Exhibit 10.1
EXCHANGE AND RECAPITALIZATION AGREEMENT
This EXCHANGE AND RECAPITALIZATION
AGREEMENT, dated as of June 11, 2008 (this ”
Agreement ”), is by and among Simon Worldwide, Inc., a
Delaware corporation (the ” Company ”) and
Overseas Toys, L.P. (the “ Investor ”).
WHEREAS, on November 10, 1999
the Company filed a Certificate of Designations (the ”
Certificate of Designations ”) relating to its
Series A Senior Cumulative Participating Convertible Preferred
Stock, par value $.01 per share (the “ Series A
Preferred Stock ”);
WHEREAS, the Investor purchased the
initial shares of Series A Preferred Stock pursuant to that
certain Securities Purchase Agreement dated as of September 1,
1999 (the “ Securities Purchase Agreement
”);
WHEREAS, as of the date hereof, the
Company has outstanding 34,374 shares of Series A Preferred
Stock and all of such outstanding shares and any additional shares
hereafter issued in respect of unpaid dividends thereon
(collectively, the “ Series A Preferred Shares
”) are and will be held by the Investor;
WHEREAS, the liquidation preference
to which the Series A Preferred Shares are entitled would
account for all proceeds reasonably available to the stockholders
of the Company if the Company were dissolved and wound up in its
present condition;
WHEREAS, the Company’s present
condition is unlikely to change in the foreseeable future;
WHEREAS, the Investor wishes to
afford the common stockholders of the Company the opportunity to
share in the proceeds in the event of a dissolution and winding up
of the Company or a business combination involving a change of
control of the Company;
WHEREAS, each Series A Preferred
Share is convertible, at any time at the option of the holder
thereof, into such number of shares of common stock, par value $.01
per share, of the Company (the ” Common Stock ”)
as is equal to $1,000 together with accrued but unpaid dividends
divided by the then applicable conversion price, currently
$8.25;
WHEREAS, the parties hereto desire to
enter into a transaction (the ” Recapitalization
”) pursuant to which the Investor will exchange all the
Series A Preferred Shares outstanding at the time of exchange
for shares of Common Stock, representing 70% of the shares of
Common Stock outstanding (calculated on a primary basis)
immediately following the Recapitalization, pursuant to a plan of
reorganization under Section 368(a)(1)(E) of the Internal
Revenue Code of 1986, as amended (the “Code”), and the
Investor’s right to receive any accrued or declared but
unpaid dividends on the Series A Preferred Shares shall be
cancelled;
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WHEREAS, a special committee of
disinterested directors of the Board of Directors of the Company
(the “ Special Committee ”) consisting of
Messrs. Allan I. Brown and Joseph W. Bartlett has received the
oral opinion of Greif & Co. (“ Greif ”), to
be confirmed in writing, stating that, based on assumptions,
qualifications and limitations set forth therein, the
Recapitalization is fair to the holders of the Common Stock of the
Company (other than the Investor), from a financial point of
view;
WHEREAS, the Special Committee has
recommended the terms of the Recapitalization to the Board of
Directors of the Company and the Board of Directors has approved
the terms of the Recapitalization and resolved to recommend to the
Company’s stockholders that the Company’s Restated
Certificate of Incorporation be amended to increase the authorized
shares of Common Stock to a total of 100,000,000 shares in order to
facilitate consummation of the Recapitalization and to enter into
certain other amendments of the Restated Certificate of
Incorporation;
NOW, THEREFORE, in consideration of
the foregoing premises and the mutual covenants and agreements
contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, intending to
be legally bound, the parties hereto agree as follows:
EXCHANGE
Exchange . Upon the satisfaction of the conditions set forth
in Article Four and subject to the other terms and conditions
set forth in this Agreement, the Investor and the Company agree
that, at the Closing (as hereinafter defined), the Series A
Preferred Shares outstanding at the time of exchange shall be
exchanged for shares of Common Stock representing 70% of the shares
of Common Stock outstanding calculated on a primary basis
immediately following such exchange (the “Exchange
Shares”), and the Investor’s right to receive any
accrued or declared but unpaid dividends on the Series A
Preferred Shares shall be cancelled. If the Closing were to occur
on the date hereof, the Exchange Shares issued to the Investor at
Closing would constitute 37,940,756 shares of Common Stock based on
the 16,260,324 shares of Common Stock currently outstanding on a
primary basis.
Closing . The closing of the Recapitalization (the
“Closing”) shall take place upon the filing of the
Charter Amendment (as hereinafter defined) with the Secretary of
State of the State of Delaware, which filing shall take place on
the first business day following the satisfaction or waiver of all
of the other conditions to Closing (other than the filing with and
acceptance by the Delaware Secretary of State of the Charter
Amendment) set forth in Article Four hereof, or as promptly as
practicable thereafter, at 10:00 a.m. Los Angeles time at the
offices of the Company at 5200 W. Century Boulevard, Los Angeles,
California 90045, or at such other time and place as the Special
Committee and the Investor may agree, provided that all of the
conditions to the Closing (other than the filing with and
acceptance by the Delaware Secretary of State of the Charter
Amendment) shall have been satisfied or waived in accordance with
the terms herein (the date of the Closing, the “Closing
Date”). The Closing may be accomplished by facsimile
transmission to the respective offices of counsel for the parties
hereto of the requisite documents,
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duly
executed where required, with originals to be delivered by
overnight courier service on the next business day following the
Closing Date.
Closing Deliveries . At the Closing, (a) the Investor
shall deliver to the Company share certificates representing the
Series A Preferred Shares then outstanding, together with duly
executed but undated stock powers with respect to the transfer to
the Company of the Series A Preferred Shares represented by
such certificates, and (b) the Company will deliver to the
Investor a duly executed certificate or certificates representing
the Exchange Shares in the respective denomination(s) specified by
Investor.
Effect of Closing . From and after the Closing, (a) the
provisions of Sections 4.5 [Continuing Covenants], 5.7
[Standstill] and 5.8 [Resignation of Investor Directors] of the
Securities Purchase Agreement and (b) that certain Voting
Agreement, dated as of September 1, 1999, among certain
individuals who were then shareholders and the Investors and its
affiliates, each shall cease to be in effect.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants
to the Investor as of the date hereof and on the Closing Date, as
follows:
Organization and Qualification . The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to own or lease and operate its
properties and assets and to carry on its business as it is now
being conducted.
Capitalization .
As of
the date hereof, the authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 1,000,000 shares
of Preferred Stock, $.01 par value (“Preferred Stock”).
Immediately following the Closing, the authorized capital stock of
the Company will consist of 100,000,000 shares of Common Stock and
no shares of Preferred Stock. As of the date hereof, 16,260,324
shares of Common Stock are issued and outstanding, and options for
an additional 155,000 shares of Common Stock are issued and
outstanding, resulting in 16,415,324 shares of Common Stock
outstanding on a fully diluted basis. All outstanding shares of
Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable.
Except
as set forth on Section 2.02(b) of the Disclosure
Schedule attached hereto (the ” Disclosure Schedule
”) and except for the Exchange Shares to be issued to the
Investor at Closing, no subscription, warrant, option, convertible
security, stock appreciation or other right (contingent or other)
to purchase or acquire any shares of any class of capital stock of
the Company or any of its Subsidiaries (as hereinafter defined) is
authorized or outstanding, and (except for the Exchange Shares to
be issued to the Investor at Closing) there is not any commitment
of the Company or any of its Subsidiaries to issue any shares,
warrants, options or other such rights or to distribute to holders
of any class of its capital stock, any evidences of indebtedness or
assets. As used in this Agreement, “ Subsidiary
” means, with respect to the
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Company,
any corporation, association or other business entity of which more
than 50% of the total voting power of shares of capital stock or
other ownership interest entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by the Company or one or more of the other Subsidiaries
of the Company or a combination thereof.
Authorization of Agreements, etc.
The
Company has the corporate power and authority to execute and
deliver this Agreement and, subject to the approval of the Charter
Amendment (as hereinafter defined), perform its obligations under
this Agreement. Each of (i) the execution and delivery by the
Company of this Agreement and (ii) subject to approval of the
Charter Amendment, the performance by the Company of its
obligations hereunder and the issuance, sale and delivery by the
Company of all of the Exchange Shares pursuant to the terms hereof,
will be duly authorized prior to the Closing by all requisite
corporate and stockholder action on the part of the Company and
will not violate any provision of applicable law, any order of any
court or other agency of government, the Restated Certificate of
Incorporation or the Amended and Restated Bylaws of the Company, or
any provision of any indenture, agreement or other instrument to
which the Company or any of its Subsidiaries or their properties or
assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default, or
result in the vesting, acceleration or material modification of any
benefits under any such indenture, agreement or other instrument or
any compensation agreement or benefit plan of the Company or any of
its Subsidiaries, or result in the creation or imposition of any
liens, claims, charges, restrictions, rights of others, security
interests, prior assignments or other encumbrances in favor of any
third Person (as hereinafter defined) upon any of the assets of the
Company or any of its Subsidiaries. As used in this Agreement,
“Person” means any individual, corporation, general or
limited partnership, limited liability company, limited liability
partnership, joint venture, estate, trust, association,
organization, or other entity or Governmental Authority (as
hereafter defined).
The
issuance and delivery of the Exchange Shares to the Investor
hereunder are not and will not be 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.
Subject
to approval of the Charter Amendment, the Exchange Shares, when
issued in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable shares of
capital stock of the Company.
Validity . This Agreement has been duly executed and
delivered by the Company. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
Governmental Approvals; Consents . Subject to the accuracy
of the representations and warranties of the Investor set forth in
Article Three and except for applicable filings and approvals,
if any, required by applicable federal and state securities laws
(including the filing with and approval by the Securities and
Exchange Commission (the “SEC”) of a proxy statement on
Schedule 14A relating to the approval of the Charter
Amendment), no registration or filing with, or consent or approval
of, or other action by, any federal, state or other
governmental
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agency,
court, instrumentality or securities exchange (each, a
“Governmental Authority”) or any other third Person is
or will be necessary by the Company for the valid execution,
delivery and performance of this Agreement or the issuance and
delivery of the Exchange Shares.
Fairness Opinion . The Special Committee has received the
oral opinion of Greif to the effect that, based on assumptions,
qualifications and limitations described to the Board of Directors
of the Company, the Recapitalization is fair to the holders of the
Common Stock of the Company (other than the Investor), from a
financial point of view. Greif has represented to and agreed with
the Special Committee that such oral opinion will be confirmed in a
written opinion delivered to the Company’s Board of Directors
no later than June 20, 2008.
REPRESENTATIONS, WARRANTIES AND AGREEMENT OF THE
INVESTOR
The Investor represents and warrants
to and agrees with the Company as of the date hereof and on the
Closing Date as follows:
Organization . The Investor is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has all requisite limited partnership power and
authority to own or lease and operate its properties and assets and
to carry on its business as it is now being conducted.
Authorization . The Investor has the limited partnership
power and authority to execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance by
the Investor of this Agreement and the exchange of the
Series A Preferred Shares by the Investor, and the
cancellation of the Investor’s right to receive any accrued
or declared but unpaid dividends on the Series A Preferred
Shares, have been duly authorized by all requisite action on the
part of the Investor and will not violate any provision of
applicable law, any order of any court or other agency of
government, the limited partnership agreement or other governing
documents of the Investor or any provision of any indenture,
agreement or other instrument to which the Investor or the
Investor’s properties or assets are bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of
time or both) a default, or result in the vesting, acceleration or
material modification of any benefits under any such indenture,
agreement or other instrument or any compensation agreement or
benefit plan of the Investor, or result in the creation or
imposition of any liens, claims, charges, restrictions, rights of
others, security interests, prior assignments or other encumbrances
in favor of any third Person upon any of the assets of the
Investor.
Validity . This Agreement has been duly executed and
delivered by the Investor. This Agreement constitutes the legal,
valid and binding obligation of the Investor, enforceable against
the Investor in accordance with its terms.
Investment Representations .
The
Investor is acquiring the Exchange Shares for the Investor’s
own account, for investment, and not with a view toward the resale
or distribution thereof.
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The
Investor understands that the Exchange Shares are not, and at
Closing will not be, registered under the Securities Act of 1933,
as amended (the “ Securities Act ”), or any
applicable state securities laws and may not be resold unless
subsequently registered under the Securities Act or unless an
exemption from such registration is available.
The
Investor has the ability to bear the economic risks of the
investment in the Exchange Shares for an indefinite period of time.
The Investor further acknowledges that it has access to copies of
the Company filings with the SEC and has had the opportunity to ask
questions of, and receive answers from, officers of the Company
with respect to the business and financial condition of the Company
and the terms and conditions of the Recapitalization.
The
Investor has such knowledge and experience in financial and
business matters that the Investor is capable of evaluating the
merits and risks of its investment in the Exchange Shares. The
Investor further represents that it is an “accredited
investor” as such term is defined in Rule 501 of
Regulation D of the SEC under the Securities Act.
Governmental Approvals; Consents . Except for filings
required by applicable federal and state securities laws, no
registration or filing with, or consent or approval of, or other
action by, any Governmental Authority or any other third Person is
or will be necessary by the Investor for the valid execution,
delivery and performance of this Agreement or the acquisition of
the Exchange Shares.
Ownership of Shares . The Investor is the record and
beneficial owner of all the issued and outstanding Series A
Preferred Shares, together with the right to receive any accrued
but unpaid dividends thereon. Neither the Investor nor any of its
affiliates owns or controls, in either case directly or indirectly,
any shares of the Company’s Common Stock.
CONDITIONS PRECEDENT
Conditions Precedent to the Obligations of the Investor in
connection with the Closing . The obligations of the Investor
to consummate the Recapitalization are subject to the satisfaction
(or waiver by the Investor) of the following conditions at or prior
to the Closing:
Representations and Warranties to Be True and Correct . The
representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects as of
the date hereof and on the Closing Date with the same force and
effect as though such representations and warranties had been made
on and as of such date.
Performance . The Company shall have performed and complied
in all material respects with all agreements, covenants and
conditions contained herein required to be performed or complied
with by it prior to or on the Closing Date.
All
Proceedings Consummated . All corporate and other proceedings
to be taken by the Company, including consummation of the Charter
Amendment, shall have been taken or obtained by the Company.
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Legal
Proceedings . On the Closing Date, no preliminary or permanent
injunction or other order, decree or ruling issued by any court or
arbitrator of competent jurisdiction nor any statute, rule,
regulation or order entered, promulgated or enacted by any
Governmental Authority shall be in effect that would, and no
action, litigation or proceeding shall be pending before any court,
arbitrator or Governmental Authority of competent jurisdiction
seeking to, prevent the consummation of, or otherwise relating to,
the transactions contemplated by this Agreement.
Necessary Approvals . All necessary governmental and
regulatory consents and approvals and necessary third party
consents shall have been obtained, and there shall have been no
amendments to the Company’s Restated Certificate of
Incorporation (except substantially as set forth in the Charter
Amendment) and the Special Committee shall not have modified or
withdrawn its recommendation of the Recapitalization or the Charter
Amendment.
Stockholder Approval . The amendments of the Company’s
Restated Certificate of Incorporation set forth in Exhibit A
hereto (the “Charter Amendment”) shall have been
approved by (i) the affirmative vote of a majority of the
outstanding shares of the Common Stock and the Preferred Stock,
voting as a single class, and (ii) the affirmative vote of a
majority of the outstanding shares of Common Stock voting at the
special meeting excluding the Series A Preferred Shares, and
the Charter Amendment shall have been filed with, and accepted by,
the Secretary of State of the State of Delaware.
Conditions Precedent to the Obligations of the Company in
Connection with the Closing . The obligations of the Company to
consummate the Recapitalization are subject to the satisfaction (or
waiver by the Company, which waiver shall require approval by the
Special Committee) of the following conditions at or prior to the
Closing:
Representations and Warranties to Be True and Correct . The
representations and warranties of the Investor contained in this
Agreement shall be true and correct in all material respects as of
the date hereof and on th
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