHEDULE 4.4. Upon issuance, sale and
delivery as contemplated by this Agreement, the shares which constitute the
Share Consideration will be duly authorized, validly issued, fully paid and
non-assessable shares of the Buyer, free of all preemptive or similar rights,
and entitled to the rights therein described. Except as set forth in SCHEDULE
4.4, there are no outstanding options, warrants, agreements, conversion rights,
preemptive or similar rights to subscribe for or purchase shares of capital
stock of the Buyer. The fair market value of the Buyer's net assets (calculated
net of all liabilities whether or not currently liquidated and whether currently
known or unknown, including, without limitation, all contingent liabilities
which may be asserted against the Buyer by a Person with respect to the actions
of the Buyer, its officers and/or directors during the time that Sam Frankino
was an officer and/or director of the Buyer, all current litigation claims, and
any liabilities, if any, which may result from the current audit of the Buyer by
the Internal Revenue Service) is not less than $1.65 per share. Notwithstanding
the provisions of Section 4.18 to the contrary, the representation and warranty
set forth in the penultimate sentence of this Section 4.4 shall be deemed
represented and made by the Buyer at the Closing as if made at such time and
shall survive the Closing for a period terminating on the earlier of (a) the
date that the Buyer files its Annual Report on Form 10-K for the fiscal year
ended January 31, 2001 with the Securities and Exchange Commission; or (b) April
1, 2001.
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SECTION 4.5. NO CONFLICT OR VIOLATION.
(a) Assuming the consents and approvals listed on Schedule 4.6
are obtained or waived, the execution, delivery and performance by the Buyer and
Newco of the Transaction Documents to which it is a party does not and will not
violate or conflict with any provision of the Certificate of Incorporation or
the By-laws of the Buyer or Newco and does not and will not violate any
provision of law, or any order, judgment or decree of any court or other
governmental or regulatory authority, nor violate nor will result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
contract, lease, loan agreement, mortgage, security agreement, trust indenture
or other agreement or instrument to which the Buyer or Newco is a party or by
which either of them is bound or to which any of the Buyer's or Newco's
properties or assets is subject, except for such violations, breaches or
defaults which, in the aggregate, will not have a Buyer Material Adverse Effect.
(b) Neither the transfer to Newco of the Purchased Interests and
cash as contemplated in Section 2.5 hereof, nor the payment by Newco to the
Seller of any amount required to be paid pursuant to Section 2.4(a) or (b)
hereof, will render the Buyer or Newco insolvent or be made with the intention
to hinder, delay or defraud creditors of either the Buyer or Newco, nor will any
such transfer or payment contravene any requirement under Delaware or other
applicable law that such payment be made only out of legally available funds.
SECTION 4.6. CONSENTS AND APPROVALS. Except as set forth in SCHEDULE
4.6, no consent, waiver, authorization or approval of, or declaration or filing
with, any governmental or regulatory authority, domestic or foreign, or other
Person is required in connection with the execution and delivery of the
Transaction Documents by the Buyer or Newco or the performance by the Buyer or
Newco of its obligations thereunder.
SECTION 4.7. FINANCIAL STATEMENTS. The Buyer has heretofore furnished
to the Seller copies of the audited consolidated balance sheets of the Company
as of: (i) January 31, 1999, 1998 and 1997, together with the related statements
of income, stockholders' equity and cash flows for the twelve month period then
ended and the notes thereto, if any, and (ii) the unaudited consolidated balance
sheet of the Company as of October 31, 1999, together with the related
statements of income, stockholders' equity and cash flows for the nine month
period then ended and the notes thereto, if any, (the "BUYER FINANCIAL
STATEMENTS"). Except as set forth therein, the Buyer Financial Statements,
including the notes thereto: (i) were prepared in accordance with GAAP; (ii)
present fairly in all material respects the consolidated financial position,
results of operations and changes in cash flows of the Buyer as of such dates
and for the periods then ended; and (iii) are in accordance with the books of
account and records of the Buyer.
SECTION 4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as contemplated by this Agreement or as set forth
in SCHEDULE 4.8, since October 31, 1999, there has not been:
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(i) Any material adverse change in the business, operations,
properties, assets, condition (financial or other) or prospects of the
Buyer, or any event that has had or is reasonably likely to have a
Buyer Material Adverse Effect, and no factor or condition exists and no
event has occurred that would be likely to result in any such change;
(ii) Any material loss, damage, destruction or other casualty
to its business (whether or not insurance awards have been received or
guaranteed); or
(iii) Any material change in any method of accounting or
accounting practice of the Buyer.
(b) Except as contemplated by the Transaction Documents or as
set forth in SCHEDULE 4.8, since October 31, 1999, the Buyer has not:
(i) Incurred any material obligation or liability
(whether absolute, accrued, contingent or otherwise) relating to
the operations of Buyer except in the ordinary course of business
consistent with past practice;
(ii) Sold or transferred any assets material to
its business or canceled any debts or claims or waived any
material rights relating to the operations of its business,
except in the ordinary course of business consistent with past
practice;
(iii) Defaulted on any of its material
obligations;
(iv) Entered into any material transaction, except
in the ordinary course of business consistent with past practice;
(v) Made any capital expenditure in excess of
$25,000, or additions to property, plant and equipment used in
the operations of its business other than ordinary repairs and
maintenance;
(vi) Entered into any agreement or made any
commitment to do any of the foregoing.
SECTION 4.9. TAX MATTERS. Except as otherwise disclosed in SCHEDULE
4.9, (i) the Buyer has filed (or joined in the filing of) when due all Tax
Returns required by applicable law to be filed with respect to the Buyer and all
Taxes shown to be due on such Tax Returns have been paid; (ii) all such Tax
Returns were true, correct and complete in all material respects as of the time
of such filing; (iii) all Taxes relating to periods ending on or before the
Closing Date owed by the Buyer (whether or not shown on any Tax Return) or to
which the Buyer may be liable under Treasury Regulations Section 1.1502-6 (or
analogous state or foreign provisions) by virtue of having been members of any
"affiliated group" (or other group filing on a combined or unitary basis) at any
time on or prior to the Closing Date, if required to have been paid, have been
paid (except for Taxes which are being contested in good faith); (iv) any
liability of the Buyer for Taxes not yet due and payable, or which are being
contested in good faith, has been provided for
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on the financial statements of the Buyer in accordance with and to the extent
required by GAAP; (v) there is no action, suit, proceeding, investigation, audit
or claim now pending against, or with respect to, the Buyer in respect of any
Tax or assessment, nor is any claim for additional Tax or assessment asserted by
any Tax authority; (vi) no material claim has been made by any Tax authority in
a jurisdiction where the Buyer does not currently file a Tax Return that it is
or may be subject to Tax by such jurisdiction, nor to the Buyer's knowledge is
any such assertion threatened; (vii) there is no outstanding request for any
extension of time within which to pay any Taxes or file any Tax Returns; (viii)
there has been no waiver or extension of any applicable statute of limitations
for the assessment or collection of any Taxes of the Buyer; (ix) no property of
the Buyer is "tax-exempt use property" within the meaning of Section 168(h) of
the Code; (x) the Buyer is not a party to any lease made pursuant to former
Section 168(f)(8) of the Internal Revenue Code of 1954; (xi) the Buyer has not
filed any agreement or consent under Section 341(f) of the Code; (xii) the Buyer
is not a "foreign person" within the meaning of Section 1445 of the Code; (xiii)
the Buyer is not a party to any agreement, whether written or unwritten,
providing for the payment of Taxes, payment for Tax losses, entitlements to
refunds or similar Tax matters; and (xiv) the Buyer has withheld and paid all
material Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party.
SECTION 4.10. REAL PROPERTY.
(a) SCHEDULE 4.10(a) lists all real property owned by the Buyer
or its subsidiaries (the "BUYER OWNED REAL PROPERTY"). Except as disclosed on
SCHEDULE 4.10(A), the Buyer or its subsidiaries have good and marketable title
in fee simple to the Buyer Owned Real Property free and clear of any Liens. All
buildings, plants and structures included on the Buyer Owned Real Property lie
wholly within the boundaries of the Buyer Owned Real Property and do not
encroach upon the property of, or otherwise conflict with the property rights
of, any other Person.
(b) SCHEDULE 4.10(b) contains a list of all leases and subleases,
together with any amendments thereto and any subordination, nondisturbance and
attornment agreements (the "BUYER LEASES"), with respect to all real property
leased by the Buyer or its subsidiaries (the "BUYER LEASED PROPERTY"). Each
Lease is in full force and effect. Each of the Buyer or its subsidiaries has
performed all material obligations required to be performed by it to date under
each of the Leases and neither the Buyer or its subsidiaries nor any other party
thereto is, except as set forth on SCHEDULE 4.10(b), in material default under
any of the Leases (and, except as set forth on SCHEDULE 4.10(b), no event has
occurred which, with due notice or lapse of time or both, would constitute such
a lapse or default). No amount due under the Leases remains unpaid and no
material controversy, claim, dispute or disagreement exists between the parties
to any of the Leases. The Buyer has delivered to the Seller a copy of each
Lease, and all amendments thereto, listed in SCHEDULE 4.10(b), except to the
extent otherwise noted therein.
(c) The covenants, conditions, restrictions, encroachments,
encumbrances, easements, rights of way, licenses, grants, building or use
restrictions, exceptions,
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reservations, limitations or other impediments affecting the Buyer Owned Real
Property or Buyer Leased Property do not and will not, with respect to each
Buyer Owned Real Property or Buyer Leased Property, materially impair the
Buyer's or its subsidiaries' ability to use any such Buyer Owned Real Property
or Buyer Leased Property in the operation of the Buyer's and its subsidiaries'
business as presently conducted. There are no pending or, to the knowledge of
the Buyer, threatened condemnation or similar proceedings affecting the Buyer
Owned Real Property. There are no pending or, to the knowledge of the Buyer,
threatened condemnation or similar proceedings affecting the Buyer Leased
Property. The Buyer and its subsidiaries have access to public roads, streets or
the like or valid easements over private streets, roads or other private
property for such ingress to and egress from the Buyer Owned Real Property and
the Buyer Leased Property, except as would not materially impair the Buyer's and
its subsidiaries' ability to use any such Buyer Owned Real Property or Buyer
Leased Property in the operation of the Buyer's and its subsidiaries' business
as presently conducted.
(d) All brokerage commissions and other compensation and fees
payable by reason of the Buyer Leases or the Buyer Owned Real Property have been
paid in full or are reflected in the Buyer Unaudited Financial Statements except
for such commissions and other compensation related to options or extensions in
the Buyer Leases which are not yet exercised.
(e) No notices of violations have been received with respect to
the improvements on the Buyer Owned Real Property and Buyer Leased Property and
the operations therein conducted, including without limitation, health, fire,
environmental, safety, zoning and building laws, ordinances and administrative
regulations, except as set forth on SCHEDULE 4.10(e).
(f) There are no outstanding requirements or recommendations by
any insurance company which has issued to the Buyer or its subsidiaries a policy
covering the Buyer Owned Real Property or Buyer Leased Property, or by any board
of fire underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on such property.
(g) All public utilities required for the operation of the Buyer
Owned Real Property and the Buyer Leased Property, as they are currently
operated, and necessary for the conduct of the business of the Buyer and its
subsidiaries, as it is presently conducted, are installed and operating, and all
installation and connection charges are paid in full.
(h) Except as set forth in SCHEDULE 4.10(b), the Buyer Owned Real
Property and the Buyer Leased Property are not subject to any lease, sublease,
license or other agreement granting to any person any right to the use,
occupancy or enjoyment of such property or any portion thereof.
(i) The plumbing, electrical, heating, air conditioning,
elevator, ventilating and all other mechanical or structural systems for which
the Buyer or its subsidiaries are responsible under the Buyer Leases in the
buildings or improvements are, to the knowledge of the Buyer, in good working
order and condition, and the roof, basement and foundation walls of such
buildings and improvements for which the Buyer or its subsidiaries are
responsible
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under said Buyer Leases, to the knowledge of the Buyer, are in good condition
and free of leaks and other material defects. All such mechanical and structural
systems and such roofs, basement and foundation walls for which others are
responsible under said Buyer Leases are, to the knowledge of the Buyer, in good
working order and condition and free of leaks and other material defects.
SECTION 4.11 LITIGATION. Except as set forth in the Buyer's public
filings or in SCHEDULE 4.11, there are no claims, actions, suits, proceedings,
labor disputes or investigations pending or, to the knowledge of Buyer,
threatened before any federal, state or local court or governmental or
regulatory authority, domestic or foreign, or before any arbitrator of any
nature, brought by or against Buyer, any of its officers, directors, employees,
agents or Affiliates, nor is any basis known to Buyer or its Affiliates for any
such action, suit, proceeding or investigation which would reasonably be
expected to have a Buyer Material Adverse Effect. The Buyer is not subject to
any order, writ, judgment, award, injunction or decree of any national, state or
local court or governmental or regulatory authority or arbitrator, domestic or
foreign, which would have a Buyer Material Adverse Effect, or that would or
might interfere with the transactions contemplated by the Transaction Documents.
SECTION 4.12. EMPLOYEE PLANS.
(a) SCHEDULE 4.12 sets forth: (i) all "employee benefit plans,"
as defined in Section 3(3) of ERISA, and all other employee benefit arrangements
or payroll practices, including, without limitation, any employment or
consulting agreements, any such arrangements or payroll practices providing
severance pay, sick leave, vacation pay, salary continuation for disability,
retirement benefits, deferred compensation, bonus pay, incentive pay, stock
options, hospitalization insurance, medical insurance, life insurance,
scholarships or tuition reimbursements, maintained by the Buyer or its
subsidiaries or to which the Buyer or its subsidiaries are obligated to
contribute thereunder for current or former employees, consultants and directors
of the Buyer or its subsidiaries (the "BUYER PLANS"), and (ii) all "employee
pension plans", as defined in Section 3(2) of ERISA, maintained by the Buyer or
its subsidiaries or any trade or business (whether or not incorporated) which is
or has ever been under control or treated as a single employer with the Buyer or
its subsidiaries under Section 414(b), (c), (m), or (o) of the Code ("BUYER
ERISA AFFILIATE") or to which the Buyer or its subsidiaries or any Buyer ERISA
Affiliate has contributed or has ever been obligated to contribute thereunder
(the "BUYER PENSION PLANS") (the Buyer Plans and Buyer Pension Plans are
hereafter collectively referred to as the "BUYER EMPLOYEE PLANS").
(b) None of the Buyer Employee Plans is a multiemployer plan, as
defined in Section 3(37) of ERISA ("BUYER MULTIEMPLOYER PLAN"), and neither the
Buyer or its subsidiaries nor any Buyer ERISA Affiliate has withdrawn in a
complete or partial withdrawal from any Buyer Multiemployer Plan, nor has any of
them incurred any liability due to the termination or reorganization of a Buyer
Multiemployer Plan.
(c) Each Buyer Employee Plan that is intended to qualify under
Section 401 of the Code has received a determination letter from the Internal
Revenue Service to the effect
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that it meets the requirements of Code Section 401(a) and the trust maintained
pursuant thereto is exempt from federal income taxation under Section 501 of the
Code, and nothing has occurred with respect to the operation of any such Buyer
Employee Plan that could cause the loss of such qualification or exemption or
the imposition of any liability, penalty or tax under ERISA or the Code.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) required to have been made under any of
the Buyer Employee Plans or by law (without regard to any waivers granted under
Section 412 of the Code) to any funds or trusts established thereunder or in
connection therewith have been made by the due date thereof (including any valid
extension), and all contributions for any period ending on or before the Closing
Date which are not yet due will have been paid or accrued on or prior to the
Closing Date. No accumulated funding deficiencies exist in any of the Buyer
Employee Plans subject to Section 412 of the Code.
(e) There is no "amount of unfunded benefit liabilities" within
the meaning of Section 4001(a)(18) of ERISA in any of the respective Buyer
Pension Plans which are subject to Title IV of ERISA. Each of the respective
Buyer Pension Plans are fully funded in accordance with the actuarial
assumptions used by the Pension Benefit Guaranty Corporation (the "PBGC") to
determine the level of funding required in the event of the termination of the
Buyer Pension Plans.
(f) None of the Buyer or its subsidiaries or any Buyer ERISA
Affiliate has terminated any Buyer Pension Plan subject to Title IV, or incurred
any outstanding liability under Section 4062 of ERISA to the PBGC or to a
trustee appointed under Section 4042 of ERISA. All premiums due the PBGC with
respect to the Buyer Pension Plans have been paid. None of the Buyer or its
subsidiaries or any Buyer ERISA Affiliate has engaged in any transaction
described in Section 4069 of ERISA.
(g) There has been no "reportable event" within the meaning of
Section 4043 of ERISA with respect to any Buyer Pension Plans subject to Title
IV of ERISA which would require the giving of notice or any other event
requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(h) There has been no material violation of ERISA or the Code
with respect to the filing of applicable reports, documents and notices
regarding the Buyer Employee Plans with the Secretary of Labor or the Secretary
of the Treasury or the furnishing of required reports, documents or notices to
the participants or beneficiaries of the Buyer Employee Plans.
(i) True, correct and complete copies of the following documents,
with respect to each of the Buyer Employee Plans, have been delivered to the
Seller by the Buyer: (i) all plans and related trust documents, and amendments
thereto; (ii) the most recent Forms 5500; (iii) the last IRS determination
letter; (iv) summary plan descriptions; (v) the most recent actuarial report
relating to the Buyer Employee Plans; and (vi) written descriptions of all
non-written agreements relating to the Buyer Employee Plans.
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(j) There are no pending actions, claims or lawsuits which have
been asserted or instituted against the Buyer Employee Plans, the assets of any
of the trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Buyer Employee Plans with respect to the operation
of such plans (other than routine benefit claims), nor do the Buyer or Newco
have knowledge of facts which could form the basis for any such claim or
lawsuit.
(k) All amendments and actions required to bring the Buyer
Employee Plans into conformity in all material respects with all of the
applicable provisions of ERISA, the Code and other applicable laws have been
made or taken except to the extent that such amendments or actions are not
required by law to be made or taken until a date after the Closing Date.
(l) Any bonding required with respect to the Buyer Employee Plans
in accordance with applicable provisions of ERISA has been obtained and is in
full force and effect.
(m) The Buyer Employee Plans have been maintained, in all
material respects, in accordance with their terms and with all provisions of
ERISA and the Code (including rules and regulations thereunder) and other
applicable federal and state laws and regulations, and none of the Buyer or its
subsidiaries or any "party in interest" or "disqualified Person" with respect to
the Buyer Employee Plans has engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA or 4975 of the Code. No fiduciary has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any Buyer
Employee Plan.
(n) None of the Buyer Employee Plans provide retiree life or
retiree health benefits except as may be required under Section 4980B of the
Code or Section 601 of ERISA and at the expense of the participant or the
participant's beneficiary. The Buyer and its subsidiaries and the Buyer ERISA
Affiliates have at all times complied with the notice and health care
continuation requirements of Section 4980B of the Code and Sections 601 through
608 of ERISA.
(o) Except as disclosed on SCHEDULE 4.12, no stock or other
security issued by the Seller, the Buyer or its subsidiaries or any of their
Affiliates forms or has formed part of the assets of any Buyer Employee Plan.
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SECTION 4.13. LABOR MATTERS.
(a) Except as set forth in SCHEDULE 4.13: (i) none of the Buyer
or its subsidiaries is a party to any outstanding employment, consulting or
management agreements or contracts with officers or employees that provide for
the payment of any bonus or commission; (ii) none of the Buyer or its
subsidiaries is party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Buyer or its subsidiaries
nor do the Seller, the Buyer or its subsidiaries know of any activities or
proceedings of any labor union to organize any such employees. The Buyer has
furnished to the Seller complete and correct copies of all such agreements
("EMPLOYMENT AND LABOR AGREEMENTS"). The Buyer and its subsidiaries have not
breached or otherwise failed to comply with any provisions of any Employment and
Labor Agreement, and are in full compliance with all terms of any collective
bargaining agreement and there are no grievances outstanding thereunder.
(b) The Buyer and its subsidiaries are in compliance with all
applicable laws relating to employment and employment practices, wages, hours,
and terms and conditions of employment and are not engaged in any unfair labor
practice; (ii) there is no unfair labor practice charge or complaint pending
before the National Labor Relations Board ("NLRB"); (iii) there is no labor
strike, material slowdown or material work stoppage or lockout actually pending
or threatened against or affecting the Buyer or its subsidiaries, and the Buyer
and its subsidiaries have not at any time experienced any strike, material slow
down or material work stoppage, lockout or other collective labor action by or
with respect to employees of the Buyer or its subsidiaries; (iv) there is no
representation claim or petition pending before the NLRB or any similar foreign
agency and no question concerning representation exists relating to the
employees of the Buyer or its subsidiaries; (v) there are no charges with
respect to or relating to the Buyer or its subsidiaries pending before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices; and (vi) the
Buyer and its subsidiaries have no formal notice from any federal, state, local
or foreign agency responsible for the enforcement of labor or employment laws of
an intention to conduct an investigation of the Buyer or its subsidiaries and no
such investigation is in progress.
SECTION 4.14. ENVIRONMENTAL MATTERS. Notwithstanding anything to the
contrary contained in this Agreement and in addition to the other
representations and warranties contained herein:
(a) The Buyer and its subsidiaries and their operations are in
compliance with all applicable Environmental Laws and have obtained, maintained
in effect and complied with all licenses, permits and other authorizations or
registrations required under Environmental Laws.
(b) The Buyer and its subsidiaries have not performed or suffered
any act which could give rise to, or have otherwise incurred, liability to any
person (governmental or not) under CERCLA or any similar state or municipal law,
nor has the Buyer or its
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subsidiaries received notice of any such liability or any claim therefor or
submitted notice pursuant to Section 103 of CERCLA to any governmental agency.
(c) No Hazardous Materials have been released, placed, dumped or
otherwise come to be located on, at, beneath or near, and no storage tank
containing any Hazardous Materials is located at, any of the real property
and/or improvements currently or, to the knowledge of the Buyer, formerly owned
or leased by the Company which could subject the Buyer to a claim or claims
pursuant to Environmental Laws.
SECTION 4.15. PURCHASE FOR INVESTMENT. Each of the Buyer and Newco is
an accredited investor as defined under Rule 501(a) of the Securities Act. The
Purchased Interest will be acquired for investment for Buyer's own account and
not with a view to the resale or distribution of any part thereof, except in
compliance with the registration provisions of the Securities Act or an
exemption therefrom.
SECTION 4.16. BROKERS AND FINDERS. None of the Buyer or its
subsidiaries or any of their respective officers, directors or employees has
employed any broker or finder, except for Slusser Associates, Inc., and none of
the Buyer or its subsidiaries or any of their respective officers, directors or
employees has incurred any liability for any investment banking fees, brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement other than fees payable to Slusser Associates,
Inc.
SECTION 4.17. DUE DILIGENCE. Each of the Buyer and Newco has sufficient
knowledge and experience in investing in companies similar to the Company and is
capable of evaluating the merits and risks of its investment in the Company as
contemplated by this Agreement and is able to bear the economic risk of such
investment for an indefinite period of time. Each of the Buyer and Newco has
been given access to full and complete information regarding the Company and has
utilized such access to its satisfaction for the purpose of obtaining
information each of the Buyer and Newco desires or deems relevant to its
decision to acquire the Purchased Interests. Each of the Buyer and Newco has had
the opportunity to ask questions of and receive answers from management and
representatives of the Company to discuss the Company's business, management and
financial affairs and to obtain any additional information each of the Buyer and
Newco desires or deems relevant. Each of the Buyer and Newco has obtained, to
the extent it has deemed necessary, professional advice with respect to the
risks inherent in the acquisition of the Purchased Interests, including, without
limitation, the matters relating to the Company's business and financial
condition.
SECTION 4.18. SURVIVAL. Except where a representation or warranty
expressly refers to another date, in which case such representation or warranty
need be true and correct only as of such date, each of the representations and
warranties set forth in this Section 4 shall be deemed represented and made by
the Buyer at the Closing as if made at such time and shall survive the Closing
for a period terminating on the later of (a) date 6 months after the Closing
Date, and (b) with respect to claims asserted pursuant to Section 6.2 of this
Agreement before the expiration of the applicable representation or warranty, on
the date such claim is finally liquidated or otherwise resolved; PROVIDED,
HOWEVER, that (x) the representations and warranties in Sections 4.14 hereof
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shall survive until the third anniversary of the Closing Date and (y) the
representations and warranties in Sections 4.4 and 4.9 hereof shall survive
until the applicable statute of limitations for third party or governmental
actions has expired.
ARTICLE V.
COVENANTS OF THE PARTIES
The Parties hereto covenant as follows (all covenants of the Seller and
the Parent being joint and several obligations and all covenants of the Buyer
and Newco being joint and several obligations):
SECTION 5.1. CONSENTS AND APPROVALS REQUIRED ON CLOSING DATE. Each of
the parties hereto has or will have on or prior to the Closing Date, at its cost
and expense, obtained all necessary consents, waivers, authorizations and
approvals of all governmental and regulatory authorities, domestic and foreign,
and of all other Persons required on the Closing Date in connection with the
execution, delivery and performance by it of the Transaction Documents.
SECTION 5.2. FURTHER ASSURANCES. Upon the request of another party at
any time after the Closing Date, the Buyer, Newco, the Seller and the Parent
shall forthwith execute and deliver such further instruments of assignment,
transfer, conveyance, endorsement, direction or authorization and other
documents as the requesting party or its counsel may request to perfect title of
the Buyer and its successors and assigns to the Purchased Interests and to
perfect title of the Seller in and to the Share Consideration or otherwise to
effectuate the purposes of the Transaction Documents.
SECTION 5.3. BEST EFFORTS. Upon the terms and subject to the conditions
of this Agreement, each party shall use its reasonable best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby and in the Transaction Documents.
SECTION 5.4. NONDISCLOSURE. Except as required under applicable law,
from and after the Closing Date, no party shall use, divulge, furnish or make
accessible to anyone any proprietary, material non-public, confidential or
secret information to the extent relating to the Buyer or its subsidiaries, in
the case of the Seller and the Parent, or relating to the Seller and the Parent,
in the case of the Buyer and Newco (in each case including, without limitation,
customer lists, supplier lists and pricing and marketing arrangements with
customers or suppliers), and each of the parties shall cooperate reasonably with
the others in preserving such proprietary, confidential or secret aspects of the
parties.
SECTION 5.5. TAX MATTERS. All transfer, documentary, sales, use, stamp,
registration, value added and other such taxes and fees (including any penalties
and interest) incurred in connection with this Agreement shall be borne and paid
equally by the Parent and the Seller, on the one hand, and the Buyer and Newco,
on the other hand, when due, and the Seller will file all necessary tax returns
and other documentation with respect to all such taxes and fees, and, if
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required by applicable law, the Buyer will, and will cause its affiliates to,
join in the execution of any such tax returns and other documentation.
SECTION 5.6. COOPERATION ON TAX MATTERS. The Buyer and the Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the preparation and filing of any tax return, statement,
report or form (including any report required pursuant to Section 6043 of the
Code and all Treasury Regulations promulgated thereunder), any audit, litigation
or other proceeding with respect to taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Seller and the Buyer agree (i) to retain, and to cause the
Company to retain, all books and records with respect to tax matters pertinent
to the Company relating to any pre-closing tax period, and to abide by all
record retention agreements entered into with any taxing authority and (ii) to
give the other party reasonable written notice prior to destroying or discarding
any such books and records and, if the party so requests, the Buyer or the
Seller, as the case may be, shall allow the other party to take possession of
such books and records.
SECTION 5.7. AMENDMENT TO MANAGEMENT AGREEMENT. The Parent shall use
its best efforts to cause the Company and City Cinemas Corporation to amend the
Management Agreement so that it provides the Buyer with the same rights as the
Parent pursuant to Section 3.2(b) thereof, and in any event, the Parent shall
deliver to the Buyer the financial statements referenced in such Section
promptly following receipt thereof.
SECTION 5.8. AMENDMENT TO TRADEMARK LICENSE AGREEMENT. The Parent shall
cause its affiliate Reading Investment Company, Inc. ("READING INVESTMENT") and
the Company to execute an amended Angelika-SOHO Trademark License Agreement
dated as of April 15, 1997 by and between Reading Investment (as amended, the
"AMENDED TRADEMARK LICENSE AGREEMENT") in the form attached hereto as Exhibit E.
SECTION 5.9. NOTIFICATION AND PUT RIGHTS.
(a) Buyer covenants and agrees that it shall provide written
notice to Parent at least thirty (30) days prior to the date on which any of the
following is proposed to occur: (i) the issuance of shares of Common Stock or of
any class or series of Preferred Stock (in one or a series of related
transactions) representing more than fifteen percent (15%) of the number or
voting power of the shares of Common Stock or Buyer Preferred Stock, as the case
may be, outstanding immediately prior to such issuance, or (ii) the making of an
investment or series of related investments involving aggregate payments by
Buyer of $10 million or more (calculated on a consolidated basis);
(b) Parent shall notify Buyer within thirty (30) days after the
date of the notice in paragraph (a) above whether it agrees with the proposed
issuance or investment described in such notice. If (x) Parent objects to any
such proposed transaction and (y) Buyer notifies Parent
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that Buyer will nonetheless proceed with the proposed transaction, Parent shall
have the option, exercisable within fifteen (15) days after the date of such
written notice, to cause Buyer to repurchase, out of funds legally available
therefor, all of the Common Share Consideration and the Preferred Share
Consideration, for an aggregate purchase price equal to (aa) $13.5 million plus
(bb) interest at a per annum rate of ten percent (10%) calculated on a daily
basis through the date of such repurchase, which repurchase shall be consummated
no later than thirty (30) days after the date of the notice of exercise of the
option provided herein; and
(c) The rights of Parent to receive notice and to require the
Buyer to repurchase the Common Share Consideration and the Preferred Share
Consideration shall expire on the date that is thirty (30) days following the
date on which Buyer files with the Securities and Exchange Commission its Annual
Report on Form 10-K for the fiscal year ended January 30, 2001, provided that
the parties shall be obligated to consummate any repurchase for which Parent has
provided notice of exercise of the repurchase option provided in Section 5.9(b)
prior to such expiration date.
SECTION 5.10. AMENDMENT TO CERTIFICATE OF INCORPORATION. Buyer hereby
covenants, subject to the fiduciary duty of the Board of Directors of Buyer, to
present to the stockholders of Buyer, at Buyer's next annual or special meeting
of stockholders, a proposed amendment to Buyer's restated Certificate of
Incorporation to eliminate Article SIXTH thereof, and shall use their best
efforts to solicit proxies in favor of such amendment.
SECTION 5.11. BOARD REPRESENTATION. Parent will be entitled to have a
representative attend all meetings of the Board of Directors of the Buyer, and
of any meetings of any executive or other similar committee of the Board of
Directors as may be formed from time to time. Buyer will give Parent
substantially the same notice of any such meeting as Parent provides to its
directors, so as to allow such representative to attend such meetings in person,
and provide to such representative copies of any materials provided to directors
from time to time, whether or not in connection with any particular Board or
executive committee meeting, contemporaneously with the delivery of such
materials to such directors. Notwithstanding the above, it is acknowledged and
agreed that such representative will not be entitled to attend any portions of
any such meeting where specific advice is being given by legal counsel to the
directors and where the presence of such representative would result in a waiver
of any otherwise applicable attorney-client communication privilege.
ARTICLE VI.
INDEMNIFICATION
SECTION 6.1. INDEMNIFICATION BY THE SELLER AND THE PARENT.
Notwithstanding the Closing and except to the extent that the Buyer or Newco has
any knowledge or information with respect to such matter on or prior to the
Closing Date, the Seller and the Parent, jointly and severally, shall indemnify
and fully defend, save and hold the Buyer, Newco, and their directors, officers
and employees (the "BUYER INDEMNITEES"), harmless if any Buyer Indemnitee shall
at
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any time or from time to time suffer any damage, liability, loss, cost, expense
(including all reasonable attorneys' fees and expenses of investigation incurred
by the Buyer Indemnitees in any action or proceeding between the Seller or the
Parent and the Buyer Indemnitees or between the Buyer Indemnitees and any third
party or otherwise), deficiency, interest, penalty, impositions, assessments or
fines (collectively, "BUYER LOSSES") arising out of or resulting from, or shall
pay or become obliged to pay any sum on account of, any and all the Seller
Events of Breach. As used herein, "SELLER EVENTS OF BREACH" shall be and mean
any one or more of the following:
(a) any untruth or inaccuracy in any representation of
the Seller or the Parent or the breach of any warranty of the Seller or the
Parent contained in the Transaction Documents written notice of which has been
given to the Seller and the Parent prior to the expiration of any survival
period applicable thereto;
(b)......any failure of the Seller or the Parent duly to
perform or observe any term, provision, covenant, agreement contained in the
Transaction Documents on the part of such Person to be performed or observed,
provided, however, that, except for Buyer Losses incurred by the Buyer
Indemnitees in connection with the inaccuracy of any representation or the
breach of any warranty of the Seller or the Parent relating to Taxes, the
representations and warranties contained in Section 3.2 or actual fraud by the
Seller or the Parent, the Seller and the Parent shall not have any obligation to
make any payment under Section 6.1(a) hereof with respect to any representation
or warranty unless (i) the Buyer Indemnitees have suffered Buyer Losses by
reason of any particular representation or warranty, together with all other
particular claims arising from the same facts and circumstances, in excess of
$50,000 and (ii) until all Buyer Indemnitees have suffered Buyer Losses (other
than Buyer Losses below the $50,000 threshold referred to in clause (i) above)
by reason of all such claims that exceed $500,000, it being understood that once
such amount is exceeded, the aggregate of all such claims in excess of $500,000
shall be payable by the Seller and Parent on demand by the Buyer.
SECTION 6.2. PROCEDURES FOR INDEMNIFICATION BY THE SELLER AND THE
PARENT. If a Seller's Event of Breach occurs or is alleged and a Buyer
Indemnitee asserts that the Seller or the Parent has become obligated to such
Buyer Indemnitee pursuant to Section 6.1 hereof, or if any suit, action,
investigation, claim or proceeding (a "PROCEEDING") is begun, made or instituted
by a third party as a result of which the Seller or the Parent may become
obligated to a Buyer Indemnitee hereunder, such Buyer Indemnitee shall give
written notice to the Seller and the Parent. The Seller and the Parent, jointly
and severally, agree to defend, contest or otherwise protect the Buyer
Indemnitee against any Proceeding at their sole cost and expense. The Buyer
Indemnitee shall have the right, but not the obligation, to participate at its
own expense in the defense thereof by counsel of the Buyer Indemnitee's choice
and shall in any event cooperate with and assist the Seller and the Parent to
the extent reasonably possible. If the Seller and the Parent fail timely to
defend, contest or otherwise protect against such Proceeding, the Buyer
Indemnitee shall have the right to do so, including, without limitation, the
right to make any compromise or settlement thereof, and the Buyer Indemnitee
shall be entitled to
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recover the entire cost thereof from the Seller or the Parent, including,
without limitation, reasonable attorneys'
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fees, disbursements and amounts paid as the result of such Proceeding, as such
costs are incurred, and the Seller and the Parent shall be bound by any
determination made in such Proceeding or any compromise or settlement effected
by the Buyer. If the Buyer Indemnitee shall have reasonably concluded upon
advice from counsel that there may be a conflict of interest between the Buyer
Indemnitee and the Seller or the Parent, the Buyer Indemnitee shall have the
right to defend, contest or otherwise protect against such Proceeding, PROVIDED
that if the Buyer Indemnitee shall compromise or settle such claims without
consent of Seller and Parent, such compromise or settlement shall not bind
Seller or Parent. If the Seller or the Parent assumes the defense of any
Proceeding, (a) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification, (b) no compromise or settlement of such claims may
be effected by the Seller or the Parent without the Buyer Indemnitee's consent
unless (i) there is no finding or admission of any violation of federal, state,
local, municipal, foreign, international, multinational or other administrative
order, law, ordinance, principal of common law, regulation, statute or treaty or
any violation of the rights of any Person and no effect on any other claims that
may be made against the Buyer Indemnitee and (ii) the sole relief provided is
monetary damages that are paid in full by the Seller or the Parent; and (c) the
Buyer Indemnitee will have no liability with respect to any compromise or
settlement of such claims effected without its consent.
SECTION 6.3. INDEMNIFICATION BY THE BUYER AND NEWCO. Notwithstanding
the Closing, and, with respect to paragraph (a) only, except to the extent that
the Seller or the Parent has any knowledge or information with respect to such
matter on or prior to the Closing Date (it being agreed that the Seller
Indemnitees are entitled to indemnification under this Section 6.3 regardless of
their knowledge of facts giving rise to any litigation referred to in paragraph
(b) hereof or of their knowledge for purposes of the representation and warranty
set forth in the penultimate sentence of Section 4.4 of any liabilities or
claims against the Buyer or any of its Affiliates), the Buyer and Newco shall,
jointly and severally, indemnify and agree to fully defend, save and hold the
Seller, the Parent, or any Affiliate of the Seller or of the Parent and their
directors, officers and employees (the "SELLER INDEMNITEES"), harmless if any
Seller Indemnitee shall at any time or from time to time suffer any damage,
liability, loss, cost, expense (including all reasonable attorneys' fees and
expenses of investigation incurred by the Seller Indemnitees in any action or
proceeding between the Buyer or Newco and the Seller Indemnitees or between the
Seller Indemnitees and any third party or otherwise), deficiency, interest,
penalty, impositions, assessments or fines (collectively, "SELLER LOSSES")
arising out of or resulting from, or shall pay or become obligated to pay any
sum on account of, any and all the Buyer Events of Breach. As used herein,
"BUYER EVENTS OF BREACH" shall be and mean any one or more of the following:
(a) any untruth or inaccuracy in any representation of the Buyer
or Newco or the breach of any warranty of the Buyer or Newco contained in the
Transaction Documents written notice of which has been given to the Buyer and
Newco prior to the expiration of any survival period applicable thereto;
(b) any Proceeding is brought by any stockholder of the Buyer,
either directly or derivatively, challenging any of the transactions
contemplated herein or in any other
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Transaction Document or asserting any liability on the part of Parent, any of
its affiliates or any of the respective officers or directors;
(c) any failure of the Buyer or Newco duly to perform or observe
any term, provision, covenant, agreement or condition contained herein or in the
Transaction Documents on the part of the Buyer or Newco to be performed or
observed;
provided, however, that, except for Seller Losses incurred by the Seller
Indemnitees in connection with the inaccuracy of any representations or the
breach of any warranty of the Buyer or Newco relating to Taxes, the
representations and warranties contained in Section 5.4 hereof or actual fraud
by the Buyer or Newco, the Buyer and Newco shall have no obligation to make any
payment under Section 6.3(a) hereof with respect to any representation or
warranty unless (i) the Seller Indemnitees have suffered Seller Losses by reason
of any particular representation or warranty, together with all other particular
claims arising from the same facts and circumstances, in excess of $50,000 and
(ii) until all Seller Indemnitees have suffered Seller Losses (other than Seller
Losses below the $50,000 threshold referred to in clause (i) above) by reason of
all such claims that exceed $500,000, it being understood that once such amount
is exceeded, the aggregate of all such claims in excess of $500,000 shall be
payable by the Buyer and Newco on demand by the Seller.
SECTION 6.4.......PROCEDURES FOR INDEMNIFICATION BY THE BUYER AND
NEWCO. If a Buyer Event of Breach occurs or is alleged and a Seller Indemnitee
asserts that the Buyer or Newco has become obligated to such Seller Indemnitee
pursuant to Section 6.3 hereof, or if any Proceeding is begun, made or
instituted by a third party as a result of which the Buyer or Newco may become
obligated to a Seller Indemnitee hereunder, such Seller Indemnitee shall give
written notice to the Buyer and Newco. The Buyer and Newco, jointly and
severally, agree to defend, contest or otherwise protect the Seller Indemnitee
against any Proceeding at their sole cost and expense. The Seller Indemnitee
shall have the right, but not the obligation, to participate at its own expense
in the defense thereof by counsel of the Seller Indemnitee's choice and shall in
any event cooperate with and assist the Buyer and Newco to the extent reasonably
possible. If the Buyer or Newco fail timely to defend, contest or otherwise
protect against such Proceeding, the Seller Indemnitee shall have the right to
do so, including, without limitation, the right to make any compromise or
settlement thereof, and the Seller Indemnitee shall be entitled to recover the
entire cost thereof from the Buyer or Newco, including, without limitation,
reasonable attorneys' fees, disbursements and amounts paid as the result of such
Proceeding, as such costs are incurred, and the Buyer or Newco shall be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the Seller. If the Seller Indemnitee shall have reasonably concluded
upon advice from counsel that there may be a conflict of interest between the
Seller Indemnitee and the Buyer or Newco, the Seller Indemnitee shall have the
right to defend, contest or otherwise protect against such Proceeding, PROVIDED
that if the Seller Indemnitee shall compromise or settle such claims without
consent of Buyer and Newco, such compromise or settlement shall not bind the
Buyer or Newco. If the Buyer or Newco assumes the defense of any Proceeding, (a)
it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification, (b) no compromise or settlement of such claims may be effected
by the Buyer or
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Newco without the Seller Indemnitee's consent unless (i) there is no finding or
admission of any violation of federal, state, local, municipal, foreign,
international, multinational or other administrative order, law, ordinance,
principal of common law, regulation, statute or treaty or any violation of the
rights of any Person and no effect on any other claims that may be made against
the Seller Indemnitee and (ii) the sole relief provided is monetary damages that
are paid in full by the Buyer or Newco; and (c) the Seller Indemnitee will have
no liability with respect to any compromise or settlement of such claims
effected without its consent. Notwithstanding the above, in the event of any
claim for indemnity under clause 6.3(b) the Seller Indemnitees will be entitled
to retain their own counsel and Buyer will promptly reimburse such Seller
Indemnitees for the reasonable costs and disbursements of such separate counsel.
ARTICLE VII.
CONDITIONS TO OBLIGATIONS OF THE SELLER AND THE PARENT
The obligations of the Seller and the Parent to consummate the
transactions contemplated by the Transaction Documents are subject to the
fulfillment, at or before the Closing Date of the following conditions, any one
or more of which may be waived by the Parent and the Seller in their sole
discretion:
SECTION 7.1. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND NEWCO. All
representations and warranties made by the Buyer and Newco in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
as if again made by the Buyer and Newco on and as of such date, except for any
warranties made with reference to a specific date, which shall be true and
correct as of such specific date.
SECTION 7.2. PERFORMANCE OF THE OBLIGATIONS OF THE BUYER AND NEWCO. The
Buyer and Newco shall have performed in all material respects all obligations
required under this Agreement to be performed by them on or before the Closing
Date.
SECTION 7.3. CONSENTS AND APPROVALS. All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, and of any Person, other than the Seller, the Parent or
their respective subsidiaries or affiliates, required on the Closing Date in
connection with the execution, delivery and performance of the Transaction
Documents shall have been duly obtained and shall be in full force and effect on
the Closing Date.
SECTION 7.4. NO VIOLATION OF ORDERS. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares any of
the Transaction Documents invalid or unenforceable in any respect or which
prevents the consummation of the transactions contemplated hereby shall be in
effect on the Closing Date.
SECTION 7.5. REGISTRATION RIGHTS AGREEMENT. On the Closing Date, the
Buyer and the Seller shall enter into the Registration Rights Agreement in the
form attached hereto as Exhibit D for the registration of the Buyer Common Stock
included in the Share Consideration.
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<PAGE> 43
SECTION 7.6. BUYER CLOSING DOCUMENTS. The Buyer shall have delivered to
the Seller or cause Newco to deliver to the Seller the following documents on
the Closing Date:
(a) the certificates representing the Share Consideration;
(b) a certificate dated the Closing Date of the Secretary of
State of the jurisdiction of incorporation of the Buyer as to its good standing
in such jurisdiction;
(c) the Transaction Documents; and
(d) such other documents, including legal opinions, or
certificates relating to the transactions contemplated by the Transaction
Documents as the Seller reasonably requests.
SECTION 7.7. LEGAL MATTERS. All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of the
Buyer and Newco under the provisions of the Transaction Documents, and all other
actions and proceedings required to be taken by or on behalf of the Buyer and
Newco in furtherance of the transactions contemplated hereby and thereby, shall
be reasonably satisfactory in form and substance to counsel for the Seller.
ARTICLE VIII.
CONDITIONS TO OBLIGATIONS OF THE BUYER AND NEWCO
The obligations of the Buyer to consummate the transactions
contemplated by the Transaction Documents are subject to the fulfillment, at or
before the Closing Date of the following conditions, any one or more of which
may be waived by the Buyer in its sole discretion:
SECTION 8.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
PARENT. All representations and warranties made by the Seller and the Parent in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date as if again made by the Seller and the Parent on and as of such
date, except for any warranties made with reference to a specific date, which
shall be true and correct as of such specific date.
SECTION 8.2. PERFORMANCE OF THE OBLIGATIONS OF THE SELLER AND THE
PARENT. The Seller and the Parent shall have performed in all material respects
all obligations required under this Agreement to be performed by them on or
before the Closing Date and the Buyer shall have received a certificate dated
the Closing Date signed by the duly authorized representatives of the Seller and
the Parent to that effect.
SECTION 8.3. CONSENTS AND APPROVALS. All consents, waivers,
authorizations and approvals of any governmental or regulatory authority,
domestic or foreign, and of any Person, other than the Buyer, Newco or their
respective subsidiaries or affiliates, in connection with the execution,
delivery and performance of the Transaction Documents shall have been duly
obtained and shall be in full force and effect on the Closing Date, subject to
the proviso in Section 8.4 hereof.
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<PAGE> 44
SECTION 8.4. NO VIOLATION OF ORDERS. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any government or
governmental or regulatory authority, domestic or foreign, that declares any of
the Transaction Documents invalid or unenforceable in any respect or which
prevents the consummation of the transactions contemplated hereby shall be in
effect on the Closing Date; PROVIDED that if Buyer or Newco fail to consummate
the transactions contemplated by the Transaction Documents because of a failure
of the conditions specified in Sections 8.3 and 8.4 based solely upon the entry
by the Delaware Court of Chancery in the Chancery Court Litigation or another
court in related litigation of an injunction or other order barring the Closing,
then the parties agree that their contractual rights under this agreement are
not affected.
SECTION 8.5. SELLER CLOSING DOCUMENTS. The Seller shall have delivered
to the Buyer or caused the Parent to deliver to the Buyer the following
documents on the Closing Date:
(a) instruments of transfer duly transferring all the Purchased
Interests on the Closing Date with appropriate transfer stamps, if any, affixed
thereto;
(b) a certificate dated the Closing Date of the Secretary of
State of the State of Delaware as to its good standing in such jurisdiction;
(c) copies of the consents, waivers and approvals specified on
SCHEDULE 3.6;
(d) the Transaction Documents; and
(e) such other documents, including legal opinions, or
certificates relating to the transactions contemplated by the Transaction
Documents as the Buyer reasonably requests.
SECTION 8.6. LEGAL MATTERS. All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of the
Seller and the Parent under the provisions of the Transaction Documents, and all
other actions and proceedings required to be taken by or on behalf of the Seller
and the Parent in furtherance of the transactions contemplated hereby and
thereby, shall be reasonably satisfactory in form and substance to counsel for
the Buyer.
ARTICLE IX.
TERMINATION
SECTION 9.1. CONDITIONS OF TERMINATION. Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated at any time before
the Closing (a) by mutual consent of the Seller and the Buyer, (b) by the Seller
if the conditions set forth in Section 8 hereof are not satisfied or waived by
the Closing Date, (c) by the Buyer if the conditions set forth in Section 9
hereof are not satisfied or waived by the Closing Date or (d) by any party
hereto that is not in breach of its material obligations hereunder if the
Closing shall not have occurred on or prior to April 30, 2000, PROVIDED that the
Buyer and Newco shall not have a right to terminate
39
<PAGE> 45
this Agreement pursuant to clause (d) if they are prohibited from closing
because of a preliminary or permanent injunction binding on them.
SECTION 9.2. EFFECT OF TERMINATION. In the event of termination
pursuant to Section 9.1 hereof, this Agreement shall become null and void and
have no effect, with no liability on the part of the Seller, the Company or the
Buyer, or their respective directors, officers, agents or stockholders, with
respect to this Agreement, except for the (i) liability of a party for expenses
pursuant to Section 11.3 hereof, (ii) liability for any breach of this Agreement
and (iii) Buyer and Newco's indemnification obligations under Section 6.3(b).
SECTION 9.3. INTENTIONALLY OMITTED.
ARTICLE X.
MISCELLANEOUS
SECTION 10.1. SUCCESSORS AND ASSIGNS. Except as otherwise provided in
this Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect, provided that the Buyer may assign its
rights to a wholly-owned SUBSIDIARY. This Agreement shall inure to the benefit
of and shall be binding upon the successors and permitted assigns of the parties
hereto.
SECTION 10.2. GOVERNING LAW; JURISDICTION. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof. The parties hereto irrevocably elect as the sole judicial forum
for the adjudication of any matters arising under or in connection with this
Agreement, and consent to the jurisdiction of, the courts of the State of New
York.
SECTION 10.3. SERVICE OF PROCESS. The parties hereto acknowledge and
agree that under this Agreement process may be served, in the case of the Buyer
and Newco, by delivery to CT Corporation, 111 8th Avenue, New York, New York,
10011, in the case of the Seller, the Parent and the Company, by delivery to
Duane, Morris & Heckscher LLP, 380 Lexington Avenue, New York, New York 10168,
Attn: Michael H. Margulis, Esq. or to such other address or to the attention of
such other person in New York City as the parties may provide by notice by given
in accordance with Section 10.6 hereof.
SECTION 10.4. EXPENSES; FEES. Except as otherwise provided herein, each
of the parties hereto shall pay its own expenses in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, any legal and accounting fees, whether or not the transactions
contemplated hereby are consummated.
SECTION 10.5. SEVERABILITY. In the event that any part of this
Agreement is declared by any court or other judicial or administrative body to
be null, void or unenforceable, said provision shall survive to the extent it is
not so declared, and all of the other provisions of this Agreement shall remain
in full force and effect.
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<PAGE> 46
SECTION 10.6. NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission,
(iii) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service maintained by the U.S. Postal Service or (iv) on the
fifth day after mailing, if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid and properly
addressed, to the party as follows:
If to the Seller:
Reading Entertainment, Inc.
One Penn Square West
30 South Fifteenth Street, Suite 1300
Philadelphia, Pennsylvania 19102-4813
Attention: James J. Cotter, Chairman
Facsimile: (215) 569-2862
Copy to:
Potter Anderson & Corroon LLP
Hercules Plaza
1313 N. Market Street
Wilmington, Delaware 19801
Attention: John F. Grossbauer, Esq.
Facsimile: (302) 984-1192
If to the Buyer:
National Auto Credit, Inc.
30000 Aurora Road
Solon, Ohio 44139
Attention: David L. Huber, Chairman of the Board
Facsimile: (440) 349-0442
Copy to:
National Auto Credit, Inc.
30000 Aurora Road
Solon, Ohio 44139
Attention: Raymond A. Varcho, Esq., Vice President,
Secretary and General Counsel
Facsimile: (440) 349-3959
Any party may change its address for the purpose of this Section by
giving the other party written notice of its new address in the manner set forth
above.
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<PAGE> 47
SECTION 10.7. AMENDMENTS; WAIVERS. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
SECTION 10.8. PUBLIC ANNOUNCEMENTS. The parties agree that after the
signing of this Agreement, neither party shall make any press release or public
announcement concerning the transactions contemplated by the Transaction
Documents without the prior written approval of the other parties unless the
disclosing party is advised by counsel that a press release or public
announcement is required by law. If any such announcement or other disclosure is
required by law, the disclosing party agrees to give the nondisclosing parties
prior notice and an opportunity to comment on the proposed disclosure.
SECTION 10.9. ENTIRE AGREEMENT. The Transaction Documents contain the
entire understanding between the parties hereto with respect to the transactions
contemplated hereby and thereby and supersedes and replaces all prior and
contemporaneous agreements and understandings, oral or written, with regard to
such transactions. All schedules hereto and any documents and instruments
delivered pursuant to any provision hereof are expressly made a part of this
Agreement as fully as though completely set forth herein.
SECTION 10.10. PARTIES IN INTEREST. Except for the rights granted to
the Buyer Indemnitees and the Seller Indemnitees in Article VI hereof, nothing
in this Agreement is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the Seller, the Parent, the
Company, the Buyer and Newco and their respective successors and permitted
assigns. Nothing in this Agreement is intended to relieve or discharge the
obligations or liability of any third persons to the Seller, the Parent, the
Company, the Buyer or Newco. No provision of this Agreement shall give any third
persons any right of subrogation or action over or against the Seller, the
Parent, the Company, the Buyer or Newco.
SECTION 10.11. SCHEDULED DISCLOSURES. Disclosure of any matter, fact or
circumstance in a Schedule to this Agreement shall not be deemed to be
disclosure thereof for purposes of any other Schedule hereto.
SECTION 10.12. PECIFIC PERFORMANCE. The parties recognize that the
Purchased Interests and the Company's principal asset, the Angelika Film Center,
are unique and not capable of duplication. Accordingly, without limited or
waiving any rights or remedies the parties may have under this Agreement now or
hereinafter existing at law or in equity or by statute, each of the parties
hereto shall be entitled to seek specific performance by the other of the
obligations to be performed by the other in accordance with the provisions of
this Agreement.
SECTION 10.13. SECTION AND PARAGRAPH HEADINGS. The section and
paragraph headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
SECTION 10.14. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
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<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
April __, 2000.
SELLER:
FA, INC.
By: ____________________________
Name:
Title:
PARENT:
READING ENTERTAINMENT, INC.
By: ___________________________
Name:
Title:
BUYER:
NATIONAL AUTO CREDIT, INC.
By: ___________________________
Name:
Title:
NEWCO:
NATIONAL CINEMAS, INC.
By: ___________________________
Name:
Title:
43
<PAGE> 1
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of April 5, 2000, between FA,
Inc. d/b/a FA of Delaware (the "INVESTOR") and National Auto Credit, Inc., a
Delaware corporation (the "COMPANY").
RECITALS
--------
WHEREAS, the Investor, an indirect wholly owned subsidiary of Reading
Entertainment, Inc., a Delaware corporation (the "PARENT"), has received or will
receive shares (the "SHARES") of Common Stock, par value $0.05 per share, of the
Company (the "COMMON STOCK"), in the amount and subject to the conditions set
forth in the Purchase Agreement, dated as of April 5, 2000, among, the Investor,
the Parent and the Company (the "PURCHASE AGREEMENT");
WHEREAS, the Company has agreed to grant the Investor certain
registration rights with respect to the Shares; and
WHEREAS, the Company and the Investor desire to define the registration
rights of the Investor on the terms and subject to the conditions herein set
forth.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms have the respective
meanings set forth below:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"HOLDER" shall mean any holder of Registrable Securities.
"INITIATING HOLDER" shall mean any Holder or Holders of Registrable
Securities aggregating at least 25% of the aggregate number of shares of Common
Stock held by all Holders.
"PERSON" shall mean an individual, partnership, joint-stock company,
corporation, limited liability company, trust or unincorporated organization,
and a government or agency or political subdivision thereof.
<PAGE> 2
"REGISTER," "REGISTERED" and "REGISTRATION" shall mean a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement.
"REGISTRABLE SECURITIES" shall mean the Shares and any additional
shares of Common Stock of the Company issued as a dividend or other distribution
with respect to, or in exchange for or in replacement of, the Shares, until, in
the case of any such securities, (i) a registration statement covering such
securities has been declared effective by the Commission and such securities
have been disposed of pursuant to such effective Registration Statement or (ii)
such securities have been disposed of in open market transactions pursuant to
Rule 144 under the Securities Act (or similar rule then in effect).
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in compliance with Sections 2(a) and (b) hereof, excluding Selling and Legal
Expenses, but including, without limitation, all registration and filing fees,
printing expenses, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"SECURITY" and "SECURITIES" shall have the meaning set forth in Section
2(1) of the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SELLING AND LEGAL EXPENSES" shall mean (x) all underwriting and
selling discounts, fees and commissions applicable to the sale of Registrable
Securities and (y) all reasonable fees and disbursements of counsel retained by
the Holders of the Registrable Securities to be included in a particular
registration.
2. REGISTRATION RIGHTS
(a) REQUESTED REGISTRATION.
(i) REQUEST FOR REGISTRATION. If the Company shall receive
from an Initiating Holder, at any time after September 30, 2000, a
written request that the Company effect any registration with respect
to all or a part of the Registrable Securities, the Company will:
(A) promptly, but in any event within ten (10)
business days of the receipt of such request, give written
notice of the proposed registration, qualification or
compliance to all other Holders; and
(B) as soon as reasonably practicable, but in any
event within 60 days following the receipt of such request,
file a registration statement on an
2
<PAGE> 3
appropriate form with the Commission and use its reasonable
best efforts to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued
under the Securities Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by
the Company within 10 business days after written notice from
the Company is given under Section 2(a)(i)(A) above; PROVIDED
that the Company shall not be obligated to effect, or take any
action to effect, any such registration pursuant to this
Section 2(a):
(v) in any particular jurisdiction in which the
Company would be required to execute a general consent to
service of process in effecting such registration,
qualification or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be
required by the Securities Act or applicable rules or
regulations thereunder;
(w) with respect to a request for registration of
Shares, after the Company has effected one (1) such
registration pursuant to this Section 2(a) requested by an
Initiating Holder and such registration has been declared or
ordered effective and the sales of such Registrable Securities
shall have closed;
(x) if the Registrable Securities requested by all
Holders to be registered pursuant to such request do not have
an anticipated aggregate public offering price (before any
underwriting discounts and commissions) of at least
$1,000,000;
(y) if at the time of any request to register
Registrable Securities, the Company is engaged or intends to
engage in an acquisition, financing or other material
transaction which, in the good faith determination of the
Board of Directors of the Company, would be adversely affected
by the requested registration to the material detriment of the
Company, or the Board of Directors of the Company determines
in good faith that the registration would require the
disclosure of material information that the Company has a bona
fide business purpose for preserving as confidential, and that
the Company is not otherwise required by applicable securities
laws or regulations to disclose, in which event, the Company
may, at its option, direct that such request be delayed for a
period not in excess of sixty days from the date of the
determination by the Board of Directors, as the case may be,
such right to delay a request to be exercised by the Company
not more than once in any twelve-month period; or
3
<PAGE> 4
(z) with respect to Holders who are officers,
directors or employees of the Company, if at the time of any
request to register Registrable Securities, directors,
officers, or employees of the Company are not permitted to
offer or sell securities in accordance with the Company's
policies.
The registration statement filed pursuant to the request of an
Initiating Holder may, subject to the provisions of Section 2(a)(ii)
below, include other securities, other than Registrable Securities, of
the Company which are held by the other stockholders ("OTHER
STOCKHOLDERS") of the Company.
The Holders holding a majority of the Registrable Securities
requested to be registered may, at any time prior to the effective date
of the registration statement relating to such registration, revoke
such request, without liability to the Company, such Holders, any of
the other Holders or the Other Stockholders, by providing a written
notice to the Company revoking such request, PROVIDED that such revoked
request shall count against the registrations available to the Holders
pursuant to Section 2(a)(w) unless such Holders pay the costs and
expenses associated with such revoked request.
(ii) UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means
of an underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 2(a). If shares held by Other
Stockholders are requested by such Other Stockholders to be included in
any registration pursuant to this Section 2, the Company shall
condition such inclusion on their acceptance of the further applicable
provisions of this Section 2. The Initiating Holders whose Registrable
Securities are to be included in such registration and the Company
shall (together with all Other Stockholders proposing to distribute
their securities through such underwriting) enter into an underwriting
agreement in customary form with the representative of the underwriter
or underwriters selected for such underwriting by such Initiating
Holders and reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 2(a), if the representative advises the
Holders in writing that marketing factors (including, without
limitation, pricing considerations) require a limitation on the number
of shares to be underwritten or a limitation on the inclusion of shares
held by directors and officers of the Company, the securities of the
Company held by Other Stockholders shall be excluded from such
registration to the extent so required by such limitation. If, after
the exclusion of such shares, further reductions are still required,
the Registrable Securities of the Company held by each Holder other
than the Initiating Holders shall be excluded from such registration to
the extent so required by such limitation. Thereafter, if still further
reductions are required, the number of Registrable Securities included
in the registration by each Initiating Holder shall be reduced on a pro
rata basis (based on the number of Registrable Securities held by such
Initiating Holder), by such minimum number of Registrable Securities as
is necessary to comply with such request. No Registrable Securities or
any other securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in
4
<PAGE> 5
such registration. If any Other Stockholder who has requested inclusion
in such registration as provided above disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the underwriter and the Initiating Holders. The
securities so withdrawn shall also be withdrawn from registration. If
the underwriter has not limited the number of Registrable Securities or
other securities to be underwritten, the Company and officers and
directors of the Company may include its or their securities for its or
their own account in such registration if the representative so agrees
and if the number of Registrable Securities and other securities which
would otherwise have been included in such registration and
underwriting will not thereby be limited.
(iii) OTHER REGISTRATION RIGHTS. The Company shall not grant
any registration rights inconsistent with the provisions of this
Section 2(a) and in granting any demand registration rights hereafter
shall provide that the Holders shall have the right to notice of the
exercise of any such demand registration right and to participate in
such registration on a pro rata basis.
(b) COMPANY REGISTRATION.
(i) If the Company shall determine to register any of its
equity securities either for its own account or for any Other
Stockholders, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Commission Rule
145 transaction, or a registration on any registration form which does
not permit secondary sales, the Company will:
(A) promptly give to each of the Holders a written
notice thereof; and
(B) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made by
the Holders within fifteen (15) days after receipt of the
written notice from the Company described in clause (A) above,
except as set forth in Section 2(b)(ii) below.
The Company may terminate, in its sole and absolute
discretion, any registration described in this Section 2(b) at any time
prior to the effectiveness of the applicable registration statement.
Upon such termination, the Company's obligations under this Section
2(b) with respect to such terminated registration shall terminate.
(ii) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an
underwriting, the Company shall so advise each of the Holders as a part
of the written notice given pursuant to Section 2(b)(i)(A). In such
event, the right of each of the Holders to registration pursuant to
this Section 2(b) shall be conditioned upon such Holders' participation
in such underwriting and the inclusion of such Holders' Registrable
Securities in the underwriting to the extent
5
<PAGE> 6
provided herein. The Holders whose shares are to be included in such
registration shall (together with the Company and the Other
Stockholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for
underwriting by the Company. Notwithstanding any other provision of
this Section 2(b), if the representative determines that marketing
factors require a limitation on the number of shares to be underwritten
or a limitation on the inclusion of shares held by directors and
officers of the Company, the representative may (subject to the
allocation priority set forth below) limit the number of Registrable
Securities to be included in the registration and underwriting to not
less than twenty five percent (25%) of the total number of shares to be
included in such underwritten offering, subject to the Company's
compliance with any registration obligations to any Demanding Holders
(as hereinafter defined) participating in such registration. The
Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled
to be included in the registration and underwriting shall be allocated
in the following manner: The securities of the Company held by
officers, directors and Other Stockholders (other than Registrable
Securities and other than securities held by holders who by contractual
right demanded such registration ("DEMANDING HOLDERS")) shall be
excluded from such registration and underwriting to the extent required
by such limitation, and, if a limitation on the number of shares is
still required, the number of shares that may be included in the
registration and underwriting by each of the Holders other than the
Demanding Holders shall be excluded from such registration to the
extent so required by such limitation. Thereafter, if still further
reductions are required, the number of shares included in the
registration by each of the Demanding Holders shall be reduced, on a
pro rata basis (based on the number of shares held by such Demanding
Holders), by such minimum number of shares as is necessary to comply
with such limitation. If any of the Holders or any officer, director or
Other Stockholder disapproves of the terms of any such underwriting, he
may elect to withdraw therefrom by written notice to the Company and
the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(iii) NUMBER AND TRANSFERABILITY. Each of the Holders shall be
entitled to have its shares included in two registrations pursuant to
this Section 2(b); provided, however, that notwithstanding anything to
the contrary contained herein, the Holders shall not be entitled to
have their shares registered in the first registered public offering of
the Company occurring within six months of the Closing Date.
(c) EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 2 shall be borne by the Company, and all Selling and Legal Expenses
shall be borne by the Holders of the securities so registered pro rata on the
basis of the number of their shares so registered; provided, however, that if,
as a result of the withdrawal of a request for registration by any of the
Holders, as applicable, the registration statement does not become effective,
the Holders and Other Stockholders requesting registration may elect to bear the
Registration Expenses
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<PAGE> 7
(pro rata on the basis of the number of their shares so included in the
registration request, or on such other basis as such Holders and Other
Stockholders may agree), in which case such registration shall not be counted as
a registration pursuant to Section 2(a)(i)(B)(w).
(d) REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Section 2, the Company will keep the Holders
holding Registrable Securities requested to be included in such registration
("PARTICIPATING HOLDERS") advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company will:
(i) furnish to each Participating Holder, and to any
underwriter before filing with the Commission, copies of any
registration statement (including all exhibits) and any prospectus
forming a part thereof and any amendments and supplements thereto
(including, upon request, all documents incorporated or deemed
incorporated by reference therein) prior to the effectiveness of such
registration statement and including each preliminary prospectus, any
summary prospectus or any term sheet (as such term is used in Rule 434
under the Securities Act)) and any other prospectus filed under Rule
424 under the Securities Act, which documents, other than exhibits and
documents incorporated or deemed incorporated by reference, will be
subject the review of the Participating Holders and any such
underwriter for a period of at least five business days, and the
Company shall not file any such registration statement or such
prospectus or any amendment or supplement to such registration
statement or prospectus to which any Participating Holder or any such
underwriter shall reasonably object within five business days after the
receipt thereof; a Participating Holder or such underwriter(s), if any,
shall be deemed to have reasonably objected to such filing only if the
registration statement, amendment, prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission;
(ii) furnish to each Participating Holder and to any
underwriter, such number of conformed copies of the applicable
registration statement and of each amendment and supplement thereto (in
each case including all exhibits) and such number of copies of the
prospectus forming a part of such registration statement (including
each preliminary prospectus, any summary prospectus or any term sheet
(as such term is used in Rule 434 under the Securities Act)) and any
other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, including without limitation documents incorporated or
deemed to be incorporated by reference prior to the effectiveness of
such registration, as each of the Participating Holders or any such
underwriter, from time to time may reasonably request;
(iii) to the extent practicable, promptly prior to the filing
of any document that is to be incorporated by reference into any
registration statement or prospectus forming a part thereof subsequent
to the effectiveness thereof, and in any event no later than the date
such document is filed with the Commission, provide copies of such
document to the Participating Holders, if requested, and to any
underwriter, make
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<PAGE> 8
representatives of the Company available for discussion of such
document and other customary due diligence matters;
(iv) make available at reasonable times for inspection by the
Participating Holders, any underwriter participating in any disposition
pursuant to such registration and any attorney or accountant retained
by the Holders or any such underwriter, all financial and other
records, pertinent corporate documents and properties of the Company
and cause the officers, directors and employees of the Company to
supply all information reasonably requested by the Participating
Holders and any such underwriters, attorneys or accountants in
connection with such registration subsequent to the filing of the
applicable registration statement and prior to the effectiveness of the
applicable registration statement, subject to the execution of a
customary confidentiality agreement;
(v) use its reasonable best efforts (x) to register or qualify
all Registrable Securities and other securities covered by such
registration under such other securities or blue sky laws of such
States of the United States of America where an exemption is not
available and as the sellers of Registrable Securities covered by such
registration shall reasonably request, (y) to keep such registration or
qualification in effect for so long as the applicable registration
statement remains in effect, and (z) to take any other action which may
be reasonably necessary or advisable to enable such sellers to
consummate the disposition in such jurisdictions of the securities to
be sold by such sellers, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction where it is not so qualified, or to
subject itself to taxation in any such jurisdiction, or to execute a
general consent to service of process in effecting such registration,
qualification or compliance, unless the Company is already subject to
service in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations thereunder;
(vi) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered with
or approved by such other federal or state governmental agencies or
authorities as may be necessary in the opinion of counsel to the
Company and counsel to the Participating Holders of Registrable
Securities to enable the Holders thereof to consummate the disposition
of such Registrable Securities in accordance with the plan of
distribution described in the applicable registration statement;
(vii) promptly notify each Holder of Registrable Securities
covered by a registration statement (A) upon discovery that, or upon
the happening of any event as a result of which, the prospectus forming
a part of such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, (B) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the
initiation of proceedings for that purpose, (C) of any request by the
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<PAGE> 9
Commission for (1) amendments to such registration statement or any
document incorporated or deemed to be incorporated by reference in any
such registration statement, (2) supplements to the prospectus forming
a part of such registration statement or (3) additional information,
(D) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of
any of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and at the request of
any such Holder promptly prepare and furnish to it a reasonable number
of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(viii) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of any such
registration, or the lifting of any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for
sale in any jurisdiction;
(ix) if requested by a Participating Holder, or any
underwriter, subject to receipt of any required information from such
Holder or underwriter, promptly incorporate in such registration
statement or prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as the Participating Holder
and any underwriter may reasonably request to have included therein,
including, without limitation, information relating to the "plan of
distribution" of the Registrable Securities, information with respect
to the number of shares of Registrable Securities being sold to such
underwriter, the purchase price being paid therefor and any other terms
of the offering of the Registrable Securities to be sold in such
offering and make all required filings of any such prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(x) furnish to the Participating Holders, addressed to them,
an opinion of counsel for the Company, dated the date of the closing
under the underwriting agreement, if any, or the date of effectiveness
of the registration statement if such registration is not an
underwritten offering, and use its reasonable best efforts to furnish
to the Participating Holders, addressed to them, a "cold comfort"
letter signed by the independent certified public accountants who have
certified the Company's financial statements included in such
registration, covering substantially the same matters with respect to
such registration (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such
other matters as the Participating Holders may reasonably request;
9
<PAGE> 10
(xi) provide promptly to the Participating Holders upon
request any document filed by the Company with the Commission pursuant
to the requirements of Section 13 and Section 15 of the Exchange Act;
and
(xii) use its reasonable best efforts to cause all Registrable
Securities included in any registration pursuant hereto to be listed on
each securities exchange on which securities of the same class are then
listed or, if not then listed on any securities exchange, to be
eligible for trading in any over-the-counter market or trading system
in which securities of the same class are then traded.
(e) INDEMNIFICATION.
(i) The Company will indemnify each of the Holders, as
applicable, each of its officers, directors and partners, and each
person controlling each of the Holders (within the meaning of the
Securities Act), with respect to each registration which has been
effected pursuant to this Section 2, and each underwriter, if any, and
each person who controls any underwriter, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any preliminary, final or summary
prospectus, offering circular or other document (including any related
registration statement, notification or the like, or any amendment or
supplement to any of the foregoing) incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
any violation (or alleged violation) by the Company of the Securities
Act or the Exchange Act or any rule or regulation thereunder or of any
applicable state or common law applicable to the Company and relating
to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and (subject to Section
2(e)(iii)) will reimburse each of the Holders, each of its officers,
directors and partners, and each person controlling each of the
Holders, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue
statement or omission based upon and in conformity with written
information furnished to the Company by the Holders or underwriter and
stated to be specifically for use therein. The foregoing
indemnification shall remain in effect regardless of any investigation
by any indemnified party and shall survive any transfer or assignment
by a Holder of its Registrable Securities or of its rights pursuant to
this Agreement.
(ii) Each of the Holders will, if Registrable Securities held
by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company,
each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration
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<PAGE> 11
statement, each person who controls the Company or such underwriter,
each Other Stockholder and each of their officers, directors, and
partners, and each person controlling such Other Stockholder against
all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged
untrue statement) made by such Holder of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) made by such Holder to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse the Company and such directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document
in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use
therein; PROVIDED, HOWEVER, that the obligations of each of the Holders
hereunder shall be limited to an amount equal to the net proceeds to
such Holder of securities sold pursuant to such registration statement
or prospectus.
(iii) Each party entitled to indemnification under Section
2(e) (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom; provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld) and the Indemnified Party may
participate in such defense at such party's expense (unless the
Indemnified Party shall have reasonably concluded upon advice from
counsel that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which
case the reasonable fees and expenses of counsel shall be at the
expense of the Indemnifying Party), and provided further that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Section 2 except to the extent the Indemnifying Party is materially
prejudiced thereby. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified
Party shall promptly furnish such information regarding itself or the
claim in question as an Indemnifying Party may reasonably request in
writing and as shall be reasonably required in connection with the
defense of such claim and litigation resulting therefrom.
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<PAGE> 12
(iv) If the indemnification provided for in this Section 2(e)
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or
expense referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such
loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on
the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant
equitable considerations, provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of any such fraudulent misrepresentation. The
relative fault of the Indemnifying Party and of the Indemnified Party
shall be determined by reference to, among other things, whether the
untrue (or alleged untrue) statement of a material fact or the omission
(or alleged omission) to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, no Holder will be required to contribute
any amount pursuant to this paragraph (e) in excess of the total price
at which the Registrable Securities of such Holder were offered to the
public (less underwriting discounts and commissions, if any).
(v) The foregoing indemnity agreement of the Company and
Holders is subject to the condition that, insofar as they relate to any
loss, claim, liability or damage made in a prospectus, preliminary
prospectus or other offering document but eliminated or remedied in an
amended prospectus, preliminary prospectus or other offering document
delivered to an underwriter or Holder, as applicable (the "FINAL
PROSPECTUS"), such indemnity agreement shall not inure to the benefit
of (A) any underwriter if a copy of the Final Prospectus was furnished
to the underwriter and was not furnished to the person asserting the
loss, liability, claim or damage at or prior to the time such action is
required by the Securities Act or (B) in circumstances where no
underwriter is acting as such in the offer and sale in question, any
Holder who (1) either directly or through its agent provided the
preliminary prospectus to the Person asserting the loss, liability,
claim or damage, (2) was furnished with a copy of the Final Prospectus,
and (3) did not furnish or cause to be furnished the Final Prospectus
to the Person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
(vi) Any indemnification payments required to be made to an
Indemnified Party under this Section 2(e) shall be made as the related
claims, losses, damages, liabilities or expenses are incurred.
(f) INFORMATION BY THE HOLDERS. Each of the Holders holding securities
included in any registration shall furnish to the Company such information
regarding such Holder and the
12
<PAGE> 13
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 2. No Investor shall be
required, in connection with any underwriting agreements entered into in
connection with any registration, to provide any information, representations or
warranties, or covenants with respect to the Company, its business or its
operations, and such Investor shall not be required to provide any
indemnification with respect to any registration statement except as
specifically provided for in Section 2(d)(ii) hereof.
(g) RULE 144 REPORTING.
With a view to making available the benefits of certain rules
and regulations of the Commission which may permit the sale of
restricted securities to the public without registration, the Company
agrees to:
(i) make and keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act ("RULE
144"), at all times;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act; and
(iii) so long as the Holder owns any Registrable Securities,
furnish to the Holder upon request, a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 and of
the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as the Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration.
(h) TERMINATION. The registration rights set forth in this Section 2
shall not be available to any Holder if, in the opinion of counsel to the
Company, all of the Registrable Securities then owned by such Holder could be
sold in any 120-day period pursuant to Rule 144(k) or at such time that no
Registrable Securities are outstanding. The Company will arrange for a provision
to the transfer agent for such shares of an opinion of counsel in connection
with any such sale under Rule 144. The Company shall use its reasonable best
efforts to comply with the requirements of Rule 144 as will enable the Holders
to make sales pursuant to Rule 144.
(i) ASSIGNMENT. The registration rights set forth in Section 2 hereof
may be assigned, in whole or in part, to any transferee of Registrable
Securities (who shall be considered thereafter to be a Holder and shall be bound
by all obligations and limitations of this Agreement).
(j) The Holders agree that, upon receipt of any notice from the Company
pursuant to Section 2(d)(vii), they shall immediately discontinue the
disposition of Registrable Securities
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<PAGE> 14
pursuant to the registration statement applicable to such Registrable Securities
until they have received copies of the amended or supplemented prospectus as
described in Section 2(d)(vii). The Holders shall destroy all copies in their
possession of the registration statement and related materials covering such
Registrable Securities at the time of receipt of the Company's notice.
3. MISCELLANEOUS
(a) DIRECTLY OR INDIRECTLY. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
(b) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.
(c) SECTION HEADINGS. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
(d) NOTICES.
(i) All communications under this Agreement shall be in
writing and shall be delivered by hand or by facsimile or mailed by
overnight courier or by registered or certified mail, postage prepaid:
(A) If to the Investor:
FA, Inc.
c/o Reading Entertainment, Inc.
One Penn Square West
30 South Fifteenth Street, Suite 1300
Philadelphia, Pennsylvania 19102-4813
Attention: James A. Wunderle, Executive Vice President
Facsimile: (215) 569-2862
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<PAGE> 15
Copy to:
Potter Anderson & Corroon LLP
Hercules Plaza
1313 N. Market Street
Wilmington, Delaware 19801
Attention: John F. Grossbauer, Esq.
Facsimile: (302) 658-1192
If to the Company:
National Auto Credit, Inc.
30000 Aurora Road
Solon, Ohio 44139
Attention: David L. Huber, Chairman of the Board
Facsimile: (440) 349-0442
Copy to:
National Auto Credit, Inc.
30000 Aurora Road
Solon, Ohio 44139
Attention: Raymond A. Varcho, Esq., Vice President,
Secretary and General Counsel
Facsimile: (440) 349-3959
Any party may change its address for the purpose of this
Section by giving the other party written notice of its new address in
the manner set forth above.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand or facsimile, on the date of such delivery; if mailed
by courier, on the first business day following the date of such
mailing; and if mailed by registered or certified mail, on the third
business day after the date of such mailing.
(e) REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto, including, without limitation, any consents, waivers and
modifications which may hereafter be executed may be reproduced by the parties
hereto by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and the parties hereto may destroy any
original document so reproduced. The parties hereto agree and stipulate that any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Investor in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties.
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<PAGE> 16
(g) ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement constitutes
the entire understanding of the parties hereto and supersedes all prior
understanding among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the Holders holding a majority of the then
outstanding Registrable Securities.
(h) SEVERABILITY. In the event that any part or parts of this Agreement
shall be held illegal or unenforceable by any court or administrative body of
competent jurisdiction, such determination shall not effect the remaining
provisions of this Agreement which shall remain in full force and effect.
(i) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
[Signature page follows]
16
<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
INVESTOR:
FA, INC.
By:
--------------------------------
Name:
Title:
COMPANY:
NATIONAL AUTO CREDIT, INC.
By:
--------------------------------
Name:
Title:
17
<PAGE> 1
Exhibit 10.3
CERTIFICATE OF DESIGNATION, NUMBER, POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS AND THE QUALIFICATIONS, LIMITATIONS, RESTRICTIONS, AND OTHER
DISTINGUISHING CHARACTERISTICS
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
OF
NATIONAL AUTO CREDIT, INC.
The undersigned hereby certify that:
1. The name of the corporation is National Auto Credit, Inc. (hereinafter
referred to as the "Corporation"), a corporation organized and existing under
the laws of the State of Delaware.
2. The certificate of incorporation of the Corporation, as amended, authorizes
the issuance of two million shares of Preferred Stock, par value $.05 per share,
and expressly vests in the Board of Directors of the Corporation the authority
provided therein to issue any or all of said shares as a class without series,
or if so determined from time to time by the board of directors, either in whole
or in part in one or more series, each series to be expressly designated by
distinguishing number, letter, or title prior to the issuance thereof; and to
designate the number, rights, preferences, privileges and other special rights
and the qualifications, limitations, restrictions, and other distinguishing
characteristics thereof.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid and pursuant to the provisions of the
Delaware General Corporation Law, has adopted the following resolutions creating
a Series "A" issue of Preferred Stock:
WHEREAS, Article FOURTH of the certificate of incorporation, as amended
(the "Certificate of Incorporation"), authorizes the Corporation to
issue up to 2,000,000 shares of Preferred Stock as a class without
series, or if so determined from time to time by the Board of
Directors, either in whole or in part in one or more series, each
series to be expressly designated by distinguishing number, letter, or
title prior to the issuance thereof.
WHEREAS, the Board of Directors is authorized by the Certificate of
Incorporation, to designate the number, rights, preferences, privileges
and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics of one or more
series of Preferred Stock;
WHEREAS, no series of such preferred stock has been previously
designated, and the Corporation now wishes to designate one hundred
(100) of such shares of Preferred Stock to be Series A Convertible
Preferred Stock; and to designate the
<PAGE> 2
number, rights, preferences, privileges and other special rights and
the qualifications, limitations, restrictions, and other distinguishing
characteristics of the same;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
fixes and determines the designation and the number of shares
constituting, and the rights, preferences, privileges and other special
rights and the qualifications, limitations, restrictions, and other
distinguishing characteristics of a new series of Preferred Stock, as
follows:
1. DESIGNATION. The series of preferred stock provided for by this
resolution shall be designated "Series A Convertible Preferred Stock"
(hereinafter referred to as the "Series A Preferred Stock").
2. AUTHORIZATION. The number of shares constituting the Series A
Preferred Stock shall be one hundred (100) shares having a par value of
$0.05 per share. Such number may not be increased or decreased without
the vote or consent of the holders of a majority of the shares of
Series A Preferred stock then outstanding.
3. DIVIDENDS. The holders of the Series A Preferred Stock shall be
entitled to receive such dividends as may be declared and paid from
time to time by the Board of Directors of the Corporation, prior to and
in preference to the holders of Common Stock. For purposes solely of
the Series A Preferred Stock's entitlement to dividends, a share of
Series A Preferred Stock shall be treated as equivalent to a share of
the Corporation's Common Stock, subject to adjustment pursuant to
Section 5 hereof, so that the Board of Directors shall not declare or
pay any dividends on the Common Stock unless it shall have declared and
paid prior thereto an equivalent dividend (as adjusted pursuant to
Section 5 hereof).
4. CONVERSION RIGHTS.
(a) At any time, at the option of the holder, and subject
to the antidilution provisions set forth in Section
5, each share of outstanding Series A Preferred Stock
may be converted into one share of the Corporation's
Common Stock. To exercise this conversion right, the
holder shall deliver written notice to the
Corporation stating the number shares of Series A
Preferred Stock which it intends to convert, along
with the certificate or certificates representing the
whole number of shares Series A Preferred Stock which
the holder intends to so convert into Common Stock.
(b) Promptly after the surrender of Series A Preferred
Stock by the holder under Section 4 (a) hereof, and
receipt thereof by the Corporation, the Corporation
shall issue and deliver, or cause to be issued and
delivered, to the holder a certificate or
certificates for
2
<PAGE> 3
the number of whole shares of Common Stock issuable
upon the conversion of such Series A Preferred Stock.
The date of the issuance of such Common Stock shall
be the "Conversion Date." No fractional shares shall
be issued upon conversion of the Series A Preferred
Stock into shares of Common Stock; the number of
shares of Common Stock issued upon conversion of the
Series A Preferred Stock shall be rounded to the
nearest whole number of shares. To the extent
permitted by law, the conversion shall be deemed to
have been effected as of the close of business on the
Conversion Date (or on the next preceding business
day if the Conversion Date is not a business day) and
at that time the rights of the holder of Series A
Preferred Stock, as such holder, shall cease, and the
holder of the Series A Preferred Stock shall become
the holder of record of shares of Common Stock and
shall solely be entitled to the rights and
preferences of the holders of shares of Common Stock.
(c) Notwithstanding anything herein to the contrary, on
any liquidation of the Corporation, the right of
conversion of the Series A Preferred Stock shall
terminate at the close of business on the last full
business day before the date fixed for payment of the
amount distributable on the Series A Preferred Stock.
5. ANTIDILUTION RIGHTS. The Conversion Price and the number of shares
issuable upon conversion shall be subject to adjustment as follows:
(a) In case the Corporation shall (i) declare a dividend
on its Common Stock payable in shares of its Common
Stock, (ii) subdivide its outstanding shares of
Common Stock, into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue any shares of
its capital stock by reclassification of the Common
Stock (including any such reclassification in
connection with a consolidation or merger in which
the Corporation is the continuing corporation), then,
and in each case, the Conversion Price in effect at
the time of the record date for such dividend or of
the effective date of such subdivision, combination
or reclassification shall be proportionately adjusted
so that the holder of any shares of the Series A
Preferred Stock surrendered for conversion after such
time shall be entitled to receive the kind and amount
of shares such holder would have owned or have been
entitled to receive had such shares of the Series A
Preferred Stock been converted immediately prior to
the time of such dividend, subdivision, combination,
or reclassification. Such adjustment shall be made
successively whenever any event listed above shall
occur.
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(b) In case of any consolidation or merger of the
Corporation with or into any other corporation (other
than a consolidation or merger in which the
Corporation is the surviving or continuing
corporation), or in case of any sale or transfer of
all or substantially all of the assets of the
Corporation, the holder of each share of the Series A
Preferred Stock, shall have after such
reorganization, classification, consolidation,
merger, sale or transfer, the right to convert such
share of the Series A Preferred Stock solely into (or
redeem such share for, out of funds legally available
for the purpose, as the case may be) the kind and
amount of shares of stock and other securities and
property including cash) which such holder would have
been entitled to receive had such share of Series A
Preferred Stock been converted immediately prior to
such consolidation, merger, sale or transfer.
(c) In case the Corporation shall distribute to holders
of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by
the corporation or other persons, assets (excluding
cash dividends) or options or rights (excluding
options to purchase and rights to subscribe for
Common Stock or other securities of the corporation
convertible into or exchangeable for Common Stock),
then, in each such case, the holders of the Series A
Preferred Stock shall, from and after the
distributions of holders of Common Stock, be entitled
upon conversion to receive the number and kind of
securities such holder would have received if such
holder's shares had been converted immediately prior
to the record date for determining holders of Common
Stock entitled to such distribution.
(d) Whenever there is an adjustment in the Conversion
Price and/or the number or kind of securities
issuable upon conversion of the Series A Preferred
Stock, as provided herein, the Corporation shall
promptly file in the custody of its Secretary, a
certificate signed by an officer of the Corporation,
showing in detail the facts requiring such
adjustment, the number and kind of securities
issuable upon conversion of Series A Preferred Stock
upon such adjustment, and the Conversion Price; and
notice of such adjustment along with a duplicate
officer's certificate shall be sent by registered
mail, postage paid, to each holder at its address as
it shall appear in the Corporation's Stock Register.
(e) The Corporation will not through any reorganization,
recapitalization, transfer of assets, consolidation,
merger,
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dissolution, issue or sale of securities or any other
voluntary action, avoid or modify or seek to avoid or
modify the observance or performance of any of the
terms to be observed or performed hereunder by the
corporation, but will at all times in good faith
assist in the carrying out of all the provisions of
this Agreement and in the taking of all such action
as may be necessary or appropriate in order to
protect the conversion rights of the holders of
Series A Preferred Stock against impairment.
6. SHARES RESERVED FOR ISSUANCE. The Corporation shall at all times
reserve and keep available and free of preemptive rights out of its
authorized but unissued Common Stock, solely for the purpose of
effecting the conversion of the Series A Preferred Stock, such number
of shares of Common Stock (or such other shares or securities as may be
required) as shall from time to time be sufficient to effect the
conversion of all outstanding Series A Preferred Stock, and if at any
time the number of authorized but unissued shares of Common Stock (or
any such other shares or other securities) shall not be sufficient to
effect the conversion of all then outstanding Series A Preferred Stock,
the Corporation shall take such action as may be necessary to increase
the authorized but unissued shares of Common Stock (or other shares or
other securities) to such number of shares as shall be sufficient for
such purposes.
7. VOTING RIGHTS.
(a) Except as otherwise provided in this Section 7, the
shares of Series A Preferred Stock shall vote as a
single class with the shares of Common Stock; and
each share of Series A Preferred Stock shall have as
many votes as the number of shares of Common Stock
into which it is convertible as of the record date
relating to a given vote, provided that, to the
extent required by law or by the Corporation's
Certificate of Incorporation, in the case of the
election of directors, holders of Series A Preferred
Stock shall be entitled to one vote per share of
Series A Preferred Stock without regard to the number
or kind shares into which such shares shall then be
convertible.
(b) So long as any shares of Series A Preferred Stock are
outstanding, each share of Series A Preferred Stock
shall be entitled to vote, or to submit a consent,
together with the Common Stock of the Corporation,
voting together as a single class, upon any matter as
to which the Common Stock is entitled to vote or
consent as a class under the Corporation's
Certificate of Incorporation or under Delaware law.
Such consent or vote may be given in person or by
proxy, either in writing without a meeting, or by
vote at any meeting called for the purpose of
obtaining such vote.
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(c) In addition to the voting rights provided by Sections
7(a) and (b) above, so long as any shares of Series A
Preferred Stock are outstanding, (i) no amendment to
the Certificate of Incorporation (except for the
designation of one or more series of Preferred Stock
pursuant to Article FOURTH of the Certificate of
Incorporation, which shall not require the approval
of the Series A Preferred Stock if a series so
designated does not rank prior to the Series A
Preferred Stock with respect to dividends or on
liquidation) and no amendment to the Bylaws of the
Corporation by the stockholders of the Corporation
may be effected without the prior vote or written
consent of a majority of those shares of Series A
Preferred Stock outstanding voting as a class and
(ii) to the extent (if any) permitted by law no
director may be removed from the Board of Directors
of the Corporation without the prior vote or written
consent of a majority of those shares of Series A
Preferred Stock outstanding, voting as a class. Such
consent or vote may be given in person or by proxy,
either in writing without a meeting, or by vote at
any meeting called for the purpose of obtaining such
vote. Each share of Series A Preferred Stock shall,
in either such event, be entitled to a single vote or
consent.
8. REDEMPTION RIGHTS. Neither the Corporation nor the holders of Series
A Preferred Stock shall have any redemption rights with respect to the
Series A Preferred Stock, except and to the extent that an adjustment
in the conversion rate made pursuant to Section 5 shall require that
the Series A Preferred Stock is convertible (in whole or in part) into
cash.
9. LIQUIDATION, DISSOLUTION AND WINDING UP.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or
involuntary, each holder of Series A Preferred Stock
shall have the right to receive a distribution of
assets of the Corporation equal to $1.50 per share
from any of the Corporation's assets then available
for distribution (i) pari passu with the holders of
any other Series of Preferred Stock and (ii) before
any distribution in connection with the liquidation,
dissolution and winding up is made to the holders of
Common Stock, all, in accordance with the Delaware
General Corporation Law. If the assets of the
Corporation are not sufficient to pay in full the
liquidation payments payable to the holders of the
Series A Preferred Stock, then the holders of such
shares shall share ratably in such distribution of
assets (i) pari passu with the holders of any other
series of Preferred Stock and (ii) before any
distributions in connection with the liquidation,
dissolution, and
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winding up is made to the holders of Common Stock,
all, in accordance with the Delaware General
Corporation Law.
(b) Whenever the distribution provided for in this
Section 9 shall be payable in property other than
cash, the value of such distribution shall be the
fair market value of such property as determined in
good faith by not less than a majority of the
directors then serving on the Board of Directors of
the Corporation. A reorganization of the Corporation,
or a consolidation or merger of the Corporation with
or into another corporation or entity or a sale of or
other disposition of all or substantially all of the
assets of the Corporation, shall not be treated as a
liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 9.
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the number, powers, preferences
and relative, optional, participating, and other special rights and the
qualifications, limitations, restrictions, and other distinguishing
characteristics thereof shall, upon the effective date of such series,
be deemed to be included in and be a part of the Certificate of
Incorporation of the Corporation pursuant to the provisions of Section
104 and 151 of the general Corporate Law of the State of Delaware.
The foregoing resolutions were duly adopted by the Board of Directors
without the requirement of shareholder action by meeting held on April 5, 2000
pursuant to the Certificate of Incorporation and the provisions of the Delaware
General Corporation Law.
IN WITNESS WHEREOF, National Auto Credit, Inc. has caused this
Certificate Of Designation, Number, Powers, Preferences And Relative,
Participating, Optional And Other Special Rights And The Qualifications,
Limitations, Restrictions, And Other Distinguishing Characteristics Of The
Series A Convertible Preferred Stock Of National Auto Credit, Inc. to be
executed by its duly authorized officer, on this 5th day of April, 2000.
NATIONAL AUTO CREDIT, INC.
By: __________________________________________
David Huber, Chairman of the Board and
Chief Executive Officer
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Exhibit 10.4
NATIONAL AUTO CREDIT, INC.
LETTERHEAD
April 5, 2000
James J. Cotter, Chairman
Reading Entertainment, Inc.
One Penn Square West
30 South Fifteenth Street, Suite 1300
Philadelphia, Pennsylvania 19103-4831
Re: Acquisition of Domestic Cinema Assets
Dear Mr. Cotter:
As we have discussed, National Auto Credit, Inc. ("National") is interested in
entering into the motion picture exhibition business in the United States
through its wholly-owned subsidiary National Cinemas, Inc. ("National Cinemas").
National and National Cinemas have entered into an agreement (the "Angelika
Agreement") with Reading Entertainment, Inc. ("RDG" and collectively with its
consolidated subsidiaries, "Reading") to acquire a 50% membership interest in
Angelika Film Centers, LLC ("AFC"). The purpose of this letter is to set out the
terms under which Reading has agreed to grant to National an option to acquire
the remainder of Reading's domestic cinema assets.
A. THE OPTION FEE: Promptly following the execution and delivery of this letter
agreement, National will transfer to Reading the sum of $500,000, in
consideration of the rights granted by Reading to National pursuant to this
letter agreement.
B. THE ASSETS COVERED: In consideration of the payment of this fee, National
will have the option, as described hereinbelow, to acquire the following assets:
1. THE CITY CINEMAS RIGHTS: These are the rights held by Reading
under that certain Agreement in Principle between RDG, James
J. Cotter and Michael Forman dated December 2, 1998, a copy of
which is appended as Appendix A to this letter (the "City
Cinemas Agreement"), other than the right to acquire the 1/6th
interest in AFC and the right to acquire by merger Off
Broadway, Inc. described in that Agreement in Principle. The
purchase price of this asset will be an amount equal to
Reading's transaction costs with respect to such transaction
(including reimbursement of the $1 million deposit previously
made by Reading and which counts as a credit against the
option fee specified in the City Cinemas Agreement).
2. THE DOMESTIC CINEMA ASSETS: These include the following cinema
assets:
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a) The remaining interest held by Reading in AFC
(including the interest being acquired pursuant to
the City Cinemas Agreement);
b) The Angelika Film Center Houston (Houston, Texas);
c) The Reading Mansville 12 (Mansville, New Jersey);
d) The St. Anthony Main (Minneapolis, Minnesota);
e) The Tower Cinema (Sacramento, California);
f) The Angelika Film Center Buffalo (Buffalo, New York);
and
g) The Angelika Film Center Dallas (under development in
Dallas, Texas).
Provided, that Reading is currently in negotiations with
respect to the Angelika Film Center Buffalo, and may terminate
its rights and obligations with respect to such cinema complex
if it is not satisfied with the results of such negotiation.
The purchase price of the Domestic Cinema Assets will be as
follows:
a) With respect to the remaining interest in AFC, the
amount of $13.5 million;
b) With respect to the cinemas at Houston, Mansville,
Minneapolis, Sacramento and Buffalo, the lesser of
Reading's historic cost basis in such assets and the
fair market value of such cinemas (such fair market
value to be determined, in the event of dispute
between the parties, by binding arbitration under the
rules of the American Arbitration Association); and
c) With respect to the cinema under development in
Dallas, Reading's cost basis in such asset.
C. EXERCISE OPTION: National will have a period of sixty (60) days, through and
including June 5, 2000 in which to determine whether or not it wishes to proceed
with the acquisition of the City Cinema Rights and the Domestic Cinema Assets.
National shall have the right to extend the sixty (60) day period provided in
the immediately preceding sentence for up to two (2) additional periods of
thirty (30) days, by written notice to Reading given on or before the expiration
of such sixty (60) day period (or extension thereof) accompanied by payment to
Reading of $100,000 in immediately available funds for each such thirty (30) day
extension. If National determines that it wishes to exercise the option, it will
give written notice of that election to Reading within this period. Thereafter,
National and Reading will cooperate and work in good faith to complete the
definitive documentation necessary to complete the transaction, with an
intention to close such transactions within sixty (60) days of the date of such
election. Closing shall be subject to compliance with the Hart-Scott-Rodino
Antitrust Improvements Act.
D. CITADEL OFFER: In the event that National elects to exercise the Option that
is the subject of this letter agreement, National will offer to Citadel Holding
Corporation ("Citadel") the right to form a joint venture with National or
National Cinemas (as the case may be) to acquire the City Cinemas Rights and the
Domestic Cinema Assets. The joint venture would be structured as a Delaware
limited liability company, and would be generally on the terms set out
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in Appendix B to this letter. Citadel will have until the later of (i) thirty
(30) days following the date on which National offers Citadel such right and
(ii) two (2) business days following the date on which National notifies Citadel
(by copy of its notice to Reading) whether it elects to exercise the option
granted to National by RDG and FA, Inc. by letter of even date herewith to
purchase the additional 1/3 Membership Interest in AFC held by FA, Inc., in
which to elect in writing to accept such offer. Thereafter, if Citadel elects to
accept such offer, National and Citadel will cooperate and work in good faith to
complete the definitive documentation necessary to complete the transaction
within the time periods specified above. If Citadel has elected to participate
in the joint venture and then fails for any reason, other than default by
National or National Cinemas, to close, National will be entitled, at its
option, within ten (10) business days of such default, to revoke through written
notice to Reading, its exercise of the option to acquire the city Cinema Rights
and the Domestic Cinema Assets.
E. EXCLUSIVITY: Reading agrees to deal exclusively with National during the term
of this option; provided, however, that Reading will be entitled to continue its
negotiations with Citadel and to enter into agreements with Citadel with respect
to the City Cinema Rights and the Domestic Cinema Assets, so long as any
agreements entered into with Citadel are entered into subject to the rights of
National under this letter agreement. National also acknowledges and agrees that
Reading may elect to dispose of its interest in the Angelika Film Center Buffalo
separate from this agreement.
F. RETURN OF OPTION FEE: In the event of failure to close the acquisition of the
City Cinemas Rights and the Domestic Cinema Assets due to default on the part of
Reading, National will be entitled to a refund of the option fee. In all other
cases, such fee will be deemed fully earned by Reading upon the execution and
delivery of this letter agreement by Reading.
G. FORM AND PAYMENT OF THE PURCHASE PRICE: The purchase price will be paid in
full at the Closing by wire transfer of currently available funds. In the event
of such a closing, the option fee will be credited to the purchase
price(including any fee paid for the extension thereof).
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
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Should you have any questions, please feel free to contact me at (440) 349-1000.
Sincerely,
David L. Huber
Chairman of the Board and
Chief Executive Officer
ACCEPTED AND AGREED
AS OF THIS _____ DAY
OF APRIL, 2000.
READING ENTERTAINMENT, INC.
By:
--------------------------------
Its:
--------------------------------
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Exhibit 10.5
NATIONAL AUTO CREDIT, INC.
LETTERHEAD
April 5, 2000
James J. Cotter, Chairman James J. Cotter, Chairman
Reading Entertainment, Inc. FA, Inc.
One Penn Square West c/o Reading Entertainment, Inc.
30 South Fifteenth Street, Suite 1300 One Penn Square West
Philadelphia, Pennsylvania 19103-4831 30 South Fifteenth Street, Suite 1300
Philadelphia, Pennsylvania 19103-4831
Re: Acquisition of Additional 1/3 Membership Interest in
Angelika Film Centers, LLC
Dear Mr. Cotter:
National Auto Credit, Inc. ("National") and its wholly-owned subsidiary,
National Cinemas, Inc. ("National Cinemas"), have entered into an agreement (the
"Angelika Agreement") with FA, Inc. and Reading Entertainment, Inc. ("RDG" and
collectively with its consolidated subsidiaries, "Reading") to acquire a 50%
membership interest in Angelika Film Centers, LLC ("AFC"). The purpose of this
letter is to set out the terms under which Reading has agreed to grant to
National an option to acquire an Additional 1/3 Membership Interest in AFC.
A. THE OPTION GRANT: For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Reading does hereby grant to
National that option more specifically described hereinbelow.
B. EXERCISE OPTION: National will have a period of forty-five (45) days, through
and including May 20, 2000 in which to determine whether or not it wishes to
proceed with the acquisition of the 1/3 Membership Interest owned by Reading
that is not subject to the Angelika Agreement (the "Subject Interest"), for a
purchase price of $9,000,000, on substantially the same terms and conditions set
forth in the Angelika Agreement (except as otherwise provided herein). If
National determines that it wishes to exercise the option, it will give written
notice of that election to Reading within this period. Thereafter, National and
Reading will cooperate and work in good faith to complete the definitive
documentation necessary to complete the transaction, with an intention to close
such transactions within thirty (30) days of the date of such election. Closing
shall be subject to compliance with the Hart-Scott-Rodino Antitrust Improvements
Act.
C. EXCLUSIVITY: Reading agrees to deal exclusively with National during the term
of this option, other then its ongoing discussions with Citadel Holding
Corporation.
<PAGE> 2
D. FORM AND PAYMENT OF THE PURCHASE PRICE: The purchase price of $9,000,000 will
be paid in full at the Closing by the issuance of the Common Stock of National,
priced at $1.50 per share. In the event that National lacks sufficient
authorized and unissued shares to pay the entire purchase price in Common Stock,
it will pay the balance in cash by wire transfer of currently available funds.
National will grant to Reading registration rights equivalent to the
registration rights granted to Reading pursuant to the Angelika Agreement.
Sincerely,
David L. Huber
Chairman of the Board and
Chief Executive Officer
ACCEPTED AND AGREED
AS OF THIS _____ DAY
OF APRIL, 2000.
READING ENTERTAINMENT, INC.
By:
------------------------------
Its:
------------------------------
2
