SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 18, 1999
Four Media Company
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(Exact name of registrant as specified in its charter)
Delaware 0-21943 95-459940
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
2813 West Alameda Avenue
Burbank, California 91505
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(Address of principal executive offices) (Zip Code)
(818) 840-7000
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(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS.
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Four Media Company (the "Company") issued a press release on January
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19, 1999 announcing that definitive agreements had been signed under which
Warburg, Pincus Equity Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V. (collectively, the
"Purchasers") would purchase approximately 10.2 million shares of the Company's
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common stock, par value $.01 per share (the "Common Stock"). The press release
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is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.
In such transaction, pursuant to a securities purchase agreement
with the Company (the "Securities Purchase Agreement"), the Purchasers will
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acquire, subject to, among other things, receipt of stockholder, regulatory and
bank approval, approximately 6.6 million newly issued shares of Common Stock
from the Company for $52.7 million, and will receive a warrant to purchase an
additional 1.1 million shares of Common Stock with an exercise price of $15.00
per share. In addition, pursuant to the Securities Purchase Agreement, after the
closing of the transaction, the Purchaser will have the right, so long as they
beneficially own at least 35% of the then outstanding shares of the Company's
Common Stock, to cause the Company to nominate and use its best efforts to elect
individuals designated by the Purchasers to be a majority of the members of the
Company's Board of Directors. Furthermore, for so long as the Purchasers
beneficially own at least 10% and less than 35% of the then outstanding shares
of the Company's Common Stock, the Company will continue to be obligated to
nominate and use its best efforts to elect individuals designated by the
Purchasers as members of the Company's Board of Directors, on a decreasing basis
roughly in proportion to such ownership. The Securities Purchase Agreement is
attached hereto as Exhibit 99.2 and is hereby incorporated by reference.
In addition, the Purchasers will acquire, subject to the closing of
the purchases under the Securities Purchase Agreement, approximately 3.1 million
shares of Common Stock beneficially owned by Technical Services Partners, L.P.
("TSP"), a limited partnership controlled by Steinhardt Management Company,
Inc., for approximately $23.4 million, pursuant to a stock purchase agreement
with TSP (the "TSP Purchase Agreement"). The TSP Purchase Agreement is attached
hereto as Exhibit 99.3 and is hereby incorporated by reference.
An additional 498,000 shares of Common Stock will be purchased by
the Purchasers, subject to the closing of the purchases under the Securities
Purchase Agreement and the TSP Purchase Agreement, for approximately $4.0
million from the Company's founders pursuant to a stock purchase agreement with
such founders (the "Founders Purchase Agreement"). The Founders Purchase
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Agreement is attached hereto as Exhibit 99.4 and is hereby incorporated by
reference.
Upon the closing of the transaction, the Company will grant the
Purchasers customary demand and piggyback registration rights with respect to
the shares of Common Stock of which they acquired beneficial ownership in the
transaction.
Concurrently with the closing of the transaction, Fleming US
Discovery Fund III, L.P. and Fleming US Discovery Offshore Fund III, L.P., the
holders of all outstanding shares of the Company's preferred stock (the
"Preferred Stockholders"), have agreed to convert all of their preferred
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shares into 2,250,000 shares of Common Stock pursuant to a Preferred Stock
Conversion and Stockholders Agreement with the Company (the "Conversion
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Agreement"). The Conversion Agreement is attached hereto as Exhibit 99.5 and is
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hereby incorporated by reference.
Upon the closing of the transaction, the Company will grant the
Preferred Stockholders customary demand and piggyback registration rights with
respect to the shares of Common Stock of which they acquired beneficial
ownership in the transaction.
In connection with such transaction, the Purchasers also entered
into (i) a Voting Agreement, dated as of January 18, 1999, with the Preferred
Stockholders, (ii) a Voting Agreement, dated as of January 18, 1999, with Robert
T. Walston, the Company's Chief Executive Officer ("Walston"), and TSP and (iii)
a Voting and Option Agreement, dated as of January 18, 1999, with TSP
(collectively, such agreements are referred to herein as the "Voting
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Agreements"). The Voting Agreements are attached hereto as Exhibits 99.6, 99.7
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and 99.8, respectively, and are hereby incorporated by reference. Under the
terms of the Voting Agreements, the Preferred Stockholders, Walston and TSP have
agreed to support the transaction described in the press release and to vote
against any competing transactions that may
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arise. As a result of the Voting Agreements, holders of over 50% of the
outstanding shares of the Company's Common Stock have agreed to vote for the
transactions contemplated by the Purchase Agreements. The Voting Agreements (but
not the option granted by TSP described below) will terminate upon termination
of the Securities Purchase Agreement.
Furthermore, in the Voting and Option Agreement, TSP granted
Purchasers an option to purchase approximately 3.1 million shares of the
Company's Common Stock (representing approximately 30% of the outstanding shares
of the Company's Common Stock) at a price equal to $7.50 per share. The option
is exercisable in certain events arising after the Securities Purchase Agreement
is terminated.
Additionally, in connection with the transaction described in the
press release, Walston entered into a new Employment Agreement (the "Walston
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Employment Agreement") with the Company, dated as of January 1, 1999, and
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effective concurrently with the closing of the transaction. Under the terms of
the Walston Employment Agreement, Walston's employment at the Company will be
for a term of five years commencing as of the date of the Walston Employment
Agreement at an annual base salary of $500,000. Additionally, under the terms of
the Walston Employment Agreement, subject to the approval by the Company's
shareholders of an amendment to the Company's 1997 Stock Plan to increase the
number of shares available for issuance thereunder, the Company will grant
Walston an option to purchase 2,500,000 shares of the Company's Common Stock at
an exercise price of $8.00 per share. Under the terms of the Walston Employment
Agreement, the Company will also loan Walston $2.0 million, which loan will be
forgiven over the term of the Walston Employment Agreement upon the achievement
of certain milestones. The Walston Employment Agreement will only become
effective upon closing of the transactions contemplated by the Securities
Purchase Agreement and such effectiveness will be retroactive to the date of the
Walston Employment Agreement.
The Company also issued a second press release on January 19, 1999
announcing that Jeffrey J. Marcketta ("Marcketta") was named President and Chief
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Administrative Officer of the Company. This press release is attached hereto as
Exhibit 99.9 and is hereby incorporated by reference.
Also in connection with the transaction and as described in the
second press release, Marcketta entered into an Employment Agreement (the
"Marcketta Employment Agreement") with the Company, effective as of January 1,
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1999. Under the terms of the Marcketta Employment Agreement, Marcketta's
employment at the Company will be for a term of five years commencing as of the
date of the Marcketta Employment Agreement at an annual base salary of $350,000.
Additionally, under the terms of the Marcketta Employment Agreement, the Company
granted Marcketta an option to purchase 500,000 shares of the Company's Common
Stock at an exercise price of $8.00 per share. The Marcketta Employment
Agreement became effective as of January 1, 1999.
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The foregoing descriptions of the various transaction documents are
only summaries thereof and are qualified in their entirety by reference to such
documents which are attached hereto and incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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7(c) Exhibits
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99.1 Press Release of Four Media Company, dated January 19, 1999.
99.2 Securities Purchase Agreement, dated as of January 18, 1999,
among Four Media Company and Warburg, Pincus Equity Partners,
L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V., as
Purchasers.
99.3 Stock Purchase Agreement, dated as of January 18, 1999, among
Technical Services Partners, L.P. and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity Partners I,
C.V., Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V., as
Purchasers.
99.4 Stock Purchase Agreement, dated as of January 18, 1999, among
John H. Donlon, Gavin W. Schutz, Robert Bailey and The Estate of
John H. Sabin and Warburg, Pincus Equity Partners, L.P.,
Warburg, Pincus Netherlands Equity Partners I, C.V., Warburg,
Pincus Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V., as Purchasers.
99.5 Preferred Stock Conversion and Stockholders Agreement, dated as
of January 18, 1999, among Four Media Company, Fleming US
Discovery Fund III, L.P., Fleming US Discovery Offshore Fund
III, L.P. and Warburg, Pincus Equity Partners, L.P., Warburg,
Pincus Netherlands Equity Partners I, C.V., Warburg, Pincus
Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V.
99.6 Voting Agreement, dated as of January 18, 1999, among Fleming US
Discovery Fund III, L.P., Fleming US Discovery Offshore Fund
III, L.P. and Warburg, Pincus Equity Partners, L.P., Warburg,
Pincus Netherlands Equity Partners I, C.V., Warburg, Pincus
Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V.
99.7 Voting Agreement, dated as of January 18, 1999, among Robert T.
Walston, Technical Services Partners, L.P. and Warburg, Pincus
Equity Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity Partners
II, C.V. and Warburg, Pincus Netherlands Equity Partners III,
C.V.
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99.8 Voting and Option Agreement, dated as of January 18, 1999, among
Technical Services Partners, L.P. and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity Partners I,
C.V., Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V.
99.9 Press Release of Four Media Company, dated January 19, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 20, 1999
FOUR MEDIA COMPANY
/s/ Robert T. Walston
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Robert T. Walston
Chairman and Chief Executive Officer
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EXHIBIT INDEX
99.1 Press Release of Four Media Company, dated January 19,
1999.
99.2 Securities Purchase Agreement, dated as of January 18,
1999, among Four Media Company and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V., as Purchasers.
99.3 Stock Purchase Agreement, dated as of January 18, 1999,
among Technical Services Partners, L.P. and Warburg,
Pincus Equity Partners, L.P., Warburg, Pincus Netherlands
Equity Partners I, C.V., Warburg, Pincus Netherlands
Equity Partners II, C.V. and Warburg, Pincus Netherlands
Equity Partners III, C.V., as Purchasers.
99.4 Stock Purchase Agreement, dated as of January 18, 1999,
among John H. Donlon, Gavin W. Schutz, Robert Bailey and
The Estate of John H. Sabin and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V., as Purchasers.
99.5 Preferred Stock Conversion and Stockholders Agreement,
dated as of January 18, 1999, among Four Media Company,
Fleming US Discovery Fund III, L.P., Fleming US Discovery
Offshore Fund III, L.P. and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V.
99.6 Voting Agreement, dated as of January 18, 1999, among
Fleming US Discovery Fund III, L.P., Fleming US Discovery
Offshore Fund III, L.P. and Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V. and Warburg, Pincus Netherlands Equity
Partners III, C.V.
99.7 Voting Agreement, dated as of January 18, 1999, among
Robert T. Walston, Technical Services Partners, L.P. and
Warburg, Pincus Equity Partners, L.P., Warburg, Pincus
Netherlands Equity Partners I, C.V., Warburg, Pincus
Netherlands Equity Partners II, C.V. and Warburg, Pincus
Netherlands Equity Partners III, C.V.
99.8 Voting and Option Agreement, dated as of January 18, 1999,
among Technical Services Partners, L.P. and Warburg,
Pincus Equity Partners,
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L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V.
99.9 Press Release of Four Media Company, dated January 19,
1999.
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