<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 18, 1999
Four Media Company
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(Exact name of registrant as specified in its charter)
Delaware 0-21943 95-459940
- ----------------- ---------------------- -----------------
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
2813 West Alameda Avenue
Burbank, California 91505
-------------------------
(Address of principal executive offices) (Zip Code)
(818) 840-7000
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
------------
Four Media Company (the "Company") issued a press release on January
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19, 1999 announcing that definitive agreements had been signed under which
Warburg, Pincus Equity Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V. (collectively, the
"Purchasers") would purchase approximately 10.2 million shares of the Company's
----------
common stock, par value $.01 per share (the "Common Stock"). The press release
------------
is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.
In such transaction, pursuant to a securities purchase agreement
with the Company (the "Securities Purchase Agreement"), the Purchasers will
-----------------------------
acquire, subject to, among other things, receipt of stockholder, regulatory and
bank approval, approximately 6.6 million newly issued shares of Common Stock
from the Company for $52.7 million, and will receive a warrant to purchase an
additional 1.1 million shares of Common Stock with an exercise price of $15.00
per share. In addition, pursuant to the Securities Purchase Agreement, after the
closing of the transaction, the Purchaser will have the right, so long as they
beneficially own at least 35% of the then outstanding shares of the Company's
Common Stock, to cause the Company to nominate and use its best efforts to elect
individuals designated by the Purchasers to be a majority of the members of the
Company's Board of Directors. Furthermore, for so long as the Purchasers
beneficially own at least 10% and less than 35% of the then outstanding shares
of the Company's Common Stock, the Company will continue to be obligated to
nominate and use its best efforts to elect individuals designated by the
Purchasers as members of the Company's Board of Directors, on a decreasing basis
roughly in proportion to such ownership. The Securities Purchase Agreement is
attached hereto as Exhibit 99.2 and is hereby incorporated by reference.
In addition, the Purchasers will acquire, subject to the closing of
the purchases under the Securities Purchase Agreement, approximately 3.1 million
shares of Common Stock beneficially owned by Technical Services Partners, L.P.
("TSP"), a limited partnership controlled by Steinhardt Management Company,
Inc., for approximately $23.4 million, pursuant to a stock purchase agreement
with TSP (the "TSP Purchase Agreement"). The TSP Purchase Agreement is attached
hereto as Exhibit 99.3 and is hereby incorporated by reference.
An additional 498,000 shares of Common Stock will be purchased by
the Purchasers, subject to the closing of the purchases under the Securities
Purchase Agreement and the TSP Purchase Agreement, for approximately $4.0
million from the Company's founders pursuant to a stock purchase agreement with
such founders (the "Founders Purchase Agreement"). The Founders Purchase
---------------------------
Agreement is attached hereto as Exhibit 99.4 and is hereby incorporated by
reference.
Upon the closing of the transaction, the Company will grant the
Purchasers customary demand and piggyback registration rights with respect to
the shares of Common Stock of which they acquired beneficial ownership in the
transaction.
Concurrently with the closing of the transaction, Fleming US
Discovery Fund III, L.P. and Fleming US Discovery Offshore Fund III, L.P., the
holders of all outstanding shares of the Company's preferred stock (the
"Preferred Stockholders"), have agreed to convert all of their preferred
----------------------
shares into 2,250,000 shares of Common Stock pursuant to a Preferred Stock
Conversion and Stockholders Agreement with the Company (the "Conversion
----------
Agreement"). The Conversion Agreement is attached hereto as Exhibit 99.5 and is
- ---------
hereby incorporated by reference.
Upon the closing of the transaction, the Company will grant the
Preferred Stockholders customary demand and piggyback registration rights with
respect to the shares of Common Stock of which they acquired beneficial
ownership in the transaction.
In connection with such transaction, the Purchasers also entered
into (i) a Voting Agreement, dated as of January 18, 1999, with the Preferred
Stockholders, (ii) a Voting Agreement, dated as of January 18, 1999, with Robert
T. Walston, the Company's Chief Executive Officer ("Walston"), and TSP and (iii)
a Voting and Option Agreement, dated as of January 18, 1999, with TSP
(collectively, such agreements are referred to herein as the "Voting
------
Agreements"). The Voting Agreements are attached hereto as Exhibits 99.6, 99.7
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and 99.8, respectively, and are hereby incorporated by reference. Under the
terms of the Voting Agreements, the Preferred Stockholders, Walston and TSP have
agreed to support the transaction described in the press release and to vote
against any competing transactions that may
2
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arise. As a result of the Voting Agreements, holders of over 50% of the
outstanding shares of the Company's Common Stock have agreed to vote for the
transactions contemplated by the Purchase Agreements. The Voting Agreements (but
not the option granted by TSP described below) will terminate upon termination
of the Securities Purchase Agreement.
Furthermore, in the Voting and Option Agreement, TSP granted
Purchasers an option to purchase approximately 3.1 million shares of the
Company's Common Stock (representing approximately 30% of the outstanding shares
of the Company's Common Stock) at a price equal to $7.50 per share. The option
is exercisable in certain events arising after the Securities Purchase Agreement
is terminated.
Additionally, in connection with the transaction described in the
press release, Walston entered into a new Employment Agreement (the "Walston
-------
Employment Agreement") with the Company, dated as of January 1, 1999, and
- --------------------
effective concurrently with the closing of the transaction. Under the terms of
the Walston Employment Agreement, Walston's employment at the Company will be
for a term of five years commencing as of the date of the Walston Employment
Agreement at an annual base salary of $500,000. Additionally, under the terms of
the Walston Employment Agreement, subject to the approval by the Company's
shareholders of an amendment to the Company's 1997 Stock Plan to increase the
number of shares available for issuance thereunder, the Company will grant
Walston an option to purchase 2,500,000 shares of the Company's Common Stock at
an exercise price of $8.00 per share. Under the terms of the Walston Employment
Agreement, the Company will also loan Walston $2.0 million, which loan will be
forgiven over the term of the Walston Employment Agreement upon the achievement
of certain milestones. The Walston Employment Agreement will only become
effective upon closing of the transactions contemplated by the Securities
Purchase Agreement and such effectiveness will be retroactive to the date of the
Walston Employment Agreement.
The Company also issued a second press release on January 19, 1999
announcing that Jeffrey J. Marcketta ("Marcketta") was named President and Chief
---------
Administrative Officer of the Company. This press release is attached hereto as
Exhibit 99.9 and is hereby incorporated by reference.
Also in connection with the transaction and as described in the
second press release, Marcketta entered into an Employment Agreement (the
"Marcketta Employment Agreement") with the Company, effective as of January 1,
------------------------------
1999. Under the terms of the Marcketta Employment Agreement, Marcketta's
employment at the Company will be for a term of five years commencing as of the
date of the Marcketta Employment Agreement at an annual base salary of $350,000.
Additionally, under the terms of the Marcketta Employment Agreement, the Company
granted Marcketta an option to purchase 500,000 shares of the Company's Common
Stock at an exercise price of $8.00 per share. The Marcketta Employment
Agreement became effective as of January 1, 1999.
3
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The foregoing descriptions of the various transaction documents are
only summaries thereof and are qualified in their entirety by reference to such
documents which are attached hereto and incorporated herein by reference.
4
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
7(c) Exhibits
--------
99.1 Press Release of Four Media Company, dated January 19, 1999.
99.2 Securities Purchase Agreement, dated as of January 18, 1999,
among Four Media Company and Warburg, Pincus Equity Partners,
L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V., as
Purchasers.
99.3 Stock Purchase Agreement, dated as of January 18, 1999, among
Technical Services Partners, L.P. and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity Partners I,
C.V., Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V., as
Purchasers.
99.4 Stock Purchase Agreement, dated as of January 18, 1999, among
John H. Donlon, Gavin W. Schutz, Robert Bailey and The Estate of
John H. Sabin and Warburg, Pincus Equity Partners, L.P.,
Warburg, Pincus Netherlands Equity Partners I, C.V., Warburg,
Pincus Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V., as Purchasers.
99.5 Preferred Stock Conversion and Stockholders Agreement, dated as
of January 18, 1999, among Four Media Company, Fleming US
Discovery Fund III, L.P., Fleming US Discovery Offshore Fund
III, L.P. and Warburg, Pincus Equity Partners, L.P., Warburg,
Pincus Netherlands Equity Partners I, C.V., Warburg, Pincus
Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V.
99.6 Voting Agreement, dated as of January 18, 1999, among Fleming US
Discovery Fund III, L.P., Fleming US Discovery Offshore Fund
III, L.P. and Warburg, Pincus Equity Partners, L.P., Warburg,
Pincus Netherlands Equity Partners I, C.V., Warburg, Pincus
Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V.
99.7 Voting Agreement, dated as of January 18, 1999, among Robert T.
Walston, Technical Services Partners, L.P. and Warburg, Pincus
Equity Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity Partners
II, C.V. and Warburg, Pincus Netherlands Equity Partners III,
C.V.
5
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99.8 Voting and Option Agreement, dated as of January 18, 1999, among
Technical Services Partners, L.P. and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity Partners I,
C.V., Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V.
99.9 Press Release of Four Media Company, dated January 19, 1999.
6
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 20, 1999
FOUR MEDIA COMPANY
/s/ Robert T. Walston
---------------------
Robert T. Walston
Chairman and Chief Executive Officer
7
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EXHIBIT INDEX
99.1 Press Release of Four Media Company, dated January 19,
1999.
99.2 Securities Purchase Agreement, dated as of January 18,
1999, among Four Media Company and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V., as Purchasers.
99.3 Stock Purchase Agreement, dated as of January 18, 1999,
among Technical Services Partners, L.P. and Warburg,
Pincus Equity Partners, L.P., Warburg, Pincus Netherlands
Equity Partners I, C.V., Warburg, Pincus Netherlands
Equity Partners II, C.V. and Warburg, Pincus Netherlands
Equity Partners III, C.V., as Purchasers.
99.4 Stock Purchase Agreement, dated as of January 18, 1999,
among John H. Donlon, Gavin W. Schutz, Robert Bailey and
The Estate of John H. Sabin and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V., as Purchasers.
99.5 Preferred Stock Conversion and Stockholders Agreement,
dated as of January 18, 1999, among Four Media Company,
Fleming US Discovery Fund III, L.P., Fleming US Discovery
Offshore Fund III, L.P. and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V.
99.6 Voting Agreement, dated as of January 18, 1999, among
Fleming US Discovery Fund III, L.P., Fleming US Discovery
Offshore Fund III, L.P. and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V.
99.7 Voting Agreement, dated as of January 18, 1999, among
Robert T. Walston, Technical Services Partners, L.P. and
Warburg, Pincus Equity Partners, L.P., Warburg, Pincus
Netherlands Equity Partners I, C.V., Warburg, Pincus
Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V.
99.8 Voting and Option Agreement, dated as of January 18, 1999,
among Technical Services Partners, L.P. and Warburg,
Pincus Equity Partners,
8
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L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V.
99.9 Press Release of Four Media Company, dated January 19,
1999.
9
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EXHIBIT 99.1
FOUR MEDIA CO.
================================================================================
January 19, 1999
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WARBURG, PINCUS TO PURCHASE 51% OF FOUR MEDIA COMPANY FOR $80 MILLION; EXPANDED
CAPITAL STRUCTURE WILL FACILITATE FUTURE GROWTH
BURBANK, Calif., Jan.19 /PRNewswire/ -- Four Media Company (Nasdaq: FOUR) today
announced that definitive agreements (collectively the "Agreement") have been
signed under which Warburg, Pincus Equity Partners, L.P. and certain affiliates
(collectively "Warburg, Pincus") will acquire 10.2 million shares of Four Media
Company common stock, comprised of both newly issued shares and existing shares,
for approximately $80.0 million. The Agreement, approved by the Four Media
Company Board of Directors, is subject to shareholder, regulatory and bank
approval.
Under the terms of the Agreement, Warburg, Pincus will acquire all 3.1 million
of the outstanding shares currently held by Technical Services Partners, L.P.,
("TSP"), a limited partnership controlled by Steinhardt Management Company,
Inc., for approximately $23.4 million. In addition, Warburg, Pincus will acquire
approximately 6.6 million common shares from the Company for $52.7 million and
will receive a warrant to purchase 1.1 million shares with an exercise price of
$15.00 per share. An additional 498,000 shares will be purchased for
approximately $4.0 million from the Company's founders, who have agreed to enter
into new long-term employment contracts and who will continue to have a
significant equity interest in the Company. Concurrently with the closing of the
transaction, the holder of all outstanding shares of the Company's preferred
stock has agreed to convert all of its preferred shares into 2,250,000 shares of
common stock.
Proceeds from the new equity investment will be used to enhance the Company's
ability to serve and support customers in the process of creating and
distributing entertainment programming and to continue to make strategic
acquisitions.
Commenting on the transaction, Robert T. Walston, Chairman and Chief Executive
Officer of Four Media Company stated, "We are very pleased to have Warburg,
Pincus as a major shareholder in Four Media Company and look forward to
benefiting from their experience with entertainment-related companies as well as
providers of business services. This equity investment demonstrates their
confidence in Four Media Company and provides us with equity capital with
which to pursue our long-term strategy. We look forward to quickly deploying
this new capital to continue our successful program of providing the latest
equipment and highest quality service to our customers in addition to making
more strategic acquisitions.
Warburg, Pincus Equity Partners, L.P. is an affiliate of E.M. Warburg, Pincus &
Co., LLC, a global investment firm with over 30 years of experience. E.M.
Warburg, Pincus & Co., LLC, through affiliated entities manages approximately
$6 billion of private equity investments, with $5 billion of incremental capital
available for future investment.
Four Media Company is a leading provider of technical and creative services to
owners, producers and distributors of television programming, feature films and
other entertainment
<PAGE>
product both domestically and internationally. The Company's services integrate
a variety of systems and processes to enhance the creation and distribution of
entertainment content. Four Media's client base includes the world's largest
entertainment companies. As a result of its investments and acquisitions, Four
Media Company is one of the largest and most diversified providers of technical
and creative services to the entertainment industry, which enables the Company
to offer its customers a single source for such services.
This press release contains forward-looking statements which are made pursuant
to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of
1995. Words such as "intends", "believes" and similar expressions reflecting
something other than historical fact are intended to identify forward-looking
statements, but are not the exclusive means of identifying such statements.
These forward-looking statements involve a number of risks and uncertainties,
including the timely development and market acceptance of products and
technologies, successful integration of acquisitions, the ability to secure
additional sources of financing, the ability to reduce operating expenses and
other factors described in the Company's filings with the Securities and
Exchange Commission, including its 1997 Prospectus. The actual results that the
Company achieves may differ materially from any forward-looking statement due to
such risks and uncertainties. The Company undertakes no obligations to revise or
update any forward-looking statements in order to reflect events or
circumstances that may arise after the date of this release.
/CONTACT: Robert T. Walston, Chairman and Chief Executive Officer, or Sandra C.
Mays, Vice President, Investor Relations, of Four Media Company, 818-840-7356,
or fax, 818-846-5197/
<PAGE>
EXHIBIT 99.2
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- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
among
WARBURG, PINCUS EQUITY PARTNERS, L.P.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.
and
FOUR MEDIA COMPANY
January 18, 1999
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TABLE OF CONTENTS
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<TABLE>
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PAGE
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SECTION 1. AUTHORIZATION OF COMMON STOCK AND WARRANT.......................................................... 2
SECTION 2. PURCHASE, SALE AND ISSUANCE OF COMMON STOCK AND WARRANT............................................ 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................... 3
3.1. Corporate Organization..................................................................... 3
3.2. Subsidiaries............................................................................... 3
3.3. Capitalization............................................................................. 4
3.4. Corporate Proceedings, etc................................................................. 6
3.5. Consents and Approvals..................................................................... 6
3.6. Absence of Defaults, Conflicts, etc........................................................ 7
3.7. SEC Reports................................................................................ 7
3.8. Absence of Certain Developments............................................................ 9
3.9. Compliance with Law........................................................................ 9
3.10. Litigation................................................................................ 10
3.11. Material Contracts........................................................................ 10
3.12. Absence of Undisclosed Liabilities........................................................ 11
3.13. Labor Relations and Employment............................................................ 12
3.14. Employee Benefit Plans.................................................................... 13
3.15. FCC Matters............................................................................... 17
3.16. Real Property............................................................................. 17
3.17. Condition of Properties................................................................... 19
3.18. Environmental Matters..................................................................... 19
3.19. Intellectual Property..................................................................... 22
3.20. Year 2000................................................................................. 24
3.21. Tax Matters............................................................................... 25
3.22. Insurance................................................................................. 27
3.23. Transactions with Related Parties......................................................... 27
3.24. Interest in Competitors................................................................... 28
3.25. Private Offering.......................................................................... 28
3.26. Brokerage................................................................................. 28
3.27. Disclosure................................................................................ 29
3.28. Takeover Provisions Inapplicable.......................................................... 29
3.29. Company Action............................................................................ 30
3.30. Fairness Opinion.......................................................................... 30
3.31. FIRPTA.................................................................................... 30
3.32. [Intentionally Deleted]................................................................... 30
3.33. Employment Agreements..................................................................... 30
3.34. Negative Assurances....................................................................... 30
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS...................................................... 31
SECTION 5. CONDUCT OF THE BUSINESS PENDING THE SALE AND PURCHASE.............................................. 33
5.1. Acquisition Proposals...................................................................... 33
5.2. Conduct of Business by the Company......................................................... 34
5.3. No Solicitation; Board Recommendation...................................................... 37
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES................................................................ 39
6.1. Access to Information; Confidentiality..................................................... 39
6.2. Company Proxy Statement.................................................................... 40
6.3. Stockholder Meeting........................................................................ 40
6.4. HSR Act.................................................................................... 41
6.5. FCC Approvals.............................................................................. 41
6.6. Additional Agreements...................................................................... 42
6.7. Notice of Breach........................................................................... 42
6.8. Director and Officer Indemnification and Insurance......................................... 42
6.9. Resale of Securities....................................................................... 43
6.10. Reduction in Size of Board................................................................ 44
6.11. Board Nominees; Independent Directors..................................................... 45
6.12. MSCL Section 338(h)(10) Election.......................................................... 46
6.13. TVN Agreement............................................................................. 46
SECTION 7. CLOSING CONDITIONS OF PURCHASERS AND THE COMPANY................................................... 46
7.1. Stockholder Approval....................................................................... 47
7.2. FCC Approval............................................................................... 47
7.3. Expiration or Termination of Waiting Period under HSR Act.................................. 47
7.4. Amendments to Stock Option Plan; Incentive Bonus Plan...................................... 47
7.5. Injunction................................................................................. 47
SECTION 8. PURCHASER CLOSING CONDITIONS....................................................................... 47
8.1. Representations and Warranties............................................................. 48
8.2. Compliance with Company Transaction Documents.............................................. 48
8.3. Officer's Certificate...................................................................... 49
8.4. Consents................................................................................... 49
8.5. Counsel's Opinion.......................................................................... 49
8.6. Registration Rights Agreement.............................................................. 49
8.7. Voting Agreements and Voting and Option Agreement.......................................... 50
8.8. Flemings Conversion Agreement.............................................................. 50
8.9. Additional Purchase Agreement.............................................................. 50
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8.10. Amendment of Credit Agreement............................................................. 50
8.11. Board Recommendation...................................................................... 50
8.12. Termination of Lock-Up Agreements......................................................... 50
8.13. Employment Agreements..................................................................... 50
SECTION 9. COMPANY CLOSING CONDITIONS......................................................................... 51
9.1. Representations and Warranties............................................................. 51
9.2. Compliance with Agreements................................................................. 51
9.3. Purchasers' Certificates................................................................... 51
SECTION 10. TERMINATION, AMENDMENT AND WAIVER................................................................. 52
10.1. Termination............................................................................... 52
10.2. Effect of Termination..................................................................... 54
10.3. Amendment................................................................................. 55
10.4. Waiver.................................................................................... 55
SECTION 11. RECOVERY OF FEES.................................................................................. 55
SECTION 12. INTERPRETATION OF THIS AGREEMENT.................................................................. 56
12.1. Terms Defined............................................................................. 56
12.2. Accounting Principles..................................................................... 59
12.3. Directly or Indirectly.................................................................... 59
12.4. Governing Law............................................................................. 60
12.5. Paragraph and Section Headings............................................................ 60
SECTION 13. MISCELLANEOUS..................................................................................... 60
13.1. Survival of Representations, Warranties and Agreements.................................... 60
13.2. Notices................................................................................... 60
13.3. Expenses.................................................................................. 62
13.4. Publicity................................................................................. 62
13.5. Specific Performance...................................................................... 62
13.6. Reproduction of Documents................................................................. 63
13.7. Successors and Assigns.................................................................... 63
13.8. Entire Agreement.......................................................................... 63
13.9. Severability.............................................................................. 64
13.10. Limitation on Enforcement of Remedies.................................................... 64
13.11. Simultaneous Effectiveness............................................................... 64
13.12. Counterparts............................................................................. 64
13.13. Joint and Several Obligations............................................................ 64
</TABLE>
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EXHIBIT A Form of Warrant
EXHIBIT B Certificate of Incorporation of the Company
EXHIBIT C Bylaws of the Company
EXHIBIT D Form of Amendment to 1997 Stock Option Plan
EXHIBIT E Form of Opinion of Counsel
EXHIBIT F Form of Registration Rights Agreement
EXHIBIT G Form of Flemings Conversion Agreement
EXHIBIT H Form of Founders Purchase Agreement
EXHIBIT I-1 Form of Walston Voting Agreement
EXHIBIT I-2 Form of Flemings Voting Agreement
EXHIBIT J Form of TSP Voting and Option Agreement
EXHIBIT K Form of TSP Purchase Agreement
Schedule 3.2 Subsidiaries
Schedule 3.3(a) Holders of Series A Preferred Stock
Schedule 3.3(b) Employee Stock Option Plans
Schedule 3.3(c) Conversion and Preemptive Rights
Schedule 3.5 Consents and Approvals
Schedule 3.6 Defaults, Conflicts, etc.
Schedule 3.8 Certain Developments
Schedule 3.9 Compliance with Law
Schedule 3.10 Litigation
Schedule 3.11 Material Contracts
Schedule 3.12 Undisclosed Liabilities
Schedule 3.13(a) Labor Relations
Schedule 3.14(a) Employee Benefit Plans
Schedule 3.14(n) Change in Control Benefits
Schedule 3.14(o) Equity-Based Compensation and Related Plans
Schedule 3.15 FCC Licenses
Schedule 3.16(a) Owned Real Property
Schedule 3.16(b) Leased Real Property
Schedule 3.16(c) Assessed Values of Owned Real Property
Schedule 3.18 Environmental Matters
Schedule 3.19(a) Intellectual Property - Applications and
Registrations/Patents
Schedule 3.19(b) Intellectual Property - Claims
Schedule 3.19(c) Intellectual Property - Licenses
Schedule 3.20 Year 2000
Schedule 3.21(b) Certain Unfiled Tax Returns
Schedule 3.22 Insurance
Schedule 3.23 Transactions with Related Parties
Schedule 3.33 Employment Agreements
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Schedule 5.2(c) Certain Recipients of Employee Stock Options
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INDEX
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Additional Purchase Agreements........................................... 49
Affiliate................................................................ 50
Agreement................................................................ 1
Applicable Percentage.................................................... 40
Board.................................................................... 1
Business Day............................................................. 50
Capital Stock............................................................ 1
Catalina................................................................. 50
Closing.................................................................. 2
Closing Date............................................................. 2
Code..................................................................... 23
Company.................................................................. 1
Company Common Stock..................................................... 1
Company Material Adverse Effect.......................................... 3
Company Preferred Stock.................................................. 4
Company Proxy Statement.................................................. 26
Company Transaction Documents............................................ 50
Company Vote............................................................. 36
Company Voting Matters................................................... 36
Computer Software........................................................ 22
Confidentiality Agreement................................................ 35
Conflict................................................................. 28
Credit Agreement......................................................... 50
DGCL..................................................................... 50
Employee Benefit Plans................................................... 12
Employment Agreements.................................................... 27
ERISA.................................................................... 12
ERISA Affiliate.......................................................... 12
Exchange Act............................................................. 50
Executives............................................................... 50
Expiration Date.......................................................... 47
Extended Expiration Date................................................. 47
FCC...................................................................... 50
FCC Approval............................................................. 50
FCC Licenses............................................................. 50
Final FCC Orders......................................................... 50
Flemings................................................................. 50
</TABLE>
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Flemings Agreements...................................................... 51
Flemings Conversion Agreement............................................ 51
Flemings Voting Agreement................................................ 52
Founders................................................................. 51
Founders Purchase Agreement.............................................. 51
GAAP..................................................................... 7
Governmental Entity...................................................... 51
Houlihan Lokey........................................................... 25
HSR Act.................................................................. 37
Intellectual Property.................................................... 20
Interim SEC Reports...................................................... 7
Key Agreements and Instruments........................................... 6
Knowledge................................................................ 51
Leased Real Property..................................................... 16
Lenders.................................................................. 50
Lock-up Agreements....................................................... 51
Material Contracts....................................................... 10
Multiemployer Plan....................................................... 12
Nasdaq Rules............................................................. 41
Organizational Documents................................................. 2
Owned Real Property...................................................... 15
Pension Plans............................................................ 12
Person................................................................... 51
Purchase Price........................................................... 2
Purchaser................................................................ 1
Purchasers............................................................... 1
Purchasers' Designee..................................................... 40
Purchasers' Expenses..................................................... 55
Registration Rights Agreement............................................ 44
SEC...................................................................... 51
SEC Reports.............................................................. 7
Securities Act........................................................... 51
Series A Preferred Stock................................................. 1
</TABLE>
-vii-
<PAGE>
<TABLE>
<S> <C>
Shares................................................................... 1
Stock Exchange Rules..................................................... 41
Subsequent Determination................................................. 34
subsidiary............................................................... 52
Superior Proposal........................................................ 34
Takeover Proposal........................................................ 30
Takeover Proposal Interest............................................... 30
Tax Return(s)............................................................ 24
Tax(es).................................................................. 23
Termination Fee/Expense Reimbursement.................................... 48
Transaction Documents.................................................... 52
Transfer................................................................. 38
TSP...................................................................... 52
TSP Purchase Agreement................................................... 52
TVN...................................................................... 41
Voting Agreements........................................................ 52
Voting and Option Agreement.............................................. 52
Walston.................................................................. 52
Walston Voting Agreement................................................. 52
Warrant.................................................................. 1
</TABLE>
-viii-
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of January 18, 1999 (this "Agreement"),
---------
by and among Four Media Company, a Delaware corporation (the "Company"),
-------
Warburg, Pincus Equity Partners, L.P., a Delaware limited partnership, Warburg,
Pincus Netherlands Equity Partners I, C.V., a Dutch limited partnership,
Warburg, Pincus Netherlands Equity Partners II, C.V., a Dutch limited
partnership, and Warburg, Pincus Netherlands Equity Partners III, C.V., a Dutch
limited partnership (each, a "Purchaser", and collectively, "Purchasers").
--------- ----------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Purchasers desire to purchase 6,582,607 shares of common stock, par
value $.01 per share, of the Company (such class of common stock, the "Company
-------
Common Stock" and the shares of the Company Common Stock being purchased, the
- ------------
"Shares") and a warrant (the "Warrant") to purchase an aggregate of 1,100,000
------ -------
shares (subject to adjustment) of Company Common Stock from the Company, and the
Company desires to issue and sell the Shares and the Warrant to Purchasers, in
each case upon the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, Purchasers and the Board of Directors of the Company (the "Board") have
-----
approved the purchase and sale of the Shares and the Warrant, and the other
transactions contemplated herein, upon the terms and subject to the conditions
set forth herein, and the Board deems such purchase and sale and other
transactions to be advisable and in the best interests of the stockholders of
the Company; and
WHEREAS, the Board has resolved to recommend approval of the purchase and sale
of the Shares and the Warrant and the other transactions contemplated herein to
the holders of all the issued and outstanding shares of Company Common Stock and
Series A Convertible Preferred Stock, par value $.01 per share (the "Series A
--------
Preferred Stock") of the Company (the Company Common Stock and the Series A
- ---------------
Preferred Stock being referred to collectively as the "Capital Stock").
-------------
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby
<PAGE>
acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
SECTION 1. AUTHORIZATION OF COMMON STOCK AND WARRANT
-----------------------------------------
(a) The Company has authorized the issuance of the Shares for sale,
and reserved the Shares for issuance, to Purchasers upon the terms and subject
to the conditions of this Agreement.
(b) The Company has authorized the issuance of the Warrant to
Purchasers and reserved for issuance the shares of Company Common Stock issuable
upon exercise of the Warrant. The terms of the Warrant are set forth in the
Form of Warrant, a copy of which is attached hereto as Exhibit A.
---------
SECTION 2. PURCHASE, SALE AND ISSUANCE OF COMMON STOCK AND WARRANT
-------------------------------------------------------
(a) Subject to the terms and conditions set forth in this Agreement
and in reliance upon the Company's and Purchasers' respective representations
and warranties set forth below, on the Closing Date (as defined below) the
Company shall (i) sell to Purchasers, and Purchasers shall purchase from the
Company, the Shares for an aggregate cash purchase price of $52,660,856 (based
on a purchase price of $8.00 per share) (the "Purchase Price") and (ii) issue
--------------
the Warrant to Purchasers. Such sale, purchase and issuance shall be effected
on the Closing Date by the Company executing and delivering to Purchasers, duly
registered in its name, (i) a duly executed stock certificate or certificates
evidencing the Shares and (ii) the duly executed Warrant against delivery by
Purchasers to the Company of the Purchase Price by wire transfer of immediately
available funds to such account as the Company shall designate prior to the
Closing Date.
(b) The closing of such sale, purchase and issuance (the "Closing")
-------
shall take place at 10:00 A.M., New York City time, on the third Business Day
after all of the conditions set forth herein have been satisfied or waived, or
such other date as Purchasers and the Company shall agree in writing (the
"Closing Date"), at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue,
------------
New York, New York, or such other location as Purchasers and the Company shall
mutually select.
-2-
<PAGE>
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Purchasers that:
3.1. Corporate Organization
----------------------
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Attached hereto as
Exhibit B and Exhibit C, respectively, are true and complete copies of the
- --------- ---------
Certificate of Incorporation and Bylaws of the Company, as amended through the
date hereof (collectively, the "Organizational Documents").
------------------------
(b) The Company has all requisite power and authority and has all
necessary approvals, licenses, permits and authorization to own, operate or
lease its properties and to carry on its business as now conducted. The Company
has all requisite power and authority to execute and deliver the Company
Transaction Documents and to perform its obligations hereunder and thereunder.
(c) The Company has filed all necessary documents to qualify to do
business as a foreign corporation in, and the Company is in good standing under
the laws of, each jurisdiction in which the conduct of the Company's business or
the nature of the properties owned or leased by the Company requires such
qualification, except where the failure to so qualify or be in good standing
would not reasonably be expected to have a material adverse effect on the
business, assets, liabilities, properties or condition (financial or otherwise)
of the Company and its subsidiaries taken as a whole (a "Company Material
----------------
Adverse Effect").
- --------------
3.2. Subsidiaries
------------
(a) Schedule 3.2 sets forth (i) the name of each subsidiary of the
------------
Company; (ii) the name of each corporation, partnership, joint venture or other
entity (other than such subsidiaries) in which the Company or any of its
subsidiaries has, or pursuant to any agreement has the right or obligation to
acquire at any time by any means, directly or indirectly, an equity interest or
investment; (iii) in the case of each of such corporations described in clauses
(i) and (ii) above, (A) the jurisdiction of incorporation, (B) the percentage of
each class
-3-
<PAGE>
of voting capital stock owned by the Company or any of its subsidiaries, (C) a
description of any contractual limitations on the holder's ability to vote or
alienate such securities, (D) a description of any outstanding options or other
rights to acquire securities of such corporation, and (E) a description of any
other contractual charge or impediment which would limit or impair the Company's
or any of its subsidiaries' ownership of such entity or interest or its ability
effectively to exercise the full rights of ownership of such entity or interest;
and (iv) in the case of each of such unincorporated entities, information
substantially equivalent to that provided pursuant to clause (iii) above with
regard to corporate entities.
(b) Each subsidiary of the Company listed on Schedule 3.2 has been
------------
duly organized, is validly existing and in good standing under the laws of the
jurisdiction of its organization, has the corporate power and authority to own
and lease its properties and to conduct its business and is duly registered,
qualified and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such registration, qualification or authorization, except
where the failure to be so registered, qualified, authorized or in good standing
would not reasonably be expected to have a Company Material Adverse Effect. All
of the issued and outstanding equity or other participating interests of each
subsidiary have been duly authorized and validly issued, are fully paid and non-
assessable, and, to the extent owned by the Company as indicated on Schedule
--------
3.2, are owned free and clear of any mortgage, pledge, lien, encumbrance,
- ---
security interest, claim or equity, except as set forth on Schedule 3.2. Except
------------
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 any issued or unissued shares of capital
stock of any subsidiary.
3.3. Capitalization
--------------
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, par value $.01 per share ("Company Preferred Stock"), of which 150,000
-----------------------
shares of Company Preferred Stock have been designated as Series A Preferred
Stock. As of the close of business on the date one Business Day prior to
-4-
<PAGE>
the date hereof, (i) 10,363,256 shares of Company Common Stock were issued and
outstanding, (ii) no shares of Company Common Stock were held in the treasury of
the Company, (iii) 150,000 shares of Series A Preferred Stock were issued and
outstanding and were held beneficially and of record by the Persons and in the
amounts set forth on Schedule 3.3(a), (iv) no shares of Company Preferred Stock
---------------
were issued or outstanding other than the 150,000 shares of Series A Preferred
Stock, (v) 2,621,463.60 shares of Company Common Stock were reserved for
issuance under the Company's employee stock option plans listed on Schedule
--------
3.3(b) in the amounts stated in such schedule and (vi) there were no bonds,
- ------
debentures, notes or other evidences of indebtedness issued or outstanding
having the right to vote on any matters on which the Company's stockholders may
vote.
(b) All the outstanding shares of capital stock of the Company have
been duly and validly issued and are fully paid and non-assessable, and were
issued in accordance with the registration or qualification requirements of the
Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom. Upon issuance, sale and delivery as contemplated by this
Agreement, the Shares will be duly authorized, validly issued, fully paid and
non-assessable shares of Company Common Stock, free of all preemptive or similar
rights. Upon their issuance in accordance with the terms of the Warrant, the
shares of Company Common Stock issuable upon exercise of the Warrant will be
duly authorized, validly issued, fully paid and non-assessable shares of Company
Common Stock, free of all preemptive or similar rights.
(c) Except for the conversion rights which attach to the warrants,
options and convertible securities which are listed on Schedule 3.3(c) hereto
---------------
and to the Warrant, on the Closing Date there will be no shares of Company
Common Stock or any other equity security of the Company issuable upon
conversion or exchange of any security of the Company nor will there be any
rights, options or warrants outstanding or other agreements to acquire shares of
Company Common Stock or any other equity security of the Company nor will the
Company be contractually obligated to purchase, redeem or otherwise acquire any
outstanding shares of Company Common Stock or Company Preferred Stock. Except
as set forth on Schedule 3.3(c), (i) no stockholder of the Company is entitled
---------------
to any preemptive or similar rights to subscribe for shares of capital stock of
the
-5-
<PAGE>
Company, (ii) the Company has not agreed to register any of its securities
under the Securities Act (other than pursuant to the Registration Rights
Agreement) and (iii) there are no existing voting trusts or similar agreements
to which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its subsidiaries.
3.4. Corporate Proceedings, etc.
---------------------------
The Company has full corporate power to execute and deliver the
Company Transaction Documents, to perform its obligations hereunder and
thereunder and, subject to obtaining the necessary approval of the Company
Voting Matters (as defined in Section 6.3) to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of the
Company Transaction Documents by the Company and each of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to the approval of the
Company Voting Matters. Except for approval of the Company Voting Matters, no
other corporate action on the part of the Company is necessary to authorize the
execution, delivery and performance of the Company Transaction Documents by the
Company and each of the transactions contemplated hereby and thereby, and upon
such execution and delivery, each of the Company Transaction Documents shall
constitute a valid and binding obligation of the Company enforceable in
accordance with its terms, except that (i) the enforceability hereof and thereof
may be subject to applicable bankruptcy, insolvency or other similar laws, now
or hereinafter in effect, affecting creditors' rights generally, and (ii) the
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.
The Company has authorized the issuance and delivery of the Shares and the
Warrant in accordance with this Agreement and, subject to the issuance of the
Warrant, the Company has reserved for issuance the shares of Company Common
Stock issuable upon exercise of the Warrant.
3.5. Consents and Approvals
----------------------
Except as set forth on Schedule 3.5 and other than the matters set
------------
forth in Sections 6.2, 6.3, 6.4 and 6.5 and any required state blue sky filings
in connection with the
-6-
<PAGE>
transactions contemplated hereby, the execution and delivery by the Company of
the Company Transaction Documents, the performance by the Company of its
obligations hereunder and thereunder and the consummation by the Company of the
transactions contemplated hereby and thereby do not require the Company or any
of its subsidiaries to obtain any consent, approval or action of, or make any
filing with or give any notice to, any corporation, Person, firm, Governmental
Entity or public or judicial authority.
3.6. Absence of Defaults, Conflicts, etc.
------------------------------------
Except as set forth on Schedule 3.6, and assuming the consents and
------------
approvals referred to in Section 3.5 and Schedule 3.5 are obtained, the
------------
execution and delivery by the Company of the Company Transaction Documents do
not, and the fulfillment of the terms hereof and thereof by the Company, and the
issuance of the Shares, the Warrant and the Company Common Stock issuable upon
exercise of the Warrant will not, result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, or permit the
acceleration of rights under or termination of, (a) any indenture, mortgage,
deed of trust, credit agreement, note or other evidence of indebtedness, or
other material agreement of the Company or any of its subsidiaries (collectively
the "Key Agreements and Instruments"), (b) the Organizational Documents, or
------------------------------
(c) any order, judgment, rule or regulation of any Governmental Entity having
jurisdiction over the Company or any of its subsidiaries or over their
respective properties or businesses, other than, in the case of clauses (a) and
(c) above, any such breaches, defaults, accelerations or terminations that would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. No event has occurred and no condition exists which,
upon notice or the passage of time (or both), would constitute a default under
any Key Agreements and Instruments or in any license, permit or authorization to
which the Company or any subsidiary is a party or by which any of them may be
bound, other than any such defaults that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
3.7. SEC Reports
-----------
(a) The Company has furnished Purchasers with true and complete
copies (including all amendments thereof) of its (i)
-7-
<PAGE>
Annual Reports on Form 10-K for the fiscal years ended August 3, 1997 and August
2, 1998 as filed with the SEC, (ii) Quarterly Report on Form 10-Q for the
quarter ended November 1, 1998, as filed with the SEC, (iii) proxy statements
related to all meetings of its stockholders (whether annual or special) held
since February 7, 1997 and (iv) all other reports filed with, or registration
statements declared effective by, the SEC since February 7, 1997, which are all
the documents (other than preliminary material) that the Company filed or was
required to file with the SEC from that date through the date hereof (clauses
(i) through (iv) being referred to herein collectively as the "SEC Reports").
-----------
From the date hereof through the Closing Date, the Company will furnish to
Purchasers copies of any reports and registration statements to be filed with
the SEC (the "Interim SEC Reports") within a reasonable amount of time prior to
filing thereof. As of their respective dates, the SEC Reports (or the Interim
-------
SEC Reports, as the case may be) complied or will comply, as the case may be, in
- -----------
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such reports and registration statements. As of their
respective dates, the SEC Reports (or the Interim SEC Reports, as the case may
be) did not and will not, as the case may be, contain any 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 light of the circumstances under
which they were, or will be, made, not misleading.
(b) The audited consolidated financial statements and unaudited
interim financial statements of the Company included in the SEC Reports (or to
be included in the Interim SEC Reports, as the case may be) comply as to form in
all material respects with applicable accounting requirements of the Securities
Act or the Exchange Act, as applicable, and with the published rules and
regulations of the SEC with respect thereto. The financial statements and the
condensed financial statements, as applicable, included in the SEC Reports (or
to be included in the Interim SEC Reports, as the case may be) (i) have been
prepared in accordance with generally accepted accounting principles ("GAAP")
----
applied on a consistent basis (except as may be indicated therein or in the
notes thereto), (ii) present fairly, in all material respects, the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of their operations and cash
-8-
<PAGE>
flows for the periods then ended subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments and any other
adjustments described therein and the fact that certain information and notes
have been condensed or omitted in accordance with the Exchange Act and the rules
and regulations promulgated thereunder, and (iii) are in all material respects
in agreement with the books and records of the Company and its subsidiaries.
(c) The Company and its subsidiaries keep proper accounting records
in which all material assets and liabilities, and all material transactions, of
the Company and its subsidiaries are recorded in conformity with applicable
accounting principles. No part of the Company's or any of its subsidiaries'
accounting system or records, or access thereto, is under the control of a
Person who is not an employee of the Company or such subsidiary (other than the
Company's independent auditors and outside legal counsel).
3.8. Absence of Certain Developments
-------------------------------
Except as disclosed in the SEC Reports filed with the SEC prior to the
date hereof or on Schedule 3.8, and except for the transactions contemplated by
------------
the Transaction Documents, since August 2, 1998, the Company and its
subsidiaries have conducted their business only in the ordinary and usual course
in accordance with past practice, and:
(a) there have not occurred any events or changes (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) that have had, or are reasonably likely in the future to have,
individually or in the aggregate, a Company Material Adverse Effect; and
(b) the Company has not taken any action which would have been
prohibited under Section 5.2 hereof.
3.9. Compliance with Law
-------------------
(a) Except as set forth on Schedule 3.9, neither the Company nor any
------------
of its subsidiaries is in violation of any laws, ordinances, governmental rules
or regulations to which it is subject, including without limitation laws or
regulations relating to the environment or to occupational health and safety.
No expenditures material to the Company and its subsidiaries
-9-
<PAGE>
taken as a whole are or will be required in order to cause the current
operations or properties of such entities to comply with any such laws,
ordinances, governmental rules or regulations and except as set forth on
Schedule 3.9, neither the Company nor any of its subsidiaries has received
- ------------
notice of violation of any law, ordinance, governmental rule or regulation and
except as set forth on Schedule 3.9, no investigation or review by any
------------
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the best of the Company's knowledge, threatened nor has any
Governmental Entity indicated an intention to conduct the same.
(b) Neither the Company or any of its subsidiaries nor, to the
Company's knowledge, any of the officers, directors, employees, agents or other
representatives of the Company or any of its subsidiaries or any other business
entity or enterprise with which the Company or any subsidiary is or has been
affiliated or associated, has, directly or indirectly, made or authorized any
payment, contribution or gift of money, property, or services, whether or not in
contravention of applicable law, (i) as a kickback or bribe to any Person or
(ii) to any political organization, or the holder of or any aspirant to any
elective or appointive public office except for personal political contributions
not involving the direct or indirect use of funds of the Company or any of its
subsidiaries.
(c) The Company and its subsidiaries have, and Schedule 3.9 lists,
------------
all licenses, permits, franchises or other governmental authorizations necessary
to the ownership of their property or to the conduct of their respective
businesses, which if violated or not obtained might have a Company Material
Adverse Effect. Neither the Company nor any subsidiary has finally been denied
any application for any such licenses, permits, franchises or other governmental
authorizations necessary to its business.
3.10. Litigation
----------
Except as disclosed in the SEC Reports or on Schedule 3.10, there is
-------------
no legal action, suit, arbitration or other legal, administrative or other
governmental investigation, inquiry or proceeding (whether federal, state, local
or foreign) pending or, to the best of the Company's knowledge, threatened
against or affecting the Company or any subsidiary or any of their respective
properties, assets or businesses which, either alone or in the aggregate, would
reasonably be expected to have a
-10-
<PAGE>
Company Material Adverse Effect or prevent or delay the consummation of the
transactions contemplated by the Transaction Documents. To the best of the
Company's knowledge, there are no facts which might result in or form the basis
for any such action, suit, arbitration, investigation, inquiry or other
proceeding. Except as set forth on Schedule 3.10, neither the Company nor any
-------------
subsidiary is subject to any order, writ, judgment, injunction, decree,
determination or award of any Governmental Entity.
3.11. Material Contracts
------------------
Neither the Company nor any of its subsidiaries is in default (or
would be in default with notice or lapse of time, or both) under, is in
violation (or would be in violation with notice or lapse of time, or both) of,
or has otherwise breached, any indenture, note, credit agreement, loan document,
lease, license or other agreement, including, without limitation, any Material
Contract (as defined below), whether or not such default has been waived, which
default, alone or in the aggregate with all other such defaults, would
reasonably be expected to have a Company Material Adverse Effect. Schedule 3.11
-------------
contains a complete and correct list as of the date hereof of each agreement,
contract and commitment of the following types, written or oral, to which the
Company or any of its subsidiaries is a party or by which they or any of their
assets are bound: (a) mortgages, indentures, security agreements, guarantees,
pledges and other agreements and instruments relating to the borrowing of money
or extension of credit; (b) employment, severance and consulting agreements
(other than any such agreements that are terminable without liability or penalty
on 30 days' or less notice); (c) licenses of patent, trademark and other rights
relating to any Intellectual Property (as defined below) and any other licenses,
permits and authorizations relating to the businesses of the Company and its
subsidiaries (whether as licensor or licensee) that involve by their terms a per
annum payment in excess of $100,000 or resulted in a payment obligation in
excess of $100,000 in the calendar year ended December 31, 1998; and (d) joint
venture or partnership contracts or agreements ((a) through (d) collectively,
"Material Contracts"). Prior to the date hereof, the Company has delivered to
------------------
Purchasers or their representatives complete and correct copies of all written
Material Contracts together will all amendments thereto, and accurate
descriptions of all oral
-11-
<PAGE>
Material Contracts. Each Material Contract is in full force and effect and is
binding upon the Company or one of its subsidiaries, as the case may be, and, to
the best of the Company's knowledge, is binding upon such other parties, in each
case in accordance with its terms. There are no material unresolved disputes
involving the Company or any of its subsidiaries under any Material Contract.
3.12. Absence of Undisclosed Liabilities
----------------------------------
(a) Except as disclosed on Schedule 3.12 and except for indebtedness,
-------------
obligations or liabilities that are reflected or reserved against as set forth
in the SEC Reports (including the notes to the financial statements included
therein), neither the Company nor any of its subsidiaries has any debt,
obligation or liability (whether accrued, absolute, contingent, liquidated or
otherwise, whether due or to become due and whether or not known to the Company)
arising out of any transaction entered into at or prior to the Closing, or any
act or omission at or prior to the Closing, or any state of facts existing at or
prior to the Closing, except (a) for debts, obligations or liabilities incurred
in the ordinary course of business since November 1, 1998, none of which
(individually or in the aggregate) would reasonably be expected to have a
Company Material Adverse Effect and (b) for liabilities and obligations arising
under the Transaction Documents.
(b) Except as disclosed on Schedule 3.12 and except for liabilities
-------------
that are reflected or reserved against in the most recent financial statements
included in the SEC Reports, neither the Company nor any of its subsidiaries has
any tax liability with respect to or based upon any transactions or events
occurring at or prior to the Closing, including, without limitation, unfunded
past service liabilities under any pension, profit sharing or similar plan.
3.13. Labor Relations and Employment
------------------------------
(a) Except as set forth on Schedule 3.13(a), (i) there is no labor
----------------
strike, dispute, slowdown, stoppage or lockout actually pending, or, to the best
of the Company's knowledge, threatened against the Company or any of its
subsidiaries, and during the past three years there has not been any such
action; (ii) to the best of the Company's knowledge, there are no union claims
to represent the employees of the Company or any of its
-12-
<PAGE>
subsidiaries; (iii) neither the Company nor any of its subsidiaries is a party
to or bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of the Company or any of its
subsidiaries; (iv) none of the employees of the Company or any of its
subsidiaries is represented by any labor organization and the Company does not
have any knowledge of any current union organizing activities among the
employees of the Company or any of its subsidiaries, nor does any question
concerning representation exist concerning such employees; (v) the Company and
its subsidiaries are, and have at all times been, in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, occupational safety and health,
equal opportunity, collective bargaining and payment of social security and
other taxes, and are not engaged in any discriminatory employment practices or
unfair labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation; (vi) there is no unfair labor practice
charge or complaint against the Company or any of its subsidiaries pending or,
to the best of the Company's knowledge, threatened before the National Labor
Relations Board or any similar state or foreign agency; (vii) there is no
grievance filed, or to the best of the Company's knowledge, threatened to be
filed, against the Company or any of its subsidiaries arising out of any
collective bargaining agreement or employment agreement or other grievance
procedure; (viii) no charges with respect to or relating to the Company or any
of its subsidiaries are pending before the Equal Employment Opportunity
Commission or any other agency responsible for the prevention of unlawful
employment practices; (ix) neither the Company nor any of its subsidiaries has
received notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company or any of its
subsidiaries and no such investigation is in progress; (x) there are no
complaints, lawsuits or other proceedings pending or, to the best of the
Company's knowledge, threatened in any forum by or on behalf of any present or
former employee of the Company or any of its subsidiaries alleging breach of any
express or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship; and (xi) there
has been no
-13-
<PAGE>
"mass layoff" or "plant closing" as defined by the Worker Adjustment and
Retraining Notification Act or any similar state or local "plant closing" law
with respect to the current or former employees of the Company and its
subsidiaries.
(b) The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with the
Company or any of its subsidiaries, nor does the Company have a present
intention to terminate the employment of any of the foregoing.
3.14. Employee Benefit Plans
----------------------
(a) Schedule 3.14(a) sets forth: (i) all "employee benefit plans", as
----------------
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and all other material employee benefit arrangements,
-----
including, without limitation, any such arrangements 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 Company or any of its subsidiaries or
to which the Company or any of its subsidiaries is obligated to contribute
thereunder for current or former employees the Company and its subsidiaries (the
"Employee Benefit Plans"), and (ii) all "employee pension plans", as defined in
----------------------
Section 3(2) of ERISA, other than any Multiemployer Plan (as defined below),
maintained by the Company 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
Company under Section 414(b) or (c), of the Code ("ERISA Affiliate") or to which
---------------
the Company or any ERISA Affiliate has contributed or been obligated to
contribute thereunder during the last six years (the "Pension Plans").
-------------
(b) Except as set forth on Schedule 3.14(a), none of the Employee
----------------
Benefit Plans or Pension Plans is a multiemployer plan, as defined in Section
3(37) of ERISA ("Multiemployer Plan"), and neither the Company nor any ERISA
------------------
Affiliate has withdrawn in a complete or partial withdrawal from any
Multiemployer Plan with respect to which the Company or any ERISA affiliate has
any unsatisfied withdrawal liability, nor has any of them incurred any
unsatisfied liability due to the termination or reorganization of a
Multiemployer Plan.
-14-
<PAGE>
(c) Each Employee Benefit Plan that is intended to qualify under
Section 401 of the Code 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 Employee Benefit 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 Employee Benefit Plans or Pension 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 Employee Benefit Plans or Pension 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 Pension Plans which are
subject to Title IV of ERISA. Each of the Pension Plans are fully funded in
accordance with the actuarial assumptions used by the PBGC to determine the
level of funding required in the event of the termination of the Pension Plans.
(f) Neither the Company nor any ERISA Affiliate has terminated any
Pension Plan subject to Title IV of ERISA with respect to which it has incurred
any material outstanding liability, or incurred any material 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
Pension Plans have been paid. Neither the Company nor any 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 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.
-15-
<PAGE>
(h) There has been no violation of ERISA or the Code with respect to
the filing of applicable reports, documents and notices regarding the Employee
Benefit 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 Employee Benefit Plans which could result in a material
liability to the Company.
(i) True, correct and complete copies of the following documents, with
respect to each of the Employee Benefit Plans and Pension Plans, have been
delivered to Purchasers by the Company or are publicly available: (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 Employee Benefit Plans and
Pension Plans; and (vi) written descriptions of all non-written agreements
relating to the Employee Benefit Plans.
(j) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Employee Benefit 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 Employee Benefit Plans with respect to the
operation of such plans (other than routine benefit claims), nor does the
Company have knowledge of facts which could form the basis for any such claim or
lawsuit.
(k) All amendments and actions required to bring the Employee Benefit
Plans and Pension 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) The Employee Benefit 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 neither the Company, any of its
subsidiaries, nor, to the best of the Company's knowledge, any "party in
interest" or "disqualified person" with respect to the Employee Benefit 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
-16-
<PAGE>
any other failure to act or comply in connection with the administration or
investment of the assets of any Employee Benefit Plan.
(m) None of the Employee Benefit Plans provide retiree life or retiree
health benefits except as may be required under Section 4980B of the Code or
Section 601 of ERISA or applicable state law and at the expense of the
participant or the participant's beneficiary. The Company and the 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.
(n) Except as set forth on Schedule 3.14(n), none of the execution and
----------------
delivery of the Company Transaction Documents, the consummation of the
transactions contemplated hereby and thereby or any other transactions involving
the Company, Purchasers and/or any of the Company's stockholders will (i) result
in any payment becoming due to any employee (current, former or retired) of the
Company or any of its subsidiaries, (ii) increase any benefits otherwise payable
under any Employee Benefit Plan, (iii) result in the acceleration of the time of
payment or vesting of any benefits under any Employee Benefit Plan, (iv) qualify
as a "change of control" or similar event under any Employee Benefit Plan or (v)
result in any payment becoming due to any employee that may be nondeductible
under Section 162(m) or Section 280G of the Code.
(o) Except as set forth on Schedule 3.14(o), no stock or other
----------------
security issued by the Company or any Affiliate forms or has formed a material
part of the assets of any Employee Benefit Plan or Pension Plan.
3.15. FCC Matters
-----------
(a) A complete and accurate list of the FCC Licenses is set forth on
Schedule 3.15. The FCC Licenses are in full force and effect and unimpaired by
- -------------
any condition that could have a Company Material Adverse Effect. No
application, complaint, action or proceeding is pending or, to the best of the
Company's knowledge, threatened, that may result in the revocation,
modification, non-renewal or suspension of any FCC License or the imposition of
any administrative or judicial sanction with respect to any FCC License.
Neither the Company, Catalina nor any other subsidiary of the Company has
knowledge of any failure
-17-
<PAGE>
of Catalina to comply in all material respects with the terms and conditions of
the FCC Licenses, and all applicable rules, regulations and policies of the FCC
and requirements of the Communications Act of 1934, as amended.
(b) The equipment which is operated pursuant to the FCC Licenses is
operated in all material respects in compliance with the rules, regulations and
policies of the FCC and requirements of the Communications Act of 1934, as
amended.
(c) Neither the Company, Catalina nor any other subsidiary of the
Company is aware of any facts or circumstances that are likely to prevent or
delay prompt FCC Approval.
3.16. Real Property
-------------
(a) Schedule 3.16(a) contains a complete and accurate list of all real
----------------
property owned in whole or in part, directly or indirectly, by the Company or
its subsidiaries (the "Owned Real Property"). The Company has good and
-------------------
marketable title in fee simple to all of the Owned Real Property, free and clear
of all liens, encumbrances, charges, mortgages, judgments and hypothecations,
whether recorded or unrecorded. None of the Owned Real Property is subject to
any right or option of any other Person to purchase or lease or otherwise obtain
title to or an interest in such real property. No Person other than the Company
or any of its subsidiaries has any right to use, occupy or lease any of the
Owned Real Property or Leased Real Property (as defined in subsection (b) of
this Section 3.16). Schedule 3.16(a) contains an accurate and complete list of
----------------
all Owned Real Property leased in whole or in part by the Company as landlord.
True and complete copies of all leases including all modification and amendments
thereto listed on Schedule 3.16(a) have been delivered to Purchasers. All of
----------------
the buildings, improvements, structures and appurtenances situated on the Owned
Real Property are owned by the Company or one if its subsidiaries and are in all
material respects in good operating condition, normal wear and tear excepted.
Except as set forth on Schedule 3.16(a), no condemnation proceeding or similar
----------------
proceeding is pending or, to the best of the Company's knowledge, threatened
that would preclude or impair the use of any such property or any improvement
thereon by the Company or any of its subsidiaries for the purpose for which it
is currently used. There is no material latent or patent structural, mechanical
or other significant defect, soil condition or deficiency in any of the
improvements
-18-
<PAGE>
located on any of the Owned Real Property or, to the best of the Company's
knowledge, the Leased Real Property.
(b) Schedule 3.16(b) lists all real property leased by the Company or
----------------
its subsidiaries as well as the commencement and expiration dates of all leases
relating thereto (the "Leased Real Property"). True and complete copies of all
--------------------
leases listed on Schedule 3.16(b) have been delivered to Purchasers. The
----------------
Company or one of its subsidiaries has a valid and existing lease or sublease
for each property subsumed within the Leased Real Property. All leases covering
any of the Leased Real Property are valid and enforceable by the Company or one
of its subsidiaries, as the case may be, in accordance with their respective
terms, are in full force and effect, and have not been modified, supplemented or
terminated except as set forth on Schedule 3.16(b), and there is not under any
----------------
such lease any default by the Company or one of its subsidiaries or, to the best
of the Company's knowledge, by any landlord or lessor under any such lease. All
third party consents required in respect of the Owned Real Property or Leased
Real Property in order to consummate the transactions contemplated by the
Company Transaction Documents have been obtained. The facilities and real
properties covered by the Leased Real Property and included in the Owned Real
Property constitute all of the facilities and real properties presently used by
the Company or its subsidiaries.
(c) Any increase in real property taxes due to the acquisition of
Owned Real Property by the Company is reflected in the most recent financial
statements included in the SEC Reports. If the values of the Owned Real
Property for purposes of California property taxes are reassessed as of the
Closing Date to their fair market values as of the Closing Date, such
reassessment will not result in a material increase in the assessed values of
such property. Schedule 3.16(c) accurately states the assessed values for
----------------
purposes of California property taxes of the Owned Real Property.
3.17. Condition of Properties
-----------------------
Except as would not reasonably be expected to have a Company Material
Adverse Effect, all facilities, machinery, equipment, fixtures, vehicles and
other properties owned, leased or used by the Company and its subsidiaries are
in good operating condition and repair, are reasonably fit and usable for the
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<PAGE>
purposes for which they are being used, are adequate and sufficient for the
Company's or such subsidiary's business and conform in all material respects
with all applicable ordinances, regulations and laws.
3.18. Environmental Matters
---------------------
(a) Except as set forth on Schedule 3.18 and except as would not
-------------
reasonably be expected to have a Company Material Adverse Effect:
(i) The Company and its subsidiaries (i) are in substantial
compliance with all Environmental Laws; (ii) have obtained
all necessary Environmental Permits, all of which are in
full force and effect; and (iii) are in substantial
compliance with all terms and conditions of such
Environmental Permits.
(ii) Neither the Company nor any of its subsidiaries has violated
or done any act which could give rise to liability under, or
have otherwise failed to act in a manner which would expose
any of them to liability under, any Environmental Law.
(iii) No Hazardous Material has been released, spilled,
discharged, dumped, disposed of, or otherwise come to be
located in, at, beneath or near any of the Owned Real
Property or Leased Real Property including properties
formerly owned, operated or otherwise controlled by the
Company or any of its subsidiaries (during the period of the
Company's or such subsidiaries' ownership, operation or
control thereof) in such manner as would reasonably be
expected to result in environmental liability to the Company
or any of its subsidiaries.
(iv) There have been and are no: (i) aboveground or underground
storage tanks; (ii) surface impoundments for Hazardous
Materials; or (iii) friable asbestos or asbestos containing
materials or polychlorinated biphenyl ("PCB") or PCB-
containing equipment, located within any
-20-
<PAGE>
portion of the Owned Real Property or Leased Real Property.
(v) No liens have been placed upon any Owned Real Property or
Leased Real Property in connection with any actual or
alleged liability under any Environmental Law.
(vi) Neither the Company nor any of its subsidiaries has received
any written notice, claim, demand, suit or request for
information from any Governmental Entity or private entity
with respect to any liability or alleged liability under any
Environmental Law, nor has any entity previously owned,
operated, or otherwise controlled by the Company or its
subsidiaries whose liability, in whole or in part, may be
attributed to the Company or any of its subsidiaries,
received any such notice, claim, demand, suit or request for
information; neither the Company nor any of its subsidiaries
has ongoing negotiations with or agreements with any
Governmental Entity or other Person or entity relating to
any Remedial Action or other claim arising under or related
to any Environmental Law.
(vii) Neither the Company nor any of its subsidiaries has
disposed, or arranged for the disposal, of any Hazardous
Materials at any facility that is or has ever been the
subject of investigation or response action under the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. (S) 9601 et seq. ("CERCLA"),
------- ------
Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901
et seq. ("RCRA"), or any state law of similar effect.
------- ----
(viii) The Company has provided to Purchasers all environmental
studies and reports pertaining to the Owned Real Property or
Leased Real Property including properties formerly owned,
operated or otherwise controlled by the Company or any of
its subsidiaries and the improvements thereon that they are
aware of, have
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<PAGE>
commissioned or have in their possession. To the best of the
Company's knowledge, such studies and reports do not contain
any inaccuracies resulting from, in whole or in part, any
material misrepresentation of the Company.
With respect to the following owned Real Property and Leased Real Property the
above representations and warranties are unqualified with respect to Company
Material Adverse Effect: 3611 North San Fernando Road, Burbank, California; 2901
West Alameda Avenue, Burbank, California; 3000 Olympic Boulevard, Santa Monica,
California; 100 Universal City Plaza, Building 153, Universal Studios,
California; 730 Arizona Avenue, Santa Monica, California; 1318 Lincoln
Boulevard, Santa Monica, California.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Environmental Laws" shall mean any statute, regulation, ordinance,
------------------
order, decree, agreement, common law duty or other requirement of United States
or Singapore law (for the Singapore Leased Real Property only) relating to
protection of human health, safety or the environment (including, without
limitation, ambient air, surface water, groundwater, wetlands, soil, surface and
subsurface strata).
"Environmental Permits" shall mean all permits, licenses, approvals,
---------------------
authorizations, consents or registrations required under any applicable
Environmental Law.
"Hazardous Materials" shall mean any chemicals, pollutants,
-------------------
contaminants, wastes, toxic substances, hazardous substances, hazardous
materials, hazardous wastes, radioactive materials, petroleum or petroleum
products.
"Remedial Action" shall mean any action required to: (i) clean up,
---------------
remove or treat Hazardous Materials; (ii) prevent a release or threat of release
of any Hazardous Material; (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care; or (iv) cure a violation of Environmental
Law.
-22-
<PAGE>
3.19. Intellectual Property
---------------------
(a) Schedule 3.19(a) sets forth a complete list of
----------------
registrations/patents or applications therefor pertaining to the Intellectual
Property, the dates of application/issuance and the relevant jurisdictions.
Except as described on Schedules 3.19(a), (b) or (c), the Company or one of its
----------------- --- ---
subsidiaries owns or, to the best of the Company's knowledge, has the valid
right to use, free and clear of all liens and other encumbrances or claims of
any nature, all of the Intellectual Property necessary for the conduct of the
business of the Company or any of its subsidiaries. Except as described on
Schedule 3.19(a), (b) or (c), all Intellectual Property listed on Schedule
- ---------------- --- ---
3.19(a) is valid, subsisting, unexpired, and enforceable and all renewal fees
and other maintenance fees that have fallen due on or prior to the effective
date of this Agreement have been paid.
(b) Except as set forth on Schedule 3.19(b), there is no claim, suit,
----------------
action or proceeding pending or, to the best of the Company's knowledge,
threatened against the Company or one of its subsidiaries: (i) alleging any
such conflict or infringement with any third party's proprietary rights; or (ii)
challenging the Company or one of its subsidiaries' ownership or use, or the
validity or enforceability of any Intellectual Property that is necessary for
the conduct of the business of the Company or any of its subsidiaries. Except
as set forth on Schedule 3.19(b), there is no claim, suit, action or proceeding
----------------
pending or, to best of the Company's knowledge, threatened by the Company or one
of its subsidiaries, alleging any third party's intellectual property rights
conflict or infringe the Intellectual Property of the Company or one of its
subsidiaries.
(c) Schedule 3.19(c) sets forth a complete and accurate list of all:
----------------
(i) licenses, sublicenses and other agreements in which the Company or one of
its subsidiaries grants rights to any Person to use the Intellectual Property;
and (ii) consents, indemnifications, forbearances to sue, settlement agreements
or cross-licensing arrangements relating to the Intellectual Property or the
intellectual property of any third party to which the Company or one of its
subsidiaries is a party. Except as set forth on Schedule 3.19(c), neither the
----------------
Company nor any of its subsidiaries is under any obligation to pay royalties or
similar payments in connection with any license, nor will the Company or any of
its subsidiaries be, as a result of the
-23-
<PAGE>
execution and delivery of the Company Transaction Documents or the performance
of its obligations hereunder or thereunder, in breach of any license, sublicense
or other agreement relating to the Intellectual Property.
(d) Except as set forth on Schedule 3.19(d), no former or present
employee, officer or director of the Company or any of its subsidiaries holds
any right or title, directly or indirectly, in whole or in part, in or to any
Intellectual Property.
(e) The Company or one of its subsidiaries owns or has the right to
use all computer software, software systems and databases and all other
information systems currently used in the business of the Company or any of its
subsidiaries and necessary for the conduct of the business of the Company or any
of its subsidiaries, including, without limitation, all such computer software
used in the business of the Company on personal computers by employees of the
Company or any of its subsidiaries.
For purposes of this Agreement, "Intellectual Property" shall mean all
---------------------
of the following, owned or used in the business of the Company or any of its
subsidiaries: (i) trademarks and service marks (registered or unregistered),
trade dress, trade names and other names and slogans embodying business or
product goodwill or indications of origin, all applications or registrations in
any jurisdiction pertaining to the foregoing and all goodwill associated
therewith; (ii) patents, patentable inventions, discoveries, improvements,
ideas, know-how, formula methodology, processes, technology and computer
programs, software and databases (including source code, object code,
development documentation, programming tools, drawings, specifications and data)
and all applications or registrations in any jurisdiction pertaining to the
foregoing, including all reissues, continuations, divisions, continuations-in-
part, renewals or extensions thereof; (iii) trade secrets, including
confidential and other non-public information, and the right in any jurisdiction
to limit the use or disclosure thereof; (iv) copyrights in writings, designs,
mask works or other works, and applications or registrations in any jurisdiction
for the foregoing; (v) database rights; (vi) Internet Web sites, domain names
and registrations or applications for registration thereof; (vii) licenses,
immunities, covenants not to sue and the like relating to any of the foregoing;
(viii) books and records
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<PAGE>
describing or used in connection with any of the foregoing; and (ix) claims or
causes of action arising out of or related to infringement or misappropriation
of any of the foregoing.
3.20. Year 2000
---------
Except as set forth on Schedule 3.20 or in the SEC Reports, or as
-------------
would not have, individually or in the aggregate, a Company Material Adverse
Effect:
(a) To the best of the Company's knowledge, none of the Computer
Software, computer firmware, computer hardware (whether general or special
purpose) and other similar or related items of automated, computerized and/or
software system(s) that are used or relied on by the Company or any of its
subsidiaries in the conduct of their respective businesses will malfunction,
cease to function, generate incorrect data, or provide incorrect results when
processing, providing, and/or receiving (i) date-related data into and between
the twentieth and twenty-first centuries and (ii) date-related data in
connection with any valid date in the twentieth and twenty-first centuries.
(b) To the best of the Company's knowledge, none of the products and
services sold, licensed, rendered or otherwise provided by the Company or any of
its subsidiaries in the conduct of their respective businesses will malfunction,
cease to function, generate incorrect data or produce incorrect results when
processing, providing and/or receiving (i) date-related data in and between the
twentieth and twenty-first centuries and (ii) date-related data in connection
with any valid date in the twentieth and twenty-first centuries; and the Company
and its subsidiaries are not and shall not be subject to liabilities arising
from their failure to do so.
For purposes of this Agreement, "Computer Software" shall mean any and
-----------------
all items, products and systems used in the operation of the business of the
Company or its subsidiaries, which incorporate the processing of dates or date-
related data (including, but not limited to, representing, calculating,
comparing and sequencing) and are operationally material to the business of the
Company or its subsidiaries, including, but not limited to, computer systems,
infrastructure items, software applications, hardware, and related equipment and
utilities including, but not limited to (i) any and all computer programs and
applications consisting of sets of statements and
-25-
<PAGE>
instructions to be used directly or indirectly in computer software or firmware
whether in source code or object code form, (ii) databases and compilations,
including without limitation any and all data and collections of data, whether
machine readable or otherwise, (iii) all versions of the foregoing including,
without limitation, all screen displays and designs thereof, and all component
modules of source code or object code or natural language code therefor, and
whether recorded on paper, magnetic media or other electronic or non-electronic
device, (iv) all descriptions, flowcharts and other work product used to design,
plan, organize and develop any of the foregoing, (v) all documentation
including, without limitation, all technical and user manuals and training
materials relating to the foregoing, and (vi) Internet domain names and content
contained on all World Wide Web sites of the Company or any of its subsidiaries.
3.21. Tax Matters
-----------
(a) The Company is the common parent of an affiliated group of
corporations (within the meaning of Section 1504(a) of the Code) eligible to
file consolidated federal income Tax Returns.
(b) Except as set forth on Schedule 3.21(b), (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 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) or to which the Company may be liable under Treasury
Regulations (S) 1.1502-6 (or analogous state, local, or foreign provisions), as
a transferee or successor, by contract or otherwise, by virtue of having been a
member 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 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 included in the SEC Reports in accordance with 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,
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<PAGE>
nor is any claim for additional Tax or assessment asserted by any Tax authority,
nor, to the best of the Company's knowledge, is any such assertion threatened;
(vi) no 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 best of 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 168(f)(8) of the Internal Revenue Code of 1954 or any analogous state or
local provisions; (xi) the Company has not filed any agreement or consent under
Section 341(f) of the Code; (xii) 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; (xiii) no ruling
with respect to Taxes (other than a request for determination of the status of a
qualified pension plan) has been requested by or on behalf of the Company; (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; and (xv) there is no security interest on any
asset of the Company that arose in connection with a failure (or alleged
failure) to pay any Tax. For purposes of this paragraph (except for clause
(xvi)), "Company" includes the Company and any of its subsidiaries.
(c) For purposes of this Agreement, the following terms shall have
the following meanings:
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Tax(es)" 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
-27-
<PAGE>
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.
"Tax Return(s)" 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.
3.22. Insurance
---------
The Company and its subsidiaries and their respective properties are
insured in such amounts, against such losses and with such insurers as are
prudent when considered in light of the nature of the properties and businesses
of the Company and its subsidiaries. Schedule 3.22 sets forth a complete and
-------------
accurate list of the insurance policies of the Company and its subsidiaries 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 or any of its subsidiaries and such policies are in full force
and effect.
3.23. Transactions with Related Parties
---------------------------------
Except as set forth on Schedule 3.23 or in the SEC Reports, neither
-------------
the Company nor any subsidiary is a party to any agreement with any of the
Company's directors, officers or, to the best of the Company's knowledge,
shareholders or, to the best of the Company's knowledge, any Affiliate or family
member of any of the foregoing under which it: (i) leases any real or personal
property (either to or from such Person), (ii) licenses real or personal
property or Intellectual Property (either to or from such Person), (iii) is
obligated to purchase any tangible or intangible asset from or sell such asset
to such Person, (iv) purchases products or services from such Person, (v) has
borrowed money from or loaned money to such Person or (vi) permits such Person
to use any personal property of the Company
-28-
<PAGE>
or any of its subsidiaries for personal purposes. Except as set forth on
Schedule 3.23 or in the SEC Reports, neither the Company nor any subsidiary
- -------------
employs as an employee or engages as a consultant any family member of any of
the Company's directors, officers or, to the best of the Company's knowledge,
shareholders. To the best of the Company's knowledge and except as set forth on
Schedule 3.23, there exist no agreements among shareholders of the Company,
- -------------
except as contemplated by the Company Transaction Documents, to act in concert
with respect to their voting or holding of Company securities.
3.24. Interest in Competitors
-----------------------
Neither the Company, nor any or its subsidiaries, nor, to the best of
the Company's knowledge, any of their respective officers or directors, has any
interest, either by way of contract or by way of investment (other than as
holder of not more than 2% of the outstanding capital stock of a publicly traded
Person) or otherwise, directly or indirectly, in any Person other than the
Company and its subsidiaries that (i) provides any services or designs, produces
or sells any product or product lines or engages in any activity similar to or
competitive with any activity currently proposed to be conducted by the Company
or any of its subsidiaries or (ii) has any direct or indirect interest in any
asset or property, real or personal, tangible or intangible, of the Company.
3.25. Private Offering
----------------
Neither the Company nor anyone acting on its behalf shall offer the
Shares or the Warrant for issue or sale to, or solicit any offer to acquire any
of the same from, anyone so as to bring the issuance and sale of the Shares, the
Warrant or the shares of Company Common Stock issuable upon the exercise of the
Warrant, or any part thereof, within the provisions of Section 5 of the
Securities Act. Based upon the representations of Purchasers set forth in
Section 4, the offer, issuance and sale of the Shares, the Warrant and the
shares of Company Common Stock issuable upon exercise of the Warrant are and
will be exempt from the registration and prospectus delivery requirements of the
Securities Act, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
-29-
<PAGE>
3.26. Brokerage
---------
Other than with respect to fees payable to Houlihan, Lokey, Howard &
Zukin Capital ("Houlihan Lokey"), there are no claims for brokerage commissions
--------------
or finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement or the other Transaction Documents based on any
arrangement made by or on behalf of the Company and the Company agrees to
indemnify and hold Purchasers harmless against any costs or damages incurred as
a result of any such claim, including with respect to fees payable to Houlihan
Lokey. The Company has heretofore furnished to Purchasers true and complete
information concerning the financial arrangements between the Company and
Houlihan Lokey pursuant to which such firm would be entitled to any payment as a
result of the transactions contemplated by the Transaction Documents.
3.27. Disclosure
----------
None of the information with respect to the Company or its
subsidiaries to be included or incorporated by reference in the proxy statement
of the Company, including any amendments or supplements thereto (collectively,
the "Company Proxy Statement") to be mailed to the stockholders of the Company
-----------------------
in connection with the transactions contemplated by the Transaction Documents
will, at the time of the mailing of the Company Proxy Statement and at the time
of the Company Vote (as defined in Section 6.3 of this Agreement), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading; provided,
that the foregoing representation shall not be applicable with respect to untrue
statements or omissions based upon information furnished to the Company by
Purchasers for use therein. The Company Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder. Prior to the date hereof, the Company has provided
or made available to Purchasers or their representatives complete and accurate
copies of (i) all unredacted minutes of meetings and written consents of the
Board and committees thereof for the period from September 25, 1996 through
December 1, 1998 and (ii) all documents and agreements, including any
amendments, renewals or modifications thereof, referenced in the schedules to
this Agreement.
-30-
<PAGE>
3.28. Takeover Provisions Inapplicable
--------------------------------
As of the date hereof and at all times on or prior to the Closing
Date, the Board shall have approved the transactions contemplated by this
Agreement, including, without limitation, the Additional Purchase Agreements,
the Voting and Option Agreement and the Voting Agreements so as to render
inapplicable hereto and thereto the limitations on business combinations
contained in Section 203 of the DGCL.
3.29. Company Action
--------------
The Board (at a meeting duly called and held) has by unanimous vote of
the directors (i) determined that the transactions that are the subject of the
Company Voting Matters (as defined in Section 6.3 of this Agreement) are
advisable and in the best interests of the Company and its stockholders, (ii)
recommended the approval of the transactions that are the subject of the Company
Voting Matters and directed that the transactions that are the subject of the
Company Voting Matters be submitted for consideration by the Company's
stockholders at the Company Vote (subject to its right to withdraw, modify or
amend such recommendation and direction solely as provided in Section 5.3 of
this Agreement), and (iii) adopted a resolution having the effect of causing the
Company not to be subject, to the extent permitted by applicable law, to any
state takeover law that may purport to be applicable to the transactions
contemplated by the Transaction Documents.
3.30. Fairness Opinion
----------------
The Company has received, and has furnished Purchasers with a complete
and correct copy of, the written opinion of Houlihan Lokey, the financial
advisor to the Company, dated the date hereof, in the form set forth on Schedule
3.30.
3.31. FIRPTA
------
The Company is not, and has not been at any time during the five year
period ending on the date of this Agreement, a United States real property
holding corporation with the meaning of Section 897(c)(2) of the Code.
-31-
<PAGE>
3.32. [Intentionally Deleted]
-----------------------
3.33. Employment Agreements
---------------------
The Company and each of the Executives have executed employment
agreements in the form set forth on Schedule 3.33 (collectively, the "Employment
------------- ----------
Agreements"). Each of the Employment Agreements is in full force and effect and
- ----------
none of the parties thereto are in breach thereof.
3.34. Negative Assurances
-------------------
To the Company's knowledge, the representations and warranties of (a)
TSP in the Voting and Option Agreement, (b) Walston and TSP, respectively, in
the Walston Voting Agreement and (c) Flemings in the Flemings Voting Agreement
are, in each such case, true and correct in all material respects.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
---------------------------------
PURCHASERS
----------
Each Purchaser jointly and severally represents and warrants to the
Company as follows:
(a) Each Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and each Purchaser has the requisite power and authority to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party and to consummate the transactions contemplated hereby and
thereby, and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement and of the other Transaction Documents to
which it is a party.
(b) This Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by each Purchaser and, assuming
the due execution and delivery of this Agreement by the Company and of such
other Transaction Documents by the other parties thereto, are the valid and
binding obligations of each Purchaser, enforceable against each Purchaser in
accordance with their respective terms, except that (i) the enforceability
hereof and thereof may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereinafter in effect, affecting creditors' rights
generally, and (ii) the availability of the remedy of specific performance or
injunctive
-32-
<PAGE>
or other forms of equitable relief may be subject to equitable defenses and
would be subject to the discretion of the court before which any proceeding
therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor of the
other Transaction Documents to which it is a party nor the performance by each
Purchaser of its obligations hereunder or thereunder will conflict with, result
in a violation or breach of, or constitute a default (or an event that, with
notice or lapse of time or both, would result in a default) or give rise to any
right of termination, amendment, cancellation or acceleration under
(collectively, a "Conflict"), (i) its certificate of limited partnership,
--------
partnership agreement or comparable instrument, (ii) any contract, commitment,
agreement, understanding, arrangement or restriction of any kind to which such
Purchaser is a party or by which such Purchaser is bound to the extent such
Conflict would materially affect such Purchaser's ability to consummate the
transactions contemplated under the Transaction Documents or (iii) any judgment,
writ, decree, order or ruling applicable to such Purchaser to the extent such
Conflict would materially affect such Purchaser's ability to consummate the
transactions contemplated under the Transaction Documents.
(d) Neither the execution and delivery of this Agreement nor of the
other Transaction Documents to which it is a party nor the performance by each
Purchaser of its obligations hereunder or thereunder will violate any law,
decree, statute, rule or regulation applicable to such Purchaser or require any
order, consent, authorization or approval of, filing or registration with, or
declaration or notice to, any corporation, Person, firm, Governmental Entity or
public or judicial authority, other than any required notices or filings with
the FCC or pursuant to the HSR Act or the federal securities laws.
(e) It is acquiring the Shares and the Warrant (and will acquire the
Company Common Stock issuable upon exercise of the Warrant) for its own account
for investment and not with a view towards the resale, transfer or distribution
thereof, nor with any present intention of distributing the Shares or the
Warrant (or the Company Common Stock acquired upon exercise of the Warrant), but
subject, nevertheless, to any requirement of law that the disposition of such
Purchaser's property shall at all times be within such Purchaser's control
(subject to any
-33-
<PAGE>
restrictions on transfer set forth herein), and without prejudice to such
Purchaser's right at all times to sell or otherwise dispose of all or any part
of such securities under a registration under the Securities Act or under an
exemption from said registration available under the Securities Act.
(f) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement or the other Transaction Documents to which it is a party based on any
arrangement made by or on behalf of such Purchaser or any of its Affiliates and
such Purchaser agrees to indemnify and hold the Company harmless against any
costs or damages incurred as a result of any such claim.
(g) It has such knowledge and experience in financial and business
matters that it 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. It has been
furnished access to such information and documents as it has requested and has
been afforded an opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of this
Agreement and the purchase of the Shares and the Warrant contemplated hereby.
It is an "accredited investor" as defined in Rule 501(a) under the Securities
Act.
(h) Neither such Purchaser nor any of its Affiliates is an
"interested stockholder" (as such term is defined in Section 203 of the DGCL) of
the Company as of the date immediately prior to the date of this Agreement, and
has not had such status with respect to the Company during the three years
preceding such prior date. Immediately prior to the date of this Agreement,
such Purchaser was not the beneficial owner of any Capital Stock of the Company.
(i) The Purchasers have available and fully committed to them all
funds necessary to consummate the transactions contemplated by the Transaction
Documents.
-34-
<PAGE>
SECTION 5. CONDUCT OF THE BUSINESS PENDING THE SALE AND PURCHASE
-----------------------------------------------------
5.1. Acquisition Proposals
---------------------
The Company will notify Purchasers immediately, but in any event
within 24 hours, if any proposals, inquiries or expressions of interest are
received by, any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with the Company or its
representatives, in each case in connection with any Takeover Proposal (as
defined below) or the possibility or consideration by a third party of making a
Takeover Proposal ("Takeover Proposal Interest") indicating, in connection with
--------------------------
such notice, the name of the Person indicating such Takeover Proposal Interest
and the terms and conditions of any proposals or offers. The Company agrees that
it will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Takeover Proposal Interest. The Company agrees that it will take the
necessary steps promptly to inform the Persons referred to in the first sentence
hereof of the obligations undertaken in this Section 5.1. The Company agrees
that it shall keep Purchasers informed, on a current basis, of the status and
terms of any Takeover Proposal Interest. As used in this Agreement, "Takeover
--------
Proposal" shall mean any tender or exchange offer involving the Company, any
- --------
proposal for a merger, consolidation or other business combination involving the
Company, any proposal or offer to acquire in any manner a greater than 15%
equity interest in, or a significant portion of the business or assets of, the
Company (other than immaterial or insubstantial assets or inventory in the
ordinary course of business or assets held for sale), any proposal or offer with
respect to any recapitalization or restructuring with respect to the Company or
any proposal or offer with respect to any other transaction similar to any of
the foregoing with respect to the Company other than pursuant to the
transactions to be effected pursuant to this Agreement and the Additional
Purchase Agreements.
5.2. Conduct of Business by the Company
----------------------------------
Except as contemplated by the Transaction Documents, from the date hereof
through the Closing Date, unless Purchasers shall otherwise agree in writing:
-35-
<PAGE>
(a) the Company shall and shall cause its subsidiaries to carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall, and shall
cause its subsidiaries to, use their reasonable best efforts to preserve intact
their present business organizations, keep available the services of their
present officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and on-going businesses shall be unimpaired on the Closing Date.
Without limiting the generality of the foregoing, the Company shall, and shall
cause its subsidiaries to, (i) maintain insurance coverages and its books and
records in a manner consistent with prior practices, (ii) comply with all laws,
ordinances and regulations of Governmental Entities applicable to the Company
and its subsidiaries, (iii) maintain and keep its properties and equipment in
good repair, working order and condition, ordinary wear and tear excepted, and
(iv) perform its obligations under all contracts and commitments to which it is
a party or by which it is bound, except in each case where the failure to so
maintain, comply or perform, either individually or in the aggregate, would not
reasonably be expected to result in a Company Material Adverse Effect;
(b) the Company shall not, nor shall it propose to, (i) sell, pledge
or transfer or agree to sell, pledge or transfer any capital stock owned by it
in any of its subsidiaries, (ii) amend its Certificate of Incorporation or By-
laws, (iii) split, combine or reclassify its outstanding capital stock or issue
or authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of the capital stock, or declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property, or (iv) directly or indirectly redeem, purchase or otherwise acquire
or agree to redeem, purchase or otherwise acquire any shares of its capital
stock, except pursuant to (A) the exercise of rights granted to such party to
repurchase shares of its capital stock from employees upon termination of
employment or (B) contractual obligations arising under agreements existing on
the date hereof and disclosed in the schedules attached hereto;
(c) the Company shall not, nor shall it permit any of its subsidiaries
to, (i) issue, deliver, sell or encumber or agree to issue, deliver, sell or
encumber any additional shares
-36-
<PAGE>
of, or stock appreciation rights or rights of any kind to acquire any shares of,
its capital stock of any class, or any options, rights or warrants to acquire,
or securities convertible into, shares of capital stock other than (A) issuances
of Company Common Stock pursuant to the exercise of warrants or stock options
outstanding on the date hereof and disclosed on Schedule 3.3(b) or Schedule
--------------- --------
3.3(c) or (B) except with respect to the persons listed on Schedule 5.2, the
- ------ ------------
grant of employee stock options and the issuance of Company Common Stock upon
exercise thereof, at fair market value at the time of grant of the options, in
each case in the ordinary course of business and consistent with past practice,
to employees below the level of officer or director, provided that such
--------
employees are not Affiliates or immediate family members of employees of the
Company or any of its subsidiaries or Affiliates at or above the level of
officer or director, in each case in the ordinary course of business and
consistent with past practice but not to exceed 50,000 shares of Company Common
Stock in the aggregate, (ii) acquire, lease or dispose or agree to acquire,
lease or dispose of any capital assets or any other assets other than in the
ordinary course of business, (iii) incur additional indebtedness or encumber or
grant a security interest in any asset or enter into any transaction other than
in the ordinary course of business, (iv) incur any liability or obligation, or
contribute any asset, to a subsidiary of the Company other than in the ordinary
course of business, (v) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, in each case in this clause (v) which are
material, individually or in the aggregate, to the Company and its subsidiaries
taken as a whole, or (vi) adopt, enter into, amend or terminate any contract,
agreement, commitment or arrangement with respect to any of the foregoing that
is not otherwise permitted by the exceptions applicable to the foregoing;
(d) the Company shall not, nor shall it permit any of its subsidiaries
to, other than to comply with applicable law, (i) adopt, enter into, terminate
or amend any bonus, profit sharing, compensation, severance, termination, stock
option, pension, retirement, deferred compensation, employment or other Employee
Benefit Plan agreement, trust, fund or other arrangement for the benefit or
welfare of any director, officer or current or
-37-
<PAGE>
former employee, except with respect to the agreements described in Section
8.13, (ii) increase in any manner the compensation or fringe benefits of any
director, officer or employee (except for normal increases in the ordinary
course of business that are consistent with past practice and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company and its subsidiaries relative to the level in effect
prior to such increase), (iii) pay any benefit not provided under any existing
plan or arrangement, (iv) except for benefits that have already been earned or
vested without acceleration, grant any awards or make any payments under any
bonus, incentive, performance or other compensation plan or arrangement or
Employee Benefit Plan (including, without limitation, the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any benefit plans or agreements or awards made thereunder), except for (A)
making of matching and annual contributions to 401(k) plans and (B) the grant of
employee stock options and the issuance of Company Common Stock upon exercise
thereof pursuant to subsection (c) of this Section 5.2, (v) take any action to
fund or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or Employee Benefit Plan,
other than in the ordinary course of business consistent with past practice, or
(vi) adopt, enter into, amend or terminate any contract, agreement, commitment
or arrangement to do any of the foregoing that is not otherwise permitted by the
exceptions applicable to the foregoing;
(e) the Company shall not, nor shall it permit any of its subsidiaries
to, make any investments in non-investment grade securities;
(f) the Company shall not, nor shall it permit its subsidiaries to,
(i) make any change in its accounting policies or procedures except as required
by GAAP or (ii) make any material Tax election, change any material Tax election
already made, adopt any material Tax accounting method, change any material Tax
accounting method unless required by GAAP, enter into any closing agreement,
settle any Tax claim or assessment or consent to any Tax claim or assessment or
any waiver of the statute of limitations for any such claim or assessment; and
-38-
<PAGE>
(g) the Company shall not enter into any agreement to perform any of
the actions prohibited under this Section 5.2 and not otherwise permitted by the
exceptions contained therein.
5.3. No Solicitation; Board Recommendation
-------------------------------------
(a) The Company will not, and will use its best efforts to ensure
that its officers, directors, employees, investment bankers, attorneys,
accountants and other agents do not, directly or indirectly: (i) initiate,
solicit or encourage, or take any action to facilitate (including by the
furnishing of information) the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Takeover Proposal, (ii) enter
into any agreement with respect to any Takeover Proposal, or (iii) in the event
of an unsolicited Takeover Proposal for the Company, engage in negotiations or
discussions with, or provide any information or data to, any Person (other than
Purchasers, any of their Affiliates or representatives and except for
information which has been previously publicly disseminated by the Company)
relating to any Takeover Proposal.
(b) Notwithstanding the foregoing, prior to the Closing, the Company
may furnish information concerning its business, properties or assets to any
Person pursuant to appropriate confidentiality agreements, and may negotiate and
participate in discussions and negotiations with such Person concerning a
Takeover Proposal (provided that the Company shall not agree to any exclusive
--------
right to negotiate with the Company) if (x) such entity or group has, without
the Company or any of its officers, directors, employees, investment bankers,
attorneys, accountants or other agents having taken any action prohibited by
Section 5.3(a) of this Agreement following the date of this Agreement, submitted
a bona fide written proposal to the Company relating to any such transaction
that the Board determines, in good faith, after receiving written advice from a
nationally recognized investment banking firm (for purposes hereof, such firms
shall include, without limitation, Houlihan Lokey and ING Baring Furman Selz),
is more favorable to the Company and its stockholders than the transactions
contemplated hereby (taking into account all relevant factors), and which is not
conditioned upon obtaining additional financing not fully committed at such time
and (y) in the opinion of the Board, after receiving advice from outside legal
counsel to the Company, the
-39-
<PAGE>
failure to provide such information or access or to engage in such discussions
or negotiations would cause the Board to breach its fiduciary duties to the
Company's stockholders under applicable law (a Takeover Proposal which satisfies
clauses (x) and (y) being referred to herein as a "Superior Proposal"). The
-----------------
Company shall within one Business Day following a determination that such
Takeover Proposal is a Superior Proposal notify Purchasers of the receipt of the
same. The Company shall promptly provide to Purchasers any nonpublic information
regarding the Company provided to any other party which was not previously
provided to Purchasers. If the Company's outside counsel agrees that a breach of
fiduciary duty would occur, the Board may (subject to this and the following
sentences) inform the Company's stockholders that it no longer believes that the
transactions contemplated hereby are advisable and no longer recommends approval
(a "Subsequent Determination"), but only at a time that is after the fifth
------------------------
Business Day following Purchasers' receipt of written notice advising Purchasers
that the Board has received a Superior Proposal specifying the material terms
and conditions of such Superior Proposal (and including a copy thereof with all
accompanying documentation), identifying the Person making such Superior
Proposal and stating that it intends to make a Subsequent Determination. After
providing such notice, the Company shall provide a reasonable opportunity to
Purchasers to make such adjustments in the terms and conditions of this
Agreement and/or any of the Transaction Documents as would enable the Board to
proceed with its recommendation to its stockholders without a Subsequent
Determination. At any time after five Business Days following notification to
Purchasers of the Company's intent to do so and if the Company has otherwise
complied with the terms of this Section 5.3(b), the Board may terminate this
Agreement pursuant to clause (ii) of Section 10.1(f) and enter into an agreement
with respect to a Superior Proposal, provided that the Company shall,
--------
concurrently with terminating this Agreement pursuant to such clause, pay or
cause to be paid to Purchasers the Termination Fee/Expense Reimbursement (as
defined in Section 10.2(b) hereof). Notwithstanding any other provision of this
Agreement, provided that this Agreement has not previously been terminated in
accordance with its terms, the Company shall submit the Company Voting Matters
to its stockholders, whether or not the Board makes a Subsequent Determination.
-40-
<PAGE>
(c) Except as set forth in Section 5.3(b), neither the Board nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Purchasers, the approval or recommendation by the
Board or any such committee of this Agreement, the other Company Transaction
Documents, the transactions contemplated hereby and thereby and the Company
Voting Matters (as defined in Section 6.3 of this Agreement), (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (iii)
enter into any agreement with respect to any Takeover Proposal.
(d) Nothing contained in this Section 5.3 shall prohibit the Company
-----------
or the Board from (i) taking, and disclosing to the Company's stockholders, a
position with respect to a Takeover Proposal pursuant to Rules 14d-9 and 14e-
2(a) under the Exchange Act or (ii) making any disclosure to the Company's
stockholders that the Board determines, in good faith and upon exercise of its
reasonable judgment after consultation with its financial advisors and outside
legal counsel, that the failure to so disclose would be reasonably likely to
result in a breach of the fiduciary duties of the Board under applicable law.
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES
-----------------------------------
6.1. Access to Information; Confidentiality
--------------------------------------
From the date hereof to the Closing, the Company shall, and shall
cause each of its subsidiaries, officers, directors, employees, auditors and
agents to, afford the officers, employees and agents of Purchasers reasonable
access at all reasonable times to its officers, employees, agents, properties,
offices and other facilities and to all books and records, and shall furnish
Purchasers with all financial, operating and other data and information as
Purchasers, through their officers, employees or agents, may reasonably request.
Purchasers shall hold, and shall cause each of their subsidiaries, officers,
directors, employees, auditors and agents to hold, in confidence all such
information in accordance with the terms of the Confidentiality Agreement, dated
March 10, 1998, between Warburg, Pincus Ventures, L.P. and the Company (the
"Confidentiality Agreement").
-------------------------
6.2. Company Proxy Statement
-----------------------
(a) As promptly as practicable after the execution of this Agreement,
the Company shall prepare and file with the SEC
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<PAGE>
preliminary proxy materials which shall constitute the preliminary Company Proxy
Statement. Purchasers shall furnish to the Company such information regarding
Purchasers as the Company may reasonably request in writing and as shall be
reasonably required in connection with preparation of the Company Proxy
Statement. As promptly as practicable after comments are received from the SEC
with respect to such preliminary Company Proxy Statement and after the
furnishing by the Company of all information required to be contained therein,
the Company shall file with the SEC the definitive Company Proxy Statement. The
Company shall mail the Company Proxy Statement to its stockholders as promptly
as practicable after clearance by the SEC. The Company shall provide Purchasers
for their review a copy of the preliminary and the definitive Company Proxy
Statement at least such amount of time prior to its filing and mailing as is
customary in transactions of the type contemplated hereby and shall not file or
mail such Company Proxy Statement without the prior written consent of
Purchasers, which consent shall not be unreasonably withheld. The Company shall
retain the services of a proxy soliciting firm mutually acceptable to Purchasers
and the Company for the purpose of communicating to the Company's stockholders
the recommendation of the Board in favor of the transactions contemplated hereby
and obtaining the Company Vote.
(b) Purchasers and the Company shall make all necessary filings
applicable to them with respect to the transactions contemplated hereby under
the Securities Act and the Exchange Act and the rules and regulations thereunder
and under applicable Blue Sky or similar securities laws and shall use their
respective reasonable best efforts to obtain required approvals and clearances
with respect thereto.
6.3. Stockholder Meeting
-------------------
The Company shall take all action necessary, in accordance with
applicable law, including the rules and regulations of the National Association
of Securities Dealers, Inc., the DGCL and the Company's Organizational
Documents, to convene a meeting of the holders of Capital Stock (such meeting
and any adjournments thereof, the "Company Vote") as promptly as practicable
------------
after the date of this Agreement for the purpose of considering and taking
action to authorize and approve this Agreement and the transactions contemplated
hereby, including,
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<PAGE>
without limitation, the transactions contemplated by Section 7.4 and, subject to
the consummation of the transactions contemplated hereby, the reduction of the
number of outstanding directors on the Board pursuant to Section 6.10 and the
election as directors of the Company of the individuals set forth in Section
6.11 (collectively, the "Company Voting Matters"). At the Company Vote, (i) all
----------------------
of the shares of Capital Stock then beneficially owned by Purchasers and their
Affiliates, or with respect to which Purchasers hold the power to direct the
voting, will be voted in favor of the Company Voting Matters and (ii) a majority
of the votes cast at the Company Vote (provided a quorum is present under
applicable law) shall be required to approve the Company Voting Matters.
6.4. HSR Act
-------
The Company and Purchasers shall use their best efforts to file as
soon as practicable notifications under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), in connection with the
-------
transactions contemplated hereby, and to respond as promptly as practicable to
any inquiries received from the Federal Trade Commission and the Antitrust
Division of the Department of Justice for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection with antitrust matters relating to the transactions contemplated
by this Agreement.
6.5. FCC Approvals
-------------
The Company, its subsidiaries and Purchasers shall use their best
efforts to file with the FCC as soon as practicable all necessary applications
for obtaining FCC Approval, and to respond as promptly as practicable to any
inquiries received from the FCC for additional information or documentation.
Each of the Company, its subsidiaries and Purchasers shall use its best efforts
to take, or cause to be taken, all action and to do or satisfy, or cause to be
done or satisfied, all things and conditions necessary, proper or advisable, to
obtain FCC Approval.
-43-
<PAGE>
6.6. Additional Agreements
---------------------
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to cooperate with the other and use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Transaction Documents, including using its reasonable best efforts to obtain
all necessary waivers, consents and approvals, and to effect all necessary
registrations and filings (including, but not limited to, filings under the HSR
Act, with the FCC for obtaining FCC Approval and with all applicable
Governmental Entities as required by law).
(b) In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of any of the Company
Transaction Documents, Purchasers and the Company shall take all such action as
promptly as practicable.
6.7. Notice of Breach
----------------
Each party shall promptly give written notice to the other parties
upon becoming aware of the occurrence or, to its knowledge, impending or
threatened occurrence, of any event which would cause any of the conditions to
such party's obligations to effect the transactions contemplated by this
Agreement not to be satisfied and will use its reasonable best efforts to
prevent or promptly remedy the same. Any such notification by the Company shall
not be deemed an amendment of this Agreement.
6.8. Director and Officer Indemnification and Insurance
--------------------------------------------------
From the date hereof through the fourth anniversary of the Closing
Date and for so long as any claim asserted prior to such date has not been fully
adjudicated by a court of competent jurisdiction, the Company (i) shall at all
times maintain liability insurance coverage with respect to each of the
Company's and its subsidiaries' respective directors and officers serving on the
date hereof, insuring each such individual against liability for their actions
as a director and/or officer (as the case may be) occurring prior to the Closing
and in scope of coverage and in amounts and having deductibles at least
equivalent to that maintained by the Company on the date hereof
-44-
<PAGE>
and otherwise reasonably comparable to the coverage maintained by the Company on
the date hereof, provided that in no event shall the Company be obligated to
--------
expend in order to maintain or procure such insurance coverage any amount per
annum in excess of 200% of the aggregate premiums paid by the Company in 1998
for such purpose (provided that if the Company is unable to obtain the insurance
--------
required by this Section 6.8 for such maximum amount, it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount), and (ii) shall not amend or modify any of the provisions of Articles
6.4 or 7 of the Company's Certificate of Incorporation or Article 8 of the
Company's By-laws in any manner that would adversely affect such individuals,
unless required by law.
6.9. Resale of Securities
--------------------
If Purchasers should decide to dispose of any of the Shares, the
Warrant or the Company Common Stock issuable upon exercise of the Warrant, each
Purchaser understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
registration under the Securities Act. In connection with any offer, resale,
pledge or other transfer (individually and collectively, a "Transfer") of any
--------
such securities other than pursuant to an effective registration statement, the
Company may require that the transferor provide to the Company an opinion of
counsel which opinion shall be reasonably satisfactory in form and substance to
the Company, to the effect that such Transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and any applicable state or foreign
securities laws. Each Purchaser agrees to the imprinting, so long as
appropriate, of substantially the following legend on certificates representing
the Shares, the Warrant and the Company Common Stock issuable upon exercise of
the Warrant:
THE SECURITIES (THE "SECURITIES") EVIDENCED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT
IT WILL NOT OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER
-45-
<PAGE>
(INDIVIDUALLY AND COLLECTIVELY, A "TRANSFER") THE SECURITIES
EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (B)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE OTHER
THAN PURSUANT TO CLAUSE (A) ABOVE, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
THEY MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OR ANY STATE OR FOREIGN SECURITIES LAW.
The legends set forth above may be removed if and when the securities
represented by such certificate are disposed of pursuant to an effective
registration statement under the Securities Act or the opinion of counsel
referred to above has been provided to the Company. The Share certificates and
the Warrant (and the Company Common Stock issuable upon exercise of the Warrant)
shall also bear any additional legends required by applicable federal, state or
foreign securities laws, which legends may be removed when, in the opinion of
counsel to the Company, the same are no longer required under the applicable
requirements of such securities laws. Each Purchaser agrees that, in connection
with any Transfer of securities by it pursuant to an effective registration
statement under the Securities Act, it will comply with all prospectus delivery
requirements of the Securities Act applicable to Purchasers. Each Purchaser
acknowledges that the Company makes no representation, warranty or agreement as
to the availability of any exemption from registration under the Securities Act
with respect to any resale of any of the Shares, the Warrant or the Company
Common Stock issuable upon exercise of the Warrant.
6.10. Reduction in Size of Board
--------------------------
The Company shall take all action necessary, in accordance with
applicable law, including the DGCL, the rules and regulations of the National
Association of Securities Dealers,
-46-
<PAGE>
Inc. and the Company's Certificate of Incorporation and By-laws, to cause the
number of outstanding directors on the Board to be decreased to seven (7)
directors effective the Closing Date, which reconstituted Board will include
Sidney Lapidus, David Libowitz, a person designated by Purchasers (the
"Purchasers' Designee"), Walston, Jeffrey J. Marcketta, an Independent Director
--------------------
(as defined in Section 6.11) designated by the Company and a person designated
by Flemings, including, to the extent required under applicable law, the
inclusion of a proposal to this effect in the Company Proxy Statement and the
recommendation of the Board to the Company's stockholders to vote for such
proposal at the Company Vote.
6.11. Board Nominees; Independent Directors
-------------------------------------
(a) For so long as Purchasers own beneficially (within the meaning of
Rule 13d-3 under the Exchange Act) at least 35% of the then outstanding shares
of Company Common Stock, the Company will nominate and use its best efforts to
elect and to cause to remain as directors on the Board such number of
individuals as Purchasers may designate as shall constitute a majority of the
Board. For so long as Purchasers own beneficially 30% or more but less than 35%
of the then outstanding shares of Company Common Stock, the Company will
nominate and use its best efforts to elect and to cause to remain as directors
on the Board the greater of (i) three individuals as designated by Purchasers
and (ii) such number of individuals as Purchasers may designate not exceeding
the product (rounded upward or downward to the nearest whole number) obtained by
multiplying the number of seats on the Board by the quotient obtained by
dividing (a) the number of shares of Company Common Stock then owned by
Purchasers by (b) the total number of shares of Company Common Stock then
outstanding (the "Applicable Percentage"). For so long as Purchasers own
---------------------
beneficially 20% or more but less than 30% of the then outstanding shares of
Company Common Stock, the Company will nominate and use its best efforts to
elect and to cause to remain as directors on the Board the greater of (i) two
individuals as designated by Purchasers and (ii) the product (rounded upward or
downward to the nearest whole number) obtained by multiplying the number of
seats on the Board by the Applicable Percentage. For so long as Purchasers own
beneficially 10% or more but less than 20% of the then outstanding shares of
Company Common Stock, the Company will nominate and use its best efforts to
elect and to cause to remain as directors on the Board the greater of (i) one
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<PAGE>
individual as designated by Purchasers and (ii) the product (rounded upward or
downward to the nearest whole number) obtained by multiplying the number of
seats on the Board by the Applicable Percentage. Any vacancy created by the
death, disability, retirement or removal of any such individual may be filled by
Purchasers. For the sake of clarity, all percentages contained in this Section
6.11(a) shall be calculated on the basis of the number of shares of Company
Common Stock outstanding on a primary, non-fully diluted basis.
(b) Purchasers shall use all reasonable efforts to ensure that, for so
long as the Company Common Stock is listed on the Nasdaq National Market or any
national securities exchange, the Board shall contain such number of
"independent directors", as defined in Section 4200 of the rules of the Nasdaq
Stock Market (the "Nasdaq Rules") or the rules governing such national
------------
securities exchange (the "Stock Exchange Rules"), as applicable ("Independent
-------------------- -----------
Directors"), as shall be required from time to time by the Nasdaq Rules or Stock
- ---------
Exchange Rules, as applicable.
(c) This Section 6.11 shall expressly survive the termination of this
Agreement in accordance with the terms described herein.
6.12. MSCL Section 338(h)(10) Election
--------------------------------
If the Company and Purchasers mutually agree that it would be in the
Company's best interests, the Company shall use its reasonable best efforts to
procure from every shareholder of MSCL, Inc. from whom the Company acquired
shares of MSCL, Inc., and provide to Purchasers, written consents to effect a
timely election pursuant to Section 338(h)(10) of the Code, and any applicable
state or local provision, with respect to the acquisition of MSCL, Inc. on
September 15, 1998.
6.13. TVN Agreement
-------------
The Company shall use its reasonable best efforts to execute with TVN
Entertainment Corporation ("TVN") a new agreement, on terms reasonably
---
satisfactory to Purchasers, regarding the provision and maintenance by the
Company of an Uplink-Playback facility for TVN, which agreement shall replace
the Deal Memorandum between the Company and TVN currently in force, the term of
which expires on January 31, 1999.
-48-
<PAGE>
SECTION 7. CLOSING CONDITIONS OF PURCHASERS AND THE COMPANY
------------------------------------------------
The respective obligations of each of the Company and Purchasers to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions.
7.1. Stockholder Approval
--------------------
This Agreement and the Company Voting Matters shall have been approved
and adopted by the requisite vote of the holders of Capital Stock at the Company
Vote.
7.2. FCC Approval
------------
The Company shall have obtained FCC Approval.
7.3. Expiration or Termination of Waiting Period under HSR Act
---------------------------------------------------------
Any waiting period (and any extension thereof) under the HSR Act
applicable to the transactions contemplated by this Agreement and the other
Transaction Documents shall have expired or been terminated.
7.4. Amendments to Stock Option Plan; Incentive Bonus Plan
-----------------------------------------------------
The amendments to the Company's 1997 Stock Option Plan, in the form
set forth in Exhibit D, and the Company's Incentive Bonus Plan, in a form
---------
reasonably acceptable to Purchasers, shall have been approved by the Board (and
such approval shall not have been modified or rescinded) and, in the case of the
amendments to the Company's 1997 Stock Option Plan, by the requisite vote of the
holders of Capital Stock in a manner that complies with the requirements of
Section 162(m) of the Code, such that any compensation attributable to the
exercise of options or payment of bonuses thereunder (including any forgiveness
of employee debt) shall constitute "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code.
7.5. Injunction
----------
No preliminary or permanent injunction or other order by any federal
or state court in the United States which prevents
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<PAGE>
the consummation of the transactions contemplated by this Agreement shall have
been issued and remain in effect.
SECTION 8. PURCHASER CLOSING CONDITIONS
----------------------------
The obligations of Purchasers to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
in writing by Purchasers in accordance with Section 10.4 hereof:
8.1. Representations and Warranties
------------------------------
The representations and warranties of the Company contained in the
Company Transaction Documents, to the extent such Company Transaction Documents
contain representations and warranties of the Company, shall be true and correct
in all respects (provided that, for purposes of this Section 8.1, any
representation or warranty of the Company contained in the Company Transaction
Documents that is qualified by a materiality standard or a Company Material
Adverse Effect qualification shall be read without regard to any such
qualifications as if such qualifications were not contained in the Company
Transaction Documents) as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except to the extent any such
representation or warranty speaks as to an earlier date, in which event it shall
be true and correct as of such earlier date) except as otherwise affected by the
transactions contemplated hereby and thereby and except for such failures which,
individually or in the aggregate, have not had and could not reasonably be
expected to (i) have a Company Material Adverse Effect, (ii) materially impair
the Company's ability to consummate the transactions contemplated under the
Transaction Documents or materially delay such transactions or (iii) impose a
material limitation on the ability of Purchasers to effectively acquire, hold or
exercise any rights of ownership with respect to the Shares, the Warrants or the
Common Stock issuable upon the exercise of the Warrant.
8.2. Compliance with Company Transaction Documents
---------------------------------------------
The Company shall have performed and complied in all material respects
with all agreements, covenants and conditions contained in the Company
Transaction Documents, to the extent such Company Transaction Documents contain
agreements, covenants and conditions
-50-
<PAGE>
of the Company, which are required to be performed or complied with by the
Company prior to or on the Closing Date, including without limitation the
actions required to be taken pursuant to Sections 6.10 and 6.11 (provided that,
for purposes of this Section 8.2, any agreement, covenant or condition of the
Company contained in the Company Transaction Documents that is qualified by a
materiality standard or a Company Material Adverse Effect qualification shall be
read without regard to any such qualifications as if such qualifications were
not contained in the Company Transaction Documents) except, solely in the case
of the agreements, covenants or conditions set forth in Section 5.2, for such
failures which, individually or in the aggregate, have not had and could not
reasonably be expected to (i) have a Company Material Adverse Effect, (ii)
materially impair the Company's ability to consummate the transactions
contemplated under the Transaction Documents or materially delay such
transactions or (iii) impose a material limitation on the ability of Purchasers
to effectively acquire, hold or exercise any rights of ownership with respect to
the Shares, the Warrants or the Common Stock issuable upon the exercise of the
Warrant.
8.3. Officer's Certificate
---------------------
Purchasers shall have received a certificate, dated the Closing Date,
signed by each of the President and the Chief Executive Officer of the Company,
certifying that the conditions specified in the foregoing Sections 8.1 and 8.2
hereof have been fulfilled.
8.4. Consents
--------
Except as set forth in Sections 7.1, 7.2, 7.3, 7.4 and 8.10, all
permits, consents, authorizations, approvals, waivers, registrations,
qualifications, designations and declarations set forth on Schedule 3.5 shall
------------
have been obtained, and, to the extent required to be submitted prior to the
Closing, all filings and notices set forth on Schedule 3.5 shall have been
------------
submitted except for such failures to obtain or submit which, individually or in
the aggregate, have not had and could not reasonably be expected to (i) have a
Company Material Adverse Effect, (ii) materially impair the Company's ability to
consummate the transactions contemplated under the Transaction Documents or
materially delay such transactions or (iii) impose a material limitation on the
ability of Purchasers to effectively acquire, hold or exercise any rights of
ownership with respect to
-51-
<PAGE>
the Shares, the Warrants or the Common Stock issuable upon the exercise of the
Warrant.
8.5. Counsel's Opinion
-----------------
Purchasers shall have received from legal counsel to the Company an
opinion, dated the Closing Date, substantially in the form of Exhibit E hereto.
---------
8.6. Registration Rights Agreement
-----------------------------
The Company and Purchasers shall have executed the Registration Rights
Agreement, substantially in the form of Exhibit F hereto (the "Registration
--------- ------------
Rights Agreement").
- ----------------
8.7. Voting Agreements and Voting and Option Agreement
-------------------------------------------------
The options and irrevocable proxies granted by (i) Walston and
Flemings, respectively, pursuant to the Voting Agreements and (ii) TSP pursuant
to the Voting and Option Agreement shall be in full force and effect and none of
the parties thereto (other than Purchasers or any of their Affiliates) shall be
in material breach thereof.
8.8. Flemings Conversion Agreement
-----------------------------
The transactions contemplated by the Flemings Conversion Agreement
shall be consummated concurrently with the Closing in accordance with the terms
thereof.
8.9. Additional Purchase Agreement
-----------------------------
The transaction contemplated by the TSP Purchase Agreement shall be
consummated concurrently with the Closing in accordance with the terms thereof.
8.10. Amendment of Credit Agreement
-----------------------------
The Credit Agreement shall have been amended on terms reasonably
acceptable to Purchasers.
8.11. Board Recommendation
--------------------
Neither the Board nor any committee thereof shall have amended,
modified, rescinded or repealed the approval by the Board of this Agreement and
the transactions contemplated hereby
-52-
<PAGE>
pursuant to which the limitations on business combinations contained in Section
203 of the DGCL were rendered inapplicable hereto and thereto, and neither the
Board nor any committee thereof shall have adopted any other resolutions in
connection with this Agreement and the transactions contemplated hereby
inconsistent with such approval of the transactions contemplated hereby.
8.12. Termination of Lock-Up Agreements
---------------------------------
The Lock-up Agreements shall have been terminated by all parties
thereto in accordance with the terms thereof.
8.13. Employment Agreements
---------------------
The Company shall have entered into employment agreements with certain
key employees of the Company identified by mutual agreement of the Company and
Purchasers, other than the Executives, on terms reasonable acceptable to
Purchasers.
SECTION 9. COMPANY CLOSING CONDITIONS
--------------------------
The obligations of the Company to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
in writing by the Company in accordance with Section 10.4 hereof:
9.1. Representations and Warranties
------------------------------
The representations and warranties of Purchasers contained in the
Transaction Documents to which it is a party shall be true in all respects on
and as of the Closing Date (except to the extent any such representation and
warranty speaks as to an earlier date, in which event it shall be true and
correct in all material respects as of such earlier date) as though such
representations and warranties were made at and as of such date, except as
otherwise affected by the transactions contemplated hereby and except for such
failures which, individually or in the aggregate, have not had and could not
reasonably be expected to materially impair Purchasers' ability to consummate
the transactions contemplated under the Transaction Documents or materially
delay such transactions.
-53-
<PAGE>
9.2. Compliance with Agreements
--------------------------
Purchasers shall have performed and complied in all material respects
with all agreements, covenants and conditions contained in the Transaction
Documents to which it is a party which are required to be performed or complied
with by them prior to or on the Closing Date.
9.3. Purchasers' Certificates
------------------------
The Company shall have received a certificate from Purchasers, dated
the Closing Date, signed by a duly authorized representative of Purchasers,
certifying that the conditions specified in the foregoing Sections 9.1 and 9.2
hereof have been fulfilled.
SECTION 10. TERMINATION, AMENDMENT AND WAIVER
---------------------------------
10.1. Termination
-----------
This Agreement may be terminated at any time prior to the Closing,
whether before or after approval of the Company Voting Matters by the
stockholders of the Company:
(a) By mutual written consent of the Board and Purchasers; or
(b) (i) By Purchasers if any of the conditions specified in Sections
7 or 8 have not been satisfied or waived by Purchasers at such time as such
condition is no longer capable of satisfaction, including the failure to obtain
any required approval of the Company's stockholders at the Company Vote or at an
adjournment thereof (provided Purchasers are not otherwise in material breach of
--------
their representations, warranties, covenants or agreements under this
Agreement); or (ii) by the Company if any of the conditions specified in
Sections 7 or 9 have not been satisfied or waived by the Company at such time as
such condition is no longer capable of satisfaction, including the failure to
obtain any required approval of the Company's stockholders at the Company Vote
(provided the Company is not otherwise in material breach of its
- ---------
representations, warranties, covenants or agreements under this Agreement); or
(c) By either Purchasers or the Company if any Governmental Entity of
competent jurisdiction shall have issued a
-54-
<PAGE>
final permanent order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and in any such case the time for
appeal or petition for reconsideration of such order shall have expired without
such appeal or petition being granted; or
(d) By Purchasers if, without any material breach by Purchasers of
their obligations under the Transaction Documents, the transactions contemplated
hereby shall not have been consummated on or before June 30, 1999 (the
"Expiration Date"), unless the sole reason for the failure to consummate the
- ----------------
transactions contemplated hereby and thereby by such date is the nonfulfillment
of the conditions specified in Section 7.2, in which case the Expiration Date
shall be extended to September 30, 1999 (the "Extended Expiration Date"); or
------------------------
(e) By the Company if, without any material breach by the Company of
its obligations under the Company Transaction Documents, the transactions
contemplated hereby shall not have been consummated on or before the Expiration
Date or, if applicable, the Extended Expiration Date; or
(f) By the Company (i) if there shall be a material breach of any of
Purchasers' representations, warranties or covenants in any of the Company
Transaction Documents, which breach cannot be or has not been cured within ten
days of the receipt of written notice thereof, or (ii) to allow the Company to
enter into an agreement in accordance with Section 5.3(b); provided that it has
--------
complied with all provisions thereof, including the notice provision therein,
and that it makes simultaneous payment to Purchasers of the Termination
Fee/Expense Reimbursement in immediately available funds as provided in Section
10.2(b) hereof; or
(g) By Purchasers if there has been a material breach of any of the
Company's representations, warranties, covenants or agreements set forth in any
of the Company Transaction Documents, which breach cannot be or has not been
cured within ten days of the receipt of written notice thereof; or
(h) By Purchasers, if (i) the Board shall withdraw, modify or change
its recommendation or approval in respect of this Agreement or the Company
Voting Matters in a manner adverse to Purchasers, (ii) the Board of Directors
shall have recommended any proposal other than by Purchasers in respect of a
Takeover
-55-
<PAGE>
Proposal, (iii) the Company shall have exercised a right with respect to a
Takeover Proposal referenced in Section 5.3(b) and shall, directly or through
its representatives, continue discussions with any third party concerning such
Takeover Proposal for more than fifteen Business Days after the date of receipt
of such Takeover Proposal, (iv) a Takeover Proposal that is publicly disclosed
shall have been commenced or communicated to the Company which contains a
proposal as to price (without regard to whether such proposal specifies a
specific price or a range of potential prices) and the Company shall not have
rejected such proposal within fifteen Business Days from the date such Takeover
Proposal was communicated to the Company (provided, that such Takeover Proposal
shall be deemed to have been communicated to the Company on such date as it
shall have been disclosed in a filing with the SEC by the party making such
Takeover Proposal), or (v) any Person or group (as defined in Section 13(d)(3)
of the Exchange Act) other than Purchasers or any of their respective
subsidiaries or Affiliates shall have become the beneficial owner of more than
15% of the outstanding shares of Company Common Stock (either on a primary or a
fully diluted basis); provided, however, that with regard to a Person that owns
-------- -------
more than 15% of the outstanding shares of Company Common Stock on the date
hereof, this provision shall be triggered by such Person becoming the beneficial
owner of an additional 5% of the outstanding shares of Company Common Stock
(either on a primary or a fully diluted basis); or
(i) By Purchasers, if the Company or its representatives shall take
any of the actions proscribed by Section 5.1 or Section 5.3 hereof.
10.2. Effect of Termination
---------------------
(a) Subject to Section 10.2(b), in the event of termination of this
Agreement as provided in Section 10.1 hereof, written notice thereof shall
forthwith be given to the other parties specifying the provision hereof pursuant
to which such termination is made, and, except as provided in Section 6.1
hereof, this Agreement shall forthwith become null and void and there shall be
no liability on the part of Purchasers or the Company or their respective
officers or directors or partners; provided that nothing herein shall relieve
--------
any party from liability for any breach of this Agreement.
-56-
<PAGE>
(b) If (i) Purchasers shall have terminated this Agreement pursuant
to Section 10.1(h) or Section 10.1(i), (ii) Purchasers shall have terminated
this Agreement pursuant to Section 10.1(g) and following the date hereof but
prior to such termination there shall have been a Takeover Proposal Interest or
(iii) the Company shall have terminated this Agreement pursuant to Section
10.1(f)(ii), then in any such case the Company shall pay simultaneously with
such termination if pursuant to Section 10.1(f)(ii) and promptly, but in no
event later than two Business Days after the date of such termination or event
if pursuant to Sections 10.1(g), 10.1(h) or 10.1(i), to Purchasers (A) a
termination fee of $2,250,000 and (B) reimbursement of up to $750,000 of actual
and documented costs and expenses incurred by Purchasers in connection with the
transactions contemplated by the Company Transaction Documents (the "Termination
-----------
Fee/Expense Reimbursement") which amounts shall be payable by wire transfer of
- -------------------------
immediately available funds to such account as Purchasers may designate in
writing to the Company.
(c) Notwithstanding anything to the contrary contained herein, any
election by the Company to pay, or by Purchaser to receive, the Termination
Fee/Expense Reimbursement pursuant to Section 10.2(b) shall constitute full
settlement of any and all liabilities of the Company for damages under this
Agreement in respect of a termination of this Agreement pursuant to Sections
10.1(f)(ii), 10.1(g), 10.1(h) or 10.1(i) and shall be the sole measure of
damages with respect thereto.
10.3. Amendment
---------
This Agreement may be amended by the parties hereto, by or pursuant to
action taken by Purchasers and the Company, at any time before or after approval
hereof by the stockholders of the Company, but, after such approval, no
amendment shall be made which materially adversely affects the rights of such
stockholders, without the further approval of such stockholders voting in the
manner specified in Section 6.3. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
10.4. Waiver
------
At any time prior to the Closing, the parties hereto, by or pursuant
to action taken by Purchasers and the Company, may (i) extend the time for the
performance of any of the obligations
-57-
<PAGE>
or other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
documents delivered pursuant hereto by the other parties and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a parties hereto to any such extension or waiver shall
be valid if set forth in an instrument in writing signed on behalf of such
party.
SECTION 11. RECOVERY OF FEES
----------------
Any party hereto who shall obtain a final judgment in a court of
competent jurisdiction for the payment of damages by another party hereto for a
breach of this Agreement shall be entitled to recover reasonable attorneys' fees
and court costs incurred in connection with the obtaining of such judgment.
SECTION 12. INTERPRETATION OF THIS AGREEMENT
--------------------------------
12.1. Terms Defined
-------------
As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:
Additional Purchase Agreements: shall mean the TSP Purchase Agreement
------------------------------
and the Founders Purchase Agreement.
Affiliate: shall mean any Person or entity, directly or indirectly,
---------
controlling, controlled by or under common control with such Person or entity.
Business Day: shall mean a day other than a Saturday, Sunday or other
------------
day on which banks in the States of New York and California are not required or
authorized to close.
Catalina: shall mean Catalina Transmission Corp., an indirect wholly
--------
owned subsidiary of the Company.
Company Transaction Documents: shall mean this Agreement, the Warrant,
-----------------------------
the Registration Rights Agreement, the Flemings Conversion Agreement and the
Employment Agreements.
Credit Agreement: shall mean the Credit Agreement, dated as of
----------------
February 27, 1998, as amended, by and among the Company, the Several Lenders
from time to time party thereto (the
-58-
<PAGE>
"Lenders), Bank of America NT&SA, as Syndication Agent, Union Bank of
-------
California, N.A., as Documentation Agent, Societe Generale as Co-Agent, and
Canadian Imperial Bank of Commerce, as Administrative Agent.
DGCL: shall mean the General Corporation Law of the State of Delaware.
----
Exchange Act: shall mean the Securities Exchange Act of 1934, as
------------
amended.
Executives: shall mean Robert T. Walston, Jeffrey J. Marcketta, John
----------
H. Donlon, Gavin W. Schutz and Robert Bailey.
FCC: shall mean the Federal Communications Commission.
---
FCC Approval: shall mean Final FCC Orders adopted by the FCC or its
------------
bureaus on designated authority which grant all consents or approvals required
under the Communications Act of 1934, as amended, and the FCC's rules,
regulations and policies for the transfer of control of the FCC Licenses to
Purchasers.
FCC Licenses: shall mean all licenses and authorizations issued by the
------------
FCC and held by the Company, Catalina or any other subsidiary of the Company.
Final FCC Orders: shall mean decisions of the FCC or its bureaus on
----------------
designated authority which have not been reconsidered, appealed, reversed,
stayed, or joined, set aside, annulled or suspended, and for which the forty
(40) day period for any such action on the FCC's own motion has expired.
Flemings: shall mean Fleming US Discovery Fund III, L.P., a Delaware
--------
limited partnership, and Fleming US Discovery Offshore Fund III, L.P., a Bermuda
limited partnership, collectively.
Flemings Agreements: shall mean, collectively, (i) the Preferred Stock
-------------------
Purchase Agreement and the Registration Rights Agreement, each dated as of
February 27, 1998, as amended, between Flemings and the Company and (ii) the
Stockholders Agreement, dated as of February 27, 1998, as amended, among
Flemings, the Company, Walston and the Founders.
Flemings Conversion Agreement: shall mean the Preferred Stock
-----------------------------
Conversion and Stockholders Agreement, dated as
-59-
<PAGE>
of the date hereof, between the Company, Flemings and Purchasers, substantially
in the form of Exhibit G hereto.
---------
Founders: shall mean John H. Donlon, Gavin W. Schutz, Robert Bailey
--------
and the estate of John H. Sabin.
Founders Purchase Agreement: shall mean the Stock Purchase Agreement,
---------------------------
dated as of the date hereof, between Purchasers and the Founders, substantially
in the form of Exhibit H hereto.
---------
Governmental Entity: shall mean any United States or international (a)
-------------------
federal, state, county, local or municipal government or administrative agency
or political subdivision thereof, (b) court or administrative tribunal, (c) non-
governmental agency, tribunal or entity that is vested by a governmental agency
with applicable jurisdiction, or (d) arbitration tribunal or other non-
Governmental Entity with applicable jurisdiction.
Knowledge: shall mean the actual knowledge of the following officers
---------
and employees of the Company: Walston, Jeffrey J. Marcketta and William Niles,
in each case without investigation or inquiry unless the context otherwise
requires.
Lock-up Agreements: shall mean the Lock-up Agreements, dated as of
------------------
January 15, 1997, by and between Furman Selz LLC and each of the following
individuals: Edward Kirtman, Shimon Topor, Robert Bailey, Gavin W. Schutz, John
H. Donlon and John H. Sabin.
Person: shall mean an individual, partnership, joint-stock company,
------
corporation, limited liability company, trust or unincorporated organization,
and a Governmental Entity.
SEC: shall mean the Securities and Exchange Commission.
---
Securities Act: shall mean the Securities Act of 1933, as amended.
--------------
subsidiary: shall mean any (a) Person of which the Company (or other
----------
specified Person) shall own directly or indirectly through a subsidiary, a
nominee arrangement or otherwise (i) at least a majority of the outstanding
capital stock (or other shares of beneficial interest) or (ii) at least a
-60-
<PAGE>
majority of the partnership, membership, joint venture or similar interests, or
(b) in which the Company (or other specified Person) is a general partner or
joint venturer. For the sake of clarity, Cinram-POP DVD Center LLC, a California
limited liability company in which the Company holds a 49% membership interest,
shall not be deemed to be a subsidiary of the Company.
Transaction Documents: shall mean this Agreement, the Additional
---------------------
Purchase Agreements, the Registration Rights Agreement, the Voting and Option
Agreement, the Voting Agreements and the Flemings Conversion Agreement.
TSP: shall mean Technical Services Partners L.P., a Delaware limited
---
partnership.
TSP Purchase Agreement: shall mean the Stock Purchase Agreement, dated
----------------------
as of the date hereof, between Purchasers and TSP, substantially in the form of
Exhibit K hereto.
- ---------
Voting Agreements: shall mean the Voting Agreements, dated as of the
-----------------
date hereof, by and among each of (i) Walston, TSP and Purchasers (the "Walston
-------
Voting Agreement") and (ii) Flemings and Purchasers (the "Flemings Voting
- ---------------- ---------------
Agreement"), substantially in the forms of Exhibit I-1 and Exhibit I-2.
- --------- ----------- -----------
Voting and Option Agreement: shall mean the Voting and Option
---------------------------
Agreement, dated as of the date hereof, among Purchasers and TSP, substantially
in the form of Exhibit J hereto.
---------
Walston: shall mean Robert T. Walston.
-------
12.2. Accounting Principles
---------------------
Where the character or amount of any asset or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP at the time
in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
12.3. Directly or Indirectly
----------------------
Where any provision in this Agreement refers to action to be taken by
any Person, or which such Person is prohibited
-61-
<PAGE>
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
12.4. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed entirely within such State.
12.5. Paragraph and 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.
SECTION 13. MISCELLANEOUS
-------------
13.1. Survival of Representations, Warranties and Agreements
------------------------------------------------------
All statements contained in any certificate or other instrument
executed and delivered by or on behalf of the Company or Purchasers pursuant to
this Agreement or in connection with the transactions contemplated hereby shall
be deemed representations and warranties of such Person hereunder. All
representations and warranties made by the parties hereto in this Agreement or
pursuant hereto shall survive the Closing hereunder and any investigation at any
time made by or on behalf of the other parties; provided, however, that no party
-------- -------
shall commence any action against the other parties in respect of any provision
of this Agreement at any time subsequent to the date eighteen (18) months after
the Closing Date, except that Purchasers shall be permitted to commence an
action against the Company in respect of the representations and warranties made
by the Company in Sections 3.14, 3.18 or 3.21 of this Agreement at any time
prior to the expiration of the longest applicable federal, state, local or
foreign statute of limitation (including any extensions thereof). All covenants
and agreements set forth in this Agreement shall survive the Closing in
accordance with their terms.
13.2. Notices
-------
(a) All communications under this Agreement shall be in writing and
shall be delivered by hand or facsimile or mailed
-62-
<PAGE>
by overnight courier or by registered mail or certified mail, postage prepaid,
in each case to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice, except that notices of changes
of address shall be effective upon receipt):
(1) if to any of the Purchasers:
Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, NY 10017
Attention: David E. Libowitz
Facsimile: (212) 878-9351
With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6009
Attention: Neil Novikoff, Esq.
Facsimile: (212) 728-8111
(2) if to the Company:
Four Media Company
625 Arizona Avenue
Santa Monica, CA 90401
Attention: William E. Niles, Esq.
Facsimile: 310-587-1277
With a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071-2007
Attention: Paul D. Tosetti, Esq. and
Michael W. Sturrock, Esq.
Facsimile: (213) 891-8763
(b) 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
-63-
<PAGE>
or certified mail, on the third Business Day after the date of such mailing.
(c) Any approvals or consents required to be granted by Purchasers
under this Agreement may be granted by David E. Libowitz acting on behalf of,
and with full authority with respect to, Purchasers.
13.3. Expenses
--------
(a) Except as provided in Section 13.3(b) or in cases in which a
Termination Fee/Expense Reimbursement is paid or payable pursuant to Section
10.2(b), all costs, fees and expenses incurred in connection with the
Transaction Documents and the transactions contemplated thereby shall be paid by
the party incurring such costs and expenses.
(b) If the transactions contemplated by this Agreement are
consummated, the Company shall pay to Purchasers (i) the lesser of (x) $500,000
or (y) the total of all costs, fees and expenses incurred by Purchasers in
connection with the Transaction Documents ("Purchasers' Expenses"), plus (ii) in
--------------------
the event that Purchasers' Expenses exceed $500,000, 50% of any such excess,
provided that the Company's reimbursement obligations pursuant to this Section
- --------
13.3(b)(i) and (ii) shall in no event exceed $1,000,000. Such monies shall be
payable on the Closing Date by wire transfer of immediately available funds to
such account as Purchasers may designate in writing to the Company.
13.4. Publicity
---------
So long as this Agreement is in effect, Purchasers and the Company
shall consult with each other in issuing any press release or otherwise making
any public statement with respect to the transactions contemplated by this
Agreement, and none of them shall issue any press release or make any public
statement prior to such consultation. The commencement of litigation relating to
this Agreement or the transactions contemplated hereby or any proceedings in
connection therewith shall not be deemed a violation of this Section 13.4.
13.5. Specific Performance
--------------------
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement
-64-
<PAGE>
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any state or federal court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
13.6. Reproduction of Documents
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by Purchasers on the Closing Date (except for
the Warrant and certificates evidencing the Shares themselves), and (c)
financial statements, certificates and other information previously or hereafter
furnished to Purchasers, may be reproduced by Purchasers by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process and Purchasers may destroy any original document so reproduced. Each
party hereto agrees and stipulates 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 Purchasers in the regular course of business) and that
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
13.7. Successors and Assigns
----------------------
Neither this Agreement nor any of the rights or obligations of any
party may be assigned without the prior written consent of the other parties,
except that Purchasers may, without such consent, assign this Agreement and any
of such rights and obligations to one or more of their Affiliates unless such
assignment causes any representation or warranty to be untrue or incorrect in
any material respect or unless such assignment shall materially delay the
Closing. Any such assignment shall not, however, act as a release of the
assigning Person. Subject to the foregoing, this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, and no other Person shall have any right, benefit or obligation
hereunder.
-65-
<PAGE>
13.8. Entire Agreement
----------------
This Agreement, the other Company Transaction Documents and the
Confidentiality Agreement constitute the entire understandings of the parties
hereto and supersede all prior agreements or understandings with respect to the
subject matter hereof among such parties.
13.9. 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.
13.10. Limitation on Enforcement of Remedies
-------------------------------------
The Company hereby agrees that it shall, and shall cause each of its
stockholders, officers, directors, employees, brokers, attorneys, accountants
and other agents to, not assert against the limited partners of Purchasers any
claim it or each of them may have under this Agreement or any other Company
Transaction Document by reason of any failure or alleged failure by Purchasers
to meet their obligations hereunder or thereunder. Each Purchaser hereby agrees
that it will not assert against the Company or any of its stockholders,
officers, directors, employees, brokers, attorneys, accountants or other agents
any claim it may have under this Agreement or any other Company Transaction
Document by reason of any failure or alleged failure by the Company to meet its
obligations hereunder or thereunder.
13.11. Simultaneous Effectiveness
--------------------------
This Agreement and each of the other Transaction Documents shall (i)
be executed simultaneously and at such time shall be valid and binding
obligations of each of the parties and signatories thereto and (ii)
simultaneously be consummated at the Closing.
13.12. 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.
-66-
<PAGE>
13.13. Joint and Several Obligations
-----------------------------
All obligations and representations and warranties of Purchasers in
the Transaction Documents are joint and several obligations.
[The remainder of this page is intentionally left blank.]
-67-
<PAGE>
IN WITNESS WHEREOF, the Company and Purchasers have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
FOUR MEDIA COMPANY
By:________________________________________
Name:
Title:
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:________________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS I, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:________________________________________
Name:
Title:
S-1
<PAGE>
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS II, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:_________________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS III, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:_________________________________________
Name:
Title:
S-2
<PAGE>
EXHIBIT 99.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
among
WARBURG, PINCUS EQUITY PARTNERS, L.P.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.
and
TECHNICAL SERVICES PARTNERS, L.P.
January 18, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. PURCHASE AND SALE OF COMMON STOCK.............................. 1
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.............. 2
2.1. Representations and Warranties of the Stockholder............. 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS................... 5
3.1. Representations and Warranties of Purchasers.................. 5
SECTION 4. COVENANTS OF THE PARTIES....................................... 7
4.1. Compliance with Voting and Option Agreement................... 7
4.2. Transfer of the Shares........................................ 7
4.3. HSR Act....................................................... 7
4.4. Additional Agreements......................................... 8
4.5. Notice of Breach.............................................. 8
SECTION 5. PURCHASERS' CLOSING CONDITIONS................................. 9
5.1. Representations and Warranties................................ 9
5.2. Compliance with Stockholder Transaction Documents............. 9
5.3. Certificate................................................... 9
5.4. Expiration or Termination of Waiting Period under HSR Act..... 9
5.5. Counsel's Opinion............................................. 9
5.6. Additional Purchase Agreements................................ 10
5.7. Injunction.................................................... 10
SECTION 6. STOCKHOLDER CLOSING CONDITIONS................................. 10
6.1. Representations and Warranties................................ 10
6.2. Compliance with Agreement..................................... 10
6.3. Purchasers' Certificate....................................... 11
6.4. Expiration or Termination of Waiting Period under HSR Act..... 11
6.5. Injunction.................................................... 11
SECTION 7. RECOVERY OF FEES............................................... 11
SECTION 8. TERMINATION, AMENDMENT AND WAIVER.............................. 11
8.1. Termination................................................... 11
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
8.2. Effect of Termination......................................... 13
8.3. Amendment..................................................... 14
8.4. Waiver........................................................ 14
SECTION 9. INTERPRETATION OF THIS AGREEMENT .............................. 14
9.1. Terms Defined................................................. 14
9.2. Directly or Indirectly........................................ 17
9.3. Governing Law................................................. 17
9.4. Paragraph and Section Headings................................ 17
SECTION 10. MISCELLANEOUS................................................. 17
10.1. Survival of Representations and Warranties................... 17
10.2. Notices...................................................... 17
10.3. Fees; Expenses............................................... 19
10.4. Publicity.................................................... 19
10.5. Specific Performance......................................... 19
10.6. Submission to Jurisdiction................................... 20
10.7. Reproduction of Documents.................................... 20
10.8. Successors and Assigns....................................... 20
10.9. Entire Agreement; Amendment and Waiver....................... 21
10.10. Severability................................................ 21
10.11. Limitation on Enforcement of Remedies....................... 21
10.12. Simultaneous Effectiveness.................................. 21
10.13. Counterparts................................................ 22
</TABLE>
-ii-
<PAGE>
EXHIBIT A Form of Company Purchase Agreement
EXHIBIT B Form of Opinion of Counsel
EXHIBIT C Form of Founders Purchase Agreement
EXHIBIT D-1 Form of Walston Voting Agreement
EXHIBIT D-2 Form of Flemings Voting Agreement
EXHIBIT E Form of TSP Voting and Option Agreement
-iii-
<PAGE>
INDEX
<TABLE>
<S> <C>
Additional Purchase Agreements....................................... 13
Agreement............................................................ 1
Board................................................................ 11
Business Day......................................................... 13
Closing.............................................................. 2
Closing Date......................................................... 2
Company.............................................................. 1
Company Common Stock................................................. 1
Company Purchase Agreement........................................... 1
Company Vote......................................................... 13
Company Voting Matters............................................... 13
Exchange Act......................................................... 2
Expiration Date...................................................... 11
Extended Expiration Date............................................. 11
FCC.................................................................. 13
Flemings............................................................. 13
Flemings Conversion Agreement........................................ 13
Founders............................................................. 13
Founders Purchase Agreement.......................................... 13
Governmental Entity.................................................. 13
HSR Act.............................................................. 4
Lien................................................................. 2
Lock-up Agreements................................................... 13
Per Share Amount..................................................... 1
Person............................................................... 14
Purchase Price....................................................... 2
Purchaser1
Purchaser Conflict................................................... 5
Securities Act....................................................... 14
Shares............................................................... 1
Stockholder.......................................................... 1
Stockholder Conflict................................................. 3
</TABLE>
-iv-
<PAGE>
<TABLE>
<S> <C>
Stockholder Transaction Documents.................................... 14
Subject Shares....................................................... 1
subsidiary........................................................... 14
Takeover Proposal.................................................... 14
Transaction Documents................................................ 14
TSP.................................................................. 14
TSP/Walston Agreement................................................ 1
Voting Agreements.................................................... 14
Voting and Option Agreement.......................................... 14
Walston Shares....................................................... 1
</TABLE>
-v-
<PAGE>
STOCK PURCHASE AGREEMENT, dated as of January 18, 1999 (this
"Agreement"), by and among Warburg, Pincus Netherlands Equity Partners, L.P., a
---------
Delaware limited partnership, Warburg, Pincus Netherlands Equity Partners I,
C.V., a Dutch limited partnership, Warburg, Pincus Netherlands Equity Partners
II, C.V., a Dutch limited partnership, Warburg, Pincus Netherlands Equity
Partners III, C.V., a Dutch limited partnership, (each, a "Purchaser", and
---------
collectively, "Purchasers") and Technical Services Partners, L.P., a Delaware
-----------
limited partnership (the "Stockholder").
-----------
WHEREAS, the Stockholder is the record and beneficial owner of
4,552,502 shares (the "Shares") of common stock, $.01 par value per share (the
------
"Company Common Stock"), of Four Media Company, a Delaware corporation (the
--------------------
"Company"); and
-------
WHEREAS, pursuant to an agreement with Robert T. Walston (the
"TSP/Walston Agreement"), Mr. Walston is the beneficial owner of 1,432,875 of
---------------------
the Shares (the "Walston Shares"; the Shares excluding the Walston Shares are
--------------
referred to herein as the "Subject Shares"); and
--------------
WHEREAS, Purchasers and the Company have entered into a Securities
Purchase Agreement, dated as of the date hereof (the "Company Purchase
----------------
Agreement"), substantially in the form of Exhibit A hereto, which provides,
- ---------- ---------
among other things, that, upon the terms and subject to the conditions therein,
Purchasers will purchase from the Company and the Company will sell to
Purchasers 6,582,607 shares of Company Common Stock and the Company will issue
to Purchasers a warrant to purchase an additional 1,100,000 shares of Company
Common Stock.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
SECTION 1. PURCHASE AND SALE OF COMMON STOCK
---------------------------------
(a) Subject to the terms and conditions set forth in this Agreement
and in reliance upon the Stockholder's and Purchasers' joint and several
representations and warranties set forth below, on the Closing Date (as defined
below) the
<PAGE>
Stockholder shall sell to Purchasers, and Purchasers shall jointly and severally
purchase from the Stockholder, all of the Subject Shares for a cash purchase
price of $7.50 per share (the "Per Share Amount"). Such sale and purchase shall
----------------
be effected on the Closing Date by the Stockholder delivering to Purchasers
certificates representing the Subject Shares duly registered in its name, duly
endorsed in blank for transfer or accompanied by stock powers duly endorsed in
blank, against delivery by Purchasers to the Stockholder of the product of the
Per Share Amount and the total number of Subject Shares (the "Purchase Price")
---------------
by wire transfer of immediately available funds to such account as the
Stockholder shall designate prior to the Closing Date.
(b) The closing of such sale, purchase and issuance (the "Closing")
-------
shall take place at 10:00 A.M., New York City time, on the third Business Day
after all of the conditions set forth herein have been satisfied or waived, or
such other date as Purchasers and the Stockholder shall agree in writing (the
"Closing Date"), at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue,
------------
New York, New York, or such other location as Purchasers and the Stockholder
shall mutually select.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
-------------------------------------------------
2.1. Representations and Warranties of the Stockholder
-------------------------------------------------
The Stockholder represents and warrants to Purchasers as follows:
(a) The Stockholder is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware, has the
requisite power and authority to execute and deliver the Stockholder Transaction
Documents and to consummate the transactions contemplated hereby and thereby,
and has taken all necessary action to authorize the execution, delivery and
performance of the Stockholder Transaction Documents.
(b) The Stockholder is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
------------
which meaning will apply for all purposes of this Agreement) of, and has good
title to, all of the Subject Shares, free and clear of any mortgage, pledge,
-2-
<PAGE>
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 (each, a "Lien")
----
(including any restriction on the right to vote, sell or otherwise dispose of
the Subject Shares), except as set forth in this Agreement.
(c) Other than the Walston Shares, the Subject Shares constitute all
of the securities (as defined in Section 3(10) of the Exchange Act, which
definition will apply for all purposes of this Agreement) of the Company
beneficially owned, directly or indirectly, by the Stockholder (excluding any
securities beneficially owned by any of its affiliates or associates (as such
terms are defined in Rule 12b-2 under the Exchange Act, which definition will
apply for all purposes of this Agreement) as to which it does not have voting or
investment power); provided, however, that the Stockholder holds the exclusive
power to vote the Walston Shares.
(d) Other than the Shares, the Stockholder does not, directly or
indirectly, beneficially own or have any option, warrant or other right to
acquire any securities of the Company that are or may by their terms become
entitled to vote or any securities that are convertible or exchangeable into or
exercisable for any securities of the Company that are or may by their terms
become entitled to vote, nor is the Stockholder subject to any contract,
commitment, arrangement, understanding or relationship (whether or not legally
enforceable), other than this Agreement and the TSP/Walston Agreement, that
allows or obligates it to vote or acquire any securities of the Company. The
Stockholder holds exclusive power to vote the Shares and has not granted a proxy
to any other Person to vote the Shares, subject to the limitations set forth in
this Agreement.
(e) This Agreement has been duly executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery of this
Agreement by Purchasers, is a valid and binding obligation of the Stockholder
enforceable against the Stockholder in accordance with its terms, except that
(i) the enforceability hereof may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereinafter in effect, affecting
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable
-3-
<PAGE>
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(f) Neither the execution and delivery of this Agreement nor the
performance by the Stockholder of its obligations hereunder will conflict with,
result in a violation or breach of, or constitute a default (or an event that,
with notice or lapse of time or both, would result in a default) or give rise to
any right of termination, amendment, cancellation, or acceleration or result in
the creation of any Lien on any Subject Shares under (collectively, a
"Stockholder Conflict"), (i) the Stockholder's certificate of limited
--------------------
partnership or partnership agreement or other constituting documents, (ii) any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which the Stockholder is a party or by which the Stockholder is
bound, to the extent such Stockholder Conflict would be reasonably likely to
affect the Stockholder's ability to consummate the transactions contemplated
hereby or (iii) any injunction, judgment, writ, decree, order or ruling
applicable to the Stockholder, to the extent such Stockholder Conflict would be
reasonably likely to affect the Stockholder's ability to consummate the
transactions contemplated hereby.
(g) To the knowledge of the Stockholder, neither the execution and
delivery of this Agreement nor the performance by the Stockholder of its
obligations hereunder will violate any law, decree, statute, rule or regulation
applicable to the Stockholder or require any order, consent, authorization or
approval of, filing or registration with, or declaration or notice to, any
court, administrative agency or other governmental body or authority, other than
any required notices or filings with the Federal Communications Commission or
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act") or
-------
the federal securities laws.
(h) All agreements, contracts, transfers of assets or liabilities or
other commitments or transactions, whether or not entered into in the ordinary
course of business, to or by which the Company or any of its subsidiaries (as
defined in Section 9.1 of this Agreement, which definition will apply for all
purposes of this Agreement), on the one hand, and the Stockholder or any of its
affiliates (other than the Company or any of its subsidiaries), on the other
hand, are or have been a party or are
-4-
<PAGE>
otherwise bound or affected, that (i) are currently pending or in effect or (ii)
involve continuing liabilities and obligations that, individually or in the
aggregate, have been, are or will be material to the Company or any of its
subsidiaries taken as a whole, have either been disclosed in the SEC Reports (as
such term is defined in the Company Purchase Agreement) or are set forth on
Schedule 3.23 to the Company Purchase Agreement.
(i) Neither the Stockholder nor anyone acting on its behalf shall
offer the Subject Shares for sale to, or solicit any offer to acquire any of the
same from, anyone so as to bring the sale of the Subject Shares, or any part
thereof, within the provisions of Section 5 of the Securities Act.
(j) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement made by or on behalf of the Stockholder and
the Stockholder agrees to indemnify and hold Purchasers harmless against any
costs or damages incurred as a result of any such claim.
(k) The Stockholder has executed terminations of the Lock-up
Agreements. Schedule 2.1(k) sets forth complete and accurate copies of such
---------------
terminations.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS
--------------------------------------------
3.1. Representations and Warranties of Purchasers
--------------------------------------------
Each Purchaser jointly and severally represents and warrants to the Stockholder,
as of the date hereof and as of the Closing Date, as follows:
(a) Each Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and each Purchaser has the requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement.
(b) This Agreement and each other Transaction Document to which it is
a party has been duly executed and delivered by
-5-
<PAGE>
each Purchaser and, assuming the due execution and delivery of this Agreement by
the Stockholder and of such other Transaction Documents by the other parties
thereto, are the valid and binding obligations of each Purchaser, enforceable
against each Purchaser in accordance with their respective terms, except that
(i) the enforceability hereof and thereof may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereinafter in effect,
affecting creditors' rights generally, and (ii) the availability of the remedy
of specific performance or injunctive or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of the
court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
performance by each Purchaser of its respective obligations hereunder or
thereunder will conflict with, result in a violation or breach of, or constitute
a default (or an event that, with notice or lapse of time or both, would result
in a default) or give rise to any right of termination, amendment, cancellation
or acceleration under (collectively a "Purchaser Conflict"), (i) its certificate
------------------
of limited partnership, partnership agreement or comparable instrument, (ii) any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which such Purchaser is a party or by which such Purchaser is bound,
to the extent such Purchaser Conflict would materially affect such Purchaser's
ability to consummate the transactions contemplated under the Stockholder
Transaction Documents or (iii) any injunction, judgment, writ, decree, order or
ruling applicable to such Purchaser, to the extent such Purchaser Conflict would
materially affect such Purchaser's ability to consummate the transactions
contemplated under the Stockholder Transaction Documents.
(d) Neither the execution and delivery of this Agreement nor the
performance by each Purchaser of its respective obligations hereunder will
violate any law, decree, statute, rule or regulation applicable to such
Purchaser or require any order, consent, authorization or approval of, filing or
registration with, or declaration or notice to, any corporation, Person, firm,
Governmental Entity or public or judicial authority, other than any required
notices or filings with the FCC or pursuant to the HSR Act or the federal
securities laws.
-6-
<PAGE>
(e) It is acquiring the Subject Shares for its own account for
investment and not with a view towards the resale, transfer or distribution
thereof, nor with any present intention of distributing the Subject Shares, but
subject, nevertheless, to any requirement of law that the disposition of such
Purchaser's property shall at all times be within such Purchaser's control
(subject to any restrictions set forth in the Company Purchase Agreement), and
without prejudice to such Purchaser's right at all times to sell or otherwise
dispose of all or any part of such securities under a registration under the
Securities Act or under an exemption from said registration available under the
Securities Act.
(f) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement or the other Transaction Documents to which it is a party based on any
arrangement made by or on behalf of such Purchaser or any of its affiliates and
such Purchaser agrees to indemnify and hold the Stockholder harmless against any
costs or damages incurred as a result of any such claim.
SECTION 4. COVENANTS OF THE PARTIES
------------------------
4.1. Compliance with Voting and Option Agreement
-------------------------------------------
The Stockholder shall perform and comply with all agreements and covenants
contained in the Voting and Option Agreement which are required to be performed
or complied with by the Stockholder prior to or on the Closing Date.
4.2. Transfer of the Shares.
----------------------
During the term of this Agreement, except as otherwise provided herein
or in the Voting and Option Agreement, the Stockholder will not (a) tender into
any tender or exchange offer or otherwise sell, transfer, pledge, assign,
hypothecate or otherwise dispose of, or encumber with any Lien, any of the
Subject Shares, (b) acquire any shares of Common Stock or other securities of
the Company, (c) deposit the Subject Shares into a voting trust, enter into a
voting agreement or arrangement with respect to the Subject Shares or grant any
proxy or power of attorney with respect to the Subject Shares or (d) enter into
any contract, option or other arrangement or undertaking with respect to the
direct or indirect acquisition or sale, transfer, pledge,
-7-
<PAGE>
assignment, hypothecation or other disposition of any interest in or the voting
of any shares of Common Stock or any other securities of the Company.
4.3. HSR Act
-------
If required under the HSR Act, Purchasers shall use their best efforts
to file as soon as practicable notifications under the HSR Act, in connection
with the transactions contemplated hereby, and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission and the
Antitrust Division of the Department of Justice for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection with antitrust matters relating to the transactions contemplated
by this Agreement.
4.4. Additional Agreements
---------------------
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to cooperate with the other and use its best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Stockholder
Transaction Documents and the other Transaction Documents to which such party is
a party, including using its best efforts to obtain all necessary waivers,
consents and approvals, and to effect all necessary registrations and filings as
may be required hereunder or thereunder, including any filings required to be
made with the Federal Communications Commission.
(b) In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of any of the Stockholder
Transaction Documents, Purchasers and the Stockholder shall take all such action
as promptly as practicable.
4.5. Notice of Breach
----------------
Each party shall promptly give notice to the other party upon becoming
aware of the occurrence or, to its knowledge, impending or threatened
occurrence, of any event which would cause any of its representations or
warranties to be untrue on
-8-
<PAGE>
the Closing Date or cause a breach of any covenant by it contained in any of the
Stockholder Transaction Documents and will use its best efforts to prevent or
promptly remedy the same. Any such notification by the Stockholder or
Purchasers shall not be deemed an amendment of this Agreement.
SECTION 5. PURCHASERS' CLOSING CONDITIONS
------------------------------
The obligations of Purchasers to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions, any one or more of which (except for
the conditions set forth in Section 5.4 and Section 5.7) may be waived in
writing by Purchasers in accordance with Section 8.4 hereof:
5.1. Representations and Warranties
------------------------------
The representations and warranties of the Stockholder contained in the
Stockholder Transaction Documents shall be true in all material respects on and
as of the Closing Date (except to the extent any such representation and
warranty speaks as to an earlier date, in which event it shall be true and
correct in all material respects as of such earlier date) as though such
representations and warranties were made at and as of such date, except as
otherwise affected by the transactions contemplated hereby and thereby.
5.2. Compliance with Stockholder Transaction Documents
-------------------------------------------------
The Stockholder shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the
Stockholder Transaction Documents which are required to be performed or complied
with by the Stockholder prior to or on the Closing Date.
5.3. Certificate
-----------
Purchasers shall have received a certificate, dated the Closing Date,
signed by the general partner of the Stockholder, certifying that the conditions
specified in the foregoing Sections 5.1 and 5.2 hereof have been fulfilled.
-9-
<PAGE>
5.4. Expiration or Termination of Waiting Period under HSR Act
---------------------------------------------------------
Any waiting period (and any extension thereof) under the HSR Act
applicable to the transactions contemplated by this Agreement shall have expired
or been terminated .
5.5. Counsel's Opinion
-----------------
Purchasers shall have received from Schulte Roth & Zabel LLP, the
legal counsel to the Stockholder, an opinion, dated the Closing Date,
substantially in the form of Exhibit B hereto.
---------
5.6. Additional Purchase Agreements
------------------------------
The transactions contemplated by the Company Purchase Agreement shall
be consummated concurrently on the Closing Date.
5.7. Injunction
----------
No preliminary or permanent injunction or other order by any federal
or state court in the United States which prevents the consummation of the
transactions contemplated by the Stockholder Transaction Documents or the
Additional Purchase Agreements shall have been issued and remain in effect.
SECTION 6. STOCKHOLDER CLOSING CONDITIONS
------------------------------
The obligations of the Stockholder to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction on or prior
to the Closing Date of the following conditions, any one or more of which
(except for the conditions set forth in Section 6.4 and Section 6.5) may be
waived in writing by the Company in accordance with Section 8.4 hereof:
6.1. Representations and Warranties
------------------------------
The representations and warranties of each Purchaser contained in the
Stockholder Transaction Documents shall be true in all material respects on and
as of the Closing Date (except to the extent any such representation and
warranty speaks as to an earlier date, in which event it shall be true and
correct in all material respects as of such earlier date) as though such
representations and warranties were made at and as of such date,
-10-
<PAGE>
except as otherwise affected by the transactions contemplated hereby.
6.2. Compliance with Agreement
-------------------------
Each Purchaser shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the
Stockholder Transaction Documents which are required to be performed or complied
with by it prior to or on the Closing Date.
6.3. Purchasers' Certificate
-----------------------
The Stockholder shall have received a certificate from Purchasers,
dated the Closing Date, signed by duly authorized representatives of Purchasers,
certifying that the conditions specified in the foregoing Sections 6.1 and 6.2
hereof have been fulfilled.
6.4. Expiration or Termination of Waiting Period under HSR Act
---------------------------------------------------------
Any waiting period (and any extension thereof) under the HSR Act
applicable to the transactions contemplated by this Agreement shall have expired
or been terminated.
6.5. Injunction
----------
No preliminary or permanent injunction or other order by any federal
or state court in the United States which prevents the consummation of the
transactions contemplated hereby shall have been issued and remain in effect.
SECTION 7. RECOVERY OF FEES
----------------
Any party hereto who shall obtain a final judgment in a court of
competent jurisdiction for the payment of damages by another party hereto for a
breach of this Agreement shall be entitled to recover reasonable attorneys' fees
and court costs incurred in connection with the obtaining of such judgment.
-11-
<PAGE>
SECTION 8. TERMINATION, AMENDMENT AND WAIVER
---------------------------------
8.1. Termination
-----------
This Agreement may be terminated at any time prior to the Closing,
whether before or after approval of the Company Voting Matters (as defined) at
the Company Vote:
(a) By mutual written consent of the Stockholder and Purchasers; or
(b) (i) By Purchasers if any of the conditions specified in Section 5
have not been satisfied or waived by Purchasers at such time as such condition
is no longer capable of satisfaction including the failure to obtain any
required approval of the Company's stockholders at the Company Vote or at any
adjournment thereof (provided Purchasers are not otherwise in material breach of
--------
their representations, warranties, covenants or agreements under the Transaction
Documents); or (ii) by the Stockholder if any of the conditions specified in
Section 6 have not been satisfied or waived by the Stockholder at such time as
such condition is no longer capable of satisfaction including the failure to
obtain any required approval of the Company's stockholders at the Company Vote
or at any adjournment thereof (provided the Stockholder is not otherwise in
--------
material breach of its representations, warranties, covenants or agreements
under the Stockholder Transaction Documents); or
(c) By either Purchasers or the Stockholder if any Governmental
Entity of competent jurisdiction shall have issued a final permanent order
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement or rendering the conditions to closing incapable
of being satisfied, and in any such case the time for appeal or petition for
reconsideration of such order shall have expired without such appeal or petition
being granted; or
(d) By Purchasers if, without any material breach by Purchasers of
their obligations under this Agreement or any other Transaction Document to
which it is a party, the transactions contemplated hereby shall not have been
consummated on or before June 30, 1999 (the "Expiration Date") unless the sole
---------------
reason for the failure to consummate the transactions contemplated hereby by
such date is the nonfulfillment of the conditions specified in Section 7.2 of
the Company Purchase Agreement, in which case the
-12-
<PAGE>
Expiration Date shall be extended to September 30, 1999 (the "Extended
--------
Expiration Date"); or
- ---------------
(e) By the Stockholder if, without any material breach by the
Stockholder of its obligations under any of the Stockholder Transaction
Documents, the transactions contemplated hereby shall not have been consummated
on or before the Expiration Date or, if applicable, the Extended Expiration
Date; or
(f) By the Stockholder if there shall be a material breach of any of
Purchasers' representations, warranties or covenants in any of the Stockholder
Transaction Documents, which breach cannot be or has not been cured within ten
days of the receipt of written notice thereof; or
(g) By Purchasers if there has been a material breach of any of the
Stockholder's representations, warranties, covenants or agreements set forth in
any of the Stockholder Transaction Documents, which breach cannot be or has not
been cured within ten days of the receipt of written notice thereof; or
(h) By Purchasers, if (i) the Board of Directors of the Company (the
"Board") shall withdraw, modify or change its recommendation or approval in
-----
respect of the Company Purchase Agreement or the Company Voting Matters in a
manner adverse to Purchasers, (ii) the Board shall have recommended any proposal
other than by Purchasers in respect of a Takeover Proposal, (iii) the Company
shall have exercised a right with respect to a Takeover Proposal and shall,
directly or through its representatives, continue discussions with any third
party concerning such Takeover Proposal for more than fifteen Business Days
after the date of receipt of such Takeover Proposal, (iv) a Takeover Proposal
that is publicly disclosed shall have been commenced or communicated to the
Company which contains a proposal as to price (without regard to whether such
proposal specifies a specific price or a range of potential prices) and the
Company shall not have rejected such proposal within fifteen Business Days from
the date such Takeover Proposal was communicated to the Company (provided, that
such Takeover Proposal shall be deemed to have been communicated to the Company
on such date as it shall have been disclosed in a filing with the Securities and
Exchange Commission by the party making such Takeover Proposal) or (v) any
Person or group (as defined in
-13-
<PAGE>
Section 13(d)(3) of the Exchange Act) other than Purchasers or any of their
respective subsidiaries or affiliates shall have become the beneficial owner of
more than 15% of the outstanding shares of Company Common Stock (either on a
primary or a fully diluted basis); provided, however, that with regard to a
-------- -------
Person that owns more than 15% of the outstanding shares of Company Common Stock
on the date hereof, this provision shall be triggered by such Person becoming
the beneficial owner of an additional 5% of the outstanding shares of Company
Common Stock (either on a primary or a fully diluted basis); or
(i) Subject to the terms of the Voting and Option Agreement, by the
Stockholder if the Company Purchase Agreement is terminated.
8.2. Effect of Termination
---------------------
In the event of termination of this Agreement as provided in Section
8.1 hereof, written notice thereof shall forthwith be given to the other parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void and there shall be no
liability on the part of Purchasers or the Stockholder or their respective
officers, directors or partners; provided that nothing herein shall relieve any
--------
party from liability for any breach of this Agreement.
8.3. Amendment
---------
This Agreement may be amended by the parties hereto, by or pursuant to
action taken by Purchasers and the Stockholder. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.4. Waiver
------
At any time prior to the Closing, the parties hereto, by or pursuant
to action taken by Purchasers and the Stockholder, may (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other parties contained herein or in any documents delivered pursuant hereto by
the other parties and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or
-14-
<PAGE>
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
SECTION 9. INTERPRETATION OF THIS AGREEMENT
--------------------------------
9.1. Terms Defined
-------------
As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:
Additional Purchase Agreements: shall mean the Company Purchase
------------------------------
Agreement and the Founders Purchase Agreement.
Business Day: shall mean a day other than a Saturday, Sunday or other
------------
day on which banks in the States of New York or California are not required or
authorized to close.
Company Vote: shall mean a meeting of or solicitation of consents from
------------
the stockholders of the Company to be convened as promptly as practicable after
the date of this Agreement.
Company Voting Matters: shall have the meaning set forth in the
----------------------
Company Purchase Agreement.
FCC: shall mean the Federal Communications Commission.
---
Flemings: shall mean Fleming US Discovery Fund III, L.P., a Delaware
--------
limited partnership, and Fleming US Discovery Offshore Fund III, L.P., a Bermuda
limited partnership, collectively.
Flemings Conversion Agreement: shall mean the Preferred Stock
-----------------------------
Conversion and Stockholders Agreement, dated as of the date hereof, between the
Company, Flemings and Purchasers.
Founders: shall mean John H. Donlon, Gavin W. Schutz, Robert Bailey
--------
and the Estate of John H. Sabin.
Founders Purchase Agreement: shall mean the Stock Purchase Agreement,
---------------------------
dated as of the date hereof, between Purchasers and the Founders, substantially
in the form of Exhibit C hereto.
Governmental Entity: shall mean any United States or international (a)
-------------------
federal, state, county, local or municipal
-15-
<PAGE>
government or administrative agency or political subdivision thereof, (b) court
or administrative tribunal, (c) non-governmental agency, tribunal or entity that
is vested by a governmental agency with applicable jurisdiction, or (d)
arbitration tribunal or other non-governmental authority with applicable
jurisdiction.
Lock-up Agreements: shall mean the Lock-up Agreements, dated as of
------------------
January 15, 1997, by and between Furman Selz LLC and each of the following
Persons: Edward Kirtman and Shimon Topor.
Person: shall mean an individual, partnership, joint-stock company,
------
corporation, limited liability company, trust or unincorporated organization,
and a Governmental Entity.
Securities Act: shall mean the Securities Act of 1933, as amended.
--------------
Stockholder Transaction Documents: shall mean this Agreement and the
---------------------------------
Voting and Option Agreement.
subsidiary: shall mean any (a) Person of which the Company (or other
----------
specified Person) shall own directly or indirectly through a subsidiary, a
nominee arrangement or otherwise (i) at least a majority of the outstanding
capital stock (or other shares of beneficial interest) or (ii) at least a
majority of the partnership, membership, joint venture or similar interests, or
(b) in which the Company (or other specified Person) is a general partner or
joint venturer. For the sake of clarity, Cinram-POP DVD Center LLC, a California
limited liability company in which the Company holds a 49% membership interest,
shall not be deemed to be a subsidiary of the Company.
Takeover Proposal: shall mean any tender or exchange offer involving
-----------------
the Company, any proposal for a merger, consolidation or other business
combination involving the Company, any proposal or offer to acquire in any
manner a greater than 15% equity interest in, or a significant portion of the
business or assets of, the Company (other than immaterial or insubstantial
assets or inventory in the ordinary course of business or assets held for sale),
any proposal or offer with respect to any recapitalization or restructuring with
respect to the Company or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to the
-16-
<PAGE>
Company other than pursuant to the transactions to be effected pursuant to this
Agreement or the Additional Purchase Agreements.
Transaction Documents: shall mean this Agreement, the Additional
---------------------
Purchase Agreements, the Voting and Option Agreement, the Voting Agreements, the
Registration Rights Agreement (as defined in the Company Purchase Agreement) and
the Flemings Conversion Agreement.
TSP: shall mean Technical Service Partners L.P., a Delaware limited
---
partnership.
Voting Agreements: shall mean the Voting Agreements, dated as of the
-----------------
date hereof, by and among each of (i) Walston, TSP and Purchasers and (ii)
Flemings and Purchasers, substantially in the forms of Exhibit D-1 and Exhibit
----------- -------
D-2.
- ---
Voting and Option Agreement: shall mean the Voting and Option
---------------------------
Agreement, dated as of the date hereof, among Purchasers and TSP, substantially
in the form of Exhibit E hereto.
---------
9.2. 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.
9.3. 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.
9.4. Paragraph and 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.
SECTION 10. MISCELLANEOUS
-------------
10.1. Survival of Representations and Warranties
------------------------------------------
All statements contained in any certificate or other instrument
executed and delivered by any party pursuant to this
-17-
<PAGE>
Agreement or in connection with the transactions contemplated hereby shall be
deemed representations and warranties of such Person hereunder. All
representations and warranties made by the parties hereto in this Agreement or
pursuant hereto shall survive the Closing hereunder and any investigation at any
time made by or on behalf of such party; provided, however, that no party shall
-------- -------
commence any action against the other parties hereto in respect of any provision
of this Agreement at any time subsequent to the date eighteen (18) months after
the Closing Date. All covenants and agreements set forth in this Agreement shall
survive the Closing in accordance with their terms.
10.2. Notices
-------
(a) All communications under this Agreement shall be in writing and
shall be delivered by hand or facsimile or mailed by overnight courier or by
registered mail or certified mail, postage prepaid, in each case to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice, except that notices of changes of address shall be
effective upon receipt):
(1) if to any of Purchasers:
Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, NY 10017
Attention: David E. Libowitz
Facsimile: (212) 878-9351
With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6009
Attention: Neil Novikoff, Esq.
Facsimile: (212) 728-8111
-18-
<PAGE>
(2) if to the Stockholder:
Technical Services Partners, L.P.
c/o Steinhardt Partners
605 Third Avenue
New York, New York 10158
Attention: Shimon Topor
Facsimile:
With copies to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Stuart D. Freedman, Esq.
Telecopier: (212) 593-5955
and
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071-2007
Attention: Paul D. Tosetti, Esq. and
Michael W. Sturrock, Esq.
Facsimile: (213) 891-8763
(b) 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.
(c) Any approvals or consents required to be granted by Purchasers
under this Agreement may be granted by David E. Libowitz acting on behalf of,
and with full authority with respect to, Purchasers.
10.3. Fees; Expenses
--------------
All costs, fees and expenses incurred in connection with the
Stockholder Transaction Documents and the transactions contemplated thereby
shall be paid by the party incurring such costs and expenses.
-19-
<PAGE>
10.4. Publicity
---------
So long as this Agreement is in effect, Purchasers and the Stockholder
shall consult with each other and the Company (which is an express third party
beneficiary of this section) in issuing any press release or otherwise making
any public statement with respect to the transactions contemplated by this
Agreement, and neither of them shall issue any press release or make any public
statement prior to such consultation, except as may be required by law or
applicable stock exchange rules. The commencement of litigation relating to this
Agreement or the transactions contemplated hereby or any proceedings in
connection therewith shall not be deemed a violation of this Section 10.4.
10.5. Specific Performance
--------------------
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any state or federal court sitting in the
State of New York, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.6. Submission to Jurisdiction
--------------------------
With respect to any suit, action or proceeding initiated by a party to
this Agreement arising out of, under or in connection with this Agreement or any
of the other Transaction Documents, the Stockholder and Purchasers each hereby
submit to the exclusive jurisdiction of any state or federal court sitting in
the State of New York and irrevocably waive, to the fullest extent permitted by
law, any objection that they may now have or hereafter obtain to the laying of
venue in any such court in any such suit, action or proceeding. The Stockholder
and each Purchaser agree that, within 14 days of the date of this Agreement, it
will appoint and designate CT Corporation System in the City of New York, New
York located at 1633 Broadway, New York, New York, or such other Person as may
be satisfactory to the other party, as its agent to receive process in any such
suit, action or proceeding and agrees that service of process on such agent
shall be deemed to be in every respect effective
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<PAGE>
service of process on it in any such suit, action or proceeding and waives all
claim of error by reason of such service.
10.7. Reproduction of Documents
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by Purchasers on the Closing Date (except for
the certificates evidencing the Subject Shares themselves), and (c) any
certificates and other information previously or hereafter furnished to
Purchasers, may be reproduced by Purchasers by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process and
Purchasers may destroy any original document so reproduced. Each party hereto
agrees and stipulates 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 Purchasers in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
10.8. Successors and Assigns
----------------------
Neither this Agreement nor any of the rights or obligations of any
party may be assigned without the prior written consent of the other parties,
except that Purchasers may, without such consent, assign this Agreement and any
of such rights and obligations to one or more of their affiliates unless such
assignment causes any representation or warranty to be untrue or incorrect in
any material respect or unless such assignment shall materially delay the
Closing. Any such assignment shall not, however, act as a release of the
assigning Person. Subject to the foregoing, this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, and no other Person shall have any right, benefit or obligation
hereunder.
10.9. Entire Agreement; Amendment and Waiver
--------------------------------------
This Agreement and the other Stockholder Transaction Documents
constitute the entire understandings of the parties hereto and supersede all
prior agreements or understandings with respect to the subject matter hereof
among such parties. This
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<PAGE>
Agreement may be amended, and the ob servance of any term of this Agreement may
be waived, with (and only with) the written consent of the Stockholder and
Purchasers .
10.10. 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.
10.11. Limitation on Enforcement of Remedies
-------------------------------------
Each party hereby agrees that it will not assert against the limited
partners of the other party any claim it may have under this Agreement or any
other Stockholder Transaction Document by reason of any failure or alleged
failure by such other party to meet its obligations hereunder or thereunder.
10.12. Simultaneous Effectiveness
--------------------------
This Agreement and each of the other Transaction Documents shall (i)
be executed simultaneously and at such time shall be valid and binding
obligations of each of the parties and signatories thereto and (ii)
simultaneously be consummated at the Closing.
10.13. 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.
[The remainder of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, Purchasers and the Stockholder have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co.,
General Partner
By:___________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS I, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:____________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS II, C.V.
By: Warburg, Pincus & Co.
General Partner
By:____________________________________
Name:
Title:
S-1
<PAGE>
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS III, C.V.
By: Warburg, Pincus & Co.,
General Partner
By:___________________________________
Name:
Title:
TECHNICAL SERVICES PARTNERS, L.P.
By: Technical Service Holding
By:_____________________________________
Name:
Title:
S-2
<PAGE>
EXHIBIT 99.4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
among
WARBURG, PINCUS EQUITY PARTNERS, L.P.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.
and
JOHN H. DONLON
GAVIN W. SCHUTZ,
ROBERT BAILEY AND
THE ESTATE OF JOHN H. SABIN
January 18, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. PURCHASE AND SALE OF COMMON STOCK.......................................................... 1
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS......................................... 2
2.1. Representations and Warranties of the Stockholders....................................... 2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS............................................... 4
3.1. Representations and Warranties of Purchasers............................................. 4
SECTION 4. COVENANTS OF THE PARTIES................................................................... 6
4.1. Exercise of Options; Transfer of Options................................................. 6
4.2. HSR Act.................................................................................. 7
4.3. Additional Agreements.................................................................... 7
4.4. Notice of Breach......................................................................... 8
SECTION 5. PURCHASERS' CLOSING CONDITIONS............................................................. 8
5.1. Representations and Warranties........................................................... 8
5.2. Compliance with Agreement................................................................ 8
5.3. Certificate.............................................................................. 8
5.4. Expiration or Termination of Waiting Period under HSR Act................................ 9
5.5. Additional Purchase Agreements........................................................... 9
5.6. Injunction............................................................................... 9
5.7. Lock-up Agreements....................................................................... 9
SECTION 6. STOCKHOLDERS' CLOSING CONDITIONS........................................................... 9
6.1. Representations and Warranties........................................................... 9
6.2. Compliance with Agreement................................................................ 10
6.3. Purchasers' Certificate.................................................................. 10
6.4. Expiration or Termination of Waiting Period under HSR Act................................ 10
6.5. Injunction............................................................................... 10
SECTION 7. TERMINATION, AMENDMENT AND WAIVER.......................................................... 10
7.1. Termination.............................................................................. 10
7.2. Effect of Termination.................................................................... 12
7.3. Amendment................................................................................ 13
7.4. Waiver................................................................................... 13
SECTION 8. INTERPRETATION OF THIS AGREEMENT........................................................... 13
8.1. Terms Defined............................................................................ 13
8.2. Directly or Indirectly................................................................... 16
8.3. Governing Law............................................................................ 16
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
8.4. Paragraph and Section Headings..................................................... 16
SECTION 9. MISCELLANEOUS.............................................................................. 16
9.1. Survival of Representations and Warranties......................................... 16
9.2. Notices............................................................................ 16
9.3. Fees; Expenses..................................................................... 18
9.4. Publicity.......................................................................... 18
9.5. Specific Performance............................................................... 18
9.6. Submission to Jurisdiction......................................................... 18
9.7. Reproduction of Documents.......................................................... 19
9.8. Successors and Assigns............................................................. 19
9.9. Entire Agreement; Amendment and Waiver............................................. 20
9.10. Severability...................................................................... 20
9.11. Limitation on Enforcement of Remedies............................................. 20
9.12. Recovery of Fees.................................................................. 20
9.13. Nature of Obligations............................................................. 20
9.14. Simultaneous Effectiveness........................................................ 21
9.15. Counterparts...................................................................... 21
</TABLE>
-ii-
<PAGE>
EXHIBIT A Form of Company Purchase Agreement
EXHIBIT B Form of TSP Purchase Agreement
EXHIBIT C-1 Form of Walston Voting Agreement
EXHIBIT C-2 Form of Flemings Voting Agreement
EXHIBIT D Form of TSP Voting and Option Agreement
SCHEDULE I List of Stockholders and Allocation of Purchase Price
Among Stockholders
SCHEDULE 2.1(c) Additional Securities Beneficially Owned by Stockholders
SCHEDULE 2.1(d) Convertible Securities Beneficially Owned by Stockholders
SCHEDULE 4.1(b) Exercise of Options; Transfer of Options
-iii-
<PAGE>
INDEX
Additional Purchase Agreements............................................ 12
Agreement................................................................. 1
Board..................................................................... 10
Business Day.............................................................. 12
Closing................................................................... 2
Closing Date.............................................................. 2
Company................................................................... 1
Company Common Stock...................................................... 1
Company Purchase Agreement................................................ 1
Company Vote.............................................................. 12
Company Voting Matters.................................................... 12
Confidentiality Agreement................................................. 12
Conflict.................................................................. 5
Employment Agreements..................................................... 12
Exchange Act.............................................................. 2
Expiration Date........................................................... 10
Extended Expiration Date.................................................. 10
Flemings.................................................................. 12
Flemings Conversion Agreement............................................. 12
Governmental Entity....................................................... 12
Lien...................................................................... 2
Lock-up Agreements........................................................ 12
Options................................................................... 1
Per Share Amount.......................................................... 1
Person.................................................................... 13
Purchase Price............................................................ 2
Purchaser................................................................. 1
SEC....................................................................... 13
Securities Act............................................................ 13
Shares.................................................................... 1
Stockholder Transaction Documents......................................... 13
Stockholders.............................................................. 1
subsidiary................................................................ 13
Takeover Proposal......................................................... 13
Transaction Documents..................................................... 13
TSP....................................................................... 13
TSP Purchase Agreement.................................................... 13
-iv-
<PAGE>
Voting Agreements......................................................... 13
Voting and Option Agreement............................................... 14
Walston................................................................... 14
-v-
<PAGE>
STOCK PURCHASE AGREEMENT, dated as of January 18, 1999 (this "Agreement"),
---------
by and among Warburg, Pincus Equity Partners, L.P., a Delaware limited
partnership, Warburg, Pincus Netherlands Equity Partners I, C.V., a Dutch
limited partnership, Warburg, Pincus Netherlands Equity Partners II, C.V., a
Dutch limited partnership, Warburg, Pincus Netherlands Equity Partners III,
C.V., a Dutch limited partnership (each, a "Purchaser", and collectively,
---------
"Purchasers"), and John H. Donlon, Gavin W. Schutz, Robert Bailey and the Estate
----------
of John H. Sabin (collectively, the "Stockholders").
------------
WHEREAS, the Stockholders are the record and beneficial owners of stock
options (the "Options") to acquire an aggregate of 497,766 shares (the "Shares")
------- ------
of common stock, $.01 par value per share (the "Company Common Stock"), of Four
--------------------
Media Company, a Delaware corporation (the "Company"); and
-------
WHEREAS, Purchasers and the Company have entered into a Securities Purchase
Agreement, dated as of the date hereof (the "Company Purchase Agreement"),
--------------------------
substantially in the form of Exhibit A hereto, which provides, among other
---------
things, that, upon the terms and subject to the conditions therein, Purchasers
will purchase from the Company and the Company will sell to Purchasers 6,582,607
shares of Company Common Stock and will issue to Purchasers a warrant to
purchase an additional 1,100,000 shares of Company Common Stock; and
WHEREAS, as a condition to the willingness of Purchasers to enter into the
Company Purchase Agreement, Purchasers have requested that the Stockholders
agree, and in order to induce Purchasers to enter into the Company Purchase
Agreement, the Stockholders have agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
SECTION 1. PURCHASE AND SALE OF COMMON STOCK
---------------------------------
(a) Subject to the terms and conditions set forth in this Agreement and in
reliance upon the Stockholders' and Purchasers' respective representations and
warranties set forth below, on the Closing Date (as defined below) the
Stockholders
<PAGE>
shall sell to Purchasers, and Purchasers shall purchase from the Stockholders,
the Shares for a cash purchase price of $8.00 per share (the "Per Share
---------
Amount"). Such sale and purchase shall be effected on the Closing Date by the
- ------
Stockholders exercising the Options in full, pursuant to which they will take
possession of the Shares, and delivering to Purchasers certificates representing
the Shares duly registered in their name, duly endorsed in blank for transfer or
accompanied by stock powers duly endorsed in blank, against delivery by
Purchasers to the Stockholders of the product of the Per Share Amount and the
total number of Shares (the "Purchase Price") in the respective amounts set
--------------
forth on Schedule I by wire transfer of immediately available funds to such
accounts as the Stockholders shall designate prior to the Closing Date.
(b) The closing of such sale, purchase and issuance (the "Closing") shall
-------
take place at 10:00 A.M., New York City time, on the third Business Day after
all of the conditions set forth herein have been satisfied or waived, or such
other date as Purchasers and the Stockholders shall agree in writing (the
"Closing Date"), at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue,
------------
New York, New York, or such other location as Purchasers and the Stockholders
shall mutually select.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
--------------------------------------------------
2.1. Representations and Warranties of the Stockholders
--------------------------------------------------
Each Stockholder represents and warrants to Purchasers, severally and not
jointly, as follows:
(a) Such Stockholder has the requisite power and authority to execute and
deliver the Stockholder Transaction Documents and to consummate the transactions
contemplated hereby and thereby, and, if not an individual, has taken all
necessary action to authorize the execution, delivery and performance of the
Stockholder Transaction Documents.
(b) Such Stockholder is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
------------
which meaning will apply for all purposes of this Agreement) of, and has good
title to, all of the Shares listed next to his or its name on Schedule I, free
and clear of any mortgage, pledge, hypothecation, rights of others, claim,
security interest, charge, encumbrance, title defect,
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<PAGE>
title retention agreement, voting trust agreement, interest, option, lien,
charge or similar restriction or limitation (each, a "Lien") (including any
----
restriction on the right to vote, sell or otherwise dispose of the Shares),
except for immaterial Liens and as set forth in this Agreement which shall not
materially affect the Stockholder's ability to consummate the transactions
contemplated under this Agreement.
(c) Except as set forth on Schedule 2.1(c) hereto, other than the
Options, the Shares listed next to his or its name on Schedule I constitute all
of the securities (as defined in Section 3(10) of the Exchange Act, which
definition will apply for all purposes of this Agreement) of the Company
beneficially owned, directly or indirectly, by such Stockholder (excluding any
securities beneficially owned by any of his or its affiliates or associates (as
such terms are defined in Rule 12b-2 under the Exchange Act, which definition
will apply for all purposes of this Agreement) as to which he does not have
voting or investment power).
(d) Except as set forth on Schedule 2.1(d) hereto, except for the Options
and the Shares listed next to his or its name on Schedule I, such Stockholder
does not, directly or indirectly, beneficially own or have any option, warrant
or other right to acquire any securities of the Company that are or may by their
terms become entitled to vote or any securities that are convertible or
exchangeable into or exercisable for any securities of the Company that are or
may by their terms become entitled to vote, nor is such Stockholder subject to
any contract, commitment, arrangement, understanding or relationship (whether or
not legally enforceable), other than this Agreement, that allows or obligates
him or it to vote or acquire any securities of the Company. Such Stockholder
holds exclusive power to vote the Shares listed next to his or its name on
Schedule I and has not granted a proxy to any other Person to vote such Shares,
subject to the limitations set forth in this Agreement.
(e) This Agreement has been duly executed and delivered by such
Stockholder and, assuming due authorization, execution and delivery of this
Agreement by Purchasers, is a valid and binding obligation of such Stockholder
enforceable against such Stockholder in accordance with its terms, except that
(i) the enforceability hereof may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereinafter in effect, affecting
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive
-3-
<PAGE>
or other forms of equitable relief may be subject to equitable defenses and
would be subject to the discretion of the court before which any proceeding
therefor may be brought.
(f) Neither the execution and delivery of this Agreement nor the
performance by such Stockholder of his or its obligations hereunder will
conflict with, result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would result in a default)
or give rise to any right of termination, amendment, cancellation, or
acceleration or result in the creation of any Lien on any Shares under, (i) any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which such Stockholder is a party or by which such Stockholder is
bound or (ii) any injunction, judgment, writ, decree, order or ruling applicable
to such Stockholder.
(g) Neither such Stockholder nor anyone acting on his or its behalf shall
offer such Shares or Options for sale to, or solicit any offer to acquire any of
the same from, anyone so as to bring the sale of such Shares or shares of
Company Common Stock issuable upon the exercise of such Options, or any part
thereof, within the provisions of Section 5 of the Securities Act.
(h) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement made by or on behalf of any of such
Stockholder and such Stockholder agrees, severally but not jointly, to indemnify
and hold Purchasers harmless against any costs or damages incurred as a result
of any such claim.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS
--------------------------------------------
3.1. Representations and Warranties of Purchasers
--------------------------------------------
Each Purchaser jointly and severally represents and warrants to the
Stockholders, as of the date hereof and as of the Closing Date, as follows:
(a) Each Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and each Purchaser has the requisite power and authority to execute and deliver
this Agreement and the other Transaction Documents to which it is a
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<PAGE>
party and to consummate the transactions contemplated hereby, and has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party.
(b) This Agreement and the other Transaction Documents to which it is a
party have been duly executed and delivered by each Purchaser and, assuming the
due execution and delivery of this Agreement by the Stockholders and of such
other Transaction Documents by the other parties thereto, are the valid and
binding obligations of each Purchaser, enforceable against each Purchaser in
accordance with their respective terms, except that (i) the enforceability
hereof and thereof may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereinafter in effect, affecting creditors' rights
generally, and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement or of the other
Transaction Documents to which it is a party nor the performance by each
Purchaser of its obligations hereunder or thereunder will conflict with, result
in a violation or breach of, or constitute a default (or an event that, with
notice or lapse of time or both, would result in a default) or give rise to any
right of termination, amendment, cancellation or acceleration under
(collectively, a "Conflict"), (i) its certificate of limited partnership,
--------
partnership agreement or comparable instrument, (ii) any contract, commitment,
agreement, understanding, arrangement or restriction of any kind to which such
Purchaser is a party or by which such Purchaser is bound to the extent such
Conflict would materially affect such Purchaser's ability to consummate the
transactions contemplated under the Stockholder Transaction Documents or (iii)
any judgment, writ, decree, order or ruling applicable to such Purchaser to the
extent such Conflict would materially affect such Purchaser's ability to
consummate the transactions contemplated under the Stockholder Transaction
Documents.
(d) Neither the execution and delivery of this Agreement or of the other
Transaction Documents to which it is a party nor the performance by each
Purchaser of its obligations hereunder will violate any law, decree, statute,
rule or regulation applicable to such Purchaser or require any order, consent,
authorization or approval of, filing or registration with, or declaration or
notice to, any corporation, Person, firm,
-5-
<PAGE>
Governmental Entity or public or judicial authority, other than any required
notices or filings with the FCC or pursuant to the HSR Act or the federal
securities laws.
(e) It is acquiring the Shares and the Warrant (and will acquire the
Company Common Stock issuable upon exercise of the Warrant) for its own account
for investment and not with a view towards the resale, transfer or distribution
thereof, nor with any present intention of distributing the Shares or the
Warrant (or the Company Common Stock acquired upon exercise of the Warrant), but
subject, nevertheless, to any requirement of law that the disposition of such
Purchaser's property shall at all times be within such Purchaser's control
(subject to any restrictions on transfer set forth in the Company Purchase
Agreement), and without prejudice to such Purchaser's right at all times to sell
or otherwise dispose of all or any part of such securities under a registration
under the Securities Act or under an exemption from said registration available
under the Securities Act.
(f) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement or the other Transaction Documents to which it is a party based on any
arrangement made by or on behalf of such Purchaser or any of its affiliates and
such Purchaser agrees to indemnify and hold the Stockholders harmless against
any costs or damages incurred as a result of any such claim.
SECTION 4. COVENANTS OF THE PARTIES
------------------------
4.1. Exercise of Options; Transfer of Options
----------------------------------------
(a) The Stockholders shall not exercise the Options until Closing;
provided, that simultaneous with the Closing, the Stockholders shall exercise
the Options in full.
(b) Except as set forth on Schedule 4.1(b) hereto or as otherwise
---------------
provided herein, during the term of this Agreement the Stockholders will not (a)
tender into any tender or exchange offer or otherwise sell, transfer, pledge,
assign, hypothecate or otherwise dispose of, or encumber with any Lien, any of
the Options or the Shares, (b) acquire any shares of Common Stock or other
securities of the Company (otherwise than in connection with the exercise of the
Options on the Closing Date pursuant to Section 4.1(a) or in connection with
options to be granted to the Stockholders under the Company's Amended 1997 Stock
Option Plan
-6-
<PAGE>
in the form attached as Exhibit D to the Company Purchase Agreement), (c)
deposit the Shares into a voting trust, enter into a voting agreement or
arrangement with respect to the Shares or grant any proxy or power of attorney
with respect to the Shares or (d) enter into any contract, option or other
arrangement or undertaking with respect to the direct or indirect acquisition or
sale, transfer, pledge, assignment, hypothecation or other disposition of any
interest in or the voting of any shares of Common Stock or any other securities
of the Company.
4.2. HSR Act
-------
If required under the HSR Act, the Stockholders and Purchasers shall use
their best efforts to file as soon as practicable notifications under the HSR
Act, in connection with the transactions contemplated hereby, and to respond as
promptly as practicable to any inquiries received from the Federal Trade
Commission and the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters
relating to the transactions contemplated by this Agreement.
4.3. Additional Agreements
---------------------
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to cooperate with the other and use its best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Stockholder
Transaction Documents and the Additional Purchase Agreements, including using
its best efforts to obtain all necessary waivers, consents and approvals, and to
effect all necessary registrations and filings as may be required hereunder or
thereunder.
(b) In case at any time after the Closing any further action is necessary
or desirable to carry out the purposes of any of the Stockholder Transaction
Documents, Purchasers and the Stockholders shall take all such action as
promptly as practicable.
-7-
<PAGE>
4.4. Notice of Breach
----------------
Each party shall promptly give notice to the other party upon becoming
aware of the occurrence or, to its knowledge, impending or threatened
occurrence, of any event which would cause any of the conditions to such party's
obligations to consummate the transactions contemplated by this Agreement not to
be satisfied and will use its best efforts to prevent or promptly remedy the
same. Any such notification by the Stockholders shall not be deemed an amendment
of this Agreement.
SECTION 5. PURCHASERS' CLOSING CONDITIONS
------------------------------
The obligations of Purchasers to effect the transactions contemplated by
this Agreement shall be subject to the satisfaction on or prior to the Closing
Date of the following conditions, any one or more of which (except for the
conditions set forth in Section 5.4 and Section 5.6) may be waived in writing by
Purchasers in accordance with Section 7.4 hereof:
5.1. Representations and Warranties
------------------------------
The representations and warranties of the Stockholders contained in this
Agreement shall be true in all material respects on and as of the Closing Date
(except to the extent any such representation and warranty speaks as to an
earlier date, in which event it shall be true and correct in all material
respects as of such earlier date) as though such representations and warranties
were made at and as of such date, except as otherwise affected by the
transactions contemplated hereby and thereby.
5.2. Compliance with Agreement
-------------------------
The Stockholders shall have performed and complied in all material respects
with all agreements, covenants and conditions contained in this Agreement which
are required to be performed or complied with by the Stockholders prior to or on
the Closing Date.
5.3. Certificate
-----------
Purchasers shall have received a certificate, dated the Closing Date,
signed by the Stockholders, certifying that the conditions specified in the
foregoing Sections 5.1 and 5.2 hereof have been fulfilled.
-8-
<PAGE>
5.4. Expiration or Termination of Waiting Period under HSR Act
---------------------------------------------------------
Any waiting period (and any extension thereof) under the HSR Act applicable
to the transactions contemplated by this Agreement shall have expired or been
terminated.
5.5. Additional Purchase Agreements
------------------------------
The transactions contemplated by the Additional Purchase Agreements shall
be consummated concurrently on the Closing Date in accordance with the terms
thereof.
5.6. Injunction
----------
No preliminary or permanent injunction or other order by any federal or
state court in the United States which prevents the consummation of the
transactions contemplated by this Agreement shall have been issued and remain in
effect.
5.7. Lock-up Agreements
------------------
The Lock-up Agreements shall have been terminated by all parties thereto in
accordance with the terms thereof.
SECTION 6. STOCKHOLDERS' CLOSING CONDITIONS
--------------------------------
The obligations of the Stockholders to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions, any one or more of which (except for
the conditions set forth in Section 6.4 and Section 6.5) may be waived in
writing by the Stockholders in accordance with Section 7.4 hereof:
6.1. Representations and Warranties
------------------------------
The representations and warranties of Purchasers contained in this
Agreement shall be true in all material respects on and as of the Closing Date
(except to the extent any such representation and warranty speaks as to an
earlier date, in which event it shall be true and correct in all material
respects as of such earlier date) as though such representations and warranties
were made at and as of such date, except as otherwise affected by the
transactions contemplated hereby.
-9-
<PAGE>
6.2. Compliance with Agreement
-------------------------
Purchasers shall have performed and complied in all material respects with
all agreements, covenants and conditions contained in this Agreement which are
required to be performed or complied with by Purchasers prior to or on the
Closing Date.
6.3. Purchasers' Certificate
-----------------------
The Stockholders shall have received a certificate from Purchasers, dated
the Closing Date, signed by a duly authorized representative of Purchasers,
certifying that the conditions specified in the foregoing Sections 6.1 and 6.2
hereof have been fulfilled.
6.4. Expiration or Termination of Waiting Period under HSR Act
---------------------------------------------------------
Any waiting period (and any extension thereof) under the HSR Act applicable
to the transactions contemplated by this Agreement shall have expired or been
terminated.
6.5. Injunction
----------
No preliminary or permanent injunction or other order by any federal or
state court in the United States which prevents the consummation of the
transactions contemplated hereby shall have been issued and remain in effect.
SECTION 7. TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.1. Termination
-----------
This Agreement may be terminated at any time prior to the Closing, whether
before or after approval of the Company Voting Matters (as defined) at the
Company Vote:
(a) By mutual written consent of the Stockholders and Purchasers; or
(b) (i) By Purchasers if any of the conditions specified in Section 5 have
not been satisfied or waived by Purchasers at such time as such condition is no
longer capable of satisfaction, including the failure to obtain any required
approval of the Company's stockholders at the Company Vote or at any adjournment
thereof (provided Purchasers are not otherwise in material breach of their
--------
representations, warranties, covenants or agreements under this Agreement); or
(ii) by the Stockholders
-10-
<PAGE>
if any of the conditions specified in Section 6 have not been satisfied or
waived by the Stockholders at such time as such condition is no longer capable
of satisfaction, including the failure to obtain any required approval of the
Company's stockholders at the Company Vote or at any adjournment thereof
(provided each Stockholder is not otherwise in material breach of his or its
--------
representations, warranties, covenants or agreements under this Agreement); or
(c) By either Purchasers or the Stockholders if any Governmental Entity
of competent jurisdiction shall have issued a final permanent order enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement, and in any such case the time for appeal or petition for
reconsideration of such order shall have expired without such appeal or petition
being granted; or
(d) By Purchasers if, without any material breach by Purchasers of their
obligations under the Transaction Documents, the transactions contemplated
hereby shall not have been consummated on or before June 30, 1999 (the
"Expiration Date") unless the sole reason for the failure to consummate the
---------------
transactions contemplated hereby by such date is the nonfulfillment of the
conditions specified in Section 7.2 of the Company Purchase Agreement, in which
case the Expiration Date shall be extended to September 30, 1999 (the "Extended
--------
Expiration Date"); or
- ---------------
(e) By the Stockholders if, without any material breach by any of the
Stockholders of their obligations under any of the Stockholder Transaction
Documents, the transactions contemplated hereby shall not have been consummated
on or before the Expiration Date or, if applicable, the Extended Expiration
Date; or
(f) By the Stockholders if there shall be a material breach of any of
Purchasers' representations, warranties or covenants hereunder, which breach
cannot be or has not been cured within ten days of the receipt of written notice
thereof; or
(g) By Purchasers if there has been a material breach of any of the
Stockholders' representations, warranties, covenants or agreements set forth in
any of the Stockholder Transaction Documents, which breach cannot be or has not
been cured within ten days of the receipt of written notice thereof;
-11-
<PAGE>
(h) By Purchasers, if (i) the Board of Directors of the Company (the
"Board") shall withdraw, modify or change its recommendation or approval in
-----
respect of the Company Purchase Agreement or the Company Voting Matters in a
manner adverse to Purchasers, (ii) the Board shall have recommended any proposal
other than by Purchasers in respect of a Takeover Proposal, (iii) the Company
shall have exercised a right with respect to a Takeover Proposal and shall,
directly or through its representatives, continue discussions with any third
party concerning such Takeover Proposal for more than fifteen Business Days
after the date of receipt of such Takeover Proposal, (iv) a Takeover Proposal
that is publicly disclosed shall have been commenced or communicated to the
Company which contains a proposal as to price (without regard to whether such
proposal specifies a specific price or a range of potential prices) and the
Company shall not have rejected such proposal within fifteen Business Days from
the date such Takeover Proposal was communicated to the Company (provided, that
such Takeover Proposal shall be deemed to have been communicated to the Company
on such date as it shall have been disclosed in a filing with the SEC by the
party making such Takeover Proposal), or (v) any Person or group (as defined in
Section 13(d)(3) of the Exchange Act) other than Purchasers or any of their
respective subsidiaries or affiliates shall have become the beneficial owner of
more than 15% of the outstanding shares of Company Common Stock (either on a
primary or a fully diluted basis); provided, however, that with regard to a
-------- -------
Person that owns more than 15% of the outstanding shares of Company Common Stock
on the date hereof, this provision shall be triggered by such Person becoming
the beneficial owner of an additional 5% of the outstanding shares of Company
Common Stock (either on a primary or a fully diluted basis); or
(i) By the Stockholder if the Company Purchase Agreement is
terminated.
7.2. Effect of Termination
---------------------
Subject to Section 9.3(b), in the event of termination of this Agreement as
provided in Section 7.1 hereof, written notice thereof shall forthwith be given
to the other parties specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void and
there shall be no liability on the part of Purchasers or the Stockholders or
their respective officers, directors or partners; provided that nothing herein
--------
shall relieve any party from liability for any breach of this Agreement.
-12-
<PAGE>
7.3. Amendment
---------
This Agreement may be amended by the parties hereto, by or pursuant to
action taken by Purchasers and the Stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4. Waiver
------
At any time prior to the Closing, the parties hereto, by or pursuant
to action taken by Purchasers and the Stockholders, may (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other parties contained herein or in any documents delivered pursuant hereto by
the other parties and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
SECTION 8. INTERPRETATION OF THIS AGREEMENT
--------------------------------
8.1. Terms Defined
-------------
As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:
Additional Purchase Agreements: shall mean the Company Purchase
------------------------------
Agreement and the TSP Purchase Agreement.
Business Day: shall mean a day other than a Saturday, Sunday or other
------------
day on which banks in the States of New York and California are not required or
authorized to close.
Company Vote: shall mean a meeting of or solicitation of consents from
------------
the stockholders of the Company to be convened as promptly as practicable after
the date of this Agreement.
Company Voting Matters: shall have the meaning set forth in the
----------------------
Company Purchase Agreement.
Confidentiality Agreement: shall have the meaning set forth in the
-------------------------
Company Purchase Agreement.
Employment Agreements: shall mean the employment agreements entered
---------------------
into between the Company and each of the
-13-
<PAGE>
Stockholders other than the estate of John H. Sabin pursuant to Section 3.33 of
the Company Purchase Agreement.
Flemings: shall mean Fleming US Discovery Fund III, L.P., a Delaware
--------
limited partnership, and Fleming US Discovery Offshore Fund III, L.P., a Bermuda
limited partnership, collectively.
Flemings Conversion Agreement: shall mean the Preferred Stock
-----------------------------
Conversion and Stockholders Agreement, dated as of the date hereof, between the
Company, Flemings and Purchasers.
Governmental Entity: shall mean any United States or international (a)
-------------------
federal, state, county, local or municipal government or administrative agency
or political subdivision thereof, (b) court or administrative tribunal, (c) non-
governmental agency, tribunal or entity that is vested by a governmental agency
with applicable jurisdiction, or (d) arbitration tribunal or other non-
governmental authority with applicable jurisdiction.
Lock-up Agreements: shall mean the Lock-up Agreements, dated as of
------------------
January 15, 1997, by and between Furman Selz LLC and each of the following
Persons: Robert Bailey, Gavin W. Schutz, John H. Donlon and John H. Sabin.
Person: shall mean an individual, partnership, joint-stock company,
------
corporation, limited liability company, trust or unincorporated organization,
and a Governmental Entity.
SEC: shall mean the Securities and Exchange Commission.
---
Securities Act: shall mean the Securities Act of 1933, as amended.
--------------
Stockholder Transaction Documents: shall mean this Agreement and the
---------------------------------
Employment Agreements.
subsidiary: shall mean any (a) Person of which the Company (or other
----------
specified Person) shall own directly or indirectly through a subsidiary, a
nominee arrangement or otherwise (i) at least a majority of the outstanding
capital stock (or other shares of beneficial interest) or (ii) at least a
majority of the partnership, membership, joint venture or similar interests, or
(b) in which the Company (or other specified Person) is a general partner or
joint venturer. For the sake of clarity, Cinram-POP DVD Center LLC, a California
limited
-14-
<PAGE>
liability company in which the Company holds a 49% membership interest, shall
not be deemed to be a subsidiary of the Company.
Takeover Proposal: shall mean any tender or exchange offer involving
-----------------
the Company, any proposal for a merger, consolidation or other business
combination involving the Company, any proposal or offer to acquire in any
manner a greater than 15% equity interest in, or a significant portion of the
business or assets of, the Company (other than immaterial or insubstantial
assets or inventory in the ordinary course of business or assets held for sale),
any proposal or offer with respect to any recapitalization or restructuring with
respect to the Company or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to the Company other
than pursuant to the transactions to be effected pursuant to this Agreement or
the Additional Purchase Agreements.
Transaction Documents: shall mean this Agreement, the Additional
---------------------
Purchase Agreements, the Voting and Option Agreement, the Voting Agreements, the
Registration Rights Agreement (as defined in the Company Purchase Agreement) and
the Flemings Conversion Agreement.
TSP: shall mean Technical Service Partners L.P., a Delaware limited
---
partnership.
TSP Purchase Agreement: shall mean the Stock Purchase Agreement, dated
----------------------
as of the date hereof, between Purchasers and TSP, substantially in the form of
Exhibit B hereto.
- ---------
Voting Agreements: shall mean the Voting Agreements, dated as of the
-----------------
date hereof, by and among each of (i) Walston, TSP and Purchasers and (ii)
Flemings and Purchasers substantially in the forms of Exhibit C-1 and Exhibit C-
----------- ----------
2.
- -
Voting and Option Agreement: shall mean the Voting and Option
---------------------------
Agreement, dated as of the date hereof, among Purchasers and TSP, substantially
in the form of Exhibit D hereto.
---------
Walston: shall mean Robert T. Walston.
-------
8.2. 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.
-15-
<PAGE>
8.3. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed entirely within such State.
8.4. Paragraph and 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.
SECTION 9. MISCELLANEOUS
-------------
9.1. Survival of Representations and Warranties
------------------------------------------
All statements contained in any certificate or other instrument
executed and delivered by any party pursuant to this Agreement or in connection
with the transactions contemplated hereby shall be deemed representations and
warranties of such Person. All representations and warranties made by the
parties hereto in this Agreement or pursuant hereto shall survive the Closing
hereunder and any investigation at any time made by or on behalf of such party;
provided, however, that no party shall commence any action against any other
- -------- -------
party hereto in respect of any provision of this Agreement at any time
subsequent to the date eighteen (18) months after the Closing Date. All
covenants and agreements set forth in this Agreement shall survive the Closing
in accordance with their terms.
9.2. Notices
-------
(a) All communications under this Agreement shall be in writing and
shall be delivered by hand or facsimile or mailed by overnight courier or by
registered mail or certified mail, postage prepaid, in each case to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice, except that notices of changes of address shall be
effective upon receipt):
-16-
<PAGE>
(1) if to any of Purchasers:
Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: David E. Libowitz
Facsimile: (212) 878-9351
With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6009
Attention: Neil Novikoff, Esq.
Facsimile: (212) 728-8111
(2) if to the Stockholders:
c/o Four Media Company
625 Arizona Avenue
Santa Monica, CA 90401
Attention: William E. Niles, Esq.
Facsimile: 310-587-1277
With a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071-2007
Attention: Paul D. Tosetti, Esq. and
Michael W. Sturrock, Esq.
Facsimile: (213) 881-8763
(b) 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.
(c) Any approvals or consents required to be granted by Purchasers
under this Agreement may be granted by David E. Libowitz acting on behalf of,
and with full authority with respect to, Purchasers.
-17-
<PAGE>
9.3. Fees; Expenses
--------------
(a) All costs, fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
(b) Any payment obligations of the Stockholders owing to Purchasers
pursuant to Section 7 shall be several obligations.
9.4. Publicity
---------
So long as this Agreement is in effect, Purchasers and the
Stockholders shall consult with each other and the Company (which is an express
third party beneficiary of this section) in issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated by this Agreement, and neither of them shall issue any press
release or make any public statement prior to such consultation. The
commencement of litigation relating to this Agreement or the transactions
contemplated hereby or any proceedings in connection therewith shall not be
deemed a violation of this Section 9.4.
9.5. Specific Performance
--------------------
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any state or federal court, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.6. Submission to Jurisdiction
--------------------------
With respect to any suit, action or proceeding initiated by a party to
this Agreement arising out of, under or in connection with this Agreement or any
of the other Transaction Documents, the Stockholders and Purchasers each hereby
submit to the exclusive jurisdiction of any state or federal court sitting in
the State of California and irrevocably waive, to the fullest extent permitted
by law, any objection that they may now have or hereafter obtain to the laying
of venue in any such court in any such suit, action or proceeding. Purchasers
agree that, within 14 days of the date of this Agreement, they will appoint and
designate CT Corporation System in the City of Los Angeles or
-18-
<PAGE>
such other Person as may be satisfactory to the Stockholders, as their agent to
receive process in any such suit, action or proceeding and agrees that service
of process on such agent shall be deemed to be in every respect effective
service of process on them in any such suit, action or proceeding and waives all
claim of error by reason of such service.
9.7. Reproduction of Documents
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by Purchasers on the Closing Date (except for
the certificates evidencing the Shares themselves), and (c) any financial
statements, certificates and other information previously or hereafter furnished
to Purchasers, may be reproduced by Purchasers by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process and
Purchasers may destroy any original document so reproduced. Each party hereto
agrees and stipulates 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 Purchasers in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
9.8. Successors and Assigns
----------------------
Neither this Agreement nor any of the rights or obligations of any
party may be assigned without the prior written consent of the other parties,
except that Purchasers may, without such consent, assign this Agreement and any
of such rights and obligations to one or more of their affiliates. Any such
assignment shall not, however, act as a release of the assigning Person. Subject
to the foregoing, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties, and no other Person
shall have any right, benefit or obligation hereunder.
9.9. Entire Agreement; Amendment and Waiver
--------------------------------------
This Agreement, the other Stockholder Transaction Documents and the
Confidentiality Agreement constitute the entire understandings of the parties
hereto and supersede all prior agreements or understandings with respect to the
subject matter
-19-
<PAGE>
hereof 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 each of the Stockholders and Purchasers.
9.10. 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.
9.11. Limitation on Enforcement of Remedies
-------------------------------------
Each Stockholder hereby agrees that he will not assert against the
limited partners of any of Purchasers any claim he may have under this Agreement
or any other Stockholder Transaction Document by reason of any failure or
alleged failure by Purchasers to meet their obligations hereunder or thereunder.
Each Purchaser hereby agrees that it will not assert against any of the
Stockholders' brokers, attorneys, accountants, or other agents any claim it may
have under this Agreement or any other Stockholder Transaction Document by
reason of any failure or alleged failure by any of the Stockholders to meet
obligations hereunder or thereunder.
9.12. Recovery of Fees
----------------
Any party hereto who shall obtain a final judgment in a court of
competent jurisdiction for the payment of damages by another party hereto for a
breach of this Agreement shall be entitled to recover reasonable attorneys' fees
and court costs incurred in connection with the obtaining of such judgment.
9.13. Nature of Obligations
---------------------
All obligations of the Stockholder hereunder (including without
limitation payment obligations) are several, but not joint, obligations of the
Stockholders.
9.14. Simultaneous Effectiveness
--------------------------
This Agreement and each of the other Transaction Documents shall (i)
be executed simultaneously and at such time shall be valid and binding
obligations of each of the parties and signatories thereto and (ii)
simultaneously be consummated at the Closing.
-20-
<PAGE>
9.15. 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.
[The remainder of this page is intentionally left blank.]
-21-
<PAGE>
IN WITNESS WHEREOF, Purchasers and the Stockholders have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co.
General Partner
By: _______________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I,
C.V.
By: Warburg, Pincus & Co.,
General Partner
By: _______________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II,
C.V.
By: Warburg, Pincus & Co.,
General Partner
By: _______________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III,
C.V.
By: Warburg, Pincus & Co.,
General Partner
S-1
<PAGE>
By: _______________________________
Name:
Title:
___________________________________
JOHN H. DONLON
___________________________________
GAVIN W. SCHUTZ
___________________________________
ROBERT BAILEY
THE ESTATE OF JOHN H. SABIN
By:
___________________________________
S-2
<PAGE>
EXHIBIT 99.5
PREFERRED STOCK CONVERSION AND STOCKHOLDERS AGREEMENT
THIS PREFERRED STOCK CONVERSION AND STOCKHOLDERS AGREEMENT (this
"Agreement") is entered into as of this ___ day of January, 1999, by and among
---------
(i) Four Media Company, a Delaware corporation (the "Company"), (ii) Warburg,
-------
Pincus Equity Partners, L.P., a Delaware limited partnership, Warburg, Pincus
Netherlands Equity Partners I, C.V., a Dutch limited partnership, Warburg,
Pincus Netherlands Equity Partners II, C.V., a Dutch limited partnership, and
Warburg, Pincus Netherlands Equity Partners III, C.V., a Dutch limited
partnership (each a "Buyer" and, collectively, the "Buyers"), and (iii) Fleming
----- ------
US Discovery Fund III, L.P. ("Fleming US") and Fleming US Discovery Offshore
----------
Fund III, L.P. ("Fleming Offshore" and with the Fleming US, collectively, the
----------------
"Fleming Funds").
-------------
RECITALS
WHEREAS, the Company and Fleming US entered into the Preferred Stock
Purchase Agreement dated as of February 5, 1998, as amended as of February 27,
1998 (the "Fleming US Purchase Agreement"), with respect to, among other things,
-----------------------------
the purchase by Fleming US of 129,280 shares of the Company's Series A
Convertible Preferred Stock, $.01 par value per share (the "Series A Shares");
---------------
WHEREAS, the Company and Fleming Offshore entered into the Preferred
Stock Purchase Agreement dated as of February 5, 1998, as amended as of February
27, 1998 (the "Fleming Offshore Purchase Agreement" and with the Fleming US
-----------------------------------
Purchase Agreement, collectively, the "Preferred Purchase Agreements"), with
-----------------------------
respect to, among other things, the purchase by Fleming Offshore of 20,720
Series A Shares;
WHEREAS, the Company and the Fleming Funds entered into (a) the
Stockholders' Agreement dated as of February 27, 1998 (the "Stockholders'
-------------
Agreement") which, among other things, granted the Fleming Funds certain rights
- ---------
with respect to their ownership of the Series A Shares and (b) the Registration
Rights Agreement dated as of February 27, 1998 (the "Registration Rights
-------------------
Agreement") whereby, among other things, the Company granted the Fleming Funds
- ---------
rights relating to the registration of the Common Shares (as defined below) of
the Company issuable upon conversion of the Series A Shares;
WHEREAS, the Company has been engaged in discussions with the Buyers
whereby the Buyers have expressed an interest in proceeding with an acquisition
of a significant equity stake in the Company pursuant to (a) a Stock Purchase
Agreement by and among Technical Services Partners, L.P. ("TSP") and the Buyers
---
(as amended from time to time, the "Partnership Stock Purchase Agreement"), with
------------------------------------
respect to the purchase by the Buyers from TSP of shares of the Company's common
stock, par value $.01 per share (all shares of the Company's common stock
referred to herein as the "Common Shares"), (b) a Securities Purchase Agreement
-------------
by and among the Company and the Buyers (as amended from time to time, the
"Securities Purchase Agreement"), with respect to the purchase by the Buyers of
-----------------------------
newly issued Common Shares directly from the Company and (c) a Stock Purchase
<PAGE>
Agreement by and among the Buyers and John H. Donlon ("Donlon"), Gavin W. Schutz
------
("Schutz"), Robert Bailey ("Bailey") and the estate of John H. Sabin ("Sabin"
------ ------ -----
and together with Donlon, Schutz and Bailey, the "Founders") (as amended from
--------
time to time, the "Founders Stock Purchase Agreement" and together with the
Securities Purchase Agreement and the Partnership Stock Purchase Agreement,
collectively, the "Purchase Agreements"), with respect to the purchase by the
-------------------
Buyers of Common Shares from the Founders (such acquisitions of Common Shares,
together with all related transactions between the Company and the Buyers, are
collectively referred to as the "Acquisitions");
------------
WHEREAS, the Company has advised the Fleming Funds that the Buyers
require as a condition precedent to the consummation of the Acquisitions that
the Fleming Funds agree to convert all of the outstanding Series A Shares into
Common Shares effective at and as of the time at which the Acquisitions are
consummated and to certain other matters set forth below; and
WHEREAS, the Fleming Funds desire to convert, and the Company desires
the Fleming Funds to convert, the Series A Shares into shares of Common Shares,
upon the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and intending to be
legally bound, the parties hereby agree as follows:
ARTICLE I.
CONVERSION
SECTION 1.1. CONVERSION OF SERIES A SHARES
Upon the terms and subject to the conditions of this Agreement, on the
Closing Date (as defined in Section 1.2 below) and concurrently with the
consummation of the Acquisitions, the Fleming Funds shall convert (the
"Conversion") 150,000 Series A Shares owned by them in the aggregate, into an
- -----------
aggregate of 2,250,000 Common Shares (subject to appropriate adjustments for
stock splits, dividends and combinations and other similar recapitalizations)
and the Company shall issue to the Fleming Funds the aggregate of 2,250,000
Common Shares required to be issued in respect of such Conversion (subject to
appropriate adjustments for stock splits, dividends and combinations and other
similar recapitalizations). The Common Shares to be issued by the Company as
provided above will be allocated among the Fleming Funds on a pro-rata basis in
accordance with their proportionate ownership of the Series A Shares.
SECTION 1.2. THE CLOSING
The closing of the Conversion (the "Closing") will take place on the
-------
same date that the closing of the Acquisitions takes place (the "Closing Date"),
------------
at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New
York, unless another date, place or
2
<PAGE>
time is agreed to in writing by the Company and the Buyers. The Company shall
give the Fleming Funds at least three business days prior written notice of the
Closing Date and time and place of Closing. The Consideration shall be paid to
the Fleming Funds at Closing by wire transfer of immediately available funds and
following delivery to the Company of duly endorsed certificates (along with a
conversion notice in the form attached as Exhibit A) evidencing the Series A
Shares subject to conversion. At the Closing, upon its receipt of the
certificates representing the Series A Shares, the Company shall also deliver to
the Fleming Funds certificates representing the Common Shares as set forth in
Section 1.1. Any and all taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock on conversion of the Series A Shares shall be
paid by the Company. The Company shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issuance or delivery of
Common Shares in a name other than that of the Series A Shares, and no such
issuance or delivery shall be made unless and until the Person (as defined in
the Certificate of Designation governing the Series A Shares (the "Certificate
-----------
of Designations")) requesting such issuance has paid to the Company the amount
- ---------------
of such tax or has established, to the satisfaction of the Company, that such
tax has been paid. At the Closing, each of the Fleming Funds shall deliver to
the Company a release and the Company shall provide each of the Fleming Funds
with a Release, in each case in the form attached hereto as Exhibit B.
SECTION 1.3. TERMINATION
This Agreement shall terminate in its entirety and be of no further
force and effect upon (a) the termination of the Purchase Agreements or (b) such
later date as all parties hereto shall agree (such date, the "Termination
-----------
Date"). The Company shall notify the Fleming Funds promptly upon the occurrence
of the Termination Date.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.1. REPRESENTATIONS BY THE COMPANY AND THE FLEMING
FUNDS
The Company hereby represents and warrants to each of the Fleming
Funds, and each of the Fleming Funds hereby represents and warrants to the
Company, that the following statements with respect to itself are true and
correct as of the date hereof: (a) such party has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereunder, (b) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action by such party, (c) this Agreement has been duly executed
and delivered by such party, and constitutes the valid and binding obligations
of such party, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equitable principles, and (d) the execution and delivery of this Agreement by
such party and the announcement of the transactions contemplated hereby does
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not, and the consummation of the transactions contemplated by this Agreement
will not (1) conflict with, or result in any violation or breach of, any
provisions of the charter, bylaws or other governing documents of such party or
any of its subsidiaries (or controlled affiliates), (2) assuming the execution
and delivery of this Agreement by the parties hereto, result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any contract,
agreement, instrument or obligation to which such party or any of its
subsidiaries (or controlled affiliates) is a party or by which any of them or
any of their properties or assets may be bound, or (3) conflict with or violate
any judgment, writ, decree, order, ruling, law, statute, rule or regulation
applicable to such party or any of its subsidiaries (or controlled affiliates)
and of its or their properties or assets, except in the case of (2) and (3),
such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not, individually or in the aggregate, prevent or
delay such party's ability to timely consummate the transactions herein
contemplated.
SECTION 2.2. TITLE
Each of the Fleming Funds represents and warrants to the Company that
the following statements with respect to itself are true and correct as of the
date hereof: (a) such Fleming Fund is the beneficial and record owner of the
number of Series A Shares set forth next to such Fleming Fund's name on the
signature pages hereto, free and clear of any liens, charges, encumbrances,
security interests and rights of others with full right and power to convert
such shares as set forth herein and (b) except for this Agreement, the Purchase
Agreements, the Registration Rights Agreement, the Preferred Purchase Agreements
and the Stockholders' Agreement, there are no outstanding agreements, options,
warrants or rights to purchase or acquire or agreements (whether voting or
otherwise) relating to any of the Series A Shares owned by such Fleming Fund.
SECTION 2.3. RESTRICTED SECURITIES
Each of the Fleming Funds represents and warrants to the Company that
it understands that the Common Shares it will receive upon the Conversion will
be characterized as "restricted securities" under the federal securities laws
inasmuch as they will be initially acquired from the Company in a transaction
not involving a public offering and that under such laws and applicable
regulations, such securities may be resold without registration under the
Securities Act, only in certain limited circumstances. In this connection, each
of the Fleming Funds represents that it is familiar with Securities and Exchange
Commission ("SEC") Rule 144 as presently in effect and it understands the resale
---
limitations imposed thereby and by the Securities Act. Each of the Fleming
Funds understands that it will be deemed an "affiliate" of the Company as that
term is defined in Rule 144.
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SECTION 2.4. LEGENDS.
It is understood that the certificates evidencing the Common Shares,
when issued in the name of each of the Fleming Funds in accordance with Section
1.1, may bear the following legend, or a legend substantially similar to such
legend:
"These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
SECTION 2.5. ADDITIONAL REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to each of the Fleming Funds that
Schedule 2.5 sets forth a complete and accurate copy of the Securities Purchase
Agreement, including all exhibits thereto, as executed by the parties thereto.
The Company further represents that it has made available to the Fleming Funds
all of the material agreements contemplated by the Securities Purchase Agreement
and the other agreements related to the Acquisitions.
SECTION 2.6. ADDITIONAL REPRESENTATIONS OF THE COMPANY
The parties hereto agree and acknowledge that the representations and
warranties set forth in Sections 3.7 through 3.23, 3.27 and 3.28 of the
Securities Purchase Agreement, inasmuch and to the extent (but only to the
extent) that such representations and warranties relate to the business,
financial condition and operations of the Company (and, except in the case of
Sections 3.27 and 3.28, not to the transactions contemplated by the Securities
Purchase Agreement or any other matters), shall be deemed to be representations
and warranties of the Company made to the Fleming Funds for the purposes of this
Agreement and shall be incorporated for such purpose herein.
ARTICLE III.
CONSENT, WAIVER & TERMINATION
SECTION 3.1. CONSENT AND WAIVER
(a) Each of the Fleming Funds hereby waives any and all of its rights,
benefits and claims under the Certificate of Designations and any other document
or agreement, to any and all adjustments to the Conversion Price (as defined in
the Certificate of Designations) to which it would or may otherwise have been or
be (now or in the future) entitled as a result of the execution, delivery and
performance of the Purchase Agreements; and
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(b) Each of the Fleming Funds hereby waives any and all of its rights,
benefits and claims under the Preferred Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement and any other agreement to which
the Company and the Fleming Funds are parties to which it would or may otherwise
have been or be (now or in the future) entitled as a result of the execution,
delivery and performance of the Purchase Agreements, including without
limitation preemptive rights and registration rights with respect to the
issuance of Common Shares to the Buyers, and hereby consents to the execution,
delivery and performance of the Purchase Agreements; provided, however, that the
foregoing waiver shall be null and void ab initio on and after the Termination
Date.
SECTION 3.2. TERMINATION OF RIGHTS UNDER OTHER AGREEMENTS
All rights of the Fleming Funds under the Preferred Purchase
Agreements, the Registration Rights Agreement, the Stockholders' Agreement and
any other agreement to which the Company and the Fleming Funds are parties shall
terminate as of the Closing Date and such agreements shall be terminated and
shall thereafter be of no further force and effect.
SECTION 3.3. RIGHTS OF INCLUSION (TAG-ALONG RIGHTS)
For so long as the Fleming Funds own at least 50% of the Common Shares
that are issued to them pursuant to Section 1.1 of this Agreement, the following
provisions of this Section 3.3 apply:
(a) Subject to subsection (e) below, in the event that either the
Chief Executive Officer ("CEO") or the Buyers (with CEO collectively, the
---
"Transferors" and each a "Transferor") propose to transfer any Common Shares
- ------------ ----------
owned by them (the "Transferor Shares") to any person (the "Transferee"), as a
----------------- ----------
condition to such transfer, the Transferor(s) shall cause the Transferee to
offer (the "Inclusion Offer") to purchase from each Fleming Fund, at each such
---------------
Fleming Fund's option, up to that number of Common Shares owned by such Fleming
Fund determined in accordance with this Section 3.3 below on the same terms and
conditions as are applicable to the Transferor Shares (including any
consideration to be received by the Transferor(s) in the form of bonuses,
consulting fees, noncompetition payments, pursuant to employment arrangements or
similar arrangements), except that neither Fleming Fund shall be required to
provide any representation, warranty or other undertaking other than with
respect to its ownership of, and authority to transfer, the Inclusion Shares
owned by it free of any liens or encumbrances (which shall, in any event,
include customary organizational representations with respect to each of the
Fleming Funds, customary representations with respect to required consents and
customary representations with respect to all of the other matters represented
by the Fleming Funds in Sections 2.1 and 2.2 hereof). The Transferor(s) shall
provide prompt written notice to each Fleming Fund (the "Inclusion Notice")
----------------
setting forth all the terms and conditions of the Inclusion Offer, and each
Fleming Fund may accept the Inclusion Offer in whole or in part by providing a
written notice of acceptance with respect to Common Shares owned by it to the
applicable Transferor(s) within 10 business days of delivery of the Inclusion
Notice to it (the "Acceptance Notice");
-----------------
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(b) Each Fleming Fund shall have the right to sell, pursuant to the
Inclusion Offer, Common Shares representing the same percentage of all Common
Shares owned by it as the Transferor Shares are of all Common Shares owned by
such Transferor; provided, however, that if neither Fleming Fund elects to
exercise such right within the 10 business day period described in subsection
(a), the Transferor(s) shall nonetheless be entitled to Transfer all of the
Transferor Shares described in the Inclusion Notice and the Fleming Funds shall
be deemed to have waived their rights hereunder with respect to such sale. In
the event the number of Inclusion Shares for which such Fleming Fund elects to
exercise such right, along with the Transferor Shares and any other shares of
the Company to be sold by other stockholders pursuant to any similar rights
granted to such other stockholders, exceed the number of shares which the
Transferee is willing to purchase, the number of shares to be transferred to the
Transferee by each transferring stockholder shall be reduced so that each
transferring stockholder is entitled to Transfer the same percentage of its
shares included in its Acceptance Notice (or other similar notice) as each other
transferring stockholder;
(c) The Transferor(s) shall have 90 days, commencing on the date of
the Inclusion Notice, in which to transfer, on behalf of himself, itself or
themselves and the Fleming Funds up to the number of shares covered by the
Inclusion Offer (including the Transferor Shares) to the Transferee. The terms
of such transfer, including, without limitation, price and form of
consideration, shall be as set forth in the Inclusion Notice. If at the end of
such 90 day period the Transferor(s) have not completed the transfer of the
Transferor Shares and the Inclusion Shares (if any) proposed to be transferred,
the Transferor(s) may not proceed with such transfer or any other transfer
without first giving a new Inclusion Notice pursuant to the provisions of this
Section 3.3;
(d) If the Transferor(s) are able to complete the transfer of the
Transferor Shares and the Inclusion Shares (if any) proposed to be transferred
within such 90 day period, at the closing thereof, each Fleming Fund shall
deliver to the Transferee a certificate or certificates representing the
Inclusion Shares owned by it to be transferred pursuant to the Inclusion Offer,
free and clear of all liens and encumbrances, and the Transferee shall pay to
each such Fleming Fund the purchase price for the Inclusion Shares so
transferred pursuant to this Section 3.3 and shall furnish such other evidence
of the completion of such transfer and the terms thereof as may be reasonably
requested by the Fleming Funds; and
(e) The provisions of this Section 3.3 shall not apply to any transfer
or proposed transfer by Transferors of shares owned by CEO or the Buyers, as
applicable, which represents twenty-five percent (25%) or less of the Common
Shares held by CEO or seven and a half percent (7.5%) or less of the Common
Shares held by the Buyers, as applicable, on the Closing Date if such transfer
or proposed transfer by CEO or the Buyers, as applicable, of the Common Shares
held by them, together with all other transfers by CEO or the Buyers, as
applicable, of Common Shares on or prior to the date of such transfer, represent
fifty percent (50%) or less of the Common Shares held by CEO or fifteen percent
(15%) or less of the Common Shares held by the Buyers, as applicable, on the
date hereof, with such baseline
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number of Common Shares held by each Transferor to be appropriately adjusted to
reflect any stock split, stock dividend, recapitalization or similar event;
provided, however, that each transfer of Common Shares by CEO or the Buyers, as
applicable, that takes place within one year of any other transfer by such
Transferor to the same person or any affiliate of such person shall be
aggregated for purposes of such twenty-five percent (25%) or seven and a half
percent (7.5%), as applicable, threshold. In addition, the provisions of this
Section 3.3 shall not apply to any transfer or proposed transfer by Transferors
to each other or to any of their Affiliates (as defined in the Purchase
Agreements) or by any of their Affiliates to any of their other Affiliates.
SECTION 3.4. REGISTRATION RIGHTS
(a) At the Closing, the Company and the Fleming Funds shall enter into
a registration rights agreement substantially in the form of Exhibit C hereto
(the "Registration Rights Agreement").
-----------------------------
(b) Except as otherwise consented to in writing by the Buyers and the
Fleming Funds, as applicable, the Company will not grant to any Person the right
to request the Company to register any equity securities of the Company, or any
securities convertible, exchangeable or exercisable for or into such securities
("Other Securities"), other than (i) piggyback registration rights entitling the
----------------
holder thereof to participate in a piggyback registration with the Buyers and
the Fleming Funds; provided, however, that the "registrable securities" (as such
term is used or defined in the Registration Rights Agreement and the Company's
registration rights agreement with the Buyers (the "Buyer Registration Rights
-------------------------
Agreement" and, together with the Registration Rights Agreement, the
- ---------
"Registration Rights Agreements")) of the Company owned by the Buyers and the
- -------------------------------
Fleming Funds shall have priority over Other Securities in any such piggyback
registration, (ii) registration rights granted in connection with the Company's
acquisition of a complementary business through a pooling of interests
transaction; provided, however, that (x) the Company is required to grant such
rights in order to account for any such acquisition as a pooling of interests
transaction, (y) such rights or the agreement or instrument granting such rights
will not restrict or otherwise adversely affect the ability of the Company to
perform its obligations under the Registration Rights Agreement and (z) the
Company shall use its reasonable best efforts to obtain agreements from any
holder(s) who receive such rights to the effect that such holders will enter
into lock-up agreements if requested to do so by any underwriter in any demand
registration (except that the Company shall not be obligated to take such action
if it would prevent the subject acquisition from being accounted for as a
pooling of interests), and (iii) registration rights granted in connection with
the Company's acquisition of a complementary business through a purchase
transaction (which could be in the form of demand registration rights or the
Company's agreement to file a registration statement for securities delivered as
consideration in such purchase transaction (a "Purchase Registration"));
provided, however, that (x) such rights or the agreement or instrument granting
such rights will not restrict or otherwise adversely affect the ability of the
Company to perform its obligations under the Registration Rights Agreements and
(y) the Buyers and the Fleming Funds shall have the right to piggyback on any
Purchase Registration in accordance with the respective Registration Rights
Agreements
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<PAGE>
and the priority of securities to be included in any such registration shall be
governed, as applicable, by such Registration Rights Agreements.
(c) From and after the Closing Date and for so long as the Buyers own
any of the Common Shares purchased by them pursuant to the Purchase Agreements,
if the Company grants piggyback registration rights to any holder of its Common
Stock, such holder's piggyback registration rights will be specifically
subordinated to the piggyback registration rights granted to the Fleming Funds
pursuant to the Registration Rights Agreement.
(d) From and after the Closing Date and for so long as the Fleming
Funds own any of the Common Shares that are issued to them pursuant to Section
1.1 of this Agreement, if the Company grants piggyback registration rights to
any holder of its Common Stock, such holder's piggyback registration rights will
be specifically subordinated to the piggyback registration rights granted to the
Fleming Funds pursuant to the Registration Rights Agreement.
SECTION 3.5. BOARD REPRESENTATION
For so long as the Fleming Funds own at least 50% of the Common Shares
that are issued to them pursuant to Section 1.1 of this Agreement, the following
provision of this Section 3.5 applies:
From and after the Conversion, the Fleming Funds shall, collectively,
have the right, but not the obligation, to nominate, in the aggregate, one
individual (the "Nominee") reasonably acceptable to the Company to stand for
-------
election to the Company's Board of Directors. The Company shall cause such
Nominee to be nominated for election to the Board of Directors (x) at each
annual meeting of stockholders of the Company (or any special meeting of
stockholders convened for the purpose (which need not be the sole purpose) of
electing directors) or (y) in connection with any solicitation of written
consents by the Company undertaken for the purpose (which need not be the sole
purpose) of electing directors. To exercise such right, within 20 days of
receipt from the Company of written notice of the scheduling of any stockholders
meeting or solicitation of written consents relating to the election of
directors, the Fleming Funds shall together deliver to the Company a written
notice setting forth (i) that they intend to submit a Nominee to stand for
election to the Board of Directors, (ii) the name of the Nominee, (iii) such
other information regarding the Nominee as would be required to be included in
the Company's proxy statement under the Securities Exchange Act of 1934, as
amended, and (iv) the consent of the Nominee to serve as a director of the
Company if so elected. The Company shall, thereafter, solicit proxies (or, if
applicable, written consents) for, and otherwise use its reasonable best efforts
to secure, the election of such Nominee to the Board of Directors.
SECTION 3.6. CERTAIN ACTIONS BY THE FLEMING FUNDS
During the period beginning on the date hereof and continuing until
the Termination Date, each Fleming Fund, jointly and severally, covenants and
agrees with the
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Company as follows:
(a) Such Fleming Fund shall not sell, assign, transfer, encumber or
otherwise dispose of any Series A Shares or enter into any contract, agreement
or understanding with respect to the direct or indirect acquisition or sale,
assignment, transfer, encumbrance or other disposition of any Series A Shares or
Common Shares issuable upon conversion of the Series A Shares, or grant proxies
or enter into any voting trust or any other agreement or arrangement with
respect to any Series A Shares or Common Shares issuable upon conversion of the
Series A Shares, except pursuant to the terms hereof or with the prior written
consent of the Company; and
(b) Such Fleming Fund shall not take or commit to take any action that
would cause or make any of its representations and warranties contained in
Article II herein inaccurate in any material respect or make the conditions to
Closing set forth in Section 4.1 impossible or impracticable to satisfy.
SECTION 3.7. RESTRICTIONS ON TRANSFER
Each of the Fleming Funds agrees that it will not sell, dispose of, or
otherwise transfer any Common Shares issuable upon conversion of the Series A
Shares unless such Common Shares issuable upon conversion of the Series A Shares
have been registered under the Securities Act and, to the extent required, under
any applicable state securities laws, or pursuant to an applicable exemption
from such registration requirements.
SECTION 3.8. INDEMNIFICATION
From and after the Closing and subject to Section 5.1 of this
Agreement, the Company shall indemnify, defend and hold harmless the Fleming
Funds from and against any and all losses, damages, liabilities, claims, suits,
demands, judgments, assessments, fines, interest, penalties, costs and expenses
(including reasonable legal, accounting, experts' and other fees, costs and
expenses) or other obligations resulting from or arising out of the breach by
the Company of any (a) representation or warranty made by the Company in this
Agreement, or (b) any covenant or agreement made by the Company in this
Agreement; provided, however, that if the breach giving rise to such claim for
indemnification is capable of cure, the Fleming Funds shall not be entitled to
indemnification as described herein unless and until the Company shall have had
a period not to exceed ten (10) days to cure such breach. Subject to the
foregoing and to the provisions of Section 5.1 hereof, the Fleming Funds will
continue to be entitled to indemnification as provided by Section 12(b) of the
Fleming US Purchase Agreement and all indemnification provided by the Company
pursuant hereto and thereto shall be so provided pursuant to and in accordance
with the indemnification procedures set forth in Section 12(b) of the Fleming US
Purchase Agreement. The parties hereto agree and acknowledge that the
indemnification provided by the Company hereunder is the sole and
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exclusive remedy of the Fleming Funds with respect to such matters and the
Fleming Funds shall have no additional or other remedies with respect thereto.
SECTION 3.9. ACCESS TO INFORMATION
(a) For so long as the Fleming Funds own at least 50% of the Common
Shares that are issued to them pursuant to Section 1.1 of this Agreement, the
Company will deliver to the Fleming Funds and the Buyers:
(i) as soon as practicable but not later than forty-five (45) days
after the end of each month, (A) a consolidated balance sheet of the Company and
its subsidiaries (as defined in the Securities Purchase Agreement) as of the end
of such month and (B) consolidated statements of operations, stockholders'
equity and cash flows of the Company and its subsidiaries for the portion of the
fiscal year ended with the end of such month, in each case in reasonable detail,
certified by an appropriate officer of the Company and setting forth in
comparative form the corresponding figures for the comparable period for the
prior year (subject to normal year-end adjustments);
(ii) as soon as practicable and without duplication of the above item,
any other materials furnished to the Company's lenders under the Credit
Agreement (as defined in the Securities Purchase Agreement), including, without
limitation, any compliance certificates furnished in respect of such
indebtedness;
(iii) copies of any special or interim audit reports or management or
comment letters with respect to the Company or its subsidiaries or their
operations submitted to the Company by independent public accountants; and
(iv) copies of the annual budget and business plan of the Company for
the next fiscal year.
(b) All such financial statements provided pursuant to this Section
3.9 shall be prepared in accordance with generally accepted accounting
principles consistently applied (except for any change in accounting principles
specified in an accompanying certificate and except that any interim financial
statements may omit notes and may be subject to normal year-end adjustments).
(c) Without limiting the foregoing provisions of this Section 3.9, the
Company agrees that, if requested in writing by the Fleming Funds or the Buyers,
as the case may be, it will not deliver to such Person (until otherwise
instructed by such Person) any non-public information or non-public materials
regarding the Company or any of its subsidiaries described in this Section 3.9.
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SECTION 3.10. CONFIDENTIALITY
Concurrently with the execution of this Agreement, the Fleming Funds
shall enter into a confidentiality agreement with respect to information of the
Company substantially in the form of Exhibit D hereto.
SECTION 3.11. MUTUAL COVENANT
Each of the parties hereto expressly agrees and covenants to each
other party that it will comply in all material respects with each covenant,
agreement, condition, obligation and undertaking of such party in and pursuant
to each of the Transaction Documents (as defined in the Securities Purchase
Agreement) to which it is a party, in each case, subject to the terms and
conditions of the applicable Transaction Document. Each of the parties hereto
understands and acknowledges that the other parties are entering into this
Agreement in reliance on the mutual covenant made in the immediately preceding
sentence.
ARTICLE IV.
CONDITIONS TO THE CLOSING
SECTION 4.1. CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligation of the Company to pay the Consideration and issue the
Common Shares is subject to the satisfaction of each of the following conditions
on or prior to the Closing Date, any of which may be waived in writing
exclusively by the Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Fleming Funds set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except to
the extent such representations speak as of an earlier date, in which case they
shall be true and correct in all material respects as of such earlier date) as
of the Closing Date as though made on and as of the Closing Date (except for
changes contemplated by this Agreement) and the Company shall have received a
certificate signed on behalf of each Fleming Fund by a duly authorized agent of
such Fleming Fund to such effect.
(b) Performance of Obligations of the Fleming Funds. Each of the
-----------------------------------------------
Fleming Funds shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of each
Fleming Fund by a duly authorized agent of such Fleming Fund to such effect.
(c) Purchase Agreements. The transactions contemplated by the
-------------------
Purchase Agreements shall be effected concurrently with the consummation of the
transactions contemplated by this Agreement.
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SECTION 4.2. CONDITIONS TO OBLIGATIONS OF THE FLEMING FUNDS
The obligation of the Fleming Funds to effect the Conversion is
subject to the satisfaction of each of the following conditions on or prior to
the Closing Date, any of which may be waived in writing exclusively by all of
the Fleming Funds:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations speak as of an earlier date, in which case they
shall be true and correct in all material respects as of such earlier date) as
of the Closing Date as though made on and as of the Closing Date (except for
changes contemplated by this Agreement) and the Fleming Funds shall have
received a certificate signed on behalf of the Company by a duly authorized
officer thereof to such effect.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Fleming Funds
shall have received certificates signed on behalf of the Company by a duly
authorized officer thereof to such effect.
(c) Purchase Agreements. The transactions contemplated by the
-------------------
Purchase Agreements shall be effected concurrently with the consummation of the
transactions contemplated by this Agreement.
(d) Opinion. The Fleming Funds shall have received, or otherwise been
-------
permitted to rely upon, an opinion of counsel to the Company substantially
similar to the opinion of such counsel required to be delivered pursuant to the
Securities Purchase Agreement.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. SURVIVAL
The provisions set forth in Article III (except Section 3.6) and
Article V shall survive the Closing Date. All representations and warranties
made by the parties hereto in this Agreement (including and to the extent such
as are specifically incorporated by reference into this Agreement pursuant to
Section 2.5) shall survive the Closing; provided, however, that neither party
shall commence any action against any other party hereto in respect of any such
representation or warranty at any time subsequent to the date eighteen (18)
months after the Closing Date.
SECTION 5.2. NOTICES
(a) All communications under this Agreement shall be in writing and
shall be delivered by hand or facsimile or mailed by overnight courier or by
registered mail or certified
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mail, postage prepaid, in each case to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice,
except that notices of changes of address shall be effective upon receipt):
If to the Fleming Funds:
Fleming Capital Management
320 Park Avenue
New York, New York 10022
Attention: Robert L. Burr
Facsimile: (212) 508-3928
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178-0060
Attention: David W. Pollak, Esq.
Facsimile: (212) 309-6273
If to the Company
Four Media Company
625 Arizona Avenue
Santa Monica, California 90401
Attention: General Counsel
Facsimile: (310) 587-1277
With a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071-2007
Attention: Paul D. Tosetti, Esq.
Michael W. Sturrock, Esq.
Facsimile: (213) 891-8763
If to any of the Buyers:
Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: David E. Libowitz
Facsimile: (212) 878-9351
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With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6009
Attention: Neil Novikoff, Esq.
Facsimile: (212) 728-8111
(b) Any notice so addressed shall be deemed to be given: if delivered
by hand or facsimile, on the date of such delivery; if sent by overnight
courier, on the first business day following the date on which such notice is
sent; and if mailed by registered or certified mail, on the third business day
after the date of such mailing.
SECTION 5.3. SCOPE OF AGREEMENT
(a) Except as specifically set forth herein, this Agreement and all
documents and instruments referred to herein (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and thereof, and (b)
are not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
(b) Each of the parties hereto acknowledges that the obligation of the
parties to effect the Conversion and of the Company to pay the Consideration is
conditioned upon the concurrent consummation of the Acquisitions. Accordingly,
immediately upon the Termination Date, there shall be no further obligation or
liability hereunder on the part of either the Company or the Fleming Funds, or
their respective officers, directors, stockholders or Affiliates (as defined in
the Purchase Agreements), except for breaches of this Agreement.
SECTION 5.4. FURTHER ASSURANCES, COOPERATION AND NOTICE
Each of the parties hereto will use its reasonable best efforts and
cooperate with each other party in executing and delivering any and all
documents, amendments and other agreements that may be necessary to evidence or
effect the agreements set forth in this Agreement. Each of the parties hereto
shall notify each other party of, and will use its reasonable best efforts to
cure before the Closing Date, any event, transaction or circumstance, as soon as
practicable after it becomes known to such party, that causes or will cause any
covenant or agreement of such party under this Agreement to be breached or that
renders or will render untrue any representation or warranty of such party
contained in this Agreement. Each of the parties hereto also shall notify each
other party in writing of, and will use its reasonable best efforts to cure,
before the Closing Date, any violation or breach, as soon as practicable after
it becomes known to such party, of any representations, warranty, covenant or
agreement made by such party. No notice given pursuant to this paragraph shall
have any effect on the representations, warranties, covenants or agreements
contained in this Agreement for purposes of determining satisfaction of any
condition contained herein.
15
<PAGE>
SECTION 5.5. ATTORNEY'S FEES
The Company shall, promptly upon presentation of invoices therefor
setting forth with reasonable specificity the expenses for which reimbursement
is being requested, reimburse the Fleming Funds for their reasonable expenses,
including but not limited to counsel fees and disbursements incurred in
connection with this Agreement and the matters contemplated hereby; provided,
however, that the Company shall not be obligated to reimburse more than $50,000
in such expenses.
SECTION 5.6. COUNTERPARTS
This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when two or more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
SECTION 5.7. GOVERNING LAW
This Agreement shall be governed and construed in accordance with the
laws of the State of New York without regard to any applicable conflicts of law.
SECTION 5.8. ASSIGNMENT; BINDING EFFECT
Except for any assignments by the Company arising by operation of law
as a result of the consummation of the transactions contemplated by the Purchase
Agreements, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable only by the parties and their
respective successors and assigns, and no person or entity not a party to a
provision herein set forth is intended to be a beneficiary of such provision.
SECTION 5.9. SPECIFIC PERFORMANCE
It is hereby agreed and acknowledged that it will be impossible to
measure in money the damages that would be suffered if the parties fail to
comply with any of the obligations herein imposed on them and that in the event
of any such failure, an aggrieved party will be irreparably damaged and will not
have an adequate remedy at law. Any such party shall, therefore, be entitled to
injunctive relief, including specific performance, to enforce such obligations,
and if any action should be brought in equity to enforce any of the provisions
of this Agreement, none of the parties hereto shall raise the defense that there
is an adequate remedy at law.
[Signature Page to Follow]
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be
executed as of the date first above written.
FOUR MEDIA COMPANY
By:_______________________
Name:__________________
Title:_________________
WARBURG, PINCUS EQUITY
PARTNERS, L.P.
By: Warburg, Pincus & Co., its General
Partner
By:_______________________
Name:__________________
Title:_________________
WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS I, C.V.
By: Warburg, Pincus & Co., its General
Partner
By:_______________________
Name:__________________
Title:_________________
WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS II, C.V.
By: Warburg, Pincus & Co., its General
Partner
By:_______________________
Name:__________________
Title:_________________
S-1
<PAGE>
WARBURG, PINCUS NETHERLANDS
EQUITY PARTNERS III, C.V.
By: Warburg, Pincus & Co., its General
Partner
By:_______________________
Name:__________________
Title:_________________
FLEMING US DISCOVERY FUND III,
L.P.
By: Fleming US Discovery Partners, L.P.,
its General Partner
By: Fleming US Discovery, LLC,
its General Partner
By:_______________________
Name:__________________
Title:_________________
FLEMING US DISCOVERY OFFSHORE
FUND III, L.P.
By: Fleming US Discovery Partners, L.P.,
its General Partner
By: Fleming US Discovery, LLC,
its General Partner
By:_______________________
Name:__________________
Title:_________________
S-1
<PAGE>
EXHIBIT 99.6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VOTING AGREEMENT
by and among
FLEMING US DISCOVERY FUND III, L.P.,
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.,
WARBURG, PINCUS EQUITY PARTNERS, L.P.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.
and
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.
dated as of
January 18, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I.
Section 1.1. Representations and Warranties of the Stockholders......... 2
Section 1.2. Representations and Warranties of Purchasers............... 4
ARTICLE II.
Section 2.1. Transfer of the Shares..................................... 5
Section 2.2. Adjustments................................................ 5
ARTICLE III.
Section 3.1. Voting Agreement........................................... 6
Section 3.2. No Solicitation............................................ 7
Section 3.3. Directors.................................................. 7
ARTICLE IV.
Section 4.1. Termination................................................ 8
Section 4.2. Expenses................................................... 9
Section 4.3. Further Assurances......................................... 9
Section 4.4. Publicity.................................................. 9
Section 4.5. Enforcement of the Agreement............................... 9
Section 4.6. Miscellaneous.............................................. 10
</TABLE>
(i)
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Agreement....................................................... 1
Closing Date.................................................... 2
Common Stock.................................................... 1
Company......................................................... 1
Company Purchase Agreement...................................... 1
Conversion Agreement............................................ 1
Exchange Act.................................................... 2
Flemings A...................................................... 1
Flemings B...................................................... 1
Lien............................................................ 2
Preferred Stock................................................. 1
Purchaser....................................................... 1
Purchaser Designees............................................. 6
Purchasers...................................................... 1
Shares.......................................................... 1
Stockholder Conflict............................................ 3
Stockholders.................................................... 1
Stockholders' Designee.......................................... 7
Warrant......................................................... 1
</TABLE>
(ii)
<PAGE>
VOTING AGREEMENT, dated as of January 18, 1999 (this "Agreement"), by
---------
and among Warburg, Pincus Equity Partners, L.P., a Delaware limited partnership,
Warburg, Pincus Netherlands Equity Partners I, C.V., a Dutch limited
partnership, Warburg, Pincus Netherlands Equity Partners II, C.V., a Dutch
limited partnership, Warburg, Pincus Netherlands Equity Partners III, C.V., a
Dutch limited partnership (each, a "Purchaser", and collectively, "Purchasers"),
--------- ----------
Fleming US Discovery Fund III, L.P., a Delaware limited partnership ("Flemings
--------
A"), Fleming US Discovery Offshore Fund III, L.P., a Bermuda limited partnership
- -
("Flemings B" which, together with Flemings A, collectively, the
----------
"Stockholders").
------------
WHEREAS, the Stockholders are the beneficial owners of 150,000 shares
(the "Shares") of Series A Convertible Preferred Stock, par value $.01 per share
------
("Preferred Stock"), of Four Media Company (the "Company"), which Preferred
--------------- -------
Stock is convertible into shares of common stock, $.01 par value per share (the
"Common Stock"), of the Company; and
------------
WHEREAS, the Stockholders and the Company have entered into a
Preferred Stock Conversion and Stockholders Agreement, dated as of the date
hereof (the "Conversion Agreement"), pursuant to which, among other things, the
--------------------
Stockholders have agreed to convert all of the Shares into a total of 2,250,000
shares of Common Stock; and
WHEREAS, Purchasers and the Company have entered into a Securities
Purchase Agreement, dated as of the date hereof (the "Company Purchase
----------------
Agreement"), which provides, among other things, that, upon the terms and
- ---------
subject to the conditions therein, Purchasers will purchase from the Company and
the Company will sell to Purchasers 6,582,607 shares of Common Stock and will
issue to Purchasers a warrant to purchase an additional 1,100,000 shares of
Common Stock (the "Warrant"); and
-------
WHEREAS, as a condition to the willingness of Purchasers to enter into
the Company Purchase Agreement, Purchasers have requested that the Stockholders
agree, and in order to induce Purchasers to enter into the Company Purchase
Agreement, the Stockholders have agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby
<PAGE>
acknowledged, and subject to the terms and conditions set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I.
Section 1.1. Representations and Warranties of the Stockholders.
--------------------------------------------------
The Stockholders represent and warrant, jointly and severally, to Purchasers, as
of the date hereof and as of the closing under the Company Purchase Agreement
(the "Closing Date"), as follows:
------------
(a) The Stockholders are the beneficial owners (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), which meaning will apply for all purposes of this Agreement) of, and have
good title to, all of the Shares, 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 (each, a "Lien")
----
(including any restriction on the right to vote, sell or otherwise dispose of
the Shares) except for immaterial Liens which shall not affect the Stockholders'
ability to perform their obligations under this Agreement.
(b) The Shares constitute all of the securities (as defined in Section
3(10) of the Exchange Act, which definition will apply for all purposes of this
Agreement) of the Company beneficially owned, directly or indirectly, by the
Stockholders (excluding any securities beneficially owned by any of their
affiliates or associates (as such terms are defined in Rule 12b-2 under the
Exchange Act, which definitions will apply for all purposes of this Agreement)
as to which they do not have voting or investment power).
(c) Except for the Shares, the Stockholders do not, directly or
indirectly, beneficially own or have any option, warrant or other right to
acquire any securities of the Company that are or may by their terms become
entitled to vote or any securities that are convertible or exchangeable into or
exercisable for any securities of the Company that are or may by their terms
become entitled to vote, nor are the Stockholders subject to any contract,
commitment, arrangement, understanding or relationship (whether or not legally
enforceable), other than this Agreement and the Conversion Agreement that allows
or obligates them to vote or acquire any securities of the Company. The
Stockholders hold exclusive power to vote the Shares and have not granted a
proxy to any other Person (as defined in the
-2-
<PAGE>
Company Purchase Agreement, which definition will apply for all purposes of this
Agreement) to vote the Shares, subject to the limitations set forth in this
Agreement.
(d) This Agreement has been duly executed and delivered by the
Stockholders and, assuming due authorization, execution and delivery of this
Agreement by Purchasers, is a valid and binding obligation of the Stockholders
enforceable against the Stockholders in accordance with its terms, except that
(i) the enforceability hereof may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereinafter in effect, affecting
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(e) Neither the execution and delivery of this Agreement nor the
performance by the Stockholders of their obligations hereunder will conflict
with, result in a violation or breach of, or constitute a default (or an event
that, with notice or lapse of time or both, would result in a default) or give
rise to any right of termination, amendment, cancellation, or acceleration or
result in the creation of any Lien on any Shares (collectively, a "Stockholder
-----------
Conflict") under, (i) any contract, commitment, agreement, understanding,
- --------
arrangement or restriction of any kind to which the Stockholders are a party or
by which the Stockholders are bound, to the extent such Stockholder Conflict
would reasonably be likely to affect the Stockholders' ability to consummate the
transactions contemplated hereby or (ii) any injunction, judgment, writ, decree,
order or ruling applicable to the Stockholders, to the extent such Stockholder
Conflict would reasonably be likely to affect the Stockholders' ability to
consummate the transactions contemplated hereby.
Section 1.2. Representations and Warranties of Purchasers. Each
--------------------------------------------
Purchaser jointly and severally represents and warrants to the Stockholders, as
of the date hereof and as of the Closing Date, as follows:
(a) Each Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and each Purchaser has the requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement.
-3-
<PAGE>
(b) This Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by each Purchaser and, assuming
the due execution and delivery of this Agreement by the Stockholders and of such
other Transaction Documents by the other parties thereto, are the valid and
binding obligations of each Purchaser, enforceable against each Purchaser in
accordance with their respective terms, except that (i) the enforceability
hereof and thereof may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereinafter in effect, affecting creditors' rights
generally, and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
performance by each Purchaser of its obligations hereunder will conflict with,
result in a violation or breach of, or constitute a default (or an event that,
with notice or lapse of time or both, would result in a default) or give rise to
any right of termination, amendment, cancellation, or acceleration or result in
the creation of any Lien on any Shares (a "Conflict") under (i) its certificate
of limited partnership, partnership agreement, or comparable instrument, (ii)
any contract, commitment, agreement, understanding, arrangement or restriction
of any kind to which such Purchaser is a party or by which such Purchaser is
bound to the extent such Conflict would materially affect such Purchaser's
ability to consummate the transactions contemplated under this Agreement or the
Company Purchase Agreement or (iii) any judgment, writ, decree, order or ruling
applicable to such Purchaser to the extent such Conflict would materially affect
such Purchaser's ability to consummate the transactions contemplated under this
Agreement or the Company Purchase Agreement.
(d) Neither the execution and delivery of this Agreement nor the
performance by each Purchaser of its obligations hereunder will violate any law,
decree, statute, rule or regulation applicable to such Purchaser or require any
order, consent, authorization or approval of, filing or registration with, or
declaration or notice to, any corporation, Person, firm, Governmental Entity (as
such term is defined in the Company Purchase Agreement) or public or judicial
authority, other than any required notices or filings with the Federal
Communications Commission or pursuant to the HSR Act or the federal securities
laws.
-4-
<PAGE>
ARTICLE II.
Section 2.1. Transfer of the Shares. During the term of this
----------------------
Agreement, except as otherwise provided herein or in the Conversion Agreement,
the Stockholders will not (a) tender into any tender or exchange offer or
otherwise sell, transfer, pledge, assign, hypothecate or otherwise dispose of,
or encumber with any Lien, any of the Shares, (b) acquire any shares of Common
Stock or other securities of the Company (otherwise than in connection with a
transaction of the type described in Section 2.2 of this Agreement), (c) deposit
the Shares into a voting trust, enter into a voting agreement or arrangement
with respect to the Shares or grant any proxy or power of attorney with respect
to the Shares or (d) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale,
transfer, pledge, assignment, hypothecation or other disposition of any interest
in or the voting of any shares of Common Stock or any other securities of the
Company.
Section 2.2. Adjustments.
-----------
(a) In the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of capital
stock or other securities of the Company on, of or affecting the Shares or the
like or any other action that would have the effect of changing the
Stockholders' ownership of the Company's capital stock or other securities or
(ii) the Stockholders become the beneficial owner of any additional shares of
Common Stock or other securities of the Company, then the terms of this
Agreement will apply to the shares of capital stock held by the Stockholders
immediately following the effectiveness of the events described in clause (i) or
the Stockholders becoming the beneficial owner thereof, as described in clause
(ii), as though they were Shares hereunder.
(b) The Stockholders hereby agree, while this Agreement is in effect,
promptly to notify Purchasers of the number of any new shares of the Common
Stock acquired by the Stockholders, if any, after the date hereof.
ARTICLE III.
Section 3.1. Voting Agreement. The Stockholders, by this Agreement,
----------------
do hereby constitute and appoint Purchasers, or any nominee thereof, with full
power of substitution, during and for the term of this Agreement, as their true
and lawful attorney and proxy for and in their name, place and stead, to vote
all the Shares Stockholders beneficially own at the time of such vote, at
-5-
<PAGE>
any annual, special or adjourned meeting of the stockholders of the Company (and
this appointment will include the right to sign their name (as stockholders) to
any consent, certificate or other document relating to the Company that the laws
of the State of Delaware may require or permit) (x) in favor of approval and
adoption of the Company Purchase Agreement, the Company Voting Matters (as
defined in the Company Purchase Agreement) and the other transactions
contemplated thereby and (y) against (a) any Takeover Proposal (as defined in
the Company Purchase Agreement), (b) any action or agreement that would result
in a breach in any respect of any covenant, agreement, representation or
warranty of the Company under the Company Purchase Agreement and (c) the
following actions (other than the other transactions contemplated by the Company
Purchase Agreement): (i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or its
subsidiaries; (ii) a sale, lease or transfer of a substantial amount of assets
of the Company or one of its subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or its Subsidiaries;
(iii) (A) any change in a majority of the persons who constitute the Board of
Directors of the Company as of the date hereof; (B) any change in the present
capitalization of the Company or any amendment of the Certificate of
Incorporation or Bylaws of the Company, as amended through the date hereof; (C)
any other material change in the Company's corporate structure or business; or
(D) any other action that, in the case of each of the matters referred to in
clauses (iii)(A), (B) and (C) is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or adversely affect the transactions
contemplated by this Agreement and the Company Purchase Agreement. This proxy
and power of attorney is a proxy and power coupled with an interest, and the
Stockholders declare that it is irrevocable during and for the term of this
Agreement. The Stockholders hereby revoke all and any other proxies with respect
to the Shares that they may have heretofore made or granted and agree that no
other writing or instrument shall be required in order to grant the proxy and
rights to Purchasers granted hereby. For Shares as to which the Stockholders are
the beneficial but not the record owner, the Stockholders shall use their best
efforts to cause any record owner of such Shares to grant to Purchasers a proxy
to the same effect as that contained herein.
Section 3.2. No Solicitation. The Stockholders will not, directly
---------------
or indirectly, through any agent, financial advisor, attorney, accountant or
other representative or otherwise, (i) solicit, initiate or encourage submission
of
-6-
<PAGE>
proposals or offers from any Person relating to, or that could reasonably be
expected to lead to, a sale or transfer of any of the Shares or a Takeover
Proposal or (ii) participate in any negotiations or discussions regarding, or
furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek a sale or transfer of
any of the Shares or a Takeover Proposal. The Stockholders shall immediately
advise Purchasers in writing of the receipt of a request for information or any
inquiries or proposals relating to a sale or transfer of any of the Shares or a
Takeover Proposal.
Section 3.3. Directors.
---------
(a) The Stockholders agree to vote all of the Shares, the shares of
Common Stock to be issued to them pursuant to the Conversion Agreement and any
other securities of the Company issued to them, including securities issued to
them in connection with a transaction of the type described in Section 2.2, in
each case in favor of any nominees of Purchasers for election to the Board of
Directors of the Company pursuant to Section 6.11 of the Company Purchase
Agreement (the "Purchaser Designees"), at each meeting of the stockholders of
-------------------
the Company at which the stockholders are voting on the election of directors to
the Board of Directors of the Company or any action so taken by written consent;
provided, however, that the Stockholders shall only be required to vote such
- -------- -------
securities in favor of the Purchaser Designees for so long as Purchasers shall
be entitled, pursuant to Section 6.11 of the Company Purchase Agreement, to
designate directors for election to the Board of Directors of the Company.
(b) Purchasers agree to vote all of the shares of Common Stock
purchased by them pursuant to the Company Purchase Agreement and the Additional
Purchase Agreements (as defined in the Company Purchase Agreement) and the
shares of Common Stock issued to them upon exercise of the Warrant and any other
securities of the Company issued to them, in each case in favor of the nominee
of the Stockholders for election to the Board of Directors of the Company
pursuant to the Conversion Agreement (the "Stockholders' Designee"), at each
----------------------
meeting of the stockholders of the Company at which the stockholders are voting
on the election of directors to the Board of Directors of the Company or any
action so taken by written consent; provided, however, that Purchasers shall
-------- -------
only be required to vote such securities in favor of the Stockholders' Designee
for so long as the Stockholders shall be entitled, pursuant to the Conversion
-7-
<PAGE>
Agreement, to designate a director for election to the Board of Directors of the
Company.
(c) This Section 3.3 and the agreements set forth herein shall
expressly survive the termination of this Agreement.
ARTICLE IV.
Section 4.1. Termination. Except as set forth in Section 3.3(c)
-----------
hereof, this Agreement will terminate on the earliest to occur of (A) the
termination of the Company Purchase Agreement, (B) the Closing Date, (C) the
mutual agreement of the Stockholders, the Company and Purchasers to so terminate
and (D) the Expiration Date (or, if applicable, the Extended Expiration Date)
(each as defined in the Company Purchase Agreement).
Section 4.2. Expenses. Except as otherwise expressly provided
--------
herein or in the Company Purchase Agreement or the Conversion Agreement, all
costs and expenses incurred by any of the parties hereto will be borne by the
party incurring such costs and expenses. Purchasers, on the one hand, and the
Stockholders, on the other hand, will indemnify and hold harmless the other from
and against any and all claims or liabilities for finder's fees or brokerage
commissions or other like payments incurred by reason of action taken by it or
any of them, as the case may be.
Section 4.3. Further Assurances. Each party hereto will execute and
------------------
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.4. Publicity. Purchasers and the Stockholders shall
---------
consult with each other and the Company before issuing any press release or
otherwise making any public statements with respect to this Agreement, the
Company Purchase Agreement, the Conversion Agreement or the other transactions
contemplated hereby or thereby and shall not issue any such press release or
make any such public statement before such consultation, except as may be
required by law or applicable stock exchange rules. The Company shall be an
express third party beneficiary of this Section 4.4.
Section 4.5. Enforcement of the Agreement. The Stockholders and
----------------------------
Purchasers acknowledge that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific
-8-
<PAGE>
terms or were otherwise breached. It is accordingly agreed that each party
hereto will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 4.6. Miscellaneous.
-------------
(a) All representations and warranties contained herein will terminate
upon the termination hereof. The covenants and agreements made herein will
survive the Closing Date in accordance with their respective terms.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment or
supplement will be effective unless in writing and signed by the party or
parties sought to be bound thereby. Any waiver by any party of a breach of any
provision of this Agreement will not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement or one or more sections hereof will not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
(c) This Agreement, the other Transaction Documents and the other
agreements attached as Exhibits to the Company Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof, and supersede all prior agreements among such parties with respect to
such matters. This Agreement may not be amended, changed, supplemented, waived
or otherwise modified, except upon the delivery of a written agreement executed
by the parties hereto.
(d) This Agreement will be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflicts of laws
principles thereof.
(e) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(f) All notices and other communications hereunder will be in writing
and will be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by telecopy,
-9-
<PAGE>
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to any of Purchasers to:
Warburg, Pincus Equity
Partners, L.P.
466 Lexington Avenue
New York, NY 10017
Attention: David E. Libowitz
Telecopier: 212-878-9351
With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Neil Novikoff, Esq.
Telecopier: (212) 728-8111
If to the Stockholders to:
Fleming US Discovery
Fund III, L.P.
Fleming US Discovery
Offshore Fund III, L.P.
c/o Fleming Capital Management
320 Park Avenue
New York, New York 10022
Attention: Robert L. Burr
Telecopier: (212) 508-3928
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: David W. Pollak, Esq.
Telecopier: (212) 309-6273
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
(g) This Agreement may be executed in any number of counterparts, each
of which will be deemed to be an original, but all of which together will
constitute one agreement.
(h) This Agreement and each of the other Transaction Documents (as
such term is defined in the Company Purchase
-10-
<PAGE>
Agreement) shall (i) be executed simultaneously and at such time shall be valid
and binding obligations of each of the parties and signatories thereto and (ii)
simultaneously be consummated at the Closing.
(i) Neither this Agreement nor any of the rights or obligations of any
party hereto may be assigned without the prior written consent of the other
parties hereto, except that Purchasers may, without such consent, assign this
Agreement and any of such rights and obligations to one or more of their
affiliates. Any such assignment shall not, however, act as a release of the
assigning Person. Subject to the foregoing, this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, and no other Person shall have any right, benefit or obligation
hereunder.
(j) If any term or provision of this Agreement is determined to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
(k) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity will be cumulative and
not alternative, and the exercise of any thereof by either party will not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
[The remainder of this page is intentionally left blank.]
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co., its general partner
By:____________________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I,
C.V.
By: Warburg, Pincus & Co., its general partner
By:____________________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II,
C.V.
By: Warburg, Pincus & Co., its general partner
By:____________________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III,
C.V.
By: Warburg, Pincus & Co., its general partner
By:____________________________________________
Name:
Title:
-12-
<PAGE>
FLEMING US DISCOVERY FUND III, L.P.
By: Fleming US Discovery Partners, L.P.,
its general partner
By: Fleming US Discovery, LLC, its general
partner
By:____________________________________
Robert L. Burr, member
FLEMING US DISCOVERY OFFSHORE
FUND III, L.P.
By: Fleming US Discovery Partners, L.P.,
its general partner
By: Fleming US Discovery, LLC, its general
partner
By:____________________________________
Robert L. Burr, member
-13-
<PAGE>
EXHIBIT 99.7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VOTING AGREEMENT
by and among
ROBERT T. WALSTON
TECHNICAL SERVICES PARTNERS, L.P.,
WARBURG, PINCUS EQUITY PARTNERS, L.P.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.
and
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.
dated as of
January 18, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I.
Section 1.1. Representations and Warranties of the Stockholder............ 2
Section 1.2. Representations and Warranties of TSP........................ 4
Section 1.3. Representations and Warranties of Purchasers................. 4
ARTICLE II.
Section 2.1. Transfer of the Shares....................................... 5
Section 2.2. Adjustments 5................................................ 6
ARTICLE III.
Section 3.1. Voting Agreement............................................. 6
Section 3.2. No Solicitation.............................................. 7
Section 3.3 Directors.................................................... 8
ARTICLE IV.
Section 4.1. Termination.................................................. 9
Section 4.2. Expenses..................................................... 9
Section 4.3. Further Assurances........................................... 9
Section 4.4. Publicity.................................................... 9
Section 4.5. Enforcement of the Agreement................................. 9
Section 4.6. Miscellaneous................................................ 10
</TABLE>
(i)
<PAGE>
SCHEDULE 1.1(b) Additional Securities Beneficially Owned by
Stockholder
SCHEDULE 1.1(c) Convertible Securities Beneficially Owned by
Stockholder
SCHEDULE 2.1 Unencumbered Shares of Stockholder
(ii)
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Agreement................................................................. 1
Closing Date.............................................................. 2
Common Stock.............................................................. 1
Company Purchase Agreement................................................ 1
Exchange Act.............................................................. 2
Lien...................................................................... 2
Purchaser................................................................. 1
Purchaser Designees....................................................... 7
Purchasers................................................................ 1
Shares.................................................................... 1
Stockholder............................................................... 1
TSP....................................................................... 1
TSP Purchase Agreement.................................................... 1
TSP Shares................................................................ 1
TSP/Walston Agreement..................................................... 1
</TABLE>
(iii)
<PAGE>
VOTING AGREEMENT, dated as of January 18, 1999 (this "Agreement"), by
---------
and among Warburg, Pincus Equity Partners, L.P., a Delaware limited partnership,
Warburg, Pincus Netherlands Equity Partners I, C.V., a Dutch limited
partnership, Warburg, Pincus Netherlands Equity Partners II, C.V., a Dutch
limited partnership and Warburg, Pincus Netherlands Equity Partners III, C.V., a
Dutch limited partnership (each, a "Purchaser", and collectively, "Purchasers"),
--------- ----------
Robert T. Walston, an individual (the "Stockholder") and Technical Services
-----------
Partnership, L.P., a Delaware limited partnership ("TSP").
---
WHEREAS, TSP is the record and beneficial owner of 4,552,502 shares
(the "TSP Shares") of common stock, $.01 par value per share (the "Common
---------- ------
Stock") of Four Media Company, a Delaware corporation (the "Company"); and
- ----- -------
WHEREAS, pursuant to an agreement with TSP (the "TSP/Walston
-----------
Agreement"), the Stockholder has beneficial ownership of 1,432,875 of the TSP
- ---------
Shares (the "Shares"); and
------
WHEREAS, Purchasers and the Company have entered into a Securities
Purchase Agreement, dated as of the date hereof (the "Company Purchase
----------------
Agreement"), which provides, among other things, that, upon the terms and
- ---------
subject to the conditions therein, Purchasers will purchase from the Company and
the Company will sell to Purchasers 6,582,607 shares of Common Stock and will
issue to Purchasers a warrant to purchase an additional 1,100,000 shares of
Common Stock; and
WHEREAS, Purchasers and TSP have entered into a Stock Purchase
Agreement, dated as of the date hereof (the "TSP Purchase Agreement"), which
----------------------
provides, among other things, that, upon the terms and subject to the conditions
therein, Purchasers will purchase from TSP, and TSP will sell to Purchasers, a
total number of shares of Common Stock representing the difference between the
TSP Shares and the Shares; and
WHEREAS, as a condition to the willingness of Purchasers to enter into
the Company Purchase Agreement, Purchasers have requested that the Stockholder
agree, and in order to induce Purchasers to enter into the Company Purchase
Agreement, the Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby
<PAGE>
acknowledged, and subject to the terms and conditions set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I.
Section 1.1. Representations and Warranties of the Stockholder. The
-------------------------------------------------
Stockholder represents and warrants to Purchasers, as of the date hereof and as
of the closing under the Company Purchase Agreement (the "Closing Date"), as
------------
follows:
(a) Pursuant to the TSP/Walston Agreement, the Stockholder shares
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which meaning will apply for all
------------
purposes of this Agreement) with TSP of, and (subject to such shared beneficial
ownership) has good title to, all of the Shares, 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 (each, a
"Lien") (including any restriction on the right to vote, sell or otherwise
----
dispose of the Shares) except for immaterial Liens which shall not materially
affect the Stockholder's ability to perform his obligations under this
Agreement.
(b) Except as set forth on Schedule 1.1(b), the Shares constitute all
of the securities (as defined in Section 3(10) of the Exchange Act, which
definition will apply for all purposes of this Agreement) of the Company
beneficially owned, directly or indirectly, by the Stockholder (excluding any
securities beneficially owned by any of his affiliates or associates (as such
terms are defined in Rule 12b-2 under the Exchange Act, which definitions will
apply for all purposes of this Agreement) as to which he does not have voting or
investment power); provided, however, that the Stockholder does not have any
voting power with respect to the Shares which voting power is held exclusively
by TSP.
(c) Except as set forth on Schedule 1.1(c), and except for the Shares,
the Stockholder does not, directly or indirectly, beneficially own or have any
option, warrant or other right to acquire any securities of the Company that are
or may by their terms become entitled to vote or any securities that are
convertible or exchangeable into or exercisable for any securities of the
Company that are or may by their terms become entitled to vote, nor is the
Stockholder subject to any contract, commitment, arrangement, understanding or
relationship (whether
-2-
<PAGE>
or not legally enforceable), other than this Agreement and the TSP/Walston
Agreement, that allows or obligates him to vote or acquire any securities of the
Company. The Stockholder holds no power to vote the Shares and has not granted a
proxy to any other Person (as defined in the Company Purchase Agreement, which
definition will apply for all purposes of this Agreement) to vote the Shares,
subject to the limitations set forth in this Agreement.
(d) This Agreement has been duly executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery of this
Agreement by Purchasers, is a valid and binding obligation of the Stockholder
enforceable against the Stockholder in accordance with its terms, except that
(i) the enforceability hereof may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereinafter in effect, affecting
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(e) Neither the execution and delivery of this Agreement nor the
performance by the Stockholder of his obligations hereunder will conflict with,
result in a violation or breach of, or constitute a default (or an event that,
with notice or lapse of time or both, would result in a default) or give rise to
any right of termination, amendment, cancellation, or acceleration or result in
the creation of any Lien on any Shares under (collectively, a "Conflict"), (i)
--------
any contract, commitment, agreement, understanding, arrangement or restriction
of any kind to which the Stockholder is a party or by which the Stockholder is
bound, to the extent such Conflict would be reasonably likely to affect the
Stockholder's ability to consummate the transactions contemplated hereby or (ii)
any injunction, judgment, writ, decree, order or ruling applicable to the
Stockholder, to the extent such Conflict would be reasonably likely to affect
the Stockholder's ability to consummate the transactions contemplated hereby.
(f) To the Stockholder's actual knowledge, the representations and
warranties of TSP contained in Sections 2.1(b), 2.1(c) and 2.1(d) of the TSP
Purchase Agreement are true and correct in all material respects.
Section 1.2. Representations and Warranties of TSP. TSP represents
--------------------------------------
and warrants to Purchasers, as of the date hereof and as of the Closing Date, as
follows:
-3-
<PAGE>
(a) To its knowledge, pursuant to the TSP/Walston Agreement and by
virtue of his shared beneficial ownership of the Shares, the Stockholder holds
no power to vote the Shares which power is held exclusively by TSP; the
Stockholder has the power to enter into this Agreement, and for so long as this
Agreement shall remain in full force and effect, TSP shall have exclusive rights
with respect to voting the Shares, but no other rights with respect to the
Shares, and may not amend in any way the terms of this Agreement without
Purchasers' written consent.
Section 1.3. Representations and Warranties of Purchasers. Each
--------------------------------------------
Purchaser jointly and severally represents and warrants to the Stockholder and
the Company, as of the date hereof and as of the Closing Date, as follows:
(a) Each Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and each Purchaser has the requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement.
(b) This Agreement and the other Transaction Documents to which it is
a party has been duly executed and delivered by each Purchaser and, assuming the
due execution and delivery of this Agreement by the Stockholder and of such
other Transaction Documents by the other parties thereto, are the valid and
binding obligations of each Purchaser, enforceable against each Purchaser in
accordance with their respective terms, except that (i) the enforceability
hereof and thereof may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereinafter in effect, affecting creditors' rights
generally, and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
performance by each Purchaser of its obligations hereunder will Conflict with
(i) its certificate of limited partnership, partnership agreement or comparable
instrument, (ii) any contract, commitment, agreement, understanding, arrangement
or restriction of any kind to which such Purchaser is a party or by which such
Purchaser is bound to the extent such Conflict would materially affect such
Purchaser's ability to consummate the transactions contemplated under this
Agreement or the Company Purchase Agreement or (iii) any
-4-
<PAGE>
judgment, writ, decree, order or ruling applicable to such Purchaser to the
extent such Conflict would materially affect such Purchaser's ability to
consummate the transactions contemplated under this Agreement or the Company
Purchase Agreement.
(d) Neither the execution and delivery of this Agreement nor the
performance by each Purchaser of its obligations hereunder will violate any law,
decree, statute, rule or regulation applicable to such Purchaser or require any
order, consent, authorization or approval of, filing or registration with, or
declaration or notice to, any corporation, Person, firm, Governmental Entity (as
such term is defined in the Company Purchase Agreement) or public or judicial
authority, other than any required notices or filings with the Federal
Communications Commission or pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder or the federal securities laws.
ARTICLE II.
Section 2.1. Transfer of the Shares. Except as set forth in
----------------------
Schedule 2.1, during the term of this Agreement the Stockholder will not (a)
- ------------
tender into any tender or exchange offer or otherwise sell, transfer, pledge,
assign, hypothecate or otherwise dispose of, or encumber with any Lien, any of
the Shares, (b) acquire any shares of Common Stock or other securities of the
Company (otherwise than in connection with a transaction of the type described
in Section 2.2 of this Agreement or in connection with the grant of 2,500,000
options to be granted to the Stockholder under the Company's amended 1997 Stock
Option Plan), (c) deposit the Shares into a voting trust, enter into a voting
agreement or arrangement with respect to the Shares or grant any proxy or power
of attorney with respect to the Shares, (d) enter into any contract, option or
other arrangement or undertaking with respect to the direct or indirect
acquisition or sale, transfer, pledge, assignment, hypothecation or other
disposition of any interest in or the voting of any shares of Common Stock or
any other securities of the Company or (e) amend, modify or terminate or cause
any amendment, modification or termination of the TSP/Walston Agreement.
Section 2.2. Adjustments.
-----------
(a) In the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of capital
stock or other securities of the
-5-
<PAGE>
Company on, of or affecting the Shares or the like or any other action that
would have the effect of changing the Stockholder's ownership of the Company's
capital stock or other securities or (ii) the Stockholder becomes the beneficial
owner of any additional shares of Common Stock or other securities of the
Company, then the terms of this Agreement will apply to the shares of capital
stock held by the Stockholder immediately following the effectiveness of the
events described in clause (i) or the Stockholder becoming the beneficial owner
thereof, as described in clause (ii), as though they were Shares hereunder.
(b) The Stockholder hereby agrees, while this Agreement is in effect,
promptly to notify Purchasers of the number of any new shares of the Common
Stock acquired by the Stockholder, if any, after the date hereof.
ARTICLE III.
Section 3.1. Voting Agreement. The Stockholder, by this Agreement,
----------------
does hereby constitute and appoint Purchasers, or any nominee thereof, with full
power of substitution, during and for the term of this Agreement, as his true
and lawful attorney and proxy for and in his name, place and stead, to vote all
the Shares Stockholder beneficially owns at the time of such vote, at any
annual, special or adjourned meeting of the stockholders of the Company (and
this appointment will include the right to sign his name (as stockholder) to any
consent, certificate or other document relating to the Company that laws of the
State of Delaware may require or permit) (x) in favor of approval and adoption
of the Company Purchase Agreement, the Company Voting Matters (as defined in the
Company Purchase Agreement) and the other transactions contemplated thereby and
(y) against (a) any Takeover Proposal (as defined in the Company Purchase
Agreement), (b) any action or agreement that would result in a breach in any
respect of any covenant, agreement, representation or warranty of the Company
under the Company Purchase Agreement and (c) the following actions (other than
the other transactions contemplated by the Company Purchase Agreement): (i) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or its subsidiaries; (ii) a sale,
lease or transfer of a substantial amount of assets of the Company or one of its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or its Subsidiaries; (iii) (A) any change in a majority of the
persons who constitute the Board of Directors of the Company as of the date
hereof; (B) any change in the present capitalization of the Company or any
amendment of the Certificate of Incorporation or Bylaws of the Company, as
amended through the
-6-
<PAGE>
date hereof; (C) any other material change in the Company's corporate structure
or business; or (D) any other action that, in the case of each of the matters
referred to in clauses (iii)(A), (B) and (C) is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, or adversely affect the
transactions contemplated by this Agreement and the Company Purchase Agreement.
This proxy and power of attorney is a proxy and power coupled with an interest,
and the Stockholder declares that it is irrevocable during and for the term of
this Agreement. The Stockholder hereby revokes all and any other proxies with
respect to the Shares that he may have heretofore made or granted and agrees
that no other writing or instrument shall be required in order to grant the
proxy and rights to Purchasers granted hereby. For Shares as to which the
Stockholder is the beneficial but not the record owner, the Stockholder shall
use his reasonable best efforts to cause any record owner of such Shares
including, without limitation, TSP with respect to the TSP Shares, to grant to
Purchasers a proxy to the same effect as that contained herein.
Section 3.2. No Solicitation. The Stockholder will not, directly or
---------------
indirectly, through any agent, financial advisor, attorney, accountant or other
representative or otherwise, (i) solicit, initiate or encourage submission of
proposals or offers from any Person relating to, or that could reasonably be
expected to lead to, a sale or transfer of any of the Shares or a Takeover
Proposal or (ii) participate in any negotiations or discussions regarding, or
furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek a sale or transfer of
any of the Shares or a Takeover Proposal. The Stockholder shall immediately
advise Purchasers in writing of the receipt of request for information or any
inquiries or proposals relating to a sale or transfer of any of the Shares or a
Takeover Proposal. Notwithstanding the foregoing, this Section 3.2 shall not
restrict the Stockholder from fulfilling his fiduciary duties as a director of
the Company pursuant to Section 5 of the Company Purchase Agreement.
Section 3.3. Directors.
---------
(a) The Stockholder agrees to vote (i) all of the Shares, (ii) any
additional shares of Common Stock issued to him upon exercise of any outstanding
or future issued stock options or warrants to purchase Common Stock (including,
without limitation, the options to purchase 2,500,000 shares of Common Stock to
be granted to the Stockholder under the Company's
-7-
<PAGE>
amended 1997 Stock Option Plan) and (iii) any other securities of the Company
issued to him, including securities issued to him in connection with a
transaction of the type described in Section 2.2, in each case in favor of any
nominees of Purchasers for election to the Board of Directors of the Company
pursuant to Section 6.11 of the Company Purchase Agreement (the "Purchaser
---------
Designees"), at each meeting of the stockholders of the Company at which the
- ---------
stockholders are voting on the election of directors to the Board of Directors
of the Company or any action so taken by written consent; provided, however,
-------- -------
that the Stockholder shall only be required to vote such securities in favor of
the Purchaser Designees for so long as Purchasers shall be entitled, pursuant to
Section 6.11 of the Company Purchase Agreement, to designate directors for
election to the Board of Directors of the Company.
(b) Purchasers agree to vote all of the shares of Common Stock
purchased by them pursuant to the Company Purchase Agreement and the Additional
Purchase Agreements (as defined in the Company Purchase Agreement) and the
shares of Common Stock issued to them upon exercise of the Warrant and any other
securities of the Company issued to them, in each case in favor of the
Stockholder for election to the Board of Directors of the Company, at each
meeting of the stockholders of the Company at which the stockholders are voting
on the election of directors to the Board of Directors of the Company or any
action so taken by written consent; provided, however, that Purchasers shall
-------- -------
only be required to vote such securities in favor of the Stockholder for so long
as the Stockholder shall be the Company's Chief Executive Officer pursuant to
the terms of the employment agreement, dated as of the date of this Agreement,
between the Company and the Stockholder. This Section 3.3 and the agreement set
forth herein shall expressly survive the termination of this Agreement.
ARTICLE IV.
Section 4.1. Termination. This Agreement will terminate on the
-----------
earliest to occur of (A) the termination of the Company Purchase Agreement, (B)
the Closing Date, (C) the mutual agreement of the Stockholder, the Company and
Purchasers to so terminate and (D) the Expiration Date (or, if applicable, the
Extended Expiration Date) (each as defined in the Company Purchase Agreement).
Section 4.2. Expenses. Except as otherwise expressly provided in
--------
the Company Purchase Agreement, all costs and expenses incurred by any of the
parties hereto will be borne by
-8-
<PAGE>
the party incurring such costs and expenses. Purchasers, on the one hand, and
the Stockholder, on the other hand, will indemnify and hold harmless the other
from and against any and all claims or liabilities for finder's fees or
brokerage commissions or other like payments incurred by reason of action taken
by him, it or any of them, as the case may be.
Section 4.3. Further Assurances. Each party hereto will execute and
------------------
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 4.4. Publicity. Purchasers and the Stockholder shall
---------
consult with each other and the Company before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
Company Purchase Agreement or the other transactions contemplated hereby or
thereby and shall not issue any such press release or make any such public
statement before such consultation, except as may be required by law or
applicable stock exchange rules. The Company shall be an express third party
beneficiary of this Section 4.4.
Section 4.5. Enforcement of the Agreement. The Stockholder,
----------------------------
Purchasers and TSP acknowledge that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that each party hereto will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section 4.6. Miscellaneous.
-------------
(a) All representations and warranties contained herein will terminate
upon the termination hereof. The covenants and agreements made herein will
survive the Closing Date in accordance with their respective terms.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment or
supplement will be effective unless in writing and signed by the party or
parties sought to be bound thereby. Any waiver by any party of a breach of any
provision of this Agreement will not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any
-9-
<PAGE>
other provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement or one or more sections hereof will not
be considered a waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
(c) This Agreement, the other Transaction Documents and the other
agreements attached as Exhibits to the Company Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof, and supersede all prior agreements among such parties with respect to
such matters. This Agreement may not be amended, changed, supplemented, waived
or otherwise modified, except upon the delivery of a written agreement executed
by the parties hereto.
(d) This Agreement will be governed by and construed in accordance
with the laws of the State of Delaware, without regard to the conflicts of laws
principles thereof.
(e) With respect to any suit, action or proceeding initiated by a
party to this Agreement arising out of, under or in connection with this
Agreement, the Stockholder and Purchasers each hereby submit to the exclusive
jurisdiction of any state or federal court sitting in the State of California
and irrevocably waive, to the fullest extent permitted by law, any objection
that they may now have or hereafter obtain to the laying of venue in any such
court in any such suit, action or proceeding.
(f) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(g) All notices and other communications hereunder will be in writing
and will be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by telecopy, or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to any of Purchasers to:
Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, NY 10017
Attention: David E. Libowitz
Telecopier: (212) 878-9351
With a copy to:
-10-
<PAGE>
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Neil Novikoff, Esq.
Telecopier: (212) 728-8111
If to the Stockholder to:
Robert T. Walston
c/o Four Media Company
625 Arizona Avenue
Santa Monica, CA 90401
Attention: William E. Niles, Esq.
Facsimile: 310-587-1277
With a copy to:
Alschuler Grossman Pines Stein & Kahan, LLP
2049 Century Park East, 39th Floor
Los Angeles, California 90067-3123
Attention: Robert Kahan, Esq.
Telecopier: 310-552-6077
If to TSP to:
Technical Services Partners, L.P.
c/o Steinhardt Partners
605 Third Avenue
New York, New York 10158
Attention: Shimon Topor
Telecopier:
With a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Stuart D. Freedman, Esq.
Telecopier: 212-593-5955
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
(h) This Agreement may be executed in any number of counterparts, each
of which will be deemed to be an original, but all of which together will
constitute one agreement.
(i) This Agreement and each of the other Transaction Documents (as
such term is defined in the Company Purchase
-11-
<PAGE>
Agreement) shall (i) be executed simultaneously and at such time shall be valid
and binding obligations of each of the parties and signatories thereto and (ii)
simultaneously be consummated at the Closing.
(j) Neither this Agreement nor any of the rights or obligations of any
party hereto may be assigned without the prior written consent of the other
parties hereto, except that Purchasers may, without such consent, assign this
Agreement and any of such rights and obligations to one or more of their
affiliates. Any such assignment shall not, however, act as a release of the
assigning Person. Subject to the foregoing, this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, and no other Person shall have any right, benefit or obligation
hereunder.
(k) If any term or provision of this Agreement is determined to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
(l) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity will be cumulative and
not alternative, and the exercise of any thereof by either party will not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
(m) All representations and warranties of Purchasers hereunder shall
be joint and several obligations.
[The remainder of this page is intentionally left blank.]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co., its
general partner
By: _____________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS I, C.V.
By: Warburg, Pincus & Co., its
general partner
By: _____________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS II, C.V.
By: Warburg, Pincus & Co., its
general partner
By: _____________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY
PARTNERS III, C.V.
By: Warburg, Pincus & Co., its
general partner
By: _____________________________________
Name:
Title:
S-1
<PAGE>
____________________________________________
Robert T. Walston
TECHNICAL SERVICES PARTNERS, L.P.
By: Technical Service Holding, its
general partner
By: _____________________________________
Name:
Title:
S-2
<PAGE>
EXHIBIT 99.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VOTING AND OPTION AGREEMENT
by and among
TECHNICAL SERVICES PARTNERS, L.P.,
WARBURG, PINCUS EQUITY PARTNERS, L.P.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.
and
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.
dated as of
January 18, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I.
Section 1.1. Representations and Warranties of the Stockholder............. 2
Section 1.2. Representations and Warranties of Purchasers.................. 3
ARTICLE II.
Section 2.1. Transfer of the Shares........................................ 4
Section 2.2. Adjustments................................................... 5
ARTICLE III.
Section 3.1. Voting Agreement.............................................. 5
Section 3.2. No Solicitation............................................... 6
ARTICLE IV.
Section 4.1. Grant of Option............................................... 7
Section 4.2. Exercise of Option............................................ 7
Section 4.3. Termination of Option......................................... 8
Section 4.4. Conditions to Closing......................................... 9
Section 4.5. Closing....................................................... 9
Section 4.6. Registration Rights........................................... 9
ARTICLE V.
Section 5.1. Termination................................................... 10
Section 5.2. Expenses...................................................... 10
Section 5.3. Further Assurances............................................ 11
Section 5.4. Publicity..................................................... 11
Section 5.5. Enforcement of the Agreement.................................. 11
Section 5.6. Miscellaneous................................................. 11
</TABLE>
(i)
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Agreement............................................................... 1
Closing................................................................. 6
Closing Date............................................................ 1
Common Stock............................................................ 1
Company Purchase Agreement.............................................. 1
Exercise Notice......................................................... 6
Exercise Price.......................................................... 6
HSR Act................................................................. 2
Lien.................................................................... 2
Manager................................................................. 8
Per Share Amount........................................................ 6
Permitted Offering...................................................... 8
Purchaser............................................................... 1
Purchaser Conflict...................................................... 3
Purchaser Option........................................................ 6
Purchaser Owned Shares.................................................. 8
Purchasers.............................................................. 1
Registrable Securities.................................................. 8
Registration Notice..................................................... 8
Securities Act.......................................................... 4
Shares.................................................................. 1
Stockholder............................................................. 1
Stockholder Conflict.................................................... 2
Stockholder Purchase Agreement.......................................... 1
Subject Shares.......................................................... 1
Trigger Event........................................................... 6
TSP..................................................................... 1
TSP/Walston Agreement................................................... 1
Walston Shares.......................................................... 1
</TABLE>
(ii)
<PAGE>
VOTING AND OPTION AGREEMENT, dated as of January 18, 1999 (this
"Agreement"), by and among Warburg, Pincus Equity Partners, L.P., a Delaware
---------
limited partnership, Warburg, Pincus Netherlands Equity Partners I, C.V., a
Dutch limited partnership, Warburg, Pincus Netherlands Equity Partners II, C.V.,
a Dutch limited partnership and Warburg, Pincus Netherlands Equity Partners III,
C.V., a Dutch limited partnership (each, a "Purchaser", and collectively,
---------
"Purchasers"), and Technical Services Partners, L.P., a Delaware limited
----------
partnership ("TSP") (the "Stockholder").
--- -----------
WHEREAS, the Stockholder is the record and beneficial owner of
4,552,502 shares (the "Shares") of common stock, $.01 par value per share (the
------
"Common Stock"), of Four Media Company, a Delaware corporation (the "Company");
------------ -------
and
WHEREAS, pursuant to an agreement with Robert T. Walston (the
"TSP/Walston Agreement"), Mr. Walston is the beneficial owner of 1,432,875 of
---------------------
the Shares (the "Walston Shares"; the Shares excluding the Walston Shares are
--------------
referred to herein as the "Subject Shares"); and
--------------
WHEREAS, Purchasers and the Company have entered into a Securities
Purchase Agreement, dated as of the date hereof (the "Company Purchase
----------------
Agreement"), which provides, among other things, that, upon the terms and
- ---------
subject to the conditions therein, Purchasers will purchase from the Company and
the Company will sell to Purchasers 6,582,607 shares of Common Stock and will
issue a warrant to purchase an additional 1,100,000 shares of Common Stock; and
WHEREAS, Purchasers and the Stockholder have entered into a Stock
Purchase Agreement, dated as of the date hereof (the "Stockholder Purchase
--------------------
Agreement"), which provides, among other things, that upon the terms and subject
- ---------
to the conditions therein, Purchasers will purchase from the Stockholder and the
Stockholder will sell to Purchasers the Subject Shares.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I.
Section 1.1. Representations and Warranties of the Stockholder. The
-------------------------------------------------
Stockholder represents and warrants to Purchasers, as of the date hereof and as
of the closing under the Company Purchase Agreement (the "Closing Date"), as
------------
follows:
(a) This Agreement has been duly executed and delivered by the
Stockholder and, assuming due authorization, execution and delivery of this
Agreement by Purchasers and the Company, is a valid and binding obligation of
the Stockholder enforceable against the Stockholder in accordance with its
terms, except that (i) the enforceability hereof may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereinafter in effect,
affecting creditors' rights generally, and (ii) the availability of the remedy
of specific performance or injunctive or other forms of equitable relief may be
subject to equitable defenses and would be subject to the discretion of the
court before which any proceeding therefor may be brought.
(b) Neither the execution and delivery of this Agreement nor the
performance by the Stockholder of its obligations hereunder will conflict with,
result in a violation or breach of, or constitute a default (or an event that,
with notice or lapse of time or both, would result in a default) or give rise to
any right of termination, amendment, cancellation, or acceleration or result in
the creation 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 (each, a "Lien") on any Shares (collectively, a "Stockholder
---- -----------
Conflict") under, (i) any contract, commitment, agreement, understanding,
- --------
arrangement or restriction of any kind to which the Stockholder is a party or by
which the Stockholder is bound, to the extent such Stockholder Conflict would be
reasonably likely to affect the Stockholder's ability to consummate the
transactions contemplated hereby or (ii) any injunction, judgment, writ, decree,
order or ruling applicable to the Stockholder, to the extent such Stockholder
Conflict would be reasonably likely to affect the Stockholder's ability to
consummate the transactions contemplated hereby.
(c) To the knowledge of the Stockholder, neither the execution and
delivery of this Agreement nor the performance by the Stockholder of its
obligations hereunder will violate any law, decree, statute, rule or regulation
applicable to the Stockholder or require any order, consent, authorization or
approval of, filing or registration with, or declaration or
-2-
<PAGE>
notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act") or the federal securities
-------
laws.
Section 1.2. Representations and Warranties of Purchasers. Each
--------------------------------------------
Purchaser jointly and severally represents and warrants to the Stockholder and
the Company, as of the date hereof and as of the Closing Date, as follows:
(a) Each Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and each Purchaser has the requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement.
(b) This Agreement and the other Transaction Documents to which it is
a party has been duly executed and delivered by each Purchaser and, assuming the
due execution and delivery of this Agreement by the Stockholder and of such
other Transaction Documents by the other parties thereto, are the valid and
binding obligations of each Purchaser, enforceable against each Purchaser in
accordance with their respective terms, except that (i) the enforceability
hereof and thereof may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereinafter in effect, affecting creditors' rights
generally, and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
performance by each Purchaser of its obligations hereunder will conflict with,
result in a violation or breach of, or constitute a default (or an event that,
with notice or lapse of time or both, would result in a default) or give rise to
any right of termination, amendment, cancellation, or acceleration under
(collectively, a "Purchaser Conflict"), (i) its certificate of limited
------------------
partnership, partnership agreement or comparable instrument, (ii) any contract,
commitment, agreement, understanding, arrangement or restriction of any kind to
which such Purchaser is a party or by which such Purchaser is bound to the
extent such Purchaser Conflict would materially affect such Purchaser's ability
to consummate the transactions contemplated under this Agreement or the
Stockholder Purchase Agreement or
-3-
<PAGE>
(iii) any injunction, judgment, writ, decree, order or ruling applicable to such
Purchaser to the extent such Purchaser Conflict would materially affect such
Purchaser's ability to consummate the transactions contemplated under this
Agreement or the Stockholder Purchase Agreement.
(d) Neither the execution and delivery of this Agreement nor the
performance by each Purchaser of its obligations hereunder will violate any law,
decree, statute, rule or regulation applicable to such Purchaser or require any
order, consent, authorization or approval of, filing or registration with, or
declaration or notice to, any corporation, Person, firm, Governmental Entity (as
such term is defined in the Company Purchase Agreement) or public or judicial
authority, other than any required notices or filings with the Federal
Communications Commission or pursuant to the HSR Act or the federal securities
laws.
(e) Any Subject Shares acquired upon exercise of the Purchaser Option
(as defined in Section 4.1 of this Agreement) will be acquired for such
Purchaser's own account, for investment purposes only and will not be, and the
Purchaser Option is not being, acquired by such Purchaser with a view to public
distribution thereof in violation of any applicable provisions of the Securities
Act of 1933, as amended (the "Securities Act").
--------------
ARTICLE II.
Section 2.1. Transfer of the Shares. During the term of this
----------------------
Agreement, except as otherwise provided herein or in the Stockholder Purchase
Agreement, the Stockholder will not (a) tender into any tender or exchange offer
or otherwise sell, transfer, pledge, assign, hypothecate or otherwise dispose
of, or encumber with any Lien, any of the Subject Shares, (b) acquire any shares
of Common Stock or other securities of the Company (otherwise than in connection
with a transaction of the type described in Section 2.2 of this Agreement), (c)
deposit the Subject Shares into a voting trust, enter into a voting agreement or
arrangement with respect to the Subject Shares or grant any proxy or power of
attorney with respect to the Subject Shares, (d) enter into any contract, option
or other arrangement or undertaking with respect to the direct or indirect
acquisition or sale, transfer, pledge, assignment, hypothecation or other
disposition of any interest in or the voting of any shares of Common Stock or
any other securities of the Company or (e) amend, modify or terminate or cause
any amendment, modification or termination of the TSP/Walston Agreement.
-4-
<PAGE>
Section 2.2. Adjustments.
-----------
(a) In the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of capital
stock or other securities of the Company on, of or affecting the Subject Shares
or the like or any other action that would have the effect of changing the
Stockholder's ownership of the Company's capital stock or other securities or
(ii) the Stockholder becomes the beneficial owner of any additional shares of
Common Stock or other securities of the Company, then the terms of this
Agreement will apply to the shares of capital stock held by the Stockholder
immediately following the effectiveness of the events described in clause (i) or
the Stockholder becoming the beneficial owner thereof, as described in clause
(ii), as though they were Subject Shares hereunder.
(b) The Stockholder hereby agrees, while this Agreement is in effect,
promptly to notify Purchasers of the number of any new shares of the Common
Stock acquired by the Stockholder, if any, after the date hereof.
ARTICLE III.
Section 3.1. Voting Agreement. The Stockholder, by this Agreement,
----------------
does hereby constitute and appoint Purchasers, or any nominee thereof, with full
power of substitution, during and for the term of this Agreement, as its true
and lawful attorney and proxy for and in its name, place and stead, to vote all
of the Shares and any other shares of Common Stock beneficially owned at the
time of such vote, at any annual, special or adjourned meeting of the
stockholders of the Company (and this appointment will include the right to sign
its name (as stockholder) to any consent, certificate or other document relating
to the Company that the laws of the State of Delaware may require or permit) (x)
in favor of approval and adoption of the Company Purchase Agreement, the Company
Voting Matters (as defined in the Company Purchase Agreement) and the other
transactions contemplated thereby and (y) against (a) any Takeover Proposal (as
defined in the Company Purchase Agreement), (b) any action or agreement that
would result in a breach in any respect of any covenant, agreement,
representation or warranty of the Company under the Company Purchase Agreement
and (c) the following actions (other than the other transactions contemplated by
the Company Purchase Agreement): (i) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination involving the
Company or its subsidiaries; (ii) a sale, lease or transfer of a substantial
amount of assets
-5-
<PAGE>
of the Company or one of its subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or its subsidiaries;
(iii) (A) any change in a majority of the persons who constitute the Board of
Directors of the Company as of the date hereof; (B) any change in the present
capitalization of the Company or any amendment of the Certificate of
Incorporation and Bylaws of the Company, as amended through the date hereof; (C)
any other material change in the Company's corporate structure or business; or
(D) any other action that, in the case of each of the matters referred to in
clauses (iii)(A), (B) and (C) is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or adversely affect the transactions
contemplated by this Agreement, the Stockholder Purchase Agreement and the
Company Purchase Agreement. This proxy and power of attorney is a proxy and
power coupled with an interest, and the Stockholder declares that it is
irrevocable during and for the term of this Agreement. The Stockholder hereby
revokes all and any other proxies with respect to the Shares that it may have
heretofore made or granted and agrees that no other writing or instrument shall
be required in order to grant the proxy and rights to Purchasers granted hereby.
Section 3.2. No Solicitation. The Stockholder will not, directly or
---------------
indirectly, through any agent, financial advisor, attorney, accountant or other
representative or otherwise, (i) solicit, initiate or encourage submission of
proposals or offers from any Person relating to, or that could reasonably be
expected to lead to, a sale or transfer of any of the Shares or a Takeover
Proposal or (ii) participate in any negotiations or discussions regarding, or
furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek a sale or transfer of
any of the Shares or a Takeover Proposal. The Stockholder shall immediately
advise Purchasers in writing of the receipt of a request for information or any
inquiries or proposals relating to a sale or transfer of any of the Shares or a
Takeover Proposal. Notwithstanding the foregoing, this Section 3.2 shall not
restrict any designee of the Stockholder to the Company's Board of Directors
from fulfilling its fiduciary duties as such a director pursuant to Section 5 of
the Company Purchase Agreement.
ARTICLE IV.
Section 4.1. Grant of Option. The Stockholder hereby grants
---------------
Purchasers an irrevocable option (the "Purchaser Option") to purchase for cash,
----------------
in the manner set forth below, all but not
-6-
<PAGE>
less than all of the Subject Shares beneficially owned by the Stockholder at a
price (the "Exercise Price") per Share equal to $7.50 per Share (the "Per Share
-------------- ---------
Amount"). In the event of any stock dividends, stock splits, recapitalizations,
- ------
combinations, exchanges of shares or the like, the Per Share Amount and the
Exercise Price will be appropriately adjusted for the purpose of this Section
4.1.
Section 4.2. Exercise of Option.
------------------
(a) Subject to the conditions set forth in Section 4.4 hereof, the
Purchaser Option may be exercised by Purchasers, in whole but not in part, at
any time after the occurrence of any Trigger Event (as defined below) until the
termination of the Purchaser Option set forth in Section 4.3. The Company shall
notify Purchasers and the Stockholder promptly in writing of the occurrence of
any Trigger Event, it being understood that the giving of such notice by the
Company is not a condition to the right of Purchasers to exercise the Purchaser
Option. In the event Purchasers wish to exercise the Purchaser Option,
Purchasers shall deliver to the Stockholder a written notice of such exercise
(the "Exercise Notice"). The closing of a purchase of Subject Shares (a
---------------
"Closing") will occur at a place, on a date and at a time designated by
- --------
Purchasers in the Exercise Notice delivered at least two and not more than five
Business Days (as defined in the Company Purchase Agreement) prior to the date
of the Closing.
(b) A "Trigger Event" means (provided Purchasers are not in material
-------------
breach of their representations, warranties or covenants set forth in Section
1.3 hereof or in any Transaction Document) any one of the following: (a) the
Company Purchase Agreement is terminated under circumstances that could entitle
Purchasers to the Termination Fee/Expense Reimbursement (as defined in Section
10.2(b) of the Company Purchase Agreement), (b) a tender or exchange offer for
some or all of the shares of Common Stock shall have been publicly proposed to
be made or shall have been made by another person, or (c) it shall have been
publicly disclosed or Purchasers shall have otherwise learned that (i) any
person or "group" (as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended), other than Purchasers, shall have acquired or proposed to
acquire beneficial ownership of more than 20% of any class or series of capital
stock of the Company (including the Common Stock), through the acquisition of
stock, the formation of a group or otherwise, or shall have been granted any
option, right or warrant, conditional or otherwise, to acquire beneficial
ownership of more than 20% of any class or series of capital stock of the
Company other than as
-7-
<PAGE>
disclosed in a Schedule 13D or 13G on file with the Securities and Exchange
Commission on December 31, 1998, (ii) any such person or group which, prior to
December 31, 1998, had filed a Schedule 13D or 13G with the Securities and
Exchange Commission shall have acquired or proposed to acquire beneficial
ownership of additional shares of any class or series of capital stock of the
Company, through the acquisition of stock, the formation of a group or
otherwise, constituting 5% or more of any such class or series, or shall have
been granted any option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of additional shares of any class or series of capital
stock of the Company (including the Common Stock) constituting 5% or more of any
such class or series; (iii) any person (other than Purchasers) shall have filed
a Notification and Report Form under the HSR Act, or made a public announcement
reflecting an intent to acquire the Company or any assets or securities of the
Company; or (iv) any person or group (other than Purchasers) shall have entered
into or offered to enter into a definitive agreement or an agreement in
principle with respect to a merger, consolidation or other business combination
with the Company.
Section 4.3. Termination of Option. The Purchaser Option will
---------------------
terminate upon the earliest to occur of: (i) the consummation of the
transactions contemplated by the Company Purchase Agreement, (ii) the
termination of the Company Purchase Agreement other than upon or during the
continuance of a Trigger Event; or (iii) September 30, 1999 (or if, at the
expiration of such period the Purchaser Option cannot be exercised by reason of
any applicable judgment, decree, order, law or regulation, ten Business Days
after such impediment to exercise has been removed or has become final and not
subject to appeal but in no event later than December 31, 1999). Upon the
giving by Purchasers to the Stockholder of the Exercise Notice and the tender of
the aggregate Exercise Price, Purchasers will be deemed to be the holders of
record of the Subject Shares transferable upon such exercise, notwithstanding
that the stock transfer books of the Company are then closed or that
certificates representing such Subject Shares have not been actually delivered
to Purchasers.
Section 4.4. Conditions to Closing. The obligation of the
---------------------
Stockholder to sell the Subject Shares to Purchasers hereunder is subject to the
conditions that (i) all waiting periods, if any, under the HSR Act, applicable
to the sale of the Subject Shares or the acquisition of the Subject Shares by
Purchasers hereunder, have expired or have been terminated; (ii) all consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any court, administrative agency or other governmental body or
authority, if
-8-
<PAGE>
any, required in connection with sale of the Subject Shares or the acquisition
of the Subject Shares by Purchasers hereunder have been obtained or made; and
(iii) no preliminary or permanent injunction or other order by any court of
competent jurisdiction prohibiting or otherwise restraining such sale or
acquisition is in effect.
Section 4.5. Closing. At any Closing, (a) the Stockholder will
-------
deliver to Purchasers or their designee a certificate or certificates in
definitive form representing the number of Subject Shares designated by
Purchasers in their Exercise Notice, such certificate or certificates with stock
powers endorsed in blank or to be registered in the name of Purchasers or their
designee and (b) Purchasers will deliver to the Stockholder by wire transfer of
immediately available funds the aggregate Exercise Price for the Subject Shares
being purchased. The Company will pay all expenses, and any and all United
States federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 4.5 in the name of Purchasers or their designee.
Section 4.6. Registration Rights.
-------------------
(a) (i) Following termination of the Company Purchase Agreement,
Purchasers may by written notice (the "Registration Notice") to the Company,
-------------------
which Registration Notice the Purchasers shall concurrently send to the
Stockholder, request the Company to register under the Securities Act all or any
part of the shares of Common Stock acquired under the Purchaser Option (the
"Purchaser Owned Shares" and such Purchaser Owned Shares requested to be
----------------------
registered for sale, the "Registrable Securities") pursuant to a bona fide firm
----------------------
commitment underwritten public offering in which Purchasers and the underwriters
shall effect as wide a distribution of such Registrable Securities as is
reasonably practicable (a "Permitted Offering"). The Registration Notice will
------------------
include a certificate executed by Purchasers and their proposed managing
underwriter, which underwriter will be an investment banking firm of nationally
recognized standing (the "Manager"), stating that (A) they have a good faith
-------
intention to commence promptly a Permitted Offering and (B) the Manager in good
faith believes that, based on the then prevailing market conditions, it will be
able to sell the Registrable Securities at a per share price equal to at least
85% of the then Fair Market Value of such shares.
(b) The Company shall use reasonable best efforts to effect, as
promptly as practicable, the registration under the
-9-
<PAGE>
Securities Act of the Registrable Securities pursuant to the terms of the
Registration Rights Agreement, dated the date hereof, between Purchasers and the
Company.
ARTICLE V.
Section 5.1. Termination. This Agreement will terminate, except for
-----------
Article IV hereof which will only terminate as and when provided therein, on the
earliest to occur of (A) the termination of the Company Purchase Agreement, (B)
the consummation of the transactions contemplated by the Company Purchase
Agreement, (C) the mutual agreement of the Stockholder, the Company and
Purchasers to so terminate and (D) the Expiration Date (or, if applicable, the
Extended Expiration Date) (each as defined in the Company Purchase Agreement).
Section 5.2. Expenses. Except as otherwise expressly provided in
--------
the Company Purchase Agreement or in the Stockholder Purchase Agreement, all
costs and expenses incurred by any of the parties hereto will be borne by the
party incurring such costs and expenses. Purchasers, on the one hand, and the
Stockholder, on the other hand, will indemnify and hold harmless the other from
and against any and all claims or liabilities for finder's fees or brokerage
commissions or other like payments incurred by reason of action taken by it.
Section 5.3. Further Assurances. Each party hereto will execute and
------------------
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 5.4. Publicity. Purchasers and the Stockholder shall
---------
consult with each other and the Company before issuing any press release or
otherwise making any public statements with respect to this Agreement or the
Company Purchase Agreement or the other transactions contemplated hereby or
thereby and shall not issue any such press release or make any such public
statement before such consultation, except as may be required by law or
applicable stock exchange rules. The Company shall be an express third party
beneficiary of this Section 5.4.
Section 5.5. Enforcement of the Agreement. The Stockholder and
----------------------------
Purchasers each acknowledge that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that each party hereto will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to
-10-
<PAGE>
enforce specifically the terms and provisions hereof in any state or federal
court sitting in New York County, New York, this being in addition to any other
remedy to which they are entitled at law or in equity.
Section 5.6. Miscellaneous.
-------------
(a) All representations and warranties contained herein will survive
for eighteen (18) months after the termination hereof. The covenants and
agreements made herein will survive the Closing Date in accordance with their
respective terms.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment or
supplement will be effective unless in writing and signed by the party or
parties sought to be bound thereby. Any waiver by any party of a breach of any
provision of this Agreement will not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement or one or more sections hereof will not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
(c) This Agreement, the other Transaction Documents and the other
agreements attached as Exhibits to the Company Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof, and supersede all prior agreements among such parties with respect to
such matters. This Agreement may not be amended, changed, supplemented, waived
or otherwise modified, except upon the delivery of a written agreement executed
by the parties hereto.
(d) This Agreement will be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflicts of laws
principles thereof.
(e) With respect to any suit, action or proceeding initiated by a
party to this Agreement arising out of, under or in connection with this
Agreement or the Stockholder Purchase Agreement, the Stockholder and Purchasers
each hereby submit to the exclusive jurisdiction of any state or federal court
sitting in New York County, New York and irrevocably waive, to the fullest
extent permitted by law, any objection that they may now have or hereafter
obtain to the laying of venue in any such court in any such suit, action or
proceeding.
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<PAGE>
(f) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(g) All notices and other communications hereunder will be in writing
and will be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by telecopy, or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to any of Purchasers to:
Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, NY 10017
Attention: David E. Libowitz
Telecopier: (212) 878-9351
With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Neil Novikoff, Esq.
Telecopier: (212) 728-8111
If to the Stockholder to:
Technical Services Partners, L.P.
c/o Steinhardt Partners
605 Third Avenue
New York, New York 10158
Attention: Shimon Topor
Telecopier:
With a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Stuart D. Freedman, Esq.
Telecopier: 212-593-5955
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
(h) This Agreement may be executed in any number of counterparts, each
of which will be deemed to be an original, but all of which together will
constitute one agreement.
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<PAGE>
(i) This Agreement and each of the other Transaction Documents (as
such term is defined in the Company Purchase Agreement) shall (i) be executed on
the Closing Date and at such time shall be valid and binding obligations of each
of the parties and signatories thereto and (ii) simultaneously be consummated at
the Closing.
(j) Neither this Agreement nor any of the rights or obligations of
any party hereto may be assigned without the prior written consent of the other
parties hereto, except that Purchasers may, without such consent, assign this
Agreement and any of such rights and obligations to one or more of their
affiliates unless such assignment causes any representation or warranty to be
untrue or incorrect in any material respect or unless such assignment shall
materially delay the Closing. Any such assignment shall not, however, act as a
release of the assigning Person. Subject to the foregoing, this Agreement shall
inure to the benefit of and be binding upon the successors and assigns of each
of the parties, and no other Person shall have any right, benefit or obligation
hereunder.
(k) If any term or provision of this Agreement is determined to be
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
(l) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity will be cumulative and
not alternative, and the exercise of any thereof by either party will not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
[The remainder of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co., its general partner
By: _______________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I,
C.V.
By: Warburg, Pincus & Co., its general partner
By: _______________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II,
C.V.
By: Warburg, Pincus & Co., its general partner
By: _______________________________________
Name:
Title:
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III,
C.V.
By: Warburg, Pincus & Co., its general partner
By: _______________________________________
Name:
Title:
S-1
<PAGE>
TECHNICAL SERVICES PARTNERS, L.P.
By: Technical Service Holding, its
general partner
By: _______________________________________
Name:
Title:
S-2
<PAGE>
EXHIBIT 99.9
================================================================================
FOUR MEDIA CO.
================================================================================
January 19, 1999
================================================================================
FOUR MEDIA COMPANY APPOINTS JEFFREY J. MARCKETTA AS PRESIDENT AND CHIEF
ADMINISTRATIVE OFFICER
BURBANK, Calif., Jan. 19/PRNewswire/ -- Four Media Company (Nasdaq: FOUR) today
announced that it has appointed Jeffrey J. Marcketta, President and CAO
effective immediately. Mr. Marcketta, who will report directly to Robert T.
Walston, Chairman and CEO of Four Media Company, will be responsible for
managing the Company's financial, merger and acquisition, banking, legal,
investor relations and information technology activities.
Prior to joining Four Media Company as President and CAO, for 10 years Mr.
Marcketta worked as an executive in the entertainment services industry. For
nearly six years Mr. Marcketta served as the Executive Vice President and Chief
Financial Officer of Panavision Inc. For two years before that, he was the
President of Panavision Europe based in London, England where he managed and
expanded Panavision's European operations while also serving as Vice President
of Corporate Development. Before joining Panavision, Mr. Marcketta was a
principal with Ernst & Young based in New York performing due diligence reviews
and advising investors and LBO firms on M&A accounting and tax structuring
issues.
Commenting on Mr. Marcketta's appointment, Rob Walston, Chairman and CEO of
Four Media Company, stated that, "combined with Warburg, Pincus agreeing to
invest more than $50 million of new equity capital into Four Media Company, the
addition of Jeff Marcketta to the Four Media team will provide additional
operating and transactional experience that will further facilitate our goal of
expanding our customer services and making additional strategic acquisitions."
Four Media Company is a leading provider of technical and creative services to
owners, producers and distributors of television programming, feature films and
other entertainment product both domestically and internationally. The Company's
services integrate a variety of systems and processes to enhance the creation
and distribution of entertainment content. Four Media's client base includes the
world's largest entertainment companies. As a result of its investments and
acquisitions, Four Media Company is one of the largest and most diversified
providers of technical and creative services to the entertainment industry,
which enables the Company to offer its customers a single source for such
services.
This press release contains forward-looking statements which are made pursuant
to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of
1995. Words such as "intends", "believes" and similar expressions reflecting
something other than historical fact are intended to identify forward-looking
statements, but are not the exclusive means of identifying such statements.
These forward-looking statements involve a number of risks and uncertainties,
including the timely development and market acceptance of products and
technologies, successful integration of acquisitions, the ability to secure
additional sources of financing, the ability to reduce operating expenses and
other factors described in the Company's filings with the Securities and
Exchange Commission, including its 1997
1 of 2
<PAGE>
Prospectus. The actual results that the Company achieves may differ
materially from any forward-looking statement due to such risks and
uncertainties. The Company undertakes no obligations to revise or update
any forward-looking statements in order to reflect events or circumstances
that may arise after the date of this release.
/CONTACT: Robert T. Walston, Chairman and Chief Executive Officer, or
Sandra C. Mays, Vice President, Investor Relations, both of Four Media
Company, 818-840-7356, or fax, 818-846-5197/
