Document:

ex101to8k06113_10182010.htm

Exhibit 10.1

 

GLOBAL SETTLEMENT AGREEMENT

 

This Global Settlement Agreement ("Agreement") is made by and among the Parties described below, and is effective as of the last date of execution below (“Effective Date”). In consideration of the promises, covenants, releases, and agreements contained in this Agreement, and for value received, the receipt and sufficiency of which are acknowledged, the Parties agree as follows:

 

1.           Definitions.

 

1.1.           “Acquisition Agreement” shall mean that certain Agreement dated August 25, 2008 by and among Wilhelmina (as defined below), Wilhelmina Acquisition Corp., Wilhelmina International, Ltd., the other Wilhelmina Transferred Companies (as defined therein) and the Sellers (as defined therein), as amended.

 

1.2.           “Esch” means Dieter Esch, individually.

 

1.3.           “Esch Escrow Agreement” means that certain Escrow Agreement dated February 13, 2009 between the Esch Parties, Wilhelmina and Olshan.

 

1.4.            “Esch Parties” means Esch and Lorex.

 

1.5.           “Krassner” means Brad Krassner, individually.

 

1.6.           “Krassner Escrow Agreement” means that certain Escrow Agreement dated February 13, 2009 between the Krassner Parties, Wilhelmina and Olshan.

 

1.7.           “Krassner L.P.” means Krassner Family Investments Limited Partnership.

 

1.8.           “Krassner Parties” means Krassner and Krassner L.P.

 

1.9.           “Lorex” means Lorex Investments AG.

 

1.10.           “Murray” means John Murray, individually.

 

1.11.           “Mutual Support Agreement” means that certain Mutual Support Agreement dated August 25, 2008 between the Shareholder Parties.

 

  

  

  

 

1.12.           “Mutual Support Agreement Amendment” means that certain Amendment to the Mutual Support Agreement on the terms set forth as Exhibit A hereto.

 

1.13.           “Newcastle” means Newcastle Partners, L.P.

 

1.14.           “Newcastle Persons” means Newcastle, Murray, Schwarz and Stone.

 

1.15.           “Newcastle Purchase Agreement” means that certain Purchase Agreement dated August 25, 2008 between Newcastle and Wilhelmina.

 

1.16.           “Parties” means the Shareholder Parties and Wilhelmina.

 

1.17.           “Press Release” means the press release set forth as Exhibit B hereto.

 

1.18.           “Olshan” means Olshan Grundman Frome Rosenzweig & Wolosky LLP

 

1.19.           “Rights Agreement” means that certain Rights Agreement dated as of July 10, 2006, as amended by and between Wilhelmina and The Bank of New York Mellon Trust Company, N.A., as rights agent.

 

1.20.           “Rights Agreement Amendment” means that Eleventh Amendment to Rights Agreement set forth as Exhibit C hereto.

 

1.21.           “Schwarz” means Mark Schwarz, individually.

 

1.22.           “Shareholder Party” or “Shareholder Parties” means Newcastle, the Esch Parties and the Krassner Parties.

 

1.23.           “Stone” means Evan Stone, individually.

 

1.24.           “Wilhelmina” means Wilhelmina International, Inc.

 

 

2.           Case Dismissal.

 

2.1.           Within three (3) business days following the Effective Date, the Esch Parties and Krassner Parties, through their counsel, shall file with the United States District Court, Southern District of New York (the “Court”) dismissal papers causing Lorex Investments AG, et al., v. Wilhelmina International, Inc. No. 09 Civ.10467 (RJS) (the “Litigation”) and all claims asserted therein to be dismissed with prejudice.

 

  

  

  

 

2.2.           Within three (3) business days following the Effective Date, Wilhelmina, through its counsel, shall file with the Court dismissal papers causing all counterclaims asserted in the Litigation to be dismissed with prejudice.

 

2.3.           The Parties agree to execute any and all instruments and documents required by the Court in the Litigation to duly effectuate the dismissal with prejudice contemplated in paragraphs 2.1 and 2.2 above.

 

 

3.           Share Release

 

3.1.           With two (2) business days following its receipt of confirmation of dismissal of the Litigation, Wilhelmina shall direct Olshan, in its capacity as Escrow Agent under each of the Esch Escrow Agreement and the Krassner Escrow Agreement, respectively, to release (a) to Lorex, a share certificate representing a total of 9,405,843 shares of common stock of Wilhelmina and (b) to Krassner L.P., a share certificate representing a total of 9,405,843 shares of common stock of Wilhelmina (the aggregate shares described in clauses (a) and (b), the “Released Shares”).

 

3.2.           Wilhelmina agrees that, following the release of the Released Shares to Lorex and Krassner L.P. pursuant to Section 3.1 above, Wilhelmina’s repurchase rights under Sections 2.6(b) and 2.8(e) of the Acquisition Agreement, Sections 4(a) and 4(b) of the Esch Escrow Agreement and Sections 4(a) and 4(b) of the Krassner Escrow Agreement shall, in each case, terminate and have no further force and effect, and Lorex and Krassner L.P. shall accordingly own the Released Shares free and clear, subject only to applicable restrictions under U.S. securities laws.

 

  

  

  

 

 

4.           Mutual Support Agreement Amendment.

 

4.1.           Simultaneously with the execution of this Agreement, the Shareholder Parties shall execute the Mutual Support Agreement Amendment.

 

 

5.           Other Governance Matters

 

5.1.           Wilhelmina shall use its diligent efforts to hold its 2010 Annual Meeting of stockholders as promptly as practicable following the execution hereof (taking into account (i) the selection process for independent directors set forth in the Mutual Support Agreement Amendment (which the parties contemplate may take up to 45 calendar days following the date that is one week following the Effective Date) and (ii) such additional customary time to prepare and file a proxy statement and provide notice to stockholders).

 

5.2.           Within six months following the execution of this Agreement, the Board of Directors of Wilhelmina shall evaluate and consider updates and/or clarifications to the Bylaws of Wilhelmina (which updates shall address (a) the advance notice procedures for nominations and shareholder proposals, (b) Wilhelmina’s fiscal year and (c) such other matters as the Board of Directors determines).  The Esch Parties, Krassner Parties and Newcastle shall comply with their respective obligations under the Mutual Support Agreement (as amended by the Mutual Support Agreement Amendment), including Section III-C(2) and (3) (in respect of the Esch Parties and Krassner Parties) and Section IV-C(2) and (3) (in respect of Newcastle), in respect of any proposed changes to the Bylaws presented to the full Board for consideration.

 

  

  

  

 

6.           Earnout Waivers

 

6.1.           The Krassner Parties hereby forever waive all of their respective rights under the Acquisition Agreement to Earnout Payments (i.e., all payments in respect of the WAM Earnout and the Miami Earnout).  For avoidance of doubt, Wilhelmina shall have no obligation to make any payments to the Krassner Parties under Sections 2.8(a), 2.8(b) and 2.8(d) of the Acquisition Agreement irrespective of the operating results of WAM and Wilhelmina Miami (including but not limited to any positive amount in respect of the three year average WAM EBITDA and/or three year average Wilhelmina Miami EBITDA calculations thereunder).

 

6.2.           The Esch Parties hereby forever waive all of their respective rights under the Acquisition Agreement to Earnout Payments (i.e., all payments in respect of the WAM Earnout and the Miami Earnout); provided that the Esch Parties shall be continue to be entitled to receive their respective share (which share equals an aggregate of 30.4%) of the first $2,000,000 of the aggregate Miami Earnout (determined without giving effect to any waiver under Section 6.1) (the “Capped Miami Esch Share”).   For avoidance of doubt, (i) Wilhelmina shall have no obligation to make any payments to the Esch Parties under Sections 2.8(a), 2.8(b) and 2.8(d) of the Acquisition Agreement irrespective of the operating results of WAM and Wilhelmina Miami (including but not limited to any positive amount in respect of the three year average WAM EBITDA and/or three year average Wilhelmina Miami EBITDA calculations thereunder), other than the Capped Miami Esch Share (if any), and (ii) if the aggregate Miami Earnout (determined without giving effect to any waiver under Section 6.1) is less than $2,000,000, then the Esch Parties shall be entitled to 30.4% of such lesser amount; provided that, notwithstanding anything to the contrary, any payments to the Esch Parties in respect of the Miami Earnout shall be subject to the offset provisions set forth in Section 8.6.

 

  

  

  

 

6.3.           Wilhelmina’s payment obligations (if any) with respect to the Miami Earnout to the Remaining Miami Sellers under Section 2.8(b)(ii) of the Acquisition Agreement shall remain in full force and effect, and, notwithstanding the waivers set forth in Section 6.2 and 6.3 above, Wilhelmina shall comply with its notification and access obligations to the Control Sellers under Section 2.8(b)(i) in respect thereof.

 

6.4.           Pursuant to Section 5 of that certain Representative and Distribution Agreement dated August 25, 2008 by and among the former shareholders of Wilhelmina Miami, Inc. (including Krassner and Esch) (the “Rep Agreement”), Krassner and Esch hereby direct Wilhelmina to pay the amounts otherwise payable to the Remaining Miami Sellers in respect of the first $2,000,000 of the Miami Earnout (determined without giving effect to any waiver under Section 6.1) to Krassner and Esch in equal shares (each payment otherwise payable to an individual Remaining Miami Seller, a “Directed Miami Payment”, and such payments collectively, the “Directed Miami Payments”), and Wilhelmina agrees to comply with this direction in reliance on the terms of the Rep Agreement as presented to Wilhelmina by Esch and Krassner; provided that Wilhelmina, Esch and Krassner agree that all Directed Miami Payments shall be held by Wilhelmina for an additional period of nine (9) months following the date such payments are otherwise required to be paid under the terms of the Acquisition Agreement (such Acquisition Agreement date, the “Miami Earnout Payment Due Date” and the date nine months thereafter, the “Extended Miami Deadline”), unless, in respect of any individual Directed Miami Payment, Krassner and/or Esch deliver to Wilhelmina an Acceptable Direction Document (as defined below) from the applicable Remaining Miami Holder to which such payment would otherwise be made (in which case such Directed Miami Payment shall made by Wilhelmina in equal shares to Esch and Krassner promptly following its receipt of such Acceptable Direction Document, but no earlier than the Miami Earnout Payment Due Date).  Notwithstanding anything to the contrary, if prior to the Extended Miami Deadline, any Remaining Miami Seller notifies Wilhelmina of an objection to, or a dispute with respect to, the payment to Esch and/or Krassner of any Directed Miami Payment, Each and Krassner agree that Wilhelmina shall be permitted to retain such Directed Miami Payment (and not release it to Esch and Krassner) until such time as Wilhelmina has received an order of court or of an arbitration panel of competent jurisdiction, written instructions signed by the Remaining Miami Shareholder, Esch and Krassner and reasonably authenticated as described below, or other evidence reasonably satisfactory to Wilhelmina, reflecting the resolution of any such objection or dispute (in which case Wilhelmina shall release such Directed Miami Payment consistent with such resolution).  For purposes of the foregoing, an “Acceptable Direction Document” means a letter or other document addressed to or naming Wilhelmina and reasonably acceptable to it which (a) directs Wilhelmina to pay or assigns a Directed Miami Payment to Esch and Krassner in equal shares, (b) references the fact that such payment would otherwise be made to the applicable Miami Seller under the terms of the Acquisition Agreement, (c) is dated after the Effective Date and (d) is (i) executed by the applicable Remaining Miami Seller and (ii) is reasonably authenticated, including, for example, by notarization, or by the separate execution as a witness by a licensed lawyer practicing law full time (which may be any lawyer at the Named Firms (as defined below)).

 

  

  

  

 

6.5.           In connection with its continuing obligations to make Earnout Payments to the Remaining Miami Sellers or the Esch Parties and the calculation thereof, Wilhelmina hereby agrees that Wilhelmina shall not assert any setoff to the Miami Earnout under Section 2.8(c) of the Acquisition Agreement in respect of (1) any negative Closing Net Asset Adjustment or (2) any Aggregate Divisional EBITDA Loss in respect of WAM.

 

6.6.           Unless defined in Article 1 of this Agreement, defined terms used in this Article 6 shall have the meaning set forth in the Acquisition Agreement.

 

  

  

  

 

7.           Attorney Fee Reimbursement.

 

Promptly (but no later than 10 business days) following the receipt by Wilhelmina of the invoices referred to in the second sentence of this paragraph, Wilhelmina shall reimburse the Esch Parties and Krassner Parties for the bona fide legal expenses charged by the firms of Strassberger, McKenna, Gutnick and Gefsky, Loeb & Loeb LLP and Drinker Biddle (collectively, the “Named Firms”) incurred in their representation of the Esch Parties and Krassner Parties in connection with the Wilhelmina matters, not to exceed an aggregate of three hundred thousand dollars ($300,000).  The Esch Parties and Krassner Parties shall provide Wilhelmina with reasonably detailed invoices (which may exclude descriptions of work performed) setting forth the amounts charged by such firms, and Wilhelmina agrees not to contest such expenses (unless contested by the Esch Parties and the Krassner Parties).  At the request of the Esch Parties and Krassner Parties, subject to the limitation set forth in the first sentence hereof, Wilhelmina shall make payments on submitted unpaid invoices directly to the applicable firms.

 

8.           Indemnification Claims

 

8.1.           Wilhelmina hereby withdraws the indemnification claims against the Esch Parties and the Krassner Parties asserted pursuant to its letter dated February 2, 2010 and in any subsequent correspondence with respect thereto, and agrees not to reassert any claims based on the facts alleged in such letter or such subsequent correspondence.

 

  

  

  

 

8.2.           The Esch Parties and Krassner Parties hereby withdraw the indemnification claims against Wilhelmina asserted pursuant to their letter dated April 13, 2010 and in any subsequent correspondence with respect thereto, and agree not to reassert any claims based on the facts alleged in such letter or such subsequent correspondence.

 

8.3.           Wilhelmina, the Esch Parties and Krassner Parties agree not to assert any additional indemnification claims under the Acquisition Agreement, provided that, subject to the terms of Section 8.6, Wilhelmina preserves all existing rights to assert indemnification claims (1) covered under Section 10.2(d) of the Acquisition Agreement, (2) with respect to Tax Notice Matters (as defined below) or (3) covering Losses arising under or in connection with claims relating to fees, commissions or other compensation or consideration owed or alleged to be owed to (i) Derek Fromm or his affiliates (including Greenstone Capital or Penates) or (ii) Sean Patterson, in each case in connection with the transactions contemplated under the Acquisition Agreement (the “Deal Consideration Claims”, and (1), (2) and (3) collectively, the “Preserved Indemnification Matters”).   Notwithstanding the foregoing, consistent with the last sentence of each of Sections 10.1, 10.2 and 10.3 hereof, Wilhelmina, the Esch Parties and the Krassner Parties preserve their respective rights to seek indemnification in respect of breaches occurring following the Effective Date of Acquisition Agreement covenants which, by their terms, continue to apply following the Effective Date (including Articles 9, 11 and 12 thereof).

 

8.4.           The Esch Parties and Krassner Parties hereby agree to indemnify, defend and hold harmless Wilhelmina and their respective directors, officers, employees, agents, attorneys and shareholders (other than the Esch Parties and the Krassner Parties) (collectively, the “Indemnified Group”) in respect of any and all Claims (as defined in the Acquisition Agreement) or Losses (as defined in the Acquisition Agreement) incurred by the Indemnified Group, in connection with the payment to Esch and/or Krassner (in lieu of any Remaining Miami Seller) of any Directed Miami Payment.

 

  

  

  

 

8.5.           The Esch Parties and Krassner Parties hereby acknowledge their prior acceptance of the terms of the letter dated July 13, 2010 with respect to their responsibility to indemnify Wilhelmina for all Losses arising in connection with the matters set forth in Form 1042 notices received by Wilhelmina International, Ltd. with respect to tax years 2006 and 2008 (the “Tax Notice Matters”).

 

8.6.            The Esch Parties and Krassner Parties agree that, notwithstanding anything to the contrary set forth herein or in the Acquisition Agreement, (1) such parties shall satisfy any indemnification obligations with respect to any Preserved Indemnification Matter at such time as any Indemnified Party (as defined in the Acquisition Agreement) is required by law or contract (including pursuant to any settlement or the terms of an engagement of counsel) to make any payment in respect thereof or an out-of-pocket Loss is otherwise incurred and (ii) if the foregoing payment obligation in respect of any Preserved Indemnification Matter is not timely performed, Wilhelmina shall be entitled to offset the amount of all or any portion of Losses  incurred by Indemnified Parties in respect thereof against any amount payable to the Esch Parties in respect of the Miami Earnout under Section 6.2 (i.e., irrespective of any joint liability provision under the Acquisition Agreement as between the Esch Parties and the Krassner Parties); provided that the foregoing shall be subject to Section 8.7.

 

8.7.           The Parties agree that indemnification by the Esch Parties and the Krassner Parties with respect to Losses incurred under Section 10.2(d) of the Acquisition Agreement shall first be satisfied in accordance with the terms of Section 2.16 of the Acquisition Agreement (it being agreed that clause (ii) thereof shall not apply by virtue of the execution of this Agreement) and only such Losses in excess of $195,000 (which is equal to the Designated Matter Cash Deduction plus the value of the Designated Matter Holdback Shares (valued at NCEH Book Value Per Share)) shall be payable or otherwise offset under Section 8.6 above.

 

  

  

  

 

9.           Rights Plan

 

9.1.           Wilhelmina shall, within one business day following the execution of this Agreement, present to The Bank of New York Mellon Trust Company, N.A., as rights agent, for its signature the Rights Agreement Amendment duly executed by Wilhelmina.

 

9.2.           Promptly following the Effective Date and prior to filing the Rights Agreement Amendment with the SEC, Wilhelmina shall rescind the designation of the Esch Parties and the Krassner Parties as Acquiring Persons under the Rights Agreement.

 

 

10.           Mutual Releases.

 

10.1.           The Esch Parties, for themselves and for all persons and entities claiming by, through, and/or under them, hereby generally and unconditionally release, acquit, and forever discharge Wilhelmina, Newcastle and Olshan, individually and jointly and severally, and each of their current and former officers, directors, employees, agents, attorneys, servants, predecessors, successors, assigns, parents, subsidiaries, affiliates, trustees, shareholders, beneficiaries and investors (including the Newcastle Persons) (collectively, the “Wilhelmina Released Parties”) of and from any and all claims, demands, rights, facts, transactions, occurrences, circumstances, acts, errors, omissions, actions, causes of action, lawsuits, proceedings, judgments, contracts, debts, expenses, liabilities, obligations, damages, losses, expenses, penalties, costs (including costs of suit and attorneys’ fees) and allegations of any kind and character whatsoever, whether legal, contractual, statutory, or equitable in nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, direct or indirect, accrued or unaccrued, absolute, fixed, or contingent, that the Esch Parties, both for themselves and for all persons and entities claiming by, through and/or under them ever had, now has, or hereafter may have against Wilhelmina, Newcastle or Olshan or any of the other Wilhelmina Released Parties based upon any fact, circumstance, matter, cause, act, error, omission, or happening occurring at any point from the beginning of time through the Effective Date of this Agreement, including but not limited to: (a) all claims and causes of action that were or that could have been asserted in the Litigation; (b) all claims arising out of or in any way connected with the Newcastle Purchase Agreement; and (c) all tort claims, claims for negligence, malpractice, breach of fiduciary or other duties, conflicts of interest, breach of contract, common law claims, statutory claims, fraud, conspiracy, aiding and abetting others in wrongful or actionable conduct, deceptive trade practices act claims, economic loss, lost profits, interest, exemplary, punitive, or additional damages, attorneys’ fees, and costs.   Notwithstanding the foregoing, except as expressly provided in this Agreement, the foregoing shall not release any party in respect of any continuing obligations or restrictions under any agreement currently in effect between the Esch Parties and any of the Wilhelmina Released Parties (including, but not limited to, under the Acquisition Agreement and the Mutual Support Agreement, as amended) or this Agreement, whether or not any other parties are signatories thereto, including but not limited to the payment to the Esch Parties of the Capped Miami Esch Share (as adjusted pursuant to Section 8.6) and the release of Designated Matter Shares pursuant to Section 2.16 of the Acquisition Agreement as modified by this Agreement.

 

  

  

  

 

10.2.           The Krassner Parties, for themselves and for all persons and entities claiming by, through, and/or under them, hereby generally and unconditionally release, acquit, and forever discharge Wilhelmina, Newcastle and Olshan, individually and jointly and severally, and each of the other Wilhelmina Released Parties of and from any and all claims, demands, rights, facts, transactions, occurrences, circumstances, acts, errors, omissions, actions, causes of action, lawsuits, proceedings, judgments, contracts, debts, expenses, liabilities, obligations, damages, losses, expenses, penalties, costs (including costs of suit and attorneys’ fees) and allegations of any kind and character whatsoever, whether legal, contractual, statutory, or equitable in nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, direct or indirect, accrued or unaccrued, absolute, fixed, or contingent, that the Krassner Parties, both for themselves and for all persons and entities claiming by, through and/or under them ever had, now has, or hereafter may have against Wilhelmina, Newcastle or Olshan and/or any of the other Wilhelmina Released Parties based upon any fact, circumstance, matter, cause, act, error, omission, or happening occurring at any point from the beginning of time through the Effective Date of this Agreement, including but not limited to: (a) all claims and causes of action that were or that could have been asserted in the Litigation; (b) all clams arising out of or in any way connected with the Newcastle Purchase Agreement; and (c) all tort claims, claims for negligence, malpractice, breach of fiduciary or other duties, conflicts of interest, breach of contract, common law claims, statutory claims, fraud, conspiracy, aiding and abetting others in wrongful or actionable conduct, deceptive trade practices act claims, economic loss, lost profits, interest, exemplary, punitive, or additional damages, attorneys’ fees, and costs.   Notwithstanding the foregoing, except as expressly provided in this Agreement, the foregoing shall not release any party in respect of any continuing obligations or restrictions under any agreement currently in effect between the Krassner Parties and any of the Wilhelmina Released Parties (including, but not limited to, under the Acquisition Agreement and the Mutual Support Agreement) or this Agreement, whether or not any other parties are signatories thereto, including but not limited to the release of Designated Matter Shares pursuant to Section 2.16 of the Acquisition Agreement as modified by this Agreement.

 

  

  

  

 

10.3.            Wilhelmina, Newcastle and each of the Newcastle Persons, for themselves and for all persons and entities claiming by, through, and/or under them, hereby generally and unconditionally release, acquit, and forever discharge the Esch Parties and the Krassner Parties and each of their current and former officers, directors, employees, agents, attorneys, servants, predecessors, successors, assigns, parents, subsidiaries, affiliates, trustees, shareholders, beneficiaries and investors (collectively, the “Seller Released Parties”)  of and from any and all claims, demands, rights, facts, transactions, occurrences, circumstances, acts, errors, omissions, actions, causes of action, lawsuits, proceedings, judgments, contracts, debts, expenses, liabilities, obligations, damages, losses, expenses, penalties, costs (including costs of suit and attorneys’ fees) and allegations of any kind and character whatsoever, whether legal, contractual, statutory, or equitable in nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, direct or indirect, accrued or unaccrued, absolute, fixed, or contingent, that Wilhelmina or Newcastle, both for themselves and for all persons and entities claiming by, through and/or under them ever had, now have, or hereafter may have against the Esch Parties, Krassner Parties and/or any other Seller Released Parties based upon any fact, circumstance, matter, cause, act, error, omission, or happening occurring at any point from the beginning of time through the Effective Date of this Agreement, including but not limited to: (a) all claims and causes of action that were or that could have been asserted in the Litigation (including any right to any payment to Wilhelmina, or repurchase of shares of common stock, in respect of the “Core Adjustment” under the Acquisition Agreement); (b) all claims relating to breaches of the representations or covenants set forth in the Acquisition Agreement (including but not limited to Article 9 thereof) or the Mutual Support Agreement; (c) all claims in respect of violations of federal securities law; and (d) all tort claims, breach of contract, common law claims, statutory claims, fraud, conspiracy, aiding and abetting others in wrongful or actionable conduct, economic loss, lost profits, interest, exemplary, punitive, or additional damages, attorneys’ fees, and costs. Notwithstanding the foregoing, (1) except as expressly provided in this Agreement, the foregoing shall not release any party in respect of any continuing obligations or restrictions under any agreement currently in effect between Wilhelmina and/or Newcastle, on the one hand, and any of the Seller Released Parties, on the other hand (including, but not limited to, under the Acquisition Agreement and the Mutual Support Agreement) or this Agreement, whether or not any other parties are signatories thereto and (2) the Esch Parties and Krassner Parties shall not be released from any indemnification obligations with respect to the Preserved Indemnification Matters.

 

  

  

  

 

10.4.           The claims released in paragraphs 10.1, 10.2 and 10.3 are referred to collectively as the “Released Claims.”

 

10.5.           Each Party acknowledges that there is a risk that after the execution of this Agreement it may discover, incur, or suffer claims or damages that were unknown or unanticipated at the time of this Agreement but included within the definition of Released Claims as described above.  Each Party expressly assumes the risk of such unknown and unanticipated claims, and agrees that this Agreement and the releases provided herein apply to all such unknown or potential claims.

 

10.6.           After investigation and/or consultation with their attorneys, and an opportunity to seek any additional counsel, each Party agrees that it understands the Agreement, and that the Agreement is fair and reasonable, and supported by good, valid, and adequate consideration.

 

10.7.           The releases set forth in this Article X shall be irrevocable, and each Party agrees not to challenge, or to seek to invalidate or undo, the releases set forth under the Section 10 on any grounds or pursuant to any theory, including but not limited to any breach of any provision of this Agreement, the Acquisition Agreement or the Mutual Support Agreement, as amended.

 

  

  

  

 

11.           Representations and Warranties.

 

11.1.           Each Party warrants and represents that he or it is the sole owner of his or its respective Released Claims and that he or it has not assigned, pledged, or otherwise sold or transferred in any manner whatsoever, either by instrument in writing or otherwise, any right, title, lien, interest or claim in the Released Claims.

 

11.2.           Each Party further warrants and represents that all necessary corporate or other action has been obtained for execution of this Agreement.  Each Party agrees to indemnify and hold harmless the other Parties from any claims that a signatory to this Agreement was not authorized to execute this Agreement.

 

11.3.           All representations or warranties of the Parties as set forth in this Agreement survive the execution of this Agreement.

 

 

12.           Miscellaneous Provisions.

 

12.1.           The Parties will bear their respective legal costs and attorneys’ fees (subject to Article 8 hereof).

 

12.2.           The Parties agree that Wilhelmina shall issue the Press Release promptly following the Effective Date, and further agree not to make any other public announcements, other than the Press Release, with respect to the provisions of this Agreement other than as specifically set forth in the Press Release; provided that, notwithstanding the foregoing, nothing herein shall restrict Wilhelmina from providing disclosure in its public filings with respect to the terms of this Agreement as Wilhelmina determines (based on advice of counsel) is required pursuant to applicable law or stock exchange requirements; provided further that, so long as the Esch and/or Krassner are members of the Board of Directors of Wilhelmina, Wilhelmina shall provide Esch and/or Krassner, as applicable, or their respective counsel the opportunity to review in advance any public filing containing any new or modified disclosure with respect to the terms of this Agreement the first time any such new or modified disclosure is to be made.

 

  

  

  

 

12.3.           The Parties shall cooperate on a one-time mutually acceptable, internal (i.e., employee) announcement by Wilhelmina to occur promptly following execution hereof (which announcement may occur at a Wilhelmina “staff” meeting or via email “blast”) with respect to Esch’s status with Wilhelmina.   Neither the foregoing, nor any other provision of this Agreement, shall restrict Wilhelmina (or any of its employees or talent) with respect to any internal communications of any kind to or between management or company employees or talent.

 

12.4.           Promptly following the execution hereof, Esch and Krassner shall convey to Sean Patterson that the Esch Parties and Krassner Parties (and not Wilhelmina or its subsidiaries) will be solely responsible for and perform their obligations pursuant to any agreement entered into with Mr. Patterson with regard to any payment promised to Mr. Patterson in connection with the transactions contemplated under the Acquisition Agreement (including with respect to any Earnout Payments thereunder), other than the consideration paid to Mr. Patterson upon the closing thereof.

 

12.5.           The Parties further acknowledge and agree that there are no unwritten, oral, or verbal understandings, agreements, representations or promises of any kind between the Parties. The rights of the Parties as set forth herein shall be governed by this Agreement, and the Parties waive any claim that they have been fraudulently induced to enter into this Agreement and any right to rescind or avoid this Agreement or the releases contained herein.

 

  

  

  

 

12.6.           This Agreement cannot be orally amended, modified, waived, or terminated, and no provision hereof may be amended, modified, waived, or terminated except in a writing duly signed by the Party against whom such amendment, modification, waiver, or termination is asserted.

 

12.7.           This Agreement shall be governed by, construed, and interpreted, and the rights of the Parties hereto determined, in accordance with the laws of the State of New York.  Any dispute, claim or controversy arising out of or relating to this Agreement shall be resolved in a state or federal court residing in New York, New York.

 

12.8.           This Agreement shall be binding upon and inure to the benefit of the Parties and their respective assigns, successors, predecessors, affiliates, officers, directors, agents, employees, partners, associates, attorneys, principals, servants, and their respective heirs, assigns, representatives, and any person or entity claiming by, through, and/or under any of them.

 

12.9.           The Parties each have had the benefit of the advice of their own counsel in negotiating, drafting, and executing this Agreement and the language of this Agreement is the product of the effort of all counsel.  Accordingly, neither the Agreement nor any provision in it shall be: (a) deemed to have been prepared or drafted by any particular Party; or (b) construed against any Party on the ground that such Party drafted the Agreement or any provision thereof.

 

12.10.           The fact that the Parties are entering into or carrying out this Agreement shall not constitute, be construed as, or be deemed to be evidence of, an admission or concession by any of the Parties, and this Agreement shall not be offered or received into evidence in any action or proceeding against any of the Parties in any court or other tribunal, for any purposes whatsoever other than to enforce this Agreement.

 

  

  

  

 

12.11.           This Agreement may be executed in multiple counterparts, each of which shall constitute an original of this Agreement.  This Agreement is effective as of the last date of execution.

 

 

[SIGNATURE PAGE FOLLOWS]

 

  

  

  

 

	
WILHELMINA INTERNATIONAL, INC.

	  
	
By:

	
/s/ Mark Schwarz

	
Its:

	
Chief Executive Officer

	
Date:

	
October 18, 2010

	  
	  
	
NEWCASTLE PARTNERS, L.P.

	  
	
By:

	
/s/ Mark Schwarz

	
Its:

	
General Partner

	
Date:

	
October 18, 2010

	  
	  

	  
	
KRASSNER PARTIES:

	  
	
BRAD KRASSNER

	  
	
/s/ Brad Krassner

	
Date:

	
October 18, 2010

	  

	  
	
KRASSNER FAMILY INVESTMENTS

	
LIMITED PARTNERSHIP

	  
	
By:

	
/s/ Brad Krassner

	
Its:

	
General Partner

	
Date:

	
October 18, 2010

	  

	  
	  
	
ESCH PARTIES:

	  
	
DIETER ESCH

	  
	
/s/ Dieter Esch

	
Date:

	
October 18, 2010

	  
	
LOREX INVESTMENTS AG

	  
	  
	
By:

	
/s/ Peter Marty

	
Its:

	
Director

	
Date:

	
October 18, 2010ex102to8k06113_10182010.htm

Exhibit 10.2

 

 

FIRST AMENDMENT TO MUTUAL SUPPORT AGREEMENT

 

 

This FIRST AMENDMENT (this “Amendment”) dated October 18, 2010 is entered into by and among Newcastle Partners, L.P. (“Newcastle”), Dieter Esch (“Esch”), Lorex Investments AG (“Lorex”), Brad Krassner (“Krassner”) and the Krassner Family Investments, L.P. (“Krassner L.P.”) (each of Esch, Lorex, Krassner and the Krassner L.P., a “Selling Party” and, collectively, the “Selling Parties”).

 

WHEREAS, the parties hereto (the “Parties”) entered into a Mutual Support Agreement (the “Agreement”) on August 26, 2008;

 

WHEREAS, concurrently with the execution hereof, the Parties, together with Wilhelmina International, Inc. (the “Company”), are entering in a Settlement Agreement, pursuant to which the Parties desire to amend the Agreement to provide for a procedure for the nomination, election and removal of independent members of the Board of Directors; and

 

WHEREAS, capitalized terms used but not otherwise defined herein shall have the respective meanings attributed to them in the Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the agreements set forth below, the parties hereto agree as follows:

 

I.           Board Size

 

Section I-D of the Agreement is hereby amended to read in its entirety as follows:

 

	
  

	
D.

	
Effective as of New Century’s annual stockholder meeting in 2010 (the “2010 Annual Meeting”) and so long as the Agreement remains in effect, the parties hereto agree that they will vote to, and that they will use their commercially reasonable efforts to cause their representatives to the New Century Board of Directors to, vote to maintain the size of its Board of Directors at seven (7) persons, unless the NP Representatives, the Esch Representative and the Krassner Representative agree that the Board of Directors can be expanded in excess of seven (7).

 

II.           Independent Nominees

 

The following Sections I-E, I-F, I-G, I-H, I-I, I-J and I-K shall be added to the Agreement:

 

	
  

	
E.

	
In addition to provisions of Section I-A, Newcastle and each of the Selling Parties agree to use their commercially reasonable efforts to cause their representatives on the Board of Directors of New Century to vote to nominate and recommend the election of the following persons to be members of the Board of Directors at each meeting of New Century’s Board of Directors, and at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting, relating to the nomination of directors with respect to any annual meeting of stockholders:

 

  

  

  

 

	
  

	
1.

	
One NP Independent Representative.  The “NP Independent Representative” means with respect to each annual meeting of stockholders beginning with the 2010 Annual Meeting, except in the case of the re-nomination of a Continuing NPIR Nominee (as defined below), one individual selected by Esch and Krassner mutually from the Newcastle QUI List (as defined below) in accordance with Sections I-G and I-J below; provided that if Esch and Krassner do not agree on such individual, Newcastle shall choose between the selections of each of Esch and Krassner from the Newcastle QUI List or (c) in the event Newcastle desires that a Continuing NPIR Nominee be re-nominated for an additional term, the Continuing NPIR Nominee.  A “Continuing NPIR Nominee” shall mean a Qualifying Unaffiliated Individual (as defined in Section I-H) then serving on New Century’s Board of Directors whose initial nomination or appointment as a director was previously approved by Esch and Krassner pursuant to Sections I-G and I-J below.

 

	
  

	
2.

	
One Seller Independent Representative.  The “Seller Independent Representative” means with respect to each subsequent annual meeting of stockholders beginning with the 2010 Annual Meeting, except in the case of the re-nomination of a Continuing SIR Nominee (as defined below), one individual selected by Newcastle from the Seller QUI List (as defined below) in accordance with Sections I-G and I-J below or (c) in the event Esch and Krassner mutually desire that a Continuing SIR Nominee be re-nominated for an additional  term, the Continuing SIR Nominee.  A “Continuing SIR Nominee” shall mean a Qualifying Unaffiliated Individual then serving on New Century’s Board of Directors whose initial nomination or appointment as a director was previously approved by Newcastle pursuant to Sections I-G and I-J below.  The Seller Independent Representative and Newcastle Independent Representative shall be referred to herein collectively as the “Independent Representatives”.

 

	
  

	
F.

	
In the event of a vacancy on New Century’s Board of Directors caused by the death, incapacity, resignation or removal of an individual designated pursuant to Section I-E and which the Board of Directors will fill, Newcastle and each of the Selling Parties agree to use their commercially reasonable efforts to cause their representatives on the Board of Directors of New Century to vote to appoint a director that meets the same criteria set forth in Section 1-E as the individual whose death, incapacity, resignation or removal caused such vacancy (i.e., if the departed director was a Seller Independent Representative, then the newly appointed individual shall be a replacement Seller Independent Representative and vice versa with respect to the NP Independent Representative).  The applicable Pre-Approving Party for the Independent Representative whose seat is vacant shall, within fifteen (15) business days of the event causing the vacancy, provide a QUI List as described in Section I-G below (or amend or supplement the most recent QUI List provided by that party so that such QUI List meets the requirements of Section I-G) from which the applicable Selecting Party will select a Seller Independent Representative or NP Independent Representative, as the case may be, in the manner provided in Section I-J below.

 

  

  

  

 

	
  

	
G.

	
On an annual basis (beginning with the 2010 Annual Meeting), each party (Newcastle, on the one hand, and Esch and Krassner jointly, on the other hand, each “Pre-Approving Party”) shall use diligent efforts to provide the other party (the “Selecting Party”) with a list containing  no less than four individuals (i) at least two of whom qualify as Enhanced QUIs (as defined below) and are identified as such and (ii) all of whom qualify as Qualifying Unaffiliated Individuals (as defined below), together with phone and email contact details for each listed individual, and a representation that to the best knowledge of the Selecting Party after reasonable investigation, each of the individuals named on the list is a Qualified Unaffiliated Individual or an Enhanced QUI, as the case may be (such list, a “QUI List”; the QUI List provided by Newcastle, the “Newcastle QUI List”, and the QUI List provided by the Sellers, the “Seller QUI List ; and the   annual delivery of a QUI List by either party, the “Annual QUI Notice”); provided that, if Esch and Krassner are unable to agree on four qualifying individuals for purposes of the Seller QUI List, then each shall pre-approve one Enhanced QUI and one Qualified Unaffiliated Individual for such list (which four individuals in total shall comprise the Seller QUI List).  Beginning with the 2012 Annual Meeting of Stockholders, the Annual QUI Notice shall be delivered by the Pre-Approving Party to the Selecting Party no later than the date that is seventy-five (75) calendar days prior to the mailing date for the proxy statement for the prior year’s annual meeting; provided that, the failure of a Pre-Approving Party to provide to the applicable Selecting Party a complete QUI List on a timely basis in accordance with the foregoing (or pursuant to the last sentence hereof) shall not result in a party losing its right to deliver a pre-approved list of candidates for its applicable Independent Representative under this Section I-G unless, on the advice of outside counsel to New Century (such advice, a “Delay Determination”), such delay (if continued) would, in light of Proxy Statement Requirements (as defined below), materially limit the Selecting Party’s ability to appropriately consider (including to interview) each candidate on the applicable QUI List delivered to it and make an informed selection under Section I-J hereof. In the event that a Delay Determination is made, the applicable Selecting Party shall choose a candidate from the prior year’s QUI List delivered by the Pre-Approving Party (which selection may be a Continuing NPIR Nominee or Continuing SIR Nominee).    Notwithstanding the foregoing or anything to the contrary: (1) with respect to the 2010 Annual Meeting of Stockholders, each Pre-Approving Party shall provide the relevant QUI List to the Selecting Party no later than one week following the execution date of the First Amendment to this Agreement; (2) with respect to the 2011 Annual Meeting of Stockholders (the “2011 Meeting”), each Pre-Approving Party shall provide the relevant QUI List to the Selecting Party no later than  February 15, 2011, (3) with respect to the 2011 Meeting and each subsequent annual meeting, if Newcastle desires that the Continuing NPIR Nominee be re-nominated, then, in lieu of delivering a Newcastle QUI List to Esch and Krassner, Newcastle shall be deliver to Esch and Krassner notice of such re-nomination within the time frame set forth above with respect to the Annual QUI Notice and (4) with respect to the 2011 Meeting and each subsequent annual meeting, if Each and Krassner mutually desire to re-nominate the Continuing SIR Nominee, then, in lieu of delivering a Seller QUI List to Newcastle, Esch and Krassner shall be deliver to Newcastle notice of such re-nomination within the time frame set forth above with respect to the Annual QUI Notice.

 

  

  

  

 

	
  

	
H.

	
For purposes of this Agreement: (A) a “Qualifying Unaffiliated Individual” means an individual that (i) meets Nasdaq’s independent director standards, (ii) is not an Affiliate of any Seller Party, Newcastle or New Century or a holder of 5% or more of any class of equity interests in any Seller Party or Newcastle or any of their Affiliates (other than New Century) and (iii) has or maintains no Economic Relationship (as defined below) with any Seller Party, Newcastle, New Century or any Affiliate of the foregoing, where (B) an individual is considered to have an “Economic Relationship” with another Person if such individual (or any Affiliate thereof) receives (or has received in the prior five years) a material direct financial benefit from such other Person (e.g., material salary or fees (including but not limited to director or consultant fees), material contractual payments under a commercial contract, equity or debt investment proceeds, etc.); (C) “Proxy Statement Requirements” shall mean the requirement of the Board of Directors to finalize a slate of director candidates in order to satisfy on a timely basis applicable annual meeting or proxy statement filing requirements under Section 211 of the Delaware General Corporation Law (the “DGCL”) or federal securities laws; and (D) “material” shall mean $5,000 or more; provided, however, that any payment of $1,000 or more to any individual on any QUI List and any Seller Party, Newcastle, New Century or any Affiliate of the foregoing shall be disclosed on such QUI List. Notwithstanding anything to the contrary, an individual shall not be disqualified from being a Qualifying Unaffiliated Individual solely by virtue of concurrently serving or having served on the same board of directors of any company (other than a company in which any Seller Party, Newcastle or New Century or Affiliate thereof holds a 5% or greater equity interest) with any Seller Party, Mark Schwarz or any other Newcastle Representative.

 

  

  

  

 

	
  

	
I.

	
For purposes of this Agreement: (A) an “Enhanced QUI” means an individual that (i) meets the Qualifying Unaffiliated Individual standard set forth above and (ii) is not a Close Long Time Personal Friend (as defined below) of a Pre-Approving Party; (B) a “Close Long Time Personal Friend” of a Pre-Approving Party means an  individual who has had Meaningful Social Contact (as defined below) on at least a monthly basis for at least ten months out of every year  starting 1990 or earlier up to the present with Krassner or Esch (if Krassner and Esch are the Pre-Approving Parties) or with Mark Schwarz, John Murray or Evan Stone (if Newcastle is the Pre-Approving Party) (for purposes of this Section I-I only, Krassner or Esch, on the one hand, or Mark Schwarz, Evan Stone or John Murray, on the other hand, are referred to as the “Relevant Principals”);  and (C) “Meaningful Social Contact” means in-person, pre-arranged (between the Relevant Principals and the Close Long Time Personal Friend) social contact that is one-on-one or involves a group of no more than ten (10) people and which (1) focuses principally on non-professional and non-business related topics  and (2) occurs in a non-professional setting  (e.g., residential setting, restaurant, etc.); provided that, without limitation, (a) any spontaneous contact (e.g., “running into” each other) in any location (whether or not occurring with frequency) and (b) contact occurring in larger group social setting or event not organized by a Relevant Principal or the Close Long Time Personal Friend or spouse of either or Close Long Time Personal Friend of both (e.g., a party at a third party’s home or club, a class,  football game, concert, etc.) are expressly excluded as “Meaningful Social Contact”.

 

	
  

	
J.

	
Following delivery of a QUI List by a Pre-Approving Party (including a notification of any selection (1) pursuant to the Annual QUI Notice or (2) for purposes of filling a vacancy under Section I-F), a Selecting Party shall have 45 calendar days to select one individual from the relevant QUI List delivered to such Selecting Party for the applicable Independent Representative.  If a Selecting Party desires to conduct in-person interviews of one or more candidates listed on the relevant QUI List, the Selecting Party shall be permitted to conduct such in-person interviews at the Company’s reasonable expense (consistent with the Company’s travel policy); provided that (1) the Selecting Party shall endeavor to promptly schedule such interviews following receipt of the relevant QUI List, (2) a Selecting Party shall use diligent efforts to conduct all such in-person interviews on no more than two days (in other words, back-to-back interviews), and (3) such in person interviews shall be conducted in Dallas, Texas and/or New York City, unless the Company consents otherwise (consent not to be unreasonably withheld).  Notwithstanding anything to the contrary, if the Selecting Party fails to inform the Company of its selection of the applicable Independent Representative within such forty-five (45) day period (other than in the case of a Delay Determination or a Failed Substitution (as defined below)), the Pre-Approving Party shall have the right to select the relevant nominee from the QUI List provided by such Pre-Approving Party; provided that, if (a) the reason for such delay is a disagreement between Esch and Krassner as to the identity of NP Independent Representative and (b) each of Esch and Krassner have notified the Company of a selection from the Newcastle QUI List within the forty-five (45) day period, then Newcastle shall select the NP Independent Representative from between the two candidates selected by Esch and Krassner.

 

  

  

  

 

	
  

	
K.

	
A Selecting Party may challenge the fact that at least two individuals on an applicable QUI List failed to meet the Enhanced QUI standard on the basis that an individual is a Close Long Time Personal Friend of a Pre-Approving Party; provided that any such challenge must be on a good faith, reasonable basis based on actual facts that have come to light or were discovered by the objecting party which indicate that the challenged individual meets the definition of a Close Long Time Personal Friend. If a challenging party presents facts in writing that establish that a challenged nominee who was presented as an Enhanced QUI is a Close Long Time Personal Friend within the definition set forth in Section I-I, then the party proposing that an individual shall promptly propose another nominee who satisfies the definition of an Enhanced QUI (such substitution, a “Substitute Nominee"). If a challenging party does not present such facts, the party proposing the applicable nominee shall be under no obligation to withdraw or substitute the applicable nominee.  Nothing in this Section I-K (including the fact that any challenge to individual on a QUI List is contemplated, pending or made) shall excuse a Selecting Party's failure to review and interview any other nominees on a QUI List proposed by a Pre-Approving Party or any Substitute Nominee, except for a Pre-Approving Party's failure to timely propose a Substitute Nominee (such event, a “Failed Substitution”).

 

III.           General Voting Provisions

 

Section III-A and III-B shall be amended to read in their entirety as follows:

 

	
  

	
A.

	
At any vote of the stockholders of New Century (whether at any meeting, or at any adjournment or adjournments thereof, or pursuant to any action by written consent in lieu of a meeting) pursuant to which New Century directors are to be elected, each Selling Party agrees to vote (or cause to be voted) all Seller NCEH Shares which such Selling Party has the right to vote in favor of (i) the required number of NP Representatives, Esch Representatives and Krassner Representatives pursuant to Article I-A and (ii) each of the NP Independent Representative and Seller Independent Representative pursuant to Article I-E, or, if the entire Board is not then up for election, in favor of the applicable individual(s) such that the composition of the Board of Directors would include (a) the required number of  NP Representatives, Esch Representatives and Krassner Representatives pursuant to Article I-A and (b) each of the NP Independent Representative and Seller Independent Representative pursuant to Article I-E.

 

  

  

  

 

	
  

	
B.

	
Selling Parties shall vote, and shall use commercially reasonable efforts to cause the Seller Representatives and any other representative thereof to so vote, in favor of (a) the nomination and/or appointment of individuals to the Board of Directors in a manner consistent with the provisions of Section I-A and I-E above and (b) if Newcastle so requests in writing to the Selling Parties, the calling of a meeting or other action to effect the removal of any NP Representative(s) requested by Newcastle, in any New Century Board of Directors meeting in which any Selling Party, the Seller Representative or any other representative of Selling Party has a vote.

 

Paragraph 3. of Section III-C shall be added to the Agreement as follows:

 

	
  

	
3.

	
Without limiting the provisions of paragraph (2) above, the Selling Parties shall not propose, and shall use their respective commercially reasonable efforts not to permit (and shall vote all Seller NCEH Shares against), (a) any amendment to New Century’s Certificate of Incorporation or By-laws or the adoption of any other corporate measure that (i) reduces or fixes the size of the Board below seven (7) directors or increases or fixes the size of the Board in excess of seven (7) directors (unless the parties otherwise agree pursuant to Article I-D) or (ii) provides that directors shall be elected other than on an annual basis and (b) the removal of any NP Representative, the NP Independent Representative or the Seller Independent Representative elected or appointed to the Board, unless Newcastle votes in favor of such removal.  The Selling Parties further agree not to seek to advise, encourage or influence (or form, join or in any way participate in any “group” or act in concert with) any other Person with respect to the voting of any New Century voting securities inconsistent with the foregoing sentence.

 

Section III-F shall be added to the Agreement as follows:

 

	
  

	
F.

	
In furtherance of the Selling Parties’ agreement above, each Selling Party hereby irrevocably (until the termination of such Selling Party’s obligations under this Article III in accordance with this Agreement) grants to, and appoints, Mark Schwarz (agent for Newcastle) and any designee of Newcastle, as Newcastle’s attorney, agent and proxy, with full power of substitution, to vote and otherwise act with respect to all of such Selling Party’s Seller NCEH Shares at any meeting of the stockholders of New Century (whether annual or special and whether or not an adjourned or postponed meeting), and in any action by written consent of the stockholders of New Century, on the matters and in the manner specified in this Article III (provided that this proxy shall not apply to the matters referred to in Article III(C)(2)).  THE FOREGOING PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE WITH RESPECT TO A SELLING PARTY (UNTIL SUCH SELLING PARTY’S OBLIGATIONS UNDER THIS ARTICLE III HAVE TERMINATED IN ACCORDANCE WITH THIS AGREEMENT) AND COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE PROXY.  The foregoing proxy of Seller Party shall be terminated and revoked as of the termination of such Selling Party’s obligations under this Article III in accordance with this Agreement.

 

  

  

  

 

Section IV-A and IV-B shall be amended to read in their entirety as follows:

 

	
  

	
A.

	
At any vote of the stockholders of New Century (whether at any meeting, or at any adjournment or adjournments thereof, or pursuant to any consent in lieu of a meeting) pursuant to which New Century directors are to be elected, Newcastle agrees to vote (or cause to be voted) all Newcastle NCEH Shares which Newcastle has the right to so vote  in favor of (i) the required number of NP Representatives, Esch Representatives and Krassner Representatives pursuant to Article I-A and (ii) each of the NP Independent Representative and Seller Independent Representative pursuant to Article I-E or, if the entire Board is not then up for election, in favor of the applicable individual(s) such that the composition of the Board of Directors would include (a) the required number of  NP Representatives, Esch Representatives and Krassner Representatives pursuant to Article I-A and (b) each of the NP Independent Representative and Seller Independent Representative pursuant to Article I-E.

 

	
  

	
B.

	
Newcastle shall vote, and shall use commercially reasonable efforts to cause the NP Representatives and any other representative thereof to so vote, in favor of (a) the nomination and/or appointment of individuals to the Board of Directors in a manner consistent with the provisions of Section I-A and Section I-E above and (b) if a Selling Party so requests in writing to Newcastle, the calling of a meeting or other action to effect the removal of the representative of such Selling Party requested by such Selling Party, in any New Century Board of Directors meeting in which Newcastle, the NP Representatives or any other representative of Newcastle has a vote.

 

Paragraph 3. of Section IV-C shall be added to the Agreement as follows:

 

	
  

	
3.

	
Without limiting the provisions of paragraph (2) above, Newcastle shall not propose, and shall use its respective commercially reasonable efforts not to permit (and shall vote all Newcastle NCEH Shares against), (a) any amendment to New Century’s Certificate of Incorporation or By-laws or the adoption of any other corporate measure that (i) reduces or fixes the size of the Board below seven (7) directors or increases of fixes the size of the Board in excess of seven (7) directors (unless the parties otherwise agreement pursuant to Article I-D) or (ii) provides that directors shall be elected other than on an annual basis and (b) the removal of the Esch Representative, the Krassner Representative,  the  Seller Independent Representative or the NP Independent Representative elected or appointed to the Board, unless the Seller Party stockholders vote in favor of such removal.  Newcastle further agrees not to seek to advise, encourage or influence (or form, join or in any way participate in any “group” or act in concert with) any other Person with respect to the voting of any New Century voting securities inconsistent with the foregoing sentence.

 

  

  

  

 

Section IV-F shall be added to the Agreement as follows:

 

In furtherance of the Newcastle’s agreement above, Newcastle hereby irrevocably (until the termination of Newcastle’s obligations under this Article IV in accordance with this Agreement) grants to, and appoints, [Dieter Esch] (agent for the Seller Parties) and any designee of the Seller Parties jointly, as attorney for Newcastle, agent and proxy, with full power of substitution, to vote and otherwise act with respect to all of Newcastle’s Newcastle NCEH Shares at any meeting of the stockholders of New Century (whether annual or special and whether or not an adjourned or postponed meeting), and in any action by written consent of the stockholders of New Century, on the matters and in the manner specified in this Article IV (provided that this proxy shall not apply to the matters referred to in Article IV(C)(2)).  THE FOREGOING PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE (UNTIL NEWCASTLE’S OBLIGATIONS UNDER THIS ARTICLE IV HAVE TERMINATED IN ACCORDANCE WITH THIS AGREEMENT) AND COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE PROXY.  The foregoing proxy of Newcastle shall be terminated and revoked as of the termination of Newcastle’s obligations under this Article IV in accordance with this Agreement.

 

IV.           Termination

 

Section X-B is hereby amended to read in its entirety as follows

 

B.      The rights and obligations of the parties hereto under Sections I,  III and IV shall terminate to the extent provided in the following clauses: (i) with respect to the rights and obligations of (or with respect to) Esch, Lorex and the Esch Representative (including but not limited Esch’s right to designate the Esch Representative pursuant to Article I-A, Esch’s right to select the Seller Independent Representative pursuant to Article I-E and any requirements of the other parties to vote for, or cause their representatives or designees to vote for, the nomination or election of any representative or designee of Esch to New Century’s Board of Directors pursuant to Articles III and IV), on the date that Esch and his Affiliates own, in the aggregate, less than 5% of the outstanding shares of NCEH Common Stock, (ii) with respect to the rights and obligations of (or with respect to) Krassner, the Krassner L.P. and the Krassner Representative (including but not limited Krassner’s right to designate the Krassner Representative pursuant to Article I-A, Krassner’s right to select the Seller Independent Representative pursuant to Article I-E and any requirements of the other parties to vote for, or cause their representatives or designees to vote for, the nomination or election of any representative or designee of Krassner to New Century’s Board of Directors pursuant to Articles III and IV), on the date that Krassner and his Affiliates own, in the aggregate, less than 5% of the outstanding shares of NCEH Common Stock, and (iii) with respect to the rights and obligations of (or with respect to) Newcastle and the NP Representatives, the date Newcastle and its Affiliates own less than 5% of the outstanding shares of NCEH Common Stock (including but not limited Newcastle’s right to designate the NP Representatives pursuant to Article I-A, Newcastle’s right to select the NP Independent Representative pursuant to Article I-E and any requirements of the other parties to vote for, or cause their representatives or designees to vote for, the nomination or election of any representative or designee of Newcastle to New Century’s Board of Directors pursuant to Articles III and IV); provided that, notwithstanding the foregoing, if a party proposes to Transfer shares of NCEH Common Stock subject to any agreement, arrangement or understanding that provides for (i) the re-possession or re-purchase of all or  any portion of the transferred shares by such party at a later date, (ii) a lien on all or any portion of the transferred shares in favor of such party or (iii) such party’s continuing beneficial ownership of all or any portion of the transferred shares (including by way of a continuing direct or indirect pecuniary interest therein) (as such terms are interpreted under the Securities Exchange Act of 1934), the transferring party shall be in breach of this Agreement if it does not require, as a condition to such Transfer, that effective upon such Transfer the transferee(s) become bound by all obligations under this Agreement (including but not limited to Sections I-D, III-C and IV-C) pursuant to a document reasonably satisfactory to the other parties to this Agreement (it being clearly understood that no such transferee shall enjoy any of the rights, including but not limited to rights to representation on New Century’s Board of Directors, set forth herein), unless the other parties hereto consent.

 

  

  

  

 

	
V.

	
Counterparts.

 

This Amendment may be executed by facsimile and in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

 

	
VI.

	
Entire Agreement

 

Except as provided herein, the Mutual Support Agreement remains unchanged and in full force and effect.  This Amendment constitutes the entire agreement of the parties hereto with respect to the first amendment of Mutual Support Agreement.

 

	
VII.

	
Governing Law.

 

This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof).

 

	
VIII.

	
Severability.

 

Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

 

	
IX.

	
Headings.

 

The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

  

  

  

 

IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the undersigned on the day and year first written above.

 

 

	  	
NEWCASTLE PARTNERS, L.P.

	  	  
	  	
By:

	

 

/s/ Mark Schwarz

	  	  	
Name:

	
Mark Schwarz

	  	  	
Title:

	
General Partner

 

 

	  	

 

/s/ Dieter Esch

	  	
Name:  Dieter Esch

 

 

	  	
LOREX INVESTMENTS AG

	  	  
	  	
By:

	

 

/s/ Peter Marty

	  	  	
Name:

	
Peter Marty

	  	  	
Title:

	
Director

 

 

	  	

 

/s/ Brad Krassner

	  	
Name:  Brad Krassner

 

 

	  	
KRASSNER FAMILY INVESTMENTS, L.P.

	  	  
	  	
By:

	

 

/s/ Brad Krassner

	  	  	
Name:

	
Brad Krassner

	  	  	
Title:

	
General Partner

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