<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
(Amendment No. 4)1
COLLEGE TELEVISION NETWORK, INC.
--------------------------------
(Name of Issuer)
Common Stock
------------
(Title of Class of Securities)
194506101
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(CUSIP Number)
Neil H. Dickson, Esq., Morris, Manning & Martin, L.L.P.
3343 Peachtree Road, N.E., 1600 Atlanta Financial Center
Atlanta, Georgia 30326 (404) 233-7000
-------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 31, 1999
---------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject to this Schedule 13D, and is
filing this schedule because of Rule 13D-1 (b)(3) or (4), check the following
box. [ ]
Note. Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. See Rule
13d-7 (b) for other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 13 Pages)
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1 The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
CUSIP NO. 194506101 13 D PAGE 2 OF 14
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
U-C Holdings, L.L.C.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: (a) [_]
(b) [_]
3. SEC USE ONLY:
4. SOURCE OF FUNDS*: WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e): [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware limited liability
company
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 0
8. SHARED VOTING POWER: 13,179,876 /2/ /3/
9. SOLE DISPOSITIVE POWER: 0
10. SHARED DISPOSITIVE POWER: 18,735,431
- ---------------
/2/ Number of shares reflects one-for-five reverse stock split effected November
12, 1997.
/3/ This figure is the total number of shares of Common Stock of the Issuer
owned or controlled by the reporting person as of August 31, 1999. U-C Holdings,
L.L.C. ("Holdings"), majority stockholder of the Issuer, purchased 1,000,000
shares of Series A Convertible Preferred Stock of the Issuer ("Series A
Preferred") pursuant to a Purchase Agreement, dated August 31, 1999 ("Purchase
Agreement"). As of the date of issuance, the Series A Preferred is convertible
into 3,333,333 shares of Common Stock, however, it is non-voting until after the
effective date of a Schedule 14C Information Statement to be sent to the
stockholders in connection with such issuance. The Purchase Agreement also
provides that the Issuer has the option to sell to Holdings, before the first
anniversary of the Purchase Agreement, an additional 266,667 shares of Series A
Preferred, and Holdings has the option to purchase up to an additional 400,000
shares of Series A Preferred if it contributes up to $6,000,000 pursuant to its
guarantee of a loan to Armed Forces from Canadian Imperial Bank of Commerce. As
of the date of the Purchase Agreement, these additional 666,667 shares of Series
A Preferred would be convertible into 2,222,222 shares of Common Stock. On
August 31, 1999, Holdings and the Issuer entered into a Cancellation Agreement,
whereby the Class D Warrant issued to Holdings on July 23, 1999 was cancelled
for no additional consideration. This figure also includes (i) 678,432 shares of
Common Stock that may be issued to Holdings upon its conversion of the
Convertible Preferred purchased by Holdings on July 23, 1999, and (ii) 924,832
shares of Common Stock that may be purchased by Holdings upon the exercise of
Class C Warrants issued to Holdings on October 5, 1998, and April 25, 1997. This
number excludes any shares of Common Stock purchasable by Holdings pursuant to
certain Equity Purchase Agreements dated April 25, 1997, which give Holdings the
right to purchase Common Stock upon the exercise of certain private placement
warrants and options.
<PAGE>
CUSIP NO. 194506101 13 D PAGE 3 OF 14
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 18,735,431
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*: [_]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 86.9%
14. TYPE OF REPORTING PERSON*: OO (limited liability company)
<PAGE>
CUSIP NO. 194506101 13 D PAGE 4 OF 14
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
John R. Willis
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: (a) [_]
(b) [_]
3. SEC USE ONLY:
4. SOURCE OF FUNDS*: AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e): [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION: U.S. Citizen
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 0
8. SHARED VOTING POWER: 13,179,876 /2/ /3/
9. SOLE DISPOSITIVE POWER: 0
10. SHARED DISPOSITIVE POWER: 18,735,431
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 18,735,431 /4/
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*: [_]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 86.9%
14. TYPE OF REPORTING PERSON*: IN
- ----------------------
/4/ Mr. Willis disclaims such beneficial ownership of the securities held by
Holdings except to the extent of his indirect beneficial interest as a Founding
Member of Willis Stein & Partners, L.L.C., the general partner of Willis Stein &
Partners, L.P., which is the Managing Member of Holdings.
<PAGE>
CUSIP NO. 194506101 13 D PAGE 5 OF 14
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
Avy H. Stein
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: (a) [_]
(b) [_]
3. SEC USE ONLY:
4. SOURCE OF FUNDS*: AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e): [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION: U.S. Citizen
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 0
8. SHARED VOTING POWER: 13,179,876 /2/ /3/
9. SOLE DISPOSITIVE POWER: 0
10. SHARED DISPOSITIVE POWER: 18,735,431
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 18,735,431 /5/
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*: [_]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 86.9%
14. TYPE OF REPORTING PERSON*: IN
- ----------------------
/5/ Mr. Stein disclaims such beneficial ownership of the securities held by
Holdings except to the extent of his indirect beneficial interest as a Founding
Member of Willis Stein & Partners, L.L.C., the general partner of Willis Stein &
Partners, L.P., which is the Managing Member of Holdings.
<PAGE>
CUSIP NO. 194506101 13 D PAGE 6 OF 14
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
Daniel M. Gill
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: (a) [_]
(b) [_]
3. SEC USE ONLY:
4. SOURCE OF FUNDS*: AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e): [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION: U.S. Citizen
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 0
8. SHARED VOTING POWER: 13,179,876 /2/ /3/
9. SOLE DISPOSITIVE POWER: 0
10. SHARED DISPOSITIVE POWER: 18,735,431
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 18,735,431 /6/
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*: [_]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 86.9%
14. TYPE OF REPORTING PERSON*: IN
- ---------------------
/6/ Mr. Gill disclaims such beneficial ownership of the securities held by
Holdings except to the extent of his indirect beneficial interest as a Founding
Member of Willis Stein & Partners, L.L.C., the general partner of Willis Stein &
Partners, L.P., which is the Managing Member of Holdings.
<PAGE>
CUSIP NO. 194506101 13 D PAGE 7 OF 14
1. NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
Daniel H. Blumenthal
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*: (a) [_]
(b) [_]
3. SEC USE ONLY:
4. SOURCE OF FUNDS*: AF
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e): [_]
6. CITIZENSHIP OR PLACE OF ORGANIZATION: U.S. Citizen
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. SOLE VOTING POWER: 0
8. SHARED VOTING POWER: 13,179,876 /2/ /3/
9. SOLE DISPOSITIVE POWER: 0
10. SHARED DISPOSITIVE POWER: 18,735,431
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 18,735,431 /7/
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*: [_]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 86.9%
14. TYPE OF REPORTING PERSON*: IN
- ----------------------
/7/ Mr. Blumenthal disclaims such beneficial ownership of the securities held by
Holdings except to the extent of his indirect beneficial interest as a Founding
Member of Willis Stein & Partners, L.L.C., the general partner of Willis Stein &
Partners, L.P., which is the Managing Member of Holdings.
<PAGE>
Item 1. Security and Issuer.
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This Statement on Schedule 13D relates to the shares of Common Stock,
$.005 par value, of College Television Network, Inc. (the "Issuer"), formerly UC
Television Network Corp. (the "Common Stock"). The address of the principal
executive office of the Issuer is College Television Network, Inc., 5784 Lake
Forrest Drive, Suite 275, Atlanta, Georgia 30328.
Item 2. Identity and Background.
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This Statement is filed by the following persons:
(a) U-C Holdings, L.L.C. ("Holdings"), a limited liability company
organized under the laws of the State of Delaware with its principal business
address at 227 West Monroe Street, Suite 4300, Chicago, Illinois 60606.
Holdings' principal business is investing in the securities of the Issuer.
(b) John R. Willis, an individual whose business address is 227 West Monroe
Street, Suite 4300, Chicago, Illinois 60606. Mr. Willis' principal occupation
is serving as a Manager and Founding Member of Willis Stein & Partners, L.L.C.,
the general partner of Willis Stein & Partners, L.P., a private equity
investment limited partnership. Mr. Willis is a citizen of the United States of
America.
(c) Avy H. Stein, an individual whose business address is 227 West Monroe
Street, Suite 4300, Chicago, Illinois 60606. Mr. Stein's principal occupation
is serving as a Manager and Founding Member of Willis Stein & Partners, L.L.C.,
the general partner of Willis Stein & Partners, L.P., a private equity
investment limited partnership. Mr. Stein is a citizen of the United States of
America.
(d) Daniel H. Blumenthal, an individual whose business address is 227 West
Monroe Street, Suite 4300, Chicago, Illinois 60606. Mr. Blumenthal's principal
occupation is serving as a Founding Member of Willis Stein & Partners, L.L.C.,
the general partner of Willis Stein & Partners, L.P., a private equity
investment limited partnership. Mr. Blumenthal is a citizen of the United
States of America.
(e) Daniel M. Gill, an individual whose business address is 227 West Monroe
Street, Suite 4300, Chicago, Illinois 60606. Mr. Gill's principal occupation is
serving as a Founding Member of Willis Stein & Partners, L.L.C., the general
partner of Willis Stein & Partners, L.P., a private equity investment limited
partnership. Mr. Gill is a citizen of the United States of America.
In addition, information relating to the following entities and persons is
provided pursuant to General Instruction C to Schedule 13D:
(g) Willis Stein & Partners, L.P., a limited partnership organized under
the laws of the State of Delaware with its principal business address at 227
West Monroe Street, Suite 4300, Chicago, Illinois 60606. The principal business
of Willis Stein & Partners, L.P. is investing in equity securities. Willis
Stein & Partners, L.P. serves as the Managing Member of Holdings.
(h) Willis Stein & Partners, L.L.C., a limited liability company organized
under the laws of the State of Delaware with its principal business address at
227 West Monroe Street, Suite 4300, Chicago, Illinois 60606. The principal
business of Willis Stein & Partners, L.L.C. is serving as the General Partner of
Willis Stein & Partners, L.P., a private equity investment limited partnership.
<PAGE>
(i) Willis Stein & Partners II, L.P., a limited partnership organized under
the laws of the State of Delaware with its principal business address at 227
West Monroe Street, Suite 4300, Chicago, Illinois 60606. The principal business
of Willis Stein & Partners II, L.P. is investing in equity securities.
(j) Willis Stein & Partners Dutch, L.P., a limited partnership organized
under the laws of the State of Delaware with its principal business address at
227 West Monroe Street, Suite 4300, Chicago, Illinois 60606. The principal
business of Willis Stein & Partners Dutch, L.P. is investing in equity
securities.
(k) Willis Stein & Partners Management II, L.P., a limited partnership
organized under the laws of the State of Delaware with its principal business
address at 227 West Monroe Street, Suite 4300, Chicago, Illinois 60606. The
principal business of Willis Stein & Partners Management II, L.P. is serving as
the General Partner of Willis Stein & Partners II, L.P. and Willis Stein &
Partners Dutch, L.P., private equity investment limited partnerships.
(l) Willis Stein & Partners Management II, L.L.C., a limited liability
company organized under the laws of the State of Delaware with its principal
business address at 227 West Monroe Street, Suite 4300, Chicago, Illinois 60606.
The principal business of Willis Stein & Partners Management II, L.L.C. is
serving as the General Partner of Willis Stein & Partners Management II, L.P., a
private equity investment limited partnership.
During the past five years, none of the entities or persons listed above
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
- ------- -------------------------------------------------
The funds used to acquire the Series A Preferred of the Issuer described in
Item 5 below were taken from the equity contributions to capital of Holdings
made by its members. The purchase price of the Series A Preferred reported
herein pursuant to the Purchase Agreement (described in Item 4) executed by and
between the Issuer and Holdings was $15,000,000.
Item 4. Purpose of Transaction.
- ------- ----------------------
On August 31, 1999, the Issuer issued to Holdings 1,000,000 shares of
Series A Convertible Preferred Stock, $.001 par value per share ("Series A
Preferred") for an aggregate purchase price of $15,000,000 pursuant to a
Purchase Agreement between Holdings and the Issuer dated August 31, 1999 (the
"Purchase Agreement"). The purpose of Holdings' purchase of shares was to enable
the Issuer to raise $15,000,000 in gross proceeds needed for the Issuer's
purchase of Armed Forces Communications, Inc., a New York corporation doing
business as Market Place Media ("Armed Forces"). Additionally, the Purchase
Agreement provides that the Issuer has the option to sell to Holdings, subject
to various conditions within the control of Holdings, before the first
anniversary of the Purchase Agreement, an additional 266,667 shares of Series A
Preferred for an aggregate purchase price of $4,000,000, and Holdings has the
option to purchase up to an additional 400,000 shares of Series A Preferred if
it contributes up to $6,000,000 pursuant to its guarantee of a loan to Armed
Forces from Canadian Imperial Bank of Commerce and its affiliates.
<PAGE>
The conversion ratio of the Series A Preferred into Common Stock is
computed by multiplying the number of shares of Series A Preferred to be
converted by the $15.00 per share purchase price and dividing the result by the
conversion price of the Series A Preferred (the "Conversion Price") then in
effect with respect to such shares. On the date of issuance, the Conversion
Price was set at $4.50. As of the date hereof the Series A Preferred is non-
voting stock, however, after the effective date of a Schedule 14C Information
Statement to be sent to the stockholders of the Issuer in connection with the
issuance of the Series A Preferred, it gains the right to vote on an as-
converted basis to Common Stock based upon the number of shares of Common Stock
the Series A Preferred is convertible into on the date of issuance or 3,333,333
shares of voting stock.
If Holdings converted the Series A Preferred based upon the current
conversion price it would acquire 3,333,333 shares of Common Stock of the
Company after which conversion Holdings would own approximately 84.0% of the
outstanding shares of the Common Stock of the Company.
Pursuant to a Cancellation Agreement, dated August 31, 1999, between
Holdings and the Issuer, the Issuer cancelled, for no additional consideration,
and Holdings consented to such cancellation, the Class D Warrant to purchase
135,686 shares of Common Stock issued to Holdings on July 23, 1999.
The share numbers set forth herein reflect (i) the purchase of shares of
Series A Preferred by Holdings pursuant to the Purchase Agreement, (ii) the
Issuer's option to issue additional shares of Series A Preferred to Holdings,
(iii) the shares issuable upon conversion of the 309,998 shares of Convertible
Preferred Stock purchased by Holdings on July 23, 1999, and (iv) the exercise
the Warrants issued to Holdings by the Issuer on October 5, 1998 and on April
25, 1997. The persons identified in response to Item 2 of this Statement will
make the determination as to when or whether to convert the Series A Preferred.
While they reserve the right to develop plans or proposals in the future
regarding the following items, at the present time none of the persons
identified in response to Item 2 of this Statement have any plans or proposals
which relate to or would result in any of the following:
(a) the acquisition of additional securities of the Issuer, or the
disposition of securities of the Issuer;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries;
(c) sale or transfer of a material amount of assets of the Issuer or any of
its subsidiaries;
(d) any change in the present board of directors or management of the
Issuer, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) any material change in the present capitalization or dividend policy of
the Issuer;
(f) any other material change in the Issuer's business or corporate
structure;
(g) any changes in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person;
<PAGE>
(h) causing a class of securities of the Issuer to be delisted from a
national securities exchange or cease to be authorized to be quoted in an inter-
dealer quotation system of a registered national security association;
(i) a class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(j) any action similar to those enumerated above.
Item 5. Interest in Securities of the Issuer.
- ------- ------------------------------------
(a) Immediately prior to the consummation of the Purchase Agreement, there
were 14,411,755 shares of the Issuer's Common Stock outstanding, of which
Holdings directly owned 11,576,612 shares, or 80.3% of the outstanding Common
Stock. On of the date of issuance, if Holdings were to (i) convert all of the
shares of Series A Preferred it now holds or has the option to purchase, (ii)
convert all of the shares of Preferred it now holds, and (iii) exercise the
Warrants it holds, including (a) the Warrant issued to Holdings on October 5,
1998, and (b) the Warrant issued to Holdings on April 25, 1997, Holdings would
own 18,735,431 shares of the Common Stock, or 86.9% of the Issuer's outstanding
Common Stock. This excludes shares issuable to Holdings pursuant to certain
Equity Protection Agreements dated April 25, 1997. John R. Willis and Avy H.
Stein (collectively, the "Managers"), as the Managers of, and John R. Willis,
Avy H. Stein, Daniel M. Gill and Daniel H. Blumenthal (collectively, the
"Founding Members"), as the Founding Members of, Willis Stein & Partners,
L.L.C., the general partner of Willis Stein & Partners, L.P., which is the
Managing Member of Holdings, may be deemed to share the power to direct the
voting and disposition of the shares of Common Stock held by Holdings and may be
deemed to beneficially own such shares. Each of the Founding Members disclaims
beneficial ownership of the securities held by Holdings except to the extent of
his indirect beneficial interest as a Founding Member of Willis Stein &
Partners, L.L.C., the general partner of Willis Stein & Partners L.P., which is
the Managing Member of Holdings.
(b) None of the Founding Members directly owns any shares of the Issuer's
Common Stock, but the Founding Members may be deemed to share the power to vote
or to direct the vote as well as the power to dispose of or to direct the
disposition of all of the shares of Common Stock held by Holdings, by virtue of
such persons' status as Managers and/or Founding Members of Willis Stein &
Partners, L.L.C., the general partner of Willis Stein & Partners, L.P., which is
the Managing Member of Holdings. Each of the Founding Members disclaims
beneficial ownership of the securities held by Holdings except to the extent of
his indirect beneficial interest as a Founding Member of Willis Stein &
Partners, L.L.C., the general partner of Willis Stein L.P., which is the
Managing Member of Holdings.
(c) Other than the securities acquired pursuant to the Purchase Agreement
and purchased by Holdings described herein, there were no transactions in the
class of securities reported on that were effected during the past sixty (60)
days or since the most recent filing of Schedule 13D by the persons named in
response to Paragraph (a).
(d) Pursuant to the Fourth Amended and Restated Limited Liability Company
Agreement of U-C Holdings, L.L.C., dated August 31, 1999 (the "Operating
Agreement"), the following persons are members of Holdings and, as such, have
the right to receive distributions from Holdings: Jason Elkin, Thomas Gatti,
Joseph D. Gersh, James Harder, Peter Kauff, Hollis W. Rademacher, Patrick Doran,
Sergio Zyman, Martin Grant, George Giatzis, Willis Stein & Partners, L.P.,
Willis Stein & Partners II, L.P. and Willis Stein & Partners Dutch, L.P. The
sole investment of Holdings is its interest in securities of the Issuer;
therefore, any dividends paid by the Issuer to Holdings
<PAGE>
will be distributed to the members of Holdings in accordance with the
distribution provisions of the Operating Agreement. As a result, the members of
Holdings have the right to receive dividends from, as well as the proceeds from
the sale of, securities of the Issuer held by Holdings.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
- ------ ---------------------------------------------------------------------
to Securities of the Issuer.
----------------------------
The Operating Agreement (described in Item 5(d) above) provides that
Willis Stein & Partners, L.P., as the Managing Member of Holdings, shall have
the sole authority with respect to the transfer and voting of the securities
owned by Holdings. The Operating Agreement contains provisions regarding the
transfer and voting of the securities of the Issuer held by Holdings. The
Operating Agreement was entered into among the members of Holdings named in
response to Item 5(d) above.
Item 7. Material to be Filed as Exhibits.
- ------ --------------------------------
The following documents are filed as exhibits hereto:
(a) Joint Filing Agreement, dated September 10, 1999, among U-C Holdings,
L.L.C., John R. Willis, Avy H. Stein, Daniel M. Gill and Daniel H. Blumenthal.
(b) Second Certificate of Designation of the Series A Convertible
Preferred Stock filed with the Corporations Division of the State of Delaware
August 31, 1999.
(c) Purchase Agreement between U-C Holdings, L.L.C. and College Television
Network, Inc., dated as of August 31, 1999.
(d) Cancellation Agreement between U-C Holdings, L.L.C. and College
Television Network, Inc., dated as of August 31, 1999.
(e) Fourth Amended and Restated Limited Liability Company Agreement of U-C
Holdings, L.L.C. dated as of August 31, 1999.
(f) Purchase Agreement between U-C Holdings, L.L.C. and College Television
Network, Inc., dated as of July 23, 1999 (incorporated by reference to Exhibit
4.1 to Issuer's Form 8-K filed August 3, 1999).
(g) Form of Class C Warrant No. C-2 issued by College Television Network,
Inc. to U-C Holdings, L.L.C. (incorporated by reference to Exhibit 4.14 to the
Issuer's Registration Statement on Form S-3 (SEC File No. 333-58479), as
amended, declared effective on July 28, 1998).
(h) Form of Class C Warrant No. C-1 issued by College Television Network,
Inc. to U-C Holdings, L.L.C. (incorporated by reference to Exhibit 4.2 to the
Schedule 13D filed on May 5, 1997).
<PAGE>
SIGNATURES
After reasonable inquiry, and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct as of this 8th day of September, 1999.
U-C HOLDINGS, L.L.C.
By: Willis Stein & Partners, L.P.
Its Managing Member
By: Willis Stein & Partners, L.L.C.
Its General Partner
By: /s/ Daniel M. Gill
---------------------------------------
Daniel M. Gill
Its Managing Director
John R. Willis
/s/ Daniel M. Gill
--------------------------------------
By: Daniel M. Gill pursuant to a Power of
Attorney attached hereto and hereby filed with
the Commission.
Avy H. Stein
/s/ Daniel M. Gill
--------------------------------------
By: Daniel M. Gill pursuant to a Power of
Attorney attached hereto and hereby filed with
the Commission.
Daniel H. Blumenthal
/s/ Daniel M. Gill
--------------------------------------
By: Daniel M. Gill pursuant to a Power of
Attorney attached hereto and hereby filed with
the Commission.
/s/ Daniel M. Gill
--------------------------------------
Daniel M. Gill
<PAGE>
EXHIBIT A
JOINT FILING AGREEMENT
----------------------
The undersigned hereby agree that the Statement on Schedule 13D to
which this Agreement is attached, relating to shares of Common Stock, par
value $.005 per share, of College Television Network, Inc., and any
amendment to such Statement, will be filed on behalf of each of the
undersigned.
This Agreement may be executed in two (2) or more counterparts, each
of which shall be an original, but all of which shall constitute but one
agreement.
Agreed this 10th day of September, 1999.
U-C HOLDINGS, L.L.C.
By: Willis Stein & Partners, L.P.
Its Managing Member
By: Willis Stein & Partners,
L.L.C.
Its General Partner
/s/ Daniel M. Gill
----------------------------------
By: Daniel M. Gill
Its Managing Director
John R. Willis
/s/ Daniel M. Gill
----------------------------------
By: Daniel M. Gill pursuant to a Power of
Attorney attached hereto and hereby filed with
the Commission.
Avy H. Stein
/s/ Daniel M. Gill
----------------------------------
By: Daniel M. Gill pursuant to a Power of
Attorney attached hereto and hereby filed with
the Commission.
Daniel H. Blumenthal
/s/ Daniel M. Gill
----------------------------------
By: Daniel M. Gill pursuant to a Power of
Attorney attached hereto and hereby filed with
the Commission.
/s/ Daniel M. Gill
----------------------------------
Daniel M. Gill
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, John R.
Willis, Avy H. Stein, Daniel M. Gill, Beth F. Johnston, and Daniel H.
Blumenthal, has made, constituted and appointed, and by these presents does
make, constitute and appoint each of John R. Willis, Avy H. Stein, Daniel M.
Gill, Beth F. Johnston, and Daniel H. Blumenthal as the undersigned's true and
lawful attorney-in-fact and agent, for the undersigned in the undersigned's
name, place and stead, to execute, acknowledge, deliver and file, with respect
to any company in which Willis Stein & Partners, L.P. has an investment, any and
all filings required by Sections 13 and/or 16 of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder,
including, but not limited to, Statements on Schedule 13D, Statements on
Schedule 13G, Forms 3, 4, and 5, and all amendments thereto to be filed by or on
behalf of any of the foregoing, hereby ratifying and confirming all that each
said attorney-in-fact and agent may do or cause to be done by virtue hereof.
The validity of this Power of Attorney shall not be affected in any
manner by reason of the execution, at any time, of other powers of attorney by
the undersigned in favor of persons other than each attorney-in-fact named
herein.
WITNESS THE EXECUTION HEREOF this 10th day June, 1997 by the
undersigned.
/s/ John R. Willis
----------------------------------
John R. Willis
/s/ Avy H. Stein
----------------------------------
Avy H. Stein
/s/ Daniel M. Gill
----------------------------------
Daniel M. Gill
/s/ Beth F. Johnston
----------------------------------
Beth F. Johnston
/s/ Daniel H. Blumenthal
----------------------------------
Daniel H. Blumenthal
<PAGE>
SECOND CERTIFICATE OF DESIGNATION,
POWERS, PREFERENCES AND RIGHTS OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
OF
COLLEGE TELEVISION NETWORK, INC.
_________________________________________________________________
Pursuant to the provisions of Section 151(g)
of the General Corporation Law of
the State of Delaware
_________________________________________________________________
College Television Network, Inc., (the "Corporation") a corporation
-----------
organized and validly existing under the General Corporation Law of the State of
Delaware, filed its original Certificate of Incorporation with the Corporations
Division on August 17, 1989. Under the provisions of and subject to the
requirements Section 151(g) of the General Corporation Law of the State of
Delaware, the undersigned, desiring (i) to decrease the number of shares of
preferred stock of the Corporation subject to the Certificate of Designation,
Powers, Preferences and Rights of the Convertible Preferred Stock filed with the
Corporations Division on July 22, 1999 (the "Original Certificate of
-----------------------
Designation"), and (ii) to set the designation, powers, preferences and rights
- -----------
of the remaining authorized but unissued preferred stock of the Corporation,
does hereby certify that the following resolutions were duly adopted by the
Board of Directors of the Corporation at a special meeting held on August 30,
1999 and approved by a unanimous vote of the holders of the issued and
outstanding Convertible Preferred Stock:
WHEREAS, the Amended and Restated Certificate of Incorporation, dated
November 10, 1997 ("Amended Certificate"), authorizes a class of stock
-------------------
designated as preferred stock (the "Preferred Stock"), comprising 2,000,000
---------------
shares, par value $0.001 per share, provides that such Preferred Stock may be
issued from time to time in one or more series, and vests authority in the Board
of Directors of the Corporation, within the limitations and restrictions stated
in the FOURTH paragraph of the Amended Certificate, to fix or alter the voting
powers, designation, preferences and relative participating, optional or other
special rights, rights and terms of redemption, the redemption price or prices
and the liquidation preferences of any series of Preferred Stock within the
limitations set forth in the Delaware General Corporation Law;
WHEREAS, the Original Certificate of Designation designated 2,000,000
shares of the authorized Preferred Stock as Convertible Preferred Stock (the
"Convertible Preferred");
---------------------
WHEREAS, it is the desire of the Board of Directors of the Corporation to
decrease the number of shares of Convertible Preferred subject to the Original
Certificate of Designation;
WHEREAS, as of the date hereof, there are 309,998 issued and outstanding
shares of Convertible Preferred;
WHEREAS, based on the foregoing, there are 1,690,002 shares of authorized
and unissued Convertible Preferred; and
WHEREAS, the Board of Directors by resolutions in accordance with Section
151(g) of the General Corporation Law of the State of Delaware has reduced the
number of shares of Convertible Preferred by 1,609,022, to 309,998; and
<PAGE>
WHEREAS, by unanimous written consent, dated as of August 30, 1999, the
holders of all of the issued and outstanding shares of Convertible Preferred
have approved the decrease in the designated authorized shares of Convertible
Preferred; and
WHEREAS, by the action of the Board of Directors to decrease the number of
shares of Preferred Stock subject to the Original Certificate of Designation,
such authorized but unissued shares of Convertible Preferred shall resume the
status which they had prior to the Original Certificate of Designation, i.e.
that of Preferred Stock subject to the FOURTH paragraph of the Amended
Certificate;
WHEREAS, it is the desire of the Board of Directors of the Corporation to
designate a new series of Preferred Stock and to fix the voting powers,
designations, preferences and rights, and the qualifications, limitations or
restrictions thereof, as provided herein.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation, does hereby reduce
the number of shares of Convertible Preferred subject to the Original
Certificate of Designation to 309,998;
FURTHER RESOLVED, that the Corporation, does hereby authorize that the
1,690,002 shares of authorized but unissued Convertible Preferred shall resume
the status which they had prior to the Original Certificate of Designation and,
thereafter, be Preferred Stock subject to the FOURTH paragraph of the Amended
Certificate;
FURTHER RESOLVED, that the Corporation, by resolution of the Board of
Directors of the Corporation, does hereby cancel any previous rights,
preferences or designations for the authorized but unissued Convertible
Preferred which were set forth in the Original Certificate of Designation and
does hereby designate 1,690,002 shares of the heretofore authorized but unissued
Preferred Stock as Series A Convertible Preferred Stock (the "Class A
-------
Convertible Preferred") and does hereby fix the powers, preferences and relative
- ---------------------
participating, optional or other special rights and qualifications, limitations
or restrictions of the Class A Convertible Preferred to be as follows:
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
SERIES A PREFERRED STOCK TERMS
------------------------------
Section 1. Dividends.
---------
1A. General Obligation.
------------------
(i) When and as declared by the Corporation's board of directors,
and to the extent permitted under the General Corporation Law of Delaware, the
Corporation shall pay preferential dividends in cash to the holders of the
Series A Convertible Preferred Stock (the "Series A Convertible Preferred") as
------------------------------
provided in this Section 1. Dividends on each share of the Series A Convertible
---------
Preferred (a "Share") shall accrue on a daily basis at the rate of 12% per annum
-----
on the Liquidation Value thereof plus all accumulated and unpaid dividends
thereon from and including the date of issuance of such Share to and including
the first to occur of (i) the date on which the Liquidation Value of such Share
(plus all accrued and unpaid dividends thereon) is paid to the holder thereof in
connection with the liquidation of the Corporation or the redemption of such
Share by the Corporation, (ii) the date on which such Share is converted into
shares of Conversion Stock hereunder or (iii) the date on which such share is
otherwise acquired by the Corporation.
(ii) Such dividends shall accrue whether or not they have been
declared and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of the dividends, and such
dividends shall be cumulative such that all accrued and unpaid dividends shall
be fully paid or declared with funds irrevocably set apart for payment before
any dividends, distributions, redemptions or other payments may be made with
respect to any Junior Securities. The date on which the Corporation initially
issues any Share shall be deemed to be its "date of issuance" regardless of the
----------------
number of times transfer of such Share is made on the stock records maintained
by or for the Corporation and regardless of the number of certificates which may
be issued to evidence such Share.
1B. Dividend Reference Dates. To the extent not paid on March 31,
------------------------
June 30, September 30 and December 31 of each year, beginning September 30, 1999
(the "Dividend Reference Dates"), all dividends which have accrued on each Share
------------------------
outstanding during the three-month period (or other period in the case of the
initial Dividend Reference Date) ending upon each such Dividend Reference Date
shall be accumulated and shall remain accumulated dividends with respect to such
Share until paid to the holder thereof. Such accumulated dividends shall not be
payable until conversion of such Share into Conversion Stock, unless earlier
declared by the Corporation's board of directors.
1C. Distribution of Partial Dividend Payments. Except as otherwise
-----------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of Dividends then accrued with respect to the Series A Convertible Preferred,
such payment shall be distributed pro rata among the holders thereof based upon
the number of Shares held by each such holder.
<PAGE>
1D. Participating Dividends. In the event that the Corporation
-----------------------
declares or pays any dividends upon the Common Stock (whether payable in cash,
securities or other property) other than dividends payable solely in shares of
Common Stock, the Corporation shall also declare and pay to the holders of the
Series A Convertible Preferred at the same time that it declares and pays such
dividends to the holders of the Common Stock, the dividends which would have
been declared and paid with respect to the Common Stock issuable upon conversion
of the Convertible Preferred had all of the outstanding Series A Convertible
Preferred been converted immediately prior to the record date for such dividend,
or if no record date is fixed, the date as of which the record holders of Common
Stock entitled to such dividends are to be determined.
Section 2. Liquidation.
-----------
Upon any liquidation, dissolution or winding up of the Corporation (whether
voluntary or involuntary), subject to the provisions of any outstanding Senior
Securities, each holder of Series A Convertible Preferred shall be entitled to
be paid, before any distribution or payment is made upon any Junior Securities,
an amount in cash equal to the greater of the following: (a) the aggregate
Liquidation Value of all Shares held by such holder (plus all accrued and unpaid
dividends thereon) and (b) the aggregate amount that would receivable by such
holder of Series A Convertible Preferred if the Series A Convertible Preferred
held by such holder had been converted into Conversion Stock in accordance with
Section 6 immediately prior to such distribution of payment. Upon such
- ---------
distribution or payment, the holders of Series A Convertible Preferred shall not
be entitled to any further payment. If upon any such liquidation, dissolution or
winding up of the Corporation the Corporation's assets to be distributed among
the holders of the Series A Convertible Preferred are insufficient to permit
payment to such holders of the aggregate among which they are entitled to be
paid under this Section 2, then the entire assets available to be distributed
---------
to the Corporation's stockholders shall be distributed pro rata among such
holders of the Series A Convertible Preferred based upon the aggregate
Liquidation Value (plus all accrued and unpaid dividends) of the Series A
Convertible Preferred held by each such holder. Not less than 60 days prior to
the liquidation, dissolution or winding up of the Corporation, the Corporation
shall mail written notice of any such liquidation, dissolution or winding up to
each record holder of Series A Convertible Preferred, setting forth in
reasonable detail the amount of proceeds to be paid with respect to each Share
and each share of Common Stock in connection with such liquidation, dissolution
or winding up. Upon the election of the holders of a majority of the outstanding
Shares, any consolidation or merger of the Corporation into or with any other
entity or entities (whether or not the Corporation is the surviving entity), or
any sale or transfer by the Corporation of all or any part of its assets, shall
be deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this Section 2.
---------
Section 3. Priority of Series A Convertible Preferred on Dividends.
-------------------------------------------------------
So long as any Series A Convertible Preferred remains outstanding, subject
to the provision of any outstanding Senior Securities, the Corporation shall
not, nor shall it permit any Subsidiary to, redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities, provided that the
Corporation may repurchase shares of Common Stock from present or former
employees or
<PAGE>
consultants of the Corporation and its Subsidiaries, nor shall the Corporation
directly or indirectly pay any dividend or make any distribution upon any Junior
Securities if at the time of or immediately after any such redemption, purchase,
acquisition, dividend or distribution the Corporation has failed to pay the full
amount of dividends accrued on the Series A Convertible Preferred or the
Corporation has failed to make any redemption of the Series A Convertible
Preferred required hereunder.
Section 4. Redemptions.
-----------
4A. Scheduled Redemptions. At the election of the holders of a
---------------------
majority of the outstanding Shares, the Corporation shall redeem all outstanding
Shares of Series A Convertible Preferred on July 23, 2006, at a price per Share
(the "Redemption Price") equal to the greater of the following: (a) the
----------------
Liquidation Value thereof (plus all accrued and unpaid dividends thereon) and
(b) the Market Price of the Common Stock issuable upon conversion of the Series
A Convertible Preferred.
4B. Redemption Payments. For each Share which is to be redeemed
-------------------
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Share) an amount in cash from
immediately available funds at a price per Share equal the Redemption Price. If
funds of the Corporation which are legally available for redemption of Shares on
any Redemption Date are insufficient to redeem the total number of Shares to be
redeemed on such date, those funds which are legally available shall be used to
redeem the maximum possible number of Shares pro rata among the holders of the
Shares to be redeemed based upon the aggregate Redemption Price payable to each
such holder, subject to the provisions of any outstanding Senior Securities. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of Shares, such funds shall immediately be used to
redeem the balance of the Shares which the Corporation has become obligated to
redeem on any Redemption Date but which it has not redeemed.
4C. Determination of the Number of Each Holder's Shares to be
---------------------------------------------------------
Redeemed. The number of Shares of Series A Convertible Preferred to be redeemed
- --------
from each holder thereof in redemptions hereunder shall be the number of Shares
determined by multiplying the total number of Shares to be redeemed times a
fraction, the numerator of which shall be the total number of Shares then held
by such holder and the denominator of which shall be the total number of Shares
then outstanding.
4D. Dividends After Redemption. No Share shall be entitled to any
--------------------------
dividends accruing after the date on which a redemption consideration of such
Share (including all accrued and unpaid dividends thereon) is paid to the holder
of such Share. On such date, all rights of the holder of such Share shall cease,
and such Share shall no longer be deemed to be issued and outstanding.
4E. Redeemed or Otherwise Acquired Shares. Any Shares which are
-------------------------------------
redeemed or otherwise acquired by the Corporation shall be canceled and retired
to authorized but unissued shares and shall not reissued, sold or transferred.
<PAGE>
Section 5. Voting Rights. The holders of the Series A Convertible
-------------
Preferred shall be entitled to notice of all stockholders meetings in accordance
with the Corporation's bylaws, and after the Shareholder Approval Effective
Date, the holders of the Series A Convertible Preferred shall be entitled to
vote on all matters submitted to the stockholders for a vote (including the
election of directors), such that the holders of the Series A Convertible
Preferred shall vote together with the holders of the Common Stock as a single
class, with each Share of Series A Convertible Preferred being entitled to vote
on an as-if-converted basis based on the number of shares of Conversion Stock
into which such Share of Series A Convertible Preferred is convertible as of the
Original Issue Date. Prior to the Shareholder Approval Effective Date, except as
otherwise required by applicable law, the Series A Convertible Preferred shall
have no voting rights.
Section 6. Conversion.
----------
6A. Conversion Rights and Procedures: Conversion Price.
--------------------------------------------------
(i) At any time and from time to time, any holder of Series A
Convertible Preferred may convert at its sole option all or any portion of the
Series A Convertible Preferred (including any fraction of a Share) held by such
holder into a number of shares of Conversion Stock computed by multiplying the
number of Shares to be converted by $15.00 and dividing the result by the
Conversion Price then in effect.
(ii) Except as otherwise provided herein, each conversion of Series
A Convertible Preferred shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Series A Convertible Preferred to be converted have been surrendered for
conversion at the principal office of the Corporation (the "Conversion Date").
---------------
At the time any such conversion has been effected, the rights of the holder of
the Shares converted as a holder of Series A Convertible Preferred shall cease
and the Person or Persons in whose name or names any certificate or certificates
for shares of Conversion Stock are to be issued upon such conversion shall be
deemed to have become the holder or holders of record of the shares of
Conversion Stock represented thereby.
(iii) The conversion rights of any Share shall terminate on the
Redemption Date for such Share unless the Corporation has failed to pay to the
holder thereof the Redemption Price in accordance with Section 4A.
----------
(iv) Notwithstanding any other provision contained herein, if a
conversion of Series A Convertible Preferred is to be made in connection with a
Change in Ownership, a Fundamental Change or other transaction affecting the
Corporation, the conversion of any Share of Series A Convertible Preferred may,
at the election of the holder thereof, be conditioned upon the consummation of
such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
<PAGE>
(v) As soon as possible after a conversion has been effected (but
in any event within ten business days in the case of subsection (a) below), the
--------------
Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of conversion Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting
holder has specified;
(b) payment in an amount equal to all dividends accrued in
accordance with Section 1 with respect to each Share converted which have
---------
not been paid prior thereto plus the amount payable with respect to
fractional shares of Conversion Stock in accordance with subsection (xi)
---------------
below; and
(c) a certificate representing any Shares of Series A
Convertible Preferred which were represented by the certificate or
certificates delivered to the Corporation in connection with such
conversion but which were not converted.
(vi) The Corporation shall declare the payment of all dividends
payable under subsection (v)(b) above. If the Corporation is not permitted
-----------------
under applicable law to pay any portion of the accrued and unpaid dividends on
the Series A Convertible Preferred being converted, then the Corporation shall
pay such dividends in cash to the converting holder as soon thereafter as funds
of the Corporation are legally available for such payment. At the request of any
such converting holder, the Corporation shall provide such holder with written
evidence of its obligation to such holder.
(vii) Any holders of Series A Convertible Preferred may elect at
their sole discretion to convert the cash dividends payable with respect to such
holder's Series A Convertible Preferred into an additional number of shares of
Conversion Stock determined by dividing the amount of the unpaid dividends to be
applied for such purpose by the Conversion Price then in effect with respect to
such Shares of Series A Convertible Preferred.
(viii) The issuance of certificates for shares of Conversion Stock
upon conversion of Series A Convertible Preferred shall be made without charge
to the holders of such Series A Convertible Preferred for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Conversion Stock. Upon
conversion of each Share of Series A Convertible Preferred, the Corporation
shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all taxes, liens,
charges and encumbrances with respect to the issuance thereof.
(ix) The Corporation shall not close its books against the transfer
of Series A Convertible Preferred or of Conversion Stock issued or issuable upon
conversion of Series A Convertible Preferred in any manner which interferes with
the timely conversion of the Series A Convertible Preferred. The Corporation
shall assist and cooperate with any holder of Shares required to make any
governmental filings or obtain any governmental approval prior to or in
connection with
<PAGE>
any conversion of Shares hereunder (including, without limitation, making any
filings required to be made by the Corporation).
(x) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for the
purpose of issuance upon the conversion of the Series A Convertible Preferred,
such number of shares of Conversion Stock issuable upon the conversion of all
outstanding Series A Convertible Preferred. All shares of Conversion Stock which
are so issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Corporation upon each
such issuance). The Corporation shall not take any action which would cause the
number of authorized but unissued shares of Conversion Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
conversion of the Series A Convertible Preferred.
(xi) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this Section 6A(xi), be delivered upon any
--------------
conversion of the Series A Convertible Preferred, the Corporation, in lieu of
delivering the fractional share therefor, shall pay an amount to the holder
thereof equal to the Market Price of such fractional interest as of the date of
conversion.
6B. Conversion Price.
----------------
(i) The initial Conversion Price of each Share of Series A
Convertible Preferred shall be $4.50. In order to prevent dilution of the
conversion rights granted under this Section 6, the Conversion Price shall be
---------
subject to adjustment from time to time pursuant to this Section 6B.
----------
(ii) If and whenever following the original date of issuance of the
Series A Convertible Preferred the Corporation issues or sells, or in accordance
with Section 6C is deemed to have issued or sold, any share of Common Stock or
----------
any warrants, options or other rights to purchase Common Stock (except as
provided by Section 6B(iii) below) for (x) consideration per share less than the
---------------
Conversion Price in effect immediately prior to such time or (y) consideration
per share less than the Market Price of the Common Stock as of the date of
issuance, then immediately upon such issue or sale or deemed issue or sale the
Conversion Price shall be reduced to the Conversion Price determined by dividing
(a) the sum of (1) the product derived by multiplying the Conversion Price in
effect immediately prior to such issue or sale by the number of shares of Common
Stock Deemed Outstanding immediately prior to such issue or sale, plus (2) the
consideration, if any, received by the Corporation upon such issue or sale, by
(b) the number of shares of Common Stock Deemed Outstanding immediately after
such issue or sale.
(iii) Notwithstanding the foregoing, there shall be no adjustment to
the Conversion Price hereunder with respect to the granting of stock options to
employees, directors, consultants and vendors of the Corporation and its
Subsidiaries or the exercise thereof.
<PAGE>
6C. Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under Section 6B, the following shall
----------
be applicable:
(i) Issuance of Rights or Options. If the Corporation in any manner
-----------------------------
grants or sells any Options and the price per share for which the Common Stock
is issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such Options, is less than
(a) the Conversion Price in effect immediately prior to the time of the granting
or sale of such Options or (b) the Market Price of the Common Stock determined
as of such time, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such Options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such Options for
such price per share. For purposes of this Section 6C(i), the "price per share
-------------
for which Common Stock is issuable" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Corporation as consideration
for the granting or sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise of all such
Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such convertible
Securities and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion Price
shall be made when Convertible Securities are actually issued upon the exercise
of such Options or when Common Stock is actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation in any
----------------------------------
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
(a) the Conversion Price in effect immediately prior to the time of such issue
or sale or (b) the Market Price of the Common Stock determined as of such time,
then the maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to outstanding and to
have been issued and sold by the Corporation at the time of the issuance or sale
of such Convertible Securities for such price per share. For the purposes of
this Section 6C(ii), the "price per share for which Common Stock is issuable"
--------------
shall be determined by dividing (A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Conversion Price shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion Price had been
or are to be made pursuant to other provisions of this Section 6, no further
---------
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
<PAGE>
(iii) Change in Option Price or Conversion Rate. If (a) the purchase
-----------------------------------------
price provided for in any Options, (b) the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities or (c) the
rate at which any Convertible Securities are convertible into or exchangeable
for Common Stock changes at any time, the Conversion Price in effect at the time
of such change shall be immediately adjusted to the Conversion Price which would
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold; provided that if such adjustment would result in an
increase of the Conversion Price then in effect, no such adjustment shall be
made. For purposes of this Section 6C, if the terms of any Option or
----------
Convertible Security which was outstanding as of the date of issuance of the
Series A Convertible Preferred are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and the
Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such change; provided that no
such change shall at any time cause the Conversion Price hereunder to be
increased.
(iv) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor (net of discounts, commissions and
related expenses). If any Common Stock, Options or Convertible Security is
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation shall be the Market Price thereof as of the date of receipt. If any
Common Stock, Options or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Corporation is
the surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or Convertible
Security, as the case may be. The fair value of any consideration other than
cash and securities shall be determined jointly by the Corporation and the
holders of a majority of the outstanding Series A Convertible Preferred. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent appraiser
experienced in valuing such type of consideration jointly selected by the
Corporation and the holders of a majority of the outstanding Series A
Convertible Preferred. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be
borne by the Corporation.
(v) Integrated Transactions. In case any Options are issued in
-----------------------
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
shall be deemed to have been issued for a consideration of $.01.
(vi) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any
<PAGE>
Subsidiary, and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(vii) Record Date. If the Corporation takes a record of the holders
-----------
of Common Stock for the purpose of entitling them (a) the receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (b) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
6E. Limitation on Conversion Prior to Shareholder Approval
------------------------------------------------------
Effective Date. Notwithstanding the provisions of this Section 6, if on the
- -------------- ---------
Conversion Date applicable to any conversion, (A) the Common Stock is then
listed for trading on the NASDAQ National Market, the New York Stock Exchange,
the American Stock Exchange or The NASDAQ SmallCap Market, (B) the Conversion
Price then in effect is such that the aggregate number of shares of Conversion
Stock that would then be issuable upon conversion of all outstanding shares of
Series A Convertible Preferred, together with any shares of Conversion Stock
previously issued upon conversion of Series A Convertible Preferred plus the
Common Stock issuable upon conversion of all outstanding Convertible preferred,
together with any shares of Common Stock previously issued upon conversion of
the Convertible Preferred, would equal or exceed 20% of the number or shares of
Conversion Stock outstanding on the Original Issue Date (the "Issuable
--------
Maximum"), and (C) the Shareholder Approval Effective Date has not occurred,
- -------
then the Corporation shall issue to any holder so requesting conversion of the
Series A Convertible Preferred its pro rata portion of the Issuable Maximum in
the same ratio that the number of shares of Series A Convertible Preferred held
by any such holder bears to all shares of Series A Convertible Preferred then
outstanding; and, with respect to any shares of Conversion Stock that otherwise
would have been issuable to such holder in excess of the Issuable Maximum, the
Company shall, as promptly as possible from time to time after a written request
by the holder, issue shares of Conversion Stock at a Conversion Price equal to
the Per Share Market Value on the Trading Day immediately preceding the date of
issuance of each such Share of Series A Convertible Preferred held by such
holder as would cause the number of shares of Conversion Stock issuable upon
such conversion to exceed the Issuable Maximum.
6F. Subdivision or Combination of Common Stock. If the Corporation
------------------------------------------
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
6G. Reorganization, Reclassification, Consolidation, Merger or
----------------------------------------------------------
Sale. Any recapitalization, reorganization, reclassification, consolidation,
- ----
merger, sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
<PAGE>
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock, is referred to herein as an "Organic Change." Prior to the
--------------
consummation of any Organic Change, the Corporation shall make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Series A Convertible Preferred then outstanding) to insure that the Series A
Convertible Preferred remains outstanding and each of the holders of Series A
Convertible Preferred shall thereafter have the right to acquire and receive, in
lieu of or in addition to (as the case may be) the shares of Conversion Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series A Convertible Preferred, such shares of stock, securities or
assets as such holder would have received in connection with such Organic Change
if such holder had converted its Series A Convertible Preferred immediately
prior to such Organic Change. In each such case, the Corporation shall also make
appropriate provisions (in form and substance satisfactory to the holders of a
majority of the Series A Convertible Preferred then outstanding) to insure that
the provisions of this Section 6 and Sections 7 and 8 shall thereafter be
--------- ---------- -
applicable to the Series A Convertible Preferred. The Corporation shall not
effect any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to the holders of a majority of
the Series A Convertible Preferred then outstanding), the obligation to deliver
to each such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
6H. Certain Events. If any event occurs of the type contemplated by
--------------
the provisions of this Section 6 but not expressly provided for by such
---------
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features but excluding
such rights granted to employees, directors, consultants and vendors), then the
Corporation's Board of Directors shall make an appropriate adjustment in the
Conversion Price then in effect so as to protect the rights of the holders of
Series A Convertible Preferred; provided that no such adjustment shall increase
the Conversion Price as otherwise determined pursuant to this Section 6 or
---------
decrease the number or shares of Conversion Stock issuable upon conversion of
each Share of Series A Convertible Preferred.
6I. Notices.
-------
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series A
Convertible Preferred, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) the Corporation shall give written notice to all holders of
Series A Convertible Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
<PAGE>
(iii) The Corporation shall also give written notice to the holders
of Series A Convertible Preferred at least 20 days prior to the date on which
any Organic Change shall take place.
Section 7. Liquidating Dividends.
---------------------
If the Corporation declares or pays a dividend upon the Common Stock
payable in a form other than in cash from earnings or earned surplus (determined
in accordance with generally accepted accounting principles, consistently
applied) except for a stock dividend payable in shares of Common Stock (a
"Liquidating Dividend"), then the Corporation shall pay to the holders of Series
--------------------
A Convertible Preferred at the time of payment thereof the Liquidating Dividends
which would have been paid on the shares of Conversion Stock had such Series A
Convertible Preferred been converted immediately prior to the date on which a
record is taken for such Liquidating Dividend, or, if no record is taken, the
date as of which the record holders of Common Stock entitled to such dividends
are to be determined.
Section 8. Purchase Rights.
---------------
If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Series A Convertible Preferred shall be
---------------
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Conversion Stock acquirable upon conversion of
such holder's Series A Convertible Preferred immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase rights,
or if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
Section 9. Events of Noncompliance.
-----------------------
9A. Definition. An Event of Noncompliance shall have occurred if:
----------
(i) the Corporation fails to pay on when due the full amount of
dividends then accrued on the Series A Convertible Preferred, whether or not
such payment is legally permissible or is prohibited by any agreement to which
the Corporation is subject;
(ii) the Corporation fails to make any redemption payment with
respect to the Series A Convertible Preferred which it is required to make
hereunder, whether or not such payment is legally permissible or is prohibited
by any agreement to which the Corporation is subject;
(iii) the Corporation breaches or otherwise fails to perform or
observe any other material covenant or agreement set forth herein or in the
Purchase Agreement (including, without limitation Section 5.22 and 5.23 thereof)
------------ ----
or the Original Purchase Agreement;
<PAGE>
(iv) any representation or warranty contained in the Purchase
Agreement or the Original Purchase Agreement or required to be furnished to any
holder of Series A Convertible Preferred pursuant to the Purchase Agreement or
the Original Purchase Agreement, or any information contained in writing
required to be furnished by the Corporation or any Subsidiary to any holder of
Series A Convertible Preferred, is false or misleading in any material respect
on the date made or furnished;
(v) the Corporation or any material Subsidiary makes an assignment
for the benefit of creditors; or an order, judgment or decree is entered
adjudicating the Corporation or any material Subsidiary bankrupt or insolvent;
or any order for relief with respect to the Corporation or any material
Subsidiary is entered under the Federal Bankruptcy Code; or the Corporation or
any material Subsidiary petitions or applies to any tribunal for the appointment
of a custodian, trustee, receiver or liquidator of the Corporation or any
material Subsidiary or of any substantial part of the assets of the Corporation
or any material Subsidiary, or commences any proceeding (other than a proceeding
for the voluntary liquidation and dissolution of a Subsidiary) relating to the
Corporation or any material Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Corporation or any material Subsidiary and
either (a) the Corporation or any such Subsidiary by any act indicates its
approval thereof, consent thereto or acquiescence therein or (b) such petition,
application or proceeding is not dismissed within 60 days;
(vi) a judgment in excess of $150,000 is rendered against the
Corporation or any material Subsidiary and, within 60 days after entry thereof,
such judgment is not discharged or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment is not
discharged;
(vii) the Corporation or any material Subsidiary defaults in the
performance of any obligation or agreement if the effect of such default is to
cause an amount exceeding $50,000 to become due prior to its stated maturity or
to permit the holder or holders of any obligation to cause an amount exceeding
$50,000 to become due prior to its stated maturity;
(viii) the Shareholder Approval Effective Date does not occur for any
reason on or prior to February 28, 2000; or
(ix) if all outstanding shares of Convertible Preferred have not be
reclassified into Series A Convertible Preferred on or before October 15, 1999
(subsections 9A (viii) and (ix) are each referred to as a "Special Event of
----------------
Noncompliance").
- -------------
9B. Consequences of Events of Noncompliance.
---------------------------------------
(i) Immediately upon the occurrence of an Event of Noncompliance
(including, without limitation, a Special Event of Noncompliance) has occurred,
and for 90 days thereafter that such Event of Noncompliance is continuing, the
dividend rate on the Series A Convertible Preferred
<PAGE>
shall increase immediately by an increment of one percentage point. Thereafter,
until such time as no Event of Noncompliance exists, the dividend rate shall
increase automatically at the end of each succeeding 90-day period by an
additional increment of one percentage points up the maximum rate permitted by
applicable law; provided that in no event shall the dividend rate be increased
pursuant to this sentence by more than five percentage points if such Event of
Noncompliance is not curable under any circumstances. Any increase of the
dividend rate resulting from the operation of this subparagraph shall terminate
as of the close of business on the date on which no Event of Noncompliance
exists and the dividend rate shall return to the rate as determined according to
Section 1, subject to subsequent increases pursuant to this Section 9B.
- --------- ----------
(ii) If a Special Event of Noncompliance has occurred, the holder or
holders of a majority of the Series A Convertible Preferred then outstanding may
demand (by written notice delivered to the Corporation) immediate redemption of
all or any portion of the Series A Convertible Preferred then outstanding at a
price per Share equal to the greater of (a) the Liquidation Value thereof (plus
all accrued and unpaid dividends thereon) and (b) the Market Price of the
Conversion Stock issuable upon exercise of the Series A Convertible Preferred.
The Corporation shall redeem all Series A Convertible Preferred as to which
rights under this paragraph have been exercised within 15 days after receipt of
the initial demand for redemption.
(iii) If any Event of Noncompliance exists, each holder of Series A
Convertible Preferred shall also have any other rights which such holder is
entitled to under any contract or agreement at any time and any other rights
which such holder may have pursuant to applicable law.
Section 10. Registration of Transfer.
------------------------
The Corporation shall keep at its principal office a register for the
registration of Series A Convertible Preferred. Upon the surrender of any
certificate representing Series A Convertible Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of Shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series A Convertible Preferred represented by such new
certificate from the date to which dividends have been fully paid on such Series
A Convertible Preferred represented by the surrendered certificate.
Section 11. Replacement.
-----------
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing Shares
of Series A Convertible Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement
<PAGE>
shall be satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the number
of Shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Series A Convertible Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 12. Definitions.
-----------
"Change in Ownership" means any sale, transfer or issuance or series of
-------------------
sales, transfers and/or issuances of Common Stock by the Corporation or any
holders thereof which results in any Person or group of Persons (as the term
"group" is used under the Securities Exchange Act of 1934), other than the
holders of Common stock and the Series A Convertible Preferred as of the date of
the Purchase Agreement, owning more than 50% of the Common Stock outstanding at
the time of such sale, transfer or issuance or series of sales, transfers and/or
issuances.
"Common Stock" means, collectively, the Corporation's Common Stock, par
------------
value $0.005, and any capital stock, other than preferred stock of the
Corporation, of any class of the Corporation hereafter authorized which is not
limited to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon any liquidation, dissolution or winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the number of
-------------------------------
shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock deemed to be outstanding pursuant to Sections 6C(i) and
--------------
6C(ii) whether or not the Options or Convertible Securities are actually
- ------
exercisable at such time, but excluding any shares of Common Stock issuable upon
conversion of the Series A Convertible Preferred.
"Conversion Stock" means shares of the Corporation's Common Stock; provided
----------------
that if there is a change such that the securities issuable upon conversion of
the Series A Convertible Preferred are issued by an entity other than the
Corporation or there is a change in the type or class of securities so issuable,
then the term "Conversion Stock" shall mean one share of the security issuable
upon conversion of the Series A Convertible Preferred if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
"Convertible Securities" means any stock or securities directly or
----------------------
indirectly convertible into or exchangeable for Common Stock other than the
Series A Convertible Preferred.
"Fundamental Change" means (a) any sale or transfer of more than 50% of the
------------------
assets of the Corporation and its Subsidiaries on a consolidated basis (measured
either by book value in accordance with generally accepted accounting principles
consistently applied or by fair market value determined in the reasonable good
faith judgment of the Corporation's Board of Directors) in any transaction or
series of transactions (other than sales in the ordinary course of business) and
<PAGE>
(b) any merger or consolidation to which the Corporation is a party, except for
a merger in which the Corporation is the surviving corporation, the terms of the
Series A Convertible Preferred are not changed and the Series A Convertible
Preferred is not exchanged for cash, securities or other property, and after
giving effect to such merger, the holders of the Corporation's outstanding
capital stock possessing a majority of the voting power (under ordinary
circumstances) to elect a majority of the Corporation's Board of Directors
immediately prior to the merger shall continue to own the Corporation's
outstanding capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Corporation's Board of Directors.
"Junior Securities" means any capital stock or other equity securities of
-----------------
the Corporation, except for the Series A Convertible Preferred and any
outstanding Senior Securities.
"Liquidation Value" of any Share as of an particular date shall be equal to
-----------------
$15.00, as adjusted for stock splits, stock dividends, recapitalizations and
other similar events.
"Market Price" of any security means the average of the closing prices of
------------
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of 30 days ending on the Trading Day
prior to the day as of which "Market Price" is being determined and the 30
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the holders of a majority of the
Series A Convertible Preferred. If such parties are unable to reach agreement
within a reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Corporation and the holders of a majority of the Series A Convertible Preferred.
The determination of such appraiser shall be final and binding upon the parties,
and the Corporation shall pay the fees and expenses of such appraiser.
"Options" means any rights, warrants or options to subscribe for or
-------
purchase Common Stock or Convertible Securities.
"Original Issue Date" shall mean the date of the first issuance of any
-------------------
shares of the Series A Convertible Preferred regardless of the number of
transfers of any particular shares of Series A Convertible Preferred and
regardless of the number of certificates which may be issued to evidence such
Series A Convertible Preferred.
"Original Purchase Agreement" means that certain purchase agreement dated
---------------------------
as of July 23, 1999 by and between the Company and U-C Holdings, L.L.C., a
Delaware limited liability company, as such agreement may from time to time be
amended in accordance with its terms.
<PAGE>
"Purchase Agreement" means that certain purchase agreement dated as of
------------------
August 31, 1999 by and between the Company and U-C Holdings, L.L.C., a Delaware
limited liability company, as such agreement may from time to time be amended in
accordance with its terms.
"Per Share Market Value" means on any particular date (a) the closing bid
----------------------
price per share of the Conversion Stock on such date on The NASDAQ SmallCap
Market, the NASDAQ National Market or other registered national stock exchange
on which the Conversion Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation system on
the date nearest preceding such date, or (b) if the Conversion Stock is not
listed then on The NASDAQ SmallCap Market, the NASDAQ National Market or any
registered national stock exchange, the closing bid price for a share of
Conversion Stock in the over-the-counter market, as reported by NASDAQ or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Conversion Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the holder.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, a limited liability, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"Redemption Date" as to any Share means the applicable date specified
---------------
herein; provided that no such date shall be a Redemption Date unless the
redemption consideration determined in accordance with Section 4A is actually
----------
paid in full on such date, and if not so paid in full, the Redemption Date shall
be the date on which such amount is fully paid.
"Senior Securities" means the 309,998 shares of Convertible Preferred Stock
-----------------
of the Company, $.001 par value (the "Convertible Preferred"), or such lesser
---------------------
amount as may be outstanding at any time, plus any other shares or preferred
stock hereafter authorized which have been approved by the holders of a majority
of the outstanding shares of Convertible Preferred.
"Shareholder Approval Effective Date" means either (a) the date of the
-----------------------------------
approval by a majority of the total votes cast on the proposal, in person or by
proxy, at a meeting of the shareholders of the Corporation held in accordance
with the Corporation's Certificate of Incorporation and bylaws, of the issuance
by the Corporation of shares of Conversion Stock exceeding the Issuable Maximum
as a consequence of the conversion of Series A convertible Preferred into
Conversion Stock at a price less than the greater of the book or market value on
the Original Issue Date as and to the extent required pursuant to Rule 4460(i)
of the NASDAQ Stock Market, Inc.'s Marketplace Rules (or any successor or
replacement provision thereof) ("Shareholder Approval") or (b) 20 business days
--------------------
after the mailing of an information statement on Schedule 14C under the Exchange
Act reflecting such Shareholder Approval having been obtained by written consent
in accordance with the Corporation's Certificate of Incorporation, bylaws and
applicable law.
<PAGE>
"Subsidiary" means, with respect to any Person, any corporation, limited
----------
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.
"Trading Day" means (a) a day on which the Conversion Stock is traded on
-----------
The NASDAQ SmallCap Market, the NASDAQ National Market or other registered
national stock exchange on which the Conversion Stock has been listed, or (b) if
the Conversion Stock is not listed on The NASDAQ SmallCap Market, the NASDAQ
National Market or any registered national stock exchange, a day on which the
Conversion Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (c) if the Conversion Stock is not quoted on the OTC
Bulletin Board, a day on which the Conversion Stock is quoted in the over-the-
counter market as reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding its functions of reporting policies).
Section 13. Amendment and Waiver.
--------------------
No amendment, modification or waiver shall be binding or effective with
respect to any provision of Sections 1 to 14 without the prior written consent
---------- --
of the holders of a majority of the Series A Convertible Preferred outstanding
at the time such action is taken; provided further that no change in the terms
contained herein may be accomplished by merger or consolidation of the
Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of the holders of the majority of the Series
A Convertible Preferred then outstanding.
Section 14. Notices.
-------
Except as otherwise expressly provided hereunder, all notices referred
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested and postage prepaid, or by reputable overnight
courier service, charges prepaid, and shall be deemed to have been given when so
mailed or sent (i) to the Corporation, at its principal executive offices and
(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
<PAGE>
IN WITNESS WHEREOF, College Television Network, Inc., has caused this
Second Certificate to be executed by its duly authorized representative as of
August 30, 1999.
COLLEGE TELEVISION NETWORK, INC.,
a Delaware corporation
By: /s/ Martin Grant
----------------------------------
Martin Grant, President
<PAGE>
PURCHASE AGREEMENT
DATED AS OF
AUGUST 31 1999
BY AND BETWEEN
COLLEGE TELEVISION NETWORK, INC.
AND
U-C HOLDINGS, L.L.C.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS......................................................................1
ARTICLE II INITIAL CLOSING.................................................................9
Section 2.1 Authorization of Initial Purchased Securities................................9
---------------------------------------------
Section 2.2 Purchase of Initial Purchased Securities.....................................9
----------------------------------------
Section 2.3 Initial Closing..............................................................9
---------------
ARTICLE III SUBSEQUENT CLOSINGS............................................................9
Section 3.1 Authorization of Additional Purchased Securities.............................9
------------------------------------------------
Section 3.2 Purchase of Additional Purchased Securities..................................9
-------------------------------------------
Section 3.3 Subsequent Closings.........................................................10
-------------------
ARTICLE IV PURCHASER'S REPRESENTATIONS....................................................11
Section 4.1 Investment Intention........................................................11
--------------------
Section 4.2 Accredited Investor.........................................................11
-------------------
Section 4.3 Corporate Existence.........................................................11
-------------------
Section 4.4 Corporate Power: Authorization: Enforceable Obligations.....................11
-------------------------------------------------------
ARTICLE V COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS.............................12
Section 5.1 Capitalization..............................................................12
--------------
Section 5.2 Authorization and Issuance of the Initial Purchased Securities and the
----------------------------------------------------------------------
Additional Purchased Securities.........................................13
-------------------------------
Section 5.3 Securities Laws.............................................................13
---------------
Section 5.4 Corporate Existence: Compliance with Law....................................13
----------------------------------------
Section 5.5 Subsidiaries................................................................14
------------
Section 5.6 Corporate Power: Authorization: Enforceable Obligations.....................14
-------------------------------------------------------
Section 5.7 Financial Statements........................................................14
--------------------
Section 5.8 Ownership of Property.......................................................15
---------------------
Section 5.9 Material Contracts: Indebtedness............................................15
--------------------------------
Section 5.10 Environmental Protection....................................................16
------------------------
Section 5.11 Labor Matters...............................................................17
-------------
Section 5.12 Taxes.......................................................................17
-----
Section 5.13 No Litigation...............................................................18
-------------
Section 5.14 Brokers.....................................................................18
-------
Section 5.15 Management and Labor Agreements.............................................18
-------------------------------
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 5.16 Patents, Trademarks, Copyrights and Licenses................................18
--------------------------------------------
Section 5.17 No Material Adverse Effect..................................................19
--------------------------
Section 5.18 ERISA.......................................................................19
-----
Section 5.19 Registration Rights.........................................................21
-------------------
Section 5.20 Required Filings............................................................21
----------------
Section 5.21 Full Disclosure.............................................................21
---------------
Section 5.22 Schedule 14C:...............................................................21
-------------
Section 5.23 Schedule 14C: Reclassification..............................................21
------------------------------
Section 5.24 Credit Agreement............................................................22
----------------
Section 5.25 Use of Proceeds.............................................................22
---------------
ARTICLE VI CONDITIONS PRECEDENT TO INITIAL CLOSING........................................22
Section 6.1 Conditions Precedent........................................................22
--------------------
ARTICLE VII CONDITIONS PRECEDENT TO SUBSEQUENT CLOSING....................................24
Section 7.1 Conditions Precedent........................................................24
--------------------
ARTICLE VIII SECURITIES LAW MATTERS.......................................................27
Section 8.1 Legends.....................................................................27
-------
Section 8.2 Transfer of Restricted Securities...........................................27
---------------------------------
ARTICLE IX EXPENSES.......................................................................28
ARTICLE X LIMITATION ON CLAIMS OF THE PURCHASER...........................................28
Section 10.1 Limitation..................................................................28
----------
ARTICLE XI MISCELLANEOUS..................................................................29
Section 11.1 Notices.....................................................................29
-------
Section 11.2 Binding Effect: Benefits....................................................30
------------------------
Section 11.3 Amendment...................................................................30
---------
Section 11.4 Successors and Assigns: Assignability.......................................30
-------------------------------------
Section 11.5 Remedies....................................................................31
--------
Section 11.6 Section and Other Headings..................................................31
--------------------------
Section 11.7 Severability................................................................31
------------
Section 11.8 Entire Agreement............................................................31
----------------
Section 11.9 Counterparts................................................................31
------------
Section 11.10 Publicity...................................................................31
---------
Section 11.11 Governing Law...............................................................31
-------------
Section 11.12 No Strict Construction......................................................31
----------------------
</TABLE>
-ii-
<PAGE>
SCHEDULES AND EXHIBITS
----------------------
Schedule 5.1 Stock, Preferred Stock, Options and Warrants
Schedule 5.4 Foreign Qualification
Schedule 5.5 Subsidiaries
Schedule 5.7 Financial Statements; Other Obligations
Schedule 5.8 Ownership of Property
Schedule 5.9 Material Contracts
Schedule 5.11 Labor Matters
Schedule 5.13 Litigation
Schedule 5.15 Management and Labor Agreements
Schedule 5.19 Registration Rights Schedule
Exhibit A Second Certificate of Designation
Exhibit B Opinion of Company Counsel
Exhibit C Capitalization Chart
-iii-
<PAGE>
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT, dated as of August 31, 1999, by and
between College Television Network, Inc., a Delaware corporation having an
office at 5784 Lake Forrest Drive, Suite 275, Atlanta, GA 30328 (the "Company"),
-------
and U-C Holdings, L.L.C., a Delaware limited liability company (the
"Purchaser").
---------
On the terms and subject to the conditions set forth herein,
the Company has agreed to issue and sell to the Purchaser, and the Purchaser has
agreed to purchase from the Company, 1,000,000 shares of the Company's series A
convertible preferred stock, $.001 par value per share ("Series A Convertible
--------------------
Preferred") for an aggregate purchase price of $15,000,000.
- ---------
On the terms and subject to the conditions set forth herein,
upon the written notice from the Company pursuant to Section 3.3, Purchaser
-----------
agrees to purchase, and the Company agrees to issue and sell to the Purchaser,
from time to time after the date of this Agreement, additional shares of Series
A Convertible Preferred for an aggregate purchase price of up to $10,000,000
less the Guaranty Amount, as defined below.
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
ARTICLE I
DEFINITIONS
"Additional Purchased Securities" shall mean shares of Series
-------------------------------
A Convertible Preferred purchased by the Purchaser at each Subsequent Closing
from time to time pursuant to Section 3.2 and Section 3.3.
----------- ------------
"Affiliated Group" shall mean an affiliated group as defined
----------------
in Section 1504 of the IRC (or any analogous combined, consolidated or unitary
group defined under state, local or foreign income tax law) of which Company is
or has been a member.
"Annual Report" shall mean the annual report of the Company on
-------------
Form 10-KSB for the fiscal year ended December 31, 1998, which has been filed
with the SEC.
"Board" shall mean the board of directors of the Company.
-----
"Business Day" shall mean any day that is not a Saturday, a
------------
Sunday or a day on which banks are required or permitted to be closed in the
State of Illinois or the State of Georgia.
"Capitalization Chart" shall have the meaning set forth in
--------------------
Section 5.1.
- -----------
<PAGE>
"Certificate of Incorporation" shall mean the Restated
----------------------------
Certificate of Incorporation of the Company filed on November 10, 1997 with the
Secretary of State of the State of Delaware, and amended by the Articles of
Amendment to the Restated Certificate of Incorporation, filed on May 29, 1998
with the Secretary of State of the State of Delaware, and as modified by the
Original Certificate of Designation, filed on July 22, 1999, and by the Second
Certificate of Designation, filed on or about the date hereof, and as the same
may be further amended from time to time.
"Charges" shall mean (A) all federal, state, county, city,
-------
municipal, local, foreign or other governmental (including, without limitation,
PBGC taxes at the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Company's employees, payroll,
income or gross receipts, (ii) the Company's ownership or use of any of its
assets, or (iii) any other aspect of the Company's business, or (B) any
liability of the Company for the payment of any amounts of the type described in
clause (A) arising as a result of being (or ceasing to be) a member of any
Affiliated Group (or being included (or required to be included) in any tax
return relating thereto).
"Class C Warrant" shall mean the Company's Class C Warrants
---------------
listed on the Capitalization Chart attached hereto as Exhibit C.
----------
"Closing" shall mean each of the Initial Closing and each
-------
Subsequent Closing, and "Closing Date" shall mean each of the Initial Closing
------------
Date and each Subsequent Closing Date.
"COBRA" shall have the meaning set forth in Section 5.19(l)
----- ---------------
"Common Stock" shall mean the common stock of the Company with
------------
par value $.005 per share.
"Controlled Group" shall mean all members of a controlled
----------------
group of corporations and all members of a controlled group of trades or
businesses (whether or not incorporated) under common control which, together
with the Company, are treated as a single employer under Section 414 of the Code
or Section 4001 of ERISA.
"Convertible Preferred" shall mean the convertible preferred
---------------------
stock, par value $.001 per share, of the Company having the rights and
preferences set forth in the Original Certificate of Designation.
"Environmental Laws" shall mean all federal, state and local
------------------
laws, statutes, ordinances and regulations, now or hereafter in effect, and in
each case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable Real Estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation).
-2-
<PAGE>
Environmental Laws include but are not limited to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. ss. 9601 et seq.) ("CERCLA"); the Hazardous Material Transportation Act,
------
as amended (49 U.S.C. ss. 1801 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. ss. 136 et seq. ); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. ss. 6901 et seq.) ("RCRA");
----
the Toxic Substance Control Act, as amended (15 U. S.C. ss. 2601 et seq.); the
Clean Air Act, as amended (42 U. S.C. ss. 740 et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.); the Occupational
Safety and Health Act, as amended (29 U.S.C. ss. 651 et sec.) ("OSHA"); and the
----
Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.), and any and
all regulations promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership notification or
approval statutes.
"Environmental Liabilities and Costs" shall mean all
-----------------------------------
liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim,
suit, action or demand by any Person, whether based in contract, tort, implied
or express warranty, strict liability, criminal or civil statute or common law
(including, without limitation, any thereof arising under any Environmental Law,
permit, order or agreement with any Governmental Authority) and which relate to
any health or safety condition regulated under any Environmental Law or in
connection with any other environmental matter or Spill or the presence of a
hazardous substance or threatened Spill of any Hazardous Substance.
"ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to the Company, any
---------------
trade or business (whether or not incorporated) under common control with the
Company and which, together with the Company, are treated as a single employer
within the meaning of Section 414(b), (c), (m) or (o) of the IRC, excluding the
Purchaser and each other Person which would not be an ERISA Affiliate if the
Purchaser did not own any issued and outstanding shares of Stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended, and all rules and regulations promulgated thereunder.
"Financials" shall mean the financial statements referred to
----------
in Section 5.7 hereof.
-----------
"Fiscal Year" shall mean the twelve month period ending
-----------
December 31. Subsequent changes of the fiscal year of the Company shall not
change the term "Fiscal Year," unless the Purchaser shall consent in writing to
such change.
-3-
<PAGE>
"GAAP" shall mean generally accepted accounting principles in
----
the United States of America as in effect from time to time.
"Governmental Authority" shall mean any nation or government,
----------------------
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranty Amount" shall mean at any given time the sum of (i)
---------------
the maximum amount which could be payable at such time by the Purchaser pursuant
to the Guaranty, plus (ii) the aggregate amount of payments actually made by the
Purchaser from time to time pursuant to the Guaranty plus (iii) the maximum
amount which could be payable at such time and by Willis Stein & Partners II,
L.P., a Delaware limited partnership (the "Fund"), and by Willis Stein &
----
Partners Dutch, L.P., a Delaware limited partnership ("Dutch" and together with
-----
the Fund, the "Funds"), pursuant to the guaranty dated as of August 31, 1999, by
-----
each of the Fund and Dutch in favor of Canadian Imperial Bank of Commerce
("CIBC") and/or its affiliates or co-lenders (the "Fund Guaranty"), plus
---- -------------
(without duplication for subparagraph (i) above) (iv) the aggregate amount of
any payments actually made by each of the Fund and Dutch from time to time
pursuant to the Fund Guaranty.
"Guaranteed Indebtedness" shall mean, as to any Person, any
-----------------------
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
------------------- -------
obligor") in any manner including, without limitation, any obligation or
- -------
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Guaranty" means that certain Guaranty, dated as of August 31,
--------
1999, by the Purchaser in favor of CIBC and/or its affiliates or co-lenders.
"Hazardous Substances" shall have the meaning set forth in
--------------------
Section 5.10(a) hereof.
- --------------
"Indebtedness" of any Person shall mean (i) all indebtedness
------------
of such Person for borrowed money or for the deferred purchase price of property
or services (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers
acceptances, whether or not matured, but not including obligations to trade
creditors incurred in the ordinary course of business), (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are
-4-
<PAGE>
limited to repossession or sale of such property), (iv) all capital lease
obligations required to be capitalized in accordance with GAAP, (v) all
Guaranteed Indebtedness, (vi) all Indebtedness referred to in clause (i), (ii),
(iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness and (vii) all liabilities
under Title IV of ERISA.
"Initial Closing" shall have the meaning set forth in Section
--------------- -------
2.3 hereof and "Initial Closing Date" shall have the meaning set forth in
- --- --------------------
Section 2.3 hereof.
- -----------
"Initial Purchased Securities" shall mean the Series A
----------------------------
Convertible Preferred purchased by the Purchaser at the Initial Closing pursuant
to Section 2.2 of this Agreement.
-----------
"IRC" shall mean the Internal Revenue Code of 1986, as
---
amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any
---
successor thereto.
"Lien" shall mean any mortgage or deed of trust, pledge,
----
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority, or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Material Adverse Effect" shall mean material adverse effect
-----------------------
on the business, assets, operations, prospects or financial or other condition
of the Company.
"Material Contracts" shall mean (i) all of the Company's
------------------
contracts, agreements, leases or other instruments to which the Company is a
party or by which the Company or its properties are bound, which in the
Company's good faith judgment are required to be disclosed as exhibits to the
Company's annual report on Form 10-KSB, (ii) all of the Company's loan
agreements, bank lines of credit agreements, indentures, mortgages, deeds of
trust, pledge and security agreements, factoring agreements, conditional sales
contracts, letters of credit or other debt instruments, (iii) all material
operating or capital leases for equipment to which the Company is a party, (iv)
all non-competition and similar agreements other than as contained in employment
agreements to which the Company is a party, (v) all contracts for the employment
of any officer or employee, (vi) all consulting agreements, (vii) any guarantees
by the Company, (viii) all distributor and sales agency agreements, (ix) all
other material contracts not made in the ordinary course of business, and (x)
all material contracts relating to the operation of the Company or, the
production of or programming for the Company or related to the technology
utilized by the Company.
-5-
<PAGE>
"MPM" shall mean Armed Forces Communications, Inc., a New York
---
corporation doing business as Market Place Media.
"Multiemployer Plan" shall mean a "multiemployer plan" as
------------------
defined in Section 4001 (a)(3) of ERISA, and to which Company or any ERISA
Affiliate is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Options" shall mean the options listed on the Capitalization
-------
Chart attached hereto as Exhibit C.
---------
"Original Certificate of Designation" shall mean the
-----------------------------------
Certificate of Designation filed with the Secretary of State of the State of
Delaware on July 22, 1999 which contains the terms and preferences of the
Company's Convertible Preferred.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
----
any successor thereto.
"Pension Plan" shall mean all "employee benefit plans", as
------------
defined in Section 3(3) of ERISA, and any other employee benefit arrangements or
payroll practices, including, without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, consulting or other
compensation agreements, retirement, deferred compensation, bonus, stock
purchase, hospitalization, medical insurance, life insurance and scholarship
programs (the "Plans") maintained by the Company or to which the Company
-----
contributed, contributes or is obligated to contribute thereunder, and (ii) all
"employee pension plans", as defined in Section 3(2) of ERISA, maintained by the
Company or any of its ERISA Affiliates to which the Company or any of its ERISA
Affiliates contributed, contributes or is obligated to contribute thereunder.
"Permitted Indebtedness" shall mean, with respect to the
----------------------
Company, (i) taxes or assessments or other governmental charges or levies,
either not yet due and payable or to the extent that nonpayment thereof is
permitted by the terms of this Agreement; (ii) obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) bids, tenders, contracts (other than contracts for
the payment of money) or leases to which the Company is a party as lessee made
in the ordinary course of business, (iv) public or statutory obligations of the
Company; (v) all deferred taxes and (vi) all unfunded pension fund and other
employee benefit plan obligations and liabilities but only to the extent
permitted to remain unfunded under applicable law.
"Person" shall mean any individual, sole proprietorship,
------
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
-6-
<PAGE>
"Private Placement Warrants" shall mean the Company's private
--------------------------
placement warrants listed on the Capitalization Chart attached hereto as Exhibit
C. -------
- -
"Registration Rights Agreement" shall mean the Registration
-----------------------------
Rights Agreement between Company and the Purchaser, dated as of April 25, 1997,
as such agreement may be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof.
"Restricted Securities" shall mean (i) the Initial Purchased
---------------------
Securities and the Additional Purchased Securities issued hereunder, and (ii)
any securities issued and exchanged with respect to the securities referred to
in clause (i) by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, reclassification, merger, consolidation
or other reorganization. As to any particular Restricted Securities, such
securities shall cease to be Restricted Securities when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (b) been distributed to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act or become eligible for
sale pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act or (c) been otherwise transferred and new certificates for them
not bearing the Securities Act legend set forth in Section 8.1 have been
-----------
delivered by Company in accordance with Section 8.2. Whenever any particular
-----------
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from Company, without expense, new securities of like tenor
nor bearing a Securities Act legend of the character set forth in Section 8.1.
-----------
"SEC" shall mean the U.S. Securities and Exchange Commission,
---
or any successor thereto.
"Second Certificate of Designation" means the Second
---------------------------------
Certificate of Designation of the Company containing the terms of the Company's
Series A Convertible Preferred, having the rights and preferences set forth on
Exhibit A attached hereto.
- ---------
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, and all rules and regulations promulgated thereunder.
"Series A Convertible Preferred" shall mean the Series A
------------------------------
Convertible Preferred stock of the Company defined in the recitals and having
the rights and preferences set forth in the Second Certificate of Designation.
"Shareholder Approval" shall have the meaning as such term is
--------------------
defined in the Second Certificate of Designation.
"Spill" shall have the meaning set forth in Section 5.10.
----- ------------
-7-
<PAGE>
"Stock" shall mean all shares, options, warrants, general or
-----
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other equity security (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the SEC under the Exchange
Act).
"Subsequent Closing" shall have the meaning set forth in
------------------
Section 3.3 hereof and "Subsequent Closing Date" shall have the meaning set
- ----------- -----------------------
forth in Section 3.3 hereof.
-----------
"Subsidiary" shall mean, with respect to any Person, (a) any
----------
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership or other entity in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.
"Transaction Documents" shall mean this Agreement, the
---------------------
Registration Rights Agreement, the Second Certificate of Designation, the
Guaranty, the Fund Guaranty, the CIBC Credit Agreement (defined in Section 5.24)
------------
and all certificates and other documents related to the transactions
contemplated hereby and thereby.
"Warrants" shall mean the Company's Private Placement Warrants
--------
and Class C Warrants.
References to this "Agreement" shall mean this Purchase and
---------
Recapitalization Agreement, including all amendments, modifications and
supplements and any exhibits or schedule to any of the foregoing, and shall
refer to the Agreement as the same may be in effect at the time such reference
becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement, as a whole, including the exhibits and
schedules hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term
-8-
<PAGE>
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
ARTICLE II
INITIAL CLOSING
Section 2.1 Authorization of Initial Purchased Securities. At
---------------------------------------------
or prior to the Initial Closing, the Company shall have duly authorized the
issuance and sale of the Initial Purchased Securities.
Section 2.2 Purchase of Initial Purchased Securities. Subject
----------------------------------------
to the terms and conditions set forth in this Agreement, on the Initial Closing
Date (as defined below), the Purchaser will purchase from the Company, and the
Company will sell to the Purchaser, an aggregate of 1,000,000 shares of Series A
Convertible Preferred for a purchase price of $15 per share (the "Per Share
---------
Price") for an aggregate purchase price of $15,000,000 (the "Initial Purchase
- ----- ----------------
Price"). The Initial Purchase Price will be payable in full by the Purchaser on
- -----
the Initial Closing Date in cash by wire transfer of immediately available funds
to an account designated by the Company.
Section 2.3 Initial Closing. The closing of the purchase and
---------------
sale of the Initial Purchased Securities (the "Initial Closing") shall take
---------------
place simultaneously with the execution of this Agreement (the "Initial Closing
---------------
Date") at the New York office of Kirkland & Ellis located at 153 East 53rd
- ----
Street, New York, New York, or such other place as shall be mutually agreed to
by the parties hereto. On the Initial Closing Date, the Company will deliver to
the Purchaser a certificate representing the shares of Series A Convertible
Preferred representing the Initial Purchased Securities to be purchased by the
Purchaser registered in the name of the Purchaser against delivery by the
Purchaser of the Initial Purchase Price by payment of cash by wire transfer of
immediately available funds to the Company in accordance with Section 2.2
-----------
hereof.
ARTICLE III
SUBSEQUENT CLOSINGS
Section 3.1 Authorization of Additional Purchased Securities.
------------------------------------------------
At or prior to the first Subsequent Closing, the Company shall duly authorize
the issuance and sale of the Additional Purchased Securities to be purchased at
such Subsequent Closing.
Section 3.2 Purchase of Additional Purchased Securities.
-------------------------------------------
Subject to the terms and conditions set forth in this Agreement, from time to
time after the Initial Closing and until:
(a) the first anniversary of the Initial Closing, with
respect to the purchase of Additional Purchased Securities upon the Company's
written notice in accordance with Section 3.3(a) below, the Purchaser may
-----------
purchase from the Company at any Subsequent Closing Additional Purchased
Securities, up to a cumulative total amount (assuming a Guaranty Amount
-9-
<PAGE>
equal to zero/1/) of 666,667 shares of Series A Convertible Preferred, at price
per share equal to the Per Share Price for an aggregate purchase price of up to
$10,000,000 less the Guaranty Amount; and
(b) so long as both the Guaranty and the Fund Guaranty
remain outstanding, or the Purchaser and the Funds have any outstanding
obligations thereunder, the Purchaser shall have the right to purchase from the
Company at any Subsequent Closing, in accordance with Section 3.3(b) below,
-------------
Additional Purchased Securities up to an aggregate number of shares equal to the
quotient obtained by dividing the initial Guaranty Amount by the Per Share
Price, at a price per share equal to the Per Share Price for an aggregate
purchase price of up to the initial Guaranty Amount.
With respect to either Section 3.2(a) and Section 3.2(b) above, the aggregate
-------------- --------------
purchase price for the Additional Purchased Securities purchased at any
Subsequent Closing shall be equal to the Per Share Price multiplied by the
number of shares of Series A Convertible Preferred purchased at such Subsequent
Closing.
Section 3.3 Subsequent Closings. Subject to the terms and
-------------------
conditions herein (including the satisfaction of the conditions set forth in
Article VII), upon either (a) the Company's written notice specifying (i) the
- -----------
proposed Subsequent Closing Date (which shall not be less than 20 nor more than
60 Business Days after delivery of such notice), (ii) the amount of Additional
Purchased Securities to be purchased and (iii) such other information as may be
requested by the Purchaser or (b) a payment by the Purchaser with respect to the
Guaranty, or a payment by either the Fund or Dutch with respect to the Fund
Guaranty, in each case whether as a result of a call by CIBC or a voluntary
investment which has the effect of reducing the amount outstanding under the
Guaranty, which the Purchaser and the Funds may elect to make such payment by
the purchase of a number of Additional Purchased Securities equal to the
quotient obtained by dividing the amount of such payment by the Per Share Price
for an aggregate purchase price equal to the amount of such payment then the
closing of each such purchase and sale of the Additional Purchased Securities
(each, a "Subsequent Closing") shall take place on such proposed Subsequent
------------------
Closing Date, or other date mutually agreed to by the parties hereto (the
"Subsequent Closing Date"), at the offices of Kirkland & Ellis at 200 East
-----------------------
Randolph Street, Chicago, Illinois or at 153 East 53rd Street, New York, New
York, or such other place as shall be mutually agreed to by the parties hereto.
On each Subsequent Closing Date, the Company will deliver to the Purchaser a
certificate representing the number of shares of Series A Convertible Preferred
purchased at such Subsequent Closing purchased at such Subsequent Closing which
together represent the Additional Purchased Securities purchased by the
Purchaser at such Subsequent Closing to be registered in the name of the
Purchaser against delivery by the Purchaser of the purchase price therefor by
payment of cash to the Company in accordance with Section 3.2.
------------
- --------------------------
/1/ As of the date hereof, the Guaranty Amount is equal to $6,000,000 and the
Purchaser may purchase up to an additional amount of 266.667 ($10 million less
$6 million divided by $15) shares of Series A Convertible Preferred.
-10-
<PAGE>
ARTICLE IV
PURCHASER'S REPRESENTATIONS
As of the Initial Closing and as of each Subsequent Closing,
the Purchaser makes the following representations and warranties to the Company,
each and all of which shall survive the execution and delivery of this Agreement
and each Closing hereunder:
Section 4.1 Investment Intention. The Purchaser is purchasing
--------------------
the Initial Purchased Securities and the Additional Purchased Securities for its
own account, for investment purposes and not with a view to the distribution
thereof. The Purchaser will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any of the Initial Purchased
Securities or the Additional Purchased Securities (or solicit any offers to buy,
purchase, or otherwise acquire any of the Initial Purchased Securities or the
Additional Purchased Securities ), except in compliance with the Securities Act.
Section 4.2 Accredited Investor. The Purchaser is an
-------------------
"accredited investor" (as that term is defined in Rule 501 of Regulation D under
the Securities Act) and by reason of its business and financial experience, it
has such knowledge, sophistication and experience in business and financial
matters as to be capable of evaluating the merits and risks of the prospective
investment, is able to bear the economic risk of such investment and it is able
to afford a complete loss of such investment.
Section 4.3 Corporate Existence. The Purchaser is a limited
-------------------
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation.
Section 4.4 Corporate Power: Authorization: Enforceable
-------------------------------------------
Obligations. The execution, delivery and performance by the Purchaser of the
- -----------
Transaction Documents to be executed by it: (i) are within Purchaser's power, as
applicable; (ii) have been duly authorized by all necessary action, as
applicable; (iii) are not in contravention of any provision of the Purchaser's
governing documents, as applicable; and (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality
binding on the Purchaser. The Purchaser has full power and authority to perform
its obligations under the Transaction Documents. The Transaction Documents to
which the Purchaser is a party have each been duly executed and delivered by
Purchaser and constitute the legal, valid and binding obligations of the
Purchaser, enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
-11-
<PAGE>
ARTICLE V
COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS
As of the Initial Closing and as of each Subsequent Closing,
the Company makes the following representations, warranties and covenants to the
Purchaser, each and all of which shall survive the execution and delivery of
this Agreement and each Closing hereunder:
Section 5.1 Capitalization.
--------------
(a) The "Capitalization Chart" attached hereto as
--------------------
Exhibit C sets forth a true and complete description of all authorized, issued
- ---------
and outstanding shares of Common Stock, Convertible Preferred and Series A
Convertible Preferred of the Company by including a description of (i) the
number of shares of each class of Stock of the Company issued and outstanding
and (ii) the number and class of all outstanding warrants, options and other
securities convertible into, or exchangeable for, shares of Common Stock or
other securities of the Company. After giving effect to the purchase of the
Initial Purchased Securities, 1,155,426 shares of Common Stock are reserved for
issuance upon exercise of the Private Placement Warrants, 924,832 shares of
Common Stock are reserved for issuance upon exercise of the Class C Warrants,
4,366,660 shares of Common Stock are reserved for issuance upon conversion of
the Series A Convertible Preferred outstanding as of the date hereof (including
the Series A Convertible Preferred purchased at the Initial Closing), and
2,915,933 shares of Common Stock are reserved for issuance upon exercise of the
Options.
(b) All issued and outstanding Stock of the Company
listed on the Capitalization Chart is duly authorized, validly issued, fully
paid and non-assessable. Schedule 5.1 hereto or the Annual Report contains a
------------
complete and correct list of all stockholders of the Company owning, to the
knowledge of the Company, more than 5% of the outstanding Stock of the Company
and the number of shares or warrants owned by each. Except as set forth on
Schedule 5.1 or the Annual Report and except as to the outstanding Series A
- ------------
Convertible Preferred, Options and Warrants, (i) there is no existing option,
warrant, call, commitment or other agreement to which the Company is a party
requiring, and there are no convertible securities of the Company outstanding
which upon conversion would require, the issuance of any additional shares of
Stock of the Company or other securities convertible into shares of equity
securities of the Company, (ii) there are no agreements or obligations
(contingent or otherwise) requiring the Company to repurchase or otherwise
acquire or retire any shares of its capital stock or any warrants, options or
other rights to acquire its capital stock, and (iii) there are no agreements to
which the Company is a party or, to the knowledge of the Company, to which any
stockholder or warrant holder of the Company is a party, with respect to the
voting or transfer of the Stock of the Company. Except as set forth on Schedule
--------
5.1 or the Annual Report, there are no stockholders' preemptive rights or rights
- ---
of first refusal or other similar rights with respect to the issuance of the
Initial Purchased Securities or the Additional Purchased Securities by the
Company. True and correct copies of the Certificate of Incorporation and by-laws
of the Company have been delivered to the Purchaser.
-12-
<PAGE>
Section 5.2 Authorization and Issuance of the Initial
-----------------------------------------
Purchased Securities, and the Additional Purchased Securities. The issuance of
- -------------------------------------------------------------
the to the Initial Purchased Securities, and the Additional Purchased Securities
purchased pursuant to the Guaranty or the Fund Guaranty, has been duly
authorized by all necessary corporate action on the part of the Company and,
upon delivery to the Purchaser of certificates therefor against payment in
accordance with the terms hereof, the Initial Purchased Securities and the
Additional Purchased Securities will have been validly issued and fully paid and
nonassessable, free and clear of all pledges, liens, encumbrances and preemptive
rights, subject to reclassification of the Convertible Preferred into the Series
A Convertible Preferred in accordance with Section 6.1(d). The issuance of
-------------
shares upon the conversion of the Series A Convertible Preferred has been duly
authorized by all necessary corporate action on the part of the Company and,
when issued upon conversion of the Series A Convertible Preferred, such Common
Stock will have been validly issued and fully paid and non-assessable.
Section 5.3 Securities Laws. In reliance on the
---------------
representations of the Purchaser contained in Section 4.1 and 4.2, the offer,
----------- ---
issuance, sale and delivery of the Initial Purchased Securities and the
Additional Purchased Securities, as provided in this Agreement, are exempt from
the registration requirements of the Securities Act and all applicable state
securities laws, and are otherwise in compliance with such laws. Neither the
Company nor any Person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of the Company
under circumstances which would require the integration of such offering with
the offering of the Initial Purchased Securities or the Additional Purchased
Securities under the Securities Act and the rules and regulations of the SEC
thereunder) which might subject the offering, issuance or sale of the Initial
Purchased Securities or the Additional Purchased Securities to the registration
requirements of Section 5 of the Securities Act. No information contained in the
documents filed with the SEC contains any untrue statement of a material fact,
or omits to state a material fact necessary to make the statements contained
therein not misleading in light of the circumstances under which made.
Section 5.4 Corporate Existence: Compliance with Law. The
----------------------------------------
Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; (ii) except as indicated on
Schedule 5.4, is duly qualified as a foreign corporation and in good standing
- ------------
under the laws of Massachusetts, New York, Illinois, California, Arizona and
Georgia and each jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification (except for jurisdictions in
which such failure to so qualify or to be in good standing would not have a
Material Adverse Effect); (iii) has the requisite corporate power and authority
and the legal right to own, pledge, mortgage or otherwise encumber and operate
its properties, to lease the property it operates under lease, and to conduct
its business as now being conducted in all material respects; (iv) has, or has
applied for, all material licenses, permits, consents or approvals from or by,
and has made all material filings with, and has given all material notices to,
all Governmental Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct; (v) is in compliance with its Certificate
of Incorporation and by-laws in all material respects; and (vi) is in compliance
with all applicable provisions of applicable laws, including, but not limited
to, the Securities Act and the Exchange Act, except for such non-
-13-
<PAGE>
compliance which would not have a Material Adverse Effect. The Company has
timely filed all reports with the SEC as is required by the Securities Act and
Exchange Act and the Rule 144 exemption is available to qualified holders of
Stock of the Company.
Section 5.5 Subsidiaries. Except with respect to the
------------
acquisition of MPM and as listed on the Schedule 5.5, there currently exist no
------------
Subsidiaries of the Company and the Company has no equity interest in any other
Person.
Section 5.6 Corporate Power: Authorization: Enforceable
-------------------------------------------
Obligations. The execution, delivery, and performance by the Company of
- -----------
this Agreement, the other Transaction Documents to which it is a party and all
instruments and documents to be delivered by the Company, the issuance and sale
of the Initial Purchased Securities, and the Additional Purchased Securities
purchased pursuant to the Guaranty or the Fund Guaranty, and the consummation of
the other transactions contemplated by any of the foregoing (subject to the
reclassification of the Convertible Preferred into the Series A Convertible
Preferred in accordance with Section 6.1(d)): (i) are within the Company's
--------------
corporate power and authority, (ii) have been duly authorized by all necessary
or proper corporate action; (iii) are not in contravention of any provision of
the Company's Certificate of Incorporation or by-laws; (iv) will not violate any
law or regulation, or any order or decree of any court or governmental
instrumentality; (v) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Company is a party or by which the Company or any of
their property is bound, (vi) will not result in the creation or imposition of
any Lien upon the capital stock or any of the property of the Company; and (vii)
do not require the consent or approval of, or any filing with, any Governmental
Authority or any other Person (except to the extent previously obtained or
made). Except for the Shareholder Approval, the execution, delivery and
performance of this Agreement and the transactions contemplated herein do not
require approval or consent of the shareholders or other holders of Stock of the
Company or the approval or authorization of any Governmental Authority, NASDAQ
(except for the listing of additional shares pursuant to NASD Rule 4310(c)(17)
regarding notice of issuance of additional securities), other securities
exchange or any other Person. Each of this Agreement and the other Transaction
Documents shall have been duly executed and delivered by the Company and each
shall then constitute a legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 5.7 Financial Statements.
--------------------
(a) The audited financial statements of the Company
dated as of December 31, 1998 (the "Financials") have been prepared in
----------
accordance with the books and records of the Company, present fairly the
financial condition of the Company as of the respective dates
-14-
<PAGE>
indicated and the results of operations for the respective periods indicated,
and have been prepared in accordance with GAAP applied on a consistent basis.
(b) Except as set forth on Schedule 5.7 or the Annual
------------
Report, the Company has no material obligations, contingent or otherwise,
including, without limitation, liabilities for Charges, long-term leases or
long-term commitments which are not reflected in the Financials, other than
those incurred since December 31, 1998, in the ordinary course of business (none
of which is a liability resulting from breach of contract, breach of warranty,
tort, infringement, or any claim or lawsuit).
(c) No dividends or other distributions have been
declared, paid or made upon any Stock of the Company, nor has any Stock of the
Company been redeemed, retired, purchased or otherwise acquired for value by the
Company since December 31, 1998.
Section 5.8 Ownership of Property.
---------------------
(a) The Company does not own any real estate. Except
as set forth on Schedule 5.8 or the Annual Report, the Company owns, has a valid
------------
leasehold interest in, or has a valid license to use, all material assets,
properties and rights, whether tangible or intangible, necessary for the conduct
of its business as presently conducted and as presently proposed to be
conducted.
(b) All real property leased by the Company is set
forth on Schedule 5.8 or the Annual Report. Each of such leases is valid and
------------
enforceable in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)) and is in full force
and effect. Except as set forth on Schedule 5.8 or the Annual Report, the
------------
Company is not in default of its obligations under any material lease or has it
delivered or received any notice of default under any such lease, nor to the
knowledge of the Company has any event occurred which, with the giving of
notice, the passage of time or both, would constitute a default under any such
lease.
Section 5.9 Material Contracts: Indebtedness. Each Material
--------------------------------
Contract is a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commerical reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)), and the Company has
no knowledge that any Material Contract is not a valid and binding agreement
against the other parties thereto. Except as set forth in Schedule 5.9 or the
------------
Annual Report, the Company is not in material default or breach (whether with or
without the passage of
-15-
<PAGE>
time, the giving of notice or both) or in receipt of any claims of default or
breach in either case that could reasonably be expected to have a Material
Adverse Effect, nor to the Company's knowledge is any third party in default or
breach, under or with respect to any Material Contract. Except as set forth on
Schedule 5.9 or the Annual Report, the Company has no Indebtedness, except
- ------------
Permitted Indebtedness and except for indebtedness under that certain Credit
Agreement, dated as of July 13, 1999, by and between the Company and LaSalle
Bank National Association.
Section 5.10 Environmental Protection.
------------------------
(a) To the Company's actual knowledge without
independent investigation, all real property owned, leased or otherwise operated
by the Company and each Subsidiary (a "Facility") is free of contamination from
--------
any substance, waste or material (i) currently identified to be toxic or
hazardous pursuant to, or which may result in liability under, any Environmental
Law or (ii) within the definition of a substance which is toxic or hazardous
under any Environmental Law, including, without limitation, any asbestos, PCB,
radioactive substance, methane, volatile hydrocarbons, industrial solvents, oil
or petroleum or chemical liquids or solids, liquid or gaseous products, or any
other material or substance which has in the past or could at any time in the
future cause or constitute a health, safety, or environmental hazard to any
Person or property or result in any Environmental Liabilities and Costs
("Hazardous Substance") of more than $25,000 or which, in either case, could
-------------------
have a Material Adverse Effect. Nor has the Company caused or suffered to occur
any release, Spill, migration, leakage, discharge, spillage, uncontrolled loss,
seepage, or filtration of Hazard Substances at or from the Facility (a "Spill")
-----
which could result in Environmental Liabilities and Costs in excess of $25,000.
(b) The Company and each Subsidiary has generated,
treated, stored and disposed of any Hazardous Substances in full compliance with
applicable Environmental Laws, except for such non-compliances which would not
have a Material Adverse Effect.
(c) The Company and each Subsidiary has obtained, or
has applied for, and is in full compliance with and in good standing under all
permit required under Environmental Laws (except for such failures which would
not have a Material Adverse Effect). The Company does not have any knowledge of
any proceedings to substantially modify or to revoke any such permit.
(d) There are no investigations, proceedings or
litigation pending or, to the Company's knowledge, threatened, affecting or
against the Company or the Facilities relating to Environmental Laws or
Hazardous Substances.
(e) Since April 25, 1997, the Company has not
received any communication or notice (including, without limitation, requests
for information) indicating the potential of Environmental Liabilities and Costs
against the Company.
-16-
<PAGE>
Section 5.11 Labor Matters.
-------------
(a) There are no strikes or other labor disputes
against the Company pending or to the Company's knowledge threatened. Hours
worked by and payment made to employees of the Company have not been in
violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters. All payments due from the Company on account of employee
health and welfare insurance have been paid or accrued as a liability on the
books of the Company. There is no organizing activity involving the Company
pending or, to the Company's knowledge, threatened by any labor union or group
of employees that individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect. There are no representation proceedings
pending or, to the Company's knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of the Company
has made a pending demand for recognition. Except as set forth on Schedule 5.11,
-------------
there are no complaints or charges against the Company pending or, to the
Company's knowledge, threatened to be filed with any federal, state, local or
foreign court, governmental agency or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by the Company of any individual.
(b) The Company is not, and during the five years
preceding the date hereof was not, a party to any labor or collective bargaining
agreement and there are no labor or collective bargaining agreements which
pertain to employees of the Company.
Section 5.12 Taxes. All federal, state, local and foreign tax
-----
returns, reports and statements required to be filed by the Company and each
Affiliated Group have been timely filed with the appropriate Governmental
Authority except where the failure to file such report or statement would not
have a Material Adverse Effect and all such returns, reports and statements are
true, correct and complete in all material respects. All Charges and other
impositions due and payable for the periods covered by such returns, reports and
statements have been paid prior to the date on which any fine, penalty, interest
or late charge may be added thereto for nonpayment thereof or any such fine,
penalty, interest or late charge has been paid. Proper and accurate amounts have
been withheld by the Company from its employees, independent contractors, or
other third parties for all periods in full and complete compliance with the
tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective governmental agencies. The Company has not executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for assessment
or collection of any Charges. No tax audits or other administrative or judicial
proceedings are pending or threatened with regard to any Charges for which the
Company may be liable and which would reasonably be expected to have a Material
Adverse Effect and no assessment of Charges is proposed against the Company. The
Company has not filed a consent pursuant to IRC Section 341(f) or agreed to have
IRC Section 341(f)(2) apply to any dispositions of subsection (f) assets (as
such term is defined in IRC Section 341(f)(4)). None of the property owned by
the Company is property which such the Company is required to treat as being
owned by any other Person pursuant to the provisions of Section 168(f)(8) of the
Internal
-17-
<PAGE>
Revenue Code of 1954, as amended, and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt" use property, within
the meaning of IRC Section 168(h). The Company has not agreed or has been
requested to make any adjustment under IRC Section 481(a) by reason of a change
in accounting method or otherwise. The Company has no obligation under any
written tax sharing agreement. The Company is not a party to or bound by any tax
allocation or tax sharing agreement and has no current or potential contractual
obligation to indemnify any other person with respect to any Charges. The
Company has not made any payments, and is not and will not become obligated
(under any contract entered into on or before the Initial Closing Date) to make
any payments, that will be non-deductible under Section 280G of the IRC (or any
corresponding provision of state, local or foreign income tax law). The Company
will not be required (A) as a result of a change in method of accounting for a
taxable period ending on or prior to the Initial Closing Date, to include any
adjustment in taxable income for any taxable period (or portion thereof) ending
after the Initial Closing Date or (B) as a result of any deferred intercompany
gain described in Treasury Regulation Sections 1. 1502-13 of former Treasury
Regulations Section 1. 1502-14 or any excess loss account described in Treasury
Regulation Section 1. 1502-19 (or any corresponding or similar provision or
administrative rule of federal, state, local or foreign income tax law), to
include any item of income in taxable income for any taxable period (or portion
thereof) ending after the Initial Closing Date, in each case, which would
reasonably be expected to have a Material Adverse Effect. The Company has not
been a member of an Affiliated Group other than one of which the Company was the
common parent, or filed or been included in a combined, consolidated or unitary
income tax return, other than one filed by the Company.
Section 5.13 No Litigation. Except as set forth on Schedule
------------- --------
5.13, no action, claim or proceeding is now pending or, to the knowledge of the
- ----
Company, threatened against the Company (or to the Company's knowledge, pending
or threatened against or affecting any of the officers, directors or employees
of the Company with respect to its business or proposed business activities), or
pending or threatened by the Company against any third party, at law, in equity
or otherwise, before any court, board, commission, agency or instrumentality of
any federal, state, or local government or of any agency or subdivision thereof,
or before any arbitrator or panel of arbitrators.
Section 5.14 Brokers. No broker or finder acting on behalf of
-------
the Company brought about the consummation of the transactions contemplated
pursuant to this Agreement and the Company has no obligation to any Person in
respect of any finder's or brokerage fees (or any similar obligation) in
connection with the transactions contemplated by this Agreement. The Company is
solely responsible for the payment of all such finder's or brokerage fees.
Section 5.15 Management and Labor Agreements. Except as set
-------------------------------
forth on Schedule 5.15 or the Annual Report, there are no management agreements
-------------
covering officers of the Company.
Section 5.16 Patents, Trademarks, Copyrights and Licenses. The
--------------------------------------------
Company owns all licenses, patents, patent applications, copyrights, service
marks, trademarks and registrations and applications for registration thereof,
and trade names necessary to continue to conduct its business as heretofore
conducted by it and now being conducted by it. To the Company's knowledge, the
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<PAGE>
Company conducts its businesses without infringement or claim of infringement of
any license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of others and the Company has
received no notices claiming any such infringement. To the Company's knowledge,
there is no infringement by others of any license, patent, copyright, service
mark, trademark, trade name, trade secret or other intellectual property right
of the Company.
Section 5.17 No Material Adverse Effect. To the Company's
--------------------------
knowledge, no event has occurred since April 25, 1997 which has had or could be
reasonably expected to have a Material Adverse Effect; provided, however, the
Purchaser acknowledges that it has been advised that the Company has operated at
a loss and has had negative cash flow since October 31, 1998.
Section 5.18 ERISA.
-----
(a) During the twelve-consecutive-month period prior
to the date of the execution and delivery of this Agreement, (i) no steps have
been taken to terminate any Pension Plan and (ii) no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien
under Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by the Company of any material liability, fine or penalty, other than the
obligations of the Company to fund the benefits provided under the Pension Plan.
(b) All contributions (if any) have been made to any
Multiemployer Plan that are required to be made by the Company or any other
member of the Controlled Group under the terms of the plan or of any collective
bargaining agreement or by applicable law; neither the Company nor any member of
the Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Plan, incurred any withdrawal liability with respect to any such plan or
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, might result in a withdrawal or partial withdrawal from any such
plan; and neither the Company nor any member of the Controlled Group has
received any notice that any Multiemployer Pension Plan is in reorganization,
that increased contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the IRC, that any
such plan is or may be terminated, or that any such plan is or may become
insolvent.
(c) The Pension Plans and the trusts maintained
pursuant thereto are exempt from federal income taxation under Section 501 of
the IRC, and nothing has occurred with respect to the operation of the Pension
Plans which could cause the loss of such qualification or exemption or the
imposition of any liability, penalty, or tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to
the terms of the Plans (without regard to any waivers granted under Section 412
of the IRC) to any funds or trusts established thereunder or in connection
therewith have been made by the due date thereof (including
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<PAGE>
any valid extension) and no accumulated funding deficiencies exist in any of the
Pension Plans subject to Section 412 of the IRC.
(e) There is no "amount of unfunded benefit
liabilities" as defined in Section 4001 (a) (18) of ERISA in any of the
respective Pension Plans, which are subject to Title IV of ERISA. Each of the
respective 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 Plan and all benefit liabilities do not
exceed the assets of such Pension Plans.
(f) There have been no "reportable events" as that
term is defined in Section 404 of ERISA and the regulations thereunder with
respect to the Pension Plans subject to Title IV of ERISA which would require
the giving of notice, or any event requiring disclosure under Sections
4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
(g) There is no material violation of ERISA with
respect to the filing of applicable reports, documents, and notice, regarding
the Plans with the Secretary of Labor and the Secretary of the Treasury or the
furnishing of such documents to the participants or beneficiaries of the Plans.
(h) To the knowledge of the Company, there are no
pending actions, claims or lawsuits which have been asserted or instituted
against the 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 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.
(i) All amendments and actions required to bring the
Plans into conformity in all material respects with all of the applicable
provisions of ERISA and other applicable laws have been made or taken except to
the extent that such amendments or actions are not required by law, regulation
or order pronounced by the IRS, to be made or taken until a date after the
applicable Closing Date.
(j) The Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA
(including rules and regulations thereunder) and other applicable Federal and
state law, and the Company or "party in interest" or "disqualified person" with
respect to the Plans has engaged in a "prohibited transaction" within the
meaning of Section 4975 of the IRC or Section 406 of ERISA.
(k) Neither the Company nor any ERISA Affiliate has
terminated any Pension Plan subject to Title IV, or incurred any outstanding
liability under Section 4062 of ERISA to the PBGC, or to a trustee appointed
under Section 4042 of ERISA.
-20-
<PAGE>
(l) Neither the Company nor any ERISA Affiliate
maintains retiree life and retiree health insurance plans which are Welfare
Plans and which provide for continuing benefits or coverage for any participant
or any beneficiary of a participant except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA").
-----
The Company and each ERISA Affiliate which maintains a Welfare Plan has complied
with the notice and continuation requirements of COBRA and the regulations
thereunder in all material respects.
(m) Neither the Company nor any ERISA Affiliate has
contributed or been obligated to contribute to a Multiemployer Plan as of the
applicable Closing.
(n) Neither the Company nor any ERISA Affiliate has
withdrawn in a complete or partial withdrawal from any Multiemployer Plan prior
to the applicable Closing Date, nor has any of them incurred any liability due
to the termination or reorganization of a Multiemployer Plan.
Section 5.19 Registration Rights. Except as listed on Schedule
------------------- --------
5.19 and except pursuant to the Registration Rights Agreement or as set forth in
- ----
the Annual Report, the Company is not under obligation to register any of its
securities pursuant to the Securities Act.
Section 5.20 Required Filings. As of the date hereof, the
----------------
Company has made all required filings under the Securities Act and Exchange Act
and all information contained in such filings are true and correct in all
material respects and do not contain any untrue information or omit to state a
material fact necessary to make any statements contained in such filings not
misleading in light of the circumstances under which they were made.
Section 5.21 Full Disclosure. No information contained in this
---------------
Agreement, any other Transaction Document, the Financials or any written
statement furnished by or on behalf of the Company pursuant to the terms of this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
Section 5.22 Schedule 14C: Shareholder Approval. The Company
----------------------------------
shall upon receiving Shareholder Approval use its best efforts to prepare and
file as promptly as practicable with the SEC a Schedule 14C Information
Statement (with respect to Rule 4460(i) of the NASDAQ Stock Market, Inc.'s
Marketplace Rules) required under the Exchange Act and take all actions
necessary to have such Schedule 14C Information Statement become effective as
promptly as practicable (but in no event later than February 28, 2000).
Section 5.23 Schedule 14C: Reclassification. Within 14
------------------------------
calendar days of the date hereof, the Company shall as promptly as practicable
prepare and file with the SEC a Schedule 14C Information Statement (with respect
to the reclassification of the Convertible Preferred into the Series A
Convertible Preferred) required under the Securities Exchange Act of 1934 and
take all actions necessary to have such Schedule 14C Information Statement
become effective as promptly as practicable and immediately upon such
effectiveness the Company shall file a Plan of Reclassification and amendment to
its Designation of Preferred Stock redesignating the Convertible Preferred into
Series A Preferred Stock (but in no event later than 45 calendar days after the
date hereof).
-21-
<PAGE>
Section 5.24 Credit Agreement. All of the representations and
----------------
warranties contained in that certain Credit Agreement, dated as of the date
hereof, by and between MPM, CIBC, as Agent, CIBC World Markets Corp., and the
several banks and lending institutions made party thereto from time to time, are
true and correct as of the date hereof and are hereby incorporated herein by
reference.
Section 5.25 Use of Proceeds. The Company shall make use of
---------------
the proceeds from the purchase of the Initial Purchased Securities for the
limited purpose of acquiring MPM pursuant to the Stock Purchase Agreement, dated
as of dated as of July 16, 1999, between the Company and MPM, and all
representations and warranties of the Company contained therein are true and
correct as of the date hereof and, to the knowledge of the Company, all other
representations and warranties contained therein are true and correct as of the
date hereof, and all such representations and warranties are hereby incorporated
herein by reference.
ARTICLE VI
CONDITIONS PRECEDENT TO INITIAL CLOSING
Section 6.1 Conditions Precedent. The obligation of the
--------------------
Purchaser to purchase the Initial Purchased Securities pursuant to Section 2.2
-----------
hereof at the Initial Closing is subject to the condition that the Purchaser
shall have received and the following shall have been delivered to the Purchaser
on the Initial Closing Date, each dated the Initial Closing Date unless
otherwise indicated, in form and substance satisfactory to the Purchaser, and
the following actions shall occur on or before the Initial Closing Date, unless
waived by the Purchaser:
(a) A favorable opinion of Morris, Manning & Martin,
L.L.P. counsel to the Company, substantially in the form attached hereto as
Exhibit B.
- ---------
(b) Resolutions of the Board or an executive
committee or special finance committee of the Company, certified by the
Secretary or Assistant Secretary of the Company, as of the Initial Closing Date,
to be duly adopted and in full force and effect on such date, authorizing, in
the case of the Board, (i) the consummation of each of the transactions
contemplated by this Agreement and (ii) officers to execute and deliver this
Agreement and each other Transaction Document to which it is a party.
(c) A copy of governmental certificate, dated the
most recent practicable date prior to the Initial Closing Date, with telegram
updates where available, showing that the Company is organized and in good
standing in the State of Delaware and is qualified as a foreign corporation and
in good standing in all other jurisdictions in which it is qualified to transact
business.
(d) A copy of the organizational charter and all
amendments thereto of the Company, certified as of a recent date by the
Secretary of State of the State of Delaware, as amended to reflect (i) the
reduction in the number of shares of Convertible Preferred authorized in the
Original
-22
<PAGE>
Certificate of Designation from 2,000,000 shares to 309,998 shares of
Convertible Preferred and (ii) the filing of the Second Certificate of
Designation (with respect to the designation of the Series A Convertible
Preferred). A copy of the Plan of Reclassification of the Company, dated as of
the date hereof and approved by the Board and the shareholders of the Company in
accordance with Delaware General Corporation Law, shall be filed with the
Secretary of State of the State of Delaware) (the "Charter") after the filing of
-------
the Schedule 14C referenced in Section 5.23 (the "Plan of Reclassification"),
------------ ------------------------
and copies of the Company's by-laws, both certified by the Secretary or
Assistant Secretary of the Company as true and correct as of the Initial Closing
Date.
(e) Certificates of the Secretary or an Assistant
Secretary of the Company, dated the Initial Closing Date, as to the incumbency
and signatures of the officers of the Company executing this Agreement, the
Initial Purchased Securities, each other Transaction Document to which it is a
party and any other certificate or other document to be delivered pursuant
hereto or thereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(f) A copy of all third party consents and approvals
(including, without limitation, the consent of LaSalle Bank National
Association, to the extent required) that are necessary for the consummation of
the transactions contemplated hereby or that are required in order to prevent a
breach of or default under, a termination or modification of, or acceleration of
the terms of, any contract, agreement or document required to be listed on the
attached Schedule 5.9 or the Annual Report, in each case on terms and conditions
------------
reasonably satisfactory to the Purchaser.
(g) A copy of all governmental and regulatory
consents and approvals that are necessary for the consummation of the
transactions contemplated hereby, in each case on terms and conditions
satisfactory to the Purchaser.
(h) No suit, action or other proceeding shall be
pending before any court or governmental regulatory body or authority in which
it is sought to restrain or prohibit the transactions contemplated hereby, or
that could have a Material Adverse Effect, and no injunction, judgment, order,
decree or ruling with respect thereto shall be in effect.
(i) Since the December 31, 1998, there shall have
been no material adverse change or material adverse development in the business,
financial condition, business prospects, operating results, assets, operations
or customer, supplier or employee relations of the Company.
(j) The Company shall have delivered to the Purchaser
a copy of the fairness opinion (the "Fairness Opinion") relating to the
----------------
transaction contemplated herein from Texada Capital Corporation, which fairness
opinion shall indicate that the price for the Series A Convertible Preferred
purchased pursuant to Section 2.2 is fair to the Company and its stockholders
-----------
(other than as to the Purchaser).
(k) The Initial Purchased Securities shall have been
delivered to the Purchaser.
-23-
<PAGE>
(l) The number of shares of Convertible Preferred
authorized in the Original Certificate of Designation shall have been reduced by
duly authorized Board action from 2,000,000 shares to 309,998 shares of
Convertible Preferred and the Second Certificate of Designation containing the
terms of the Series A Convertible Preferred, Plan of Reclassifications and
redesignations of the Convertible Preferred to Series A Convertible Preferred,
shall have been duly adopted by Board action and filed with the Secretary of the
State of Delaware.
(m) WSP shall receive a fairness opinion from CIBC
relating to the transaction contemplated herein, which fairness opinion shall
indicate that the transactions herein are fair to Willis Stein & Partners, L.P.
and its affiliates.
ARTICLE VII
CONDITIONS PRECEDENT TO SUBSEQUENT CLOSING
Section 7.1 Conditions Precedent. The obligation of the
--------------------
Purchaser to purchase the Additional Purchased Securities at any Subsequent
Closing pursuant to Section 3.2 hereof is subject to the condition that the
-----------
Purchaser shall have received and the following shall have been delivered to the
Purchaser on each Subsequent Closing Date, each dated as of such Subsequent
Closing Date unless otherwise indicated, in form and substance satisfactory to
the Purchaser, and the following actions shall occur on or before each
Subsequent Closing Date, unless waived in writing by the Purchaser:
(a) The representations and warranties of the Company
contained in Article V shall be true and correct in all material respects as if
---------
made on such Subsequent Closing Date.
(b) There shall not have occurred or be continuing
any "Event of Noncompliance" or "Special Event of Noncompliance" with respect to
the Series A Convertible Preferred, as such terms are defined in the Second
Certificate of Designation.
(c) If the proposed use of the funds is to consummate
an acquisition, then the Purchaser shall have completed its business, legal,
accounting and other due diligence investigation and evaluation of the Company
and its affiliates and shall be satisfied in its sole discretion with the result
thereof and with the documentation relating to such acquisition.
(d) If the proposed use of the funds is for working
capital purposes, then the Purchaser shall be satisfied in its sole discretion
with the intended use of funds.
(e) The Purchaser shall have received all necessary
internal approvals for the purchase of such Additional Purchases Securities and
shall be satisfied with the use of proceeds of its financing in each case in its
sole discretion.
(f) The Purchaser shall have received a favorable
opinion of Morris, Manning
-24-
<PAGE>
& Martin L.L.P., counsel to the Company, substantially in the form attached
hereto as Exhibit B.
---------
(g) The Purchaser shall have received funding from
its members in amounts sufficient to pay the purchase price for the Additional
Purchased Securities.
(h) Resolutions of the board of directors, executive
committee or special finance committee of the Company, certified by the
Secretary or Assistant Secretary of the Company, as of each Subsequent Closing
Date, to be duly adopted and in full force and effect on such date, authorizing
the consummation of each purchase of Additional Purchased Securities.
(i) A copy of governmental certificate, dated the
most recent practicable date prior to each Subsequent Closing Date, with
telegram updates where available, showing that the Company is organized and in
good standing in the State of Delaware and is qualified as a foreign corporation
and in good standing in all other jurisdictions in which it is qualified to
transact business.
(j) A copy of the organizational charter and all
amendments thereto of the Company, certified as of a recent date by the
Secretary of State of the State of Delaware, and copies of the Company's
by-laws, certified by the Secretary or Assistant Secretary of the Company as
true and correct as of each Subsequent Closing Date.
(k) Certificates of the Secretary or an Assistant
Secretary of the Company, dated as of Subsequent Closing Date, as to the
incumbency and signatures of the officers of the Company executing the purchase
of the Additional Purchased Securities and any other certificate or other
document to be delivered pursuant hereto or thereto, together with evidence of
the incumbency of such Secretary or Assistant Secretary.
(l) A copy of all third party consents and approvals
(including, without limitation, the consent of LaSalle Bank National Association
and/or CIBC, in each case only to the extent required) that are necessary for
the consummation of the transactions contemplated hereby or that are required in
order to prevent a breach of or default under, a termination or modification of,
or acceleration of the terms of, any contract, agreement or document in each
case on terms and conditions reasonably satisfactory to the Purchaser.
(m) A copy of all governmental and regulatory
consents and approvals that are necessary for the consummation of the
transactions contemplated hereby, in each case on terms and conditions
satisfactory to the Purchaser.
(n) No suit, action or other proceeding shall be
pending before any court or governmental regulatory body or authority in which
it is sought to restrain or prohibit the transactions contemplated hereby, or
that could have a Material Adverse Effect, and no injunction, judgment, order,
decree or ruling with respect thereto shall be in effect.
(o) Since the Initial Closing Date, there shall have
been no material adverse
-25-
<PAGE>
change or material adverse development in the business, financial condition,
business prospects, operating results, assets, operations or customer, supplier
or employee relations of the Company.
(p) the Fairness Opinion shall not have been
withdrawn, revised or amended in any way and, at the request of the Purchaser,
the Company shall have delivered to the Purchaser an updated Fairness Opinion
relating to the transaction contemplated herein, which fairness opinion shall
indicate that the price for the Additional Purchased Securities purchased at
each Subsequent Closing pursuant to Section 3.2 is fair to the Company and its
-----------
stockholders.
(q) The Additional Purchased Securities shall be
delivered to the Purchaser.
(r) Prior to or as of each Subsequent Closing, the
Company shall have duly authorized a sufficient number of shares of Series A
Convertible Preferred to permit the issuance of the Additional Purchased
Securities purchased at each such Subsequent Closing, and the Company shall have
duly authorized a sufficient number of shares of Common Stock for the conversion
of such Additional Purchased Securities pursuant to terms and provisions listed
in the Second Certificate of Designation.
(s) The Shareholder Approval Effective Date (as
defined in the Second Certificate of Designation) shall have occurred on or
prior to February 28, 2000 in accordance with Section 5.22.
------------
(t) The Company shall have filed the Plan of
Reclassification with the Secretary of State of the State of Delaware, and such
filing shall have become effective within 45 days after the date hereof in
accordance with Section 5.23, and the Company shall have reduced the number of
------------
authorized shares of Convertible Preferred to zero.
(u) There shall have been no material change in the
Market Price (as defined in the Second Certificate of Designation) of, or in the
public market for, the Common Stock or the public markets generally.
(v) Such other documents as the Purchaser may
reasonably request.
ARTICLE VIII
SECURITIES LAW MATTERS
Section 8.1 Legends.
-------
(a) Each certificate representing the Initial
Purchased Securities or the Additional Purchased Securities shall bear a legend
substantially in the following form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED
-26-
<PAGE>
BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH STOCK. THE SHARES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION THEREFROM."
Section 8.2 Transfer of Restricted Securities
---------------------------------
(a) Restricted Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 or Rule 144A of the Securities and Exchange Commission (or any similar rule
or rules then in force) if such rule is available and (iii) subject to the
conditions specified in subparagraph (b) below, any other legally available
means to transfer.
(b) In connection with the transfer of any Restricted
Securities (other than a transfer described in clause (i) or (ii) of
subparagraph (a) above), the holder thereof shall deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of counsel which (to the Company's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that such
transfer of Restricted Securities may be effected without registration of such
Restricted Securities under the Securities Act. In addition, if the holder of
the Restricted Securities delivers to the Company an opinion of counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates or instruments, as the case may be, for such
Restricted Securities which do not bear the Securities Act legend set forth in
Section 8.1 above. If the Company is not required to deliver new certificate or
- -----------
instruments, as the case may be, for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound by
the conditioned contained in this Section 8.2.
-----------
(c) Upon the request of a holder of Restricted
Securities, the Company shall promptly supply to such holder or such holder's
prospective transferees all information regarding the Company required to be
delivered in connection with a transfer pursuant to Rule 144 or 144A of the
Securities and Exchange Commission.
(d) If any Restricted Securities become eligible for
sale pursuant to Rule 144(k), the Company shall, upon the request of the holder
of such Restricted Securities, remove the legend set forth in Section 7.1 from
-----------
the certificates or instruments, as the case may be, representing such
Restricted Securities.
-27-
<PAGE>
ARTICLE IX
EXPENSES
The Company shall pay all reasonable out-of-pocket expenses of
(i) the Purchaser in connection with the preparation, review or negotiation of
the Transaction Documents and the transactions contemplated thereby, including
cost incurred in connection with the Initial Closing and each Subsequent
Closing, (ii) stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement, the issuance and delivery of the
Initial Purchased Securities or the Additional Purchased Securities, and the
issuance and delivery of any Common Stock upon the conversion of the Series A
Convertible Preferred and (iii) the Purchaser or its managing member in
connection with (A) any amendment, modification or waiver, or consent with
respect to, any of the Transaction Documents, and (B) any attempt by the
Purchaser or its managing member to enforce any of its rights against the
Company or any other Person under or pursuant to of any of the Transaction
Documents (including the reasonable fees and expenses of all of its counsel and
consultants retained in connection with the Transaction Documents and the
transactions contemplated thereby).
ARTICLE X
LIMITATION ON CLAIMS OF THE PURCHASER
Section 10.1 Limitation.
----------
(a) The Purchaser shall not bring any action or claim
against the Company for damages for a breach of any representation, warranty or
covenant contained herein by the Company until such damages exceed $100,000 at
which time the Purchaser may bring an action for all claims.
(b) The Company shall not bring any action or claims
against the Purchaser for damages for a breach of any representation, warranty
or covenant contained herein by the Purchaser until such damages exceed
$100,000, at which time the Company may bring an action for all claims.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. Whenever it is provided herein that any
-------
notice, demand, request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by another, or
whenever any of the parties desires to give or serve upon another any such
communication with respect to this Agreement, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
either shall be delivered in person with receipt acknowledged or by registered
or certified mail, return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback addressed as follows:
-28-
<PAGE>
If to the Purchaser:
U-C Holdings, L.L.C.
227 W. Monroe Street, Suite 4300
Chicago, Illinois 60606
Attn: Avy H. Stein
Daniel M. Gill
Telecopy No.: (312) 422-2424
with a copy to:
Kirkland & Ellis
200 E. Randolph Street
Chicago, Illinois 60601
Attn: Margaret A. Gibson, Esq.
Telecopy No.: (312) 861-2200
If to the Company:
College Television Network, Inc.
5784 Lake Forrest Drive
Suite 275
Atlanta, GA 30328
Attn: Jason Elkin
Telecopy No.: (404) 256-9168
with copies to:
Morris, Manning & Martin, L.L.P.
3343 Peachtree Road, N.E.
1600 Atlanta Financial Center
Atlanta, Georgia 30326
Attn: Neil H. Dickson, Esq.
Telecopy No.: (404) 365-9532
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited with the United
States mail.
Section 11.2 Binding Effect: Benefits. Except as otherwise
------------------------
provided herein, this
-29-
<PAGE>
Agreement shall be binding upon and inure to the benefit of the parties to this
Agreement and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended or shall be construed to give any
person other than the parties to this Agreement or their respective successors
or assigns any legal or equitable right, remedy or claim under or in respect of
any agreement or any provision contained herein.
Section 11.3 Amendment. No amendment or waiver of any
---------
provision of this Agreement or any other Transaction Document nor consent to any
departure by the Company therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Company and the Purchaser, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action, of compliance with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by either party to exercise any
right or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
Section 11.4 Successors and Assigns: Assignability. Neither
-------------------------------------
this Agreement nor any right, remedy, obligation or liability arising hereunder
or by reason hereof shall be assignable by the Company without the prior written
consent of the Purchaser. All covenants contained herein shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns
(including any subsequent holder of any of the Initial Purchased Securities, the
Additional Purchased Securities or any Common Stock issuable upon exercise of
the Initial Purchased Securities or the Additional Purchased Securities).
Section 11.5 Remedies. The Purchaser, in addition to being
--------
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate. In any action or proceeding brought to enforce
any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
Section 11.6 Section and Other Headings. The section and other
--------------------------
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
Section 11.7 Severability. In the event that any one or more
------------
of the provisions contained in this Agreement shall be determined to be invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision or provisions in every
-30-
<PAGE>
other respect and the remaining provisions of this Agreement shall not be in any
way impaired.
Section 11.8 Entire Agreement. This Agreement and the
----------------
agreements and documents referred to herein contain the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, whether written or oral,
relating to such subject matter in any way.
Section 11.9 Counterparts. This Agreement may be executed in
------------
any number of counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
Section 11.10 Publicity. Neither the Purchaser nor the Company
---------
shall issue any press release or make any public disclosure regarding the
transactions contemplated hereby unless such press release or public disclosure
is approved by the other party in advance. Notwithstanding the foregoing, each
of the parties hereto may, in documents required to be filed by it with the SEC
or other regulatory bodies, make such statements with respect to the
transactions contemplated hereby as each may be advised by counsel is legally
necessary or advisable, and may make such disclosure as it is advised by its
counsel is required by law.
Section 11.11 Governing Law. This Agreement shall be governed
-------------
by, construed and enforced in accordance with, the laws of the Delaware without
regard to the principles thereof relating to conflict of laws. Service of
process on the parties in any action arising out of or relating to this
Agreement shall be effective if mailed to the parties in accordance with
Section 11.1 hereof. The parties hereto waive all right to trial by jury in any
- ------------
action or proceeding to enforce or defend any rights under this Agreement.
Section 11.12 No Strict Construction. The language used in
----------------------
this Agreement shall be deemed to be the language chosen by the parties hereto
to express their mutual intent, and no rule of strict construction shall be
applied against any party.
* * * * *
-31-
<PAGE>
-32-
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser has executed
this Agreement as of the day and year first above written.
COLLEGE TELEVISION NETWORK, INC.
By: /s/ Martin Grant
Its: President
U-C HOLDINGS, L.L.C.
By: WILLIS STEIN & PARTNERS, L.P.
Its: Managing Member
By: Willis Stein & Partners, L.L.C.
Its: General Partner
By: /s/ Daniel M. Gill
----------------------------------
Daniel M. Gill
Its: Managing Director
<PAGE>
CANCELLATION AGREEMENT
----------------------
THIS CANCELLATION AGREEMENT (the "Agreement") dated as of August 31, 1999,
---------
is made by and between College Television Network, Inc., a Delaware corporation
having an office at 5784 Lake Forrest Drive, Suite 275, Atlanta, GA 30328 (the
"Company"), and U-C Holdings, L.L.C., a Delaware limited liability company (the
- --------
"Purchaser").
---------
WHEREAS, the Company and the Purchaser entered into a Purchase Agreement,
dated as of July 23, 1999 (the "Purchase Agreement") whereby, in addition to
------------------
other transactions contained therein, the Purchaser purchased from the Company a
Class D Warrant to purchase 135,686 shares of the Company's common stock, par
value $0.005 (the "Class D Warrant").
---------------
WHEREAS, the Company and the Purchaser now wish to cancel and terminate the
Class D Warrant in accordance with Section 11(g) thereof.
-------------
NOW, THEREFORE, the parties hereto agree as follows:
1. Cancellation. The Purchaser hereby agrees, unconditionally and without
------------
reservation, to surrender and deliver the Class D Warrant to the Company for
cancellation, as of the date hereof, without any payment of cash or other
consideration to the Purchaser and the Company agrees to cancel such Class D
Warrant upon receipt from the Purchaser.
2. Binding Effect; Benefits. This Agreement shall be binding upon and
------------------------
inure to the benefit of the parties to this Agreement and their respective
successors and their assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the Purchaser and
the Company or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
3. Amendment. No amendment to this Agreement shall be effective unless
---------
the same shall be in writing and signed by the Company and Purchaser.
4. Entire Agreement. This Agreement contains the entire agreement and
----------------
understanding between the parties with respect to the subject matter hereof and
supersede all prior agreements and understanding, whether written or oral,
relating to such subject matter in any way.
5. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
<PAGE>
6. Governing Law. This Agreement shall be governed by, construed and
-------------
enforced in accordance with, the laws of the Delaware without regard to the
principles thereof relating to conflict of laws. Service of process on the
parties in any action arising out of or relating to this Agreement shall be
effective if mailed to the parties in accordance with Section 9.1 of the
-----------
Purchase Agreement. The parties hereto waive all right to trial by jury in any
action or proceeding to enforce or defend any rights under this Agreement.
7. No Strict Construction. The language used in this Agreement shall be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
* * * * *
-2-
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser has executed this
Termination Agreement as of the day and year first above written.
COLLEGE TELEVISION NETWORK, INC.
By: /s/ Peter Kauff
-------------------------------------------
Its: Asst. Secretary
------------------------------------------
U-C HOLDINGS, L.L.C.
By: WILLIS STEIN & PARTNERS, L.P.
Its: Managing Member
By: Willis Stein & Partners, L.L.C.
Its.: General Partner
By:/s/ Daniel M. Gill
------------------------------------
Daniel M. Gill
Its: Managing Director
-3-
<PAGE>
EXHIBIT K
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
---------------------------------------------
U-C HOLDINGS, L.L.C.
A Delaware Limited Liability Company
---------------------------------------------
FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
Dated as of August 31, 1999
THE MEMBERSHIP INTERESTS REPRESENTED BY THIS LIMITED LIABILITY COMPANY AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH INTERESTS MAY NOT
BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT
EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND
COMPLIANCE WITH THE OTHER RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................... 1
-----------
1.1 Certain Definitions............................................... 1
-------------------
1.2 Other Definitions................................................. 7
-----------------
1.3 Construction...................................................... 7
------------
ARTICLE II ORGANIZATION................................................ 7
------------
2.1 Formation......................................................... 7
---------
2.2 Name.............................................................. 8
----
2.3 Registered Office; Registered Agent; Principal Office; Other 8
Offices...........................................................
-------
2.4 Purposes.......................................................... 8
--------
2.5 Term.............................................................. 8
----
2.6 No State-Law Partnership.......................................... 8
------------------------
ARTICLE III MEMBERSHIP; MEMBER UNITS................................... 9
------------------------
3.1 Members........................................................... 9
-------
3.2 Liability of Members.............................................. 9
--------------------
3.3 No Authority to Bind Company...................................... 9
----------------------------
3.4 Member Units...................................................... 9
------------
3.5 Issuance of Additional Units and Interests; Admission of New 10
Members; Additional Capital Contributions.........................
-----------------------------------------
3.6 Representations, Warranties and Agreements of the Members......... 11
---------------------------------------------------------
3.7 Capital Contributions............................................. 12
---------------------
3.8 Defaulting Members................................................ 13
------------------
3.9 Repurchased Units................................................. 13
-----------------
ARTICLE IV CAPITAL ACCOUNTS............................................ 13
----------------
4.1 Establishment and Determination of Capital Accounts............... 13
---------------------------------------------------
4.2 Computation of Amounts............................................ 14
----------------------
4.3 Interest; Withdrawal.............................................. 14
--------------------
ARTICLE V DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES............. 14
------------------------------------------------
-i-
<PAGE>
5.1 Generally......................................................... 14
---------
5.2 Distributions: Round One Investment............................... 14
-----------------------------------
5.3 Distributions: Round Two Investment............................... 16
-----------------------------------
5.4 Management Unit Holdback.......................................... 17
------------------------
5.5 Allocation of Profits and Losses.................................. 18
--------------------------------
5.6 Capital Contributions............................................. 18
---------------------
5.7 Tax Allocations; Code Section 704(c).............................. 19
------------------------------------
ARTICLE VI MANAGEMENT OF THE COMPANY.................................. 20
-------------------------
6.1 Managing Member................................................... 20
---------------
6.2 Delegation by Managing Member..................................... 20
-----------------------------
6.3 Resignation; Vacancy; Removal..................................... 20
-----------------------------
6.4 Compensation...................................................... 21
------------
6.5 Board Membership of Subsidiaries.................................. 21
--------------------------------
ARTICLE VII MEMBERS.................................................... 21
-------
7.1 Membership Status; Resignation.................................... 21
------------------------------
7.2 No Participation in Management.................................... 22
------------------------------
7.3 Voting Rights Generally; Voting of Units.......................... 22
----------------------------------------
7.4 Conflicts of Interest............................................. 22
---------------------
7.5 Outside Activities................................................ 22
------------------
7.6 Confidentiality................................................... 22
---------------
ARTICLE VIII EXCULPATION AND INDEMNIFICATION........................... 23
-------------------------------
8.1 Exculpation....................................................... 23
-----------
8.2 Right to Indemnification.......................................... 23
------------------------
8.3 Advance Payment................................................... 24
---------------
8.4 Indemnification of Employees and Agents........................... 24
---------------------------------------
8.5 Appearance as a Witness........................................... 24
-----------------------
8.6 Nonexclusivity of Rights.......................................... 24
------------------------
8.7 Savings Clause.................................................... 24
--------------
ARTICLE IX TAXES....................................................... 24
-----
9.1 Tax Returns....................................................... 24
-----------
9.2 Tax Matters Partner............................................... 25
-------------------
-ii-
<PAGE>
ARTICLE X BOOKS, REPORTS............................................... 25
--------------
10.1 Maintenance of Books.............................................. 25
--------------------
10.2 Member Tax Information............................................ 25
----------------------
ARTICLE XI TRANSFERS................................................... 25
---------
11.1 Assignment by Members............................................. 25
---------------------
11.2 Void Transfers.................................................... 25
--------------
11.3 Substituted Member................................................ 26
------------------
11.4 Effect of Assignment.............................................. 26
--------------------
11.5 Permitted Transfers............................................... 27
-------------------
11.6 Deliveries for Transfer........................................... 27
-----------------------
11.7 Prospective Transferees........................................... 27
-----------------------
11.8 Legend............................................................ 27
------
11.9 Effective Date.................................................... 27
--------------
ARTICLE XII DISSOLUTION, LIQUIDATION AND TERMINATION................... 28
----------------------------------------
12.1 Dissolution....................................................... 28
-----------
12.2 Liquidation and Termination....................................... 28
---------------------------
12.3 Management Holder Give Back....................................... 29
---------------------------
12.4 Deficit Capital Accounts.......................................... 30
------------------------
12.5 Cancellation of Certificate....................................... 30
---------------------------
ARTICLE XIII GENERAL PROVISIONS......................................... 31
------------------
13.1 Notices........................................................... 31
-------
13.2 Entire Agreement.................................................. 31
----------------
13.3 Effect of Waiver or Consent....................................... 31
---------------------------
13.4 Amendment, Modification or Waiver................................. 31
---------------------------------
13.5 Binding Effect.................................................... 32
--------------
13.6 Governing Law; Severability....................................... 32
---------------------------
13.7 Further Assurances................................................ 32
------------------
13.8 Waiver of Certain Rights.......................................... 32
------------------------
13.9 Indemnification and Reimbursement for Payments on Behalf of a
Member............................................................ 32
------
13.10 Notice to Members of Provisions................................... 33
-------------------------------
13.11 Counterparts...................................................... 33
------------
13.12 Consent to Jurisdiction........................................... 33
-----------------------
13.13 Headings.......................................................... 33
--------
13.14 Remedies.......................................................... 33
--------
-iii-
<PAGE>
FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF U-C HOLDINGS, L.L.C.
A Delaware Limited Liability Company
THIS FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF U-C HOLDINGS, L.L.C. (this "Agreement"), dated as of August 31, 1999, for
---------
good and valuable consideration, is adopted by, executed and agreed to by Willis
Stein & Partners, L.P., a Delaware limited partnership ("WSPI"), Willis Stein &
----
Partners II, L.P., a Delaware limited partnership ("WSPII"), Willis Stein &
-----
Partners Dutch, L.P., a Delaware limited partnership ("Dutch") and the other
-----
Persons listed on Schedule A hereto. This Agreement was originally executed on
----------
April 25, 1997 and was amended and restated on May 15, 1997 (which such restated
agreement was amended, but not restated, from time to time thereafter) and was
further amended and restated in its entirety on July 23, 1999 and is now further
amended and restated in its entirety as of the date hereof.
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms have the following meanings:
"Act" means the Delaware Limited Liability Company Act, Title 6,
---
Sections 18-106 to 18-1107 and any successor statute, as amended from time to
time.
"Adjusted Capital Account Deficit" shall mean, with respect to any
--------------------------------
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year or other period, after giving effect to the
following adjustments:
(i) Crediting to such Capital Account any amounts which such Member is
obligated to restore to the Company pursuant to any provision of this Agreement
or is deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debiting to such Capital Account the items described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6). This definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treasury Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Affiliate" means, with respect to a Person, another Person that
---------
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, where "control"
-------
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities, contract or otherwise.
<PAGE>
"Applicable Class A Percentage" means, on any date of determination,
-----------------------------
the lesser of (i) 20% or (ii) 20% of the quotient obtained by dividing (A) the
number of outstanding Class A Management Units on such date by (B) 2,000.
"Applicable Class B Percentage" means, on any date of determination,
-----------------------------
the lesser of (i) 5% or (ii) 5% multiplied by the quotient obtained by dividing
(A) the number of outstanding Class B Management Units on such date by (B) 500.
"Book Value" means, with respect to any Company property, the
----------
Company's adjusted basis for federal income tax purposes, adjusted from time to
time to reflect the adjustments required or permitted by Treasury Regulation
Sections 1.704-l(b)(2)(iv)(d)-(g).
"Business Day" means any day other than a Saturday, a Sunday or a
------------
holiday on which national banking associations in the State of Illinois are
closed.
"Capital Contribution" means the aggregate contributions made by a
--------------------
Member to the capital of the Company. The aggregate Capital Contributions as of
the date hereof of each Member is shown opposite such Member's name on Schedule
--------
A, as the same may be amended from time to time.
- -
"Cash Inflows" means, with respect to the Investors, all payments or
------------
distributions of cash received by such Investors directly from the Company with
respect to the Investor Units issued to the Investors pursuant to this Agreement
(including, without limitation, distributions made to the Investors pursuant to
Section 5.4).
- -----------
"Cash Outflows" means, with respect to the Investors, all Capital
-------------
Contributions made by such Investors with respect to Investor Units issued to
the Investors pursuant to this Agreement (including, without limitation,
contributions made by the Investors pursuant to Section (5.4).
-------------
"Class A Investor Units" means (i) any Class A Investor Units
----------------------
originally issued to the Investors pursuant to this Agreement and designated as
Class A Investor Units on Schedule A, (ii) any Class A Investor Units otherwise
----------
acquired by a Person holding Class A Investor Units and (iii) any Class A
Investor Units issued with respect to the Class A Investor Units referred to in
clauses (i) or (ii) by way of dividend or Unit split or in connection with a
combination of Units, recapitalization, merger or other reorganization. A Class
A Investor Unit will continue to be a Class A Investor Unit in the hands of any
Person to which such Unit is transferred.
"Class B Investor Units" means (i) any Class B Investor Units
----------------------
originally issued to the Investors pursuant to this Agreement and designated as
Class B Investor Units on Schedule A, (ii) any Class B Investor Units otherwise
----------
acquired by a Person holding Class B Investor Units and (iii) any Class B
Investor Units issued with respect to the Class B Investor Units referred to in
clauses (i) or (ii) by way of dividend or Unit split or in connection with a
combination of Units, recapitalization, merger or other reorganization. A Class
B Investor Unit will continue to be a Class B Investor Unit in the hands of any
Person to which such Unit is transferred.
-2-
<PAGE>
"Class A Management Units" means (i) the Class A Management Units (A)
------------------------
issued and outstanding as of the date hereof and held by Jason Elkin, Joseph D.
Gersh, Peter Kauff, George Giatzis, and Martin Grant or (B) allocated to the
Pool pursuant to this Agreement and designated as Class A Management Units on
Schedule A and (ii) any Class A Management Units issued with respect to such
- ----------
Class A Management Units by way of dividend or Unit split or in connection with
a combination of Units, recapitalization, merger or other reorganization. A
Class A Management Unit will continue to be a Class A Management Unit in the
hands of any Person to which such Unit is transferred.
"Class B Management Units" means (i) the Class B Management Units (A)
------------------------
originally issued and outstanding pursuant to this Agreement to the applicable
persons listed on Schedule A or (B) allocated to the Pool pursuant to this
----------
Agreement and designated as Class B Management Units on Schedule A and (ii) any
----------
Class B Management Units issued with respect to such Class B Management Units by
way of dividend or Unit split or in connection with a combination of Units,
recapitalization, merger or other reorganization. A Class B Management Unit
will continue to be a Class B Management Unit in the hands of any Person to
which such Unit is transferred.
"Class A Investor IRR" means the annual interest rate (compounded
--------------------
annually) which, when used to calculate the net present value of (i) all Cash
Inflows received by any holder of Class A Investor Units with respect to the
Round One Investment and (ii) all Cash Outflows made to any holder of Class A
Investor Units with respect to the Round One Investment through the date of
determination, causes such net present value to equal zero. Any Class A
Investor IRR calculation required pursuant to this Agreement shall be determined
by the Company's regular outside accounting firm. For purposes of any such net
present value calculation, each Cash Inflow and each Cash Outflow specified
above shall be deemed to have been received or made on the first day of the
month nearest to the actual date of such payment.
"Class B Investor IRR" means the annual interest rate (compounded
--------------------
annually) which, when used to calculate the net present value of (i) all Cash
Inflows received by any holder of Class B Investor Units with respect to the
Round Two Investment and (ii) all Cash Outflows made to any holder of Class B
Investor Units with respect to the Round Two Investment through the date of
determination, causes such net present value to equal zero. Any Class B
Investor IRR calculation required pursuant to this Agreement shall be determined
by the Company's regular outside accounting firm. For purposes of any such net
present value calculation, each Cash Inflow and each Cash Outflow specified
above shall be deemed to have been received or made on the first day of the
month nearest to the actual date of such payment.
"Class A Investor Yield" means at any time an amount calculated on a
----------------------
daily basis (without daily compounding) at the rate of 12.5% per annum,
compounded annually, on the Unreturned Class A Investor Capital and the Unpaid
Class A Investor Yield.
"Class B Investor Yield" means at any time an amount calculated on a
----------------------
daily basis (without daily compounding) at the rate of 12.5% per annum,
compounded annually, on the Unreturned Class B Investor Capital and the Unpaid
Class B Investor Yield.
"Class R Management Units" means (i) the Class R Management Units
------------------------
originally issued to Jason Elkin and Joseph D. Gersh and designated as Class R
Management Units on Schedule A and (ii) any Class R Management Units issued with
----------
respect to such Class R Management Units by way of dividend or Unit split or in
connection with a combination of Units, recapitalization, merger or other
reorganization.
-3-
<PAGE>
A Class R Management Unit will continue to be a Class R Management Unit in the
hands of any person to which such Unit is transferred.
"Code" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute. Such term shall be deemed to include any future amendments
to the Code or any successor statute to the extent the Managing Member
determines that any such amendments do not adversely affect the relative
economic interests of the Members hereunder.
"Company" means U-C Holdings, L.L.C., a Delaware limited liability
-------
company.
"CTN" means College Television Network, Inc., a Delaware corporation.
---
"Entity" means any general partnership, limited partnership,
------
corporation, association, cooperative, joint stock company, trust, limited
liability company, business trust, joint venture, unincorporated organization,
governmental entity (or any department, agency or political subdivision thereof)
or other entity.
"Equity Protection Agreements" means those certain Equity Protection
----------------------------
Agreements dated as of April 25, 1997 by and between the Company and CTN, as
amended and modified from time to time.
"Family Group" means a Unitholder's spouse and descendants (whether
------------
natural or adopted) and any trust solely for the benefit of such Unitholder
and/or such Unitholder's spouse and/or descendants.
"Fiscal Year" of the Company means the Company's annual accounting
-----------
period ending on December 31.
"Investor" means any holder of Class A Investor Units or Class B
--------
Investor Units, and "Investors" shall mean all such Investors collectively.
---------
"Investor Units" means, collectively, the Class A Investor Units and
--------------
the Class B Investor Units.
"Losses" for any period means all items of Company loss, deduction and
------
expense for such period determined in accordance with Section 4.2.
-----------
"Management Holder" means any holder of Management Units.
-----------------
"Management Units" means, collectively, the Class A Management Units,
----------------
the Class B Management Units and the Class R Management Units.
"Member" means any Person executing this Agreement as of the date of
------
this Agreement as a Member or hereafter admitted to the Company as a Member in
accordance with this Agreement and the Act, but does not include any Person who
has ceased to be a member of the Company or no longer owns Units. The Members
shall constitute the "members" (as that term is defined in the Act) of the
Company.
-4-
<PAGE>
"Person" means any individual or Entity, and the heirs, executors,
------
administrators, legal representatives, successors and assigns of such Person
where the context so permits.
"Permitted Transferee" means (i) with respect to any Unitholder who is
--------------------
a natural person, a member of such Unitholder's Family Group and any Transferee
pursuant to applicable laws of descent and distribution and (ii) with respect to
any Unitholder which is an Entity, any of such Unitholder's Affiliates.
"Pool" means, collectively, (i) any Class B Management Units that have
----
not been allocated to any Member or have become unallocated due to repurchase by
the Company and (ii) those certain Class A Management Units listed as of the
date hereof on Schedule A across from the caption "Unallocated Pool".
----------
"Preferred Units" means (i) any Preferred Units originally issued to
---------------
WSPI, WSPII or Dutch pursuant to this Agreement and designated as Preferred
Units on Schedule A, and (ii) any Preferred Units issued with respect to the
----------
Preferred Units referred to in clause (i) by way of dividend or Unit split or in
connection with a combination of Units, recapitalization, merger or other
reorganization. A Preferred Unit will continue to be a Preferred Unit in the
hands of any Person to which such Unit is transferred.
"Profits" for any period means all items of Company income and gain
-------
for such period determined in accordance with Section 4.2.
-----------
"Required Interests" means each of (i) the Members holding at least a
------------------
majority of the Investor Units and (ii) the Members holding at least a majority
of the Management Units.
"Restricted Securities" means (i) the securities issued hereunder, and
---------------------
(ii) any securities issued with respect to the securities referred to in clause
(i) above in connection with a conversion, combination of shares,
recapitalization, merger, consolidation or other reorganization.
"Round One Investment" means all Capital Contributions made on or
--------------------
after April 25, 1997 and on and before July 23, 1999 plus any Capital
Contributions made with respect to the securities purchased on or before July
23, 1999 and all Capital Contributions made after July 23, 1999 to fund the
exercise of any Warrants and the Equity Protection Agreements pursuant to
Section 3.5(c).
- --------------
"Round Two Investment" means all Capital Contributions made after July
--------------------
23, 1999 other than Capital Contributions made with respect to a Round One
Investment.
"Round One Proceeds" means any and all proceeds or other distributions
------------------
on or with respect to any securities purchased or otherwise acquired or received
(including any other securities issued with respect to such securities by way of
an interest payment, stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization) by the Company from CTN with the proceeds of the Round One
Investment.
"Round Two Proceeds" means any and all proceeds or other distributions
------------------
on or with respect to any securities purchased or otherwise acquired or received
(including any other securities issued with respect to such securities by way of
an interest payment, stock dividend or stock split or in connection with
-5-
<PAGE>
a combination of shares, recapitalization, merger, consolidation or other
reorganization) by the Company from CTN with the proceeds of the Round Two
Investment.
"Securities Act" means the U.S. Securities Act of 1933, as amended.
--------------
"Subsidiary" shall mean, with respect to any Person, (a) any
----------
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership, limited liability company or other entity
in which such Person and/or one or more Subsidiaries of such Person shall have
an interest (whether in the form of voting or participation in profits or
capital contribution) of more than 50%.
"Taxable Year" means the Company's taxable year ending December 31 (or
------------
part thereof, in the case of the Company's last taxable year), or such other
year as is (i) required by Section 706 of the Code or (ii) determined by the
Managing Manager.
"Transfer" means any sale, transfer, assignment, pledge, mortgage,
--------
exchange, hypothecation, grant of a security interest or other direct or
indirect disposition or encumbrance of an interest (including, without
limitation, by operation of law) or the acts thereof. The terms "Transferee,"
----------
"Transferred," and other forms of the word "Transfer" shall have correlative
- ------------
meanings.
"Treasury Regulations" means the income tax regulations promulgated
--------------------
under the Code and effective as of the date hereof. Such term shall be deemed
to include any future amendments to such regulations and any corresponding
provisions of succeeding regulations to the extent the Managing Member
determines that any such amendments and succeeding regulations do not adversely
affect the relative economic interests of the Members hereunder.
"Unitholder" means any holder of a Unit.
----------
"Unpaid Class A Investor Yield" means at any time with respect to any
-----------------------------
Class A Investor Unit an amount equal to the excess, if any, of (a) the
aggregate Class A Investor Yield accrued through such date with respect to such
Class A Investor Unit, over (b) all prior distributions made by the Company with
respect to such Class A Investor Unit pursuant to Section 5.2(b) and Section
-------------- -------
5.4(a) and Section 12.4.
- ------ ------------
"Unpaid Class B Investor Yield" means at any time with respect to any
-----------------------------
Class B Investor Unit an amount equal to the excess, if any, of (a) the
aggregate Class B Investor Yield accrued through such date with respect to such
Class B Investor Unit, over (b) all prior distributions made by the Company with
respect to such Class B Investor Unit pursuant to Section 5.3(b), Section 5.4(a)
-------------- --------------
and Section 12.4.
------------
"Unreturned Class A Investor Capital" means at any time the aggregate
-----------------------------------
Capital Contributions with respect to the Class A Investor Units reduced by all
prior distributions made to the holders of Class A Investor Units by the Company
pursuant to Section 5.2(a).
--------------
-6-
<PAGE>
"Unreturned Class B Investor Capital" means at any time the aggregate
-----------------------------------
Capital Contributions with respect to the Class B Investor Units reduced by all
prior distributions made to the holders of Class B Investor Units by the Company
pursuant to Section 5.3(a).
--------------
"Warrants" means those certain Class C Warrants to purchase common
--------
stock of CTN issued to the Company by CTN on April 25, 1997, to purchase common
stock of CTN issued to the Company by CTN from time to time.
1.2 Other Definitions. Each of the following defined terms has the
-----------------
meaning given such term in the Section set forth opposite such defined term:
<TABLE>
<CAPTION>
Defined Term Section
------------ -------
<S> <C>
"Agreement" Preamble
"Board" 6.5
"Capital Account" 4.1
"Certificate" 2.1
"Certificated Units" 11.8
"Defaulting Member" 3.8
"Indemnifying Member" 13.9
"Management Notes" 5.6
"Management Directors" 6.5(a)(ii)
"Managing Member" 6.1
"Other Directors" 6.5(a)(iii)
"Passive Investment" 2.4
"Post-Distribution Capital Contribution" 5.3(f)
"Proceeding" 8.2
"Remaining Assets" 12.2(d)
"Tax Matters Member" 9.2
"Unit" 3.4
</TABLE>
1.3 Construction. Whenever the context requires, the gender of allused
------------
in this Agreement includes the masculine, feminine and neuter. All references to
Articles and Sections refer to articles and sections of this Agreement, and all
references to Schedules are to schedules attached hereto, each of which is made
a part hereof for all purposes.
-7-
<PAGE>
ARTICLE II
ORGANIZATION
------------
2.1 Formation. The Company has been organized as a Delaware limited
---------
liability company by the filing of a Certificate of Formation (the
"Certificate") under and pursuant to the Act. The rights and liabilities
-----------
of the Members shall be determined pursuant to the Act and this Agreement. To
the extent that the rights or obligations of any Member are different by reason
of any provision of this Agreement than they would be in the absence of such
provision, this Agreement, to the extent permitted by the Act, shall control.
2.2 Name. The name of the Company is "U-C Holdings, L.L.C." and all
----
Company business shall be conducted in that name or such other names that comply
with applicable law as the Managing Member may select from time to time.
2.3 Registered Office; Registered Agent; Principal Office; Other
------------------------------------------------------------
Offices. The registered office of the Company required by the Act to be
maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate or such other office (which need not
be a place of business of the Company) as the Managing Member may designate from
time to time in the manner provided by law. The principal office of the Company
shall be at such place as the Managing Member may designate, from time to time,
which need not be in the State of Delaware, and the Company shall maintain
records there.
2.4 Purposes. The nature of the business or purposes to be conducted or
--------
promoted by the Company is to engage in any lawful act or activity for which
limited liability companies may be organized under the Act. The Company may
engage in any and all activities necessary, desirable or incidental to the
accomplishment of the foregoing. Notwithstanding anything herein to the
contrary, nothing set forth herein shall be construed as authorizing the Company
to possess any purpose or power, or to do any act or thing, forbidden by law to
a limited liability company organized under the laws of the State of Delaware.
The Company shall not (i) create, incur, assume or suffer to exist any
indebtedness for borrowed money or issue evidences of indebtedness or guaranty
indebtedness, or secure the same by a mortgage, pledge or other lien on the
assets of the Company, or (ii) enter into or engage in any transaction which is
reasonably likely to cause WSPI or any of its limited partners which are exempt
from income taxation under Code (S) 501(a) and, if applicable, any pension plan
that any such trust may be a part of, to recognize unrelated business taxable
income as defined in Code (S)(S) 512 and 514. Without limiting the generality of
the preceding sentence, the Company shall not: (i) engage in any trade or
business other than the passive investment in securities of a corporation (a
"Passive Investment") or (ii) create, incur, assume or suffer to exist any
- -------------------
indebtedness for borrowed money or issue evidences of indebtedness or guarantee
indebtedness in connection with a Passive Investment, or secure the Passive
Investment by a mortgage, pledge or other lien on the assets of the Company, for
any length of time. It is understood and agreed to by the Members and the
Company that the Negative Pledge Agreement, dated as of July 26, 1999, by and
between the Company and LaSalle Bank National Association, and the Guaranty,
dated as of August 31, 1999, from the Company in favor of Canadian Imperial Bank
of Commerce, as Agent, and the lender institutions referenced therein, are both
hereby approved by the Members and neither such agreements shall in any way be
deemed to be a violation of this Section 2.4.
-----------
-8-
<PAGE>
2.5 Term. The term of the Company commenced on the date the
----
Certificate was filed with the office of the Secretary of State of Delaware and
shall continue in existence until December 31, 2007 or termination and
dissolution of the Company as determined under Section 12.1 of this Agreement.
------------
2.6 No State-Law Partnership. The Members intend that the Company shall
------------------------
not be a partnership (including, without limitation, a limited partnership) or
joint venture, and that no Member or the Company shall be a partner or joint
venturer of any other Member or the Company, for any purposes other than federal
and, if applicable, state tax purposes, and this Agreement shall not be
construed to the contrary. The Members intend that the Company shall be treated
as a partnership for federal and, if applicable, state income tax purposes, and
each Member and the Company shall file all tax returns and shall otherwise take
all tax and financial reporting positions in a manner consistent with such
treatment.
ARTICLE III
MEMBERSHIP; MEMBER UNITS
------------------------
3.1 Members. The name and address of each Member, the number of Units of
-------
each class owned by such Member at any time, the percentage of each class of
Units owned by such Member, and the Capital Contribution and Capital Account of
such Member with respect to such Units (as determined in accordance with Section
-------
4.1) shall be set forth next to each Member's name on Schedule A hereto, as
- ---
amended from time to time in accordance with this Agreement. Each Person listed
on Schedule A, upon (i) his or its execution of this Agreement or counterpart
----------
thereof and (ii) receipt (or deemed receipt) of such Person's Capital
Contribution as set forth on Schedule A, is hereby admitted to the Company as a
----------
Member of the Company. No Member shall be required to make any additional
Capital Contribution except as required by applicable law or by Section 3.5. The
-----------
Members acknowledge that George Giatzis is no longer an employee of CTN, that
the Company has exercised its option pursuant to George Giatzis employment
agreement with CTN (to which the Company is a party) to repurchase all 200 Class
A Management Units held by George Giatzis, but that as of the date hereof such
repurchase has not been completed, that the Company and George Giatzis have not
agreed to the related repurchase price with respect to 66 of those Class A
Management Units, and that at such time as such repurchase has been completed
and the repurchase price is no longer in dispute, all 200 Class A Management
Units will be allocated to the Pool.
3.2 Liability of Members. Except as otherwise required by applicable law
--------------------
and as expressly set forth in this Agreement, no Member shall have any personal
liability whatsoever in his capacity as a Member, whether to the Company, to any
of the other Members, to the creditors of the Company or to any other third
party, for the debts, liabilities, commitments or any other obligations of the
Company or for any losses of the Company, and therefore, a Member shall be
liable only to make the payments provided herein. In accordance with the Act and
the laws of the State of Delaware, a member of a limited liability company may,
under certain circumstances, be required to return amounts previously
distributed to such member. It is the intent of the Members that no distribution
to any Member pursuant to Article V hereof shall be deemed a return of money or
---------
other property paid or distributed in violation of the Act.
3.3 No Authority to Bind Company. No Member (in such Member's capacity as
----------------------------
a Member) shall have the authority or power to represent or act for or on behalf
of the Company, to do any
-9-
<PAGE>
act that would be binding on the Company or to make any expenditures or incur
any obligations on behalf of the Company other than the Managing Member. Each
Member hereby consents to the exercise by the Managing Member of the powers
conferred on such Managing Member by law and this Agreement.
3.4 Member Units. Each Member's interest in the Company, including such
------------
Member's interest, if any, in the capital, income, gains, losses, deductions and
expenses of the Company and the right to vote, if any, on certain Company
matters as provided in this Agreement, shall be represented by "Units" (each,
-----
individually, a "Unit," and any number of Units, including fractions thereof,
----
"Units"). As of the date hereof, the Units are comprised of "Class A Investor
----- ----------------
Units," "Class B Investor Units," "Preferred Units," "Class A Management Units,"
- ----- ---------------------- --------------- ------------------------
"Class B Management Units" and "Class R Management Units". The ownership by a
------------------------ ------------------------
Member of any Class A Investor Units, Class B Investor Units, Preferred Units,
Class A Management Units, Class B Management Units and/or Class R Management
Units shall entitle such Member to allocations of Profits and Losses and other
items and distributions of cash and other property with respect to such Units as
set forth in Article V hereof. Ownership of a Unit by a Member shall entitle
---------
such Member to one (1) vote on any matter voted on by all Members as provided in
this Agreement and/or as required by applicable law. The Managing Member may
cause the Company to issue to a Member certificates representing the Units held
by such Member.
3.5 Issuance of Additional Units and Interests; Admission of New Members;
--------------------------------------------------------------------
Additional Capital Contributions.
- --------------------------------
(a) Subject to obtaining the consent of the Required Interests and as
otherwise provided in this Agreement, the Managing Member shall have the right
to cause the Company to issue (i) additional Units or other interests in the
Company (including other classes or series thereof having different rights),
(ii) obligations, evidences of indebtedness or other securities or interests
convertible or exchangeable into Units or other interests in the Company and
(iii) warrants, options or other rights to purchase or otherwise acquire Units
or other interests in the Company; provided, however, that at any time following
-------- -------
the date hereof, the Company shall not issue Units to any Person unless such
Person shall have executed a joinder agreement in form satisfactory to the
Managing Member pursuant to which such Person agrees to be bound by the
provisions of this Agreement; provided further that no consent of the Required
-------- -------
Interests shall be required in connection with the issuance of the Management
Notes on July 23, 1999 or on August 31, 1999. The Managing Member shall
determine the terms and conditions governing the issuance of such additional
interests, including the number and designation of such additional interests,
the preference (with respect to distributions, in liquidation or otherwise) over
any other Units and any required contributions in connection therewith. Subject
to Section 3.5(b) below, a Person to which the Company issues Units or other
--------------
interests in the Company shall be admitted as a Member of the Company only with
the prior written consent of the Managing Member and if such Person has executed
and delivered a counterpart of this Agreement. Notwithstanding the foregoing,
the Managing Member shall have the right, without obtaining the consent of the
Required Interests or any Member, to cause the Company to issue additional
Investor Units in connection with the repurchase by the Company of any Units
held by any Member pursuant to an agreement with such Member on the same terms
with respect to such repurchased units. At least 10 days prior to the issuance
and sale of any additional Investor Units in connection with any such
repurchase, the Company shall give written notice of such issuance to the
Investors (other than any Investor whose Units are being repurchased) and, to
the extent permitted under applicable securities laws without material
expenditure by the Company, each such Investor shall be entitled to purchase in
connection with such issuance a number of additional Investor Units equal to
such Investor's pro rata share
-10-
<PAGE>
(based upon the number of Investor Units held by such Investor and the number
of Investor Units held by all Investors other than any Investor whose Units are
being repurchased) of such additional Investor Units. Any Investor Units which
remain unpurchased after such offer to such Investors, shall be reoffered to
such Investors on a pro rata basis until all of such Investor Units shall have
been purchased. Each such Investor may elect to purchase additional Investor
Units by delivering written notice of such election to the Company together with
the purchase price therefor (in the form specified in the Company's notice)
within 10 days after receipt of the Company notice. Each purchasing Investor
shall be entitled to purchase such additional Investor Units at the same price
and on the same terms as such Investor Units are offered by the Company to the
other Investors.
(b) Notwithstanding anything herein to the contrary, Jason Elkin shall have
the right in his sole discretion, without obtaining the consent of the Required
Interests or any Member, to (i) cause the Company to issue those certain Class A
Management Units contained in the Pool as of the date hereof or hereafter added
to the Pool pursuant to Section 3.9, or (ii) cause the Company to issue any
-----------
Class B Management Units, or allocate any unallocated Class B Management Units
from the Pool, in an amount not to exceed an aggregate issued and outstanding
number equal to 500 Class B Management Units, in each case to employees of any
Subsidiary of the Company (including, without limitation, employees of CTN but
excluding Jason Elkin); provided, however, that prior to any such issuance,
Jason Elkin shall require such employees to enter into agreements providing for
the repurchase of such Management Units upon termination of employment and shall
obtain the consent of the Managing Member solely with respect to adequacy of any
repurchase rights in favor of the Company regarding such Class A Management
Units or Class B Management Units; and provided further that the Company shall
not issue Class A Management Units or Class B Management Units, or allocate any
unallocated Class A Management Units or Class B Management Units from the Pool,
to any Person unless such Person shall have executed a joinder agreement in form
satisfactory to the Managing Member pursuant to which such Person agrees to be
bound by the provisions of this Agreement, which such form has already been
approved by the Managing Member. In the event Jason Elkin ceases to be an
employee of any Subsidiary of the Company (including, without limitation, CTN)
or ceases to be a Member, the Managing Member shall have the right to issue any
additional Class A Management Units or Class B Management Units, or allocate any
unallocated Class A Management Units or Class B Management Units from the Pool.
(c) Notwithstanding anything to the contrary in Section 3.5(a) above, each
--------------
Investor shall be required to make additional Capital Contributions to the
Company from time to time with respect to the Investor Units held by such
Investor when and as called by the Managing Member upon ten days prior written
notice solely to fund the exercise by the Company of the Warrants or the
exercise by the Company of the purchase rights granted pursuant to the Equity
Protection Agreements. The amount of any such additional Capital Contribution
by such Investor shall be limited to such Investor's pro rata share (based upon
the number of outstanding Investor Units held by such Investor and the number of
outstanding Investor Units held by all Investors) of the aggregate Capital
Contribution being made by all Investors pursuant to such capital call by the
Managing Member. No additional Investor Units will be issued in connection with
any such additional Capital Contribution, unless otherwise decided by the
Managing Member.
3.6 Representations, Warranties and Agreements of the Members. Each
---------------------------------------------------------
Member hereby represents and warrants (severally as to itself only) that:
-11-
<PAGE>
(a) The Units have been purchased by such Member and not by any other
Person, with the Member's own funds or by issuance of Management Notes and not
with the funds of any other Person other than pursuant to the issuance of
Management Notes, and for the account of such Member, not as a nominee or agent
and not for the account of any other Person. Such Member has purchased the Units
for investment for an indefinite period, not with a view to the sale or
distribution of any part of all thereof by public or private sale or other
disposition.
(b) Such Member has been advised that the Units have not been registered
under the Securities Act or registered or qualified under any other securities
law, on the ground, among others, that no distribution or public offering of the
Units is to be effected and the Units will be issued by the Company in
connection with a transaction that does not involve any public offering within
the meaning of Section 4(2) of the Securities Act, or the rules and regulations
of the Securities and Exchange Commission and under comparable exemptive
provisions of the securities laws, rules and regulations of other jurisdictions.
Such Member understands that the Company is relying in part on the Member's
representations as set forth herein for purposes of claiming such exemptions and
that the basis for such exemptions may not be present if, notwithstanding such
Member's representations, such Member has in mind merely acquiring Units for
resale on the occurrence or non-occurrence of some predetermined event. Such
Member has no such intention.
(c) Such Member has such knowledge and experience in financial and business
matters that such Member is capable of evaluating the merits and risks of an
investment in Units and has the capacity to protect such Member's own interests
in connection with such Member's proposed investment in Units.
(d) Such Member acknowledges that such Member has been furnished with such
financial and other information concerning the Company as such Member considers
necessary in connection with such Member's investment in Units. Such Member has
carefully reviewed such information and is thoroughly familiar with the proposed
business, operations, properties and financial condition of the Company and has
discussed with representatives of the Company any questions the Purchase may
have had with respect thereto. Such Member understands: (i) the risks involved
in this offering, including the speculative nature of the investment; (ii) the
financial hazards involved in this offering, including the risk of losing such
Member's entire investment; (iii) the lack of liquidity and restrictions on
transfers of Units; and (iv) the tax consequences of this investment. Such
Member has consulted with such Member's own legal, accounting, tax, investment
and other advisers with respect to the tax treatment of an investment by such
Member in Units and the merits and risks of an investment in Units. Such Member
is an "accredited investor" as defined under the Securities Act or has provided
written notice to the Company that such Member is not an "accredited investor"
prior to purchasing any Units or other interest in the Company.
(e) The execution, delivery and performance by such Member of this
Agreement have been duly authorized by such Member. This Agreement constitutes
a valid and binding obligation of such Member, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
-12-
<PAGE>
(f) Such Member understands that the Units will be "restricted securities"
as that term is defined in Rule 144 under the Securities Act and, accordingly,
that the Units must be held indefinitely unless they are subsequently registered
under the Securities Act and qualified under any other applicable securities law
or exemptions from such registration and qualification are available. Such
Member understands that the Company is under no obligation to register or
qualify Units under the Securities Act, or any other securities law.
(g) Such Member is a resident of the jurisdiction set forth in such
Member's address on Schedule A.
----------
3.7 Capital Contributions. Each Member has made the Capital Contributions
---------------------
to the Company in cash or assets in the amount set forth opposite such Member's
name on Schedule A hereto. Upon receipt of such Capital Contribution set forth
----------
opposite such Member's name on Schedule A, such Member shall be deemed to own
----------
the number of Units set forth opposite such Member's name on Schedule A.
----------
3.8 Defaulting Members. If any Member (a "Defaulting Member") fails to
------------------ -----------------
make full payment of any portion of any additional Capital Contribution called
by the Managing Member pursuant to Section 3.5(c), the Managing Member may
--------------
undertake any one or more of the following steps:
(a) The Managing Member may pursue and enforce all rights and remedies the
Company may have against such Defaulting Member, including a lawsuit to collect
the overdue amount, with interest calculated thereon at a rate equal to 12%.
(b) Notwithstanding anything herein to the contrary, from and after any
date on which a Defaulting Member's fails to make any additional Capital
Contribution pursuant to Section 3.5(c), if such Defaulting Member continues to
--------------
hold Units, such Defaulting Member shall have no right to receive any
distributions from the Company until such time as the amount of distributions
that would have been made to the Defaulting Member shall have been reduced by an
amount equal to the sum of (A) an amount equal to 18% per annum, compounded
annually, of the unpaid additional Capital Contribution and (B) an amount equal
to the unpaid Capital Contribution, and such reduced amount shall have been
distributed to the Investors other than the Defaulting Member pursuant to
Section 5.2(a) and Section 5.3(a).
- -------------- --------------
3.9 Repurchased Units. Any Units issued pursuant to this Agreement which
-----------------
are subsequently held by the Company as a result of any repurchase of such Units
by the Company or otherwise, shall not be considered outstanding Units for any
purpose hereunder, including any Class A Management Units and Class B Management
Units allocated to the Pool. Any Management Units repurchased by the Company
shall be reallocated to the Pool; provided that any Management Units repurchased
--------
by the Company may only be subsequently reissued for a purchase price equal to
or greater than the consideration received in connection with such repurchase.
ARTICLE IV
CAPITAL ACCOUNTS
----------------
-13-
<PAGE>
4.1 Establishment and Determination of Capital Accounts. A capital account
---------------------------------------------------
("Capital Account") shall be established for each Member in accordance with the
--------------
Treasury Regulations under Section 704(b) of the Code. In accordance with such
Treasury Regulations, the Capital Account of each Member shall consist of such
Member's Capital Contribution as listed on Schedule A as of the date hereof, and
shall be (i) increased by any additional Capital Contributions made by such
Member pursuant to the terms of this Agreement and such Member's share of items
of income and gain allocated to such Member pursuant to Article V and (ii)
---------
decreased by such Member's share of items of loss, deduction and expense
allocated to such Member pursuant to Article V and any distributions to such
---------
Member of cash or the fair market value of any other property (net of
liabilities assumed by such Member and liabilities to which such property is
subject) distributed to such Member. Any references in this Agreement to the
Capital Account of a Member shall be deemed to refer to such Capital Account as
the same may be increased or decreased from time to time as set forth above. The
Capital Account maintenance rules set forth in this Section 4.1 are intended to
-----------
be consistent with the capital account maintenance rules of Treasury Regulation
Section 1.704-1(b)(2)(iv).
4.2 Computation of Amounts. For purposes of computing the amount of any
----------------------
item of income, gain, loss, deduction or expense to be reflected in Capital
Accounts, the determination, recognition and classification of each such item
shall be the same as its determination, recognition and classification for
federal income tax purposes; provided that (a) any income that is exempt from
-------------
federal income tax shall be added to such taxable income or losses; (b) any
expenditures of the Company described in Section 705(a)(2)(B) of the Code or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(i), shall be subtracted from such taxable
income or losses; (c) if the Book Value of any Company property is adjusted
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(e) (in connection with
a distribution of such property) or (f) (in connection with a revaluation of
Capital Accounts), the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such property; (d) if property that is
reflected on the books of the Company has a Book Value that differs from the
adjusted tax basis of such property, depreciation, amortization and gain or loss
with respect to such property shall be determined by reference to such Book
Value; and (e) the computation of all items of income, gain, loss, deduction and
expense shall be made without regard to any election pursuant to Section 754 of
the Code that may be made by the Company, unless the adjustment to basis of
Company property pursuant to such election is reflected in Capital Accounts
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
4.3 Interest; Withdrawal. No Member shall be paid interest on any Capital
--------------------
Contributions to the Company or on the balance of such Member's Capital Account.
No Member shall have any right (a) to demand the return of such Member's Capital
Contributions or any other distribution from the Company (whether upon
resignation, withdrawal or otherwise), except upon dissolution of the Company
pursuant to Article XII hereof, or (b) to cause a partition of the Company's
-----------
assets.
ARTICLE V
DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES
------------------------------------------------
5.1 Generally. Subject to the provisions of Section 18-607 of the Act, the
---------
Managing Member shall have sole discretion regarding the amounts and timing of
distributions to Members, in each
-14-
<PAGE>
case subject to the retention and establishment of reasonable reserves of, or
payment to third parties of, such funds as the Managing Member deems necessary
with respect to the reasonable business needs of the Company which shall include
the payment or the making of provision for the payment when due of the Company's
obligations, including the payment of any management or administrative fees and
expenses or any other obligations.
5.2 Distributions Round One Investment. Except as provided in Sections 5.4
----------------------------------
and 5.6, distributions to be made with respect to any Round One Proceeds at any
time shall be made in the following order and priority:
(a) First, to the holders of Class A Investor Units pro rata according to
-----
their ownership of outstanding Class A Investor Units until the aggregate
distributions with respect to the Class A Investor Units made pursuant to this
Section 5.2(a) reduces the aggregate Unreturned Class A Investor Capital to
- --------------
zero;
(b) Second, to the holders of Class A Investor Units pro rata according to
------
their Unpaid Class A Investor Yield until the aggregate distributions with
respect to the Class A Investor Units made pursuant to this Section 5.2(b) and
--------------
Section 5.4(a) reduces the aggregate Unpaid Class A Investor Yield to zero;
- --------------
(c) Third, to the holders of the Class R Management Units pro rata
-----
according to their ownership of the outstanding Class R Management Units until
the aggregate distributions with respect to the Class R Management Units made
pursuant to this Section 5.2(c) equals $750,000;
--------------
(d) Fourth, to the holders of the Class A Management Units pro rata
------
according to their ownership of the outstanding Class A Management Units until
the aggregate distributions with respect to the Class A Management Units made
pursuant to this Section 5.2(d) equals the Applicable Class A Percentage of all
--------------
distributions made pursuant to Section 5.2(b) and this Section 5.2(d);
-------------- --------------
(e) Fifth, until such time as the Class A Investor IRR for each holder of
-----
Class A Investor Units equals 30%, the Applicable Class A Percentage to the
holders of Class A Management Units pro rata according to their ownership of
outstanding Class A Management Units and the remainder to the holders of Class A
Investor Units pro rata according to their ownership of outstanding Class A
Investor Units;
(f) Sixth, after such time as the Class A Investor IRR equals 30% for each
-----
holder of Class A Investor Units (i) to the holders of Class A Management Units
the Applicable Class A Percentage, pro rata according to their ownership of
outstanding Class A Management Units and (ii) the remainder to the holders of
Class B Management Units, pro rata according to their ownership of outstanding
Class B Management Units, until the aggregate distributions with respect to the
Class B Management Units made pursuant to this Section 5.2(f) is equal to the
--------------
Applicable Class B Percentage of the aggregate distributions made pursuant to
Section 5.2(b), (d), (e) and this Section 5.2(f) with respect to the Class A
- ------------------------ --------------
Investor Units and Management Units; and
(g) Seventh, the Applicable Class A Percentage to the holders of Class A
-------
Management Units pro rata according to their ownership of outstanding Class A
Management Units, the Applicable
-15-
<PAGE>
Class B Percentage to the holders of the Class B Management Units pro rata
according to their ownership of outstanding Class B Management Units and the
remainder to the holders of Class A Investor Units pro rata according to their
ownership of outstanding Class A Investor Units.
(h) Notwithstanding Sections 5.2(d) through (g), if subsequent to the
--------------- ---
making of any distribution pursuant to Sections 5.2(d) through (g), a Capital
--------------- ---
Contribution with respect to any Class A Investor Units occurs (a "Post-
----
Distribution Class A Capital Contribution"), then in such case (i) the amount
- -----------------------------------------
that would otherwise be distributed to holders of Class B Management Units
pursuant to Sections 5.2(f) and (g) shall be reduced (and such amount shall be
---------------- ---
distributed in accordance with Sections 5.2(a) through (e) hereof) by an amount
--------------- ---
equal to the excess, if any, of (x) the aggregate amount of all distributions
previously made to the holders of Class B Management Units pursuant to Sections
--------
5.2(f) and (g) over (y) the aggregate amount of the distributions that would
- ------ ---
have been made to the holders of Class B Management Units pursuant to Sections
--------
5.2(f) and (g) if all Post-Distribution Class A Capital Contributions had been
- ------ ---
taken into account for purposes of determining whether the Class A Investor IRR
equaled or exceeded 30% for each holder of Class A Investor Units on the date of
such distributions and (ii) the amount that would otherwise be distributed to
holders of Class A Management Units pursuant to Sections 5.2(d) through (g) and
--------------- ---
clause (i) of this Section 5.2(h) shall be reduced (and such amount shall be
distributed in accordance with Section 5.2(a) and (b) hereof) by an amount equal
-------------- ---
to the excess of (x) the aggregate amount of all distributions previously made
to the holders of Class A Management Units pursuant to Sections 5.2(d) through
---------------
(g) over (y) the aggregate amount of the distributions that would have been made
- ---
to the holders of Class A Management Units pursuant to Sections 5.2(d) through
---------------
(g) if all Post-Distribution Class A Capital Contributions had been taken into
- ---
account for purposes of determining whether the Unpaid Class A Investor Yield
had been reduced to zero for all holders of Class A Investor Units on the date
of such distributions.
(i) Attached hereto as Schedule B is an illustrative example of the
----------
operation of this Section 5.2.
-----------
5.3 Distributions Round Two Investment. Except as provided in Sections 5.4
----------------------------------
and 5.6 hereof, distributions to be made with respect to any Round Two Proceeds
at any time shall be made in the following order and priority:
(a) First, to the holders of Class B Investor Units pro rata according to
-----
their ownership of outstanding Class B Investor Units until the aggregate
distributions with respect to the Class B Investor Units made pursuant to this
Section 5.3(a) reduces the aggregate Unreturned Class B Investor Capital to
- --------------
zero;
(b) Second, to the holders of Class B Investor Units pro rata according to
------
their Unpaid Class B Investor Yield until the aggregate distributions with
respect to the Class B Investor Units made pursuant to this Section 5.3(b)
--------------
reduces the aggregate Unpaid Class B Investor Yield to zero;
(c) Third, to the holders of the Class A Management Units pro rata
-----
according to their ownership of the outstanding Class A Management Units until
the aggregate distributions with respect to the Class A Management Units made
pursuant to this Section 5.3(c) equals the Applicable Class A Percentage of all
--------------
distributions made pursuant to Section 5.3(b) and this Section 5.3(c);
-------------- --------------
-16-
<PAGE>
(d) Fourth, until such time as the Class B Investor IRR for each holder of
------
Class B Investor Units equals 30%, the Applicable Class A Percentage to the
holders of Class A Management Units pro rata according to their ownership of
outstanding Class A Management Units and the remainder to the holders of Class B
Investor Units pro rata according to their ownership of outstanding Class B
Investor Units;
(e) Fifth, after such time as the Class B Investor IRR equals 30% for each
-----
holder of Class B Investor Units (i) to the holders of Class A Management Units
the Applicable Class A Percentage, pro rata according to their ownership of
outstanding Class A Management Units and (ii) the remainder to the holders of
Class B Management Units, pro rata according to their ownership of outstanding
Class B Management Units, until the aggregate distributions with respect to the
Class B Management Units made pursuant to this Section 5.3(e) is equal to the
--------------
Applicable Class B Percentage of the aggregate distributions made pursuant to
Section 5.3(b), (c), (d) and this Section 5.3(e) with respect to the Class B
- ------------------------ --------------
Investor Units and Management Units; and
(f) Sixth, the Applicable Class A Percentage to the holders of Class A
-----
Management Units pro rata according to their ownership of outstanding Class A
Management Units, the Applicable Class B Percentage to the holders of the Class
B Management Units pro rata according to their ownership of outstanding Class B
Management Units and the remainder to the holders of Class B Investor Units pro
rata according to their ownership of outstanding Class B Investor Units.
(g) Notwithstanding Sections 5.3(b) through (f), if subsequent to the
--------------- ---
making of any distribution pursuant to Sections 5.3(b) through (f), a Capital
--------------- ---
Contribution with respect to any Class B Investor Units occurs (a "Post-
----
Distribution Capital Contribution"), then in such case (i) the amount that would
- ---------------------------------
otherwise be distributed to holders of Class B Management Units pursuant to
Sections 5.3(e) and (f) shall be reduced (and such amount shall be distributed
- --------------- ---
in accordance with Sections 5.3(a) through (d) hereof) by an amount equal to the
--------------- ---
excess, if any, of (x) the aggregate amount of all distributions previously made
to the holders of Class B Management Units pursuant to Sections 5.3(e) and (f)
--------------- ---
over (y) the aggregate amount of the distributions that would have been made to
the holders of Class B Management Units pursuant to Sections 5.3(e) and (f) if
--------------- ---
all Post-Distribution Capital Contributions had been taken into account for
purposes of determining whether the Class B Investor IRR equaled or exceeded 30%
for each holder of Class B Investor Units on the date of such distributions and
(ii) the amount that would otherwise be distributed to holders of Class A
Management Units pursuant to Sections 5.3(c) through (f) and clause (i) of this
--------------- ---
Section 5.3(g) shall be reduced (and such amount shall be distributed in
- --------------
accordance with Section 5.3(a) and (b) hereof) by an amount equal to the excess
-------------- ---
of (x) the aggregate amount of all distributions previously made to the holders
of Class A Management Units pursuant to Sections 5.3(c) through (f) over (y) the
--------------- ---
aggregate amount of the distributions that would have been made to the holders
of Class A Management Units pursuant to Sections 5.3(b) through (f) if all Post-
--------------- ---
Distribution Capital Contributions had been taken into account for purposes of
determining whether the Unpaid Class B Investor Yield had been reduced to zero
for all holders of Class B Investor Units on the date of such distributions.
(h) Attached hereto as Schedule C is an illustrative example of the
----------
operation of this Section 5.3.
-----------
5.4 Management Unit Holdback. Notwithstanding Sections 5.2 and 5.3 hereof:
------------ ---
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<PAGE>
(a) No distribution shall be made with respect to any Class A Management
Unit until the Unpaid Class A Investor Yield and the Unpaid Class B Investor
Yield have each been reduced to zero. Any distribution to which holders of
Class A Management Units would be entitled pursuant to the terms of Section 5.2
-----------
or 5.3 (as applicable) without regard to this Section 5.4 that is not
--- -----------
distributed by reason of application of the first sentence of this Section 5.4
-----------
shall be held by the Company or, if requested by WSPI, shall be distributed to
WSPI, WSPII or Dutch. If, as a result of any distribution pursuant to Section
-------
5.2 or 5.3 hereof, the Unpaid Class A Investor Yield and the Unpaid Class B
- --- ---
Investor Yield have each been reduced to zero, any amounts not distributed with
respect to the Class A Management Units pursuant to the first sentence of this
Section 5.4 shall (prior to any other distributions under Section 5.2 or 5.3
- ----------- ----------- ---
hereof) be distributed to the holders of Class A Management Units, pro rata
according to their ownership of the outstanding Class A Management Units. If
any amounts required to be distributed with respect to the Class A Management
Units pursuant to the preceding sentence had previously been distributed to
WSPI, WSPII or Dutch pursuant to the second sentence of this Section 5.4, WSPI,
-----------
WSPII or Dutch (as applicable) shall contribute such amount to the Company
(which contributions shall be deemed to be Capital Contributions hereunder).
(b) No distribution shall be made with respect to any Class B Management
Unit until the Class A Investor IRR equals or exceeds 30% for all holders of
Class A Investor Units and the Class B Investor IRR equals or exceeds 30% for
all holders of Class B Investor Units. Any distribution to which holders of
Class B Management Units would be entitled pursuant to the terms of Section 5.2
-----------
or 5.3 (as applicable) without regard to this Section 5.4 that is not
--- -----------
distributed by reason of application of the first sentence of this Section 5.4
-----------
shall be held by the Company or, if requested by WSPI, WSPII or Dutch, shall be
distributed to (i) the Investors until the Unpaid Class A Yield and the Unpaid
Class B Yield have each been reduced to zero for all holders of Class A Investor
Units and Class B Investor Units and (ii) thereafter in accordance with Sections
--------
5.2(d) and (e) and Sections 5.3(c) and (d) hereof. If, as a result of any
- ------ --- --------------- ---
distribution pursuant to Section 5.2 or 5.3 hereof, the Class A Investor IRR
----------- ---
equals or exceeds 30% for all holders of Class A Investor Units and the Class B
Investor IRR equals or exceeds 30% for all holders of Class B Investor Units,
any amounts not distributed with respect to the Class B Management Units
pursuant to the first sentence of this Section 5.4 shall (prior to any other
-----------
distributions under Section 5.2 or 5.3 hereof) be distributed to the holders of
----------- ---
Class B Management Units, pro rata according to their ownership of the
outstanding Class B Management Units. The Investors and/or any holder of Class
A Management Units who or that received a distribution pursuant to the second
sentence of this Section 5.4(b) shall contribute to the Company an amount equal
--------------
to such person's appropriate share of the amount required to be distributed to
holders of Class B Management Units pursuant to the immediately preceding
sentence.
5.5 Allocation of Profits and Losses.
--------------------------------
(a) Except as set forth in Section 5.5(b) hereof, for each Fiscal Year of
--------------
the Company, all Profits and Losses shall be allocated to the Members' Capital
Accounts in a manner such that, as of the end of such Fiscal Year, the Capital
Account of each Member (which may be either a positive or negative balance)
shall be equal to (a) the amount which would be distributed to such Member,
determined as if the Company were to liquidate all of its assets for the Book
Value thereof and distribute the proceeds thereof pursuant to Section 12.2
------------
hereof, minus (b) the sum of (i) such Member's share of partnership minimum gain
-----
(as determined according to Treasury Regulation Sections 1.704-2(d) and (g)(3))
and partner minimum gain (as determined according to Treasury Regulation Section
1.704-2(i)) and (ii) the amount,
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<PAGE>
if any, which such Member is obligated to contribute to the capital of the
Company as of the last day of such Fiscal Year.
(b) If any Unitholder that unexpectedly receives an adjustment, allocation
or distribution described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as of the
end of any Taxable Year, then Profits for such Taxable Year shall be allocated
to such Unitholder in proportion to, and to the extent of, such Adjusted Capital
Account Deficit. This Section 5.3(b) is intended to be a qualified income
--------------
offset provision as described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.
5.6 Capital Contributions.
---------------------
(a) Notwithstanding anything to the contrary contained in Sections 5.2 and
----------------
5.3, the Members acknowledge that the Management Holders paid a portion of their
- ---
Capital Contributions by the delivery of promissory notes to the Company, which
notes outstanding as of the date hereof are listed on Schedule A (as amended and
restated from time to time, the "Management Notes") and that all principal and
----------------
accrued interest with respect to the Management Notes which is paid to the
Company by such Management Holders shall be distributed solely to the holders of
the Preferred Units. Each of the Management Holders acknowledges and agrees
that until such time as all principal and accrued interest with respect to the
Management Note of such Management Holder is paid in full, such Management
Holder shall have no right to receive any distributions from the Company and all
distributions which would have been paid by the Company to such Management
Holder shall be retained by the Company as payment with respect to the
Management Note of such Management Holder and distributed in accordance with the
immediately preceding sentence until such Management Notes and all accrued and
unpaid interest thereon is paid in full.
(b) Of the aggregate Capital Contributions made by WSPI, an amount equal
to the aggregate principal amount of all Management Notes issued with respect to
the Round One Investment shall be treated as contributed with respect to
Preferred Units, and the remainder shall be treated as contributed with respect
to Class A Investor Units. Of the aggregate Capital Contributions made by WSPII
or Dutch, an amount equal to the aggregate principal amount of all Management
Notes issued with respect to the Round Two Investment shall be treated as
contributed with respect to Preferred Units, and the remainder shall be treated
as contributed with respect to Class B Investor Units. The Company and the
Members acknowledge and agree that the principal amount of any Management Note
shall be treated as a Capital Contribution and included in the Capital Account
of the Member issuing such Management Note as of the original date of issuance
of such Management Note, or as of the date of assumption of such Management
Note, and that any assumption of the obligation to repay any such Management
Note shall be treated as an assumption of the rights and obligations associated
with such related Capital Contribution.
5.7 Tax Allocations; Code Section 704(c).
------------------------------------
(a) The income, gains, losses, deductions and expenses of the Company shall
be allocated, for federal, state and local income tax purposes, among the
Members in accordance with the allocation of such income, gains, losses,
deductions and expenses among the Members for computing their Capital Accounts,
except that if any such allocation is not permitted by the Code or other
- -----------
applicable law,
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<PAGE>
the Company's subsequent income, gains, losses, deductions and expenses shall be
allocated among the Members so as to reflect as nearly as possible the
allocation set forth herein in computing their Capital Accounts.
(b) In accordance with Code Section 704(c) and the Treasury Regulations
thereunder, income, gain, loss, deduction and expense with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its fair market value at the time of contribution.
(c) If the Book Value of any Company asset is adjusted pursuant to Section
-------
4.2, subsequent allocations of items of taxable income, gain, loss, deduction
- ---
and expense with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its
Book Value in the same manner as under Code Section 704(c).
(d) Any elections or other decisions relating to such allocations shall be
made by the Members in any manner that reasonably reflects the purpose and
intent of this Agreement. Allocations pursuant to this Section 5.7 are solely
-----------
for purposes of federal, state and local taxes and shall not affect, or in any
way be taken into account in computing, any Member's Capital Account or share of
profits, losses, other items or distributions pursuant to any provisions of this
Agreement.
(e) The Company and the Members agree to use the "traditional method" with
respect to Section 704(c) of the Code.
ARTICLE VI
MANAGEMENT OF THE COMPANY
-------------------------
6.1 Managing Member. Except as otherwise required by the Act, the business
---------------
and affairs of the Company shall be managed by or under the direction of a
"manager" (as that term is defined in the Act) who shall be a Member (the
---
"Managing Member"). The initial Managing Member shall be WSPI. Except as
---------------
otherwise expressly provided for in this Agreement, the Members hereby consent
to the exercise by the Managing Member of all such powers and rights conferred
on it by the Act with respect to the management and control of the Company. The
Managing Member shall have the power on behalf and in the name of the Company to
carry out any and all of the objectives and purposes of the Company and to
perform all acts and enter into and perform all contracts and other undertakings
which the Managing Member, in its sole discretion, deems necessary or advisable
or incidental thereto, including the power to dispose of or vote any security
held by the Company (including any securities of CTN) or exercise or convert any
right to acquire securities held by the Company (including the Warrants,
convertible preferred stock of CTN and the Equity Protection Agreements).
Notwithstanding the foregoing and except as explicitly set forth in this
Agreement, if a vote, consent or approval of the Members is required by the Act
or other applicable law with respect to any act to be taken by the Company or
matter considered by the Managing Member, the Members agree that they shall be
deemed to have consented to or approved such act or voted on such matter in
accordance with the determination of the Managing Member on such act or matter.
No Member, in his or its capacity as a Member, shall have any power to act for,
sign for or do
-20-
<PAGE>
any act that would bind the Company. The Managing Member shall devote such time
and effort to the affairs of the Company as he or it may deem appropriate for
the oversight of the management and affairs of the Company.
6.2 Delegation by Managing Member. The Managing Member shall have the
-----------------------------
power and authority to delegate to one or more other Persons the Managing
Member's rights and powers to manage and control the business and affairs of the
Company, including to delegate to agents and employees of a Member or the
Company, and to delegate by a written agreement with, or otherwise to, other
Persons. The Managing Member may authorize any Person (including, without
limitation, any Member) to enter into and perform under any document on behalf
of the Company.
6.3 Resignation; Vacancy; Removal. The Managing Member may resign by
-----------------------------
delivering his or its written resignation to the Company and to the other
Members. Such resignation shall be effective fourteen (14) business days
following receipt of such resignation by the Company unless some later time is
specified in such resignation. If a vacancy in the position of Managing Member
should for any reason occur, a replacement Managing Member shall be appointed by
WSPI. Any subsequent Managing Member may be removed only by WSPI. The initial
Managing Member may not be removed for any reason.
6.4 Compensation. The Managing Member shall not be entitled to
------------
compensation from the Company in connection with its activities as Managing
Member; provided that the foregoing shall not prevent the Managing Member from
--------
receiving reimbursement for out-of-pocket expenses incurred by the Managing
Member on behalf of the Company, receiving distributions as a Member pursuant to
this Agreement or otherwise receiving compensation from the Company for actions
unrelated to its activities as Managing Member.
6.5 Board Membership of Subsidiaries.
--------------------------------
(a) The Managing Member and each other Member shall cause the Company to
vote all voting securities of CTN over which the Company has voting control and
shall take all other necessary or desirable actions within its control
(including in its capacity as a member of the Board, as defined below) so that
the following individuals shall be elected to the board of directors of CTN (the
"Board") and shall remain directors of the Board until removed in accordance
-----
with Sections 6.5(b) and 6.5(c):
--------------- ------
(i) two representatives designated by the holders of a majority of the
Investor Units (the "Investor Directors"), which Investor Directors shall
------------------
initially be Avy H. Stein and Daniel M. Gill;
(ii) Jason Elkin, Peter Kauff and Martin Grant (the "Management
----------
Directors"), so long as each such Management Director is employed by CTN; and
(iii) up to six additional representatives designated by the holders of
a majority of the Investor Units, who shall initially include Thomas McMillian
(the "Other Directors").
---------------
-21-
<PAGE>
(b) The removal from the Board (with or without cause) of any Investor
Director or any Other Director shall only be upon written request of the
Managing Member and under no other circumstances.
(c) Each Management Director shall be removed from the Board automatically
if such Management Director ceases to be employed by CTN for any reason.
(d) In the event that any representative designated hereunder ceases to
serve as a member of the Board during his term of office for any reason, the
resulting vacancy on the Board shall be filled by a representative designated by
the same group or Person that designated such prior representative.
ARTICLE VII
MEMBERS
-------
7.1 Membership Status; Resignation. A Transfer by a Member of all of such
------------------------------
Member's Units shall be deemed to be a resignation by such Member effective upon
consummation of such Transfer and such Member shall not be entitled to any
distributions or payments of any kind from the Company as a consequence of such
transfer and the transferee shall be entitled to succeed to the rights, benefits
and interests in all such Units. Transfers may only be made pursuant to Article
-------
XI hereof. To the fullest extent permitted by law, a Member may not resign or
- --
withdraw as a Member of the Company without the consent of the Managing Member,
which consent may be withheld in its sole discretion.
7.2 No Participation in Management. The management of the business and
------------------------------
affairs of the Company shall be vested in whole in the Managing Member in
accordance with Article VI of this Agreement. Except with respect to the
----------
execution and filing of the Certificate, as otherwise specifically provided by
this Agreement or required by the Act, no Member, acting solely in the capacity
of Member, shall participate in the management of or be an agent of the Company
or have any authority to act for or bind the Company.
7.3 Voting Rights Generally; Voting of Units. Except as expressly
--------------------------
provided in this Agreement or as may be required by the Act, Members shall have
no voting, approval or consent rights. Each Member shall be entitled to one (1)
vote for each Unit held by such Member upon any matter upon which Members are
entitled to vote submitted to a vote at a meeting of the Members called by the
Managing Member. Any action required to, or which may be, taken by Members may
be taken without a meeting if consented thereto in a writing setting forth the
action so taken and signed by the Members who constitute a Required Interest and
who are entitled to vote with respect to the subject matter thereof.
7.4 Conflicts of Interest. The Company may transact business with any
---------------------
Member, its Affiliates and each of their respective stockholders, directors,
officers, controlling persons, members, partners and employees; provided, the
terms of those transactions are no less favorable than those the Company could
obtain from unrelated third parties or are approved by a majority of the Members
who have no direct or indirect interest in that transaction.
-22-
<PAGE>
7.5 Outside Activities. Each Member of the Company, in its capacity as
------------------
such, its Affiliates and each of their respective stockholders, directors,
officers, controlling persons, members, partners and employees may at any time
and from time to time may engage in and own interests in other business ventures
of any and every type and description, independently or with others (including
ones in competition with the Company) with no obligation to offer to the Company
or any other Member or officer the right to participate therein. Neither the
Company nor any Member of the Company shall have any rights by virtue of this
Agreement or the limited liability company relationship created hereby in any
such business interests or activities of any such Person.
7.6 Confidentiality. Each Member agrees to maintain the confidentiality
---------------
of all proprietary, nonpublic information, documents and materials relating to
the business of the Company or any of its Subsidiaries which the Member now or
in the future may possess, except to the extent disclosure of any such
information is required by law or authorized by the Company or reasonably occurs
in connection with disputes over the terms of this Agreement.
ARTICLE VIII
EXCULPATION AND INDEMNIFICATION
-------------------------------
8.1 Exculpation. No Member (including the Managing Member) shall have
-----------
any duty to the Company or to any Member of the Company except as expressly set
forth herein. No Member (including the Managing Member) shall be liable to any
other Member or the Company for any loss or damage suffered by the Company or
any Member unless such loss or damage is caused by such Member's gross
negligence, willful misconduct, intentional violation of law or material breach
of this Agreement. No Member (including the Managing Member) shall be liable for
errors in judgment or for any acts or omissions that do not constitute gross
negligence, willful misconduct, intentional violation of law or material breach
of this Agreement. Any Member (including the Managing Member) may consult with
counsel and accountants in respect of Company affairs, and provided such Member
acts in good faith reliance upon the advice or opinion of such counsel or
accountants, such Member shall not be liable for any loss or damage suffered by
the Company or any Member in reliance thereon. The preceding sentence shall in
no way limit any Person's right to rely on information to the extent provided in
Section 18-406 of the Act.
8.2 Right to Indemnification. Subject to the limitations and conditions
------------------------
as provided in this Article VIII, each Person who was or is made a party or is
------------
threatened to be made a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative (hereinafter a "Proceeding"), or any appeal in such a Proceeding or
----------
any inquiry or investigation that could lead to such a Proceeding, by reason of
the fact that such Person, or a Person of whom such Person is the legal
representative, is or was a Member of the Company or while a Member of the
Company is or was serving at the request of the Company as a manager, director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic limited liability company,
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise, shall be indemnified by the Company (to the
extent of the Company's assets and without requiring any additional Capital
Contributions not otherwise required by this Agreement) to the fullest extent
permitted under applicable law, as the same exist or may hereafter be amended
(but, in the
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<PAGE>
case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than said law
permitted the Company to provide prior to such amendment) against judgments,
penalties (including excise and similar taxes and punitive damages), fines,
settlements and reasonable expenses (including, without limitation, attorneys'
fees) actually incurred by such Person in connection with such
Proceeding; provided that (a) such Person's course of conduct was pursued in
--------------
good faith and believed by such Person to be in the best interests of the
Company and (b) such course of conduct did not constitute gross negligence or
willful misconduct on the part of such Person and otherwise was in accordance
with the terms of this Agreement. Indemnification under this Article VIII shall
------------
continue as to a Person who has ceased to serve in the capacity which initially
entitled such Person to indemnity hereunder. The rights granted pursuant to
this Article VIII shall be deemed contractual rights, and no amendment,
------------
modification or repeal of this Article VIII shall have the effect of limiting or
------------
denying any such rights with respect to actions taken or Proceedings arising
prior to any amendment, modification or repeal. It is expressly acknowledged
that the indemnification provided in this Article VIII could involve
------------
indemnification for negligence or under theories of strict liability.
8.3 Advance Payment. The right to indemnification conferred in this
---------------
Article VIII shall include the right to be paid or reimbursed by the Company the
- ------------
reasonable expenses incurred by a Person of the type entitled to be indemnified
under Section 8.2 who was, is or is threatened to be made a named defendant or
-----------
respondent in a Proceeding in advance of the final disposition of the Proceeding
and without any determination as to the Person's ultimate entitlement to
indemnification; provided, however, that the payment of such expenses incurred
by any such Person in advance of the final disposition of a Proceeding shall be
made only upon delivery to the Company of a written affirmation by such Person
of his or her good faith belief that he has met the standard of conduct
necessary for indemnification under Article VIII and a written undertaking, by
------------
or on behalf of such Person, to repay all amounts so advanced if it shall
ultimately be determined that such indemnified Person is not entitled to be
indemnified under this Article VIII or otherwise.
------------
8.4 Indemnification of Employees and Agents. The Company shall indemnify
---------------------------------------
and advance expenses to any officer, director, partner, employee, agent of the
Managing Member or of any other Member or the Company to the same extent and
subject to the same conditions that it may indemnify and advance expenses to the
Members including the Managing Member under this Article VIII.
------------
8.5 Appearance as a Witness. Notwithstanding any other provision of this
-----------------------
Article VIII, the Company may pay or reimburse reasonable out-of-pocket expenses
- ------------
incurred by any Member including the Managing Member or such Managing Member's
officers, directors, employees, partners and agents in connection with such
Person's appearance as a witness or other participation in a Proceeding related
to or arising out of the business of the Company at a time when such Person is
not a named defendant or respondent in the Proceeding.
8.6 Nonexclusivity of Rights. The right to indemnification and the
------------------------
advancement and payment of expenses conferred in this Article VIII shall not be
------------
exclusive of any other right which a Person indemnified pursuant to this Article
-------
VIII may have or hereafter acquire under any law (common or statutory), any
- ----
agreement, any provision of the Certificate or this Agreement, any vote of
Members or otherwise.
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<PAGE>
8.7 Savings Clause. If this Article VIII or any portion hereof shall be
-------------- ------------
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Person indemnified
pursuant to this Article VIII as to costs, charges and expenses (including
------------
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative to the full extent permitted by any applicable portion of this
Article VIII that shall not have been invalidated and to the fullest extent
- ------------
permitted by applicable law.
ARTICLE IX
TAXES
-----
9.1 Tax Returns. The Company shall cause to be prepared and filed all
-----------
necessary federal and state income tax returns for the Company, including making
any elections the Managing Member may deem appropriate and in the best interests
of the Members. Each Member shall furnish to the Managing Member all pertinent
information in its possession relating to Company operations that is necessary
to enable the Company's income tax returns to be prepared and filed.
9.2 Tax Matters Partner. The Managing Member shall be the "tax matters
-------------------
partner" of the Company pursuant to Section 6231(a)(7) of the Code (the "Tax
---
Matters Member"). The Tax Matters Member is authorized to represent the Company
- --------------
before the Internal Revenue Service and any other governmental agency with
jurisdiction, and to sign such consents and to enter into settlements and other
agreements with such agencies as the Managing Member deems necessary or
advisable.
ARTICLE X
BOOKS, REPORTS
--------------
10.1 Maintenance of Books. The Company shall keep appropriate books and
--------------------
records of accounts and shall keep appropriate minutes of the proceedings of its
Members and any committees. The Fiscal Year of the Company shall be the calendar
year.
10.2 Member Tax Information. Within forty-five (45) days after the end of
----------------------
each Taxable Year, the Company will cause to be delivered to each Person who was
a Member at any time during such Taxable Year a Form K-1 and such other
information, if any, with respect to the Company as may be necessary for the
preparation of such Member's federal, state and local income tax returns.
ARTICLE XI
TRANSFERS
---------
11.1 Assignment by Members. Subject to Section 3.5(b) regarding the rights
--------------------- --------------
of Elkin to allocate Units contained in the Pool, no Management Holder shall
transfer any Management Units of
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<PAGE>
the Company, or offer to Transfer all or any part of such Management Holder's
Management Units of the Company (whether voluntarily or involuntarily) without
the consent of the Managing Member, which consent may be withheld in the
Managing Member's sole discretion, except for a transfer of Management Units to
the Company to be allocated to the Pool. Each transferee of Units or other
interest in the Company shall as a condition prior to such Transfer execute a
joinder agreement in a form satisfactory to the Managing Member pursuant to
which such transferee shall agree to be bound by the provisions of this
Agreement (it being understood that any such Transfer shall have the effect of
Transferring an economic interest in such Units and shall not have the effect of
Transferring any other rights of a Member unless such Transferee is admitted as
a substitute Member pursuant to Section 11.3). Any Transfer by a Member of any
------------
part of Units to a Person who is not a Member shall not relieve such Member of
any of its obligations with respect to such Units.
11.2 Void Transfers. Any Transfer by any Member of any Units or other
--------------
interest in the Company (a) in contravention of this Agreement (including,
without limitation, the failure of the transferee to execute a counterpart in
accordance with Section 11.1), or (b) which would cause the Company to not be
treated as a partnership for U.S. federal income tax purposes, shall be void and
ineffectual and shall not bind or be recognized by the Company or any other
party. No purported assignee pursuant to a void transfer shall have any right to
any profits, losses or distributions of the Company.
11.3 Substituted Member.
------------------
(a) An assignee of any Units or other interest in the Company held by a
Member, or any portion thereof, shall become a substituted Member entitled to
all the rights of a Member if and only if the assignor gives the assignee such
right, and prior written consent to such assignment and substitution has been
obtained from the Managing Member, which consent may be withheld in such
Managing Member's sole discretion.
(b) The Company and the Members shall be entitled to treat the record owner
of any Units or other interest in the Company as the absolute owner thereof and
shall incur no liability for distributions of cash or other property made in
good faith to such owner until such time as a written assignment of such Units
or other interest in the Company, which assignment is permitted pursuant to the
terms and conditions of Section 11.1 and Section 11.3 hereof, has been received
------------ ------------
and accepted by the Managing Member and recorded on the books of the Company.
(c) Upon the admission of a substituted Member, Schedule A attached hereto
----------
shall be amended to reflect the name, address and Units of such substituted
Member and to eliminate the name and address of and other information relating
to the assigning Member with regard to the assigned Units.
-26-
<PAGE>
11.4 Effect of Assignment.
--------------------
(a) Any Member who shall make a permitted assignment under this Agreement
of any Units or other interest in the Company shall cease to be a Member of the
Company with respect to such Units or other interest and shall no longer have
any rights or privileges of a Member with respect to such Units or other
interest, except that unless and until the assignee of such Member is admitted
as a substituted Member in accordance with the provisions of this Article XI,
----------
such assigning Member shall retain the statutory rights and obligations of an
assignor member under applicable law, including, but not by way of limitation,
the right to vote.
(b) Any Person who acquires in any manner whatsoever any Units or other
interest in the Company, irrespective of whether such Person has accepted and
adopted in writing the terms and provisions of this Agreement, shall be deemed
by the acceptance of the benefits of the acquisition thereof to have agreed to
be subject to and bound by of all the terms and conditions of this Agreement
that any predecessor in such Units or other interest in the Company of such
Person was subject to or by which such predecessor was bound. With respect to a
permitted assignment, the Company shall use the "closing of the books method"
for all allocation purposes.
(c) Following an assignment of any Units or other interest that is
permitted under this Agreement, the transferee of such Units or interest shall
be treated as having made all of the Capital Contributions in respect of, and
received all of the distributions received in respect of, such Units or
interest, shall succeed to the Capital Account associated with such Units or
interest and shall receive allocations and distributions under Articles V and
----------
XII in respect of such Units or interest as if such transferee were a Member.
- ---
11.5 Permitted Transfers. Subject in all events to the general
-------------------
restrictions on Transfers contained in Sections 11.1, 11.2 and 11.3, the
------------- ---- ----
restrictions contained in the first sentence of Section 11.1 shall not apply to
------------
any Transfer of Units by any Unitholder among such Unitholder's Permitted
Transferees so long as such Permitted Transferee shall agree in writing to be
bound by the provisions of this Agreement prior to any such Transfer.
11.6 Deliveries for Transfer.
-----------------------
(a) In connection with the Transfer of any Restricted Securities, the
holder thereof will deliver written notice to the Company describing in
reasonable detail the Transfer or proposed Transfer. In addition, in the case
of any Certificated Units (as defined below), if the holder of such Restricted
Securities delivers to the Company an opinion of counsel satisfactory to the
Company that no subsequent Transfer of such Restricted Securities will require
registration under the Securities Act, the Company will promptly upon such
contemplated Transfer deliver new certificates or instruments, as the case may
be, for such Restricted Securities which do not bear the restrictive legend
relating to the Securities Act as set forth below. If the Company is not
required to deliver new certificates or instruments, as the case may be, for
such Restricted Securities not bearing such legend, the holder thereof will not
Transfer the same until the prospective transferee has confirmed to the Company
in writing its agreement to be bound by the conditions contained in this Section
-------
11.6.
- ----
(b) Notwithstanding any other provisions of this Article XI, no Transfer of
----------
Units or any other interest in the Company may be made unless in the opinion of
counsel (who may be counsel for the
-27-
<PAGE>
Company), satisfactory in form and substance to the Managing Member and counsel
for the Company (which opinion may be waived, in whole or in part, at the
discretion of the Managing Member), such Transfer would not violate any federal
securities laws or any state or provincial securities or "blue sky" laws
(including any investor suitability standards) applicable to the Company or the
interest to be transferred, or cause the Company to be required to register as
an Investment Company under the Investment Company Act of 1940, as amended. Such
opinion of counsel shall be delivered in writing to the Company prior to the
date of the Transfer.
11.7 Prospective Transferees. Subject to the terms of this Agreement, the
-----------------------
Company agrees to cooperate, as may reasonably be requested, in order to provide
any information and access to any information to any prospective transferee in
connection with a proposed Transfer.
11.8 Legend. In the event that certificates representing the Units are
------
issued ("Certificated Units"), such certificates will bear a legend stating that
------------------
the Transfer of the Units is subject to the conditions specified in this
Agreement.
11.9 Effective Date. Any Transfer and any related admission of a Person as
--------------
a Member in compliance with this Article XI shall be deemed effective on such
----------
date that the transferee or successor in interest complies with the requirements
of this Agreement.
ARTICLE XII
DISSOLUTION, LIQUIDATION AND TERMINATION
----------------------------------------
12.1 Dissolution. The Company shall be dissolved and its affairs shall be
-----------
wound up on the first to occur of the following:
(a) the expiration of its term pursuant to Section 2.5;
-----------
(b) prior to April 25, 2002, the written consent of the Required Interests
to dissolve the Company;
(c) after April 25, 2002, the written determination of the Managing Member
(in its self-discretion) to dissolve the Company;
(d) upon the determination of the Managing Member in the event of a sale of
all or substantially all the Company's assets or in the event the Company no
longer owns any securities of CTN; and
(e) the entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Act.
The death, retirement, resignation, expulsion, incapacity, bankruptcy or
dissolution of a Member, or the occurrence of any other event that terminates
the continued membership of a Member in the Company,
-28-
<PAGE>
shall not cause a dissolution of the Company, and the Company shall continue in
existence subject to the terms and conditions of this Agreement.
12.2 Liquidation and Termination. On dissolution of the Company, the
---------------------------
Managing Member shall act as liquidator or may appoint one or more Members as
liquidator. The liquidator(s) shall proceed diligently to wind up the affairs of
the Company and make final distributions as provided herein and in the Act. The
costs of liquidation shall be borne as a Company expense. Until final
distribution, the liquidator(s) shall continue to operate the Company properties
with all of the power and authority of the Managing Member and the Members. The
steps to be accomplished by the liquidators are as follows:
(a) as promptly as possible after dissolution and again after final
liquidation, the liquidator(s) shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable;
(b) the liquidator(s) shall cause the notice described in the Act to be
mailed to each known creditor of and claimant against the Company in the manner
described thereunder;
(c) the liquidator(s) shall pay, satisfy or discharge from Company funds
all of the debts, liabilities and obligations of the Company (including, without
limitation, all expenses incurred in liquidation) or otherwise make adequate
provision for payment and discharge thereof (including, without limitation, the
establishment of a cash fund for contingent liabilities in such amount and for
such term as the liquidator(s) may reasonably determine); and
(d) the remaining assets of the Company (the "Remaining Assets") shall be
----------------
distributed to the Members in accordance with Sections 5.2 through 5.4 and 5.6
--------------------------------
hereof. The Remaining Assets shall be distributed by the end of the taxable
year of the Company during which the liquidation of the Company occurs (or, if
later, 90 days after the date of the liquidation).
All distributions in kind to the Members shall be made subject to the liability
of each distributee for costs, expenses and liabilities theretofore incurred or
for which the Company has committed prior to the date of termination, and those
costs, expenses and liabilities shall reduce the amount to be distributed to the
distributees in accordance with Sections 5.2 through 5.4 and 5.6 pursuant to
------------------------ ---
this Section 12.2. The distribution of cash and/or property to a Member in
------------
accordance with the provisions of this Section 12.2 constitutes a complete
------------
return to the Member of its Capital Contributions and a complete distribution to
the Member of its interest in the Company and all the Company's property and
constitutes a compromise to which all Members have consented within the meaning
of the Act. To the extent that a Member returns funds to the Company, it has no
claim against any other Member for those funds. Any Company assets distributed
in kind will first be written up or down to their fair market value, thus
creating Profits or Losses (if any), which shall be allocated in accordance with
Section 5.5.
- -----------
12.3 Management Holder Give Back.
---------------------------
(a) If, subsequent to the making of any distribution pursuant to Section
-------
5.2(d) through (g), one or more Post-Distribution Class A Capital Contributions
- ------ ---
occurred, then, after the final distribution
-29-
<PAGE>
of assets of the Company among the Members as provided in Section 12.2 and
------------
Article V, the following Capital Contributions and distributions shall be made:
- ---------
(i) To the extent that the amount that would otherwise have been
distributed to holders of Class B Management Units pursuant to Section 5.2(f)
--------------
and (g) and Section 12.2(d) was not reduced in distributions subsequent to such
--- ---------------
Post-Distribution Class A Capital Contributions by an amount equal to the excess
described in Section 5.2(h)(i), then (A) the holders of Class B Management Units
-----------------
shall make a Capital Contribution to the Company (pro rata according to their
respective ownership of Class B Management Units) in an amount equal to the
lesser of (I) the extent to which such reduction was less than such excess
described in Section 5.2(h)(i) or (II) the aggregate amount distributed to
-----------------
holders of Class B Management Units pursuant to Sections 5.2, 5.4(b) and 12.2(d)
-------------------- -------
(but, with respect to distributions pursuant to Section 5.4(b), only to the
-----------
extent such distributions were made with respect to distributions that would
have been made pursuant to Section 5.2, but for the first sentence of Section
----------- -------
5.4(b)), and (B) the amount contributed to the Company pursuant to clause (A) of
- ------
this Section 12.3(a)(i) shall be distributed in accordance with Section 5.2(a)
------------------ --------------
through (e), and
- -----------
(ii) To the extent that the amount that would otherwise have been
distributed to holders of Class A Management Units pursuant to Section 5.2(d)
--------------
through (g) and Section 12.2(d) was not reduced in distributions subsequent to
--- ---------------
such Post-Distribution Class A Capital Contributions by an amount equal to the
excess described in Section 5.2(h)(ii), then (A) the holders of Class A
------------------
Management Units shall make a Capital Contribution to the Company (pro rata
according to their respective ownership of Class A Management Units) in an
amount equal to the lesser of (I) the extent to which such reduction was less
than such excess described in Section 5.2(h)(ii) or (II) the aggregate amount
------------------
distributed to holders of Class A Management Units pursuant to Sections 5.2,
-------------
5.4(a) and 12.2(d) (but, with respect to distributions pursuant to Section
- ------ ------- -------
5.4(a), only to the extent such distributions were made with respect to
- ------
distributions that would have been made pursuant to Section 5.2 but for the
-----------
first sentence of Section 5.4(a)), and (B) the amount contributed to the Company
--------------
pursuant to clause (A) of this Section 12.3(a)(ii) shall be distributed in
-------------------
accordance with Section 5.2(a) and (b).
----------------------
(b) If, subsequent to the making of any distribution pursuant to Section
-------
5.3(c) through (f), one or more Post-Distribution Capital Contributions
- ------ ---
occurred, then, after the final distribution of assets of the Company among the
Members as provided in Section 12.2 and Article V, the following Capital
------------ ---------
Contributions and distributions shall be made:
(i) To the extent that the amount that would otherwise have been
distributed to holders of Class B Management Units pursuant to Section 5.3(d)
--------------
through (f) and Section 12.2(d) was not reduced in distributions subsequent to
--- ---------------
such Post-Distribution Class B Capital Contributions by an amount equal to the
excess described in Section 5.3(g)(i), then (A) the holders of Class B
---------
Management Units shall make a Capital Contribution to the Company (pro rata
according to their respective ownership of Class B Management Units) in an
amount equal to the lesser of (I) the extent to which such reduction was less
than such excess described in Section 5.3(g)(i) or (II) the aggregate amount
-----------------
distributed to holders of Class B Management Units pursuant to Sections 5.3,
-------------
5.4(b) and 12.2(d) (but, with respect to distributions pursuant to Section
- ------ ------- -------
5.4(b), only to the extent such distributions were made with respect to
distributions that would have been made pursuant to Section 5.3 but for the
-----------
first sentence of Section 5.4(b)), and (B) the amount contributed to the Company
--------------
pursuant to clause (A) of this Section 12.3(b)(i) shall be distributed in
------------------
accordance with Section 5.3(a) through (d); and
--------------------------
-30-
<PAGE>
(ii) To the extent that the amount that would otherwise have been
distributed to holders of Class A Management Units pursuant to Section 5.3(c)
--------------
through (f) and Section 12.2(d) was not reduced in distributions subsequent to
--- ---------------
such Post-Distribution Class B Capital Contributions by an amount equal to the
excess described in Section 5.3(g)(ii) then (A) the holders of Class A
------------------
Management Units shall make a Capital Contribution to the Company (pro rata
according to their respective ownership of Class A Management Units) in an
amount equal to the lesser of (I) the extent to which such reduction was less
than such excess described in Section 5.3(g)(ii) or (II) the aggregate amount
------------------
distributed to holders of Class A Management Units pursuant to Sections 5.3,
-------------
5.4(a) and 12.2(d) (but, with respect to distributions pursuant to Section
- ------ ------- -------
5.4(a), only to the extent such distributions were made with respect to
- ------
distributions that would have been made pursuant to Section 5.3 but for the
-----------
first sentence of Section 5.4(a)), and (B) the amount contributed to the Company
--------------
pursuant to clause (A) of this Section 12.3(b)(ii) shall be distributed in
-------------------
accordance with Section 5.3(a) and (b).
----------------------
12.4 Deficit Capital Accounts. Except as otherwise provided in Section
------------------------ -------
12.3, and notwithstanding any custom or rule of law to the contrary, to the
- ----
extent that any Member has a deficit Capital Account balance, upon dissolution
of the Company such deficit shall not be an asset of the Company and such
Members shall not be obligated to contribute such amount to the Company to bring
the balance of such Member's capital account to zero.
12.5 Cancellation of Certificate. On completion of the distribution of
---------------------------
Company assets as provided herein, the Company is terminated, and the Managing
Member (or such other Person or Persons as the Act may require or permit) shall
file a certificate of cancellation with the Secretary of State of Delaware,
cancel any other filings made pursuant to Section 2.5 and take such other
-----------
actions as may be necessary to terminate the Company.
ARTICLE XIII
GENERAL PROVISIONS
------- ----------
13.1 Notices. Except as expressly set forth to the contrary
-------
in this Agreement, all notices, requests or consents provided for or permitted
to be given under this Agreement must be in writing and shall be deemed
delivered: (a) upon delivery if delivered in person; (b) three (3) business
days after deposit in the United States mail, addressed to the recipient,
postage paid, and registered or certified with return receipt requested; (c)
upon transmission if sent via telecopier, with a confirmation copy sent via
overnight mail, provided that confirmation of such overnight delivery is
-------------
received; or (d) one (1) business day after deposit with a national overnight
courier provided that confirmation of such overnight delivery is received. All
-------------
notices, requests and consents to be sent to a Member must be sent to or made at
the address given for that Member on Schedule A, or such other address as that
----------
Member may specify by notice to the other Members. Any notice, request, or
consent to the Company or the Managing Member must be given to the Managing
Member at the address for the Managing Member set forth on Schedule A. Whenever
----------
any notice is required to be given by law, the Certificate or this Agreement, a
written waiver thereof, signed by the Person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
-31-
<PAGE>
13.2 Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the Members and their Affiliates relating to the Company and supersedes all
prior contracts or agreements with respect to the Company, whether oral or
written.
13.3 Effect of Waiver or Consent. A waiver or consent, express or
---------------------------
implied, to or of any breach or default by any Person in the performance by that
Person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that Person of the
same or any other obligations of that Person with respect to the Company.
Failure on the part of a Person to complain of any act of any Person or to
declare any Person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that Person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.
13.4 Amendment, Modification or Waiver. Except as otherwise expressly
---------------------------------
provided herein, this Agreement may be amended, modified or waived from time to
time only by a written instrument adopted by the Managing Member; provided,
however, that (a) except as otherwise expressly provided herein, an amendment or
modification reducing disproportionately a Member's Units or other interest in
profits or losses or in distributions or increasing a Member's Capital
Contribution shall be effective only with that Member's consent, (b) an
amendment, modification or waiver to this Agreement which affects the
liabilities, obligations or rights of a particular class of Units in a manner
which is more adverse than such amendment, modification or waiver affects the
rights of all classes of Units shall be effective only with the consent of the
holders of a majority of the outstanding Units of such class, and (c) an
amendment, modification or waiver reducing the Required Interests for any
consent or vote in this Agreement shall be effective only with the consent or
vote of Members having the interest theretofore required, and provided further
that the Managing Member may amend and modify the provisions of this Agreement
and Schedule A hereto to the extent necessary to reflect the issuance of new
----------
Units or other interests in the Company as contemplated by Section 3.5 as
-----------
determined in good faith by the Managing Member.
13.5 Binding Effect. Subject to the restrictions on Transfers set forth
--------------
in this Agreement, this Agreement is binding on and shall inure to the benefit
of the Members and their respective heirs, legal representatives, successors and
assigns.
13.6 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND SHALL
---------------------------
BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, EXCLUDING ANY
CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the event
of a direct conflict between the provisions of this Agreement and any provision
of the Certificate or any mandatory provision of the Act, the applicable
provision of the Certificate or the Act shall control. If any provision of this
Agreement or the application thereof to any Person or circumstance is held
invalid or unenforceable to any extent, the remainder of this Agreement and the
application of that provision to other Persons or circumstances is not affected
thereby and that provision shall be enforced to the greatest extent permitted by
law.
13.7 Further Assurances. In connection with this Agreement and the
------------------
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments
-32-
<PAGE>
and perform any additional acts that may be necessary or appropriate to
effectuate and perform the provisions of this Agreement and those transactions.
13.8 Waiver of Certain Rights. Each Member irrevocably waives any right
------------------------
it may have to demand any distributions or withdrawal of property from the
Company or to maintain any action for dissolution of the Company or for
partition of the property of the Company.
13.9 Indemnification and Reimbursement for Payments on Behalf of a
-------------------------------------------------------------
Member. If the Company is obligated to pay any amount to a governmental agency
- ------
(or otherwise makes a payment) because of a Member's status or otherwise
specifically attributable to a Member (including, without limitation, federal,
state or local withholding taxes, state personal property taxes, state
unincorporated business taxes, state personal property replacement taxes, etc.),
then such Member (the "Indemnifying Member") shall indemnify the Company in full
-------------------
for the entire amount paid (including, without limitation, any interest,
penalties and expenses associated with such payments). The amount to be
indemnified shall be charged against the Capital Account of the Indemnifying
Member, and, at the option of the Members, either:
------
(a) promptly upon notification of an obligation to indemnify the Company,
the Indemnifying Member shall make a cash payment to the Company equal to the
full amount to be indemnified (and the amount paid shall be added to the
Indemnifying Member's Capital Account but shall not be treated as a Capital
Contribution), or
--
(b) the Company shall reduce distributions which would otherwise be made to
the Indemnifying Member, until the Company has recovered the amount to be
indemnified (and, notwithstanding Section 4.1, the amount withheld shall not be
-----------
treated as a Capital Contribution).
The provisions of this Section 13.9 shall survive a liquidation,
------------
dissolution or termination of the Company.
13.10 Notice to Members of Provisions. By executing this Agreement, each
-------------------------------
Member acknowledges that it has actual notice of (i) all of the provisions
hereof (including, without limitation, the restrictions on the transfer set
forth in Article XI) and (ii) all of the provisions of the Certificate.
13.11 Counterparts. This Agreement may be executed in multiple
------------
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
13.12 Consent to Jurisdiction. Each Member irrevocably submits to the
-----------------------
non-exclusive jurisdiction of the United States District Court for the Northern
District of Illinois and the state courts of the State of Illinois, sitting in
Chicago, for the purposes of any suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby. Each Member further
agrees that service of any process, summons, notice or document by U.S.
certified or registered mail to such Member's respective address set forth above
shall be effective service of process in any action, suit or proceeding in
Illinois with respect to any matters to which it has submitted to jurisdiction
as set forth above in the immediately preceding sentence. Each Member
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the United States District Court for the Northern
District of Illinois or the state courts of the State of Illinois, sitting in
Chicago, and hereby irrevocably and unconditionally waives and
-33-
<PAGE>
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in such court has been brought in an inconvenient forum.
13.13 Headings. The headings used in this Agreement are for the purpose
--------
of reference only and will not otherwise affect the meaning or interpretation of
any provision of this Agreement.
13.14 Remedies. The Company and the Members shall be entitled to enforce
--------
their rights under this Agreement specifically, to recover damages by reason of
any breach of any provision of this Agreement (including costs of enforcement)
and to exercise any and all other rights existing in their favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that the Company or any
Member may in its or his sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance or injunctive relief (without
posting a bond or other security) in order to enforce or prevent any violation
or threatened violation of the provisions of this Agreement.
13.15 Parties in Interest. Except as expressly provided in the Act,
-------------------
nothing in this Agreement shall confer any rights or remedies under or by reason
of this Agreement on any Persons other than the Members and their respective
successors and assigns nor shall anything in this Agreement relieve or discharge
the obligation or liability of any other Person to any party to this Agreement,
nor shall any provision give any other Person any right of subrogation or action
over or against any party to this Agreement.
* * * * * *
-34-
<PAGE>
IN WITNESS WHEREOF, the Members have executed this Fourth Amended and
Restated Limited Liability Company Agreement as of the date first set forth
above.
MEMBERS:
WILLIS STEIN & PARTNERS, L.P.
By: Willis Stein & Partners, L.L.C.
Its: General Partner
By: /s/ Daniel M. Gill
-------------------------
Daniel M. Gill
Its: Managing Director
WILLIS STEIN & PARTNERS II, L.P.
By: Willis Stein & Partners Management II, L.P.
Its: General Partner
By: Willis Stein & Partners Management II, L.L.C.
Its: General Partner
By: /s/ Daniel M. Gill
-------------------------
Daniel M. Gill
Its: Managing Director
WILLIS STEIN & PARTNERS DUTCH, L.P.
By: Willis Stein & Partners Management II, L.P.
Its: General Partner
By: Willis Stein & Partners Management II, L.L.C.
Its: General Partner
By: /s/ Daniel M. Gill
-------------------------
Daniel M. Gill
Its: Managing Director
-35-
<PAGE>
MEMBERS (continued)
/s/ Hollis W. Rademacher
_______________________________
Hollis W. Rademacher
/s/ Jason Elkin
_______________________________
Jason Elkin
/s/ Joseph D. Gersh
_______________________________
Joseph D. Gersh
/s/ James Harder
_______________________________
James Harder
/s/ Thomas Gatti
_______________________________
Thomas Gatti
/s/ Peter Kauff
_______________________________
Peter Kauff
/s/ Patrick Doran
_______________________________
Patrick Doran
/s/ Sergio Zyman
_______________________________
Sergio Zyman
/s/ Martin Grant
_______________________________
Martin Grant
/s/ George Giatzis
_______________________________
George Giatzis
-36-
<PAGE>
SCHEDULE B
[TO COME]
-37-
<PAGE>
U-C Holdings, LLC
7/21/99
Schedule of Investor Units
- --------------------------------------------------------------
<TABLE>
<CAPTION>
Pledged
Jason Elkin Issue Date Maturity Date Amount Units Status Purpose
- ----------- ----------- -------------- ------ ----- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Note 12-May-97 1-Jan-03 $333,333.40 333,334 Initial Investment
Note 20-May-98 1-Jan-03 $180,834.00 166,667 Purchase from Dobson
Note 2-Oct-98 1-Jan-03 $283,057.00 283,057 Rights Offering
$797,224.40
Pledged
Peter Kauff Issue Date Maturity Date Amount Units Status
- ----------- ----------- -------------- ------ ----- ------
Note 2-Oct-98 1-Jan-03 $94,352.00 [_______]
Note 20-May-98 1-Jan-03 $180,834.00 166,666 Purchase from Dobson
$275,186.00 #VALUE! (diference is due to
accrued interest).
Pledged
Joseph Gersh Issue Date Maturity Date Amount Units Status Purpose
- ------------ ----------- -------------- ------ ----- ------ -------
Note 12-May-97 1-Jan-03 $333,333.30 333,333 expired Initial Investment
Note 2-Oct-98 1-Jan-03 $188,704.00 166,667 Rights Offering
$522,037.30 $500,000.00 (diference is due to
accrued interest).
Pledged
John Dobson Issue Date Maturity Date Amount Units Status Purpose
- ----------- ----------- -------------- ------ ----- ------ -------
Note 12-May-97 12-May-98 $333,333.30 333,333 expired Initial Investment
forfeited
</TABLE>
<PAGE>
U-C Holdings, LLC
7/21/99
Schedule of Investor Units
- -----------------------------------------------------
<TABLE>
<CAPTION>
[FT 1]
Original Original John Dobson John Dobson Rights
Investment Investment Transfer on Transfer on Offering
(units) (dollars) (units) (dollars) (units)
4/25/97 4/25/97 5/20/98 5/20/98 7/2/98
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Willis Stein 15,200,000 $15,200,000 0 $0 8,604,918
Hollis Rademacher 75,000 $75,000 0 $0 42,458
Jason Elkin 333,334 $333,334 166,667 $180,834 283,057
Joseph Gersh 333,333 $333,333 0 $0 188,704
Peter Kauff 0 $0 166,666 $180,834 94,352
John Dobson 333,333 $333,333 (333,333) $0 0
John DeSimon 0 $0 0 $0 0
James Harder 0 $0 0 $0 0
Mark Goldstein 0 $0 0 $0 0
Marisusan Trout 0 $0 0 $0 0
Thomas Gatti 0 $0 0 $0 0
Sergio Zyman 0 $0 0 $0 0
Pat Doran 0 $0 0 $0 0
George Giatzis 0 $0 0 $0 0
--------------------------------------------------------------------
total 16,275,000 $16,275,000 0 $361,668 9,213,489
====================================================================
<CAPTION>
Total Total
Rights Joseph Gersh Joseph Gersh Class A Class A
Offering Transfer on Transfer on Investor Units Investor Units
(dollars) (units) (dollars) (units) (dollars)
7/2/98 2/19/99 2/19/99 7/15/99 7/15/99
----------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Willis Stein $8,604,918 0 $0 23,804,918 $23,804,918
Hollis Rademacher $42,458 0 117,458 $117,458
Jason Elkin 522,037 1,305,095 $514,168
Joseph Gersh (522,037) 0 $333,333
Peter Kauff 0 261,018 $180,834
John Dobson 0 0 $333,333
John DeSimon 0 0 $0
James Harder 0 0 $0
Mark Goldstein 0 0 $0
Marisusan Trout 0 0 $0
Thomas Gatti 0 0 $0
Sergio Zyman 0 0 $0
Pat Doran 0 0 $0
George Giatzis 0 0 $0
-----------------------------------------------------------------------
total $8,647,376 0 $0 25,488,489 $25,284,044
=======================================================================
</TABLE>
FT 1: Jason Elkin issued a Promissory Note on May 12, 1997 due on May 12
1998 for $333,333.40 for his purchase of Investor Units Jospeh Gerh
issued a Promissory Note on May 12, 1997 due on May 12 1998 for
$333,333.30 for his purchase of Investor Units John Dobson issued a
Promissory Note on May 12, 1997 due on May 12 1998 for $333,333.30 for
his purchase of Investor Units
Note 1: J. Dobson forfeited his Class A Investor Units for failure to pay the
purchase price pursuant to the Management Note and the Payment and
Release Agreement. One half of his Investor Units was reissued by the
Company to Jason Elkin and the other half to Peter Kauff for $180,834
each pursuant to the First Amendment to the Second Amended and Restated
Limited Liability Company Agreement, dated as of May 20, 1999.
Note 2: J. Gersh transferred all of his Investor Units to Jason Elkin
pursuant to a Payment Agreement and General Release, dated as of
2/19/99, and pursuant to the Note dated 2/12/97 and related Pledge
Agreement and the Note dated 5/12/97 and the related Pledge Agreement.
<PAGE>
SCHEDULE A - As of August 31, 1999
- ----------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Capital Account with
Name and Address of Number of Class A Investor respect to the Class A % of Class A
Members Units Investor Units Investor Units
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Willis Stein & Partners, L.P.
227 West Monroe Street
Suite 4300 5/15/97 15,200,000 5/15/97 $15,200,000
Chicago, Il 60606 10/2/98 8,604,918 10/2/98 $8,604,918
Telecopy: (312) 422-2424 7/23/99 4,342,829 7/23/99 $4,342,829
(312) 422-2400 ========== ==========
subtotal 28,147,747 subtotal $28,147,747 93.3947778%
Attention: Avy H. Stein
Daniel M. Gill
- -----------------------------------------------------------------------------------------------------------------------------
Willis Stein & Partners II, L.P.
(same as above)
- -----------------------------------------------------------------------------------------------------------------------------
Willis Stein & Partners Dutch, L.P.
(same as above)
- -----------------------------------------------------------------------------------------------------------------------------
Hollis W. Rademacher
55 West Monroe 5/15/97 75,000 5/15/97 $75,000
Suite 2530 10/2/98 42,458 10/2/98 $42,458
Chicago, IL 60603 7/23/99 21,428 7/23/99 $21,428
Telecopy: (312) 444-9519 ======== ========
subtotal 138,887 subtotal $138,887 0.4608295%
(312) 444-9369
- -----------------------------------------------------------------------------------------------------------------------------
Jason Elkin [FT 1] 5/15/97 333,334 5/15/97 $333,334
5784 Lake Forrest Drive 5/20/98 166,667 5/20/98 $166,667
Suite 275 10/2/98 283,057 10/2/98 $283,057
Atlanta, GA 30328 2/19/99 522,037 2/19/99 $522,037
7/23/99 238,094 7/23/99 $238,094
subtotal 1,543,189 subtotal $1,543,189 5.1203312%
- -----------------------------------------------------------------------------------------------------------------------------
Joseph D. Gersh
5784 Lake Forrest Drive
Suite 275
Atlanta, GA 30328
- -----------------------------------------------------------------------------------------------------------------------------
James Harder
1497 Sandburg Drive
Schaumburg, IL 60173
- -----------------------------------------------------------------------------------------------------------------------------
Thomas Gatti
20 Sutton Place South
New York, NY 10026
- -----------------------------------------------------------------------------------------------------------------------------
Peter Kauff [FT 2] 5/20/98 166,666 5/20/98 $166,666
909 Third Avenue, 9th Fllor 10/2/98 94,352 10/2/98 $94,352
New York, NY 10022 7/23/99 47,619 7/23/99 $47,619
subtotal 308,636 subtotal $308,636 1.0240615%
- -----------------------------------------------------------------------------------------------------------------------------
Patrick Doran
4780 Outlook Way
Marietta, Georgia 30066
- -----------------------------------------------------------------------------------------------------------------------------
Sergio Zyman
- -----------------------------------------------------------------------------------------------------------------------------
Martin Grant [FT 3]
2 Sleepy Hollow
Chappaqua, NY 10514
- -----------------------------------------------------------------------------------------------------------------------------
George Giatzis [FT4]
- -----------------------------------------------------------------------------------------------------------------------------
Unallocated Pool
- -----------------------------------------------------------------------------------------------------------------------------
Total 30,138,459 $30,138,459 100.000%
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Number of
Capital Account with Class R
Name and Address of Number of Class B Investor respect to the Class B % of Class B Investor Units
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Willis Stein & Partners, L.P.
227 West Monroe Street
Suite 4300
Chicago, Il 60606
Telecopy: (312) 422-2424
(312) 422-2400
Attention: Avy H. Stein
Daniel M. Gill
- -----------------------------------------------------------------------------------------------------------------------------
Willis Stein & Partners II, L.P.
(same as above) 8/31/99 13,335,374 8/31/99 $13,335,374
========== ===========
subtotal 13,335,374 subtotal $13,335,374 88.9025%
- -----------------------------------------------------------------------------------------------------------------------------
Willis Stein & Partners Dutch, L.P.
(same as above) 8/31/99 673,843 8/31/99 $673,843
========== ===========
subtotal 673,843 subtotal $673,843 4.4923%
- -----------------------------------------------------------------------------------------------------------------------------
Hollis W. Rademacher
55 West Monroe
Suite 2530
Chicago, IL 60603
Telecopy: (312) 444-9519 8/31/99 69,124 8/31/99 $69,124 0.4608%
(312) 444-9369 ========== =========
subtotal 69,124 subtotal $69,124
- -----------------------------------------------------------------------------------------------------------------------------
Jason Elkin [FT 1]
5784 Lake Forrest Drive
Suite 275
Atlanta, GA 30328 65
8/31/99 768,050 8/31/99 $768,050
========== ==========
subtotal 768,050 subtotal $768,050 5.1203%
- -----------------------------------------------------------------------------------------------------------------------------
Joseph D. Gersh
5784 Lake Forrest Drive 35
Suite 275
Atlanta, GA 30328
- -----------------------------------------------------------------------------------------------------------------------------
James Harder
1497 Sandburg Drive
Schaumburg, IL 60173
- -----------------------------------------------------------------------------------------------------------------------------
Thomas Gatti
20 Sutton Place South
New York, NY 10026
- -----------------------------------------------------------------------------------------------------------------------------
Peter Kauff [FT 2]
909 Third Avenue, 9th Fllor
New York, NY 10022 8/31/99 153,609 8/31/99 $153,609
========= =========
subtotal 153,609 subtotal $153,609 1.0241%
- -----------------------------------------------------------------------------------------------------------------------------
Patrick Doran
4780 Outlook Way
Marietta, Georgia 30066
- -----------------------------------------------------------------------------------------------------------------------------
Sergio Zyman
- -----------------------------------------------------------------------------------------------------------------------------
Martin Grant [FT 3]
2 Sleepy Hollow
Chappaqua, NY 10514
- -----------------------------------------------------------------------------------------------------------------------------
George Giatzis [FT4]
- -----------------------------------------------------------------------------------------------------------------------------
Unallocated Pool
- -----------------------------------------------------------------------------------------------------------------------------
Total 15,000,000 15,000,000 100% 100
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Capital Capital Capital
Account with Number of Account % of Number Account with
respect to Class A w/r/t Class Class A of Class respect to
Name and Address of Class R Mgmt. Mgmt. A Mgmt Mgmt. B Mgmt Class A Mgmt
Members Units Units Units Units Units Units
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Willis Stein & Partners, L.P.
227 West Monroe Street
Suite 4300
Chicago, Il 60606
Telecopy: (312) 422-2424
(312) 422-2400
Attention: Avy H. Stein
Daniel M. Gill
- -----------------------------------------------------------------------------------------------------------------------------
Willis Stein & Partners II, L.P.
(same as above)
- -----------------------------------------------------------------------------------------------------------------------------
Willis Stein & Partners Dutch, L.P.
(same as above)
- -----------------------------------------------------------------------------------------------------------------------------
Hollis W. Rademacher
55 West Monroe
Suite 2530
Chicago, IL 60603
Telecopy: (312) 444-9519
(312) 444-9369
- -----------------------------------------------------------------------------------------------------------------------------
Jason Elkin [FT 1]
5784 Lake Forrest Drive
Suite 275 $65 1,100 $1,100 55.00%
Atlanta, GA 30328
- -----------------------------------------------------------------------------------------------------------------------------
Joseph D. Gersh
5784 Lake Forrest Drive $35 100 $100 5.00%
Suite 275
Atlanta, GA 30328
- -----------------------------------------------------------------------------------------------------------------------------
James Harder
1497 Sandburg Drive 100 $100
Schaumburg, IL 60173
- -----------------------------------------------------------------------------------------------------------------------------
Thomas Gatti
20 Sutton Place South 100 $100
New York, NY 10026
- -----------------------------------------------------------------------------------------------------------------------------
Peter Kauff [FT 2]
909 Third Avenue, 9th Fllor 100 $100 5.00%
New York, NY 10022
- -----------------------------------------------------------------------------------------------------------------------------
Patrick Doran
4780 Outlook Way 50 $50
Marietta, Georgia 30066
- -----------------------------------------------------------------------------------------------------------------------------
Sergio Zyman 200 $200
- -----------------------------------------------------------------------------------------------------------------------------
Martin Grant [FT 3]
2 Sleepy Hollow 300 $300 15.00% 50 $50
Chappaqua, NY 10514
- -----------------------------------------------------------------------------------------------------------------------------
George Giatzis [FT4] 200 $200
- -----------------------------------------------------------------------------------------------------------------------------
Unallocated Pool 200 $200 10.00%
- -----------------------------------------------------------------------------------------------------------------------------
Total $100 2,000 $2,000 90% 500 $500
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
% of
Class B Capital Account
Name and Address of Mgmt Number of Preferred with respect to % Preferred Total Ending
Members Units Units Preferred Units Units Capital Account
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Willis Stein & Partners, L.P.
227 West Monroe Street
Suite 4300 05/15/97 $1,000,000 1,000,000
Chicago, Il 60606 10/02/98 $566,113 566,113
Telecopy: (312) 422-2424 7/23/99 $285,713 285,713
(312) 422-2400 =======================================
1,851,826 $1,851,826
100% $28,147,747.00
Attention: Avy H. Stein
Daniel M. Gill
- ----------------------------------------------------------------------------------------------------------------------------------
Willis Stein & Partners II, L.P.
(same as above) 8/31/99 921,590 $44,332.00 $13,379,706.00
- ----------------------------------------------------------------------------------------------------------------------------------
Willis Stein & Partners Dutch, L.P.
(same as above) 8/31/99 921,590 $877,327.00 $1,551,170.00
- ----------------------------------------------------------------------------------------------------------------------------------
Hollis W. Rademacher
55 West Monroe
Suite 2530
Chicago, IL 60603
Telecopy: (312) 444-9519 $138,887
(312) 444-9369
- ----------------------------------------------------------------------------------------------------------------------------------
Jason Elkin [FT 1]
5784 Lake Forrest Drive
Suite 275
Atlanta, GA 30328 $2,311,239
- ----------------------------------------------------------------------------------------------------------------------------------
Joseph D. Gersh
5784 Lake Forrest Drive
Suite 275
Atlanta, GA 30328
- ----------------------------------------------------------------------------------------------------------------------------------
James Harder
1497 Sandburg Drive 20.00%
Schaumburg, IL 60173
- ----------------------------------------------------------------------------------------------------------------------------------
Thomas Gatti
20 Sutton Place South 20.00%
New York, NY 10026
- ----------------------------------------------------------------------------------------------------------------------------------
Peter Kauff [FT 2]
909 Third Avenue, 9th Fllor
New York, NY 10022
$462,245
- ----------------------------------------------------------------------------------------------------------------------------------
Patrick Doran
4780 Outlook Way 10.00%
Marietta, Georgia 30066
- ----------------------------------------------------------------------------------------------------------------------------------
Sergio Zyman 40.00%
- ----------------------------------------------------------------------------------------------------------------------------------
Martin Grant [FT 3]
2 Sleepy Hollow 10.00%
Chappaqua, NY 10514
- ----------------------------------------------------------------------------------------------------------------------------------
George Giatzis [FT4]
- ----------------------------------------------------------------------------------------------------------------------------------
Unallocated Pool
- ----------------------------------------------------------------------------------------------------------------------------------
Total 100% 2,773,485 $2,773,485 100% $45,990,994
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FT 1 The Investor Units owned by Jason Elkin are subject to a Pledge
Agreement to secure payment of promissory notes issued by Jason on May
12, 1997 in the principal amount of $333,333.4, May 20, 1998 in the
principal amount of $180,834, October 2, 1998 in the principal amount
of $238,057, March 1, 1999 in the principal amount of $581,281.75,
July 23, 1999 in the principal amount of $238,092 and on August 31,
1999 in the principal amount of $768,045, all for an aggregate amount
of $2,384,643. The difference between this aggregate balance and the
related Units shown above is due to the capitalization of interest
into principal related to transfers of units but not included as a
Capital Contribution pursuant to the terms of this Agreement.
FT 2 The Investor Units owned by Peter Kauff are subject to a Pledge
Agreement to secure payment of promissory notes issued by Jason on May
20, 1998 in the principal amount of $180,834, May 20, 1998 in the
principal amount of $94,352, July 23, 1999 in the principal amount of
$47,620, and August 31, 1999 in the principal amount of $153,615, all
for an aggregate amount of $476,421. The difference between this
aggregate balance and the number of Units shown above is due to the
capitalization of capitalization of interest into principal related to
transfers of units but not included as a Capital Contribution pursuant
to the terms of this Agreement.
FT 3 Martin Grant has an Option to purchase Class A Investor Units from J.
Elkin in an amount equal to .5% of total Class A Investor Units.
FT 4 George Giatzis is no longer an employee of the Company, but as of the
date hereof, the Company has not finalized the repurchase of his 200
Class A Management Units. Upon completion of such repurchase and at
such time as the repurchase price is not in dispute, the 200 Class A
Management Units will be allocated to the Pool.
40
