<PAGE>
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)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.3)*
-
NEWSTAR MEDIA INC. (f/k/a DOVE ENTERTAINMENT, INC.)
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $0.01 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
652503 10 3
- --------------------------------------------------------------------------------
(CUSIP Number)
Mr. Terrence A. Elkes Peter D. Weinstein, Esq.
500 5th Avenue Morrison, Cohen, Singer &
Suite #3520 Weinstein, LLP
New York, NY 10110 750 Lexington Avenue
New York, NY 10022
Telephone 212/735-8680
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
August 13, 1998; August 27, 1998; November 12, 1998
- --------------------------------------------------------------------------------
(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 that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), 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.
*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 ("Act") 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).
1
<PAGE>
13D
CUSIP
No. 652503103
Page 2 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
Media Equities International, LLC
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* 00
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization New York
- -------------------------------------------------------------------------------
7 Sole Voting Power
7,642,042 shares 35.3%
-----------------------------------------------------------------
Number of 8 Shared Voting Power
Shares 0 shares 0%
Beneficially -----------------------------------------------------------------
Owned By
Each 9 Sole Dispositive Power
Reporting 7,642,042 shares 35.3%
Person -----------------------------------------------------------------
With
10 Shared Dispositive Power
0 shares 0%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
OO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
2
<PAGE>
13D
CUSIP
No. 652503103
Page 3 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
Apollo Partners LLC
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* OO
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization Connecticut
- -------------------------------------------------------------------------------
7 Sole Voting Power
0 shares 0%
-----------------------------------------------------------------
Number of 8 Shared Voting Power
Shares 7,642,042 shares 35.3%
Beneficially
Owned By -----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 0 shares 0%
Person
With -----------------------------------------------------------------
10 Shared Dispositive Power
7,642,042 shares 35.3%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
OO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
3
<PAGE>
13D
CUSIP
No. 652503103
Page 4 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
Terrence A. Elkes
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* OO
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization United States
- -------------------------------------------------------------------------------
7 Sole Voting Power
3,689,848 shares 17.0%
-----------------------------------------------------------------
Number of 8 Shared Voting Power
Shares 7,642,042 shares 35.3%
Beneficially -----------------------------------------------------------------
Owned By
Each 9 Sole Dispositive Power
Reporting 3,689,848 shares 17.0%
Person -----------------------------------------------------------------
With
10 Shared Dispositive Power
7,642,042 shares 35.3%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
4
<PAGE>
13D
CUSIP
No. 652503103
Page 5 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
Kenneth F. Gorman
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* OO
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization United States
- -------------------------------------------------------------------------------
7 Sole Voting Power
3,689,847 shares 17.0%
-----------------------------------------------------------------
8 Shared Voting Power
Number of 7,642,042 shares 35.3%
Shares -----------------------------------------------------------------
Beneficially
Owned By 9 Sole Dispositive Power
Each 3,689,847 shares 17.0%
Reporting -----------------------------------------------------------------
Person
With 10 Shared Dispositive Power
7,642,042 shares 35.3%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
5
<PAGE>
13D
CUSIP
No. 652503103
Page 6 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
H.A.M. Media Group, LLC
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* OO
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization New York
- -------------------------------------------------------------------------------
7 Sole Voting Power
0 shares 0%
-----------------------------------------------------------------
Number of
Shares 8 Shared Voting Power
Beneficially 7,642,042 shares 35.3%
Owned By -----------------------------------------------------------------
Each
Reporting 9 Sole Dispositive Power
Person 0 shares 0%
With -----------------------------------------------------------------
10 Shared Dispositive Power
7,642,042 shares 35.3%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
OO
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
6
<PAGE>
13D
CUSIP
No. 652503103
Page 7 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
John T. Healy
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* PF, OO
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization United States
- -------------------------------------------------------------------------------
7 Sole Voting Power
5,000 shares 0.1%
-----------------------------------------------------------------
Number of
Shares 8 Shared Voting Power
Beneficially 7,642,042 shares 35.3%
Owned By -----------------------------------------------------------------
Each
Reporting 9 Sole Dispositive Power
Person 5,000 shares 0.1%
With -----------------------------------------------------------------
10 Shared Dispositive Power
7,642,042 shares 35.3%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
7
<PAGE>
13D
CUSIP
No. 652503103
Page 8 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
Bruce Maggin
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* PF, OO
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization United States
- -------------------------------------------------------------------------------
7 Sole Voting Power
32,500 shares 0.1%
-----------------------------------------------------------------
Number of 8 Shared Voting Power
Shares 7,642,042 shares 35.3%
Beneficially -----------------------------------------------------------------
Owned By
Each 9 Sole Dispositive Power
Reporting 32,500 shares 0.1%
Person -----------------------------------------------------------------
With
10 Shared Dispositive Power
7,642,042 shares 35.3%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
8
<PAGE>
13D
CUSIP
No. 652503103
Page 9 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
Ronald Lightstone
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* PF,00
- -------------------------------------------------------------------------------
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e) / /
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization United States
- -------------------------------------------------------------------------------
7 Sole Voting Power
964,920 shares 4.5%
-----------------------------------------------------------------
Number of
Shares 8 Shared Voting Power
Beneficially 7,642,042 shares 35.3%
Owned By -----------------------------------------------------------------
Each
Reporting 9 Sole Dispositive Power
Person 964,920 shares 4.5%
With -----------------------------------------------------------------
10 Shared Dispositive Power
7,642,042 shares 35.3%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
IN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
9
<PAGE>
13D
CUSIP
No. 652503103
Page 10 of 38 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
Elkes Limited Partnership
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* OO
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
7 Sole Voting Power
3,689,848 shares 17.0%
-----------------------------------------------------------------
Number of 8 Shared Voting Power
Shares 0 shares 0%
Beneficially -----------------------------------------------------------------
Owned By
Each 9 Sole Dispositive Power
Reporting 3,689,848 shares 17.0%
Person -----------------------------------------------------------------
With
10 Shared Dispositive Power
0 shares 0%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
PN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
10
<PAGE>
13D
CUSIP
No. 652503103
Page 11 of 37 Pages
- -------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification Nos. of Above Persons (Entities Only)
Gorman Limited Partnership
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds* 00
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
7 Sole Voting Power
3,689,847 shares 17.0%
-----------------------------------------------------------------
Number of
Shares 8 Shared Voting Power
Beneficially 0 shares 0%
Owned By -----------------------------------------------------------------
Each
Reporting 9 Sole Dispositive Power
Person 3,689,847 shares 17.0%
With -----------------------------------------------------------------
10 Shared Dispositive Power
0 shares 0%
- -------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
16,006,068 shares
- -------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* / /
- -------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
73.9%
- -------------------------------------------------------------------------------
14 Type of Reporting Person*
PN
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
11
<PAGE>
This statement, dated December 10, 1998 constitutes Amendment No. 3 to the
Schedule 13D, dated March 28, 1997 regarding the reporting persons' ownership of
certain securities of NewStar Media Inc. (formerly known as Dove Entertainment,
Inc.) (the "Issuer").
ITEM 1. Security and Issuer
(a) Common Stock, $0.01 par value per share (CUSIP No. 652503 10 3)
("Common Stock").
(b) Warrants ("Warrant") entitling the holder to purchase an
aggregate of 3,000,000 shares of Common Stock, exercisable
immediately upon issuance, pursuant to which the following
exercise prices and expiration dates are applicable,
respectively, with respect to three equal tranches of the
underlying shares of Common Stock: (i) $2.00 per share with an
expiration date of March 27, 2000; (ii) $2.50 per share with an
expiration date of March 27, 2000; and (iii) $3.00 per share with
an expiration date of March 27, 2001.
(c) Series B Preferred Stock, $0.01 par value (the "Series B
Preferred Stock") entitling the holder to convert one share of
Series B Preferred Stock into 500 shares of Common Stock (subject
to adjustment),following the date of six months after issuance,
at a conversion price of $2.00 per share, and redeemable at the
option of the Issuer, in whole or in part, at any time after the
fifth anniversary of the date of the Certificate of Determination
relating to the issuance of the Series B Preferred Stock, subject
to certain conditions. The holders of the Series B Preferred
Stock are entitled to vote as a single class together with all
other voting classes and stock on all actions to be taken by the
stockholders of the Issuer except with respect to voting for the
election of directors, in which case, so long as the reporting
persons hereunder own at least 750,000 shares of Common Stock
(assuming for these purposes that the shares of Series B
Preferred Stock were converted in their entirety) and so long as
Media Equities holds a majority of the initially issued shares of
Series B Preferred Stock, the holders of the Series B Preferred
Stock are entitled to elect one third of the directors of the
Issuer.
(d) Series C Preferred Stock, $0.01 par value (the "Series C
Preferred Stock") entitling the holder to convert one share of
Series C Preferred Stock into 500 shares of Common Stock (subject
to adjustment), following the date of six months after issuance,
at a conversion price of $2.00 per share, and redeemable at the
option of the Issuer, in whole or in part, at any time after the
fifth anniversary of the date of the Certificate of Determination
relating to the issuance of the Series C Preferred Stock, subject
to certain conditions. The holders of the Series C Preferred
Stock are entitled to vote as a single class together with all
other voting classes and stock on all actions to be taken by the
stockholders of the Issuer.
12
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(e) Series D Preferred Stock, $0.01 par value (the "Series D
Preferred Stock") entitling the holder to convert one share of
Series D Preferred Stock into 1.20497 shares of Common Stock, at
a conversion price of $3.31958 per share, and redeemable at the
option of the Issuer, in whole or in part, at any time after the
fifth anniversary of the date of the Certificate of Determination
relating to the issuance of the Series D Preferred Stock, subject
to certain conditions. The holders of the Series D Preferred
Stock are entitled to vote as a single class together with all
other voting classes and stock on all actions to be taken by the
stockholders of the Issuer. The Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock are sometimes
referred to herein as the "Preferred Stock".
(f) NewStar Media Inc.
8955 Beverly Boulevard
Los Angeles, California 90048
ITEM 2. Identity and Background
1.
(a) Media Equities International, LLC ("Media Equities"), a limited
liability company organized under the limited liability company
laws of the State of New York.
(b) Address: 500 5th Avenue, Suite #3520, New York, NY 10110
(c) Principal Business: Investments and consulting.
(d) Within the last five (5) years, Media Equities has not been
convicted in any criminal proceeding.
(e) Within the last five (5) years, Media Equities has not been a
party to any civil proceeding of a judicial or administrative
body of competent jurisdiction which resulted in a judgment,
decree, or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or a finding of a violation with respect to such
laws.
The members of Media Equities are Apollo Partners LLC, H.A.M.
Media Group LLC and Ronald Lightstone.
2.
(a) Apollo Partners LLC ("Apollo"), a limited liability company
organized under the Limited Liability Company Act of the State of
Connecticut, and a member of Media Equities.
(b) Address: 500 5th Avenue, Suite #3520, New York, NY 10110
13
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(c) Principal Business: Investments
(d) Within the last five (5) years, Apollo has not been convicted in
any criminal proceeding.
(e) Within the last five (5) years, Apollo has not been a party to
any civil proceeding of a judicial or administrative body of
competent jurisdiction which resulted in a judgment, decree, or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws
or a finding of a violation with respect to such laws.
Terrence A. Elkes and Kenneth F. Gorman are the members and managers of Apollo.
3.
(a) Terrence A. Elkes
(b) Address: Apollo Partners, 500 5th Avenue, Suite #3520, New York,
NY 10110
(c) Principal occupation: Investor
(d) Within the last five (5) years, Terrence Elkes has not been
convicted in any criminal proceeding (excluding traffic
violations and similar misdemeanors, if any).
(e) Within the last five (5) years, Terrence Elkes has not been a
party to any civil proceeding of a judicial or administrative
body of competent jurisdiction which resulted in a judgment,
decree, or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or a finding of a violation with respect to such
laws.
(f) Citizenship: United States.
Terence A. Elkes is a manager of Media Equities, a member and manager of Apollo,
the managing general partner of Elkes Limited Partnership, and the Chairman of
the Board of Directors of the Issuer.
4.
(a) Kenneth F. Gorman
(b) Address: Apollo Partners, 500 5th Avenue, Suite #3520, New York,
NY 10110
(c) Principal occupation: Investor
14
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(d) Within the last five (5) years, Kenneth Gorman has not been
convicted in any criminal proceeding (excluding traffic
violations and similar misdemeanors, if any).
(e) Within the last five (5) years, Kenneth Gorman has not been a
party to any civil proceeding of a judicial or administrative
body of competent jurisdiction which resulted in a judgment,
decree, or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or a finding of a violation with respect to such
laws.
(f) Citizenship: United States.
Kenneth F. Gorman is a manager of Media Equities, a member and manager of
Apollo, the managing general partner of Gorman Limited Partnership, and the
Vice-Chairman of the Board of Directors of the Issuer.
5.
(a) H.A.M. Media Group LLC ("H.A.M. Media"), a limited liability
company organized under the Limited Liability Company Law of the
State of New York and a member of Media Equities.
(b) Address: 305 Madison Avenue, Suite 3016, New York, New York 10017
(c) Principal business: Investments
(d) Within the last five (5) years, H.A.M. Media has not been
convicted in any criminal proceeding.
(e) Within the last five (5) years, H.A.M. Media has not been a party
to any civil proceeding of a judicial or administrative body of
competent jurisdiction which resulted in a judgment, decree, or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws
or a finding of a violation with respect to such laws.
John T. Healy and Bruce Maggin are the members and managers of H.A.M.
Media.
6.
(a) John T. Healy
(b) Address: H.A.M. Media Group, 305 Madison Avenue, Suite 3016, New
York, New York 10017
(c) Principal occupation: Investor
15
<PAGE>
(d) Within the last five-(5) years, John Healy has not been convicted
in any criminal proceeding (excluding traffic violations and
similar misdemeanors, if any).
(e) Within the last five (5) years, John Healy has not been a party
to any civil proceeding of a judicial or administrative body of
competent jurisdiction which resulted in a judgment, decree, or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws
or a finding of a violation with respect to such laws.
(f) Citizenship: United States.
John T. Healy is a manager of Media Equities, a member and manager of H.A.M.
Media, and a director of the Issuer.
7.
(a) Bruce Maggin
(b) Address: H.A.M. Media Group, 305 Madison Avenue, Suite 3016, New
York, New York 10017
(c) Principal occupation: Investor
(d) Within the last five (5) years, Bruce Maggin has not been
convicted in any criminal proceeding (excluding traffic
violations and similar misdemeanors, if any).
(e) Within the last five (5) years, Bruce Maggin has not been a party
to any civil proceeding of a judicial or administrative body of
competent jurisdiction which resulted in a judgment, decree, or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws
or a finding of a violation with respect to such laws.
(f) Citizenship: United States.
Bruce Maggin is a manager of Media Equities, a member and manager of H.A.M.
Media, and a director of the Issuer.
8.
(a) Ronald Lightstone
(b) Address: NewStar Media Inc., 8955 Beverly Boulevard, Los Angeles,
California 90048
(c) Principal occupation: President and Chief Executive Officer of
the Issuer
16
<PAGE>
(d) Within the last five (5) years, Ronald Lightstone has not been
convicted in any criminal proceeding (excluding traffic
violations and similar misdemeanors, if any).
(e) Within the last five (5) years, Ronald Lightstone has not been a
party to any civil proceeding of a judicial or administrative
body of competent jurisdiction which resulted in a judgment,
decree, or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or a finding of a violation with respect to such
laws.
(f) Citizenship: United States.
Ronald Lightstone is a member and manager of Media Equities, and is the
President and Chief Executive Officer and a director of the Issuer.
9.
(a) Elkes Limited Partnership ("ELP"), a limited partnership
organized under the limited partnership laws of the State of
Delaware.
(b) Address: c/o Apollo Partners, 500 5th Avenue, Suite #3520,New
York, NY 1011
(c) Principal Business: Investments
(d) Within the last five (5) years, ELP has not been convicted in any
criminal proceeding.
(e) Within the last five (5) years, ELP has not been a party to any
civil proceeding of a judicial or administrative body of
competent jurisdiction which resulted in a judgment, decree, or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws
or a finding of a violation with respect to such laws.
The managing general partner of ELP is Terrence A. Elkes.
10.
(a) Gorman Limited Partnership ("GLP"), a limited partnership
organized under the limited partnership laws of the State of
Delaware.
(b) Address: c/o Apollo Partners, 500 5th Avenue, Suite #3520,New
York, NY 1011
(c) Principal Business: investments
(d) Within the last five (5) years, GLP has not been convicted in any
criminal proceeding.
17
<PAGE>
(e) Within the last five (5) years, GLP has not been a party to any
civil proceeding of a judicial or administrative body of
competent jurisdiction which resulted in a judgment, decree, or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws
or a finding of a violation with respect to such laws.
The managing general partner of GLP is Kenneth F. Gorman.
ITEM 3. Source and Amount of Funds or Other Consideration.
(a) Media Equities obtained funds for the purchase of the securities from its
working capital, which in turn was obtained from contributions from the
individual reporting persons from personal funds. The amount of funds used in
making each of the purchases, respectively, pursuant to each of the Stock
Purchase Agreement, the Securities Purchase Agreement, the First Securities
Purchase Agreement, and the Second Securities Purchase Agreement, respectively
(see Item 4 herein), is set forth below:
NAME AMOUNT OF CONSIDERATION
---- -----------------------
Media Equities $4,002,000
Media Equities $3,086,000
Media Equities $ 100,000
Media Equities $ 250,000
In addition to the securities purchased pursuant to each of the Stock Purchase
Agreement, the Securities Purchase Agreement, the First Securities Purchase
Agreement and the Second Securities Purchase Agreement, Media Equities has
acquired (i) 308,028 shares of Common Stock from the Issuer as payment of the
consulting fees payable by the Issuer to Media Equities pursuant to the
Consulting Agreement (including those payments which were to have been made in
cash) (see Item 4 herein), (ii) 34,014 shares of Common Stock from the Issuer as
payment of a guarantee fee payable by the Issuer to Media Equities and (iii)
582,000 shares of Common Stock as payment of accrued dividends on the referred
Stock. The amount of the consideration for the acquisition of such securities is
set forth below:
18
<PAGE>
NAME AMOUNT OF CONSIDERATION
---- -----------------------
Media Equities $300,000
Media Equities $ 50,000
Media Equities $695,552
(b) ELP obtained funds for the purchase of shares from its working capital,
which in turn was obtained from contributions from its partners (Terrence Elkes
and Kenneth Gorman), from personal funds. The amount of funds used in making the
purchases pursuant to each of the First Elkes/Gorman/Lightstone Purchase
Agreement and the Second Elkes/Gorman/Lightstone Purchase Agreement respectively
(see Item 4 herein) is set forth below:
NAME AMOUNT OF CONSIDERATION
---- -----------------------
Elkes Limited Partnership $2,500,000
Elkes Limited Partnership $ 153,000
(c) GLP obtained funds for the purchase of shares from its working capital,
which in turn was obtained from contributions from its partners (Kenneth Gorman
and Terrence Elkes), from personal funds. The amount of funds used in making the
purchases pursuant to each of the First Elkes/Gorman/Lightstone Purchase
Agreement and the Second Elkes/Gorman/Lightstone Purchase Agreement,
respectively (see Item 4 herein), is set forth below:
NAME AMOUNT OF CONSIDERATION
---- -----------------------
Gorman Limited Partnership $2,500,000
Gorman Limited Partnership $ 153,000
(d) Pursuant to his employment agreement with the Issuer, Ronald Lightstone is
to receive 400,000 shares of Common Stock. As of the date of this filing,
200,000 of such shares have vested and 22,222 will vest within the next 60 days.
Ronald Lightstone, pursuant to the First Elkes/Gorman/Lightstone Purchase
Agreement, purchased 347,705 shares of Common Stock from the Issuer for
$500,000, which funds were his personal funds. Ronald Lightstone, pursuant to
the Second Elkes/Gorman/Lightstone Purchase Agreement, purchased 47,288 shares
of Common Stock from the Issuer for $34,000, which funds were his personal
funds.
19
<PAGE>
ITEM 4. Purpose of Transaction.
The reporting persons acquired their shares for purposes of investment.
By virtue of the transactions described herein, Media Equities may be deemed to
control the Issuer.
On March 27, 1997, Media Equities entered into the Stock Purchase
Agreement (the "Stock Purchase Agreement") pursuant to which it became
obligated, subject to the terms and conditions therein, to purchase the Series B
Preferred Stock and Warrants of the Issuer. The transaction contemplated two
closings for the purchase of the securities. The first closing occurred March
28, 1997 pursuant to which Media Equities purchased (a) 3,000 shares of Series B
Preferred Stock and (b) a Warrant to purchase 1,500,000 shares of Common Stock,
of the Issuer. The second closing occurred in two parts, the first on May 15,
1997 pursuant to which Media Equities purchased (a) 250 shares of Series B
Preferred Stock, and (b) a Warrant to purchase 125,000 shares of Common Stock,
of the Issuer, and the second on June 3, 1997 pursuant to which Media Equities
purchased (a) 750 shares of Series B Preferred Stock, and (b) a Warrant to
purchase 375,000 shares of Common Stock, of the Issuer.
Media Equities and certain other purchasers entered into a pledge
agreement, dated March 27, 1997, with the Issuer pursuant to which it agreed to
pledge certain of the shares of Series B Preferred Stock as collateral to secure
the payment for the securities to be purchased in the second closing, described
above. The Pledge Agreement was terminated upon completion of the second
closing.
Pursuant to the terms of the Stock Purchase Agreement and the terms of
the Series B Preferred Stock, so long as Media Equities owns 750,000 shares of
Common Stock of the Issuer (assuming for these purposes that the shares of
Preferred Stock were converted in their entirety), (i) so long as Media Equities
holds a majority of the initially issued shares of Series B Preferred Stock, the
holders of the Series B Preferred Stock have the right to elect one third of the
board of directors, and (ii) if Media Equities no longer owns a majority of the
initially issued shares of the Series B Preferred Stock, Media Equities has the
right to nominate, and the Issuer is obligated to use its best efforts to have
elected as management nominees, one third of the Board of Directors of the
Issuer. The Stock Purchase Agreement fixes the number of directors at nine. In
addition, in the event of the default by the Issuer in the observance of certain
covenants enumerated in the Stock Purchase Agreement, Media Equities has the
right to appoint two additional directors, effectively giving Media Equities the
right to nominate a majority of the Board of Directors, which directors shall
continue to serve until the earlier of the next occurring annual meeting of the
shareholders of the Issuer following the cure of any default or until Media
Equities no longer owns at least 750,000 shares of Common Stock (assuming for
these purposes that the shares of Series B Preferred Stock were converted in
their entirety).
20
<PAGE>
In connection with the transaction pursuant to the Stock Purchase
Agreement, in order to fulfill the Issuer's obligations, the number of directors
constituting the Board was increased from six to nine, and Messrs. Gorman,
Maggin and Lightstone were elected to the Board of Directors of the Issuer.
The Stock Purchase Agreement also provides that one of the Media
Equities' nominee directors shall be a member of the Executive Committee. The
current nominee to the executive committee of the Board of Directors is Ronald
Lightstone.
Concurrently with the initial closing under the Stock Purchase
Agreement, Media Equities entered into a shareholders voting agreement (the
"Shareholders Voting Agreement"), dated March 27, 1997, among Media Equities,
Michael Viner ("Viner) and Deborah Raffin ("Raffin", and together with Viner,
"Viner") pursuant to which Viner has agreed to vote, and to use his reasonable
best efforts to cause all of his affiliates to vote, all of the shares of Common
Stock of the Issuer beneficially owned thereby and entitled to vote thereon for
the election of the requisite number of director designees of Media Equities
then required pursuant to Section 6.3 or 7.2 of the Stock Purchase Agreement,
and to take all actions to cause the election of such designees, including
seeking the resignation of current directors of the Issuer.
Pursuant to the Stock Purchase Agreement, Media Equities entered into a
three-year consulting agreement (the "Consulting Agreement"), dated as of April
1, 1997, between Media Equities and the Issuer, pursuant to which Media Equities
will provide substantial general management consulting advice relating to the
business of Media Equities, in exchange for which the Issuer will pay Media
Equities annual compensation in the amount of $300,000 per year as follows:
$200,000 in cash payable quarterly in advance and $100,000 in Common Stock of
the Issuer valued at current market value on the date of payment, payable
quarterly in arrears.
Pursuant to the Stock Purchase Agreement, Media Equities was also
granted registration rights under a registration rights agreement (the
"Registration Rights Agreement"), dated March 27, 1997 among the Issuer, Media
Equities, Viner and Raffin. Pursuant to the Registration Rights Agreement, the
Issuer has agreed to prepare and file with the Securities and Exchange
Commission, by not later than July 31, 1997, one or more registration statements
providing, among other things, for the sale by Media Equities or its principal,
of the shares of Common Stock issuable upon exercise of the Warrants, upon
conversion of the Series B Preferred Stock or Series C Preferred Stock and upon
issuance of the shares of Common Stock pursuant to the Consulting Agreement.
On June 13, 1997, Media Equities consummated the transactions
contemplated by a Securities Purchase Agreement dated June 10, 1997 (the
"Securities Purchase Agreement") between Media Equities, Viner and Raffin
pursuant to which Media Equities purchased from Viner and Raffin (i) Warrants to
purchase 825,000 shares of Common Stock, (ii) 1,570 shares of Series C Preferred
Stock, (iii) 214,113 shares of Series D Preferred Stock and (iv) 500,000 shares
21
<PAGE>
of Common Stock of the Issuer. Pursuant to the terms of the Securities Purchase
Agreement, Media Equities was also granted a right of first refusal for the
three year period ending on the third anniversary of the date of the Securities
Purchase Agreement, to purchase from Viner and Raffin any shares of Common Stock
which they desire to transfer, including shares of Common Stock which they
propose to sell through market transactions. Additionally, pursuant to the
Securities Purchase Agreement, Viner and Raffin have assigned all of their
respective rights under the Registration Rights Agreement to Media Equities.
Concurrently with the closing under the Securities Purchase Agreement, Viner and
Raffin entered into an Employment Termination Agreement under which each
resigned as an officer and director of the Issuer. Following such resignation,
Terrence A. Elkes and John T. Healy were elected to the Board of Directors of
the Issuer. As a result, representatives of Media Equities constitute five
directors out of the entire Board which consists of seven directors.
Additionally, Ronald Lightstone was appointed Chief Executive Officer of the
Issuer.
By virtue of the transactions consummated pursuant to the Securities
Purchase Agreement certain of the ancillary agreements described above
previously entered into by the reporting persons pursuant to the Stock Purchase
Agreement may have been rendered inapplicable with respect to certain securities
of the Issuer held by such reporting persons.
On August 15, 1997, Media Equities consummated the transactions
contemplated by a Securities Purchase Agreement, dated August 15, 1997 (the
"First Securities Purchase Agreement") between Media Equities and Howard Gittis
("Gittis") pursuant to which Media Equities purchased from Gittis (i) Warrants
to purchase 50,000 shares of Common Stock and (ii) 100 shares of Series C
Preferred Stock.
On August 22, 1997, Media Equities consummated the transactions
contemplated by a Securities Purchase Agreement dated August 22, 1997 (the
"Second Securities Purchase Agreement") between Media Equities and Al Bussen
("Bussen"), pursuant to which Media Equities purchased from Bussen (i) Warrants
to purchase 125,000 shares of Common Stock and (ii) 250 shares of Series C
Preferred Stock, of the Issuer.
Pursuant to guaranty agreements, each dated as of November 4, 1997,
each of Messrs. Elkes, Gorman, Healy, Lightstone and Maggin have agreed to
guaranty the obligations of the Issuer under the Issuer's credit facility with
the Chase Manhattan Bank, in an amount not to exceed the lesser of $4,000,000
and the outstanding principal of and any interest on all loans made under such
credit facility in excess of the borrowing base (which borrowing base will be
equal to or less than $6,000,000). The Issuer is not permitted to borrow any
amounts under such credit facility in excess of the borrowing base without the
prior written approval of Media Equities. The Issuer has agreed to pay Media
Equities a fee of $50,000 for such guaranty by its principals.
22
<PAGE>
On July 8, 1998, Media Equities agreed to accept payment of accrued
dividends on the Preferred Stock for year ended December 31, 1997 in the form of
Common Stock. On July 30, 1998, Media Equities agreed to accept payment of
accrued dividends on the Preferred Stock for the quarter ended March 31, 1998
and June 30, 1998 in the form of Common Stock. The aggregate amount of accrued
dividends (plus accrued interest) was $588,897. On August 17, 1998 Media
Equities acquired 392,854, shares of Common Stock as payment of such accrued
dividends. On November 11, 1998, Media Equities agreed to accept payment of
accrued dividends on the Preferred Stock for the quarter ended September 30,
1998. The aggregate amount of accrued dividends was $ $106,655. In December
1998, Media Equities acquired 189,146 shares of Common Stock as payment of such
accrued dividends.
Ronald Lightstone and the Issuer are parties to an employment
agreement, dates as of February 4, 1998. Mr. Lightstone is employed as the
President and Chief Executive Officer of the Issuer. The term of Mr.
Lightstone's employment agreement commenced on June 10, 1997 and ends on June
10, 1999. Pursuant to the agreement Mr. Lightstone was granted 400,000 shares of
Common Stock, ownership of which will vest over a three year period (1/36 of
such shares vesting each month), commencing July 1997. As of the date of this
filing 200,000 shares of such employment agreement shares have vested and an
additional 22,222 will vest within 60 days.
On August 31, 1998, Ronald Lightstone, ELP, and GLP consummated the
transactions contemplated by a Stock Purchase Agreement dated as of July 30,
1998 among the Issuer, Apollo and Mr. Lightstone (the "First
Elkes/Gorman/Lightstone Purchase Agreement") pursuant to which (i) ELP, as
assignee of Apollo, purchased 1,738,526 shares of Common Stock from the Issuer
for a cash purchase price of $2,500,000, (ii) GLP, as assignee of Apollo,
purchased 1,738,526 shares of Common Stock from the Issuer for a cash purchase
price of $2,500,000 and (iii) Mr. Lightstone purchased 347,705 shares of Common
Stock from the Issuer for a cash purchase price of $500,000. In the event of the
default by the Issuer in the observance of certain covenants enumerated in the
First Elkes/Gorman/Lightstone Purchase Agreement, ELP, GLP, and Mr. Lightstone
have the right to appoint two additional directors, which directors shall
continue to serve until the earlier of the next occurring annual meeting of the
shareholders of the Issuer following the cure of any default or until they no
longer own at least 750,000 shares of Common Stock. Pursuant to the First
Elkes/Gorman/Lightstone Stock Purchase Agreement, ELP, GLP and Mr. Lightstone
were also granted registration rights pursuant to which the Issuer has agreed to
prepare and file with the Securities and Exchange Commission one or more
registration statements providing for the sale of the shares purchased pursuant
to such agreement.
On November 16, 1998, Ronald Lightstone, ELP, and GLP consummated the
transactions contemplated by a Stock Purchase Agreement dated as of November 12,
1998 among the Issuer, Apollo and Mr. Lightstone (the "Second
Elkes/Gorman/Lightstone Purchase Agreement") pursuant to which (i) ELP, as
23
<PAGE>
assignee of Apollo, purchased 212,796 shares of Common Stock from the Issuer for
a cash purchase price of $153,000, (ii) GLP, as assignee of Apollo, purchased
212,795 shares of Common Stock from the Issuer for a cash purchase price of
$153,000 and (iii) Mr. Lightstone purchased 47,288 shares of Common Stock from
the Issuer for a cash purchase price of $34,000. In the event of the default by
the Issuer in the observance of certain covenants enumerated in the Second
Elkes/Gorman/Lightstone Purchase Agreement, ELP, GLP, and Mr. Lightstone have
the right to appoint two additional directors, which directors shall continue to
serve until the earlier of the next occurring annual meeting of the shareholders
of the Issuer following the cure of any default or until they no longer owns at
least 750,000 shares of Common Stock. Pursuant to the Second
Elkes/Gorman/Lightstone Stock Purchase Agreement, ELP, GLP and Mr. Lightstone
were also granted registration rights pursuant to which the Issuer has agreed to
prepare and file with the Securities and Exchange Commission one or more
registration statements providing for the sale of the shares purchased pursuant
to such agreement.
The Second Elkes/Gorman/Lightstone Purchase Agreement provides that
ELP, GLP and Lightstone have the option to adjust the purchase price of the
Common Stock purchased by them under the First Elkes/Gorman/Lightstone Purchase
Agreement to a price equal to $0.719 per share. Such right is effective during
the period November 16, 1998 to January 10, 1999. If ELP elects to adjust the
purchase price, it will receive 1,738,526 shares of Common Stock. If GLP elects
to adjust the purchase price, it will receive 1,738,526 shares of Common Stock.
If Ronald Lightstone elects to adjust the purchase price, he will receive
347,705 shares of Common stock. Because each of ELP, GLP and Ronald Lightstone
has the right to adjust the purchase price and receive the shares within 60 days
from the date of this filing, such shares have been included in this filing.
ITEM 5. Interests in Securities of the Issuer.
(a) The following list sets forth the aggregate number and percentage
of outstanding shares of Common Stock owned beneficially (within
the meaning of Rule 13d-3 and the Securities Exchange Act of
1934) by each reporting person named in Item 2, as of December
10, 1998:
24
<PAGE>
NAMES SHARES OF PERCENTAGE OF SHARES
COMMON STOCK OF COMMON STOCK
BENEFICIALLY BENEFICIALLY OWNED (3)
OWNED (1)(2)
- ---------------------------------- -------------------- ------------------------
Media Equities (4) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
Apollo (5) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
Terrence A. Elkes (5) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
Kenneth F. Gorman (5) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
H.A.M. Media (5) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
John T. Healy (6) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
Bruce Maggin(7) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
Ronald Lightstone(8) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
Elkes Limited Partnership(9) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
Gorman Limited Partnership (10) 16,006,068 73.9%
- ---------------------------------- -------------------- ------------------------
(1) (a) Media Equities owns directly (i) 1,424,042 shares of Common Stock, (ii)
3,000,000 shares of Common Stock issuable upon exercise of Warrants, (iii)
the equivalent of 2,000,000 shares of Common Stock issuable upon conversion
of Series B Preferred Stock, calculated based on a conversion ratio of 500
shares of Common Stock to one share of Series B Preferred Stock, (iv) the
equivalent of 960,000 shares of Common Stock issuable upon conversion of
Series C Preferred Stock, calculated based on a conversion ratio of 500
shares of Common Stock to one share of Series C Preferred Stock and (v)
258,000 shares of Common Stock issuable upon conversion of Series D
Preferred Stock, calculated based on a conversion ratio of 1.20497 shares
of Common Stock to one share of Series D Preferred Stock.
(b) ELP owns directly 1,951,322 shares of Common Stock and has the right to
acquire an additional 1,738,526 shares of Common Stock within 60 days from
the date of this filing.
(c) GLP owns directly 1,951,321 shares of Common Stock and has the right to
acquire an additional 1,738,526 shares of Common Stock within 60 days from
the date of this filing.
(d) Ronald Lightstone owns directly 594,993 shares of Common Stock and has
the right to acquire an additional 369,927 shares of Common Stock within 60
days from the date of this filing. Mr. Lightstone has the right to receive
an additional 177,778 shares on Common Stock pursuant to his Employment
Agreement. Because those shares have not yet vested and will not vest
within 60 days from the date of this filing those shares have not been
included as being beneficially owned by Mr. Lightstone.
25
<PAGE>
(e) Bruce Maggin owns directly 32,500 shares of Common Stock.
(f) John Healy owns directly 5,000 shares of Common Stock.
For purposes of this filing, all reporting persons have been deemed to
beneficially own all of the shares set forth in this note (1).
(2) Does not include shares of Common Stock to be acquired by Media Equities
pursuant to the Consulting Agreement referred to in Item 6(g), the amount
of which is indeterminable as of the date hereof.
(3) For purposes of calculating the percentage of shares beneficially owned,
the following shares are deemed to be outstanding for all reporting
persons, for all purposes: (i) 11,337,625, as reported in the Issuer's
10-QSB for the quarter ended September 30,, 1998; (ii) 59,260 shares that
have vested pursuant to Mr. Lightstone's employment agreement but were not
included in the number of shares in (i) above; (iii) 22,222 shares that
will vest pursuant to Mr. Lightstone's employment agreement within 60 days
from the date of this filing; (iv) 189,146 shares issued as dividends on
Preferred Stock that were not included in the number of shares in (i)
above; (v) 3,000,000 shares issuable upon exercise of warrants; (vi)
2,000,000 shares issuable upon conversion of Series B Preferred Stock;
(vii) 960,000 shares issuable upon conversion of Series C Preferred Stock;
(viii) 258,000 shares issuable upon conversion of Series D Preferred Stock;
(ix) 1,738,526 shares which Elkes Limited Partnership has the right to
acquire within 60 days from the date of this filing; (x) 1,738,526 shares
which Gorman Limited Partnership has the right to acquire within 60 days
from the date of this filing and (xi) 347,705 shares which Mr. Lightstone
has the right to acquire within 60 days from the date of this filing.
Accordingly, the total number of outstanding shares is deemed to be
21,651,010.
(4) Media Equities, disclaims beneficial ownership of the shares of Common
Stock referred to in note (1)(b),(c),(d),(e), and (f).
(5) Each of Apollo, H.A.M., Terrance Elkes and Kenneth Gorman disclaims
beneficial ownership of the shares of Common Stock referred to in note (1).
(6) John T. Healy disclaims beneficial ownership of the shares of Common Stock
referred to in note (1) (a),(b),(c),(d), and (e).
(7) Bruce Maggin disclaims beneficial ownership of the shares of Common Stock
referred to in note (1) (a),(b),(c),(d), and (f).
(8) Ronald Lightstone disclaims beneficial ownership of the shares of Common
Stock referred to in note (1) (a),(b),(c),(e), and (f).
(9) ELP disclaims beneficial ownership of the shares of Common Stock referred
to in note (1) (a),(c),(d),(e), and (f).
26
<PAGE>
(10) GLP disclaims beneficial ownership of the shares of Common Stock referred
to in note (1) (a),(b),(d),(e), and (f).
(b) Media Equities has sole power to cast all votes and sole power to
dispose of all shares, with respect to the Common Stock referred to
under note (1)(a) in the foregoing chart.
By virtue of being a member of Media Equities, Apollo may be deemed to
have shared power to cast all votes to which Media Equities has the
right to cast, and may be deemed to have shared power to dispose of
all shares of Common Stock beneficially owned by Media Equities.
By virtue of being a member and a manager of Apollo and a manager of
Media Equities, Terrence A. Elkes may be deemed to have shared power
to cast all votes to which Media Equities has the right to cast, and
may be deemed to have shared power to dispose of all shares of Common
Stock beneficially owned by Media Equities. In addition, by virtue of
being the managing general partner of ELP, Mr. Elkes has sole power to
cast all votes to which ELP has the right to cast and has sole power
to dispose of all shares of Common Stock directly owned by ELP (i.e.
those shares referred to in note (1)(b) of the foregoing chart).
By virtue of being a member and a manager of Apollo and a manager of
Media Equities, Kenneth F. Gorman may be deemed to have shared power
to cast all votes to which Media Equities has the right to cast, and
may be deemed to have shared power to dispose of all shares of Common
Stock beneficially owned by Media Equities. In addition, by virtue of
being the managing general partner of GLP, Mr. Gorman has sole power
to cast all votes to which GLP has the right to cast and has sole
power to dispose of all shares of Common Stock directly owned by GLP
(i.e. those shares referred to in note (1)(c) of the foregoing chart).
By virtue of being a member of Media Equities, H.A.M. Media may be
deemed to have shared power to cast all votes to which Media Equities
has the right to cast, and may be deemed to have shared power to
dispose of all shares of Common Stock beneficially owned by Media
Equities.
By virtue of being a member and a manager of H.A.M. Media and a
manager of Media Equities, John T. Healy may be deemed to have shared
power to cast all votes to which Media Equities has the right to cast,
and may be deemed to have shared power to dispose of all shares of
Common Stock beneficially owned by Media Equities. John T. Healy has
sole power to vote and dispose of 5,000 shares of the Common Stock,
representing less than 0.1% of the outstanding Common Stock.
27
<PAGE>
By virtue of being a member and manager of H.A.M. Media and a manager
of Media Equities, Bruce Maggin may be deemed to have shared power to
cast all votes to which Media Equities has the right to cast, and may
be deemed to have shared power to dispose of all shares of Common
Stock beneficially owned by Media Equities. Bruce Maggin has sole
power to vote and dispose of 32,500 shares of the Common Stock,
representing less than 0.1% of the outstanding Common Stock.
By virtue of being a member and a manager of Media Equities, Ronald
Lightstone may be deemed to have shared power to cast all votes to
which Media Equities has the right to cast, and may be deemed to have
shared power to dispose of all shares of Common Stock beneficially
owned by Media Equities. Ronald Lightstone has sole power to vote and
dispose of all shares Common Stock. referred to in note (1)(d) of the
foregoing chart.
ELP has the sole power to cast all votes and sole power to dispose of
all shares, with respect to the Common Stock referred to in note
(1)(b) in the foregoing chart.
GLP has the sole power to cast all votes and sole power to dispose of
all shares, with respect to the Common Stock referred to in note
(1)(c) in the foregoing chart.
(c) The following is a description of all transactions in the Common Stock,
Warrants and Preferred Stock of the Issuer by the persons identified in
Item 2 of this Schedule 13D effected from March 28, 1997 through December
1, 1998 inclusive.
<TABLE>
<CAPTION>
NAME OF DATE OF SECURITIES PURCHASE PRICE
SHAREHOLDER ACQUISITION ACQUIRED
- ---------------------------- -------------------------- ----------------------------- --------------------------
<S> <C> <C> <C>
Media Equities 3/28/97 Warrant to purchase $ 1,500
1,500,000 shares of
Common Stock (1)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 3/28/97 3,000 shares of $3,000,000
Series B Preferred
Stock (1)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 5/13/97 Warrant to purchase $ 125
125,000 shares of
Common Stock (1)
- ---------------------------- -------------------------- ----------------------------- --------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------- -------------------------- ----------------------------- --------------------------
<S> <C> <C> <C>
Media Equities 5/13/97 250 shares of Series $ 250,000
B Preferred Stock
(1)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 6/3/97 Warrant to purchase $ 375
375,000 shares of
Common Stock (1)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 6/3/97 750 shares of Series $ 750,000
B Preferred Stock
(1)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 6/13/97 Warrant to purchase $1,570,000
825,000 shares of
Common Stock and
1,570 shares of
Series C Preferred
Stock (2)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 6/13/97 214,113 shares of $ 516,000
Series D Preferred
Stock (2)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 6/13/97 500,000 shares of $1,000,000
Common Stock (2)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 8/15/97 Warrant to purchase $ 100,000
50,000 shares of
Common Stock and
100 shares of Series
C Preferred Stock
(3)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 8/22/97 Warrant to purchase $ 250,000
125,000 shares of
Common Stock and
250 shares of Series
C Preferred Stock
(4)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 8/17/98 68,028 shares of $ 100,000
Common Stock (5)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 8/17/98 34,014 shares of $ 50,000
Common Stock (6)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 8/17/98 392,854 shares of $ 588,897
Common Stock (7)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Media Equities 5/22/98 240,000 shares of $ 200,000
Common Stock (8)
- ---------------------------- -------------------------- ----------------------------- --------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------- -------------------------- ----------------------------- --------------------------
<S> <C> <C> <C>
Media Equities 11/11/98 189,146 shares of $ 106,655
Common Stock (9)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Ronald Lightstone 8/31/98 347,705 shares of $ 500,000
Common Stock (10)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Ronald Lightstone 2/4/98 400,000 shares of (10)
Common Stock (11)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Ronald Lightstone 11/16/98 47,288 shares of $ 34,000
Common Stock (12)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Elkes Limited 8/31/98 1,738,526 shares of $2,500,000
Partnership Common Stock (13)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Elkes Limited 11/16/98 212,796 shares of $ 153,000
Partnership Common Stock (14)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Gorman Limited 8/31/98 1,738,526 shares of $2,500,000
Partnership Common Stock (15)
- ---------------------------- -------------------------- ----------------------------- --------------------------
Gorman Limited 11/16/98 212,795 shares of $ 153,000
Partnership Common Stock (16)
- ---------------------------- -------------------------- ----------------------------- --------------------------
</TABLE>
(1) Media Equities acquired the securities of the Issuer in a private placement
pursuant to the Stock Purchase Agreement. See Item 4 herein.
(2) Media Equities acquired the securities of the Issuer in a private placement
pursuant to the Securities Purchase Agreement. See Item 4 herein.
(3) Media Equities acquired the securities of the Issuer in a private placement
pursuant to the First Securities Purchase Agreement. See Item 4 herein.
(4) Media Equities acquired the securities of the Issuer in a private placement
pursuant to the Second Securities Purchase Agreement. See Item 4 herein.
(5) Media Equities acquired securities of the Issuer as payment of the stock
portion of the consulting fee pursuant to the Consulting Agreement. See
Item 4 herein.
(6) Media Equities acquired securities of the Issuer as payment of a guaranty
fee. See Item 4 herein.
(7) Media Equities acquired securities as payment of accrued dividends on
Preferred Stock (in lieu of cash payments). See Item 4 herein.
(8) Media Equities acquired securities as payment of the cash portion of the
consulting fee pursuant to the Consulting Agreement (in lieu of receiving
cash). See Item 4 herein.
(9) Media Equities acquired securities as payment of accrued dividends on
Preferred Stock (in lieu of cash payments). See Item 4 herein.
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(10) Ronald Lightstone acquired securities of the Issuer in a private placement
pursuant to the First Elkes/Gorman/Lightstone Stock Purchase Agreement. See
Item 4 herein.
(11) Ronald Lightstone acquired securities of the Issuer pursuant to his
employment agreement. Not all of these shares have vested. As of the date
of this filing 200,000 of such shares have vested and 22,222 will vest
within the next 60 days. See Item 4 herein.
(12) Ronald Lightstone acquired securities of the Issuer in a private placement
pursuant to the Second Elkes/Gorman/Lightstone Purchase Agreement. See Item
4 herein.
(13) ELP acquired securities of the Issuer in a private placement pursuant to
the First Elkes/Gorman/Lightstone Purchase Agreement. See Item 4 herein.
(14) ELP acquired securities of the Issuer in a private placement pursuant to
the Second Elkes/Gorman/Lightstone Purchase Agreement. See Item 4 herein.
(15) GLP acquired securities of the Issuer in a private placement pursuant to
the First Elkes/Gorman/Lightstone Purchase Agreement. See Item 4 herein.
(16) GLP acquired securities of the Issuer in a private placement pursuant to
the Second Elkes/Gorman/Lightstone Purchase Agreement. See Item 4 herein.
(d) No other person has the right to receive or the power to direct the
receipt of dividends from or the proceeds from the sale of such
securities.
(e) Not applicable. `
ITEM 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
(a) Media Equities is a limited liability company established and governed
by the Limited Liability Company Law of the State of New York and an
Operating Agreement. Pursuant to such agreement, voting and investment
power over the securities of the Issuer held by Media Equities is
vested in its members - Apollo, H.A.M. Media and Ronald Lightstone.
(b) Apollo is a limited liability company established and governed by the
Limited Liability Company Act of the State of Connecticut and an
Operating Agreement. Pursuant to such agreement, voting and investment
power over the shares of Common Stock of the Issuer held by Apollo
through its interest in Media Equities is vested in the members of
Apollo. The members of Apollo are Terrence A. Elkes and Kenneth F.
Gorman.
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(c) H.A.M. Media is a limited liability company established and governed
by the Limited Liability Company Law of the State of New York and an
Operating Agreement. Pursuant to such agreement, voting and investment
power over the shares of Common Stock of the Issuer held by H.A.M.
Media through its interest in Media Equities is vested in the members
of H.A.M. Media. The members of H.A.M. Media are John T. Healy and
Bruce Maggin.
(d) The reporting persons acquired certain securities of the Issuer in a
private placement pursuant to the Stock Purchase Agreement, among the
Issuer, Media Equities, Michael Viner ("Viner") and Deborah Raffin
("Raffin"). See Item 4.
(e) The reporting persons acquired certain securities of the Issuer held
by Viner and Raffin, pursuant to the Securities Purchase Agreement
among Media Equities, Viner and Raffin. See Item 4.
(f) Concurrently with the initial closing under the Stock Purchase
Agreement, Media Equities entered into a shareholders voting agreement
(the "Shareholders Voting Agreement") dated March 27, 1997, among
Media Equities, Viner and Raffin (Viner and Raffin, together, "Viner")
pursuant to which Viner has agreed to vote, and to use his reasonable
best efforts to cause all of his affiliates to vote, all of the shares
of Common Stock of the Issuer beneficially owned thereby and entitled
to vote thereon for the election of the requisite number of director
designees of Media Equities then required pursuant to Section 6.3 or
7.2 of the Stock Purchase Agreement, and to take all actions to cause
the election of such designees, including seeking the resignation of
current directors of the Issuer. See Item 4.
(g) Pursuant the Stock Purchase Agreement, Media Equities entered into a
three-year consulting agreement (the "Consulting Agreement"), dated as
of April 1, 1997, between Media Equities and the Issuer, pursuant to
which Media Equities will provide substantial general management
consulting advice relating to the business of Media Equities, in
exchange for which the Issuer will pay to Media Equities annual
compensation in the amount of $300,000 per year as follows: $200,000
in cash payable quarterly in advance and $100,000 in Common Stock of
the Issuer valued at current market value on the date of payment,
payable quarterly in arrears. See Item 4.
(h) Pursuant to the Stock Purchase Agreement, Media Equities was also
granted registration rights under a registration rights agreement (the
"Registration Rights Agreement"), dated March 27, 1997 among the
Issuer, Media Equities, Viner and Raffin. Pursuant to the Registration
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Rights Agreement, the Issuer has agreed to prepare and file with the
Securities and Exchange Commission, by not later than July 31, 1997,
one or more registration statements providing, among other things, for
the sale by Media Equities or its principal, of the shares of Common
Stock issuable upon exercise of the Warrants, upon conversion of the
Series B Preferred Stock and Series C Preferred Stock and upon
issuance of the shares of Common Stock pursuant to the Consulting
Agreement. See Item 4.
(i) Pursuant to the Securities Purchase Agreement, Media Equities was also
granted the right of first refusal to purchase shares of Common Stock
owned by Viner and Raffin, either privately or in market sales. See
Item 4.
(j) Pursuant to the Securities Purchase Agreement, Viner and Raffin
assigned all of their rights under the Registration Rights Agreement
to Media Equities. See Item 4.
(k) On August 15, 1997, Media Equities consummated the transactions
contemplated by a Securities Purchase Agreement, dated August 15, 1997
(the "First Securities Purchase Agreement") between Media Equities and
Howard Gittis ("Gittis") pursuant to which Media Equities purchased
from Gittis (i) Warrants to purchase 50,000 shares of Common Stock and
(ii) 100 shares of Series C Preferred Stock.
(l) On August 22, 1997, Media Equities consummated the transactions
contemplated by a Securities Purchase Agreement dated August 22, 1997
(the "Second Securities Purchase Agreement") between Media Equities
and Al Bussen ("Bussen"), pursuant to which Media Equities purchased
from Bussen (i) Warrants to purchase 125,000 shares of Common Stock
and (ii) 250 shares of Series C Preferred Stock, of the Issuer.
(m) Ronald Lightstone acquired certain shares of Common Stock from the
Issuer pursuant to the First Elkes/Gorman/Lightstone Purchase
Agreement and the Second Elkes/Gorman/Lightstone Purchase Agreement.
See Item 4.
(n) Pursuant to the First Elkes/Gorman/Lightstone Purchase Agreement and
the Second Elkes/Gorman/Lightstone Stock Purchase Agreement, ELP, GLP
and Mr. Lightstone were granted registration rights. The Issuer has
agreed to prepare and file with the Securities and Exchange
Commission, one or more registration statements providing, among other
things, for the sale by ELP, GLP or Mr. Lightstone, the shares of
Common Stock purchased under such agreements. See Item 4.
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(o) ELP is a limited partnership established and governed by the limited
partnership laws of the State of Delaware and a partnership agreement.
Pursuant to such agreement, voting and investment power over the
securities of the Issuer held by ELP is vested in its managing general
partner - Terrance Elkes. ELP, as assignee of Apollo, acquired shares
of Common Stock from the Issuer pursuant to the First
Elkes/Gorman/Lightstone Purchase Agreement and the Second
Elkes/Gorman/Lightstone Purchase Agreement. See Item 4 herein.
(p) GLP is a limited partnership established and governed by the law of
the State of Delaware and a partnership agreement. Pursuant to such
agreement, voting and investment power over he securities of the
Issuer help by GLP is vested in its managing general partner - Kenneth
Gorman. GLP, as assignee of Apollo acquired shares of Common Stock
from the Issuer pursuant to the First Elkes/Gorman/Lightstone Purchase
Agreement and the Second Elkes/Gorman/Lightstone Purchase Agreement.
See Item 4 herein.
(q) Ronald Lightstone acquired certain shares of common stock from the
Issuer pursuant to his employment agreement. See Item 4.
(r) Except for the circumstances discussed or referred to in paragraphs
(a) through (l) above, there are no contracts, arrangements,
understandings, or relationships with respect to the securities of the
Issuer among any of the persons reporting in this Schedule 13D.
ITEM 7. Material to be Filed as Exhibits
Exhibit 1 - Stock Purchase Agreement, dated March 27, 1997, among Dove
Entertainment, Inc., a California corporation, Media Equities International,
LLC, a New York limited liability company, Michael Viner and Deborah Raffin,
Incorporated by reference herein from the Schedule 13-D dated March 28, 1997.
Exhibit 2 - Stockholders Voting Agreement, dated March 27, 1997, among
Media Equities International, LLC, a New York limited liability company, Michael
Viner and Deborah Raffin incorporated by reference herein from the Schedule 13-D
dated March 28, 1997.
Exhibit 3 - Securities Purchase Agreement, dated June 10, 1997, among
Media Equities International, LLC, a New York limited liability company, Michael
Viner and Deborah Raffin, incorporated by reference herein from the Issuer's
Form 8-K filed June 25, 1997.
Exhibit 4 - Securities Purchase Agreement, dated August 15, 1997,
between Media Equities International, LLC a New York limited liability company
and Howard Gittis, incorporated by reference herein from Amendment No. 2 to
Schedule 13-D filed September 11, 1997.
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Exhibit 5 - Securities Purchase Agreement, dated August 22, 1997,
between Media Equities International, LLC a New York limited liability company
and Al Bussen, incorporated by reference herein from Amendment No. 2 to
Schedule 13-D filed September 11, 1997.
Exhibit 6 - Stock Purchase Agreement, dated as of July 30, 1998. among
NewStar Media Inc., Apollo Partners, LLC and Ronald Lightstone.
Exhibit 7 - Stock Purchase Agreement, dated as of November 12, 1998,
among NewStar Media Inc., Apollo Partners, LLC and Ronald Lightstone
Exhibit 8 - Agreement of Limited Partnership of Elkes Limited
Partnership dated as of August 28,1998.
Exhibit 9 - Agreement of Limited Partnership of Gorman Limited
Partnership dated as of August 28,1998
Exhibit 10 - Agreement that Schedule 13D is being filed on behalf of
Media Equities, Apollo, H.A.M. Media, Terrence A. Elkes, Kenneth F. Gorman,
Bruce Maggin, John T. Healy, and Ronald Lightstone. See statement below.
Pursuant to Rule 13d-1(k)(1) this Schedule 13D is being filed on behalf
of each of Media Equities, Apollo, H.A.M. Media, Terrence A. Elkes, Kenneth F.
Gorman, Bruce Maggin, John T. Healy, Ronald Lightstone, Elkes Limited
Partnership and Gorman Limited Partnership. By their signatures on this Schedule
13D, each of Media Equities, Apollo, H.A.M. Media, Terrence A. Elkes, Kenneth F.
Gorman, Bruce Maggin, John T. Healy, Ronald Lightston, Elkes Limited Partnership
and Gorman Limited Partnership agrees for itself or himself, that this Schedule
13D is filed on behalf of each of them.
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Signature
After reasonable inquiry and to the best of their knowledge and belief,
each of the undersigned hereby certifies that the information set forth in this
Schedule is true, complete, and correct.
Date: December 16, 1998
MEDIA EQUITIES INTERNATIONAL, LLC
By: /s/ Ron Lightstone
Name: Ron Lightstone
Title: Member
APOLLO PARTNERS LLC
By: /s/ Terrence A. Elkes
Name: Terrence A. Elkes
Title: Member
/s/ Terrence A. Elkes
- ----------------------------------------
Terrence A. Elkes
/s/ Kenneth F. Gorman
- ----------------------------------------
Kenneth F. Gorman
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H.A.M. MEDIA GROUP LLC
By: /s/ Bruce Maggin
Name: Bruce Maggin
Title: Vice President
/s/ Bruce Maggin
- ---------------------------------------
Bruce Maggin
/s/ John T. Healy
- ----------------------------------------
John T. Healy
/s/ Ronald Lightstone
- ----------------------------------------
Ronald Lightstone
ELKES LIMITED PARTNERSHIP
By: /s/ Terrance A. Elkes
Name: Terrance A. Elkes
Title: Managing General Partner
GORMAN LIMITED PARTNERSHIP
By: /s/ Kenneth F. Gorman
Name: Kenneth F. Gorman
Title: Managing General Partner
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL
CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001).
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Exhibit 99.6
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "AGREEMENT") made as of July 30, 1998
among NewStar Media Inc., a California corporation (the "COMPANY"), Apollo
Partners, LLC and Ronald Lightstone (each a "PURCHASER" and collectively the
"PURCHASERS").
WITNESSETH:
WHEREAS, the Company desires to sell, and Purchasers desire to
purchase, subject to the terms and conditions of this Agreement, shares of the
Common Stock of the Company, par value $.01 per share (the "COMMON STOCK");
WHEREAS, a special committee of the Board of Directors, at a meeting
held on July 30, 1998, approved the sale and issuance of Common Stock of the
Company to the Purchasers on the terms set forth in this Agreement;
WHEREAS, this Agreement memorializes the agreement between the
Purchasers and the Company concerning the issuance and sale of Common Stock of
the Company as approved by the special committee on July 30, 1998.
NOW, THEREFORE, in the consideration of the foregoing and the
covenants, agreements, representations and warranties herein contained, and
intending to be legally bound, the parties hereby mutually agree as follows:
SECTION 1
SALE AND PURCHASE OF THE COMPANY'S SECURITIES; CLOSING
1.1. SALE OF THE SECURITIES.
(a) Subject to the terms and conditions herein set forth, the
Company agrees to sell and issue to the Purchasers, and each Purchaser agrees to
purchase from the Company, Common Stock of the Company as follows:
(i) On the Closing Date (as hereinafter defined), Apollo
Partners, LLC ("APOLLO") shall purchase 3,477,052 shares of
Common Stock of the Company for a purchase price per share equal
to the average of the closing prices of the Company's Common Stock
as reported on the Nasdaq SmallCap Market on July 24, 27, 28, 29
and 30, 1998 (i.e. $1.438) (the "PURCHASE PRICE") or an aggregate
of $5,000,000.
(ii) On the Closing Date, Ronald Lightstone ("LIGHTSTONE")
shall purchase 347,705 shares of Common Stock of the Company for
the Purchase Price or an aggregate of $500,000.
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The shares being purchased hereunder are hereinafter
referred to as the "SHARES".
(b) In connection with the purchase of the Shares, each Purchaser
shall have the right to assign all or a portion of its rights (but not its
obligation) to purchase such Shares from the Company under this Agreement to any
person, provided such person submits to the Company at the Closing a certificate
setting forth the representations in Section 3 below. Any such assignees shall
be deemed a "Purchaser" hereunder.
(c) In connection with the sale and issuance of the Shares, the
Company agrees to register the Shares as set forth in the form of Registration
Rights Agreement annexed hereto as Exhibit A (the "REGISTRATION RIGHTS
AGREEMENT").
1.2. CLOSING. The closing of the issuance and sale of the Shares to the
Purchasers (the "CLOSING") shall take place at the offices of the Company on or
before August 31, 1998 (the date on which the Closing actually takes place being
referred to as the "CLOSING DATE").
1.3. DELIVERY. At the Closing, the Company shall issue and deliver to
each Purchaser a certificate or certificates, registered in the name of the
Purchaser, representing the Shares being purchased by such Purchaser, against
delivery to the Company of the Purchase Price therefor by wire transfer and
shall execute and deliver the Registration Rights Agreement.
1.4. ADJUSTMENT TO PURCHASE PRICE; OPTION TO REPURCHASE.
(a) If the Company's appeal currently pending before the Nasdaq
Hearing Panel to maintain the Company's listing on the Nasdaq SmallCap Market is
unsuccessful and the Company's Common Stock is delisted (the "LISTING EVENT"),
the Purchase Price shall be adjusted (the "ADJUSTED PURCHASE PRICE") such that
the Adjusted Purchase Price shall be equal to the average of the closing prices
of the Company's Common Stock for the five business days following the day on
which the Company publicly announces that the Company's Common Stock will be
delisted from the Nasdaq SmallCap Market; provided that the Adjusted Purchase
Price shall in no event be less than one-half of the Purchase Price.
(b) If the Listing Event shall have occurred before the Closing
Date and the Adjusted Purchase Price is determinable on or prior to the Closing
Date, then, notwithstanding Section 1.1 (a):
(i) On the Closing Date, Apollo shall purchase that
number of shares of Common Stock of the Company that $5,000,000
will purchase at the Adjusted Purchase Price.
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(ii) On the Closing Date, Lightstone shall purchase that
number of shares of Common Stock of the Company that $500,000
will purchase at the Adjusted Purchase Price.
(c) If (i) the Listing Event shall have occurred after the Closing
Date or (ii) the Listing Event shall have occurred on or prior to the Closing
Date and the Adjusted Purchase Price is not determinable on or prior to the
Closing Date, Apollo and Lightstone shall purchase the Shares in accordance with
Section 1.1 (a). Thereafter, promptly after the occurrence of the Listing Event
and the date on which the Adjusted Purchase Price is determined, (A) if the
Adjusted Purchase Price is less than the Purchase Price, the Company shall
deliver to the Purchasers and (B) if the Adjusted Purchase Price is greater than
the Purchase Price, the Purchasers shall return to the Company, that number of
shares of Common Stock of the Company such that after such delivery, Apollo will
have that number of shares of Common Stock of the Company that $5,000,000 would
purchase at the Adjusted Purchase Price and Lightstone will have that number of
shares of Common Stock of the Company that $500,00 would purchase at the
Adjusted Price.
(d) Notwithstanding anything to the contrary contained herein, if
the Listing Event shall occur, the Company shall have the right, but not the
obligation, to purchase all (and not less than all) of the Shares from Apollo
and Lightstone at the Purchase Price (the "Repurchase Option"). The Repurchase
Option shall expire five business days after the occurrence of the Listing Event
if the Company shall not have notified the Purchasers in writing of the
Company's intent to repurchase the Shares.
SECTION 2
THE COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchasers the following:
2.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of California, and has all requisite corporate power and
authority to own and lease its properties and assets and to conduct its business
as currently conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property in the course of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a whole.
2.2. AUTHORIZATION. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement and to carry out the transactions contemplated hereby and thereby. The
terms and provisions of this Agreement and the Registration Rights Agreement
have been reviewed by a Special Committee of the Board of Directors composed of
independent directors of the Company. The members of the Special Committee have
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unanimously recommended that this Agreement and the Registration Rights
Agreement be approved, authorized, executed and delivered. The execution,
delivery, and performance of this agreement and the Registration Agreement by
the Company have been duly authorized by all requisite corporate action, and
this Agreement has been and the Registration Agreement when executed and
delivered by the Company will, be duly executed and delivered by the Company and
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights generally and
general equitable principles.
2.3. CAPITAL STOCK. The authorized shares of the Company consist of
20,000,000 shares of Common Stock and 2,000,000 shares of preferred stock, $.01
par value per share, of which 400,000 shares have been designated Series A
Preferred Stock, 5,000 shares have been designated Series B Preferred Stock, and
5,000 shares have been designated Series C Preferred Stock 400,000 shares have
been designated Series D Preferred Stock and 1,500 shares have been designated
Series E Preferred Stock. There are no voting trusts or other agreements or
understandings known to the Company with respect to the voting of the capital
stock of the Company.
2.4. ISSUANCE OF THE SHARES. The sale, issuance and delivery of the
Shares in accordance with the terms of this Agreement have been authorized by
all necessary corporate action, and the Shares when sold, issued and delivered,
against the full payment of the purchase price will be duly and validly issued,
fully paid and nonassessable. The sale, issuance and delivery of the Shares are
not subject to any preemptive rights of stockholders of the Company or to any
right of first refusal or other similar right in favor of any person.
2.5. CONSENTS AND APPROVALS. Except for filings under Federal and
applicable state securities laws, no permit, consent, approval or authorization
of or declaration to or filing with any governmental authority, not made or
obtained, is required in connection with the execution or delivery of this
Agreement by the Company, the offer, sale, issuance or delivery of the Shares,
or the carrying out by the Company of the transactions contemplated hereby.
2.6. PRIVATE OFFERING. Neither the Company nor anyone acting on behalf
of the Company has offered the Shares for sale to, or solicited offers to buy
from, or otherwise approached or negotiated with, any individual or entity in
connection with the sale of such securities other than a limited number of
investors, including the Purchasers. Assuming the accuracy of each Purchaser's
representations contained in Section 3 of this Agreement, the offer, issuance
and delivery of the Shares are exempt from registration under the Securities Act
of 1933, as amended (the "1933 ACT"), and all action required to be taken prior
to the offer or sale of the Shares has been taken under the applicable state
securities laws.
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2.7. NO CONFLICT WITH LAW OR DOCUMENTS. The execution, delivery, and
performance by the Company of this Agreement and the Registration Rights
Agreement, and the performance by the Company of its obligations under such
documents, and the sale, issuance and delivery of the Shares, will not violate
any provision of law, any order of any court or other agency of government, the
Articles of Incorporation or By-laws, or any provision of any indenture,
agreement or other instrument by which the Company or any of its properties or
assets is bound or affected, or conflict with, result in a breech of, result in
or permit the termination of or acceleration of rights or obligations under, or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
2.8. DISCLOSURE. Neither this Agreement nor any other document,
certificate, instrument or statement furnished or made to the Purchasers by or
on behalf of the Company in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading in light of the circumstances under which they were made.
2.9. LITIGATION. Except as disclosed in the Company's public filings
and in Schedule 2.9, there are no (a) actions or suits individually in excess of
$50,000 or in the aggregate in excess of $250,000, or any proceedings or
investigations at law or in equity or by or before any governmental
instrumentality or other agency now pending or to the Company's knowledge,
threatened against or adversely affecting the Company, or (b) judgments,
decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against or affecting the
Company, except as in all matters under (a) and (b), which are not reasonably
expected to result in a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a whole (a
"MAE"), or are covered by appropriate amounts of insurance.
2.10. SUBSIDIARIES. Except for NewStar Worldwide Inc., NewStar
Television Inc., Dove Four Point, Inc., Dove Audio, Inc., Dove Entertainment,
Inc., Dove Retail, Inc., Family Blessings Productions Inc. and Empire Burbank
Studios, the Company has no subsidiaries and does not own any interest directly
or indirectly, in any other corporation, partnership, joint venture or other
enterprise or entity.
2.11. INTELLECTUAL PROPERTY.
(a) To the best knowledge of the Company the Company, owns, is
licensed or otherwise has the right to all intellectual property relating to its
audio titles, books, films and television products (the "Products") and all
rights to use all patents, trademarks, service marks, trade names, copyrights,
licenses, franchises and other rights (collectively, including with respect to
the intellectual property relating to the Products, the "RIGHTS") being used to
conduct its business as now operated. The Company has made available to the
Purchasers a complete set of all agreements permitting the Company to use the
Rights of the third parties or allowing third parties to use the Rights of the
Company.
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(b) No Right or Product presently sold by or employed by the
Company, or which the Company contemplates selling or employing, infringes upon
the Rights that are owned by any third party except as would not result in a
MAE.
(c) No litigation is pending and no claim has been made against
the Company, or to the best of the Company's knowledge, is threatened,
contesting the right of the Company to sell or use any Right or Product
presently sold or employed by the Company, except as disclosed in the Company's
public filings or except which would result in a MAE.
(d) Except as disclosed in the Company's public filings, no
employee, officer or consultant of the Company has any proprietary, financial or
other interest in any Right owned or used by the Company which entitles such
person to the payment of an amount in excess of $10,000 with respect to any
single Right, or $25,000 with respect to all Rights in which such person has an
interest.
(e) The Company has taken reasonable measures to protect and
preserve the security, confidentiality and value of its Rights, including trade
secrets and other confidential information.
2.12. UNDISCLOSED LIABILITIES. Except for the agreements and
obligations listed on the balance sheet for the Company included in its
Quarterly Report on Form 10-QSB for the three months ended June 30, 1997, to the
best of the Company's knowledge, the Company does not have any outstanding
liability except for liabilities incurred in the ordinary course of business
which are either for amounts less than $50,000 or are cancelable on not more
than 30 days notice. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party that could
reasonably be expected to result in a MAE.
2.13. TITLE TO PROPERTIES. The Company has good and marketable title to
all of its owned properties and assets, free and clear of all mortgages,
pledges, security interests, liens, charges and encumbrances, except for
Permitted Encumbrances (as defined below). The Company enjoys peaceful and
undisturbed possession under all leases relating to real property and all other
leases (other than immaterial leases which can be replaced on substantially the
same terms) necessary for the operation of the business; and all such leases are
valid and subsisting and in full force and effect. As used herein, "PERMITTED
ENCUMBRANCES" means any mortgages, pledges, security interests, liens, charges
and other encumbrances (i) disclosed in the Company's public filings to the date
hereof or permitted under the Company's credit facility with The Chase Manhattan
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Bank, (ii) liens for current taxes, assessment and other governmental charges
not overdue (other than liens, assessments or charges being contested in good
faith), (iii) mechanic's material men's and similar liens which may have arisen
in the ordinary course of business and which, in the aggregate, would not be
material to the financial condition of the Company, (iv) security interests
securing indebtedness not in default for the purchase price of or lease rental
payments on property purchased or leased under capital lease arrangements in the
ordinary course of business, and (v) minor imperfections of title, if any, not
material in amount and not materially detracting from the values or impairing
the use of the property subject thereto or impairing the operations or proposed
operations of the Company.
2.14. REAL PROPERTY. Other than the premises containing the Company's
headquarters located at 8955 Beverly Boulevard, Los Angeles, California, the
Company owns no real property.
2.15. TAXES.
(a) The Company has timely filed all federal, state and local
income tax returns and has timely filed with all appropriate governmental
agencies all sales, ad valorem, franchise and other tax, license, gross receipts
and other similar returns and reports required to be filed by the Company. The
Company has reported all taxable income and losses on those returns on which
such information is required to be reported, and paid or provided for the
payment of all taxes on said returns or taxes due pursuant to any assessment
received by it, including without limitation, any taxes by law to be withheld
and/or paid in connection with any officer's or employee's compensation or due
pursuant to any assessment received by it. There are no agreements for the
extension of time for the assessment or payment of any amounts of tax. The
Company had made available to the Purchasers for inspection copies of income tax
returns that are true and complete copies of the federal applicable state, local
or other income tax returns filed by the Company.
(b) The Company had paid all tax liabilities of the Company
arising through the end of the taxable year ended December 31, 1997. All tax
liabilities of the Company arising after December 31, 1997 have been paid or
adequately disclosed and properly reserved for on the books and records and
financial statements of the Company. Except for current audits by the Internal
Revenue Service of Dove Four Point, Inc. for the 1994 tax year and Dove Audio
for the 1994 tax year, no federal or applicable state, local or other tax return
of the Company for any period has been or is currently under audit by the
Internal Revenue Service or any state, local or other tax authorities. Except
for an assessment by Michigan, for approximately $90,000, no claim has been made
by federal, state, local or other authorities relating to such returns or any
audit. For purposes of this section the word "timely" shall mean that such
returns were filed within the time prescribed by law for the filing thereof,
including the time permitted under any applicable extensions. The Company is not
aware of any facts which it believes would constitute the basis for the proposal
of any material tax deficiencies for any unexamined year. All taxes which the
Company is required by law to withhold and collect have been duly withheld and
collected, and has been timely paid over to the proper authorities to the extent
due and payable.
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2.16. ENVIRONMENTAL MATTERS. The Company has complied with each and is
not in violation of any, federal, state or local law, regulation, permit,
provision or ordinance relating to the generation, storage, transportation,
treatment or disposal of hazardous, toxic or polluting substances, except where
such noncompliance or violation could not reasonably be expected to result in a
MAE. The Company has obtained and adhered to all necessary permits and other
approvals necessary to store, dispose, and otherwise handle hazardous, toxic and
polluting substances, the failure of which to obtain or adhere to could not
reasonably be expected to result in a MAE. The Company has reported, to the
extent required by federal, state and local law, all past and present sites
where hazardous, toxic or polluting substances, if any, from the Company have
been treated, stored or disposed. The Company has not transported any hazardous,
toxic or polluting substances or arranged for the transportation of such
substances to any location which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against the
Company for clean-up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under the
Compensation and Liability Act of 1980, as amended which claims would result in
a MAE.
2.17. COMPLIANCE WITH LAW.
(a) The Company is not in default under any order of any court,
governmental authority or arbitration board or tribunal to which the Company was
subject or in violation of any laws, ordinances, governmental rules or
regulations (including, but not limited to, those relating to environmental,
safety, building, product safety or health standards or employment matters) to
which the Company is or was subject, in each case, that could reasonably be
expected to result in a MAE. The business is being conducted in compliance with
all applicable laws ordinances, rules and regulations applicable to the Company,
the non-compliance with which could reasonably be expected to have a MAE. The
Company has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its business, which failure could have a MAE.
(b) The Company has filed all documents (the "FILINGS") required
to be filed with the Securities and Exchange Commission (the "COMMISSION")
pursuant to the 1933 Act and the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") and true, correct and complete copies of the Filings have
been made available to the Purchasers. The Filings complied in all material
respects with the requirements of the 1933 Act and the Exchange Act, as
applicable, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
render the statement not misleading in the light of the circumstances in which
they were made. The Company has filed in a timely manner all reports required to
be filed since June 10, 1997. For purposes of this section the word "timely"
shall have the meaning given in Section 2.15
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2.18. EMPLOYEE BENEFIT PLANS.
(a) The Company has complied and currently is in compliance, both
as to form and operation, with the applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal
Revenue Codes of 1954 and/or 1986,as amended respectively (the "CODE"), with
respect to each "employee benefit plan" as defined under Section 3(3) of ERISA
("Plan") which the Company (i) has ever adopted, maintained, established or to
which the Company has ever been required to contribute or to which the Company
has ever contributed or (ii) currently maintains or to which the Company
currently contributes or is required to contribute or (iii) currently
participates in or is required to participate in or is required to participate
in, except in each case or all cases in the aggregate where such noncompliance
would not result in a MAE.
(b) The Company has never maintained, adopted or established,
contributed or been required to contribute to, or otherwise participated in or
been required to contribute to, or otherwise participated in or been required to
participate in, a "multi-employer plan" (as defined in Section 3 (37) of ERISA).
No amount is due or owing from the Company on account of a "multi-employer plan"
(as defined in Section 3(37) of ERISA) of on account of any withdrawal
therefrom.
(c) Notwithstanding anything else set forth herein, the Company
has not incurred any material liability with respect to a Plan, including,
without limitation, under ERISA (including, without limitation, Title I or Title
IV or ERISA and other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Code or other applicable law, which has not been
satisfied or reserved in full, and no event has occurred, and there exists no
condition or set of circumstances which could result in the imposition of any
material liability with respect to the Plan, including, without limitation,
under ERISA (including, without limitation, Title I or Title IV or ERISA), the
Code or other applicable law with respect to the Plan.
(d) The Company has not committed itself, orally or in writing,
to (i) provide or cause to be provided to any person now or at any time covered
by an Plan and payments or benefits, which are material either singly or in the
aggregate, in addition to, or in lieu of, those payments or benefits set forth
under any Plan, or (ii) continue the payment of, or accelerate the payment of,
benefits, which are material either singly or in the aggregate, under any Plan,
except as expressly set forth thereunder. Complete and correct copies of all
written arrangements described in the preceding sentence as in effect on the
date hereof have been made available to the Purchasers.
(e) Except for the Employment Termination Agreement with the
Viners, the employment agreements with Messrs. Ziskin and Lightstone and
agreements with various industry guilds, the Company has not committed itself,
orally or in writing, to provide or cause to be provided any severance or other
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post-employment benefit, salary continuation, termination, disability, death,
retirement, health or medical benefit, or similar benefit to any person
(including, without limitation, any former or current employee) except as set
forth under any Plan, except for such benefits which individually or in the
aggregate are not material. Complete and correct copies of all written
arrangements described in the preceding sentence as in effect on the date hereof
have been made available to the Purchasers.
2.19. INSURANCE. All policies of liability, theft, fidelity, business
interruption, life, fire, product liability, workmen's compensation, health and
other forms of insurance held by the Company are valid and enforceable policies
and are outstanding and duly in force and all premiums with respect thereto are
paid to date. To the best of the Company's knowledge, the amounts of coverage
under such policies of insurance for the assets and properties of the Company
are adequate against risks usually insured against by persons operating similar
businesses and operating similar properties.
2.20. REGISTRATION RIGHTS. Except as contemplated by or described in
the Registration Rights Agreement, as disclosed in the Stock Purchase Agreement
dated as of March 27, 1997 among Dove Entertainment, Inc. and the persons listed
therein and as contemplated by the agreements with Media Equities International,
Michael Viner and Deborah Raffin, Michael Yageman, John Tinker, Steven Soloway,
Tin Man, Leopold, Petrich & Smith and Custom Duplicating, no person has any
right to cause the Company to effect the registration under the 1933 Act of any
of the Company's debt or equity securities.
SECTION 3
PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants to the Company the following:
3.1. AUTHORIZATION. Such Purchaser has all requisite power and
authority to execute this Agreement and the Registration Rights Agreement and to
carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement by such Purchaser have been duly
authorized by all requisite corporate action, and this Agreement has been duly
executed and delivered by such Purchaser and the Registration Rights Agreement
when duly executed and delivered by such Purchaser will constitute its valid and
binding obligation, enforceable against such Purchaser in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and general equitable principles.
3.2. PURCHASE FOR INVESTMENT. The Shares are being acquired by such
Purchaser for its own account, not as a nominee or agent, for investment and not
with a view to resale or distribution within the meaning of the 1933 Act, and
the rules and regulations thereunder, and such Purchaser will not distribute the
Shares in violation or contravention of the 1933 Act. Such Purchaser is not
aware of any facts or circumstances that contradict the representation in the
first sentence of Section 2.6.
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3.3. RESTRICTIONS ON TRANSFER. The Purchaser acknowledges that (a) the
Shares are not registered under the 1933 Act as of the Closing Date, (b) the
Shares will not be transferable unless so registered or unless an exception for
such registration is applicable and (c) certificates representing the Shares
will bear a legend substantially in the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
DISPOSED OF, AND NO TRANSFER OF THE SECURITIES MAY BE MADE BY
THE COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM."
3.4. SOPHISTICATION: ACCESS TO INFORMATION.
(a) Such Purchaser represents and warrants to the Company, that
such Purchaser and if such Purchaser is a limited liability company each member
of such Purchaser (i) is an "accredited investor" as defined in the 1933 Act and
is financially able to purchase the Shares (ii) is fully capable of
understanding the type of investment being made pursuant to this Agreement, and
the risks involved in connection therewith, (iii) believes that the nature of
the Shares is consistent with their overall investment programs and financial
position, (iv) recognizes that there are substantial risks involved in their
purchase of the Shares, (v) is capable of bearing the economic risk of its
investment for an indefinite period of time and can afford a complete loss of
its investment, (vi) has adequate means of providing for their current liquidity
needs, (vii) has no need for liquidity of their investment, (viii) is not
expecting any short term income from their investment and (ix) has no reason to
anticipate any change in personal circumstances, financial or otherwise, which
may cause or require any sale of the Shares.
(b) Such Purchaser acknowledges to the Company that it has had the
opportunity to ask questions of and receive answers from the Company's officers
and directors concerning the terms and conditions of the (i) purchase and
delivery of the Shares and (ii) business and financial conditions of the
Company; and such Purchaser has received to its satisfaction, such additional
information about the business and financial conditions of the Company and the
terms and conditions of the purchase and delivery of the Shares, as it has
requested.
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SECTION 4
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell, issue and deliver the Shares on the
Closing Date as specifically provided, is subject to the fulfillment to its
satisfaction of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES. On the Closing Date, the
representations and warranties contained in Section 3 hereof shall be true and
correct with the same effect as though made on and as of the Closing Date.
4.2. NO INJUNCTION. There shall not be any pending or threatened suit,
action or litigation, or administrative, arbitration or other proceeding or
governmental inquiry or investigation questioning the validity of this Agreement
or the transactions contemplated hereby.
SECTION 5
AFFIRMATIVE COVENANTS OF THE COMPANY
5.1. ANNOUNCEMENTS. The Purchasers acknowledge that the Company may be
required by law to make certain announcements regarding the transaction
contemplated hereby. The content of any such public announcement by either party
will be subject to review and approval of the other party, such delivery and
review of content constituting such public announcement shall be timely and
approval shall not be unreasonably withheld.
5.2. INDEMNIFICATION.
(a) The Company (together with its successors and assigns, the
"INDEMNIFYING PARTY") shall indemnify and hold harmless each Purchaser, its
principals, employees (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel incurred by an Indemnified Party) in any action or proceeding between
an Indemnifying Party and Indemnified Party (or Indemnified Parties) or between
an Indemnified Party (or Indemnified Parties) and any third party or otherwise,
or other liabilities (collectively, the "LIABILITIES") resulting from or arising
out of any breach of any representation or warranty, covenant or agreement of an
Indemnifying Party to such Indemnified Party in this Agreement, or any legal,
administrative or other actions (including actions brought by any equity holder
of the Company) or derivative actions brought by any third party claiming
through or in Indemnifying Party's name), proceedings or investigations whether
formal or informal), or written threats thereof, based upon, relating to or
arising out of any breach of any representation or warranty, covenant or
agreement of an Indemnifying Party to such Indemnified Party in this Agreement;
including the enforcement by any Indemnified Party of its rights hereunder. For
purposes of this Section 5.2, "losses" shall include, but not be limited to, a
diminution in value of the Shares resulting from or arising out of any breach of
any representation or warranty, covenant or agreements of an Indemnifying Party
in this Agreement.
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(b) To the extent that such indemnification is unenforceable for
any reason, the Indemnifying Party shall make the maximum contribution to the
payment and satisfaction of the Liabilities which shall be permissible under
applicable laws.
(c) In connection with the obligation of the Indemnifying Party to
indemnify for or contribute towards expenses as set forth above, the
Indemnifying Party further agrees, upon presentation of appropriate invoices
containing reasonable detail, to reimburse each Indemnified Party for all such
expenses (including fees, disbursements and other charges of counsel incurred by
an Indemnified Party in any action or proceeding between the Indemnifying Party
and such Indemnified Party, or Parties, and any third party otherwise) as they
are incurred by such Indemnified Party subject to an undertaking to reimburse
such amounts if determined not entitled to it.
5.3. FINANCIAL STATEMENTS AND REPORTS. For so long as the Purchasers
continue to hold in the aggregate at least 1% of the outstanding shares of
Common Stock, the Company shall furnish to the Purchasers the following
financial statements and reports:
(a) Within the period prescribed by the Securities and Exchange
Commission (the "COMMISSION"), an audited balance sheet, and related audited
statements of income, cash flows and shareholders' equity of the Company as of
and for such fiscal year prepared in accordance with GAAP, consistently applied,
and accompanied by the opinion of the Company's regularly engaged firm of
independent certified public accountants.
(b) Within the period prescribed by the Commission, a quarterly
balance sheet and statements of income, cash flows and stockholders' equity of
the Company as of and for such quarter and the year to date and as of and for
the corresponding periods of the preceding fiscal year. The interim statements
described above shall be unaudited, but prepared in accordance with GAAP,
subject only to normal year-end adjustments and shall be certified by the Chief
Financial Officer of the Company; and
(c) Promptly upon their becoming available, the Company shall
deliver to the Purchasers copies of (i) all financial statements, reports,
notices and proxy statements sent or made available to shareholders by the
Company, (ii) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by the Company with any securities exchange or
with the Commission or any governmental or private regulatory authority, and
(iii) all press releases and other statements made available by the Company to
the public concerning material developments in the business of the Company.
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5.4. ACCESS. The Company shall during usual business hours and upon
reasonable notice, permit the Purchasers' duly authorized representatives to
visit and inspect the properties of the Company, to examine the stock register,
books and record of account and records of the proceedings of the incorporators,
stockholders and directors and to make copies or extracts therefrom, and to
discuss the Company's business with its officers and directors.
5.5. OTHER FILINGS AND DISSEMINATION OF MATERIAL. For so long as the
Purchasers continue to hold in the aggregate at least 1% of the outstanding
shares of Common Stock:
(a) The Company shall make and keep public information available
as those terms are understood and defined in Rule 144 promulgated under the 1933
Act.
(b) The Company shall file with the Commission in a timely manner
all reports and other documents as the Commission may prescribe under the
Exchange Act at any time.
(c) The Company shall furnish to the Purchasers a written
statement by the Company as to its compliance with the reporting requirements of
the Exchange Act as the Purchasers may reasonably request to avail itself of any
rule or regulation of the Commission allowing such holder to sell any such
securities without registration.
SECTION 6
NEGATIVE COVENANTS OF THE COMPANY
6.1. NEGATIVE COVENANTS.
(a) So long as the Purchasers continue to hold not less than an
aggregate of 750,000 shares of Common Stock, the Company hereby covenants and
agrees with the Purchasers that without the consent of the Purchasers, which
right of consent shall be exercised in good faith and in a commercially
reasonable manner,
(i) the Company will not;
(A) adopt an annual budget;
(B) incur any debt for borrowed money or sell and issue any
debt or equity securities other than compensation for
employees, directors and consultants or pursuant to any
options, warrants or convertible securities outstanding
on the date hereof;
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(C) change or alter its principal business or enter into any
new business (it being understood that exploiting
ancillary rights shall not be considered new business).
(ii) no executive officer of the Company will knowingly:
(A) hire any executive that earns in excess of $100,000 per
year;
(B) make any changes or additions to the Company's auditors,
consultants or principal outside counsel;
(D) commence any litigation not in the ordinary course of
business or settle any litigation not in the ordinary
course of business or where the amount to be paid by the
Company is $25,000 or more;
(E) acquire any assets where the required payment by the
Company is in excess of $155,000 or sell or license
outside of the ordinary course of business assets where
the payment to the Company is in excess of $155,000,
including film, audio or publishing rights;
(F) commence active pre-production for (I) any television
movie-of-the-week, special or mini-series, unless the
license fee payable (or previously paid) for such
program by the U.S. broadcast or cable network together
with bankable foreign licenses is at least equal to the
budgeted negative cost (including all normal and
customary production budget items including for
functions performed by the Company and including a
customary contingency of 10%, minus $250,000 and the
Company reasonably believes that additional revenues
from uncommitted territories is reasonably likely to
generate revenues in excess of $250,000 in the two years
from the date of commencement of such pre-production,
(II) any episodic television series unless the budgeted
negative cost (including all normal and customary
production budget items including for functions
performed by the Company and including a customary
contingency of 10%) per episode is less than $150,000
and at least 80% of such negative cost will be funded by
a U.S. broadcast or cable network and the Company
reasonably believes that additional revenues from
uncommitted territories is reasonably likely to generate
revenues in excess of the unfunded amount within two
years from the date of commencement of such production;
or (III) engage in the production of a theatrical
feature film, except to the extent the Company's
commitments are less than $250,000 and the Company
reasonably believes that expected revenue from such film
will be in excess of all costs relating thereto,
including the amount of the Company's commitment;
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(G) issue any financial press releases or publicly issue or
otherwise publicly discuss the Company's projected
financial results (it being understood that the
foregoing is not intended to restrict comments in
general terms as to the anticipated success of any
particular project).
(b) For purposes of this Section 6.1 only, Apollo and Lightstone
jointly shall from time to time designate a person (a "Representative") by
written notice to the Company, who shall have the authority as between the
Company and the Purchasers to give or withhold the Purchasers' consent as
contemplated in this Section 6.1, which Representative shall, until further
notice, be Ronald Lightstone.
6.2. REMEDY. In the event that the Company breaches any of the
covenants set forth in Section 6.1, and such breach is continuing unremedied for
a period of thirty (30) days after notice thereof is given to the Company by
both of Apollo and Lightstone, then the Company shall immediately upon written
demand by both of Apollo and Lightstone take all steps necessary or appropriate
to elect its Board of Directors two additional directors nominated by both of
Apollo and Lightstone, including calling a special meeting for such purpose,
which directors shall continue to serve until the earlier of the annual meeting
of the shareholders of the Company next following the cure of the breach which
gave rise to the exercise of rights under this Section 6.2, or until the
Purchasers no longer own at least 750,000 Common Shares. If shareholder approval
shall be required for such election of such additional directors, whether for an
approval of an amendment to the Company's By-Laws or otherwise, such appointment
shall be subject to such shareholder approval and the Company shall use its best
efforts to obtain such shareholder approval. The rights afforded to the
Purchaser hereunder shall arise each time there is a breach of the covenants set
forth in section 6.1 and shall be severable with respect thereto, provided in no
event shall this Section entitled the Purchasers to have more than two
additional directors designated at any one time.
SECTION 7
MISCELLANEOUS
7.1. PAYMENT OF EXPENSES: COUNSEL. The Company shall pay all expenses,
including the reasonable fees and expenses of the Purchasers' counsel (if any),
incurred by the Company and/or the Purchasers in connection with the sale,
issuance and delivery of the Shares pursuant to this Agreement and the
execution, delivery and performance of this Agreement.
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7.2. TRANSFER OF TAXES. The Company will pay, and hold the Purchasers
harmless against, liability for the payment of any transfer or similar taxes
payable in connection with the initial sale, issuance and delivery of the
Shares.
7.3. BROKER OR FINDER. The parties individually represent and warrant
that, to the best of their individual knowledge, no broker or finder has acted
for it in connection with this Agreement or the transactions contemplated by
this Agreement and that no broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, arrangements or understandings made by such party. The Company shall
indemnify the Purchasers and the Purchasers shall indemnify the Company against,
and hold it harmless from, any claim, liability, cost or expense (including
reasonable attorneys' fees and expenses) resulting from any agreement,
arrangement or understanding made by the Company or the Purchasers, as the case
may be.
7.4. GOVERNING LAW. This agreement shall be governed by and construed
and enforced in accordance with laws of the State of New York, without reference
to conflict of law provisions.
7.5. NOTICE. Any notice or other communication required or permitted
hereunder shall be sufficiently given only if sent by facsimile transmission or
by registered or certified mail, postage prepaid, addressed as follows or to
such other address or addresses as may hereafter be furnished in writing by
notice similarly given by one party or to the other:
To the Company: NewStar Media Inc.
8955 Beverly Boulevard
Los Angeles, CA 90048
Facsimile: (310) 724-7146
The Purchasers: Apollo Partners Ltd.
1 Stamford Plaza, 12th Floor
Stamford, CT 06901
Ron Lightstone
NewStar Media
8955 Beverly Blvd.
Los Angeles, CA 90048
With a required
copy to: Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attn: Peter D. Weinstein, Esq.
Jack Levy, Esq.
Telephone: 212-734-8600
Facsimile: 212-735-8708
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7.6. ENTIRE AGREEMENT. This Agreement including the Appendix, Schedules
and Exhibits hereto, contain the entire agreement and understanding among the
parties with respect to the subject matter hereof and shall not be modified or
affected by any offer, proposal, statement or representation, oral or written,
made by or for any party in connection with the negotiation of the terms hereof.
All references herein to this Agreement shall specifically include, incorporate
and refer to the Appendix, Schedules and exhibits attached hereto which are
hereby made a part hereof. There are no representations, promises, warranties,
covenants, undertakings or assurances (express or implied) other than those
expressly set forth or provided for herein and in the other documents referred
to herein. This Agreement may not be modified or amended orally, but only by a
writing signed by the parties.
7.7. SEVERABILITY. If any part of this Agreement is held to be
unenforceable or invalid under, or in conflict with, the applicable law of any
jurisdiction, the unenforceable, invalid or conflicting part shall, to the
extent permitted by applicable law, be narrowed or replaced, to the extent
possible, with a judicial construction in such jurisdiction that effects the
intent of the parties regarding this Agreement and such unenforceable, invalid
or conflicting part. To the extent permitted by applicable law, notwithstanding
the unenforceability, invalidity or conflict with applicable law of any part of
this Agreement, the remaining parts shall be valid, enforceable and binding on
the parties.
7.8. HEADINGS. The headings of the Sections of this Agreement are
reinstated for convenience of reference only and shall not be considered a part
hereof.
7.9. COUNTERPARTS. This agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
[SIGNATURE PAGES ON NEXT PAGE]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date set forth above.
THE COMPANY:
NEWSTAR MEDIA INC.
By:/s/ Neil Topham
---------------------------------------------
Name: Neil Topham
Title: Vice President & Chief
Financial Officer
THE PURCHASERS:
APOLLO PARTNERS, LLC
By:/s/ Terrence A. Elkes
---------------------------------------------
Name: Terrence Elkes
Title:
By:/s/ Kenneth F. Gorman
---------------------------------------------
Name: Kenneth Gorman
Title:
/s/ Ronald Lightstone
---------------------------------------
Ronald Lightstone
S-1
<PAGE>
SCHEDULE 2.9
Saskatchewan Film and Video Development Corporation and The Edge Productions
Corp. v. Dove Audio, Inc. (United States District Court Central District of
California 98-3760 GHK (SHx))
Liza Greer v. NewStar Media Inc. (Los Angeles Superior Court BC193089)
Hamdon Entertainment v. Dove Audio, Inc.; Dove II, Inc.; Dove Communications,
Inc.; and Dove Entertainment, Inc. (Arbitration before Judicial Arbitration and
Mediation Service (Hon. Barnet M. Cooperman))
Larry Flynt v. Dove Audio, Inc.; Dove Books; Dove Entertainment, Inc. (Los
Angeles Superior Court BC194869)
Creditors' House v. NewStar Media Inc. (Los Angeles Municipal Court 98E05530)
National Commercial Recovery v. Dove Audio (Los Angeles Municipal Court
98K08000)
Goodman v. Buena Vista Television, Inc. et al. (U.S.D.C. No. CV 98-0218 DT
(VAPx))
R.R. Donnelly Receivable v. NewStar Inc. (Los Angeles Superior Court BC187902)
Time Warner City Cable Advertising, Inc. v. Dove Entertainment (Beverly Hills
Municipal Court 90 C 00639)
Joanne Parrent v. Michael Viner and Dove Entertainment (Los Angeles Superior
Court BC183507)
Mattken Corp. V. NewStar Media (Los Angeles Superior Court BC 191736)
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of August ___, 1998, by and
among NewStar Media Inc., a California corporation (the "COMPANY"), and Apollo
Partners, LLC and Ronald Lightstone, as Purchasers (each a "PURCHASER" and
collectively, the "PURCHASERS").
WHEREAS, the Purchasers are acquiring securities of the Company
pursuant to a Stock Purchase Agreement dated the date hereof among the Company
and the Purchasers (the "STOCK PURCHASE AGREEMENT"; capitalized terms used in
this Registration Rights Agreement without definition shall have the meanings
ascribed thereto in the Stock Purchase Agreement).
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and intending to be legally bound, the parties hereto agree as
follows:
1. REGISTRATION RIGHTS
1.1 (a) The Company shall as expeditiously as practicable, but in any
event not later than December 31, 1998, prepare and file with the Securities and
Exchange Commission (the "COMMISSION") one or more registration statements
(individually and collectively, the "REGISTRATION STATEMENT") under the
Securities Act of 1933 (the "1933 ACT"), providing for the registration of the
Shares (together with all shares of Common Stock issued in connection therewith,
including by way of a stock split or other adjustment or stock dividend, the
"REGISTRABLE SECURITIES") for sale by the Purchasers, then holding such
securities (including with respect to Apollo Partners, LLC., its principals who
for the purpose of this Agreement shall be included in the term "PURCHASER").
Thereafter, the Company shall use its reasonable best efforts to cause such
Registration Statement to be declared effective not later than February 26,
1999. If at any time after the Registration Statement becomes effective, the
Registration Statement is not available for sales by any Purchaser, then the
Company shall, as expeditiously as possible, prepare and file with the
Commission, to the extent required, an amendment or new registration statement
in order to afford such Purchaser the benefit of the registration contemplated
in this Section 1.1, and shall use its reasonable best efforts to have such
amendment or new registration statement declared effective as promptly as
practicable.
(b) Notwithstanding the foregoing, in the event that the Company
proposes to undertake an underwritten public offering immediately prior to the
filing of or during the pendency or effectiveness of the Registration Statement,
each Purchaser will be obligated to either (x) join the underwritten offering
with respect to all or a portion of the Registerable Securities requested by
such Purchaser to be included therein (subject to the approval of the managing
underwriter, which may exclude such shares entirely or require pro rata cut-back
with other selling shareholders, and/or (y) execute a "lock-up" agreement with
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respect to the sale or other disposition of any Registrable Securities not so
included or permitted to be included for a period commencing with the filing of
the related registration statement and ending 90 days after the effective date
of the related Registration Statement, but in any event not more than 135 in the
aggregate.
1.2. REGISTRATION PROCEDURES.
(a) The Registration Statement may be in any form for which the
Company then qualifies or which counsel for the Company deems appropriate;
(b) Before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to counsel selected
by the Purchasers, copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel, and after the filing of
the Registration Statement, the Company will promptly notify the Purchasers of
any stop order issued or, to the knowledge of the Company, threatened by the
Commission and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered;
(c) The Company shall prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the registration statement
effective for so long as any of the Registrable Securities remain owned by a
Purchaser, and so long as such registration is necessary to permit the public
resale thereof without any limitation on the amount of such sales pursuant to
Rule 144 under the Securities Act or otherwise, and comply with the provisions
of the 1933 Act with respect to the disposition of all Registrable Securities
during such period in accordance with the intended methods of disposition set
forth in the registration statement;
(d) The Company shall furnish to each Purchaser, before filing the
Registration Statement, if requested, copies of the Registration Statement as
proposed to be filed, and thereafter furnish to each Purchaser such number of
copies of the Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in the
registration statement (including each preliminary prospectus) and such other
document as the Purchasers may reasonably request in order to facilitate the
disposition of the Registrable Securities;
(e) The Company shall use its commercially reasonable efforts to
register or qualify the Registerable Securities covered by such Registration
Statement under the securities or blue sky laws of such jurisdictions as the
Purchasers shall reasonably request (provided that the Company shall not be
required to consent to general service of process for all purposes in any
jurisdiction where it is not then qualified to do business) and do any and all
other acts or things which may be necessary or advisable to enable such seller
to consummate the public sale or other disposition in such jurisdictions of such
Registrable Securities;
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(f) The Company shall notify the each Purchaser, at any time when a
prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Purchasers prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(g) The Company shall furnish, at the request of each Purchaser on
the date that the Registration Statement becomes effective, (a) an opinion,
dated such date, of the independent counsel representing the Company for the
purposes of such registration, addressed to the Purchasers, stating that such
registration statement has become effective under the 1993 Act; and (b) a
letter, dated such date, from the independent certified public accountants of
the Company addressed to the Purchasers making such request, stating that they
are independent certified public accountants within the meaning of the 1933 Act,
and that in the opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or the
prospectus, or any amendment or supplemental thereto, comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act,
and covering such other matters (including information as to the period ending
not more than five (5) business days prior to the date of such letter) with
respect to the registration, if independent certified public accountants are
normally requested to provide comfort on such matters, as such Purchaser may
reasonably request.
(h) The Company shall make available for inspection by the
Purchasers and any attorney, accountant or other professional retained by any
Purchaser or any underwriter (collectively, the "INSPECTORS"), all financial and
other records, permanent corporate documents and properties of the Company
(collectively, the "RECORDS") as are reasonably necessary to enable them to
exercise due diligence, and cause the Company's officers, directors, and
employees to supply all information reasonably requested by such Inspectors in
connection with the registration statement. The Purchasers further agree that
they will, upon learning that disclosure of such Records is sought in a court of
component jurisdiction, give notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(i) The Company shall otherwise use its commercially reasonable
efforts to comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders, as soon as reasonably
practicable an earnings statement satisfying the provisions of Section 11(a) of
the 1933 Act and covering a period of twelve months, beginning within three
months after the effective date of the Registration Statement;
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(j) The Company shall use its commercially reasonable efforts to
cause all Registrable Securities to be listed on each securities exchange (if
any) on which similar securities issued by the Company are then listed; and
(k) The Company shall provide a transfer agent and registrar for
all of the Registrable Securities not later then the effective date of such
Registration Statement.
1.3. DISCONTINUANCE OF DISPOSITION. The Purchasers, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 1.2 (f) shall forthwith discontinue disposition of the Registrable
Securities until the Purchaser receives copies of the supplemented or amended
prospectus contemplated by Section 1.2 (f) or until it is advised in writing
(the "ADVICE") by the Company that the use of the prospectus may be resumed and
has received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus.
1.4. INFORMATION TO BE FURNISHED BY PURCHASERS. Each Purchaser all
furnish to the Company such information and execute such documents regarding the
Registrable Securities held by such Purchaser and the intended method of
disposition thereof as the Company shall reasonably request in connection with
the action to be taken by the Company.
1.5. EXPENSES OF REGISTRATION. The Company shall pay all expenses
incurred by the Company in complying with Section 1.1 and 1.3 (other than the
underwriter's discounts and commissions and fees and expenses of special counsel
to the Purchasers, if any), including, without limitation, all registration and
filing fees (including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), fees and expenses of complying with
securities and blue sky laws, printing expenses, fees, and disbursements of
counsel to the Company, and of the Company's independent public accountants.
1.6. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each Purchaser,
its executive officers, directors and controlling persons (within the meaning of
the 1933 Act) and each person who participates as an underwriter or controlling
person of an underwriter (within the meaning of the 1933 Act) with respect to a
Registration Statement pursuant to Section 1.1 against any losses, claims,
damages or liabilities to which any of them may become subject under the 1933
Act or otherwise insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or allegedly untrue statement of any material fact contained in a registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, and
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will reimburse any of them for any legal or other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable hereunder in any such case if any such loss, claim, damage or
liability arise out of or is based upon any untrue statement or allegedly untrue
statement or omission or alleged omission made in such registration statement,
prospectus or amendment or supplement thereto in reliance upon and in conformity
with written information furnished to the Company for such purpose by such
Purchaser or by its representative.
(b) Each Purchaser shall indemnify and hold harmless the Company,
its executive officers, directors and controlling persons (within the meaning of
the 1933 Act) and each person who participates as an underwriter or controlling
person of an underwriter (within the meaning of the 1933 Act) with respect to a
registration statement pursuant to Section 1.1 against any losses, claims,
damages or liabilities to which any of them may become subject under the 1933
Act or otherwise insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, in reliance upon and in
conformity with written information furnished to the supplement thereof, in
reliance upon and in conformity with written information furnished to the
Company by each Purchaser or by its representative, and will reimbursement any
of them for any legal or other expenses reasonably incurred by them in
connection with investigating or defending, any such, loss, claim, damage,
liability or action.
(c) A party's obligation to indemnify (the "indemnifying party")
and the other party's rights to indemnity and payment (the "indemnified party")
under Section 1.6 is contingent upon the indemnified party (i) giving the
indemnifying party prompt written notice of such claim; (ii) allowing the
indemnifying party to have sole right to control and direct the investigation,
preparation and defense of any such claim or action and all negotiations for its
settlement or compromise; and (iii) providing reasonable assistance to the
indemnifying party, such assistance to be solely at the cost and expense of the
indemnifying party. The indemnified party, at its own expense, shall be entitled
to participate in the defense and to receive copies of all pleadings and other
papers in connection with the claim.
(d) If for any reason the indemnification provided for in the
preceding Sections 1.6 (a) and 1.6 (b) is unavailable to an indemnified party as
contemplated by those sections, then the indemnifying party will contribute to
the amount paid or payable to the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations,
provided that no Purchaser will not be required to contribute in an amount
greater than the difference between the net proceeds received by such Purchaser
with respect to the sale of any Registrable Securities and all amounts already
contributed by such Purchaser with respect to such claims.
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1.7. UNDERWRITING AGREEMENT. If the Registrable Securities are to be
sold pursuant to a registration statement in an underwritten offering in which
no shares of the Company are being sold for the account of the Company, the
Company agrees to enter into an underwriting agreement with the underwriter or
underwriters (who shall be subject to the approval of the Company) containing
customary representations and warranties with respect to the business and
operations of the Company, including without limiting the generality of the
foregoing, customary provisions with respect to indemnification by the Company
of the underwriters of such offering.
2. MISCELLANEOUS
2.1. OWNER OF REGISTRABLE SECURITIES. The Company may deem and treat
the person in whose name the Registrable Securities are registered as the
absolute owner thereof for all purposes whatsoever.
2.2. SUCCESSORS. This Agreement shall be binding upon and shall inure
to the benefit of the successors and assigns of each Purchaser, and the term
"Purchaser" shall be deemed to be include each such holder of Registrable
Securities. This Agreement shall be binding upon and shall inure to the benefit
of the Company and its successors and assigns.
2.3. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without regard
to such state's conflicts of law principles.
2.4. NOTICE. Any notice or other communication required or permitted
hereunder shall be sufficiently given only if sent by facsimile transmission or
by registered or certified mail, postage prepaid, addressed as follows or to
such other address or addresses as may hereafter be furnished in writing by
notice similarly given by one party to the other:
To the Company: NewStar Media Inc.
8955 Beverly Blvd.
Los Angeles, CA 90048
Telephone: (310) 786-1600
Facsimile: (310) 247-2932
The Purchasers: Apollo Partners Ltd.
1 Stamford Plaza, 12th Floor
Stamford, CT 06901
Ron Lightstone
NewStar Media
8955 Beverly Blvd.
Los Angeles, CA 90048
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With a required
copy to: Morrison Cohen Singer & Weinstein, LLP
770 Lexington Avenue
New York, New York 10022
Attn: Peter D. Weinstein, Esq.
Jack Levy, Esq.
Telephone: 212-734-8600
Facsimile: 212-735-8708
2.5. FULL AGREEMENT. This Agreement sets forth the entire understanding
of the parties with respect to transactions contemplated hereby, and shall not
be modified or amended except by written agreement of all parties hereto.
2.6. HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience of reference only and shall not be considered a part
hereof.
2.7. COUNTERPARTS. This Agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first forth above.
THE COMPANY:
NEWSTAR MEDIA INC.
By:_____________________________________________
Name: Neil Topham
Title: Vice President & Chief
Financial Officer
THE PURCHASERS:
APOLLO PARTNERS, LLC
By:_____________________________________________
Terrence Elkes
Manager
By:_____________________________________________
Kenneth Gorman
Manager
________________________________________________
Ronald Lightstone
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Exhibit 99.7
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "AGREEMENT") made as of November 12, 1998
among NewStar Media Inc., a California corporation (the "COMPANY"), Apollo
Partners, LLC and Ronald Lightstone (each a "PURCHASER" and collectively the
"PURCHASERS").
WITNESSETH:
WHEREAS, the Company desires to sell, and Purchasers desire to
purchase, subject to the terms and conditions of this Agreement, shares of the
Common Stock of the Company, par value $.01 per share (the "COMMON STOCK");
WHEREAS, a special committee of the Board of Directors, at a meeting
held on November 12, 1998, approved the sale and issuance of Common Stock of the
Company to the Purchasers on the terms set forth in this Agreement;
WHEREAS, the Company and the Purchasers are parties to that certain
Stock Purchase Agreement, dated as of July 30, 1998 (the "Stock Purchase
Agreement");
WHEREAS, the Company and the Purchasers desire to adjust the purchase
price of the shares of Common Stock purchased by the Purchasers under the Stock
Purchase Agreement;
WHEREAS, a special committee of the Board of Directors, at a meeting
held on November 12, 1998, approved the adjustment in the purchase price of the
shares of Common Stock purchased under the Stock Purchase Agreement on the terms
set forth in this Agreement;
WHEREAS, this Agreement memorializes the agreement between the
Purchasers and the Company concerning the issuance and sale of Common Stock of
the Company as approved by the special committee on November 12, 1998 and the
adjustment of the purchase price of the shares of Common Stock purchased under
the Stock Purchase Agreement.
NOW, THEREFORE, in the consideration of the foregoing and the
covenants, agreements, representations and warranties herein contained, and
intending to be legally bound, the parties hereby mutually agree as follows:
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SECTION 1
SALE AND PURCHASE OF THE COMPANY'S SECURITIES; CLOSING
1.1. SALE OF THE SECURITIES.
(a) Subject to the terms and conditions herein set forth, the
Company agrees to sell and issue to the Purchasers, and each Purchaser agrees to
purchase from the Company, Common Stock of the Company as follows:
(i) On the Closing Date (as hereinafter defined) Apollo
Partners, LLC ("Apollo") shall purchase 425,591 of Common
Stock of the Company for a purchase price of $0.719 per share or
an aggregate of $305,999.93
(ii) On the Closing Date, Ronald Lightstone ("LIGHTSTONE")
shall purchase 47,288 shares of Common Stock of the
Company for $0.719 per share or an aggregate of $34,000.07.
The shares being purchased hereunder are hereinafter
referred to as the "PURCHASED SHARES".
(b) In connection with the purchase of the Purchased Shares, each
Purchaser shall have the right to assign all or a portion of its rights (but not
its obligation) to purchase such Purchased Shares from the Company under this
Agreement to any person, provided such person submits to the Company at the
Closing a certificate setting forth the representations in Section 3 below. Any
such assignees shall be deemed a "Purchaser" hereunder.
(c) In connection with the sale and issuance of the Purchased
Shares, the Company agrees to register the Purchased Shares as set forth in the
form of Registration Rights Agreement annexed hereto as Exhibit A (the
"REGISTRATION RIGHTS AGREEMENT").
1.2. CLOSING. The closing of the issuance and sale of the Purchased
Shares to the Purchasers (the "CLOSING") shall take place at the offices of the
Company on or before November 16, 1998 (the date on which the Closing actually
takes place being referred to as the "CLOSING DATE").
1.3. DELIVERY. At the Closing, the Company shall issue and deliver to
each Purchaser a certificate or certificates, registered in the name of the
Purchaser, representing the Purchased Shares being purchased by such Purchaser,
against delivery to the Company of the Purchase Price therefor by wire transfer
and shall execute and deliver the Registration Rights Agreement.
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1.4. ADJUSTMENT TO NUMBER OF SHARES PURCHASED. Notwithstanding anything
to the contrary contained herein, if, after the date of this Agreement and prior
to the Closing Date, the Company shall have issued Common Stock to persons other
than Apollo and Lightstone with the effect of increasing the net tangible assets
of the Company above $2,360,000 (a "Stock Issuance"), the number of shares of
Common Stock to be purchased by the Purchasers hereunder shall be determined in
accordance with the following formula:
Number of Shares = $2,700,000 - Net Tangible Assets
--------------------------------
$0.719
Where "Net Tangible Assets" is the net tangible assets of the Company based on
the Company's balance sheet as at September 30, 1998 and giving pro forma affect
to all Stock Issuances.
The number of shares of Common Stock to be purchased by Apollo shall equal 90%
of such adjusted number of shares and the number of shares of Common Stock to be
purchased by Lightstone shall equal 10% of such adjusted number of shares.
1.5 ADJUSTMENT OF PURCHASE PRICE
(a) In consideration of the purchase of the Purchased Shares by
Apollo and Lightstone, the Company hereby grants to Apollo and Lightstone the
option to, and upon exercise of such option agrees to, adjust the purchase price
of the shares of Common Stock purchased by Apollo and Lightstone under the Stock
Purchase Agreement. The purchase price shall be adjusted to equal $0.719 per
share.
(b) The adjustment to the purchase price shall be effective at the
option of Apollo and/or Lightstone on any date during the period commencing on
November 16, 1998 and ending on January 10, 1999. Apollo and/or Lightstone shall
also have the option of electing not to adjust the purchase price. If Apollo
and/or Lightstone do not notify the Company on or before January 10, 1999 that
it and/or he elects to adjust the purchase price, the purchase price shall not
be adjusted.
(c) Upon notification by Apollo that it has elected to exercise
its option to adjust the purchase price, the Company shall issue 1,738,526
shares of Common Stock to Elkes Limited Partnership (an assignee of Apollo under
the Stock Purchase Agreement) and 1,738,526 shares of Common Stock to Gorman
Limited Partnership (an assignee of Apollo under the Stock Purchase Agreement).
Upon notification by Lightstone that he has elected to exercise his option to
adjust the purchase price, the Company shall issue 347,705 shares of Common
Stock to Lightstone. The shares to be issued upon exercise of such option are
referred to as the "OPTION SHARES", and together with the Purchased Shares are
referred to as the "SHARES". The Option Shares shall be deemed shares issued
under the Stock Purchase Agreement and shall have all of the registration rights
of the shares issued under the Stock Purchase Agreement in accordance with the
Registration Rights Agreement, dated as of August 31, 1998, entered into in
connection therewith.
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(d) This Section 1.5 shall supersede Section 1.4 of the Stock
Purchase Agreement.
SECTION 2
THE COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchasers the
following:
2.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of California, and has all requisite corporate power and
authority to own and lease its properties and assets and to conduct its business
as currently conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property in the course of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a whole.
2.2. AUTHORIZATION. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement and to carry out the transactions contemplated hereby and thereby. The
terms and provisions of this Agreement and the Registration Rights Agreement
have been reviewed by a Special Committee of the Board of Directors composed of
independent directors of the Company. The members of the Special Committee have
unanimously recommended that this Agreement and the Registration Rights
Agreement be approved, authorized, executed and delivered. The execution,
delivery, and performance of this agreement and the Registration Agreement by
the Company have been duly authorized by all requisite corporate action, and
this Agreement has been, and the Registration Rights Agreement when executed and
delivered by the Company will be, duly executed and delivered by the Company and
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights generally and
general equitable principles.
2.3. CAPITAL STOCK. The authorized shares of the Company consist of
20,000,000 shares of Common Stock and 2,000,000 shares of preferred stock, $.01
par value per share, of which 400,000 shares have been designated Series A
Preferred Stock, 5,000 shares have been designated Series B Preferred Stock, and
5,000 shares have been designated Series C Preferred Stock, 400,000 shares have
been designated Series D Preferred Stock and 1,500 shares have been designated
Series E Preferred Stock. There are no voting trusts or other agreements or
understandings known to the Company with respect to the voting of the capital
stock of the Company.
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2.4. ISSUANCE OF THE SHARES. The sale, issuance and delivery of the
Shares in accordance with the terms of this Agreement have been authorized by
all necessary corporate action, and the Shares when sold, issued and delivered,
against the full payment of the purchase price will be duly and validly issued,
fully paid and nonassessable. The sale, issuance and delivery of the Shares are
not subject to any preemptive rights of stockholders of the Company or to any
right of first refusal or other similar right in favor of any person.
2.5. CONSENTS AND APPROVALS. Except for filings under Federal and
applicable state securities laws, no permit, consent, approval or authorization
of or declaration to or filing with any governmental authority, not made or
obtained, is required in connection with the execution or delivery of this
Agreement by the Company, the offer, sale, issuance or delivery of the Shares,
or the carrying out by the Company of the transactions contemplated hereby.
2.6. PRIVATE OFFERING. Neither the Company nor anyone acting on behalf
of the Company has offered the Shares for sale to, or solicited offers to buy
from, or otherwise approached or negotiated with, any individual or entity in
connection with the sale of such securities other than a limited number of
investors, including the Purchasers. Assuming the accuracy of each Purchaser's
representations contained in Section 3 of this Agreement, the offer, issuance
and delivery of the Shares are exempt from registration under the Securities Act
of 1933, as amended (the "1933 ACT"), and all action required to be taken prior
to the offer or sale of the Shares has been taken under the applicable state
securities laws.
2.7. NO CONFLICT WITH LAW OR DOCUMENTS. The execution, delivery, and
performance by the Company of this Agreement and the Registration Rights
Agreement, and the performance by the Company of its obligations under such
documents, and the sale, issuance and delivery of the Shares, will not violate
any provision of law, any order of any court or other agency of government, the
Articles of Incorporation or By-laws, or any provision of any indenture,
agreement or other instrument by which the Company or any of its properties or
assets is bound or affected, or conflict with, result in a breech of, result in
or permit the termination of or acceleration of rights or obligations under, or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
2.8. DISCLOSURE. Neither this Agreement nor any other document,
certificate, instrument or statement furnished or made to the Purchasers by or
on behalf of the Company in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading in light of the circumstances under which they were made.
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2.9. LITIGATION. Except as disclosed in the Company's public filings
and in Schedule 2.9, there are no (a) actions or suits individually in excess of
$50,000 or in the aggregate in excess of $250,000, or any proceedings or
investigations at law or in equity or by or before any governmental
instrumentality or other agency now pending or to the Company's knowledge,
threatened against or adversely affecting the Company, or (b) judgments,
decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against or affecting the
Company, except as in all matters under (a) and (b), which are not reasonably
expected to result in a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a whole (a
"MAE"), or are covered by appropriate amounts of insurance.
2.10. SUBSIDIARIES. Except for NewStar Worldwide Inc., NewStar
Television Inc., Dove Four Point, Inc., Dove Audio, Inc., Dove Entertainment,
Inc., Dove Retail, Inc., Family Blessings Productions Inc. and Empire Burbank
Studios, the Company has no subsidiaries and does not own any interest directly
or indirectly, in any other corporation, partnership, joint venture or other
enterprise or entity.
2.11. INTELLECTUAL PROPERTY.
(a) To the best knowledge of the Company the Company, owns, is
licensed or otherwise has the right to all intellectual property relating to its
audio titles, books, films and television products (the "Products") and all
rights to use all patents, trademarks, service marks, trade names, copyrights,
licenses, franchises and other rights (collectively, including with respect to
the intellectual property relating to the Products, the "RIGHTS") being used to
conduct its business as now operated. The Company has made available to the
Purchasers a complete set of all agreements permitting the Company to use the
Rights of the third parties or allowing third parties to use the Rights of the
Company.
(b) No Right or Product presently sold by or employed by the
Company, or which the Company contemplates selling or employing, infringes upon
the Rights that are owned by any third party except as would not result in a
MAE.
(c) No litigation is pending and no claim has been made against
the Company, or to the best of the Company's knowledge, is threatened,
contesting the right of the Company to sell or use any Right or Product
presently sold or employed by the Company, except as disclosed in the Company's
public filings or except which would result in a MAE.
(d) Except as disclosed in the Company's public filings, no
employee, officer or consultant of the Company has any proprietary, financial or
other interest in any Right owned or used by the Company which entitles such
person to the payment of an amount in excess of $10,000 with respect to any
single Right, or $25,000 with respect to all Rights in which such person has an
interest.
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(e) The Company has taken reasonable measures to protect and
preserve the security, confidentiality and value of its Rights, including trade
secrets and other confidential information.
2.12. UNDISCLOSED LIABILITIES. Except for the agreements and
obligations listed on the balance sheet for the Company included in its
Quarterly Report on Form 10-QSB for the three months ended September 30, 1997,
to the best of the Company's knowledge, the Company does not have any
outstanding liability except for liabilities incurred in the ordinary course of
business which are either for amounts less than $50,000 or are cancelable on not
more than 30 days notice. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party that could
reasonably be expected to result in a MAE.
2.13. TITLE TO PROPERTIES. The Company has good and marketable title to
all of its owned properties and assets, free and clear of all mortgages,
pledges, security interests, liens, charges and encumbrances, except for
Permitted Encumbrances (as defined below). The Company enjoys peaceful and
undisturbed possession under all leases relating to real property and all other
leases (other than immaterial leases which can be replaced on substantially the
same terms) necessary for the operation of the business; and all such leases are
valid and subsisting and in full force and effect. As used herein, "PERMITTED
ENCUMBRANCES" means any mortgages, pledges, security interests, liens, charges
and other encumbrances (i) disclosed in the Company's public filings to the date
hereof or permitted under the Company's credit facility with The Chase Manhattan
Bank, (ii) liens for current taxes, assessment and other governmental charges
not overdue (other than liens, assessments or charges being contested in good
faith), (iii) mechanic's material men's and similar liens which may have arisen
in the ordinary course of business and which, in the aggregate, would not be
material to the financial condition of the Company, (iv) security interests
securing indebtedness not in default for the purchase price of or lease rental
payments on property purchased or leased under capital lease arrangements in the
ordinary course of business, and (v) minor imperfections of title, if any, not
material in amount and not materially detracting from the values or impairing
the use of the property subject thereto or impairing the operations or proposed
operations of the Company.
2.14. REAL PROPERTY. Other than the premises containing the Company's
headquarters located at 8955 Beverly Boulevard, Los Angeles, California, the
Company owns no real property.
2.15. TAXES.
(a) The Company has timely filed all federal, state and local
income tax returns and has timely filed with all appropriate governmental
agencies all sales, ad valorem, franchise and other tax, license, gross receipts
and other similar returns and reports required to be filed by the Company. The
Company has reported all taxable income and losses on those returns on which
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such information is required to be reported, and paid or provided for the
payment of all taxes on said returns or taxes due pursuant to any assessment
received by it, including without limitation, any taxes by law to be withheld
and/or paid in connection with any officer's or employee's compensation or due
pursuant to any assessment received by it. There are no agreements for the
extension of time for the assessment or payment of any amounts of tax. The
Company had made available to the Purchasers for inspection copies of income tax
returns that are true and complete copies of the federal applicable state, local
or other income tax returns filed by the Company.
(b) The Company had paid all tax liabilities of the Company
arising through the end of the taxable year ended December 31, 1997. All tax
liabilities of the Company arising after December 31, 1997 have been paid or
adequately disclosed and properly reserved for on the books and records and
financial statements of the Company. Except for current audits by the Internal
Revenue Service of Dove Four Point, Inc. for the 1994 tax year and Dove Audio
for the 1994 tax year, no federal or applicable state, local or other tax return
of the Company for any period has been or is currently under audit by the
Internal Revenue Service or any state, local or other tax authorities. Except
for an assessment by Michigan, for approximately $90,000, no claim has been made
by federal, state, local or other authorities relating to such returns or any
audit. For purposes of this section the word "timely" shall mean that such
returns were filed within the time prescribed by law for the filing thereof,
including the time permitted under any applicable extensions. The Company is not
aware of any facts which it believes would constitute the basis for the proposal
of any material tax deficiencies for any unexamined year. All taxes which the
Company is required by law to withhold and collect have been duly withheld and
collected, and has been timely paid over to the proper authorities to the extent
due and payable.
2.16. ENVIRONMENTAL MATTERS. The Company has complied with each and is
not in violation of any, federal, state or local law, regulation, permit,
provision or ordinance relating to the generation, storage, transportation,
treatment or disposal of hazardous, toxic or polluting substances, except where
such noncompliance or violation could not reasonably be expected to result in a
MAE. The Company has obtained and adhered to all necessary permits and other
approvals necessary to store, dispose, and otherwise handle hazardous, toxic and
polluting substances, the failure of which to obtain or adhere to could not
reasonably be expected to result in a MAE. The Company has reported, to the
extent required by federal, state and local law, all past and present sites
where hazardous, toxic or polluting substances, if any, from the Company have
been treated, stored or disposed. The Company has not transported any hazardous,
toxic or polluting substances or arranged for the transportation of such
substances to any location which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against the
Company for clean-up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under the
Compensation and Liability Act of 1980, as amended which claims would result in
a MAE.
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2.17. COMPLIANCE WITH LAW.
(a) The Company is not in default under any order of any court,
governmental authority or arbitration board or tribunal to which the Company was
subject or in violation of any laws, ordinances, governmental rules or
regulations (including, but not limited to, those relating to environmental,
safety, building, product safety or health standards or employment matters) to
which the Company is or was subject, in each case, that could reasonably be
expected to result in a MAE. The business is being conducted in compliance with
all applicable laws ordinances, rules and regulations applicable to the Company,
the non-compliance with which could reasonably be expected to have a MAE. The
Company has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its business, which failure could have a MAE.
(b) The Company has filed all documents (the "FILINGS") required
to be filed with the Securities and Exchange Commission (the "COMMISSION")
pursuant to the 1933 Act and the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") and true, correct and complete copies of the Filings have
been made available to the Purchasers. The Filings complied in all material
respects with the requirements of the 1933 Act and the Exchange Act, as
applicable, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
render the statement not misleading in the light of the circumstances in which
they were made. The Company has filed in a timely manner all reports required to
be filed since June 10, 1997. For purposes of this section the word "timely"
shall have the meaning given in Section 2.15
2.18. EMPLOYEE BENEFIT PLANS.
(a) The Company has complied and currently is in compliance, both
as to form and operation, with the applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Internal
Revenue Codes of 1954 and/or 1986,as amended respectively (the "CODE"), with
respect to each "employee benefit plan" as defined under Section 3(3) of ERISA
("Plan") which the Company (i) has ever adopted, maintained, established or to
which the Company has ever been required to contribute or to which the Company
has ever contributed or (ii) currently maintains or to which the Company
currently contributes or is required to contribute or (iii) currently
participates in or is required to participate in or is required to participate
in, except in each case or all cases in the aggregate where such noncompliance
would not result in a MAE.
(b) The Company has never maintained, adopted or established,
contributed or been required to contribute to, or otherwise participated in or
been required to contribute to, or otherwise participated in or been required to
participate in, a "multi-employer plan" (as defined in Section 3 (37) of ERISA).
No amount is due or owing from the Company on account of a "multi-employer plan"
(as defined in Section 3(37) of ERISA) of on account of any withdrawal
therefrom.
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(c) Notwithstanding anything else set forth herein, the Company
has not incurred any material liability with respect to a Plan, including,
without limitation, under ERISA (including, without limitation, Title I or Title
IV or ERISA and other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Code or other applicable law, which has not been
satisfied or reserved in full, and no event has occurred, and there exists no
condition or set of circumstances which could result in the imposition of any
material liability with respect to the Plan, including, without limitation,
under ERISA (including, without limitation, Title I or Title IV or ERISA), the
Code or other applicable law with respect to the Plan.
(d) The Company has not committed itself, orally or in writing,
to (i) provide or cause to be provided to any person now or at any time covered
by an Plan and payments or benefits, which are material either singly or in the
aggregate, in addition to, or in lieu of, those payments or benefits set forth
under any Plan, or (ii) continue the payment of, or accelerate the payment of,
benefits, which are material either singly or in the aggregate, under any Plan,
except as expressly set forth thereunder. Complete and correct copies of all
written arrangements described in the preceding sentence as in effect on the
date hereof have been made available to the Purchasers.
(e) Except for the Employment Termination Agreement with the
Viners, the employment agreements with Messrs. Ziskin and Lightstone and
agreements with various industry guilds, the Company has not committed itself,
orally or in writing, to provide or cause to be provided any severance or other
post-employment benefit, salary continuation, termination, disability, death,
retirement, health or medical benefit, or similar benefit to any person
(including, without limitation, any former or current employee) except as set
forth under any Plan, except for such benefits which individually or in the
aggregate are not material. Complete and correct copies of all written
arrangements described in the preceding sentence as in effect on the date hereof
have been made available to the Purchasers.
2.19. INSURANCE. All policies of liability, theft, fidelity, business
interruption, life, fire, product liability, workmen's compensation, health and
other forms of insurance held by the Company are valid and enforceable policies
and are outstanding and duly in force and all premiums with respect thereto are
paid to date. To the best of the Company's knowledge, the amounts of coverage
under such policies of insurance for the assets and properties of the Company
are adequate against risks usually insured against by persons operating similar
businesses and operating similar properties.
2.20. REGISTRATION RIGHTS. Except as contemplated by or described in
the Registration Rights Agreement, as disclosed in the Stock Purchase Agreement
dated as of March 27, 1997 among Dove Entertainment, Inc. and the persons listed
therein and as contemplated by the agreements with Media Equities International,
Michael Viner and Deborah Raffin, Apollo, Lightstone, Michael Yageman, John
Tinker, Steven Soloway, Tin Man, Leopold, Petrich & Smith and Custom
Duplicating, no person has any right to cause the Company to effect the
registration under the 1933 Act of any of the Company's debt or equity
securities.
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SECTION 3
PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants to the Company the following:
3.1. AUTHORIZATION. Such Purchaser has all requisite power and
authority to execute this Agreement and the Registration Rights Agreement and to
carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement by such Purchaser have been duly
authorized by all requisite corporate action, and this Agreement has been duly
executed and delivered by such Purchaser and the Registration Rights Agreement
when duly executed and delivered by such Purchaser will constitute its valid and
binding obligation, enforceable against such Purchaser in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and general equitable principles.
3.2. PURCHASE FOR INVESTMENT. The Shares are being acquired by such
Purchaser for its own account, not as a nominee or agent, for investment and not
with a view to resale or distribution within the meaning of the 1933 Act, and
the rules and regulations thereunder, and such Purchaser will not distribute the
Shares in violation or contravention of the 1933 Act. Such Purchaser is not
aware of any facts or circumstances that contradict the representation in the
first sentence of Section 2.6.
3.3. RESTRICTIONS ON TRANSFER. The Purchaser acknowledges that (a) the
Shares are not registered under the 1933 Act as of the Closing Date, (b) the
Shares will not be transferable unless so registered or unless an exception for
such registration is applicable and (c) certificates representing the Shares
will bear a legend substantially in the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
DISPOSED OF, AND NO TRANSFER OF THE SECURITIES MAY BE MADE BY
THE COMPANY OR ITS TRANSFER AGENT, IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM."
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3.4. SOPHISTICATION: ACCESS TO INFORMATION.
(a) Such Purchaser represents and warrants to the Company, that
such Purchaser and if such Purchaser is a limited liability company each member
of such Purchaser (i) is an "accredited investor" as defined in the 1933 Act and
is financially able to purchase the Shares (ii) is fully capable of
understanding the type of investment being made pursuant to this Agreement, and
the risks involved in connection therewith, (iii) believes that the nature of
the Shares is consistent with their overall investment programs and financial
position, (iv) recognizes that there are substantial risks involved in their
purchase of the Shares, (v) is capable of bearing the economic risk of its
investment for an indefinite period of time and can afford a complete loss of
its investment, (vi) has adequate means of providing for their current liquidity
needs, (vii) has no need for liquidity of their investment, (viii) is not
expecting any short term income from their investment and (ix) has no reason to
anticipate any change in personal circumstances, financial or otherwise, which
may cause or require any sale of the Shares.
(b) Such Purchaser acknowledges to the Company that it has had the
opportunity to ask questions of and receive answers from the Company's officers
and directors concerning the terms and conditions of the (i) purchase and
delivery of the Shares and (ii) business and financial conditions of the
Company; and such Purchaser has received to its satisfaction, such additional
information about the business and financial conditions of the Company and the
terms and conditions of the purchase and delivery of the Shares, as it has
requested.
SECTION 4
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell, issue and deliver the Purchased
Shares on the Closing Date as specifically provided, is subject to the
fulfillment to its satisfaction of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES. On the Closing Date, the
representations and warranties contained in Section 3 hereof shall be true and
correct with the same effect as though made on and as of the Closing Date.
4.2. NO INJUNCTION. There shall not be any pending or threatened suit,
action or litigation, or administrative, arbitration or other proceeding or
governmental inquiry or investigation questioning the validity of this Agreement
or the transactions contemplated hereby.
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SECTION 5
AFFIRMATIVE COVENANTS OF THE COMPANY
5.1. ANNOUNCEMENTS. The Purchasers acknowledge that the Company may be
required by law to make certain announcements regarding the transaction
contemplated hereby. The content of any such public announcement by either party
will be subject to review and approval of the other party, such delivery and
review of content constituting such public announcement shall be timely and
approval shall not be unreasonably withheld.
5.2. INDEMNIFICATION.
(a) The Company (together with its successors and assigns, the
"INDEMNIFYING PARTY") shall indemnify and hold harmless each Purchaser, its
principals, employees (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel incurred by an Indemnified Party) in any action or proceeding between
an Indemnifying Party and Indemnified Party (or Indemnified Parties) or between
an Indemnified Party (or Indemnified Parties) and any third party or otherwise,
or other liabilities (collectively, the "LIABILITIES") resulting from or arising
out of any breach of any representation or warranty, covenant or agreement of an
Indemnifying Party to such Indemnified Party in this Agreement, or any legal,
administrative or other actions (including actions brought by any equity holder
of the Company) or derivative actions brought by any third party claiming
through or in Indemnifying Party's name), proceedings or investigations whether
formal or informal), or written threats thereof, based upon, relating to or
arising out of any breach of any representation or warranty, covenant or
agreement of an Indemnifying Party to such Indemnified Party in this Agreement;
including the enforcement by any Indemnified Party of its rights hereunder. For
purposes of this Section 5.2, "losses" shall include, but not be limited to, a
diminution in value of the Purchased Shares resulting from or arising out of any
breach of any representation or warranty, covenant or agreements of an
Indemnifying Party in this Agreement.
(b) To the extent that such indemnification is unenforceable for
any reason, the Indemnifying Party shall make the maximum contribution to the
payment and satisfaction of the Liabilities which shall be permissible under
applicable laws.
(c) In connection with the obligation of the Indemnifying Party to
indemnify for or contribute towards expenses as set forth above, the
Indemnifying Party further agrees, upon presentation of appropriate invoices
containing reasonable detail, to reimburse each Indemnified Party for all such
expenses (including fees, disbursements and other charges of counsel incurred by
an Indemnified Party in any action or proceeding between the Indemnifying Party
and such Indemnified Party, or Parties, and any third party otherwise) as they
are incurred by such Indemnified Party subject to an undertaking to reimburse
such amounts if determined not entitled to it.
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5.3. FINANCIAL STATEMENTS AND REPORTS. For so long as the Purchasers
continue to hold in the aggregate at least 1% of the outstanding shares of
Common Stock, the Company shall furnish to the Purchasers the following
financial statements and reports:
(a) Within the period prescribed by the Securities and Exchange
Commission (the "COMMISSION"), an audited balance sheet, and related audited
statements of income, cash flows and shareholders' equity of the Company as of
and for such fiscal year prepared in accordance with GAAP, consistently applied,
and accompanied by the opinion of the Company's regularly engaged firm of
independent certified public accountants.
(b) Within the period prescribed by the Commission, a quarterly
balance sheet and statements of income, cash flows and stockholders' equity of
the Company as of and for such quarter and the year to date and as of and for
the corresponding periods of the preceding fiscal year. The interim statements
described above shall be unaudited, but prepared in accordance with GAAP,
subject only to normal year-end adjustments and shall be certified by the Chief
Financial Officer of the Company; and
(c) Promptly upon their becoming available, the Company shall
deliver to the Purchasers copies of (i) all financial statements, reports,
notices and proxy statements sent or made available to shareholders by the
Company, (ii) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by the Company with any securities exchange or
with the Commission or any governmental or private regulatory authority, and
(iii) all press releases and other statements made available by the Company to
the public concerning material developments in the business of the Company.
5.4. ACCESS. The Company shall during usual business hours and upon
reasonable notice, permit the Purchasers' duly authorized representatives to
visit and inspect the properties of the Company, to examine the stock register,
books and record of account and records of the proceedings of the incorporators,
stockholders and directors and to make copies or extracts therefrom, and to
discuss the Company's business with its officers and directors.
5.5. OTHER FILINGS AND DISSEMINATION OF MATERIAL. For so long as the
Purchasers continue to hold in the aggregate at least 1% of the outstanding
shares of Common Stock:
(a) The Company shall make and keep public information available
as those terms are understood and defined in Rule 144 promulgated under the 1933
Act.
(b) The Company shall file with the Commission in a timely manner
all reports and other documents as the Commission may prescribe under the
Exchange Act at any time.
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(c) The Company shall furnish to the Purchasers a written
statement by the Company as to its compliance with the reporting requirements of
the Exchange Act as the Purchasers may reasonably request to avail itself of any
rule or regulation of the Commission allowing such holder to sell any such
securities without registration.
SECTION 6
NEGATIVE COVENANTS OF THE COMPANY
6.1. NEGATIVE COVENANTS.
(a) So long as the Purchasers continue to hold not less than an
aggregate of 750,000 shares of Common Stock, the Company hereby covenants and
agrees with the Purchasers that without the consent of the Purchasers, which
right of consent shall be exercised in good faith and in a commercially
reasonable manner,
(i) the Company will not;
(A) adopt an annual budget;
(B) incur any debt for borrowed money or sell and issue any
debt or equity securities other than compensation for
employees, directors and consultants or pursuant to any
options, warrants or convertible securities outstanding
on the date hereof;
(C) change or alter its principal business or enter into any
new business (it being understood that exploiting
ancillary rights shall not be considered new business).
(ii) no executive officer of the Company will knowingly:
(A) hire any executive that earns in excess of $100,000 per
year;
(B) make any changes or additions to the Company's auditors,
consultants or principal outside counsel;
(D) commence any litigation not in the ordinary course of
business or settle any litigation not in the ordinary
course of business or where the amount to be paid by the
Company is $25,000 or more;
(E) acquire any assets where the required payment by the
Company is in excess of $155,000 or sell or license
outside of the ordinary course of business assets where
the payment to the Company is in excess of $155,000,
including film, audio or publishing rights;
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(F) commence active pre-production for (I) any television
movie-of-the-week, special or mini-series, unless the
license fee payable (or previously paid) for such
program by the U.S. broadcast or cable network together
with bankable foreign licenses is at least equal to the
budgeted negative cost (including all normal and
customary production budget items including for
functions performed by the Company and including a
customary contingency of 10%, minus $250,000 and the
Company reasonably believes that additional revenues
from uncommitted territories is reasonably likely to
generate revenues in excess of $250,000 in the two years
from the date of commencement of such pre-production,
(II) any episodic television series unless the budgeted
negative cost (including all normal and customary
production budget items including for functions
performed by the Company and including a customary
contingency of 10%) per episode is less than $150,000
and at least 80% of such negative cost will be funded by
a U.S. broadcast or cable network and the Company
reasonably believes that additional revenues from
uncommitted territories is reasonably likely to generate
revenues in excess of the unfunded amount within two
years from the date of commencement of such production;
or (III) engage in the production of a theatrical
feature film, except to the extent the Company's
commitments are less than $250,000 and the Company
reasonably believes that expected revenue from such film
will be in excess of all costs relating thereto,
including the amount of the Company's commitment;
(G) issue any financial press releases or publicly issue or
otherwise publicly discuss the Company's projected
financial results (it being understood that the
foregoing is not intended to restrict comments in
general terms as to the anticipated success of any
particular project).
(b) For purposes of this Section 6.1 only, Apollo and Lightstone
jointly shall from time to time designate a person (a "Representative") by
written notice to the Company, who shall have the authority as between the
Company and the Purchasers to give or withhold the Purchasers' consent as
contemplated in this Section 6.1, which Representative shall, until further
notice, be Ronald Lightstone.
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6.2. REMEDY. In the event that the Company breaches any of the
covenants set forth in Section 6.1, and such breach is continuing unremedied for
a period of thirty (30) days after notice thereof is given to the Company by
both of Apollo and Lightstone, then the Company shall immediately upon written
demand by both of Apollo and Lightstone take all steps necessary or appropriate
to elect its Board of Directors two additional directors nominated by both of
Apollo and Lightstone, including calling a special meeting for such purpose,
which directors shall continue to serve until the earlier of the annual meeting
of the shareholders of the Company next following the cure of the breach which
gave rise to the exercise of rights under this Section 6.2, or until the
Purchasers no longer own at least 750,000 common shares. If shareholder approval
shall be required for such election of such additional directors, whether for an
approval of an amendment to the Company's By-Laws or otherwise, such appointment
shall be subject to such shareholder approval and the Company shall use its best
efforts to obtain such shareholder approval. The rights afforded to the
Purchaser hereunder shall arise each time there is a breach of the covenants set
forth in section 6.1 and shall be severable with respect thereto, provided in no
event shall this Section entitled the Purchasers to have more than two
additional directors designated at any one time.
SECTION 7
MISCELLANEOUS
7.1. PAYMENT OF EXPENSES: COUNSEL. The Company shall pay all expenses,
including the reasonable fees and expenses of the Purchasers' counsel (if any),
incurred by the Company and/or the Purchasers in connection with the sale,
issuance and delivery of the Shares pursuant to this Agreement and the
execution, delivery and performance of this Agreement.
7.2. TRANSFER OF TAXES. The Company will pay, and hold the Purchasers
harmless against, liability for the payment of any transfer or similar taxes
payable in connection with the initial sale, issuance and delivery of the
Shares.
7.3. BROKER OR FINDER. The parties individually represent and warrant
that, to the best of their individual knowledge, no broker or finder has acted
for it in connection with this Agreement or the transactions contemplated by
this Agreement and that no broker or finder is entitled to any broker's or
finder's fee or other commission in respect thereof based in any way on
agreements, arrangements or understandings made by such party. The Company shall
indemnify the Purchasers and the Purchasers shall indemnify the Company against,
and hold it harmless from, any claim, liability, cost or expense (including
reasonable attorneys' fees and expenses) resulting from any agreement,
arrangement or understanding made by the Company or the Purchasers, as the case
may be.
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7.4. GOVERNING LAW. This agreement shall be governed by and construed
and enforced in accordance with laws of the State of New York, without reference
to conflict of law provisions.
7.5. NOTICE. Any notice or other communication required or permitted
hereunder shall be sufficiently given only if sent by facsimile transmission or
by registered or certified mail, postage prepaid, addressed as follows or to
such other address or addresses as may hereafter be furnished in writing by
notice similarly given by one party or to the other:
To the Company: NewStar Media Inc.
8955 Beverly Boulevard
Los Angeles, CA 90048
Facsimile: (310) 724-7146
The Purchasers: Apollo Partners Ltd.
1 Stamford Plaza, 12th Floor
Stamford, CT 06901
Ron Lightstone
NewStar Media
8955 Beverly Blvd.
Los Angeles, CA 90048
With a required
copy to: Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attn: Peter D. Weinstein, Esq.
Jack Levy, Esq.
Telephone: 212-734-8600
Facsimile: 212-735-8708
7.6. ENTIRE AGREEMENT. This Agreement including the Appendix, Schedules
and Exhibits hereto, contain the entire agreement and understanding among the
parties with respect to the subject matter hereof and shall not be modified or
affected by any offer, proposal, statement or representation, oral or written,
made by or for any party in connection with the negotiation of the terms hereof.
All references herein to this Agreement shall specifically include, incorporate
and refer to the Appendix, Schedules and exhibits attached hereto which are
hereby made a part hereof. There are no representations, promises, warranties,
covenants, undertakings or assurances (express or implied) other than those
expressly set forth or provided for herein and in the other documents referred
to herein. This Agreement may not be modified or amended orally, but only by a
writing signed by the parties.
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7.7. SEVERABILITY. If any part of this Agreement is held to be
unenforceable or invalid under, or in conflict with, the applicable law of any
jurisdiction, the unenforceable, invalid or conflicting part shall, to the
extent permitted by applicable law, be narrowed or replaced, to the extent
possible, with a judicial construction in such jurisdiction that effects the
intent of the parties regarding this Agreement and such unenforceable, invalid
or conflicting part. To the extent permitted by applicable law, notwithstanding
the unenforceability, invalidity or conflict with applicable law of any part of
this Agreement, the remaining parts shall be valid, enforceable and binding on
the parties.
7.8. HEADINGS. The headings of the Sections of this Agreement are
reinstated for convenience of reference only and shall not be considered a part
hereof.
7.9. COUNTERPARTS. This agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
SIGNATURE PAGES ON NEXT PAGE
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date set forth above.
THE COMPANY:
NEWSTAR MEDIA INC.
By:/s/ Neil Topham
---------------------------------------------
Name: Neil Topham
Title: Vice President & Chief
Financial Officer
THE PURCHASERS:
APOLLO PARTNERS, LLC
By:/s/ Terrence A. Elkes Kenneth F. Gorman
---------------------------------------------
Name: Terrence A. Elkes Kenneth F. Gorman
Title:
/s/ Ronald Lightstone
--------------------------------------
Ronald Lightstone
S-1
<PAGE>
SCHEDULE 2.9
Saskatchewan Film and Video Development Corporation and The Edge Productions
Corp. v. Dove Audio, Inc. (United States District Court Central District of
California 98-3760 GHK (SHx))
Larry Flynt v. Dove Audio, Inc.; Dove Books; Dove Entertainment, Inc. (Los
Angeles Superior Court BC194869)
Creditors' House v. NewStar Media Inc. (Los Angeles Municipal Court 98E05530)
National Commercial Recovery v. Dove Audio (Los Angeles Municipal Court
98K08000)
Goodman v. Buena Vista Television, Inc. et al. (U.S.D.C. No. CV 98-0218 DT
(VAPx))
R.R. Donnelly Receivable v. NewStar Inc. (Los Angeles Superior Court BC187902)
Time Warner City Cable Advertising, Inc. v. Dove Entertainment (Beverly Hills
Municipal Court 90 C 00639)
Joanne Parrent v. Michael Viner and Dove Entertainment (Los Angeles Superior
Court BC183507)
Mattken Corp. V. NewStar Media (Los Angeles Superior Court BC 191736)
Palisades Pictures LLC, Nothing to Lose Productions Inc., CUB Films, Mark
Severini, Eric Bross and Jeff Dowd v. Dove International, Inc., Dove Audio, Inc.
and NewStar Media Inc. (Los Angeles County Superior Court BC 194069)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of November 12, 1998, by and
among NewStar Media Inc., a California corporation (the "COMPANY"), and Apollo
Partners, LLC and Ronald Lightstone, as Purchasers (each a "PURCHASER" and
collectively, the "PURCHASERS").
WHEREAS, the Purchasers are acquiring securities of the Company
pursuant to a Stock Purchase Agreement dated the date hereof among the Company
and the Purchasers (the "STOCK PURCHASE AGREEMENT"; capitalized terms used in
this Registration Rights Agreement without definition shall have the meanings
ascribed thereto in the Stock Purchase Agreement).
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and intending to be legally bound, the parties hereto agree as
follows:
1. REGISTRATION RIGHTS
1.1 (a) The Company shall as expeditiously as practicable, but in any
event not later than December 31, 1998, prepare and file with the Securities and
Exchange Commission (the "COMMISSION") one or more registration statements
(individually and collectively, the "REGISTRATION STATEMENT") under the
Securities Act of 1933 (the "1933 ACT"), providing for the registration of the
Shares (together with all shares of Common Stock issued in connection therewith,
including by way of a stock split or other adjustment or stock dividend, the
"REGISTRABLE SECURITIES") for sale by the Purchasers, then holding such
securities (including with respect to Apollo Partners, LLC., its principals who
for the purpose of this Agreement shall be included in the term "PURCHASER").
Thereafter, the Company shall use its reasonable best efforts to cause such
Registration Statement to be declared effective not later than February 26,
1999. If at any time after the Registration Statement becomes effective, the
Registration Statement is not available for sales by any Purchaser, then the
Company shall, as expeditiously as possible, prepare and file with the
Commission, to the extent required, an amendment or new registration statement
in order to afford such Purchaser the benefit of the registration contemplated
in this Section 1.1, and shall use its reasonable best efforts to have such
amendment or new registration statement declared effective as promptly as
practicable.
(b) Notwithstanding the foregoing, in the event that the Company
proposes to undertake an underwritten public offering immediately prior to the
filing of or during the pendency or effectiveness of the Registration Statement,
each Purchaser will be obligated to either (x) join the underwritten offering
with respect to all or a portion of the Registerable Securities requested by
such Purchaser to be included therein (subject to the approval of the managing
underwriter, which may exclude such shares entirely or require pro rata cut-back
with other selling shareholders, and/or (y) execute a "lock-up" agreement with
respect to the sale or other disposition of any Registrable Securities not so
included or permitted to be included for a period commencing with the filing of
the related registration statement and ending 90 days after the effective date
of the related Registration Statement, but in any event not more than 135 in the
aggregate.
<PAGE>
1.2. REGISTRATION PROCEDURES.
(a) The Registration Statement may be in any form for which the Company
then qualifies or which counsel for the Company deems appropriate;
(b) Before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to counsel selected
by the Purchasers, copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel, and after the filing of
the Registration Statement, the Company will promptly notify the Purchasers of
any stop order issued or, to the knowledge of the Company, threatened by the
Commission and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered;
(c) The Company shall prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep the registration statement
effective for so long as any of the Registrable Securities remain owned by a
Purchaser, and so long as such registration is necessary to permit the public
resale thereof without any limitation on the amount of such sales pursuant to
Rule 144 under the Securities Act or otherwise, and comply with the provisions
of the 1933 Act with respect to the disposition of all Registrable Securities
during such period in accordance with the intended methods of disposition set
forth in the registration statement;
(d) The Company shall furnish to each Purchaser, before filing the
Registration Statement, if requested, copies of the Registration Statement as
proposed to be filed, and thereafter furnish to each Purchaser such number of
copies of the Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in the
registration statement (including each preliminary prospectus) and such other
document as the Purchasers may reasonably request in order to facilitate the
disposition of the Registrable Securities;
(e) The Company shall use its commercially reasonable efforts to
register or qualify the Registerable Securities covered by such Registration
Statement under the securities or blue sky laws of such jurisdictions as the
Purchasers shall reasonably request (provided that the Company shall not be
required to consent to general service of process for all purposes in any
jurisdiction where it is not then qualified to do business) and do any and all
other acts or things which may be necessary or advisable to enable such seller
to consummate the public sale or other disposition in such jurisdictions of such
Registrable Securities;
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<PAGE>
(f) The Company shall notify the each Purchaser, at any time when a
prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of any event as a result of which the prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Purchasers prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(g) The Company shall furnish, at the request of each Purchaser on the
date that the Registration Statement becomes effective, (a) an opinion, dated
such date, of the independent counsel representing the Company for the purposes
of such registration, addressed to the Purchasers, stating that such
registration statement has become effective under the 1993 Act; and (b) a
letter, dated such date, from the independent certified public accountants of
the Company addressed to the Purchasers making such request, stating that they
are independent certified public accountants within the meaning of the 1933 Act,
and that in the opinion of such accountants, the financial statements and other
financial data of the Company included in the registration statement or the
prospectus, or any amendment or supplemental thereto, comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act,
and covering such other matters (including information as to the period ending
not more than five (5) business days prior to the date of such letter) with
respect to the registration, if independent certified public accountants are
normally requested to provide comfort on such matters, as such Purchaser may
reasonably request.
(h) The Company shall make available for inspection by the Purchasers
and any attorney, accountant or other professional retained by any Purchaser or
any underwriter (collectively, the "INSPECTORS"), all financial and other
records, permanent corporate documents and properties of the Company
(collectively, the "RECORDS") as are reasonably necessary to enable them to
exercise due diligence, and cause the Company's officers, directors, and
employees to supply all information reasonably requested by such Inspectors in
connection with the registration statement. The Purchasers further agree that
they will, upon learning that disclosure of such Records is sought in a court of
component jurisdiction, give notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(i) The Company shall otherwise use its commercially reasonable efforts
to comply with all applicable rules and regulations of the Commission, and make
generally available to its security holders, as soon as reasonably practicable
an earnings statement satisfying the provisions of Section 11(a) of the 1933 Act
and covering a period of twelve months, beginning within three months after the
effective date of the Registration Statement;
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<PAGE>
(j) The Company shall use its commercially reasonable efforts to cause
all Registrable Securities to be listed on each securities exchange (if any) on
which similar securities issued by the Company are then listed; and
(k) The Company shall provide a transfer agent and registrar for all of
the Registrable Securities not later then the effective date of such
Registration Statement.
1.3. DISCONTINUANCE OF DISPOSITION. The Purchasers, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 1.2 (f) shall forthwith discontinue disposition of the Registrable
Securities until the Purchaser receives copies of the supplemented or amended
prospectus contemplated by Section 1.2 (f) or until it is advised in writing
(the "ADVICE") by the Company that the use of the prospectus may be resumed and
has received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus.
1.4. INFORMATION TO BE FURNISHED BY PURCHASERS. Each Purchaser all
furnish to the Company such information and execute such documents regarding the
Registrable Securities held by such Purchaser and the intended method of
disposition thereof as the Company shall reasonably request in connection with
the action to be taken by the Company.
1.5. EXPENSES OF REGISTRATION. The Company shall pay all expenses
incurred by the Company in complying with Section 1.1 and 1.3 (other than the
underwriter's discounts and commissions and fees and expenses of special counsel
to the Purchasers, if any), including, without limitation, all registration and
filing fees (including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), fees and expenses of complying with
securities and blue sky laws, printing expenses, fees, and disbursements of
counsel to the Company, and of the Company's independent public accountants.
1.6. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each Purchaser, its
executive officers, directors and controlling persons (within the meaning of the
1933 Act) and each person who participates as an underwriter or controlling
person of an underwriter (within the meaning of the 1933 Act) with respect to a
Registration Statement pursuant to Section 1.1 against any losses, claims,
damages or liabilities to which any of them may become subject under the 1933
Act or otherwise insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or allegedly untrue statement of any material fact contained in a registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not misleading, and
will reimburse any of them for any legal or other expenses reasonably incurred
-4-
<PAGE>
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable hereunder in any such case if any such loss, claim, damage or
liability arise out of or is based upon any untrue statement or allegedly untrue
statement or omission or alleged omission made in such registration statement,
prospectus or amendment or supplement thereto in reliance upon and in conformity
with written information furnished to the Company for such purpose by such
Purchaser or by its representative.
(b) Each Purchaser shall indemnify and hold harmless the Company, its
executive officers, directors and controlling persons (within the meaning of the
1933 Act) and each person who participates as an underwriter or controlling
person of an underwriter (within the meaning of the 1933 Act) with respect to a
registration statement pursuant to Section 1.1 against any losses, claims,
damages or liabilities to which any of them may become subject under the 1933
Act or otherwise insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, in reliance upon and in
conformity with written information furnished to the supplement thereof, in
reliance upon and in conformity with written information furnished to the
Company by each Purchaser or by its representative, and will reimbursement any
of them for any legal or other expenses reasonably incurred by them in
connection with investigating or defending, any such, loss, claim, damage,
liability or action.
(c) A party's obligation to indemnify (the "indemnifying party") and
the other party's rights to indemnity and payment (the "indemnified party")
under Section 1.6 is contingent upon the indemnified party (i) giving the
indemnifying party prompt written notice of such claim; (ii) allowing the
indemnifying party to have sole right to control and direct the investigation,
preparation and defense of any such claim or action and all negotiations for its
settlement or compromise; and (iii) providing reasonable assistance to the
indemnifying party, such assistance to be solely at the cost and expense of the
indemnifying party. The indemnified party, at its own expense, shall be entitled
to participate in the defense and to receive copies of all pleadings and other
papers in connection with the claim.
(d) If for any reason the indemnification provided for in the preceding
Sections 1.6 (a) and 1.6 (b) is unavailable to an indemnified party as
contemplated by those sections, then the indemnifying party will contribute to
the amount paid or payable to the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations,
provided that no Purchaser will not be required to contribute in an amount
greater than the difference between the net proceeds received by such Purchaser
with respect to the sale of any Registrable Securities and all amounts already
contributed by such Purchaser with respect to such claims.
-5-
<PAGE>
1.7. UNDERWRITING AGREEMENT. If the Registrable Securities are to be
sold pursuant to a registration statement in an underwritten offering in which
no shares of the Company are being sold for the account of the Company, the
Company agrees to enter into an underwriting agreement with the underwriter or
underwriters (who shall be subject to the approval of the Company) containing
customary representations and warranties with respect to the business and
operations of the Company, including without limiting the generality of the
foregoing, customary provisions with respect to indemnification by the Company
of the underwriters of such offering.
2. MISCELLANEOUS
2.1. OWNER OF REGISTRABLE SECURITIES. The Company may deem and treat
the person in whose name the Registrable Securities are registered as the
absolute owner thereof for all purposes whatsoever.
2.2. SUCCESSORS. This Agreement shall be binding upon and shall inure
to the benefit of the successors and assigns of each Purchaser, and the term
"Purchaser" shall be deemed to be include each such holder of Registrable
Securities. This Agreement shall be binding upon and shall inure to the benefit
of the Company and its successors and assigns.
2.3. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without regard
to such state's conflicts of law principles.
2.4. NOTICE. Any notice or other communication required or permitted
hereunder shall be sufficiently given only if sent by facsimile transmission or
by registered or certified mail, postage prepaid, addressed as follows or to
such other address or addresses as may hereafter be furnished in writing by
notice similarly given by one party to the other:
To the Company: NewStar Media Inc.
8955 Beverly Blvd.
Los Angeles, CA 90048
Telephone: (310) 786-1600
Facsimile: (310) 247-2932
The Purchasers: Apollo Partners Ltd.
500 5th Avenue
Suite #3520
New York, NY 10110
Ron Lightstone
NewStar Media
8955 Beverly Blvd.
Los Angeles, CA 90048
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<PAGE>
With a required
copy to: Morrison Cohen Singer & Weinstein, LLP
770 Lexington Avenue
New York, New York 10022
Attn: Peter D. Weinstein, Esq.
Jack Levy, Esq.
Telephone: 212-734-8600
Facsimile: 212-735-8708
2.5. FULL AGREEMENT. This Agreement sets forth the entire understanding
of the parties with respect to transactions contemplated hereby, and shall not
be modified or amended except by written agreement of all parties hereto.
2.6. HEADINGS. The headings of the Sections of this Agreement are
inserted for convenience of reference only and shall not be considered a part
hereof.
2.7. COUNTERPARTS. This Agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first forth above.
THE COMPANY:
NEWSTAR MEDIA INC.
By:_____________________________________________
Name: Neil Topham
Title: Vice President & Chief
Financial Officer
THE PURCHASERS:
APOLLO PARTNERS, LLC
By:_____________________________________________
Terrence Elkes
Manager
_____________________________________________
Ronald Lightstone
-8-
<PAGE>
Exhibit 99.8
AGREEMENT OF LIMITED PARTNERSHIP
of
Elkes Limited Partnership,
A Delaware Limited Partnership
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS....................................................... 1
Section 1.1 Certain Terms............................................... 1
Section 1.2 Short Fiscal Years and Other Accounting
Periods..................................................... 4
ARTICLE II
NAME, OFFICE, BUSINESS.................................................... 4
Section 2.1 Name........................................................ 4
Section 2.2 Office in the State of Delaware; Agent
for Service................................................. 4
Section 2.3 Purpose of the Partnership.................................. 4
Section 2.4 Location of Principal Place of
Business.................................................... 5
Section 2.5 Names and Business Address of General
Partners.................................................... 5
Section 2.6 Term........................................................ 5
ARTICLE III
CAPITAL CONTRIBUTIONS..................................................... 5
Section 3.1 Effective Date Capital Accounts............................. 5
Section 3.2 Capital Account............................................. 6
Section 3.3 Additional Capital Contributions............................ 6
Section 3.4 Interest on Capital Contributions........................... 6
Section 3.5 Distributions and Return of Capital
Contributions............................................... 6
Section 3.6 Form of Capital Contributions............................... 6
Section 3.7 Future Required Capital Contributions of
General Partners............................................ 6
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES.......................................... 7
Section 4.1 Allocations of Profits and Losses........................... 7
Section 4.2 Taxable Income or Loss...................................... 7
Section 4.3 Code ss. 704(c)............................................. 7
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Page
ARTICLE V
DISTRIBUTIONS............................................................. 7
Section 5.1 Distributions of Available Cash............................. 7
Section 5.2 Other Distributions......................................... 7
Section 5.3 Distributions in Cash or Property........................... 7
ARTICLE VI
POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNERS......................... 8
Section 6.1 Authority................................................... 8
Section 6.2 Liability................................................... 8
Section 6.3 Indemnification............................................. 8
Section 6.4 Survival.................................................... 9
ARTICLE VII
TRANSFERS OF INTERESTS BY PARTNERS........................................ 9
Section 7.1 Transfer of Partner's Interest.............................. 9
Section 7.2 Transferees Bound by Agreement.............................. 13
ARTICLE VIII
DISSOLUTION OF THE PARTNERSHIP............................................ 13
ARTICLE IX
WINDING UP, TERMINATION AND LIQUIDATING DISTRIBUTIONS..................... 13
Section 9.1 Winding Up.................................................. 13
Section 9.2 Distribution of Partnership
Property.................................................... 14
Section 9.3 Termination................................................. 14
ARTICLE X
BOOKS AND RECORDS, REPORTS, FISCAL YEAR................................... 14
Section 10.1 Books and Records........................................... 14
Section 10.2 Reports..................................................... 14
Section 10.3 Fiscal Year................................................. 14
ARTICLE XI
AMENDMENT OF PARTNERSHIP AGREEMENT........................................ 14
Approval of Amendments.................................................... 14
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<PAGE>
Page
ARTICLE XII
MISCELLANEOUS............................................................. 15
Section 12.1 Power of Attorney........................................... 15
Section 12.2 Notices..................................................... 16
Section 12.3 Entire Agreement............................................ 16
Section 12.4 Governing Law............................................... 16
Section 12.5 Voting, Consents and Approvals.............................. 17
Section 12.6 Effect...................................................... 17
Section 12.7 Pronouns and Number......................................... 17
Section 12.8 Captions.................................................... 17
Section 12.9 Partial Enforceability...................................... 17
Section 12.10 Counterparts................................................ 18
Section 12.11 Third Party Beneficiaries................................... 18
Schedule A................................................................... 21
-iii-
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF ELKES LIMITED PARTNERSHIP
This Agreement of Limited Partnership of the Elkes Limited Partnership,
a Delaware limited Partnership (the "PARTNERSHIP"), effective as of August 28,
1998 (the "EFFECTIVE DATE") by and among the General Partners (as defined
herein) and the Limited Partners (as defined herein).
R E C I T A L S
In consideration of the premises and covenants contained herein, the
parties agree as of the Effective Date as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 CERTAIN TERMS. The following definitions apply to this
Agreement:
"ACCOUNTING PERIOD" means, as the context may re quire, the
period beginning as of the Effective Date or on the day following the last day
of the immediately preceding Accounting Period, and ending on the next
succeeding of the following:
(a) the last day of each Fiscal Year of the Partnership;
(b) the day prior to the date of any withdrawal of any Partner or any
distribution to any Partner;
(c) the day prior to the day as of which a Person is admitted as a
Partner or any Partner makes a Capital Contribution; and
(d) any day specified as the last day of an Accounting Period by the
Managing General Partner.
"AGREEMENT" means this Agreement of Limited Partnership (including the
Schedule hereto), as amended, modified or supplemented from time to time.
"CAPITAL ACCOUNT" means, with respect to each Partner, the
account so designated and established on the books and records of the
Partnership for each Partner which shall be determined in accordance with
Treasury Regulations ss. 1.704-1(b)(2)(iv).
1
<PAGE>
"CAPITAL CONTRIBUTION" means the total amount of cash and the initial
fair market value of any property (other than cash) less any liabilities
encumbering such contributed property that the Partnership is considered to
assume or take subject to under Code ss. 752, contributed to the capital of the
Partnership by any Partner.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time (or any succeeding law). References to sections of the Code shall include
amended or successor provisions thereto.
"FIRST REFUSAL NOTICE" has the meaning specified in Section 7.1.
"FIRST REFUSAL PARTNER" has the meaning specified in Section 7.1.
"FISCAL YEAR" has the meaning specified in Section 10.3.
"GENERAL PARTNERS" means the general partners of the Partnership as of
the Effective Date and/or any other Person admitted to the Partnership as a
general partner in accordance with the Partnership Act. As of the Effective
Date, the General Partners are Terrence A. Elkes and Kenneth F. Gorman.
"INTEREST" means the individual interest of each Partner in the
Partnership at any particular time including, without limitation, any right to
participate in the Partnership or to receive distributions. The interest of the
General Partners shall constitute General Partnership Interests and the interest
of the Limited Partners shall constitute Limited Partnership Interests.
"LIMITED PARTNERS" means the limited partners of the Partnership as of
the Effective Date and any other Person admitted to the Partnership as a limited
partner in accordance with the Partnership Act and any Substituted Limited
Partners. As of the Effective Date, the only Limited Partner is Terrence A.
Elkes.
2
<PAGE>
"MANAGING GENERAL PARTNER" means, as of the Effective Date, Terrence A.
Elkes. In the event of the withdrawal of Terrence A. Elkes as a General Partner,
Kenneth F. Gorman shall become the Managing General Partner provided he is a
General Partner at such time.
"PARTNERS" means the General Partners, Limited Partners and Substituted
Limited Partners, collectively, where no distinction is required by the context
in which the term is used.
"PARTNERSHIP ACT" means the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time (or any succeeding law).
"PARTNERSHIP PROPERTY" means any real or personal property, whether
tangible or intangible, owned by the Partnership and any goodwill.
"PERSON" means any individual, partnership, corporation, trust or
other entity.
"PROFITS" and "LOSSES" mean, for each Accounting Period, an
amount equal to the Partnership's taxable income or loss, respectively, for such
Accounting Period determined in accordance with Code ss. 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code ss. 703(a)(1) shall be included in taxable income or
loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from Federal income
tax and not otherwise taken into account in computing Profits and Losses
pursuant to this definition shall increase or decrease such taxable income or
loss;
(b) Any expenditure of the Partnership described in Code ss.
705(a)(2)(B) or treated as Code ss. 705(a)(2)(B) expenditures pursuant to
Treasury Regulations ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits and Losses pursuant to this definition, shall
reduce such taxable income or increase such taxable loss, as the case may be.
3
<PAGE>
"REGULATORY RULE" means each statute, regulation, rule and other
requirement applicable to the Partnership.
"SELLING PARTNER" has the meaning specified in
Section 7.1.
"SUBSTITUTED LIMITED PARTNER" means any Person admitted to the
Partnership as a Substituted Limited Partner pursuant to the provisions of
Section 7.1.
"THIRD PARTY OFFER" has the meaning specified in Section 7.1.
"THIRD PARTY OFFER NOTICE" has the meaning specified in Section 7.1.
"TREASURY REGULATIONS" means the Treasury Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding Treasury Regulations).
Section 1.2 SHORT FISCAL YEARS AND OTHER ACCOUNTING PERIODS. The
definitions of the terms set forth in Section 1.1 shall be modified, where
appropriate, to reflect short Fiscal Years and other Accounting Periods.
ARTICLE II
NAME, OFFICE, BUSINESS
Section 2.1 NAME. The name of the Partnership is "Elkes Limited
Partnership", or such other name or variations thereof as may, from time to
time, be selected by the Managing General Partner.
Section 2.2 OFFICE IN THE STATE OF DELAWARE; AGENT FOR SERVICE. The
address of the Partnership's registered office in the State of Delaware is c/o
The Corporation Service Company, Corporation Trust Center, 1013 Centre Road,
Wilmington, County of New Castle, Delaware 19805. The name of the Partnership's
registered agent for service of process in the State of Delaware at such address
is The Corporation Service Company or such other agent as may be designated from
time to time by the Managing General Partner.
4
<PAGE>
Section 2.3 PURPOSE OF THE PARTNERSHIP. The purpose of the
Partnership is to manage, invest and reinvest certain Partnership Property and
to engage in any activities in connection therewith, including without
limitation:
(1) to purchase, sell, invest and deal in securities of any kind;
(2) to engage in the real estate business, including, without
limitation, the right to acquire, own, hold, develop, and operate
real properties, in whatever capacity;
(3) to acquire interests of any type in corporations, limited and
general partnerships, limited liability companies and joint
ventures;
(4) to engage in any trades and businesses in any capacity and form
any types of business enterprises;
(5) to operate any business enterprise;
(6) to borrow and lend money;
(7) to make, enter into, deliver and perform all contracts, agreements
and undertakings; and
(8) to engage in any and all activities incident to the foregoing.
Section 2.4 LOCATION OF PRINCIPAL PLACE OF BUSINESS. The location of
the principal place of business of the Partnership is 12 Trails End, Rye, New
York 10580, or such other location as may from time to time be determined by the
Managing General Partner. The Managing General Partner may change the location
of the principal place of business of the Partnership by notice to all Partners.
The Partnership may maintain such other offices as the Managing General Partner
may deem advisable at any other place or places within or outside of the United
States.
Section 2.5 NAMES AND BUSINESS ADDRESS OF GENERAL PARTNERS. The names
and business addresses of each of the General Partners are: (a) Terrence A.
Elkes, 12 Trails End, Rye, New York 10580 and (b) Kenneth F. Gorman, Cornwall
Lane, Sands Point, New York 11050, or such other place as may from time to time
be specified by such General Partner by notice to the Partnership.
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Section 2.6 TERM. The term of the Partnership (the "Term") commenced
with the filing of the initial certificate of limited partnership in the Office
of the Secretary of State of the State of Delaware and shall continue until
dissolution pursuant to Article VIII of this Agreement.
ARTICLE III
CAPITAL CONTRIBUTIONS
Section 3.1 EFFECTIVE DATE CAPITAL ACCOUNTS. On the date hereof, the
Managing General Partner, in his capacity as such, the other General Partner and
the initial Limited Partner, in his capacity as such, are making the
contributions to the Partnership specified on Schedule A hereto. The Capital
Accounts of the Partners as of the Effective Date are set forth on Schedule A
hereto.
Section 3.2 CAPITAL ACCOUNT. The Managing General Partner shall
maintain a Capital Account for each Partner.
Section 3.3 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) No Partner shall have any right to make additional Capital
Contributions, but any Partner may do so with the approval of the Managing
General Partner.
(b) Except as otherwise provided in this Agreement or required by law,
no Partner shall be obligated to make any additional Capital Contributions
to the Partnership.
Section 3.4 INTEREST ON CAPITAL CONTRIBUTIONS. No Partner shall be
entitled to interest on or with respect to any Capital Contribution or with
respect to any amounts to be paid to such Partner pursuant to this Agreement.
6
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Section 3.5 DISTRIBUTIONS AND RETURN OF CAPITAL CONTRIBUTIONS. Except
as provided in this Agreement, no Partner shall be entitled to a return of any
part of its Capital Contributions or to receive any distributions from the
Partnership.
Section 3.6 FORM OF CAPITAL CONTRIBUTIONS. Capital Contributions to the
Partnership may be made in cash or in kind. If contributions to the capital of
the Partnership are made in property other than cash, they shall be valued at
their fair market value on the date of contribution.
Section 3.7 FUTURE REQUIRED CAPITAL CONTRIBUTIONS OF GENERAL PARTNERS.
On each date after the Effective Date on which a Capital Contribution is made by
any Limited Partner, the General Partners will make, if necessary, Capital
Contributions such that the aggregate Capital Account balances of the General
Partners will never be less than one ninety-ninth of the aggregate Capital
Account balances of all of the Limited Partners; provided that Kenneth F. Gorman
shall not be required to make any such contribution without his prior written
consent.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
Section 4.1 ALLOCATIONS OF PROFITS AND LOSSES. Profits and Losses shall
be allocated for each Accounting Period pro rata among the Partners in
accordance with the positive balance of their Capital Accounts.
Section 4.2 TAXABLE INCOME OR LOSS. Except as provided in Section 4.3
below, the net profits and net losses of the Partnership (including, for this
purpose, separately stated items pursuant to Code Section 703(a)(1)), as
determined for federal income tax purposes, shall be allocated in the same
manner as Profits and Losses are allocated under Section 4.1.
Section 4.3 CODE SS. 704(C). Partnership income, gain, loss and
deduction, as determined for federal income tax purposes, shall be allocated
7
<PAGE>
among the Partners, in accordance with the principles of Code ss. 704(c), the
Treasury Regulations thereunder, and Treasury Regulations ss. 1.704-1(b)(4)(i),
to account for any variation between the adjusted tax basis and book value of
Partnership Property.
ARTICLE V
DISTRIBUTIONS
Section 5.1 DISTRIBUTIONS OF AVAILABLE CASH. The Partnership shall
distribute to each Partner thirty-five percent (35%) of the taxable income
allocated to such Partner pursuant to Section 4.2 not later than 100 days after
the last day of each Fiscal Year.
Section 5.2 OTHER DISTRIBUTIONS. Any Partnership distributions in
excess of the distributions made pursuant to Section 5.1 shall be made: (a) by
the Managing General Partner in his sole discretion and (b) pro rata among the
Partners in accordance with the positive balances of their Capital Accounts.
Section 5.3 DISTRIBUTIONS IN CASH OR PROPERTY. All distributions
pursuant to this Article V and pursuant to Section 9.2 shall be made, unless
otherwise agreed to by all of the Partners, in cash. If distributions from the
Partnership are made in property other than cash, they shall be valued at their
fair market value on the date of distribution. If the Partners shall not agree
on the value of the property, the fair market value shall be determined by a
qualified appraiser selected by the Managing General Partner.
ARTICLE VI
POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNERS
Section 6.1 AUTHORITY. Except as otherwise specifically provided
herein, the Managing General Partner shall have exclusive and complete authority
and discretion to manage the operations and affairs of the Partnership and to
make all decisions regarding the business of the Partnership and shall have all
8
<PAGE>
rights and powers of a General Partner under the Partnership Act and the other
General Partner shall have no such authority or discretion and agrees that he
shall not act on behalf of the Partnership until such time, if any, as he
becomes Managing General Partner. Any action taken by the Managing General
Partner shall constitute the act of and serve to bind the Partnership. Persons
dealing with the Partnership are entitled to rely conclusively on the power and
authority of the Managing General Partner.
Section 6.2 LIABILITY. Except as otherwise provided by law, the General
Partners shall not be personally liable for the return of all or any portion of
the Capital Contributions and shall not be required to pay to the Partnership or
any Partner any deficit in any Partner's Capital Account. Neither the General
Partners nor any former, present or future partner, member, officer, director,
stockholder, employee, agent or affiliate of the General Partners shall be
liable, responsible or accountable to the Partnership or any Partner for: (a)
any act performed or omitted by any of them, including, without limitation,
those acts performed or omitted on advice of legal counsel, accountants, brokers
or consultants of the Partnership, or for any costs, damages or liabilities
arising therefrom, or by law, unless that act or omission was performed or
omitted fraudulently or in bad faith; or (b) any loss due to the negligence,
dishonesty or bad faith of any employee, officer, broker, consultant or other
agent of the Partnership selected, engaged and retained in good faith by a
General Partner.
Section 6.3 INDEMNIFICATION. The Partnership agrees to:
(a) indemnify and hold harmless the General Partners and the respective
personal representatives, heirs, successors in interest and assignees of the
General Partners (each, an "INDEMNIFIED PARTY"), from and against any and all
damages incurred or suffered by any Indemnified Party arising out of or in
connection with the Partnership or its business or affairs; PROVIDED, HOWEVER,
that the Partnership shall not indemnify or hold harmless any Indemnified Party
with respect to any act or omission which was performed or omitted fraudulently
or in bad faith by such Indemnified Party; and
(b) advance to any Indemnified Party expenses for which the Partnership
is required to indemnify the Indemnified Party pursuant to this Section 6.3
subject to the undertaking of the Indemnified Party to repay such advances if it
is ultimately determined that such Indemnified Party is not entitled to be
indemnified.
Section 6.4 SURVIVAL. The exculpation provided in Section 6.2 and the
indemnification provided in Section 6.3 shall survive any termination of this
Agreement.
ARTICLE VII
TRANSFERS OF INTERESTS BY PARTNERS
Section 7.1 TRANSFER OF PARTNER'S INTEREST.
(a) No Partner may sell, assign, pledge, gift or otherwise encumber or
dispose of all or any portion of that Partner's Interest (including any
beneficial interest therein) except as provided in Section 7.1(b) or Section
7.1(c).
(b) A Partner may sell, assign, pledge, gift or otherwise encumber or
dispose of all or any portion of that Partner's Interest provided the following
conditions are met:
(i) an instrument of transfer in form and substance satisfactory
to the Managing General Partner shall be executed by both the
transferor and transferee of the Interest or portion thereof and
delivered to the Partnership, and the transferee shall, if so requested
by the Managing General Partner, assume the obligations, if any, of the
transferor to the Partnership allocable to the Interests or portion
thereof transferred;
(ii) the transferor and the transferee shall execute such other
instruments as the Managing General Partner may require; and
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<PAGE>
(iii) such transfer is not to a minor or to a Person under a
disability, except that this limitation shall not apply to a transfer
in trust for the benefit of a minor or a person under a disability or
custodianship under the applicable Uniform Transfer to Minors Act or
similar legislation of any state or jurisdiction.
(c) A Partner may sell his entire Interest ("SELLING PARTNER") provided
the following conditions are met:
(i) Having received a bona fide offer therefor (a "THIRD PARTY
OFFER"), the Selling Partner shall first give written notice to the
other Partners, which notice shall specify the identity of the proposed
purchaser and annex thereto an executed copy of the Third Party Offer
("THIRD PARTY OFFER NOTICE"). The other Partners shall then have the
right to acquire, in accordance with the provisions of this Section
7.1(c), the entire Interest of such Selling Partner upon the same terms
and conditions as are contained in the Third Party Offer. Such right
can be exercised by any Partner who desires to purchase the Selling
Partner's Interest (a "FIRST REFUSAL PARTNER") by giving notice (a
"FIRST REFUSAL NOTICE") to the Selling Partner and the Managing General
Partner within fifteen (15) days from the date of the Third Party Offer
Notice of the percentage of the Selling Partner's Interest which such
First Refusal Partner desires to purchase. If any Partner fails to give
notice within said time, such Partner's purchase option shall lapse,
his First Refusal Notice shall be null and void and for purposes of
such sale he shall not be a First Refusal Partner.
(ii) If the First Refusal Notices which are timely collectively
request purchases of exactly one hundred percent (100%) of the Selling
Partner's Interest, then the Managing General Partner shall, within ten
(10) days following the date of expiration of the time for sending
First Refusal Notices, send a closing notice to the Selling Partner and
the First Refusal Partners which shall specify: (1) the percentage of
the Selling Partner's Interest to be purchased by each First Refusal
11
<PAGE>
Partner, as set forth in the First Refusal Notices and (2) the date of
the closing for the purchase of the Selling Partner's Interest, which
date shall be determined by the Managing General Partner in accordance
with Section 7.1(c)(iv).
(iii) If the First Refusal Notices which are timely collectively
request purchases of more than one hundred percent (100%) of the
Selling Partner's Interest, then the percentage of the Selling
Partner's Interest to be purchased by each of the First Refusal
Partners shall be reduced from the percentage set forth in his First
Refusal Notice on a pro rata basis in accordance with the percentage of
the Selling Partner's Interest specified in the respective First
Refusal Notices of the First Refusal Partners such that the total
percentage of the Selling Partner's Interest that all First Refusal
Partners are purchasing is equal to one hundred percent (100%). The
Managing General Partner shall determine the percentage of the Selling
Partner's Interest which each First Refusal Partner shall purchase in
accordance with the preceding sentence, which determination shall be
deemed correct absent manifest error. The Managing General Partner
shall, within ten (10) days following the date of expiration of the
time for sending First Refusal Notices, send a closing notice to the
Selling Partner and the First Refusal Partners which shall specify: (1)
the percentage of the Selling Partner's Interest to be purchased by
each First Refusal Partner, as determined in accordance with this
Section 7.1(c)(iii) and (2) the date and place of the closing for the
purchase of the Selling Partner's Interest, as determined in accordance
with Section 7.1(c)(iv).
(iv) Closing for the transfer of the Selling Partner's Interest
shall take place: (1) at the principal place of business of the
Partnership or such other place as the Managing General Partner shall
select and (2) on such date as the Managing General Partner shall
select and specify in the closing notice sent pursuant to Section
7.1(c)(ii) or Section 7.1(c)(iii), as appropriate, which date shall be
within 20 days after such closing notice is given.
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<PAGE>
(v) If the First Refusal Notices which are timely collectively
request purchases of less than one hundred percent (100%) of the
Selling Partner's Interest, then the Managing General Partner shall
notify the Selling Partner and the First Refusal Partners thereof and
the Selling Partner shall be free for a period of 60 days from the date
of such notice from the Managing General Partner to sell the Selling
Partner's Interest to the party which made the Third Party Offer
provided such sale is effected strictly in accordance with the terms
and conditions as set forth in the Third Party Offer; and, further
provided, that the transferee is SUI JURIS and mentally competent and
that such sale is not prohibited by law.
(d) Any purported transfer of an Interest which is not made in
compliance with this Agreement shall be null and void and of no force or effect
whatsoever.
(e) No transferee of an Interest pursuant to Section 7.1(b) or Section
7.1(c) or otherwise shall become a Substituted Limited Partner unless: (1) the
transfer is made in compliance with either Section 7.1(b) or Section 7.1(c); (2)
the transferee accepts, adopts and approves all of the terms and provisions of
this Agreement as evidenced by its execution of a counterpart signature page to
this Agreement; (3) in the case of a transfer pursuant to Section 7.1(b) only,
all of the Partners give their prior written consent, which consent may be
withheld by any Partner in his sole discretion; and (4) the transferring Partner
and the transferee execute and acknowledge such other instruments as the
Managing General Partner may deem reasonably necessary or appropriate.
(f) Anything herein to the contrary notwithstanding, until such time as
the transferee of an Interest has been admitted to the Partnership as a
Substituted Limited Partner or the Managing General Partner has determined that
the requirements of Section 7.1(b) or Section 7.1(c) for transfer of an Interest
have been satisfied, both the Partnership and the General Partners shall be
entitled to treat the transferor of such Interest as the absolute owner thereof
in all respects.
13
<PAGE>
(g) In the event of the transfer of a Partner's Interest at any time
other than the end of the Partnership's Fiscal Year, the distributive shares of
the various items of Partnership income, gain, loss, deduction and credit as
computed for tax purposes shall be allocated between the transferor and the
transferee pursuant to any permissible method agreed upon by the transferor and
transferee.
Section 7.2 TRANSFEREES BOUND BY AGREEMENT. Any successor or transferee
of a Partner and any Substituted Limited Partner shall be subject to and bound
by all of the provisions of this Agreement as if originally a party to this
Agreement.
ARTICLE VIII
DISSOLUTION OF THE PARTNERSHIP
The Partnership shall be dissolved upon the earliest of:
(a) September 1, 2048; or
(b) Any act or event specified in the Partnership Act ss. 17-801 or any
successor provision thereto; provided, however, that the business of the
Partnership may be carried on by one General Partner.
ARTICLE IX
WINDING UP, TERMINATION AND LIQUIDATING DISTRIBUTIONS
Section 9.1 WINDING UP.
(a) In the event of the dissolution of the Partnership, the Managing
General Partner shall wind up the affairs of the Partnership. The Managing
General Partner may liquidate all or any part of the Partnership Property. The
Managing General Partner shall, in his sole discretion, determine the time,
manner and terms of any sale or sales of the Partnership Property pursuant to
the liquidation.
14
<PAGE>
(b) The Partners shall continue to share Profits and Losses during the
period of dissolution of the Partnership in accordance with Article IV.
(c) In the event of the dissolution of the Partnership, the Managing
General Partner shall have the right to dispose of the goodwill and all of the
Partnership's books and papers in any manner as he may deem advisable.
Section 9.2 DISTRIBUTION OF PARTNERSHIP PROPERTY. Subject to the right
of the Managing General Partner to set up cash reserves as he may deem necessary
or appropriate, after payment or adequate provision for the payment of all debts
and obligations of the Partnership, the Partnership Property (and/or the
proceeds of the liquidation of the Partnership Property) shall be distributed
pro rata to the Partners in accordance with their respective Capital Accounts.
Section 9.3 TERMINATION. The Partnership shall terminate when all
Partnership Property shall have been disposed of and distributions made as
provided in Section 9.2. The Managing General Partner shall then execute and
cause to be filed all documents and instruments required to effect the
termination.
ARTICLE X
BOOKS AND RECORDS, REPORTS, FISCAL YEAR
Section 10.1 BOOKS AND RECORDS. True and complete books of account and
records are to be kept by the Partnership and shall be available during
reasonable business hours for inspection by each Partner.
Section 10.2 REPORTS. As soon as practicable after the end of each
Fiscal Year, the Managing General Partner shall send to each Person who was a
Partner at any time during such Fiscal Year, an annual statement indicating such
Partner's share of the Partnership's taxable income or loss, capital gain or
loss, and other items relevant for federal income tax purposes.
15
<PAGE>
Section 10.3 FISCAL YEAR. The fiscal year of the Partnership (the
"FISCAL YEAR") shall be from January 1 through December 31 of each year or
portion thereof during which the Partnership is in existence.
ARTICLE XI
AMENDMENT OF PARTNERSHIP AGREEMENT
APPROVAL OF AMENDMENTS. Amendments to this Agreement may be made by the
Managing General Partner without the consent of any other Partner through use of
the power of attorney described in Section 12.1 if those amendments are: (i) of
a non-material nature, as reasonably determined by the Managing General Partner;
(ii) for the purpose of creating a new class or classes of Limited Partnership
Interests, admitting additional Limited Partners or reflecting the withdrawal of
Limited Partners; (iii) necessary to maintain the Partnership's status as a
partnership according to ss. 7701(a)(2) of the Code; (iv) necessary to preserve
the validity of any and all allocations of Partnership income, gain, loss or
deduction pursuant to ss. 704(b) of the Code; or (v) contemplated by this
Agreement. Amendments to this Agreement other than those described in the first
sentence of this Article XI must be made in accordance with the Partnership Act.
Any supplemental or amendatory agreement shall be adhered to and have the same
effect from and after its effective date as if the same had originally been
embodied in, and formed a part of, this Agreement. The Managing General Partner
shall give written notice to all of the Partners promptly after any amendment
has become effective. Any amendment to this Agreement must be in writing.
ARTICLE XII
MISCELLANEOUS
Section 12.1 POWER OF ATTORNEY. Each Partner hereby constitutes and
appoints the Managing General Partner as its true and lawful representative and
attorney-in-fact, in its name, place and stead and with full power of
substitution to make, execute, publish, acknowledge, deliver, record and file
16
<PAGE>
and swear to the execution, delivery, acknowledgment, filing and/or recording
of: (a) the Certificate of Limited Partnership of the Partnership, any amendment
thereof required because of an amendment to this Agreement or in order to
effectuate any change in the membership of the Partnership and (b) all such
other agreements, applications, instruments, documents, certifications,
certificates and reports which may from time to time be required by the laws of
the United States of America, the State of Delaware or any other jurisdiction,
or any political sub division or agency thereof, or any Regulatory Rule, all of
the foregoing to effectuate, implement and continue the valid and subsisting
existence of the Partnership. The power of attorney granted hereby is coupled
with an interest and is irrevocable and shall: (i) continue in full force and
effect notwithstanding the subsequent death, incapacity, dissolution,
termination or bankruptcy of the Partner granting the same or the transfer of
all or any portion of such Partner's Interest and (ii) extend to that Partner's
successors, assigns and legal representatives. Each Partner agrees to be bound
by any representation made by the attorney-in-fact acting in good faith pursuant
to and in accordance with the power of attorney, and hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the attorney-in-fact taken in good faith pursuant to, and in accordance with,
the power of attorney.
Section 12.2 NOTICES. All notices and demands required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given: (a) (i) upon receipt if delivered personally (unless subject to clause
(a)(ii) of this Section 12.2) or if mailed by registered or certified mail; (ii)
on the date after dispatch if sent by overnight courier or (iii) upon dispatch
if transmitted by telecopy or other means of facsimile which provides immediate
delivery to compatible equipment in the possession of the recipient, if receipt
has been confirmed and (b) in any case, if to the Partnership or the Managing
General Partner, to:
17
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Terrence A. Elkes
12 Trails End
Rye, New York 10580
Telecopy Number: (914) 381-2374
Confirmation Number: (914) 381-5350
and if to any other Partner, to the address or telecopy number of such Partner
as shown from time to time on the records of the Partnership. Any Partner may
specify a different address or telecopy number by notifying the Managing
General Partner thereof. The Managing General Partner may specify a different
address or telecopy number by notifying all Partners thereof.
Section 12.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof, as of the
Effective Date supersedes any prior agreement or understandings among them, and
may not be modified or amended in any manner other than as set forth herein.
Section 12.4 GOVERNING LAW.
(a) This agreement and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the law of the state of Delaware
without giving effect to the conflicts of law principles thereof.
(b) All of the provisions of this Agreement shall be subject to all
applicable Regulatory Rules.
(c) Notwithstanding anything herein to the contrary, to the extent
that this Agreement is invalid, void, illegal or otherwise inconsistent with
Delaware law or any Regulatory Rule, such Regulatory Rule and/or Delaware law
shall override this Agreement to the extent necessary to conform this Agreement
to such Regulatory Rule or Delaware law.
Section 12.5 VOTING, CONSENTS AND APPROVALS. Any action requiring the
consent, approval or affirmative vote of Partners under this Agreement may be
taken by vote at a meeting or, in lieu thereof, by written consent of Partners.
The granting or withholding of consents or approvals by any party hereto shall
be in the sole discretion of such party, unless otherwise expressly provided in
this Agreement.
18
<PAGE>
Section 12.6 EFFECT. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
permitted assigns.
Section 12.7 PRONOUNS AND NUMBER. Wherever it appears appropriate from
the context, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in either the masculine,
feminine or neuter shall include the masculine, feminine and neuter.
Section 12.8 CAPTIONS. Captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provision hereof.
Section 12.9 PARTIAL ENFORCEABILITY. If any provision of this
Agreement, or the application of that pro vision to any Person or circumstance,
shall be held invalid, the remainder of this Agreement, or the application of
that provision to Persons or circumstances other than those to which it is held
invalid, shall not be affected thereby, except to the extent necessary to carry
out the purposes of this Agreement.
Section 12.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
Section 12.11 THIRD PARTY BENEFICIARIES. The parties hereto intend that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
19
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
GENERAL PARTNERS:
-----------------------------------
Terrence A. Elkes
-----------------------------------
Kenneth F. Gorman
LIMITED PARTNERS:
-----------------------------------
Terrence A. Elkes
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
20
<PAGE>
INDIVIDUAL OR TRUST SIGNATORY
STATE OF______________________, COUNTY OF_____________________ ss.:
On _________________, 199__ before me_________________________
personally came ___________________________________ to me known, and known to me
to be the individual(s) described in, and who executed the foregoing document
and duly acknowledged to me that he executed the same.
_________________________________
Notary Public
CORPORATE SIGNATORY
- -------------------
STATE OF ________, COUNTY OF ____________________________ ss.:
On ______________________, 199__ before me_____________________
personally came ____________________________ to me known, who, by me duly sworn,
did depose and say that deponent is the ___________________of _________________,
the corporation described in, and which executed the foregoing document; and
that deponent signed deponent's name by order of the board of directors.
_________________________________
Notary Public
21
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Schedule A
----------
Capital Accounts as of the Effective Date
-----------------------------------------
Initial Capital Capital Account
Contribution ---------------
---------------
General Partners
- ----------------
Terrence A. Elkes $ 24,000.00 $ 24,000.00
Kenneth F. Gorman $ 1,000.00 $ 1,000.00
Limited Partners
- ----------------
Terrence A. Elkes $2,475,000.00 $2,475,000.00
A-1
<PAGE>
Exhibit 99.9
AGREEMENT OF LIMITED PARTNERSHIP
of
Gorman Limited Partnership,
A Delaware Limited Partnership
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS....................................................... 1
Section 1.1 Certain Terms............................................... 1
Section 1.2 Short Fiscal Years and Other Accounting
Periods..................................................... 4
ARTICLE II
NAME, OFFICE, BUSINESS.................................................... 4
Section 2.1 Name........................................................ 4
Section 2.2 Office in the State of Delaware; Agent
for Service................................................. 4
Section 2.3 Purpose of the Partnership.................................. 4
Section 2.4 Location of Principal Place of
Business.................................................... 5
Section 2.5 Names and Business Address of General
Partners.................................................... 5
Section 2.6 Term........................................................ 5
ARTICLE III
CAPITAL CONTRIBUTIONS..................................................... 5
Section 3.1 Effective Date Capital Accounts............................. 5
Section 3.2 Capital Account............................................. 6
Section 3.3 Additional Capital Contributions............................ 6
Section 3.4 Interest on Capital Contributions........................... 6
Section 3.5 Distributions and Return of Capital
Contributions............................................... 6
Section 3.6 Form of Capital Contributions............................... 6
Section 3.7 Future Required Capital Contributions of
General Partners............................................ 6
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES.......................................... 7
Section 4.1 Allocations of Profits and Losses........................... 7
Section 4.2 Taxable Income or Loss...................................... 7
Section 4.3 Code ss. 704(c)............................................. 7
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Page
ARTICLE V
DISTRIBUTIONS............................................................. 7
Section 5.1 Distributions of Available Cash............................. 7
Section 5.2 Other Distributions......................................... 7
Section 5.3 Distributions in Cash or Property........................... 7
ARTICLE VI
POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNERS......................... 8
Section 6.1 Authority................................................... 8
Section 6.2 Liability................................................... 8
Section 6.3 Indemnification............................................. 8
Section 6.4 Survival.................................................... 9
ARTICLE VII
TRANSFERS OF INTERESTS BY PARTNERS........................................ 9
Section 7.1 Transfer of Partner's Interest.............................. 9
Section 7.2 Transferees Bound by Agreement.............................. 13
ARTICLE VIII
DISSOLUTION OF THE PARTNERSHIP............................................ 13
ARTICLE IX
WINDING UP, TERMINATION AND LIQUIDATING DISTRIBUTIONS..................... 13
Section 9.1 Winding Up.................................................. 13
Section 9.2 Distribution of Partnership
Property.................................................... 14
Section 9.3 Termination................................................. 14
ARTICLE X
BOOKS AND RECORDS, REPORTS, FISCAL YEAR................................... 14
Section 10.1 Books and Records........................................... 14
Section 10.2 Reports..................................................... 14
Section 10.3 Fiscal Year................................................. 14
ARTICLE XI
AMENDMENT OF PARTNERSHIP AGREEMENT........................................ 14
Approval of Amendments.................................................... 14
ii
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Page
ARTICLE XII
MISCELLANEOUS............................................................. 15
Section 12.1 Power of Attorney........................................... 15
Section 12.2 Notices..................................................... 16
Section 12.3 Entire Agreement............................................ 16
Section 12.4 Governing Law............................................... 16
Section 12.5 Voting, Consents and Approvals.............................. 17
Section 12.6 Effect...................................................... 17
Section 12.7 Pronouns and Number......................................... 17
Section 12.8 Captions.................................................... 17
Section 12.9 Partial Enforceability...................................... 17
Section 12.10 Counterparts................................................ 18
Section 12.11 Third Party Beneficiaries................................... 18
Schedule A................................................................... 21
-iii-
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF GORMAN LIMITED PARTNERSHIP
This Agreement of Limited Partnership of the Gorman Limited
Partnership, a Delaware limited Partnership (the "PARTNERSHIP"), effective as of
August 28, 1998 (the "EFFECTIVE DATE") by and among the General Partners (as
defined herein) and the Limited Partners (as defined herein).
R E C I T A L S
In consideration of the premises and covenants contained herein, the
parties agree as of the Effective Date as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 CERTAIN TERMS. The following definitions apply to this
Agreement:
"ACCOUNTING PERIOD" means, as the context may require, the period
beginning as of the Effective Date or on the day following the last day of the
immediately preceding Accounting Period, and ending on the next succeeding of
the following:
(a) the last day of each Fiscal Year of the Partnership;
(b) the day prior to the date of any withdrawal of any Partner or any
distribution to any Partner;
(c) the day prior to the day as of which a Person is admitted as a
Partner or any Partner makes a Capital Contribution; and
(d) any day specified as the last day of an Accounting Period by the
Managing General Partner.
"AGREEMENT" means this Agreement of Limited Partnership (including the
Schedule hereto), as amended, modified or supplemented from time to time.
"CAPITAL ACCOUNT" means, with respect to each Partner, the account so
designated and established on the books and records of the Partnership for each
Partner which shall be determined in accordance with Treasury Regulations ss.
1.704-1(b)(2)(iv).
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"CAPITAL CONTRIBUTION" means the total amount of cash and the
initial fair market value of any property (other than cash) less any liabilities
encumbering such contributed property that the Partnership is considered to
assume or take subject to under Code ss. 752, contributed to the capital of the
Partnership by any Partner.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time (or any succeeding law). References to sections of the Code shall include
amended or successor provisions thereto.
"FIRST REFUSAL NOTICE" has the meaning specified in Section 7.1.
"FIRST REFUSAL PARTNER" has the meaning specified in Section 7.1.
"FISCAL YEAR" has the meaning specified in Section 10.3.
"GENERAL PARTNERS" means the general partners of the Partnership as of
the Effective Date and/or any other Person admitted to the Partnership as a
general partner in accordance with the Partnership Act. As of the Effective
Date, the General Partners are Terrence A. Elkes and Kenneth F. Gorman.
"INTEREST" means the individual interest of each Partner in the
Partnership at any particular time including, without limitation, any right to
participate in the Partnership or to receive distributions. The interest of the
General Partners shall constitute General Partnership Interests and the interest
of the Limited Partners shall constitute Limited Partnership Interests.
"LIMITED PARTNERS" means the limited partners of the Partnership as of
the Effective Date and any other Person admitted to the Partnership as a limited
partner in accordance with the Partnership Act and any Substituted Limited
Partners. As of the Effective Date, the only Limited Partner is Kenneth F.
Gorman.
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"MANAGING GENERAL PARTNER" means, as of the Effective Date, Kenneth F.
Gorman. In the event of the withdrawal of Kenneth F. Gorman as a General
Partner, Terrence A. Elkes shall become the Managing General Partner provided he
is a General Partner at such time.
"PARTNERS" means the General Partners, Limited Partners and Substituted
Limited Partners, collectively, where no distinction is required by the context
in which the term is used.
"PARTNERSHIP ACT" means the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time (or any succeeding law).
"PARTNERSHIP PROPERTY" means any real or personal property, whether
tangible or intangible, owned by the Partnership and any goodwill.
"PERSON" means any individual, partnership, corporation, trust or other
entity.
"PROFITS" and "LOSSES" mean, for each Accounting Period, an amount
equal to the Partnership's taxable income or loss, respectively, for such
Accounting Period determined in accordance with Code ss. 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code ss. 703(a)(1) shall be included in taxable income or
loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from Federal income
tax and not otherwise taken into account in computing Profits and Losses
pursuant to this definition shall increase or decrease such taxable income or
loss;
(b) Any expenditure of the Partnership described in Code ss.
705(a)(2)(B) or treated as Code ss. 705(a)(2)(B) expenditures pursuant to
Treasury Regulations ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits and Losses pursuant to this definition, shall
reduce such taxable income or increase such taxable loss, as the case may be.
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"REGULATORY RULE" means each statute, regulation, rule and other
requirement applicable to the Partnership.
"SELLING PARTNER" has the meaning specified in Section 7.1.
"SUBSTITUTED LIMITED PARTNER" means any Person admitted to the
Partnership as a Substituted Limited Partner pursuant to the provisions of
Section 7.1.
"THIRD PARTY OFFER" has the meaning specified in Section 7.1.
"THIRD PARTY OFFER NOTICE" has the meaning specified in Section 7.1.
"TREASURY REGULATIONS" means the Treasury Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding Treasury Regulations).
Section 1.2 SHORT FISCAL YEARS AND OTHER ACCOUNTING PERIODS. The
definitions of the terms set forth in Section 1.1 shall be modified, where
appropriate, to reflect short Fiscal Years and other Accounting Periods.
ARTICLE II
NAME, OFFICE, BUSINESS
Section 2.1 NAME. The name of the Partnership is "Gorman Limited
Partnership", or such other name or variations thereof as may, from time to
time, be selected by the Managing General Partner.
Section 2.2 OFFICE IN THE STATE OF DELAWARE; AGENT FOR SERVICE.
The address of the Partnership's registered office in the State of Delaware is
c/o The Corporation Service Company, Corporation Trust Center, 1013 Centre Road,
Wilmington, County of New Castle, Delaware 19805. The name of the Partnership's
registered agent for service of process in the State of Delaware at such address
is The Corporation Service Company or such other agent as may be designated from
time to time by the Managing General Partner.
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Section 2.3 PURPOSE OF THE PARTNERSHIP. The purpose of the
Partnership is to manage, invest and reinvest certain Partnership Property and
to engage in any activities in connection therewith, including without
limitation:
(1) to purchase, sell, invest and deal in securities of any kind;
(2) to engage in the real estate business, including, without
limitation, the right to acquire, own, hold, develop, and operate
real properties, in whatever capacity;
(3) to acquire interests of any type in corporations, limited and
general partnerships, limited liability companies and joint
ventures;
(4) to engage in any trades and businesses in any capacity and form
any types of business enterprises;
(5) to operate any business enterprise;
(6) to borrow and lend money;
(7) to make, enter into, deliver and perform all contracts, agreements
and undertakings; and
(8) to engage in any and all activities incident to the foregoing.
Section 2.4 LOCATION OF PRINCIPAL PLACE OF BUSINESS. The location of
the principal place of business of the Partnership is Cornwall Lane, Sands
Point, New York 11050, or such other location as may from time to time be
determined by the Managing General Partner. The Managing General Partner may
change the location of the principal place of business of the Partnership by
notice to all Partners. The Partnership may maintain such other offices as the
Managing General Partner may deem advisable at any other place or places within
or outside of the United States.
Section 2.5 NAMES AND BUSINESS ADDRESS OF GENERAL PARTNERS. The
names and business addresses of each of the General Partners are: (a) Terrence
A. Elkes, 12 Trails End, Rye, New York 10580 and (b) Kenneth F. Gorman, Cornwall
Lane, Sands Point, New York 11050, or such other place as may from time to time
be specified by such General Partner by notice to the Partnership.
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Section 2.6 TERM. The term of the Partnership (the "Term")
commenced with the filing of the initial certificate of limited partnership in
the Office of the Secretary of State of the State of Delaware and shall continue
until dissolution pursuant to Article VIII of this Agreement.
ARTICLE III
CAPITAL CONTRIBUTIONS
Section 3.1 EFFECTIVE DATE CAPITAL ACCOUNTS. On the date hereof, the
Managing General Partner, in his capacity as such, the other General Partner and
the initial Limited Partner, in his capacity as such, are making the
contributions to the Partnership specified on Schedule A hereto. The Capital
Accounts of the Partners as of the Effective Date are set forth on Schedule A
hereto.
Section 3.2 CAPITAL ACCOUNT. The Managing General Partner shall
maintain a Capital Account for each Partner.
Section 3.3 ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) No Partner shall have any right to make additional Capital
Contributions, but any Partner may do so with the approval of the
Managing General Partner.
(b) Except as otherwise provided in this Agreement or required by law,
no Partner shall be obligated to make any additional Capital Contributions to
the Partnership.
Section 3.4 INTEREST ON CAPITAL CONTRIBUTIONS. No Partner shall be
entitled to interest on or with respect to any Capital Contribution or with
respect to any amounts to be paid to such Partner pursuant to this Agreement.
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Section 3.5 DISTRIBUTIONS AND RETURN OF CAPITAL CONTRIBUTIONS. Except
as provided in this Agreement, no Partner shall be entitled to a return of any
part of its Capital Contributions or to receive any distributions from the
Partnership.
Section 3.6 FORM OF CAPITAL CONTRIBUTIONS. Capital Contributions to the
Partnership may be made in cash or in kind. If contributions to the capital of
the Partnership are made in property other than cash, they shall be valued at
their fair market value on the date of contribution.
Section 3.7 FUTURE REQUIRED CAPITAL CONTRIBUTIONS OF GENERAL PARTNERS.
On each date after the Effective Date on which a Capital Contribution is made by
any Limited Partner, the General Partners will make, if necessary, Capital
Contributions such that the aggregate Capital Account balances of the General
Partners will never be less than one ninety-ninth of the aggregate Capital
Account balances of all of the Limited Partners; provided that Terrence A. Elkes
shall not be required to make any such contribution without his prior written
consent.
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
Section 4.1 ALLOCATIONS OF PROFITS AND LOSSES. Profits and Losses shall
be allocated for each Accounting Period pro rata among the Partners in
accordance with the positive balance of their Capital Accounts.
Section 4.2 TAXABLE INCOME OR LOSS. Except as provided in Section
4.3 below, the net profits and net losses of the Partnership (including, for
this purpose, separately stated items pursuant to Code Section 703(a)(1)), as
determined for federal income tax purposes, shall be allocated in the same
manner as Profits and Losses are allocated under Section 4.1.
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Section 4.3 CODE SS. 704(C). Partnership income, gain, loss and
deduction, as determined for federal income tax purposes, shall be allocated
among the Partners, in accordance with the principles of Code ss. 704(c), the
Treasury Regulations thereunder, and Treasury Regulations ss. 1.704-1(b)(4)(i),
to account for any variation between the adjusted tax basis and book value of
Partnership Property.
ARTICLE V
DISTRIBUTIONS
Section 5.1 DISTRIBUTIONS OF AVAILABLE CASH. The Partnership shall
distribute to each Partner thirty-five percent (35%) of the taxable income
allocated to such Partner pursuant to Section 4.2 not later than 100 days after
the last day of each Fiscal Year.
Section 5.2 OTHER DISTRIBUTIONS. Any Partnership distributions in
excess of the distributions made pursuant to Section 5.1 shall be made: (a) by
the Managing General Partner in his sole discretion and (b) pro rata among the
Partners in accordance with the positive balances of their Capital Accounts.
Section 5.3 DISTRIBUTIONS IN CASH OR PROPERTY. All distributions
pursuant to this Article V and pursuant to Section 9.2 shall be made, unless
otherwise agreed to by all of the Partners, in cash. If distributions from the
Partnership are made in property other than cash, they shall be valued at their
fair market value on the date of distribution. If the Partners shall not agree
on the value of the property, the fair market value shall be determined by a
qualified appraiser selected by the Managing General Partner.
ARTICLE VI
POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNERS
Section 6.1 AUTHORITY. Except as otherwise specifically provided
herein, the Managing General Partner shall have exclusive and complete authority
and discretion to manage the operations and affairs of the Partnership and to
make all decisions regarding the business of the Partnership and shall have all
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rights and powers of a General Partner under the Partnership Act and the other
General Partner shall have no such authority or discretion and agrees that he
shall not act on behalf of the Partnership until such time, if any, as he
becomes Managing General Partner. Any action taken by the Managing General
Partner shall constitute the act of and serve to bind the Partnership. Persons
dealing with the Partnership are entitled to rely conclusively on the power and
authority of the Managing General Partner.
Section 6.2 LIABILITY. Except as otherwise provided by law, the
General Partners shall not be personally liable for the return of all or any
portion of the Capital Contributions and shall not be required to pay to the
Partnership or any Partner any deficit in any Partner's Capital Account. Neither
the General Partners nor any former, present or future partner, member, officer,
director, stockholder, employee, agent or affiliate of the General Partners
shall be liable, responsible or accountable to the Partnership or any Partner
for: (a) any act performed or omitted by any of them, including, without
limitation, those acts performed or omitted on advice of legal counsel,
accountants, brokers or consultants of the Partnership, or for any costs,
damages or liabilities arising therefrom, or by law, unless that act or omission
was performed or omitted fraudulently or in bad faith; or (b) any loss due to
the negligence, dishonesty or bad faith of any employee, officer, broker,
consultant or other agent of the Partnership selected, engaged and retained in
good faith by a General Partner.
Section 6.3 INDEMNIFICATION. The Partnership agrees to:
(a) indemnify and hold harmless the General Partners and the respective
personal representatives, heirs, successors in interest and assignees of the
General Partners (each, an "INDEMNIFIED PARTY"), from and against any and all
damages incurred or suffered by any Indemnified Party arising out of or in
connection with the Partnership or its business or affairs; PROVIDED, HOWEVER,
that the Partnership shall not indemnify or hold harmless any Indemnified Party
with respect to any act or omission which was performed or omitted fraudulently
or in bad faith by such Indemnified Party; and
(b) advance to any Indemnified Party expenses for which the Partnership
is required to indemnify the Indemnified Party pursuant to this Section 6.3
subject to the undertaking of the Indemnified Party to repay such advances if it
is ultimately determined that such Indemnified Party is not entitled to be
indemnified.
Section 6.4 SURVIVAL. The exculpation provided in Section 6.2 and
the indemnification provided in Section 6.3 shall survive any termination of
this Agreement.
ARTICLE VII
TRANSFERS OF INTERESTS BY PARTNERS
Section 7.1 TRANSFER OF PARTNER'S INTEREST.
(a) No Partner may sell, assign, pledge, gift or otherwise encumber or
dispose of all or any portion of that Partner's Interest (including any
beneficial interest therein) except as provided in Section 7.1(b) or Section
7.1(c).
(b) A Partner may sell, assign, pledge, gift or otherwise encumber or
dispose of all or any portion of that Partner's Interest provided the following
conditions are met:
(i) an instrument of transfer in form and substance satisfactory
to the Managing General Partner shall be executed by both the transferor
and transferee of the Interest or portion thereof shall be delivered to the
Partnership, and the transferee shall, if so requested by the Managing
General Partner, assume the obligations, if any, of the transferor to the
Partnership allocable to the Interests or portion thereof transferred;
(ii) the transferor and the transferee shall execute such other
instruments as the Managing General Partner may require; and
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(iii) such transfer is not to a minor or to a Person under a
disability, except that this limitation shall not apply to a transfer in
trust for the benefit of a minor or a person under a disability or
custodianship under the applicable Uniform Transfer to Minors Act or
similar legislation of any state or jurisdiction.
(c) A Partner may sell his entire Interest ("SELLING PARTNER") provided
the following conditions are met:
(i) Having received a bona fide offer therefor (a "THIRD
PARTY OFFER"), the Selling Partner shall first give written notice to
the other Partners, which notice shall specify the identity of the
proposed purchaser and annex thereto an executed copy of the Third Party
Offer ("THIRD PARTY OFFER NOTICE"). The other Partners shall then have
the right to acquire, in accordance with the provisions of this Section
7.1(c), the entire Interest of such Selling Partner upon the same terms
and conditions as are contained in the Third Party Offer. Such right can
be exercised by any Partner who desires to purchase the Selling
Partner's Interest (a "FIRST REFUSAL PARTNER") by giving notice (a
"FIRST REFUSAL NOTICE") to the Selling Partner and the Managing General
Partner within fifteen (15) days from the date of the Third Party Offer
Notice of the percentage of the Selling Partner's Interest which such
First Refusal Partner desires to purchase. If any Partner fails to give
notice within said time, such Partner's purchase option shall lapse, his
First Refusal Notice shall be null and void and for purposes of such
sale he shall not be a First Refusal Partner.
(ii) If the First Refusal Notices which are timely collectively
request purchases of exactly one hundred percent (100%) of the Selling
Partner's Interest, then the Managing General Partner shall, within ten
(10) days following the date of expiration of the time for sending First
Refusal Notices, send a closing notice to the Selling Partner and the First
Refusal Partners which shall specify: (1) the percentage of the Selling
Partner's Interest to be purchased by each First Refusal Partner, as set
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forth in the First Refusal Notices and (2) the date of the closing for the
purchase of the Selling Partner's Interest, which date shall be determined
by the Managing General Partner in accordance with Section 7.1(c)(iv).
(iii) If the First Refusal Notices which are timely collectively
request purchases of more than one hundred percent (100%) of the Selling
Partner's Interest, then the percentage of the Selling Partner's Interest
to be purchased by each of the First Refusal Partners shall be reduced from
the percentage set forth in his First Refusal Notice on a pro rata basis in
accordance with the percentage of the Selling Partner's Interest specified
in the respective First Refusal Notices of the First Refusal Partners such
that the total percentage of the Selling Partner's Interest that all First
Refusal Partners are purchasing is equal to one hundred percent (100%). The
Managing General Partner shall determine the percentage of the Selling
Partner's Interest which each First Refusal Partner shall purchase in
accordance with the preceding sentence, which determination shall be deemed
correct absent manifest error. The Managing General Partner shall, within
ten (10) days following the date of expiration of the time for sending
First Refusal Notices, send a closing notice to the Selling Partner and the
First Refusal Partners which shall specify: (1) the percentage of the
Selling Partner's Interest to be purchased by each First Refusal Partner,
as determined in accordance with this Section 7.1(c)(iii) and (2) the date
and place of the closing for the purchase of the Selling Partner's
Interest, as determined in accordance with Section 7.1(c)(iv).
(iv) Closing for the transfer of the Selling Partner's Interest
shall take place: (1) at the principal place of business of the Partnership
or such other place as the Managing General Partner shall select and (2) on
such date as the Managing General Partner shall select and specify in the
closing notice sent pursuant to Section 7.1(c)(ii) or Section 7.1(c)(iii),
as appropriate, which date shall be within 20 days after such closing
notice is given.
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(v) If the First Refusal Notices which are timely collectively
request purchases of less than one hundred percent (100%) of the Selling
Partner's Interest, then the Managing General Partner shall notify the
Selling Partner and the First Refusal Partners thereof and the Selling
Partner shall be free for a period of 60 days from the date of such notice
from the Managing General Partner to sell the Selling Partner's Interest to
the party which made the Third Party Offer provided such sale is effected
strictly in accordance with the terms and conditions as set forth in the
Third Party Offer; and, further provided, that the transferee is sui juris
and mentally competent and that such sale is not prohibited by law.
(d) Any purported transfer of an Interest which is not made in
compliance with this Agreement shall be null and void and of no force or effect
whatsoever.
(e) No transferee of an Interest pursuant to Section 7.1(b) or Section
7.1(c) or otherwise shall become a Substituted Limited Partner unless: (1) the
transfer is made in compliance with either Section 7.1(b) or Section 7.1(c); (2)
the transferee accepts, adopts and approves all of the terms and provisions of
this Agreement as evidenced by its execution of a counterpart signature page to
this Agreement; (3) in the case of a transfer pursuant to Section 7.1(b) only,
all of the Partners give their prior written consent, which consent may be
withheld by any Partner in his sole discretion; and (4) the transferring Partner
and the transferee execute and acknowledge such other instruments as the
Managing General Partner may deem reasonably necessary or appropriate.
(f) Anything herein to the contrary notwithstanding, until such time as
the transferee of an Interest has been admitted to the Partnership as a Substi
tuted Limited Partner or the Managing General Partner has determined that the
requirements of Section 7.1(b) or Section 7.1(c) for transfer of an Interest
have been satisfied, both the Partnership and the General Partners shall be
entitled to treat the transferor of such Interest as the absolute owner thereof
in all respects.
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(g) In the event of the transfer of a Partner's Interest at any time
other than the end of the Partnership's Fiscal Year, the distributive shares of
the various items of Partnership income, gain, loss, deduction and credit as
computed for tax purposes shall be allocated between the transferor and the
transferee pursuant to any permissible method agreed upon by the transferor and
transferee.
Section 7.2 TRANSFEREES BOUND BY AGREEMENT. Any successor or transferee
of a Partner and any Substituted Limited Partner shall be subject to and bound
by all of the provisions of this Agreement as if originally a party to this
Agreement.
ARTICLE VIII
DISSOLUTION OF THE PARTNERSHIP
The Partnership shall be dissolved upon the earliest of:
(a) September 1, 2048; or
(b) Any act or event specified in the Partnership Act ss. 17-801 or any
successor provision thereto; provided, however, that the business of the
Partnership may be carried on by one General Partner.
ARTICLE IX
WINDING UP, TERMINATION AND LIQUIDATING DISTRIBUTIONS
Section 9.1 WINDING UP.
(a) In the event of the dissolution of the Partnership, the Managing
General Partner shall wind up the affairs of the Partnership. The Managing
General Partner may liquidate all or any part of the Partnership Property. The
Managing General Partner shall, in his sole discretion, determine the time,
manner and terms of any sale or sales of the Partnership Property pursuant to
the liquidation.
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(b) The Partners shall continue to share Profits and Losses during the
period of dissolution of the Partnership in accordance with Article IV.
(c) In the event of the dissolution of the Partnership, the Managing
General Partner shall have the right to dispose of the goodwill and all of the
Partnership's books and papers in any manner as he may deem advisable.
Section 9.2 DISTRIBUTION OF PARTNERSHIP PROPERTY. Subject to the right
of the Managing General Partner to set up cash reserves as he may deem necessary
or appropriate, after payment or adequate provision for the payment of all debts
and obligations of the Partnership, the Partnership Property (and/or the
proceeds of the liquidation of the Partnership Property) shall be distributed
pro rata to the Partners in accordance with their respective Capital Accounts.
Section 9.3 TERMINATION. The Partnership shall terminate when all
Partnership Property shall have been disposed of and distributions made as
provided in Section 9.2. The Managing General Partner shall then execute and
cause to be filed all documents and instruments required to effect the
termination.
ARTICLE X
BOOKS AND RECORDS, REPORTS, FISCAL YEAR
Section 10.1 BOOKS AND RECORDS. True and complete books of
account and records are to be kept by the Partnership and shall be available
during reasonable business hours for inspection by each Partner.
Section 10.2 REPORTS. As soon as practicable after the end of
each Fiscal Year, the Managing General Partner shall send to each Person who was
a Partner at any time during such Fiscal Year, an annual statement indicating
such Partner's share of the Partnership's taxable income or loss, capital gain
or loss, and other items relevant for federal income tax purposes.
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Section 10.3 FISCAL YEAR. The fiscal year of the Partnership (the
"FISCAL YEAR") shall be from January 1 through December 31 of each year or
portion thereof during which the Partnership is in existence.
ARTICLE XI
AMENDMENT OF PARTNERSHIP AGREEMENT
APPROVAL OF AMENDMENTS. Amendments to this Agreement may be made by the
Managing General Partner without the consent of any other Partner through use of
the power of attorney described in Section 12.1 if those amendments are: (i) of
a non-material nature, as reasonably determined by the Managing General Partner;
(ii) for the purpose of creating a new class or classes of Limited Partnership
Interests, admitting additional Limited Partners or reflecting the withdrawal of
Limited Partners; (iii) necessary to maintain the Partnership's status as a
partnership according to ss. 7701(a)(2) of the Code; (iv) necessary to preserve
the validity of any and all allocations of Partnership income, gain, loss or
deduction pursuant to ss. 704(b) of the Code; or (v) contemplated by this
Agreement. Amendments to this Agreement other than those described in the first
sentence of this Article XI must be made in accordance with the Partnership Act.
Any supplemental or amendatory agreement shall be adhered to and have the same
effect from and after its effective date as if the same had originally been
embodied in, and formed a part of, this Agreement. The Managing General Partner
shall give written notice to all of the Partners promptly after any amendment
has become effective. Any amendment to this Agreement must be in writing.
ARTICLE XII
MISCELLANEOUS
Section 12.1 POWER OF ATTORNEY. Each Partner hereby constitutes and
appoints the Managing General Partner as its true and lawful representative and
attorney-in-fact, in its name, place and stead and with full power of
substitution to make, execute, publish, acknowledge, deliver, record and file
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and swear to the execution, delivery, acknowledgment, filing and/or recording
of: (a) the Certificate of Limited Partnership of the Partnership, any
amendment thereof required because of an amendment to this Agreement or in
order to effectuate any change in the membership of the Partnership and (b) all
such other agreements, applications, instruments, documents, certifications,
certificates and reports which may from time to time be required by the laws of
the United States of America, the State of Delaware or any other jurisdiction,
or any political sub division or agency thereof, or any Regulatory Rule, all of
the foregoing to effectuate, implement and continue the valid and subsisting
existence of the Partnership. The power of attorney granted hereby is coupled
with an interest and is irrevocable and shall: (i) continue in full force and
effect notwithstanding the subsequent death, incapacity, dissolution,
termination or bankruptcy of the Partner granting the same or the transfer of
all or any portion of such Partner's Interest and (ii) extend to that Partner's
successors, assigns and legal representatives. Each Partner agrees to be bound
by any representation made by the attorney-in-fact acting in good faith pursuant
to and in accordance with the power of attorney, and hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the attorney-in-fact taken in good faith pursuant to, and in accordance with,
the power of attorney.
Section 12.2 NOTICES. All notices and demands required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given: (a) (i) upon receipt if delivered personally (unless subject to
clause (a)(ii) of this Section 12.2) or if mailed by registered or certified
mail; (ii) on the date after dispatch if sent by overnight courier or (iii) upon
dispatch if transmitted by telecopy or other means of facsimile which provides
immediate delivery to compatible equipment in the possession of the recipient,
if receipt has been confirmed and (b) in any case, if to the Partnership or the
Managing General Partner, to:
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Kenneth F. Gorman
Cornwall Lane
Sands Point, New York 11050
Telecopy Number: (516) 944-8693
Confirmation Number: (516) 944-8745
and if to any other Partner, to the address or telecopy number of such Partner
as shown from time to time on the records of the Partnership. Any Partner may
specify a different address or telecopy number by notifying the Managing
General Partner thereof. The Managing General Partner may specify a different
address or telecopy number by notifying all Partners thereof.
Section 12.3 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof, as
of the Effective Date supersedes any prior agreement or understandings among
them, and may not be modified or amended in any manner other than as set forth
herein.
Section 12.4 GOVERNING LAW.
(a) This agreement and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the law of the state of Delaware
without giving effect to the conflicts of law principles thereof.
(b) All of the provisions of this Agreement shall be subject to all
applicable Regulatory Rules.
(c) Notwithstanding anything herein to the contrary, to the extent that
this Agreement is invalid, void, illegal or otherwise inconsistent with Delaware
law or any Regulatory Rule, such Regulatory Rule and/or Delaware law shall
override this Agreement to the extent necessary to conform this Agreement to
such Regulatory Rule or Delaware law.
Section 12.5 VOTING, CONSENTS AND APPROVALS. Any action requiring
the consent, approval or affirmative vote of Partners under this Agreement may
be taken by vote at a meeting or, in lieu thereof, by written consent of
Partners. The granting or withholding of consents or approvals by any party
hereto shall be in the sole discretion of such party, unless otherwise expressly
provided in this Agreement.
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Section 12.6 EFFECT. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
permitted assigns.
Section 12.7 PRONOUNS AND NUMBER. Wherever it appears appropriate from
the context, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in either the masculine,
feminine or neuter shall include the masculine, feminine and neuter.
Section 12.8 CAPTIONS. Captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provision hereof.
Section 12.9 PARTIAL ENFORCEABILITY. If any provision of this
Agreement, or the application of that provision to any Person or circumstance,
shall be held invalid, the remainder of this Agreement, or the application of
that provision to Persons or circumstances other than those to which it is held
invalid, shall not be affected thereby, except to the extent necessary to carry
out the purposes of this Agreement.
Section 12.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
Section 12.11 THIRD PARTY BENEFICIARIES. The parties hereto
intend that this Agreement shall not benefit or create any right or cause of
action in or on behalf of any Person other than the parties hereto.
19
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
GENERAL PARTNERS:
-----------------------------------
Terrence A. Elkes
-----------------------------------
Kenneth F. Gorman
LIMITED PARTNERS:
-----------------------------------
Kenneth F. Gorman
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
-----------------------------------
Name:
20
<PAGE>
INDIVIDUAL OR TRUST SIGNATORY
STATE OF______________________, COUNTY OF_____________________ ss.:
On _________________, 199__ before me_________________________
personally came ___________________________________ to me known, and known to me
to be the individual(s) described in, and who executed the foregoing document
and duly acknowledged to me that he executed the same.
_________________________________
Notary Public
CORPORATE SIGNATORY
- -------------------
STATE OF ________, COUNTY OF ____________________________ ss.:
On ______________________, 199__ before me_____________________
personally came ____________________________ to me known, who, by me duly sworn,
did depose and say that deponent is the ___________________of _________________,
the corporation described in, and which executed the foregoing document; and
that deponent signed deponent's name by order of the board of directors.
_________________________________
Notary Public
21
<PAGE>
Schedule A
----------
Capital Accounts as of the Effective Date
-----------------------------------------
Initial Capital Capital Account
Contribution ---------------
---------------
General Partners
- ----------------
Terrence A. Elkes $ 1,000.00 $ 1,000.00
Kenneth F. Gorman $ 24,000.00 $ 24,000.00
Limited Partners
- ----------------
Kenneth F. Gorman $2,475,000.00 $2,475,000.00
A-1
