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EXHIBIT 2
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ASSET PURCHASE AND SALE AGREEMENT
by and between
THE XXXXXX ENTERTAINMENT COMPANY,
a California corporation,
XXXXXX COMICS, INC.,
a New York corporation,
and
BHP PRODUCTIONS, INC.,
a California corporation,
on the one hand,
and
CLASSIC MEDIA, LLC,
a Delaware limited liability company,
on the other hand
Dated as of March 7, 2001
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT is made and entered into as of
the 7th day of March 2001 (this "Agreement"), by and between THE XXXXXX
ENTERTAINMENT COMPANY, a California corporation (the "Company"), XXXXXX COMICS,
INC., a New York corporation and a wholly owned subsidiary of the Company
("HCI"), and BHP PRODUCTIONS, INC., a California corporation and a wholly owned
subsidiary of HCI ("BHP"), on the one hand (individually, a "Seller" and,
collectively, "Sellers"), and CLASSIC MEDIA, LLC, a Delaware limited liability
company ("Purchaser"), on the other hand.
R E C I T A L S
A. Sellers are engaged in the business (collectively, the "Xxxxxx
Entertainment Business") of creating, owning, using, marketing, licensing and
otherwise exploiting on a worldwide basis a library of cartoon characters, which
include, without limitation, the characters listed on Schedule 1.1A, sometimes
referred to as the "Characters," and other Entertainment Related Assets. The
Characters do not include any cartoon characters appearing in the films owned by
PM Entertainment, which are listed on Schedule 1.1B (the "PM Entertainment
Characters"). The PM Entertainment Characters do not include any Characters.
X. Xxxxxxx desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, substantially all of the assets, properties and rights
owned or held by Sellers and used in the conduct of the Xxxxxx Entertainment
Business (the "Acquisition"), all on the terms and subject to the conditions set
forth in this Agreement.
C. The Board of Directors of the Company and each other Seller has
approved this Agreement, upon the terms and subject to the conditions set forth
in this Agreement, has determined that the Acquisition and the other
transactions contemplated hereby are advisable and in the best interests of its
shareholders and has resolved to recommend that its shareholders approve this
Agreement, the Acquisition and the other transactions contemplated hereby. In
addition, the shareholder of each Seller (other than the Company) has approved
this Agreement, the Acquisition and the other transactions contemplated hereby.
D. Pursuant to that certain Escrow Agreement dated as of August 24,
2000 (the "Escrow Agreement"), by and among Purchaser, the Company and Escrow
Holder (as defined therein), Purchaser initially deposited with Escrow Holder a
deposit of $1,000,000 (which Purchaser agrees to increase to $1,500,000 within
fifteen (15) business days after the date of this Agreement, and Purchaser's
failure to so increase the Deposit shall be a Purchaser Material Breach for
which no notice or cure period shall apply) (such amount, as so increased,
without any accrued interest or other earnings thereon, is referred to herein as
the "Deposit"). Purchaser and the Company are also parties to a Letter of Intent
dated August 24, 2000 (as amended by an amendment to Letter of Intent dated
September 28,
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2000, the "August 24 Letter of Intent"), all action on which shall be stayed
pending the completion of the Acquisition, subject to the provisions of Article
VIII.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and other promises contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS; LIABILITIES; CLOSING
Section 1.1 Purchase and Sale of Xxxxxx Entertainment Assets. On the
terms and subject to the conditions of this Agreement, at the Closing, Sellers
shall sell, assign, transfer, convey, grant and deliver to Purchaser, and
Purchaser shall purchase from Sellers, free and clear of any and all Liens
(other than the Permitted Liens (as defined in Section 3.6(a)) and the Assumed
Liabilities that Purchaser will assume hereunder), the following assets,
properties and rights owned or held by Sellers and used in the conduct of the
Xxxxxx Entertainment Business (such assets, properties and rights described in
this Section 1.1, other than the Retained Assets, being collectively referred to
herein as the "Xxxxxx Entertainment Assets"), including, without limitation:
(a) Entertainment Related Assets. All Entertainment Related
Assets, including, without limitation, the Characters listed on Schedule 1.1A
and the copyrights, trademarks, Physical Properties, Rights and other
Entertainment Related Assets listed on Schedules 3.7(b)(i) through 3.7(b)(iii);
(b) Cash Proceeds. Cash proceeds derived from any source with
respect to the Xxxxxx Entertainment Assets or the Xxxxxx Entertainment Business
collected or received on or after February 1, 2001, other than cash proceeds
derived from the License Agreements listed on Schedule 1.2(b) and the cash in
transit referred to in Section 1.2(d);
(c) Assigned Contracts. All contracts, licenses, agreements,
commitments, understandings and arrangements related primarily to the Xxxxxx
Entertainment Assets or the conduct of the Xxxxxx Entertainment Business,
including, without limitation, the contracts, licenses and agreements that are
listed or described on Schedule 1.1(c) (collectively, including the Acquisition
Agreements, License Agreements, Underlying Agreements and other agreements
covered by the definition of Entertainment Related Assets in clause (a) above,
the "Assigned Contracts") and the rights of Sellers thereunder;
(d) Assigned Receivables. All accounts, notes and other
receivables, including, without limitation, all overages and accounts receivable
that have been classified as bad debts, and other rights to payment of money,
and any evidences thereof, relating primarily to the Xxxxxx Entertainment Assets
or arising primarily out of the conduct of the Xxxxxx Entertainment Business,
whether or not existing on the Closing Date, other than the Retained Receivables
(collectively, the "Assigned Receivables");
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(e) Prepaid and Other Assets. Any prepaid expenses, deposits
and similar assets relating to the Xxxxxx Entertainment Assets;
(f) Claims. All of Sellers' rights, claims, credits, causes of
action or rights of setoff against third parties relating primarily to any
Xxxxxx Entertainment Assets or the conduct of the Xxxxxx Entertainment Business,
including, without limitation, audit rights against third parties, whether
arising prior to, on or after the Closing Date, including, without limitation,
any and all proceeds arising from the Company's audit adjustment claim against
Universal with respect to unpaid royalties due to the Company in connection with
Universal's licensing and merchandising for the character "Casper" and, in
connection therewith, Purchaser shall bear any payments due from the Company to
Universal regarding past licensing and merchandising for the character "Casper"
as provided in Section 1.3(d);
(g) Licenses. Any transferable licenses, permits and other
authorizations issued by any Governmental or Regulatory Authority affecting the
use of any Xxxxxx Entertainment Assets or necessary for the conduct of the
Xxxxxx Entertainment Business;
(h) Warranties. All rights of Sellers under express or implied
warranties from vendors given to Sellers with respect to any Xxxxxx
Entertainment Assets, to the extent the same may be assigned;
(i) Files and Records. All original copies of books, records
and accounts, files, legal files and related correspondence, databases and
papers of Sellers, whether in hard copy, electronic format or another medium,
relating to the Xxxxxx Entertainment Assets or the conduct of the Xxxxxx
Entertainment Business (except for those assets that relate primarily to the
Retained Assets), including, without limitation, style books, sales and
promotional materials, correspondence files, proprietary software (including all
source code, object code, firmware, development tools, files, records and data
and all media on which any of the foregoing is recorded), supplies, merchandise
and product samples, price lists, pricing records and related schedules, and any
information relating to Taxes imposed on the Xxxxxx Entertainment Assets;
(j) Xxxxxx Domain Names. The Xxxxxx name and website,
including the Xxxxxx Domain Names; and
(k) Goodwill. All goodwill associated with the foregoing
assets, properties and rights and the Xxxxxx Entertainment Business.
Section 1.2 Retained Assets. In addition to the assets, properties and
rights excluded from the definition of Xxxxxx Entertainment Assets in Section
1.1, Sellers are not selling, and Purchaser is not purchasing, any of the
following assets, properties or rights, all of which shall be retained by
Sellers (collectively referred to herein as the "Retained Assets"):
(a) Any assets, properties or rights that are not used
primarily in the conduct of the Xxxxxx Entertainment Business, including,
without limitation, the assets, properties and rights used primarily in the
conduct of the film business of Xxxxx/Xxxxx
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Entertainment Group, Inc., a California corporation ("PM Entertainment") and a
wholly owned subsidiary of the Company;
(b) The License Agreements regarding the film "Casper's
Haunted Christmas", and the film "Xxxx Xxxx'x Great Easter Adventure" (and all
proceeds and accounts receivable relating thereto (including, without
limitation, the Retained Receivables and all overages)) for which deal memos or
executed agreements were either in negotiation, pending, entered into or renewed
prior to February 1, 2001, all as listed on Schedule 1.2(b);
(c) The accounts, notes and other receivables, and other
rights to payment of money, of Sellers arising under the License Agreements
listed on Schedule 1.2(b), including, without limitation, those listed on
Schedule 1.2(c) (the "Retained Receivables");
(d) Any cash on hand, and cash in transit from Hearst
Entertainment in the amount of up to $229,825, and in bank accounts of Sellers
and Sellers' rights in and to any capital stock and other equity interests in
third parties;
(e) Any pensions or profit sharing plans, and the assets
thereof, and all other employee benefit plans or arrangements and the assets
thereof;
(f) Any real property and leases of, and other interests in,
real property of Sellers, including, without limitation, deposits relating
thereto;
(g) Any capital stock or other equity interests of Sellers or
any of their Affiliates;
(h) All securities and equipment in the various Company
subsidiaries (including, without limitation, PM Entertainment, Inferno
Acquisition Corp., Sunland Studios, Inc., BHP, HCI, Firetrap, Inc., Shadow Hills
Post LLC and Xxxxxx Fashions LLC), all filmed entertainment properties owned by
PM Entertainment, and the films "Layover" and "Roxanne's Best Christmas;"
(i) Any rights with respect to Sellers' employees or any
employee benefit plans of Sellers;
(j) Any insurance policies insuring Sellers against liability
with respect to their businesses or assets;
(k) The Settlement Agreement and Mutual General Release dated
as of December 15, 2000, between the Company and Xxxx Xxxxxxx (the "Xxxxxxx
Settlement Agreement");
(l) Any Tax Returns of Sellers, any rights to or claims for
refunds or rebates of Taxes for periods ending on or prior to the Closing Date,
and the benefits of any net operating loss carryforwards, carrybacks or other
credits of Sellers, whether or not attributable to the Xxxxxx Entertainment
Business; or
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(m) Any assets used in connection with the corporate
organizational functions of Sellers (including furniture and fixtures and other
tangible personal property not primarily related to the Xxxxxx Entertainment
Assets or the Xxxxxx Entertainment Business), the corporate charter, taxpayer
and other identification numbers, corporate seals, minute books and stock
transfer books and personnel files, whether or not used for the benefit of the
Xxxxxx Entertainment Business.
Section 1.3 Assumed Liabilities. At the Closing, Purchaser shall
deliver to Sellers the Instrument of Assignment and Assumption pursuant to which
Purchaser shall assume and agree to discharge the following (and only the
following) liabilities and obligations of Sellers (the "Assumed Liabilities") in
accordance with their respective terms and subject to the respective conditions
thereof:
(a) Payments due to Columbia/TriStar in respect of the film
"Xxxx Xxxx'x Great Easter Adventure" (to be capped at $180,000), including the
reimbursement to Sellers of any such amounts paid by Sellers to Columbia/TriStar
between February 1, 2001 and Closing (to be reimbursed or prorated at the
Closing upon presentation of documentation for such expenses);
(b) All other liabilities or obligations (capped at $100,000
in the aggregate) in respect of the Xxxxxx Entertainment Assets or the Assigned
Contracts agreed to or committed to prior to February 1, 2001, including
existing licensing arrangements, development deals, and credit commitments, and
including (i) $25,000 due to a writer for the next "Casper" direct-to-video
production, (ii) unpaid residuals owing regarding the film "Xxxx Xxxx'x Great
Easter Adventure" of approximately $65,000 and (iii) net obligations (equal to
$0) owed to a writer with respect to a "Xxxxxx Xxxx" screenplay for the Warner
Brothers pilot, net of the Warner Brother's reimbursement of the same which is
being assigned to Purchaser hereunder as an Assigned Receivable;
(c) Any Royalties and Participations, Guild Payments and other
third-party payments arising in the generation of the Assigned Receivables
(payment of which prior to the Closing may be made by Seller if due and payable
and accounted for as a Proration Adjustment);
(d) Any liabilities for the audit adjustment, if any, due from
the Company to Universal regarding past licensing and merchandising for the
character "Casper" as set forth in Section 1.1(f);
(e) Obligations under the Xxxxxxx Settlement Agreement arising
on or after the Closing (not to exceed $11,300 per month and ending April 25,
2003), and fifty percent (50%) of such obligations with respect to the period
between March 1, 2001 and Closing (such fifty percent (50%) to be paid at the
Closing as a Proration Adjustment), it being understood that such Xxxxxxx
Settlement Agreement shall not be an Assigned Contract (in the event that
payments under the Xxxxxxx Settlement Agreement are accelerated, other than due
to a default by Purchaser of its obligations under this clause (e) after the
Closing (which default shall be the subject of indemnification hereunder),
Purchaser shall continue to
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pay an amount not to exceed $11,300 per month through April 25, 2003 to Sellers,
and Sellers shall be responsible for paying the accelerated amounts to Xx.
Xxxxxxx when due);
(f) $10,000 per year salary and contract of Xxx Xxxxxxxx, a
lifetime consultant to the Company (paid on and after Closing);
(g) $5,000 per year salary and contract of Xxxxxxx Xxxx, a
lifetime consultant to the Company (paid on and after Closing);
(h) Delivery costs for the Harveytoons Entertainment Assets
(limited to $150,000, including delivery costs for Purchaser and Swen), and if
Sellers have previously paid a portion of this amount, Sellers shall be
reimbursed for such payments at the Closing;
(i) All liabilities and obligations of Sellers accruing or
arising on or after February 1, 2001, relating to:
(i) the rental and other charges payable with respect
to the storage at off-site storage facilities of Entertainment Related
Assets with respect to the time period on and after February 1, 2001
(estimated to be approximately $1,600 per month);
(ii) the Assigned Contracts (including, for the
avoidance of doubt, the obligation to repurchase returned video
cassette and DVD units from Universal of the film "Casper's Haunted
Christmas") but not any other expenses or obligations incurred or
arising thereunder prior to February 1, 2001, except as set forth in
Section 1.3(b);
(j) Except as otherwise provided herein, all costs and
expenses of maintaining or preserving the intellectual property included in the
Entertainment Related Assets on or after February 1, 2001;
(k) Guild liens in respect of the Xxxxxx Entertainment Assets;
and
(l) All liabilities in respect of Taxes for which Purchaser is
liable pursuant hereto.
Section 1.4 Retained Liabilities. Notwithstanding Section 1.3,
Purchaser shall not assume or be obligated to pay, perform or otherwise
discharge any liability or obligation of Sellers not expressly and specifically
assumed by Purchaser as an Assumed Liability (all such liabilities and
obligations not being assumed being herein called the "Retained Liabilities").
Without limiting the generality of the foregoing, none of the following shall be
Assumed Liabilities for purposes of this Agreement:
(a) any intercompany payables and other liabilities or
obligations among the Sellers and their Affiliates;
(b) any costs and expenses incurred by Sellers incident to
their negotiation and preparation of this Agreement and their performance and
compliance with
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the agreements and conditions contained herein and therein (except as otherwise
specifically provided herein);
(c) any debts, liabilities and obligations in respect of any
Retained Assets;
(d) any liabilities in respect of the claims or proceedings
which are otherwise described or should have been described in Schedule 3.11,
which claims or proceedings Sellers shall have the right to dispose of in its
discretion;
(e) any Royalties and Participations, Guild Payments and other
third-party payments arising in the generation of, or attributable to, Retained
Receivables collected prior to February 1, 2001, except as otherwise set forth
in Section 1.3(b)(ii);
(f) all liabilities or obligations of any kind relating to the
Xxxxxx Entertainment Business, the Xxxxxx Entertainment Assets and the Assigned
Contracts accruing or arising out of, or based upon, events, facts,
circumstances, occurrences or developments in existence or that occurred prior
to February 1, 2001, except to the extent such liabilities expressly constitute
an Assumed Liability;
(g) any liabilities and obligations related to, associated
with or arising out of (i) the occupancy, operation, use or control of any of
the Xxxxxx Entertainment Assets prior to February 1, 2001, (ii) all costs and
expenses of maintaining or processing the intellectual property included in the
Entertainment Related Assets prior to February 1, 2001, and (iii) the operation
of the Xxxxxx Entertainment Business prior to February 1, 2001;
(h) any liabilities or obligations relating to or owed to
employees of Seller, including, without limitation, severance, COBRA, insurance
or other obligations in connection with the termination of their employment with
Seller;
(i) Any Taxes of Sellers (or any of them) arising out of or
relating to the Xxxxxx Entertainment Assets or the Xxxxxx Entertainment Business
(it being understood that Purchaser shall be liable for Taxes attributable to
Assigned Receivables and other amounts received by Purchaser);
(j) Any liabilities, obligations, penalties, costs or expenses
arising out of any action taken against Sellers or the Xxxxxx Entertainment
Assets by any Governmental or Regulatory Authority; and
(k) Any debts, claims, liabilities, obligations or expenses
that arise out of, or are based upon, any action or inaction on the part of any
Seller or any Affiliate of Sellers, including, without limitation, breach of
contract, negligence, willful misconduct, bad faith, violation of Laws or
failure to take action that is required to be taken, whether or not such action
or inaction related to the Xxxxxx Entertainment Assets or the Xxxxxx
Entertainment Business and whether or not such debt, claim, liability,
obligation or expense arose prior to, on or after February 1, 2001, except for
such actions alleging that this Agreement or the Acquisition constitutes an
impermissible transfer of an Assigned Contract, if such Assigned Contract was
identified as one for which consent was required, and Purchaser determined to
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consummate the Acquisition without such consent, in which case such debts,
claims, liabilities, obligations or expenses shall be borne by Purchaser.
Section 1.5 Closing. The closing of the Acquisition (the "Closing")
shall occur at the offices of Irell & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxx,
Xxxxx 000, Xxx Xxxxxxx, XX 00000, at 9:00 a.m. (Los Angeles time), on a date
that is not later than the fifth business day following the date that the
Acquisition and the other transactions contemplated hereby shall have been duly
approved by the requisite vote or consent of the Company's shareholders, or such
other date and time as the Company, on behalf of itself and the other Sellers,
and Purchaser may agree in writing (the "Closing Date"), subject to Article
VIII.
ARTICLE II.
PURCHASE PRICE
Section 2.1 Purchase Price. As full consideration for the Xxxxxx
Entertainment Assets, Purchaser shall pay to the Company, on behalf of itself
and the other Sellers, in accordance with Section 2.2, an amount (the "Purchase
Price") equal to $16,000,000, minus the Assigned Receivables Collection Amount,
and shall assume the Assumed Liabilities. Sellers acknowledge that payment of
the Purchase Price to the Company shall be in full satisfaction of all payments
due to Sellers hereunder.
Section 2.2 Payment of Purchase Price. The Purchase Price shall be
payable at the Closing as follows:
(a) The Company and Purchaser shall execute and deliver to the
Escrow Holder joint written escrow directions, in form and substance
satisfactory to Purchaser and the Company (the "Joint Escrow Directions"),
instructing the Escrow Holder to release (i) to the Company, on behalf of itself
and the other Sellers, the aggregate amount of the Deposit (i.e., $1,500,000)
and (ii) to Purchaser, the interest and other earnings accrued on the Deposit,
if any; and
(b) Purchaser shall pay to the Company, by wire transfer of
immediately available funds to a bank account designated by the Company at least
two (2) business days prior to the Closing Date, an amount equal to (i)
$14,500,000, minus (ii) the Assigned Receivables Collection Amount, plus or
minus (iii) the Proration Adjustment.
Section 2.3 Assigned Receivables Collection Amount. The parties
acknowledge that, at the Closing, Purchaser is purchasing from Sellers any and
all Assigned Receivables and that Sellers (or any of them) may have collected or
received or may collect or receive, on or after February 1, 2001, and prior to
the Closing, proceeds or other amounts owing on, or on account of, the Assigned
Receivables. To the extent that Sellers (or any of them) have collected or
received on or after February 1, 2001, and prior to the Closing any proceeds or
other amounts, or property, owing on, or paid on account of, any Assigned
Receivables, the Purchase Price to be paid by Purchaser at the Closing shall be
reduced by an amount (the "Assigned Receivables Collection Amount") equal to the
amount of such proceeds or other amounts, or the value of such property
(determined in good faith by the Board of Directors of the Company and
Purchaser), so collected and received by Sellers. The Company shall
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from time to time deliver to Purchaser a schedule listing the Assigned
Receivables collected on and after February 1, 2001.
Section 2.4 Prorations. Any income, revenue, collections, proceeds,
liabilities, costs, Taxes or expenses with respect to the Xxxxxx Entertainment
Assets shall be appropriately prorated as of February 1, 2001 (except as another
date is otherwise specifically provided for in Article I), by the Company, on
behalf of itself and the other Sellers, and Purchaser prior to the Closing
(without duplication). At the Closing, the Company, on behalf of itself and the
other Sellers, and Purchaser shall adjust the cash portion of the Purchase Price
payable pursuant to Section 2.2(b) as a result of such proration adjustments
(the "Proration Adjustment").
Section 2.5 Purchase Price Allocation. As soon as practicable after the
date hereof but prior to the Closing, Purchaser shall deliver to the Company a
written estimate of allocation of the Purchase Price among the Xxxxxx
Entertainment Assets. The parties shall use reasonable good faith efforts to
mutually agree upon a final allocation schedule of the Purchase Price and the
Assumed Liabilities among the Xxxxxx Entertainment Assets, recognizing that the
overwhelming preponderance of the value of the Xxxxxx Entertainment Assets is in
the intellectual property assets and the Assigned Receivables being purchased by
Purchaser hereunder. If the parties fail to reach agreement on the final
allocation schedule, the parties shall engage an appraisal firm to determine
such final allocation schedule (which determination shall be binding on the
parties). Purchaser and Sellers will each make available to the appraisal firm
such personnel and such information, books and records as may be reasonably
required by the appraisal firm to make its final allocation. The cost of any
appraisal shall be borne equally between Purchaser, on the one hand, and
Sellers, on the other. The parties agree that (a) the final allocation schedule
shall be consistent with and governed by Section 1060 of the Internal Revenue
Code (including IRS Form 8594 or any other forms and reports required to be
filed pursuant to Section 1060 of the Internal Revenue Code or any comparable
provision of state, local or foreign law for filing by each) and (b) each party
will file all Tax Returns and determine all Taxes (including, without
limitation, for purposes of Section 1060) in accordance with and based on such
final allocation, and neither will take any position that is inconsistent
therewith upon examination of any Tax Return, in any refund claim, in any
litigation or otherwise.
Section 2.6 Sales and Use Tax. Purchaser shall be responsible for, and
shall pay, all sales, transfer, use and similar Taxes incurred in connection
with the purchase and sale of the Xxxxxx Entertainment Assets. Tax Returns
required to be filed in respect of transfer Taxes shall be prepared and timely
filed by Purchaser, but shall be delivered to Sellers at least five (5) business
days before filing for Sellers' review.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLERS
In order to induce Purchaser to enter into this Agreement and to
purchase the Xxxxxx Entertainment Assets, Sellers hereby jointly and severally
represent and warrant to Purchaser as follows:
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Section 3.1 Organization. Each Seller is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized, and has full power and authority to conduct its business as now
conducted and as currently proposed to be conducted and to own, use, license and
lease its assets and properties, including, without limitation, the Xxxxxx
Entertainment Assets.
Section 3.2 Authority Relative to Agreement.
(a) Each Seller has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Transaction Documents to which it is a party and to consummate the
Acquisition and the other transactions contemplated hereby and thereby.
(b) The execution and delivery by each Seller of this
Agreement and the Transaction Documents to which such Seller is or will be a
party and the consummation of the Acquisition and the other transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary action on the part of such Seller, subject only, in the case of the
Company, to the receipt of shareholder approval as described in the first
sentence of Section 3.2(e). Without limiting the generality of the foregoing,
the Board of Directors of each Seller has duly and validly authorized and
approved the execution, delivery and performance of such Seller's obligations
under this Agreement and each other Transaction Document to which such Seller is
a party, has determined that the Acquisition and the other transactions
contemplated hereby are advisable and in the best interests of its shareholders
and has resolved to recommend to its shareholders that they or it, as the case
may be, approve this Agreement, the Acquisition and the other transactions
contemplated hereby. The sole shareholder of each of HCI and BHP has duly and
validly authorized and approved this Agreement, the Acquisition and the other
transactions contemplated hereby in accordance with the California General
Corporation Law. No state takeover statute or similar statute or regulation
applies to the transactions contemplated by this Agreement.
(c) This Agreement has been, and at the Closing the other
Transaction Documents will be, as applicable, duly and validly executed and
delivered by each Seller that is a party thereto and, assuming the due
authorization, execution and delivery hereof (and, in the case of the
Transaction Documents to which Purchaser is a party, thereof) by Purchaser, this
Agreement constitutes, and at the Closing the other Transaction Documents will
constitute, a legal, valid and binding obligation of each such Seller,
enforceable against each such Seller in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws relating
to the enforcement of creditors' rights generally and by general principles of
equity.
(d) The Company directly owns beneficially and of record all
of the outstanding capital stock of HCI and of BHP.
(e) The affirmative vote or written consent of (i) the holders
of at least a majority of the outstanding shares of Series B Preferred Stock,
voting together as a single class, and (ii) the holders of at least a majority
of the outstanding shares of Company
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Common Stock voting together as a single class with all outstanding shares of
Series A Preferred Stock and Series B Preferred Stock (with each share of
Preferred Stock being entitled to the number of votes equal to the number of
shares of Company Common Stock into which such shares of Preferred Stock may be
converted at such time), are the only votes of the holders of any class or
series of Company securities necessary to approve this Agreement, the
Acquisition and the other transactions contemplated hereby on behalf of the
Company. The affirmative vote or written consent of the Company is the only vote
of the holders of any class or series of HCI securities necessary to approve
this Agreement, the Acquisition and the other transactions contemplated hereby
on behalf of HCI. The affirmative vote or written consent of the Company is the
only vote of the holders of any class or series of BHP securities necessary to
approve this Agreement, the Acquisition and the other transactions contemplated
hereby on behalf of BHP.
Section 3.3 No Conflict. Except as set forth on Schedule 3.3, the
execution and delivery by each Seller of this Agreement and the other
Transaction Documents to which it is a party do not, and the performance by such
Seller of its obligations under this Agreement and the other Transaction
Documents to which it is a party and the consummation of the Acquisition and the
other transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of the
articles of incorporation or bylaws of such Seller, as amended through the date
hereof;
(b) conflict with or result in a violation or breach of any
Law applicable to such Seller or any of its assets or properties; or
(c) except as would not have a Material Adverse Effect, (i)
conflict with or result in a violation or breach of, (ii) constitute a default
(or an event that, with or without notice or lapse of time or both, would
constitute a default) under, (iii) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(iv) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments or performance under,
(v) result in the creation or imposition of (or the obligation to create or
impose) any Lien upon such Seller or any of its assets and properties under or
(vi) result in the loss of any material benefit under any Assigned Contract.
Section 3.4 Consents and Approvals. Except as set forth in Schedule 3.4
or where any Seller's failure to obtain such consent would not have a Material
Adverse Effect, no consent, approval, authorization or permit of, or filing with
or notice to, any Governmental or Regulatory Authority or other Person is
required in connection with the execution, delivery or performance by any Seller
of this Agreement and the other Transaction Documents or the consummation of the
Acquisition or the other transactions contemplated hereby or thereby.
Section 3.5 [Intentionally Deleted]
Section 3.6 Title to Properties; Liens and Encumbrances.
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(a) Except as set forth in Schedule 3.6, (i) Sellers
collectively have good and marketable title to the Xxxxxx Entertainment Assets
and (ii) the Xxxxxx Entertainment Assets are not subject to any Liens, except
for (A) applicable Guild Liens listed on Schedule 3.6(b) and (B) obligations or
restrictions on use contained in the Assigned Contracts (clauses (A) and (B)
being collectively referred to as the "Permitted Liens") and (C) the Xxxxx Xxxx,
which will be terminated prior to or at the Closing. There are no leases,
subleases, conditional sales contracts or similar agreements constituting any
Xxxxxx Entertainment Assets or that relate primarily to the Xxxxxx Entertainment
Business.
(b) At the Closing, Purchaser will acquire good, valid and
marketable title to the Xxxxxx Entertainment Assets, free and clear of any and
all Liens (other than the Permitted Liens). No Person other than Sellers owns or
controls, or has any interest in, any material Xxxxxx Entertainment Assets other
than, with respect to the Assigned Contracts, Persons (other than Sellers) that
are parties thereto. The Xxxxxx Entertainment Assets constitute substantially
all of the assets, properties and rights owned or held by Sellers and their
Affiliates and used in the conduct of the Xxxxxx Entertainment Business, and
there are no other material assets, properties or rights used in the operation
of the Xxxxxx Entertainment Business that will not be sold to Purchaser
hereunder, other than the Retained Assets. Immediately following the Closing,
Purchaser will own or lawfully possess substantially all assets, properties and
rights reasonably required to enable Purchaser to conduct the Xxxxxx
Entertainment Business as it has been conducted by Seller. Except with respect
to the Assigned Contracts and the License Agreements described in Schedule
1.2(b), no Seller is bound by any contract, license, agreement or arrangement
that restricts it, nor is any Seller otherwise restricted in any material
respect, from exploiting the Xxxxxx Entertainment Assets or carrying on the
Xxxxxx Entertainment Business or any part thereof, except as may be expressly
set forth in the Assigned Contracts, and no such restriction as to Purchaser
will arise as a result of the consummation of the transactions contemplated
hereby.
Section 3.7 Matters Relating to Entertainment Related Assets.
(a) Except as set forth in Schedule 3.7(a) (or except as may
occur by operation of statute, including pursuant to Section 304 of the
Copyright Act of 1976, as amended or equivalent foreign statutes to which the
Entertainment Related Assets may be subject, or, with respect to any Assigned
Contract, as expressly set forth by its terms), to the best knowledge of
Sellers: (i) each Seller owns good and marketable title to, holds fully valid,
enforceable and exclusive licenses of or is otherwise duly authorized to use
substantially all rights under all copyrights, trademarks, service marks, trade
secrets and other intellectual property used or otherwise exploited by such
Seller, including, without limitation, substantially all of (A) the Rights and
the exclusive rights to use, duplicate, distribute, merchandise, create
derivative works based upon, publicly perform, and publicly display, in any
media and by any means, throughout the universe in perpetuity (the extent
provided by applicable law), (B) the Entertainment Related Assets, including,
without limitation, any and all Literary Properties, Characters (including,
without limitation, Casper the Friendly Ghost, Xxxxxx Xxxx, Xxxxx the Good Witch
and Xxxx Xxxx), motion pictures, musical compositions, master recordings and
other music-related rights, or other works of authorship or artistic works
exploited by Sellers, and (C) the exclusive right to use any confidential or
proprietary know-how, system or procedure used by such Seller in any media
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and by any means, throughout the universe in perpetuity; and (ii) each of the
Entertainment Related Assets is valid and enforceable except to the extent
invalidity or unenforceability would not have a Material Adverse Effect, and
none of the Entertainment Related Assets is subject to any material claim,
judgment, holding, decision, encumbrance or restriction, including, without
limitation, any limitation of Sellers' rights to use, assign or license.
(b) Schedule 3.7(b)(i) sets forth a true, correct and
materially complete list of all copyright registrations related to the
Entertainment Assets. Schedule 3.7(b)(ii) sets forth a true, correct and
materially complete list of all trademarks, service marks, trade names, domain
names and logos, and all registrations thereof, included in the Xxxxxx
Entertainment Assets. Schedule 1.1(c) sets forth a true, correct and materially
complete list of all Assigned Contracts, including, with respect to each License
Agreement, a summary of certain terms thereof. Sellers have made available to
Purchaser true, correct and complete copies of all Assigned Contracts. Schedule
3.7(b)(iii) sets forth a true, correct and complete list (the "Physical
Properties Schedule") of each location at which the Physical Properties are held
or stored and a description of the nature or type of Physical Properties held or
stored thereat and, at the Closing, Purchaser shall have exclusive ownership of
such Physical Properties.
(c) To the best knowledge of Sellers, the ownership, use or
exploitation of the Entertainment Related Assets by any means in connection with
the business and operations of Sellers or their Affiliates prior to the Closing
does not and will not infringe or misappropriate the rights of any other Person,
including, without limitation, any rights relating to defamation, contract,
trademark, unfair competition, copyright, trade secret, privacy or publicity.
Except as set forth in Schedule 3.7(c), no Seller or any Affiliate of Sellers
has received any notice of infringement or misappropriation or other notice of
claim relating to any Entertainment Related Asset including, without limitation,
oppositions filed in respect to Sellers' trademark applications. Further, to the
best knowledge of Sellers, no presently existing assignment, license or other
transfer to Sellers of any Entertainment Related Asset or of any rights
thereunder is now or will in the future become subject to rescission,
cancellation or termination (except as may occur by operation of statute
pursuant to Section 304 of the Copyright Act of 1976, as amended, or any
equivalent foreign statutes to which the Rights may be subject, or, with respect
to any Assigned Contract, as expressly set forth by its terms).
(d) All advances, guarantees, Guild Payments, Royalties and
Participations, laboratory payments, costs and fees charged by agents and
sub-agents, and other amounts or obligations owed, due or payable prior to or on
the Closing Date by any Seller, any of its Affiliates or any of its
predecessors-in-interest pursuant to or under the Assigned Contracts or
otherwise in respect of the Entertainment Related Assets have been, or at the
Closing will have been, fully and accurately accounted for, and if due, paid and
discharged, except where challenged by Sellers in good faith by appropriate
proceedings. (This representation shall not affect the calculation of the
Proration Adjustment.)
(e) Except as set forth in Schedule 3.7(e) and in the Assigned
Contracts, there are no Persons that have (or will have) any rights to
participate in the development, production, distribution or financing of any
Entertainment Related Assets.
15
(f) Except as set forth on Schedule 3.7(f) and in the Assigned
Contracts, the consummation of the transactions contemplated hereby will not
give any party the right to terminate, or will not result in the termination of,
any material Assigned Contract, and the Assigned Contracts and all amounts
payable thereunder are freely assignable.
(g) Except as set forth in Schedule 3.7(g), each material
Assigned Contract (i) has been duly authorized, executed and delivered by
Sellers and, to the best knowledge of Sellers, the other parties thereto; (ii)
remains in full force and effect in accordance with its express terms; (iii) is
binding on the parties thereto in accordance with and to the extent of its terms
and applicable Laws; and (iv) is not subject to, and no Seller or any Affiliate
of any Seller has received any written notice threatening or declaring,
termination as a result of any alleged uncured breach or default or, in the case
of any notice, alleged incurred breach or default. No Seller, any Affiliate of
any Seller or, to the best knowledge of Sellers, any other Person is in breach
or default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained in any Assigned Contract, nor are
there any claims by such other Person that would give rise to any right of
setoff, dispute or counterclaim.
(h) To the best knowledge of Sellers, there has been, and
through the Closing there will be, no lapse in coverage with respect to any
errors and omissions and/or general liability insurance policies carried by
Sellers and their Affiliates.
(i) The films entitled "Casper's Haunted Christmas" and "Xxxx
Xxxx'x Great Easter Adventure" are of first class technical quality for
broadcast purposes.
Section 3.8 Compliance with Laws. Sellers have owned, used and operated
the Xxxxxx Entertainment Assets in compliance in all material respects with all
applicable Laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) and have obtained
all material licenses, permits and other approvals of any Governmental or
Regulatory Authority that are necessary to the operation of the Xxxxxx
Entertainment Business.
Section 3.9 Absence of Material Changes. Except as disclosed in
Schedule 3.9, since September 30, 2000:
(a) no Seller or Affiliate of Sellers has entered into any
contract, commitment or transaction, or incurred any liabilities or other
obligations, with respect to the Xxxxxx Entertainment Business outside of the
ordinary course of business;
(b) no Seller or Affiliate of Sellers has entered into any
strategic alliance, joint development agreement or marketing, distribution,
licensing or similar agreement in connection with the Xxxxxx Entertainment
Business;
(c) there has not been any amendment or other modification (or
agreement to do so), or violation of the terms, of any Assigned Contract (with
respect to violations by any third party, to the knowledge of Sellers);
16
(d) no Seller or Affiliate of Sellers has entered into any
contract, agreement or other arrangement pursuant to which any other Person is
granted marketing, distribution, licensing or similar rights of any type or
scope with respect to any Entertainment Related Assets;
(e) no Person has accelerated, terminated, modified or
cancelled any Assigned Contract;
(f) no claim, action, lawsuit, arbitration or other proceeding
has been commenced or, to the best knowledge of Sellers, threatened by or
against any Seller, any Xxxxxx Entertainment Assets or any Affiliate of Seller
with respect to the Xxxxxx Entertainment Business;
(g) there has not been any amendment to the charter, bylaws or
similar governing documents of any Seller or any of its Affiliates;
(h) there has not been any transfer or grant of any rights or
interests in, to or under any Xxxxxx Entertainment Assets;
(i) no Seller or Affiliate of Sellers has made or agreed to
make any disposition or sale of, waiver of rights to, license or lease of, or
incurrence of any Lien on, any Xxxxxx Entertainment Assets;
(j) no Seller or Affiliate of Sellers has made or agreed to
make any capital expenditures or other commitments with respect to the Xxxxxx
Entertainment Business;
(k) no Seller or Affiliate of Sellers has made or agreed to
make payment, discharge or satisfaction, in an amount in excess of $25,000,
individually, or $50,000 in the aggregate, of any claim, liability or obligation
(whether absolute, accrued, asserted or unasserted, contingent or otherwise)
with respect to any Xxxxxx Entertainment Assets, other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in the Company Financial Statements or under the
Assigned Contract pursuant to the express terms thereof;
(l) no Seller or Affiliate of Sellers has failed to pay or
otherwise satisfy any costs, liabilities or obligations due and payable with
respect to the Xxxxxx Entertainment Assets or the Xxxxxx Entertainment Business,
except for liabilities that are being contested in good faith by appropriate
means or procedures and that, individually or in the aggregate, are immaterial
in amount;
(m) Sellers have taken all actions reasonably required to
procure, maintain, renew, extend or enforce any material Entertainment Related
Assets;
(n) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any Xxxxxx
Entertainment Asset that is material to the Xxxxxx Entertainment Business; or
17
(o) no Seller or Affiliate of Sellers has entered into or
approved any contract, arrangement or understanding, or acquiesced in respect of
any contract, arrangement or understanding, to do, engage in or cause or having
the effect of any of the foregoing.
Section 3.10 Taxes; Tax Returns.
(a) Sellers have duly and timely filed all federal, state,
local and foreign Tax Returns and other Tax reports required to be filed by each
of them, and have timely paid all Taxes that have become due and payable,
whether or not so shown on any such return or report, the failure of which to be
filed or paid could adversely affect or result in the imposition of a Lien upon
the Xxxxxx Entertainment Assets or create any transferee or other liability upon
Purchaser, except such amounts as are being contested diligently and in good
faith and described on Schedule 3.10. Sellers have received no notice of, nor do
Sellers have any knowledge of, any deficiency, assessment or audit, or proposed
deficiency, assessment or audit from any Taxing Authority that could affect or
result in the imposition of a Lien upon the Xxxxxx Entertainment Assets or
create any transferee or other liability upon Purchaser. Schedule 3.10 indicates
those Tax Returns, if any, of the Sellers that have been audited or examined by
any Taxing Authority of any jurisdiction within the past five (5) years, and
indicates those Tax Returns of the Sellers that currently are the subject of
audit or examination in connection with assessing additional Taxes against or in
respect of the Xxxxxx Entertainment Assets. Sellers shall not be liable for a
breach of this Section 3.10(a) to the extent that such breach does not affect
Purchaser's use and enjoyment of the Xxxxxx Entertainment Assets.
(b) The Xxxxxx Entertainment Assets are not subject to any
joint venture, partnership or other arrangement or contract that is treated as a
partnership for federal income tax purposes.
(c) Within the past five (5) years, no claim has been made by
a Taxing Authority of any jurisdiction in which the Sellers do not file Tax
Returns that Sellers are or may be subject to taxation by that jurisdiction in
respect of the Xxxxxx Entertainment Assets or the Xxxxxx Entertainment Business.
Sellers shall not be liable for a breach of this Section 3.10(c) to the extent
that such breach does not affect Purchaser's use and enjoyment of the Xxxxxx
Entertainment Assets.
Section 3.11 Litigation. Except as set forth in Schedule 3.11, there is
no claim, action, suit, arbitration or other proceedings pending or, to the best
knowledge of Sellers, threatened against or affecting any Xxxxxx Entertainment
Assets or the ability of Sellers (or any of them) to consummate the Acquisition
or the other transactions contemplated hereby or that could adversely affect the
exploitation by Purchaser of any Xxxxxx Entertainment Assets or the conduct of
the Xxxxxx Entertainment Business. There are no orders, judgments or decrees of
any Governmental or Regulatory Authority applicable to or affecting any Xxxxxx
Entertainment Assets or the ability of Sellers (or any of them) to consummate
the Acquisition or the other transactions contemplated hereby or that could
adversely affect the exploitation by Purchaser of any Xxxxxx Entertainment
Assets or the conduct of the Xxxxxx Entertainment Business. No Seller is aware
of any facts that give rise or could give rise to a
18
good faith claim by any third party against any Seller with respect to the
Xxxxxx Entertainment Assets or the Xxxxxx Entertainment Business.
Section 3.12 Insurance. Schedule 3.12 sets forth a true, complete and
correct list of all general liability, property, directors' and officers'
liability and errors and omissions insurance policies that insure the business
and operations of Sellers and their Affiliates with respect to the Xxxxxx
Entertainment Business or affect or relate to the ownership, use or operation of
the Xxxxxx Entertainment Assets. Each such insurance policy is valid and binding
and in full force and effect, all premiums due thereunder have been paid when
due and no Seller or other Person to whom such policy has been issued has
received any notice of cancellation or termination in respect of any such policy
or is in default thereunder. Sellers have timely filed with its insurers with
respect to such policies claims for which it believes it has coverage with
respect to all matters set forth on Schedule 3.11 and any other material
occurrences. Sellers have no knowledge of any reason or state of facts that
could lead to the cancellation or termination of such policies or of any
threatened termination of, or material premium increase with respect to, any of
such policies. No Seller or any Affiliate of Seller has received notice that any
insurer under any such insurance policies is denying, disputing or questioning
liability with respect to a claim thereunder or defending under a reservation of
rights clause. Sellers shall not be liable for a breach of this Section 3.12 to
the extent that such breach does not affect Purchaser's use and enjoyment of the
Xxxxxx Entertainment Assets.
Section 3.13 Books and Records. The minute books, stock ledgers and
books of account of Sellers with respect to the Xxxxxx Entertainment Assets and
the Xxxxxx Entertainment Business are substantially complete and correct and
have been maintained in all material respects in accordance with sound business
practices. Sellers shall not be liable for a breach of this Section 3.13 to the
extent that such breach does not affect Purchaser's use and enjoyment of the
Xxxxxx Entertainment Assets.
Section 3.14 Powers of Attorney and Suretyships; No Interest. No Seller
has any powers of attorney outstanding, or any obligation or liability related
to the Xxxxxx Entertainment Assets or the Xxxxxx Entertainment Business as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any other Person, except as endorser to makers of
checks or letters of credit, respectively, endorsed or made in the ordinary
course of the Xxxxxx Entertainment Business. After the Closing, no Seller and no
Affiliate of any Seller will have an interest in the Xxxxxx Entertainment
Assets.
Section 3.15 Proxy Statement. The Proxy Statement shall not, at the
time filed with the SEC, as of the date of mailing by the Company to its
shareholders or as of the date of the meeting of the Company's shareholders,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement shall comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder.
Section 3.16 Employee Benefit Plans. There are no Liens against the Xxxxxx
Entertainment Assets under Section 412(n) of the Code or Sections 302(f) or 4068
of the
19
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Except as
set forth in Schedule 3.16 and except with respect to the Directors Guild of
America, the Screen Actors Guild, the Writers Guild of America and any other
entertainment-related guilds, no Seller nor any corporation, trade, business or
other entity under common control with any Seller, within the meaning of
Sections 414(b), (c), (m) or (o) of the Code, or under Section 4001 of ERISA (an
"ERISA Affiliate"), is or was obligated to contribute to any multiemployer plan
within the meaning of Section 3(37) of ERISA or any plan subject to Title IV of
ERISA. From and after the Closing, Purchaser will have no obligation to
contribute to, or any liability in respect of, any "Employee Benefit Plan" (as
such term is defined below) sponsored or maintained by any Seller or any ERISA
Affiliate, or to which Seller or any ERISA Affiliate was obligated to
contribute. Sellers and their ERISA Affiliates will not, in connection with the
transactions contemplated by this Agreement, cease to provide any group health
plan coverage to their employees in a manner that would cause Purchaser to be
deemed a successor employer of such Seller or its ERISA Affiliates within the
meaning of Treasury Regulations Section 54.4980B-9 Q&A8(c). For purposes of this
Agreement, the term "Employee Benefit Plan" means (a) any employee benefit plan
within the meaning of Section 3(3) of ERISA or (b) any similar employment,
severance or other arrangement or policy (whether written or oral) providing for
insurance coverage (including self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
fringe benefits, or retirement benefits, or for profit sharing, deferred
compensation, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits.
Section 3.17 No Brokers. No broker, investment banker, finder or other
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Sellers.
Section 3.18 Solvency. Effective as of the date hereof and immediately
following the Closing, each Seller's assets, at a fair valuation, shall exceed
the amount of such Seller's debts, at a fair valuation. Both prior to and after
the consummation of the Acquisition, Sellers were able to and shall be able to
discharge their debts as they became due or become due, as the case may be.
Section 3.19 Accuracy of Information; Full Disclosure. None of this
Agreement, the other Transaction Documents, the Schedules or any certificate
delivered by or on behalf of Sellers contains, or will contain when taken as a
whole with all such disclosures, any untrue statement of a material fact or
omit, or will omit, to state any material fact required to be stated herein or
therein or necessary in order to make the statements contained herein or
therein, in the light of the circumstances in which they were made, not
misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
20
Section 4.1 Organization and Qualification. Purchaser is a limited
liability company duly formed and validly existing in good standing under the
laws of the State of Delaware. Purchaser has all requisite limited liability
company power and authority to enter into, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is a party.
Section 4.2 Due Execution, Delivery and Performance of Agreement. The
execution, delivery and performance by Purchaser of this Agreement and the other
Transaction Documents to which Purchaser is a party have been duly and validly
authorized by all necessary limited liability company and member action on the
part of Purchaser. This Agreement has been, and, when executed and delivered at
the Closing the other Transaction Documents to which Purchaser is a party will
be, duly executed and delivered by Purchaser, and this Agreement constitutes, or
when executed and delivered at the Closing the Transaction Documents to which
Purchaser is a party will constitute (assuming the due authorization, execution
and delivery by Sellers), the legal, valid and binding obligations of Purchaser,
enforceable against it in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting creditors' rights
generally.
Section 4.3 Proxy Statement. The information regarding Purchaser
contained in the Proxy Statement and provided by Purchaser shall not, at the
time filed with the SEC, as of the date of mailing by the Company to its
shareholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
Section 4.4 No Conflict. The execution and delivery by Purchaser of
this Agreement and the other Transaction Documents to which Purchaser is a party
do not, and the performance by Purchaser of its obligations under this Agreement
and the other Transaction Documents to which Purchaser is a party and the
consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the certificate of formation or operating
agreement of Purchaser;
(b) conflict with or result in a violation or breach of any
Law applicable to Purchaser or any of its assets or properties; or
(c) (i) conflict with or result in a violation or breach of,
or (ii) constitute a default (or an event that, with or without notice or lapse
of time or both, would constitute a default) under any material contract,
agreement, license, indenture, mortgage, credit agreement, guarantee or other
document to which Purchaser is a party or by which any of Purchaser's assets is
bound.
Section 4.5 Consents and Approvals. No consent, approval, authorization
or permit of, or filing with or notice to, any Governmental or Regulatory
Authority or other Person is required in connection with the execution,
delivery, or performance by Purchaser
21
of this Agreement and the other Transaction Documents or the consummation of the
transactions contemplated hereby or thereby other than those that have been
obtained or made.
Section 4.6 No Brokers. No broker, investment banker, finder or other
Person is entitled to any broker's, finder's financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Purchaser or any
of its Affiliates.
Section 4.7 Purchaser Financial Capability. Purchaser has access to
sufficient financial resources to complete the Acquisition and the other
transactions contemplated hereby.
ARTICLE V.
COVENANTS AND OTHER AGREEMENTS
Section 5.1 Conduct of Business. From February 1, 2001, through the
Closing, Sellers shall, and shall cause each of its Affiliates to, carry on the
Xxxxxx Entertainment Business in the usual, regular and ordinary course
consistent with past practice, pay its liabilities and Taxes when due, pay or
perform other obligations when due consistent with Sellers' past practices
(other than liabilities, Taxes and other obligations, if any, contested in good
faith through appropriate proceedings), and, to the extent consistent with such
business, use all commercially reasonable efforts, and institute all policies
required, to (a) keep the Xxxxxx Entertainment Business intact; (b) maintain and
preserve the goodwill, business relationships, licenses and franchises of the
Xxxxxx Entertainment Business; and (c) maintain in full force and effect all of
the existing casualty, liability and other insurance of the Xxxxxx Entertainment
Business in amounts not less than those in effect on February 1, 2001. Except as
expressly contemplated by this Agreement, from February 1, 2001, through the
Closing, no Seller or any Affiliate of Seller shall, without the prior written
consent of Purchaser, take or agree in writing or otherwise to take any action
that would result in the occurrence of any of the changes enumerated in Section
3.9 or any other action that would make any of its representations or warranties
contained in this Agreement untrue or incorrect in any material respect or
prevent such Seller from performing or cause Purchaser not to perform its
agreements and covenants hereunder or cause any condition to Purchaser's closing
obligations in Article VI not to be satisfied. From February 1, 2001, through
the Closing, Sellers shall not do, cause or permit, and shall cause its
Affiliates not to do, cause or permit, any of the following with respect to the
Xxxxxx Entertainment Business, without the prior written consent of Purchaser,
or if the taking of such action would impair or adversely affect the ability of
Sellers (or any of them) to consummate the Acquisition or the other transactions
contemplated hereby or would adversely affect the ability of Purchaser to
exploit the Xxxxxx Entertainment Assets after the Closing:
(a) Charter Documents: cause or permit any amendment to its
articles of incorporation, bylaws or similar governing documents;
(b) Dividends; Changes in Capital Stock: (i) declare, pay or
set aside any dividend on, or make any other type of distribution (whether in
cash, stock or other property)
22
in respect of, its capital stock, other than, with respect to the Company, the
payment of payment-in-kind dividends on the Preferred Stock of the Company; (ii)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (iii) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination of
service to it, or adopt any plan or arrangement with respect to any of the
foregoing;
(c) Contracts: enter into any contract, license, agreement or
commitment with respect to any Xxxxxx Entertainment Assets, or amend, supplement
or otherwise modify or waive any of the terms of any Assigned Contract, except
that Sellers may enter into agreements with third-party payors of the Retained
Receivables solely to modify the payment terms thereof so long as such
modifications do not impair Purchaser's rights or benefits under the Assigned
Contract;
(d) Issuance of Securities: issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of capital
stock any Seller or any Affiliate of Seller, other than (i) the issuance by the
Company of shares of Company Common Stock pursuant to the conversion of
outstanding shares of preferred stock of the Company and the exercise of
warrants existing as of the date hereof and (ii) grants of Company stock options
to employees hired after the date of this Agreement under the Company's stock
option plans;
(e) Sell or License: sell, assign, license, transfer or
otherwise dispose of any Xxxxxx Entertainment Assets or any rights or interests
therein, whether or not entered into in the ordinary course of business;
(f) Exclusive Rights: enter into, or amend or otherwise
modify, any agreement pursuant to which any other Person is granted marketing or
other rights of any type or scope with respect to any Xxxxxx Entertainment
Assets;
(g) Dispositions: sell, assign, lease, license, transfer or
otherwise dispose of, or encumber in any manner, any Xxxxxx Entertainment
Assets;
(h) Indebtedness: incur any indebtedness for borrowed money or
guarantee any indebtedness, liability or other obligation, or issue or sell any
debt securities or guarantee any debt securities of others, in each case that
affects any Xxxxxx Entertainment Assets or the Xxxxxx Entertainment Business;
(i) Leases: enter into any operating or capital lease with
respect to any Xxxxxx Entertainment Assets;
(j) Payment of Obligations: pay, discharge or satisfy any
claim, liability or obligation (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) relating to any Xxxxxx Entertainment Assets
other than those arising in the ordinary course of the Xxxxxx Entertainment
Business;
23
(k) Insurance: reduce the amount of any insurance coverage
provided by Sellers' errors and omissions and general liability and property
insurance policies existing on the date of this Agreement;
(l) Termination or Waiver: terminate or waive any right of
material value with respect to any Xxxxxx Entertainment Asset or the Xxxxxx
Entertainment Business;
(m) Affiliates: enter into any transactions with its
Affiliates with respect to the Xxxxxx Entertainment Assets or the Xxxxxx
Entertainment Business;
(n) Litigation: commence any action, suit or other proceeding
other than for the routine collection of bills, or settle any litigation at a
cost to any Seller or any of its Affiliates in excess of $25,000 with respect to
the Xxxxxx Entertainment Assets, provided that Sellers promptly notify Purchaser
of any routine xxxx collection actions and settlements at or below $25,000;
(o) Production: enter into any new production or development
contracts, agreements or arrangements with respect to the Xxxxxx Entertainment
Assets or the Xxxxxx Entertainment Business, including, without limitation, any
production service agreements, co-production agreements, talent contracts,
pre-sale agreements, distribution agreements and production financing
agreements; or
(p) Other: take or agree in writing or otherwise to take, any
of the actions described in Section 5.1(a) through Section 5.1(o) above, or any
other action that would prevent any Seller from performing, or cause any Seller
not to perform, its covenants and agreements hereunder. Sellers represent and
warrant that since February 1, 2001, they have complied with their respective
obligations under this Section 5.1.
Section 5.2 Access to Information. Until the earlier to occur of the
Closing Date and the date of termination of this Agreement pursuant to Section
8.1, Sellers shall, and shall cause their officers, directors, employees,
representatives and agents to (a) give Purchaser and its officers, employees,
accountants, counsel, financing sources and other agents and representatives
full access to all buildings, offices and other facilities and to all books and
accounting and other records of Sellers with respect to the Xxxxxx Entertainment
Business, whether located on the premises of the Company or at other locations;
(b) permit Purchaser to make such inspections of the Physical Properties or
other Entertainment Related Assets as it may reasonably require; (c) cause its
officers to furnish Purchaser such financial, operating, technical and other
data and other information with respect to the Xxxxxx Entertainment Assets and
the Xxxxxx Entertainment Business as Purchaser from time to time may request,
including financial statements and schedules; (d) cause its officers and other
management to be available to Purchaser in all cases consistent with the limited
resources available to Sellers; provided, however, that no investigation
pursuant to this Section 5.2 shall affect or be deemed to modify any
representation or warranty made by Sellers.
Section 5.3 Exclusivity.
(a) Subject to Section 5.3(b) hereof, until the earlier to
occur of the Closing Date and the date of termination of this Agreement pursuant
to Section 8.1, no
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Seller nor any of its officers, directors, employees, Affiliates, agents or
other representatives nor the Company (in its capacity as the sole shareholder
of BHP and HCI) shall, directly or indirectly, take any of the following
actions: (i) solicit, encourage, initiate, entertain, accept receipt of, review
or encourage any proposals or offers from, or participate in or conduct
discussions with or participate or engage in negotiations with, any Person
relating to any offer or proposal, oral, written or otherwise, formal or
informal, with respect to the acquisition of any Xxxxxx Entertainment Assets or
the Xxxxxx Entertainment Business (including, but not limited to, any
acquisition structured as a merger, consolidation, share exchange, purchase or
otherwise) (in each case, a "Xxxxxx Sale Transaction"), (ii) provide information
with respect to any Seller, any Affiliate of any Seller, the Xxxxxx
Entertainment Assets or the Xxxxxx Entertainment Business to any Person, other
than to Purchaser, relating to (or which any Seller believes would be used for
the purpose of formulating an offer or proposal with respect to), or otherwise
assist, cooperate with, facilitate or encourage any effort or attempt by any
such Person with regard to, any Xxxxxx Sale Transaction, (iii) agree to enter
into any contract, agreement or other arrangement with any Person, other than
Purchaser, providing for, or approve, a Xxxxxx Sale Transaction, (iv) make or
authorize any statement, recommendation, solicitation or endorsement in support
of any Xxxxxx Sale Transaction other than by Purchaser, or (v) authorize or
permit any of Sellers' or their Affiliates' officers, directors, employees,
shareholders or other agents to take any such action. The Board of Directors of
each Seller shall not fail to recommend, or withdraw, modify or change in any
manner adverse to Purchaser its approval or recommendation of, this Agreement,
the Acquisition or the other transactions contemplated hereby, or resolve to
take any of the foregoing actions. In addition, if any Seller or any Affiliate
of Sellers receives any offer or proposal (formal or informal, oral, written or
otherwise) relating to, or any inquiry or contact from any Person with respect
to, a Xxxxxx Sale Transaction, such Seller shall immediately notify such offeror
that the Company has entered into an exclusive sales agreement and cannot
negotiate any offers for sale and such Seller shall also notify Purchaser
thereof and provide Purchaser with the details thereof, including the identity
of the Person or Persons making such offer or proposal, and shall keep Purchaser
fully informed on a current basis of the status and details of any such offer or
proposal. This Section 5.3(a) shall not apply to any proposals or offers from
third parties with respect to (i) the sale of the capital stock or assets of PM
Entertainment or its subsidiaries or (ii) the sale of the capital stock of the
Company, provided that in any such sale the purchaser therein shall expressly
agree to honor this Agreement, and vote in favor thereof if necessary.
(b) Nothing contained in this Section 5.3 shall prevent the
Board of Directors of the Company from considering, negotiating, discussing,
approving and recommending to the shareholders of the Company a bona fide Xxxxxx
Sale Transaction not solicited in violation of this Agreement, provided that the
Board of Directors of the Company determines in good faith, upon advice of
outside counsel, that it is required to do so in order to discharge properly its
fiduciary duties. Nothing contained in this Section 5.3 shall prohibit the Board
of Directors of the Company from complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer. If the Board of
Directors of the Company receives a request for material nonpublic information
by a Person who makes, or indicates that it is considering making, an offer of a
bona fide Xxxxxx Sale Transaction, and the Board of Directors determines in good
faith and upon the advice of
25
outside counsel that it is required to cause the Company to act as provided in
this Section 5.3(b) in order to discharge properly the directors' fiduciary
duties, then, provided such Person has executed a confidentiality agreement
substantially similar to the one then in effect between the Company and
Purchaser, the Company may provide such Person with access to information
regarding the Company.
Section 5.4 Termination of UCC Financing Statements. Promptly following
the execution of this Agreement, Sellers shall take all such actions as may be
necessary to cause, effective prior to or at the Closing, the termination and
release of the Xxxxx Xxxx and all other Liens (other than the Permitted Liens)
to which any Xxxxxx Entertainment Assets are subject.
The parties shall consult with one another regarding the Liens, and
related UCC financing statements and other statements and filings, to be
terminated and released pursuant to this Section 5.4.
Section 5.5 Shareholder Approval.
(a) As soon as practicable after the date of this Agreement,
and in no event later than fifteen (15) business days after the date hereof, the
Company shall prepare and cause to be filed with the SEC a proxy statement
pursuant to Rule 14a-3 promulgated under Section 14A of the Exchange Act
(together with any amendments or supplements thereto, the "Proxy Statement") in
connection with the approval and adoption of this Agreement, the Acquisition and
the other transactions contemplated hereby. The Proxy Statement shall include a
statement that the Company's Board of Directors has approved this Agreement,
determined that this Agreement, the Acquisition and the other transactions
contemplated hereby are in the best interests of the Company's shareholders and
recommends that the Company's shareholders vote in favor thereof, and the
Company and its Board of Directors shall use its best efforts to solicit such
votes from its shareholders. The Proxy Statement shall comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder. The Company shall immediately advise
Purchaser if the Proxy Statement, including any amendments or supplements
thereto, at the time filed with the SEC, as of the date of mailing to the
shareholders of the Company or at the time of the meeting of the Company's
shareholders, contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Company shall respond promptly to any comments of the SEC or
its staff with respect thereto and use its best efforts to have the Proxy
Statement cleared by the SEC as soon as practicable after its filing. The
Company shall also promptly furnish to Purchaser and its counsel copies of any
correspondence received from the SEC, and shall permit representatives of the
Company to attend any telephone calls with the SEC that discuss comments made by
its staff. As soon as practicable after clearance by the SEC of the Proxy
Statement, the Company shall mail the Proxy Statement to its shareholders. In
addition, the Company shall take all action necessary in accordance with
applicable Laws and its charter to duly call, give notice of, convene and hold a
meeting of its shareholders as soon as practicable solely to consider and
approve this Agreement, the Acquisition and the other transactions contemplated
hereby.
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(b) As promptly as practicable, each party shall properly
prepare and file any other filings required under the Securities Act, the
Exchange Act or any other Laws (including, without limitation, state securities
and "blue sky" laws) relating to the transactions contemplated by this Agreement
(collectively, "Other Filings").
(c) The Company shall provide copies of drafts of the Proxy
Statement to Purchaser and its counsel at least two (2) business days prior to
the date of filing of such document with the SEC (including with respect to each
amendment or supplement thereto) so as to allow Purchaser to review and comment
on such documents. Such review shall not be deemed a review by Purchaser or its
counsel as to whether the Company has properly complied with SEC rules or
regulations. Prior to the filing of the Proxy Statement with the SEC, the
Company shall consider in good faith any comments made by, or changes requested
by, Purchaser or its counsel.
Section 5.6 Reasonable Efforts; Notification. Each party shall use its
best efforts to take, or cause to be taken (including through its officers and
directors and other appropriate personnel), all actions, and to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including, without limitation, (a) obtaining all
necessary actions or non-actions, waivers, consents and approvals from
Governmental and Regulatory Authorities, and the making of all necessary
registrations and filings (including filings with Governmental and Regulatory
Authorities, if any) and the taking of all reasonable steps as may be necessary
to obtain consents, approvals or waivers from, or to avoid any action, suit or
other proceeding by, any Governmental and Regulatory Authorities, (b) seeking
all necessary consents, approvals or waivers from third parties under the
Assigned Contracts and otherwise, (c) defending any actions, suits or other
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental and Regulatory Authorities vacated or reversed, and
(d) satisfying each of the conditions to closing to be satisfied by it under
Article VI, as applicable.
Section 5.7 Public Announcements. The Company, on behalf of itself and
the other Sellers, on the one hand, and Purchaser, on the other hand, will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the transactions contemplated by this Agreement, and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law, court process or
obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system (in which case the parties will
use reasonable efforts to cooperate in good faith with respect to such press
release or other public statement). The parties agree that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement shall be in the form heretofore agreed to by the parties.
Section 5.8 Confidentiality. The parties acknowledge that the Company
and Purchaser are parties to the Confidentiality Agreement, which shall remain
in full force and
27
effect and shall survive any termination of this Agreement (but not the Closing)
in accordance with its terms.
Section 5.9 Advice of Changes. The Company, on behalf of itself and the
other Sellers, on the one hand, and Purchaser, on the other, shall promptly
advise the other orally and in writing of any representation or warranty made by
it in this Agreement becoming untrue or inaccurate in any material respect;
provided, however, that no such notification shall amend or otherwise modify the
representations or warranties of the parties under this Agreement.
Section 5.10 [Intentionally Omitted.]
Section 5.11 Delivery of Physical Properties. Within ten (10) days
prior to the Closing, representatives of the Company and Purchaser shall
cooperate with one another, at the sole expense of Purchaser, to (a) box and
package all Physical Properties located or held at the executive offices of
Sellers or at storage or other facilities under Sellers' control, (b) retrieve,
box and package all Physical Properties that are not located or held at such
offices or at such storage or other facilities, and (c) deliver to Purchaser all
such Physical Properties at such address as Purchaser may designate. Sellers
agree that, at Purchaser's request, Sellers will cancel the leases with the
off-site storage facilities as of the Closing Date.
Section 5.12 Agreement with Swen International. The parties acknowledge
that PM Entertainment entered into an agreement with Swen International, Inc.
("Swen"), as evidenced by an Invoice dated October 19, 2000, pursuant to which
Swen agreed to create new musical tracks for sixty-five (65) half-hour episodes
of Harveytoons, an Entertainment Related Asset. Such musical tracks were to be
delivered by PM Entertainment to Entertainment Rights Distribution Limited.
Sellers have advised Purchaser that Swen has not yet delivered any of the
musical tracks to be created under PM Entertainment's arrangement with Swen. If,
after the date hereof, Swen delivers such musical tracks (in whatever form), the
Company shall cause all such music tracks, if created, to be delivered to
Purchaser within two (2) business days after delivery thereof, it being
understood that the musical tracks constitute Entertainment Related Assets that
are being purchased by Purchaser pursuant to the terms of this Agreement. In
addition, Sellers shall use their reasonable best efforts to deliver to
Purchaser additional documentation, in form and substance reasonably
satisfactory to Purchaser, evidencing that no third party owns any right, title
or interest in and to such musical tracks. Sellers make no representation as to
the nature and quality of the work performed by Swen.
Section 5.13 Amendment of PM Sales Agency Agreement; No Further
Licensing. Prior to the Closing, the Company shall cause the Sales Agency
Agreement dated as of April 3, 2000, between the Company, HCI, BHP and Firetrap,
Inc. and PM Entertainment, as "Sales Agent," to be amended, effective as of
January 31, 2001, to provide that PM Entertainment shall no longer have any
right to act as a sales or selling agent for any Characters, programs, films or
other Entertainment Related Assets in the Territory (as defined therein) or any
portion thereof from and after February 1, 2001. Sellers hereby represent and
warrant to Purchaser that since January 31, 2001, PM Entertainment has not
entered into any contracts, licenses or other agreements with respect to any
Entertainment
28
Related Assets, or renewed, extended or otherwise modified, and will not renew,
extend or otherwise modify after January 31, 2001, any License Agreements listed
on Schedule 1.2(b), it being understood that such License Agreements shall
expire or terminate in accordance with their terms as they existed as of January
31, 2001, except that Sellers may enter into agreement with the parties to such
License Agreements solely to modify the payment terms thereof so long as such
modifications do not impair Purchaser's rights or benefits after the expiration
of such agreements.
Section 5.14 Further Assurances. At any time and from time to time
after the date hereof, at Purchaser's request and without further consideration,
each Seller and Sellers' Affiliates shall execute and deliver to Purchaser such
instruments of sale, transfer, conveyance, assignment and delivery, consents,
assurances, powers of attorney and other instruments, and take all such other
action, as Purchaser may reasonably request in order to vest in Purchaser all
right, title and interest of such Seller (or such Seller's Affiliates) in and to
the Xxxxxx Entertainment Assets, and otherwise in order to carry out the purpose
and intent of this Agreement. Without limiting the generality of the foregoing,
effective at the Closing, each Seller hereby irrevocably appoints Purchaser and
its officers, employees and agents, and each of them, as such Seller's true and
lawful attorneys-in-fact, with full power of substitution to do all things and
to take such actions in the name and on behalf of such Seller that Purchaser may
deem necessary or advisable to vest in Purchaser all right, title and interest
of such Seller (or such Seller's Affiliates) in and to the Xxxxxx Entertainment
Assets and otherwise to carry out the purpose and intent of this Agreement,
including, without limitation, to sign and deliver any certificates of
ownership, formalization documents and other documentation necessary to transfer
title to any Xxxxxx Entertainment Assets to Purchaser. This appointment and
power-of-attorney is irrevocable, is coupled with an interest and is granted in
consideration of Purchaser's entering into this Agreement. This appointment and
power-of-attorney shall not apply to any Retained Assets.
Section 5.15 Certain Additional Covenants.
(a) Confidentiality Obligations.
(i) From and after the Closing, Sellers will keep all
confidential, proprietary and technical information relating to the
Xxxxxx Entertainment Assets and Purchaser's business confidential, will
not disclose such information to any third parties except as required
by Law and shall refrain from using such information for any purpose
whatsoever. In the event that a Seller is requested or required to
disclose any such information, such Seller shall notify Purchaser
promptly of the request or requirement so that the Purchaser may seek
an appropriate protective order or waive compliance with the provisions
of this Section 5.15(a).
(ii) From and after the Closing, Purchaser will keep
all confidential, proprietary and technical information relating to the
Sellers' continuing business confidential, will not disclose such
information to any third parties except as required by Law and shall
refrain from using such information for any purpose whatsoever. In the
event that Purchaser is requested or required to disclose any such
information, Purchaser shall notify the Company promptly of the request
or
29
requirement so that the Company may seek an appropriate protective
order or waive compliance with the provisions of this Section 5.15(a).
(b) Change of Corporate Names. Promptly following the Closing,
but in any event not later than ten (10) days thereafter, each Seller shall duly
authorize and file with the applicable Governmental or Regulatory Authority an
amendment to their charters to change its name to eliminate any references to
"Xxxxxx," "Xxxxxx Entertainment," "Xxxx Xxxx" or "BHP" and, after the Closing,
Sellers shall not, and shall cause each of its Affiliates not to, use the names
"Xxxxxx" or "Xxxxxx Entertainment," "Xxxx Xxxx" or "BHP," the name of any
Characters or any confusingly similar names, trademarks, service marks, trade
names, brands or logos. Notwithstanding the foregoing, Sellers may continue to
use stationery and other printed materials that are inscribed with the words
"Xxxxxx" or "Xxxxxx Entertainment" for a period of not more than forty-five (45)
days after the Closing to allow Sellers time to effect arrangements for new
stationery and other printed materials that exclude such references.
(c) [Intentionally Deleted.]
(d) Litigation Cooperation; Certain Reimbursement Payment.
Sellers, on the one hand, and Purchaser, on the other, shall reasonably
cooperate with the other in the defense or prosecution of any action, suit or
other proceeding instituted against or by such party relating to or arising out
of the Xxxxxx Entertainment Assets or the conduct of the Xxxxxx Entertainment
Business (other than any action, suit, arbitration or other proceeding between
Sellers, on the one hand, and Purchaser, on the other, arising out of the
transactions contemplated by this Agreement). The party requesting such
cooperation shall be responsible for, and shall pay, the out-of-pocket costs and
expenses (including reasonable attorneys' fees and expenses) of the party
providing such cooperation and of its officers, employees and agents incurred in
connection with providing such cooperation, but shall not be obligated to
reimburse the party providing such cooperation for such party's time spent
providing such cooperation or the salaries or costs of fringe or other benefits
paid by the party providing such cooperation to its officers, employees or
agents while assisting in the defense or prosecution of any such action, suit or
other proceeding. Sellers and Purchaser acknowledge that Sellers have been
negotiating with more than one Person for a transaction similar to the
Acquisition, and that Sellers may determine, without any obligation to do so, to
reimburse such Person for its expenses and time as compensation for its efforts
and to secure any required consents. Purchaser agrees to share equally with
Seller (up to an aggregate of $250,000 from Purchaser) with respect to any such
reimbursement payment, whether such payment is made before, on or after the
Closing, and Sellers shall pay all amounts in excess of Purchaser's
contribution. Alternatively, at the election of Seller, Purchaser has agreed to
reimburse Sellers for up to $250,000 of legal fees and related expenses incurred
by Sellers in connection with the transactions contemplated by this Agreement
and the August 24 Letter of Intent.
(e) Taxes. Sellers and Purchaser shall reasonably cooperate in
connection with the preparation and filing of any Tax Return or similar
information statement, for which the other is responsible for preparing and
filing with respect to the Xxxxxx Entertainment Assets.
30
(f) Agreement to Make Payments. Each Seller covenants and
agrees to pay, perform and discharge when due all liabilities, obligations,
costs and expenses arising out of or related to any Retained Receivables or the
other Retained Assets and all Retained Liabilities, whether such liabilities,
obligations, costs, expenses or Retained Liabilities arise prior to, on or after
the Closing Date, including, without limitation, all Royalties and
Participations, Guild Payments and other amounts due to third parties with
respect to the Retained Receivables, the other Retained Assets and all Retained
Liabilities. Purchaser shall have no obligation whatsoever to make any such
payments or assume any such liabilities, obligations, costs and expenses.
(g) Accounts Receivable. It is understood by Sellers and
Purchaser that, pursuant hereto, Sellers are retaining certain accounts
receivable and will collect the proceeds thereof before and after the Closing
Date and that Purchaser is entitled to the proceeds of all collections of
Sellers with respect to the Xxxxxx Entertainment Business after February 1,
2001. In the event that Purchaser before or after the Closing receives a payment
from a third party that, pursuant to the terms hereof, should have been paid to
Sellers, Purchaser agrees to promptly remit such payment to Sellers. In the
event that Sellers receive a payment from a third party that, pursuant to the
terms hereof, should have been paid to Purchaser or should have been included in
the Proration Adjustment but was not so included, Sellers agree to promptly
remit such payment to Purchaser. (In the event that Sellers have received
payments prior to the Closing Date that should be the property of Purchaser,
Sellers will account and remit such payment to Purchaser within ten (10) days
after the Closing.)
(h) Performance of Assigned Contracts. Pursuant to the terms
hereof, the Assigned Contracts will be assigned from Sellers to Purchaser at the
Closing. Purchaser acknowledges and agrees that it shall be responsible for
performing the Assigned Contracts on and after February 1, 2001. Accordingly,
Purchaser and Sellers agree that until the Closing, Sellers shall continue to
perform the Assigned Contracts and Purchaser shall reimburse Sellers for their
out-of-pocket costs and expenses reasonably incurred in connection with such
performance between February 1, 2001 and the Closing (but not for Seller's time
spent or the salaries or costs of fringe or other benefits paid by Seller to its
officers, employees or agents in connection therewith), such reimbursement
payment to be made as a Proration Adjustment.
(i) Location of and Access to Physical Properties. After the
Closing, Sellers may have, at their cost, access to the Physical Properties for
the purpose of servicing the License Agreements listed on Schedule 1.2(b), if
any, retained by Sellers. For so long as such agreements remain in effect,
Purchaser agrees that all Physical Properties included in the Purchased Assets
shall be stored at a location in the United States and to cooperate with Sellers
(at no cost to Purchaser) in Sellers' performance of such License Agreements.
(j) Insurance. Following the execution of this Agreement,
Purchaser and Sellers shall cooperate with each other, at no additional cost to
either party, if possible, to ensure that the Xxxxxx Entertainment Assets
continue to be insured by reasonable insurance coverage. The Company and
Purchaser will use their reasonable best efforts to add the other party as an
additional named insured on their liability policies.
31
Section 5.16 Maintenance of Site. Sellers shall continue to operate and
maintain the Sites (as defined in the definition of Entertainment Assets) at
Purchaser's expense (Seller warrants that such costs shall not exceed $1,500 per
month) from February 1, 2001 through the Closing Date in the same manner as they
have been operated and maintained through the date hereof without interruption
and shall not change or otherwise alter any Site without the prior written
consent of Purchaser. The parties shall cooperate with one another prior to the
Closing so that, at the Closing, Sellers may assign and transfer to Purchaser
all web-hosting contracts or other arrangements with third parties with respect
to the Sites, and such contracts and other arrangements shall be Assigned
Contracts.
Section 5.17 Access to Records After Closing. For a period of five (5)
years after the Closing Date, Sellers and their representatives shall have
reasonable access to all of the books and records of the Xxxxxx Entertainment
Business purchased by Purchaser hereunder to the extent that such access may
reasonably be required by Sellers in connection with the matters relating to or
affected by the operations of the Xxxxxx Entertainment Business prior to the
Closing Date. Such access shall be afforded by Purchaser after receipt of
reasonable advanced notice and during normal business hours. Sellers shall be
solely responsible for any costs or expenses incurred by them pursuant to this
Section 5.17. If Purchaser desires to dispose of any of such books and records
prior to the expiration of such five (5) year period, Purchaser shall, prior to
such disposition, give Sellers a reasonable opportunity, at Sellers' expense, to
segregate and remove such books and records as Sellers may select. For a period
of five (5) years after the Closing Date, Purchaser and its representatives
shall have reasonable access to all of the books and records of the Xxxxxx
Entertainment Business that Sellers may retain after the Closing Date. Such
access shall be afforded by Sellers after receipt of reasonable advanced notice
and during normal business hours. Purchaser shall be solely responsible for any
costs or expenses incurred by it pursuant to this Section 5.17. If any Seller
desires to dispose of any of such books and records prior to the expiration of
such five (5) year period, such Seller shall, prior to such disposition, give
Purchaser a reasonable opportunity, at Purchaser's expense, to segregate and
remove such books and records as Purchaser may select.
ARTICLE VI.
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligation. The respective
obligations of each party to effect the Acquisition are subject to the
satisfaction on or prior to the Closing Date of the following conditions:
(a) Shareholder Approval. This Agreement, the Acquisition and
the other transactions contemplated hereby shall have been duly and validly
approved by the requisite vote or consent of the Company's shareholders.
(b) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, entered, enacted, promulgated,
enforced or issued by any court or other Governmental or Regulatory Authority of
competent jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing the consummation of the Acquisition
or the other transactions contemplated by this Agreement.
32
Section 6.2 Conditions to Obligation of Purchaser. The obligations of
Purchaser to purchase the Xxxxxx Entertainment Assets as provided in this
Agreement are further subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Sellers contained in this Agreement that are qualified as to
materiality or a Material Adverse Effect shall be true and correct, and those
not so qualified shall be true and correct in all material respects, in each
case as of the date hereof and at and as of the Closing, with the same force and
effect as though made at and as of the Closing (except those which speak as of a
specific date, as to which such representations and warranties shall be true and
correct as of such date), and Purchaser shall have received an officers'
certificate signed by the President and the Chief Financial Officer of each
Seller to such effect.
(b) Covenants and Agreements. Sellers shall have performed and
complied with in all material respects all covenants and agreements required by
this Agreement to be performed and complied with by it at or prior to the
Closing, and Purchaser shall have received an officers' certificate signed by
the President and the Chief Financial Officer of each Seller to such effect.
(c) Opinion of Sellers' Counsel. Purchaser shall have received
an originally executed opinion letter of Sidley & Austin, special counsel to
Sellers, dated as of the Closing Date, covering the matters set forth in Exhibit
B, with such exceptions, qualifications and limitations as are customary and
reasonable in transactions of this nature.
(d) Consents and Approvals. All consents, approvals,
authorizations and permits of any Governmental and Regulatory Authorities and
other third parties required to assign or otherwise transfer any Xxxxxx
Entertainment Assets shall have been obtained (including, without limitation,
the consents and approvals listed on attached Schedule 3.4), except where the
failure to obtain the same could not reasonably be expected to result in a
Material Adverse Effect. The parties acknowledge that it is a condition to
Purchaser's obligations to close that Sellers shall have obtained such consents
and approvals to Purchaser's assumption of the Assigned Contracts, respectively,
but have further agreed to expedite the Closing and "close around" such consents
if required. To that end, to the extent that Sellers are unable to obtain any
such third-party consent prior to the earlier of (i) five (5) days after
obtaining the requisite vote or consent of the Company's shareholders and (ii)
June 30, 2001, the parties agree that they shall cooperate reasonably to allow
Purchaser to enjoy the material benefits of the applicable Assigned Contract; in
this regard, Sellers agree to pay over to Purchaser within five (5) business
days any amounts received by Sellers pursuant to such Assigned Contract which
would have been payable to Purchaser had the Assigned Contract been assigned to
Purchaser. If such a transfer of benefits is possible, Purchaser shall reimburse
Sellers for their reasonable out-of-pocket costs and expenses payable in
connection with the performance of such Assigned Contract (exclusive of
attorney's and advisors' fees), and the parties shall consult and cooperate with
one another with respect to approval rights and other matters under such
Assigned Contract. If such a transfer of benefits is not possible, Purchaser may
elect to terminate this Agreement as a
33
failure of this condition to Purchaser's obligations to close, and the
consequences thereof shall be as provided in Section 8.3(e).
(e) Closing Documents. Purchaser shall have received the
following documents, in each case executed by Sellers, respectively:
(i) Bills of sale, assignments, certificates of
title, endorsements and other instruments or documents of sale,
transfer or conveyance, in form and substance reasonably acceptable to
Purchaser, sufficient to sell, assign, convey and transfer to Purchaser
the Xxxxxx Entertainment Assets, free and clear of any Liens (other
than the Permitted Liens);
(ii) Such instruments and other documents as
Purchaser may reasonably request for filing or recordation with the
United States Patent and Trademark Office, the United States Copyright
Office and other United States and foreign governmental agencies with
respect to certain Xxxxxx Entertainment Assets, including, without
limitation, short-form copyright assignments and short-form trademark
assignments;
(iii) Joint Escrow Directions, duly executed by
the Company;
(iv) Instrument of Assignment and Assumption, in form
and substance reasonably satisfactory to Sellers and Purchaser (the
"Instrument of Assignment and Assumption"), duly executed by Purchaser;
and
(v) Settlement Agreement and Mutual Release of
Claims, in substantially the form of Exhibit A (the "Settlement and
Release of Claims"), duly executed by the Company.
(f) No Material Adverse Change. Since the date of execution of
this Agreement, no Material Adverse Change shall have occurred.
(g) Lien Releases. All Liens on the Xxxxxx Entertainment
Assets, including, without limitation, the Xxxxx Xxxx but excluding the
Permitted Liens, shall have been released and terminated, and Purchaser shall
have received documentation, in form and substance reasonably satisfactory to
Purchaser, evidencing the same.
(h) Resolutions. Purchaser shall have received from each
Seller copies of all resolutions, consents and other authorizations of the Board
of Directors and the shareholders of each Seller approving this Agreement, the
Acquisition and the other transactions contemplated by this Agreement,
respectively, in each case certified by the Secretary of each Seller,
respectively, as of the Closing Date.
(i) Other Documents. Purchaser shall have received such other
documents as Purchaser may reasonably request.
34
Section 6.3 Conditions to Obligations of Seller. The obligations of
Sellers to sell the Xxxxxx Entertainment Assets as provided in this Agreement
are further subject to the satisfaction or waiver on or prior to the Closing
Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement that are qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, in each case as of the date hereof, and at
and as of the Closing with the same force and effect as though made at and as of
the Closing (except those which speak as of a specific date, as to which such
representations and warranties shall be true and correct as of such date), and
Sellers shall have received an officers' certificate signed by the President and
the Chief Financial Officer of Purchaser to such effect.
(b) Covenants and Agreements. Purchaser shall have performed
and complied with in all material respects all covenants and agreements required
by this Agreement to be performed and complied with by it at or prior to the
Closing, and Sellers shall have received an officers' certificate signed by the
President and the Chief Financial Officer of Purchaser to such effect.
(c) Payment of Purchase Price. At the Closing, the Company
shall have received the Purchase Price pursuant to Section 2.2.
(d) Closing Documents. The Company shall have received the
following documents, in each case executed by Purchaser:
(i) Joint Escrow Directions, duly executed by
Purchaser;
(ii) Settlement and Release of Claims, duly
executed by Purchaser; and
(iii) Instrument of Assignment and Assumption,
duly executed by Purchaser.
(e) Opinion of Purchaser's Counsel. The Company shall have
received an originally executed opinion letter of Irell & Xxxxxxx LLP, special
counsel to Purchaser, dated as of the Closing Date, covering the matters set
forth in Exhibit C, with such exceptions, qualifications and limitations as are
customary and reasonable in transactions of this nature.
(f) Other Documents. Sellers shall have received such other
documents as Sellers may reasonably request.
Section 6.4 Waiver of Closing Conditions. If Purchaser waives any
condition to its obligation to purchase the Xxxxxx Entertainment Assets under
Section 6.2 and consummates the Acquisition, Purchaser agrees that it will not
have any right to assert any claim for liability against Sellers for their
failure to satisfy such closing condition. If Sellers waive any condition to
their obligations to sell the Xxxxxx Entertainment Assets under Section 6.3 and
consummate the Acquisition, Sellers agree that they will not have any right
35
to assert any claim for liability against Purchaser for its failure to satisfy
such closing condition.
ARTICLE VII.
SURVIVAL; INDEMNIFICATION
Section 7.1 Survival of Representations and Warranties; Purchaser
Investigation. The representations and warranties of Sellers set forth in this
Agreement and in any other Transaction Document shall survive (and not be
affected in any respect by) the Closing, and Sellers shall remain jointly and
severally liable for any breach of such representations and warranties, for a
period of one (1) year following the Closing Date; provided, however, that (a)
the representations and warranties set forth in Section 3.10 (Taxes), shall
survive for the period ending ninety (90) days after the expiration of the
statute of limitations (including extensions) applicable to any breach thereof,
(b) the representations and warranties set forth in Section 3.1 (Organization),
Section 3.2 (Authority Relative to this Agreement), Section 3.3 (No Conflicts),
Section 3.4 (Consents and Approvals), Section 3.6 (Title to Properties; Liens
and Encumbrances), Section 3.17 (No Brokers) and Section 3.18 (Solvency) shall
survive the Closing indefinitely, (c) any representations and warranties as to
which a claim is submitted in writing prior to the expiration of the applicable
survival period hereunder and identified as a claim for indemnification
(including details as to the nature and, to the extent known, the amount of the
claim) shall survive until the matter has been finally resolved; (d) any claims
for breach of any representation or warranty or which is based on fraud or
intentional misrepresentation shall survive until the matter is finally
resolved; and (e) any claim for breach of any covenant, indemnity or other
obligation contained herein shall survive the Closing indefinitely. In addition,
each Seller agrees that neither the review by Purchaser of the books and
records, condition, business, assets, properties, operations or prospects of
Sellers, the Xxxxxx Entertainment Assets or the Xxxxxx Entertainment Business,
nor any other due diligence investigation by or on behalf of Purchaser, nor the
participation of Purchaser in the preparation of the Schedules, shall modify or
otherwise limit the right of Purchaser to rely on the truth and accuracy of the
representations and warranties of Sellers contained in this Agreement or any
other Transaction Document, it being understood that the Schedules are the sole
responsibility of Sellers.
Section 7.2 Indemnification by Sellers. Sellers shall jointly and
severally indemnify and hold harmless Purchaser and its Affiliates, members,
officers, managers, directors, employees, agents, "control persons" and other
representatives (collectively, "Seller Indemnified Persons"), in respect of any
and all Losses incurred by, imposed upon or asserted against any Seller
Indemnified Person in connection with:
(a) the breach of any representation or warranty made by
Sellers (or any of them) in this Agreement or in any other Transaction Document;
provided, however, that (i) no claim for Losses may be brought by any Seller
Indemnified Person under this Section 7.2(a) with respect to the breach of any
representations and warranties contained in Section 3.3 through Section 3.16 and
Section 3.19 unless and until the aggregate amount of all Losses incurred by the
Seller Indemnified Persons exceeds $100,000, in which event the Seller
Indemnified Persons shall be entitled to indemnification for any and all Losses
in excess of the first $100,000, and (ii) the maximum amount of Losses for which
Sellers shall
36
be obligated to indemnify the Seller Indemnified Persons in connection with
breaches of the representations and warranties contained in Section 3.3 through
Section 3.5 and Section 3.7 through Section 3.16 and Section 3.19 only shall
equal $2,000,000;
(b) the material breach of any covenant or other obligation of
Sellers (or any of them) contained in this Agreement or in any other Transaction
Document, including, without limitation, the covenants and agreements set forth
in Article V;
(c) any misrepresentation or inaccuracy contained in any
certificate or other statement furnished by or on behalf of Sellers (or any of
them) pursuant to this Agreement or any other Transaction Document (provided
that, in the event that clause (a) of this Section 7.2, on the one hand, and
this clause (c), on the other, are applicable to such misrepresentation or
inaccuracy, the provisions of clause (a) shall govern); and
(d) any Retained Liabilities, including, without limitation,
any claims asserted against Purchaser or any of its Affiliates by third parties
with respect thereto.
Section 7.3 Indemnification by Purchaser. Purchaser shall indemnify and
hold harmless Sellers and their officers, directors, employees, agents and other
representatives (collectively, "Purchaser Indemnified Persons"), in respect of
any and all Losses incurred by, imposed upon or asserted against any Purchaser
Indemnified Person in connection with:
(a) the material breach of any representation or warranty made
by Purchaser in this Agreement or in any other Transaction Document;
(b) the material breach of any covenant or other obligation of
Purchaser contained in this Agreement or in any other Transaction Document;
(c) any Assumed Liabilities;
(d) any misrepresentation or inaccuracy contained in any
certificate or other statement furnished by Purchaser pursuant to this Agreement
or any other Transaction Document; and
(e) any claims, liabilities or obligations with respect to the
operation of the Xxxxxx Entertainment Business by Purchaser from and after the
Closing (except as otherwise provided herein).
Section 7.4 Claims for Indemnification. Whenever any claim shall arise
for indemnification hereunder, the party entitled to indemnification (the
"Indemnified Party") shall promptly notify the other party (the "Indemnifying
Party") in writing of the claim and, when known, the facts constituting the
basis for such claim. In the event of any claim for indemnification hereunder
resulting from or in connection with any claim or legal proceedings by a third
party, the notice to the Indemnifying Party shall specify, if known, the amount
or an estimate of the amount of the liability arising therefrom. The Indemnified
Party shall not settle or compromise any claim by a third party for which it is
entitled to indemnification hereunder without the prior written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld), unless
suit shall have been instituted
37
against it and the Indemnifying Party shall not have taken control of such suit
after notification thereof as provided in Section 7.5.
Section 7.5 Third-Party Claims. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceedings by a third party, the Indemnifying Party at its sole cost and
expense may, upon written notice to the Indemnified Party, assume the defense of
any such claim or legal proceeding if it acknowledges to the Indemnified Party
in writing its obligations to indemnify the Indemnified Party with respect to
all elements of such claim and provides evidence reasonably acceptable to the
Indemnified Party that it has the financial capacity to assume the defense. The
Indemnified Party shall be entitled to participate in (but not control) the
defense, compromise or settlement of any such action, with its counsel and at
its own expense. Such participation shall include, without limitation, the right
to consult with the Indemnifying Party and its counsel or other representatives
concerning such claim, and the Indemnifying Party and the Indemnified Party and
their respective counsel or other representatives shall cooperate with respect
to such claim. The Indemnifying Party shall not, without the Indemnified Party's
written consent, settle or compromise any claim or consent to entry of any
judgment that does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release from all
liability with respect of such claim. If the Indemnifying Party shall elect not
to undertake such defense, or within a reasonable time after notice of such
claim, does not assume the defense of any such claim or litigation resulting
therefrom, (a) the Indemnified Party may defend against such claim or
litigation, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate, and (b) the Indemnifying
Party shall be entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense. If the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such third-party claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that the Indemnified Party did not defend or settle such third-party
claim in a reasonably prudent manner.
Section 7.6 Adjustments to Purchase Price. All indemnity and other
payments made under this Agreement shall be treated for Tax purposes as
adjustments to the Purchase Price.
Section 7.7 Waiver of Suretyship Rights and Defenses. The parties
acknowledge that each Seller may be deemed to be a guarantor or surety of any
other Seller by reason of the fact that the indemnification and other
obligations of Sellers under this Agreement and the other Transaction Documents
are joint and several. As such, each Seller may be entitled, as a guarantor or
surety of such other Sellers' obligations, to certain rights and defenses under
applicable Laws, including, without limitation, the rights and defenses
described in Section 2856(a) of the Civil Code of the State of California.
Nevertheless, it is the intention of each Seller to waive, and each Seller
hereby waives, any and all such rights and defenses available to it under
applicable Laws, including, without limitation, those described under Section
2856(a) of the Civil Code of the State of California. This Section 7.7 is
intended to be an unconditional and irrevocable waiver of any rights and
defenses such Seller may have if such Seller is deemed to be a guarantor or
surety of any other Seller.
38
ARTICLE VIII.
TERMINATION; EXPENSES
Section 8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing,
whether before or after approval of the matters to be considered by the
shareholders of the Company:
(a) By the mutual written agreement of the Company, on behalf
of itself and the other Sellers, and Purchaser;
(b) By either the Company, on behalf of itself and the other
Sellers, or Purchaser:
(i) at any time after June 30, 2001 (or such later
date as may be mutually agreed upon by the parties in writing), if the
Closing shall not have occurred on or prior to such date other than due
to the failure of the party seeking to terminate this Agreement to
perform its obligations under this Agreement or any other Transaction
Document required to be performed by it at or before the Closing; or
(ii) if any Governmental or Regulatory Authority
shall have issued a Restraint or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and such Restraint or
other action shall become final and non-appealable, provided that the
party seeking to terminate this Agreement pursuant to this Section
8.1(b)(ii) shall have used its best efforts to prevent entry of and to
remove such Restraint;
(c) By Purchaser if:
(i) (A) there shall have been a breach of any
representation or warranty on the part of Sellers (or any of them) set
forth in this Agreement, or if any representation or warranty of
Sellers (or any of them) shall have become materially untrue, in either
case such that the conditions set forth in Section 6.2(a) would be
incapable of being satisfied by June 30, 2001; (B) Sellers (or any of
them) shall have breached or failed to perform in any material respect
any of its or their covenants or other agreements contained in this
Agreement, which breach or failure to perform cannot be or has not been
cured within twenty (20) days (or prior to June 30, 2001, if a shorter
period) after the giving of written notice to Sellers of such breach
(in either of clause (A) or (B), a "Seller Material Breach"); provided,
however, that, in each of clauses (A) and (B), Purchaser is not then in
Purchaser Material Breach of any representation, warranty, covenant or
other agreement contained in this Agreement; or
(ii) the Company shall have convened a meeting of its
shareholders and shall have failed to obtain the requisite vote or
consent of its shareholders on or before June 30, 2001;
39
(iii) there shall have occurred at any time a
Material Adverse Change; or
(iv) the Board of Directors of the Company, pursuant
to the provisions of Section 5.3(b), shall have withdrawn its approval
or recommendation of this Agreement and the Acquisition or shall have
recommended a Xxxxxx Sale Transaction to its shareholders.
(d) By the Company (on behalf of itself and the other
Sellers), if:
(i) (A) there shall have been a breach of any
representation or warranty on the part of Purchaser set forth in this
Agreement, or if any representation or warranty of Purchaser shall have
become materially untrue, in either case such that the conditions set
forth in Section 6.3(a) would be incapable of being satisfied by the
earlier of five (5) business days after receipt of the requisite vote
or consent of the Company's shareholders and June 30, 2001; (B)
Purchaser shall have breached or failed to perform in any material
respect any of its covenants or other agreements contained in this
Agreement, which breach or failure to perform cannot be or has not been
cured within twenty (20) days (or prior to the earlier of five (5)
business days after receipt of the requisite vote or consent of the
Company's shareholders and June 30, 2001, if a shorter period) after
the giving of written notice to Purchaser of such breach (in either of
clause (A) or (B), "Purchaser Material Breach"); provided, however,
that, in each of clauses (A) and (B), no Seller is then in Seller
Material Breach of any representation, warranty, covenant or other
agreement contained in this Agreement;
(ii) the Board of Directors of the Company, pursuant
to the provisions of Section 5.3(b), shall have withdrawn its approval
or recommendation of this Agreement and the Acquisition or shall have
recommended a Xxxxxx Sale Transaction to its shareholders; or
(iii) the Company shall have convened a meeting of
its shareholders and shall have failed to obtain the requisite vote or
consent of its shareholders on or before June 30, 2001.
Section 8.2 Effect of Termination. In the event of a termination of
this Agreement by either Purchaser or the Seller pursuant to Section 8.1,
written notice thereof shall forthwith be given by the terminating party to the
other party, and this Agreement shall thereupon terminate and become void and
have no effect, and the transactions contemplated hereby shall be abandoned
without further action by the parties, except that the provisions of Section
5.15(a), this Section 8.2, Section 8.3 and Article IX shall survive the
termination of this Agreement, as applicable. Notwithstanding the foregoing,
nothing contained in this Agreement shall relieve any party of any liability for
fraud in connection with this Agreement or the transactions contemplated hereby.
Section 8.3 Fees and Expenses.
40
(a) Except as otherwise provided herein, all fees and expenses
incurred in connection with the August 24 Letter of Intent, this Agreement and
the transactions contemplated hereby shall be borne by the party incurring such
fees or expenses, whether or not the Closing shall have occurred.
(b) In the event that this Agreement shall be terminated by
the Company pursuant to Section 8.1(d)(i) (i.e., a Purchaser Material Breach),
then (i) Sellers shall be entitled to receive the Deposit and the interest and
other earnings thereon (collectively, the "Escrow Funds"), and the Company and
Purchaser shall enter into the Settlement and Release of Claims, and (ii)
Purchaser shall promptly reimburse the Company for all fees and expenses
actually incurred by the Company in connection with the transactions
contemplated by the August 24 Letter of Intent and this Agreement, up to a
maximum of $120,000. The parties agree that it would be speculative, impractical
and extremely difficult to determine or estimate the damage that would be
suffered by Sellers in the event that the Closing does not occur as a result of
a Purchaser Material Breach. Accordingly, the parties agree that the receipt of
the Escrow Funds specified in clause (i) of this Section 8.3(b) is a reasonable
estimate of the total net detriment that Sellers would suffer as a result of any
failure to consummate the Closing as a result thereof. Such Escrow Funds shall
constitute liquidated damages and not a penalty.
(c) In the event that this Agreement shall be terminated by
Purchaser pursuant to Section 8.1(c)(i) (i.e., a Seller Material Breach), then
(A) the Escrow Funds shall be refunded promptly to Purchaser, and the Company
and Purchaser shall enter into the Settlement and Release of Claims, (ii)
Sellers shall promptly reimburse Purchaser for all fees and expenses actually
incurred by Purchaser in connection with the transactions contemplated by the
August 24 Letter of Intent and this Agreement, up to a maximum of $350,000, and
(iii) Sellers shall immediately pay to Purchaser, by wire transfer in
immediately available funds, a termination fee of $500,000. The parties agree
that it would be speculative, impractical and extremely difficult to determine
or estimate the damage that would be suffered by Purchaser in the event that the
Closing does not occur as a result of a Seller Material Breach. Accordingly, the
parties agree that the fee specified in clause (iii) of this Section 8.3(c) is a
reasonable estimate of the total net detriment that Purchaser would suffer as a
result of any failure to consummate the Closing as a result thereof. Such fee
shall constitute liquidated damages and not a penalty. The parties acknowledge
and agree that, in the event that clause (d) of this Section 8.3, on the one
hand, and this clause (c), on the other hand, are applicable, the provisions of
this clause (c) shall govern.
(d) In the event that this Agreement shall be terminated (i)
by Purchaser pursuant to Section 8.1(c)(ii) or by the Company pursuant to
Section 8.1(d)(iii) (i.e., failure by the Company to obtain the requisite vote
or consent of its shareholders after a meeting of the Company's shareholders) or
(ii) by Purchaser pursuant to Section 8.1(c)(iv) or by the Company pursuant to
Section 8.1(d)(ii) (i.e., the recommendation by the Board of Directors of the
Company of a Xxxxxx Sale Transaction), then (A) the Escrow Funds shall be
refunded promptly to Purchaser, and the Company and Purchaser shall enter into
the Settlement and Release of Claims, (B) Sellers shall promptly reimburse
Purchaser for all fees and expenses actually incurred by Purchaser in connection
with the transactions contemplated by the August 24 Letter of Intent and this
Agreement, up to a maximum of $350,000, and (C) if,
41
within six (6) months following the date of such termination, any Seller or any
Affiliate of Sellers enters into a definitive agreement for, or shall have
consummated, a Xxxxxx Sale Transaction, then, in any such case, Sellers shall
jointly and severally pay, or cause to be paid, to Purchaser, by wire transfer
in immediately available funds immediately upon the consummation of the Xxxxxx
Sale Transaction, a termination fee of $500,000. The parties agree that it would
be speculative, impractical and extremely difficult to determine or estimate the
damage that would be suffered by Purchaser in the event that the Closing does
not occur as a result thereof. Accordingly, the parties agree that the fee
specified in clause (C) of this Section 8.3(d) is a reasonable estimate of the
total net detriment that Purchaser would suffer as a result of any failure to
consummate the Closing as a result thereof. Such fee shall constitute liquidated
damages and not a penalty.
(e) Notwithstanding anything to the contrary contained herein
or otherwise, if the Closing shall not occur for any reason on or before June
30, 2001, other than as provided in Section 8.3(b), Section 8.3(c) or Section
8.3(d) (including, without limitation, the failure to obtain third-party
consents necessary to assign and transfer the Assigned Contracts (subject to
Section 6.2(d)), the occurrence of a Material Adverse Change, the imposition of
Restraints or any delays in consummating the Acquisition as a result of the
SEC's delayed review of the Proxy Statement), this Agreement shall terminate as
provided in the first sentence of Section 8.2, the Escrow Funds shall be
refunded promptly to Purchaser, the Company and Purchaser shall enter into the
Settlement and Release of Claims and each party shall bear its own costs and
expenses incurred in connection with the August 24 Letter of Intent, this
Agreement and the transactions contemplated hereby.
Section 8.4 Sole Remedies. The parties agree that the remedies provided
for in Section 8.3 are the sole and exclusive remedies in the event of a breach
or termination of this Agreement as provided therein (other than for fraud).
ARTICLE IX.
MISCELLANEOUS
Section 9.1 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
against facsimile confirmation or mailed by internationally recognized overnight
courier prepaid, to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
Classic Media, LLC
000 Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx Xxxxxxxxxx
with a copy (which shall not constitute notice) to:
42
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq. or Xxxxxxxx X. Xxxxx, Esq.
If to Sellers (or any of them), to:
The Xxxxxx Entertainment Company
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer
with a copy (which shall not constitute notice) to:
Sidley & Austin
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery and receipt, (b) if delivered by facsimile transmission to the
facsimile number as provided for in this Section 9.1, be deemed given upon the
first business day of or after facsimile confirmation and (c) if delivered by
overnight courier to the address as provided in this Section 9.1, be deemed
given on the earlier of the first business day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section 9.1). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
Section 9.2 Entire Agreement. This Agreement, together with the
Appendices, Exhibits and Schedules, the Confidentiality Agreement, the August 24
Letter of Intent and Escrow Agreement, constitute the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, provided that the
Confidentiality Agreement shall survive any termination of this Agreement (but
not the Closing) in accordance with its terms.
Section 9.3 Third-Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under Section 7.2 or Section 7.3.
43
Section 9.4 No Assignment; Binding Effect. Neither the Company nor any
other Seller, on the one hand, nor Purchaser, on the other, may assign its
rights or delegate its obligations under this Agreement, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that Purchaser may assign its rights and delegate its obligations hereunder to a
wholly owned subsidiary without the consent of any Seller, provided that such
assignment or delegation shall not relieve Purchaser of its obligations
hereunder. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties and their respective
successors and assigns.
Section 9.5 Headings; Construction. The headings contained in this
Agreement have been inserted for convenience of reference only and do not define
or limit the provisions hereof. Article, section, subsection, exhibit, schedule,
recital, preamble and party references are to this Agreement unless otherwise
indicated. The parties agree that this Agreement is the product of negotiation
between sophisticated parties and individuals, all of whom were represented by
counsel, and each of whom had an opportunity to participate in and did
participate in, the drafting of each provision hereof. Accordingly, ambiguities
in this Agreement, if any, shall not be construed strictly or in favor of or
against any party hereto but rather shall be given a fair and reasonable
construction without regard to the rule of contra proferentem.
Section 9.6 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
Section 9.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
without giving effect to any choice of law or conflict of law provision or rule
that would cause the application of the laws of any jurisdiction other than the
State of California.
Section 9.8 Counterparts. This Agreement may be executed in any number
of counterparts or by facsimile, each of which will be deemed an original, but
all of which together will constitute one and the same instrument.
Section 9.9 Specific Performance. The parties acknowledge and agree
that the Characters, and their goodwill in particular, and the other Xxxxxx
Entertainment Assets are unique and valuable assets that cannot be replaced and
that remedies at law for any breach, or threatened breach, of this Agreement
would be inadequate. Accordingly, Sellers, on the one hand, and Purchaser, on
the other, covenant and agree that the other will be entitled to injunctive
relief and other equitable remedies to restrain any such breach or threatened
breach, including, without limitation, preliminary injunctive relief and
pretrial equitable
44
remedies, and to enforce specifically the terms and provisions of this Agreement
in any court of competent jurisdiction, in addition to any other rights or
remedies to which the parties may be entitled at law or in equity. The parties
acknowledge that injunctive relief is not available to compel a Closing absent
affirmative shareholder approval.
Section 9.10 Prevailing Party. In any action, suit, arbitration or
other proceeding in connection with this Agreement, the prevailing party shall
be entitled to recover from the non-prevailing party all of its costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred by such prevailing party.
Section 9.11 Knowledge. Whenever the term "Sellers' knowledge,"
"knowledge of Sellers," "to the best knowledge of Sellers" or words of similar
import are used in this Agreement or any other Transaction Document with respect
to the existence or absence of any fact, it shall mean that Xxxxx X. Xxxxxxx,
Xxxxx Xxxxxxxxxx and/or Xxxx Xxxxxxx knows or should have known, based upon
reasonable inquiry, of the existence or absence of such fact.
Section 9.12 Alternative Dispute Resolution.
(a) All claims, controversies and disputes arising out of or
related to this Agreement, the events underlying this Agreement or any other
Transaction Document between the Company and/or the other Sellers, on the one
hand, and Purchaser, on the other hand, shall be finally settled by arbitration
before a single arbitrator conducted under the supervision of, and in accordance
with the Commercial Arbitration Rules of, the American Arbitration Association
(the "AAA"), including the Optional Emergency Measures. The arbitration shall be
held at the offices of the AAA located in the City of Los Angeles, State of
California, or at such other offices of the AAA as the parties may mutually
agree.
(b) Either party may submit the claim, controversy or dispute
to the AAA for arbitration if the parties are unable in good faith to resolve
such matter within forty-five (45) days from the date that either party notifies
the other party in writing of such claim, controversy or dispute. The parties
shall use their reasonable best efforts to agree upon a mutually acceptable
arbitrator within twenty (20) days after submission of such claim, controversy
or dispute to the AAA. If the parties are unable to agree upon a mutually
acceptable arbitrator, then either party may request that the AAA supply a list
of potential arbitrators satisfying the requirements of any of the provisions of
this Section 9.12 and such other requirements as the parties may mutually agree
upon. Within ten (10) days after receipt of the list, the parties shall
independently rank the potential arbitrators, simultaneously exchange rankings
and select as the arbitrator the individual receiving the highest combined
ranking who is available to serve. Any such arbitrator shall be impartial in
fact and appearance, and not an advocate of any party, and, if available, shall
be a former state judge of the State of California.
(c) The parties expressly provide that the provisions of
Section 1283.05 of the Code of Civil Procedure of the State of California (or
any similar law of any state) relating to the parties' rights of discovery are
incorporated into, and made a part of, this Section 9.12. The arbitrator shall
render his decision in writing and in accordance with the
45
laws of the State of California not later than thirty (30) days after the final
statements and proof have been submitted and any hearing on the matter has been
closed. The decision of the arbitrator will be conclusive and binding upon the
parties, and judgment on the award may be entered in any court of competent
jurisdiction (whether within the United States or in any foreign country) or
application may be made to such court for judicial acceptance of the award and
an order of enforcement, as the case may be. Nothing contained in this Section
9.12 shall bar either party from seeking preliminary injunctive relief or other
pretrial equitable remedies in any court of competent jurisdiction as provided
in Section 9.9.
(d) PURCHASER AND SELLERS EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO
THE JURISDICTION OF THE AAA IN THE CITY OF LOS ANGELES, STATE OF CALIFORNIA, AS
TO ANY OF THE PARTIES' DISPUTES HEREUNDER OR UNDER ANY OTHER TRANSACTION
DOCUMENT, AND PURCHASER AND SELLERS HEREBY IRREVOCABLY WAIVE ANY PRESENT OR
FUTURE OBJECTION WHICH THEY MAY HAVE BASED ON LACK OF PERSONAL JURISDICTION,
SUBJECT MATTER JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENT TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS COULD BE GRANTED BY
THE SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA. PURCHASER AND SELLERS HEREBY WAIVE PERSONAL SERVICE OF ANY
AND ALL DOCUMENTS RESPECTING SUCH ARBITRATION, AND AGREE THAT SERVICE OF ALL
SUCH DOCUMENTS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
PURCHASER OR THE SELLERS AT THE ADDRESS SET FORTH IN SECTION 9.1.
Section 9.13 Amendments. This Agreement may be amended, supplemented or
otherwise modified from time to time by the mutual written agreement of the
Company, on behalf of itself and the other Sellers, on the one hand, and
Purchaser, on the other; provided, however, that there shall not be made any
amendment that by applicable Law requires further approval of the shareholders
of Sellers without the further approval of such shareholders.
Section 9.14 Extension; Waiver. At any time prior to the Closing, any
party may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance by the other party with any of the agreements, covenants or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed by its duly authorized representative.
SELLERS
46
THE XXXXXX ENTERTAINMENT COMPANY, a
California corporation
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
---------------------------------
Title: Chief Executive Officer
---------------------------------
XXXXXX COMICS, INC., a New York
corporation
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
---------------------------------
Title: Chief Executive Officer
---------------------------------
BHP PRODUCTIONS, INC., a California
corporation
By: /s/ Xxxxxxx Xxxxx
---------------------------------
Name: Xxxxxxx Xxxxx
---------------------------------
Title: Chairman
---------------------------------
PURCHASER
CLASSIC MEDIA, LLC, a Delaware
limited liability company
By: /s/ Xxxx Xxxxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxxxx
---------------------------------
Title: President/Chief Executive Officer
---------------------------------
47
APPENDICES
Appendix A Certain Definitions
EXHIBITS
Exhibit A Form of Settlement and Release of Claims
Exhibit B Forms of Legal Opinions of Counsel to Sellers
Exhibit C Forms of Legal Opinions of Counsel to Purchaser
SCHEDULES
Schedule 1.1A Certain Entertainment Related Assets
Schedule 1.1B PM Entertainment Animated Properties
Schedule 1.1(c) Assigned Contracts
Schedule 1.2(b) Retained License Agreements
Schedule 1.2(c) Retained Receivables
Schedule 3.3 No Conflicts
Schedule 3.4 Consents and Approvals
Schedule 3.6 Title to Assets
Schedule 3.6(b) Applicable Guild Liens
Schedule 3.7(a) Exceptions to Entertainment Related Assets
Schedule 3.7(b)(i) Copyright Registrations
Schedule 3.7(b)(ii) Trademarks
Schedule 3.7(b)(iii) Physical Properties Schedule
Schedule 3.7(c) Infringement
Schedule 3.7(e) Participation Rights
Schedule 3.7(f) Assignment of Assigned Contracts
Schedule 3.7(g) Exceptions to Assigned Contracts
Schedule 3.9 Absence of Material Changes
Schedule 3.10 Taxes
Schedule 3.11 Litigation
Schedule 3.12 Insurance
Schedule 3.16 Employee Benefit Plans
48
APPENDIX A
CERTAIN DEFINITIONS
In addition to the terms defined in this Agreement, the following terms
have the meanings indicated below:
"Acquisition Agreements" shall mean any and all material agreements
pursuant to which any Seller, any Affiliate of Sellers or any of its or their
predecessors-in-interest licensed, acquired or purchased from any other Person
any Entertainment Related Assets or was granted the right to act as a sales
agent or to administer, sell or otherwise exploit any Entertainment Related
Assets.
"Affiliate" shall mean, with respect to any Person, (a) any other
Person directly or indirectly controlling, controlled by or under common control
with, such Person, (b) any other Person that owns or controls (i) ten percent
(10%) or more of any class of equity securities of such Person or any of its
Affiliates or (ii) ten percent (10%) or more of any class of equity securities
(including any equity securities issuable upon the exercise of any option,
warrant or other convertible security) of such Person or any of its Affiliates,
or (c) as to a corporation, each director and officer thereof, and as to a
partnership, each general partner thereof, and as to a limited liability
company, each managing member or similarly authorized person thereof (including
officers), and as to any other entity, each Person exercising similar authority
to those of a director or officer of a corporation. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with") as applied to
any Person means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this Agreement, including (unless the context
otherwise requires) the Appendices, Exhibits and the Schedules, as the same may
be amended or supplemented from time to time in accordance with the terms
hereof.
"Characters" shall mean the characters listed in Schedule 1.1A, any
other derivative or related characters, and all other characters, whether
existing or in development, created, owned or controlled by any Seller or any of
its Affiliates.
"Chase" shall mean The Chase Manhattan Bank, as Administrative Agent
under the Chase Credit Agreement.
"Chase Credit Agreement" shall mean the Credit, Security, Guaranty and
Pledge Agreement, dated as of April 3, 2000, among the Company, the "Guarantors"
referred to therein, the "Lenders" referred to therein and Chase, as agent for
the Lenders (in such capacity, the "Administrative Agent") and as issuer of
letters of credit.
"Xxxxx Xxxx" shall mean the Liens granted to Chase, as Administrative
Agent, under the Chase Credit Agreement.
49
"Company Common Stock" means the Class A Common Stock, no par value per
share, of the Company.
"Confidentiality Agreement" shall mean the Confidentiality Agreement
dated June 20, 2000, between the Company and Purchaser.
"Development Projects" shall mean the television, motion picture,
direct-to-video, Internet and other projects in development by Sellers and
listed or described on Schedule 1.1A.
"Entertainment Assets" shall mean, collectively:
(i) All of the Characters and all motion pictures, television
productions, Videogram productions, animated productions, CD-ROMs, DVDs
and other interactive and/or multimedia products, songs, musical
compositions, recordings, phonorecords, books, publications, Literary
Properties, the Physical Properties, items of merchandise and similar
properties, or any products or projects in development relating to any
of the foregoing, whether or not featuring any of the Characters, in or
to which any Seller or any of its Affiliates has any Rights;
(ii) All technology and resources (other than Sellers'
employees), whether owned or licensed, used in connection with the
operation of all web sites related to the Entertainment Related Assets
(the "Sites"), including, without limitation: all computer software
(including all source code, object code, firmware, development tools,
files, records and data and all media on which any of the foregoing is
recorded) related thereto; all computer and networking hardware
including servers, routers and storage devices; all contracts or
agreements, including, without limitation, ISP agreements, hosting
agreements, service agreements and maintenance agreements; all
techniques, methods, applications and other technology relating to the
Sites; the Uniform Resource Locators ("URL"), domain names, brands,
logos, trademarks, service marks and other names used in or in
connection therewith; the Site user interface and all rights therein;
all derivative works of any of the foregoing; and any reference
materials or other documentation, whether in printed or machine
readable form relating to the operation of the Site; and
(iii) All Development Projects.
"Entertainment Related Assets" shall mean, collectively, (a) the
Entertainment Assets, the Assigned Contracts and the Rights; (b) all properties
and things of value pertaining to the Rights and the Entertainment Assets; (c)
all rights under the Assigned Contracts; (d) all files, books, copyright reports
and records (including, without limitation, financial books and records) and all
contracts, agreements, assignments, documents or other papers, including
originally executed copies of such contracts, agreements, assignments, documents
or other papers, respecting the Entertainment Assets and the amounts payable
under License Agreements, Guild Payments and Royalties and Participations; (e)
all data bases and any other information in an electronic format of any Seller
and any of its Affiliates respecting the Entertainment Assets, amounts payable
under License Agreements, Guild
50
Payments and Royalties and Participations and all unexploited Rights; and (f)
all Liens in favor of any Seller or any of its Affiliates granted, conveyed or
assigned under any of the Assigned Contracts, including, without limitation, in
each of clauses (a) through (f), those listed on Schedule 1.1A.
"Escrow Holder" shall have the meaning set forth in the Escrow
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" shall mean generally accepted accounting principles in the
United States, as in effect from time to time.
"Governmental or Regulatory Authority" shall mean any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, Nasdaq quotation service and the National
Association of Securities Dealers.
"Guild Payments" shall mean the obligations payable by any Seller or
any of its Affiliates pursuant to guild agreements or collective bargaining
agreement in connection with the distribution and exploitation of the
Entertainment Assets.
"Xxxxxx Domain Names" shall mean the Internet domain names listed on
Schedule 3.7(b)(ii), together with the goodwill of Sellers symbolized thereby.
"Income Tax" shall mean any income, alternative or add-on minimum tax
(including taxes under Section 59A of the Internal Revenue Code), gross income,
gross receipts, franchise, profits, including estimated taxes relating to any of
the foregoing, or other similar tax or other like assessment or charge of
similar kind whatsoever, excluding any Other Tax, together with any interest and
any penalty, addition to tax or additional amount imposed by any Taxing
Authority responsible for the imposition of any such Tax (domestic or foreign);
or (ii) any liability of a Person for the payment of any taxes, interest,
penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. Section 1.1502-6 or comparable provisions of any
Taxing Authority in respect of a Tax Return of each Seller or any affiliated,
consolidated, combined, unitary or similar group of which each Seller is or was
a member or any contract.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Law" or "Laws" shall mean any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law, whether in the United States, any foreign country or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"License Agreements" shall mean all agreements entered into by any
Seller, any of its Affiliates or any of its predecessors-in-interest, including,
without limitation, those agreements executed prior to the date hereof, pursuant
to which any Seller, any of its
51
Affiliates or any of its predecessors-in-interest licensed, sold or granted any
Rights to any other Person, or otherwise relating to the exploitation of any
Entertainment Related Assets.
"Liens" shall mean any lien (statutory or otherwise), mortgage, pledge,
security interest, easement, license, charge, option, adverse claim or other
encumbrance of any kind, or any conditional sale contract, title retention
contract or other contract to give any of the foregoing, except for any
restrictions on transfer generally arising under any applicable federal or state
law.
"Literary Properties" shall mean any and all underlying literary,
dramatic or other works (whether published or unpublished), screenplays,
teleplays, stories, adaptations, scripts, treatments, scenarios and any and all
other literary or dramatic materials of any kind on which the Entertainment
Assets are based or which were written for or included in the Entertainment
Assets.
"Losses" shall mean any and all claims, demands, losses, damages,
obligations, liabilities, costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses, settlement costs and any expenses for
investigating or defending any actions or threatened actions.
"Material Adverse Change" or "Material Adverse Effect" shall mean any
event, matter, condition or circumstance that has or would have a material
adverse effect on the ability of Purchaser to own, use, market, license or
otherwise exploit, or materially restrict Purchaser from owning, using,
marketing, licensing or otherwise exploiting, (i) the Characters or other
Entertainment Related Assets taken as a whole or (ii) any of the following
Characters, each taken separately: Casper, Xxxxxx Xxxx, Xxxxx, Xxxx Xxxx, Hot
Stuff or Bunny; provided, however, that a Material Adverse Change or Material
Adverse Effect shall exclude any change that is directly attributable to
conditions affecting the entertainment media industry generally.
"Other Tax" shall mean any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign) as the context requires.
"Person" means any individual, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union or association, or any Governmental or
Regulatory Authority.
"Physical Properties" shall mean any and all physical film, sound and
other physical properties, manifestations and elements of or relating to the
Entertainment Related Assets, or any of them, and all versions thereof, in
whatever state of completion, that are owned or controlled by any Seller or any
Affiliate of Sellers or to which any Seller or any Affiliate of Sellers has
access, including, without limitation, all prints, negatives, duplicating
negatives, interpositives, fine grains, music and sound effects tracks, master
tapes and other duplicating
52
materials of any kind, foreign language dubbed and titled versions, prints and
negatives of stills, trailers and television spots, animation cells,
memorabilia, comic books, posters, promos and other advertising and publicity
materials of all kinds, licensing and merchandising samples, reels, cuts, trims,
outtakes and stock footage, bibles, treatments, screenplays and scripts.
"Rights" shall mean all rights of every kind and nature in and to the
Entertainment Assets and the right to distribute, market, license, assign,
transfer, sell and otherwise exploit the Entertainment Assets and said rights
throughout the universe in perpetuity by all manners and means and in all media
whether now known or hereafter created or devised, including, without
limitation:
(a) the right to distribute, exhibit, exploit and market the
Entertainment Assets by all means and methods, now known or hereafter
devised and in all markets or media and territories, including, without
limitation, theatrically, non-theatrically, by all means of television
(including, without limitation, free over-the-air telecasts by any
television stations or superstations and/or by means of pay or
subscription television of any kind including, without limitation,
basic cable, pay cable, pay-per-view, satellite transmissions and by
any other technology or device for the transmission and/or reception of
television, whether now known or hereafter created or devised), on-line
over the Internet, World Wide Web and other computer networks, by
CD-ROMs, DVDs and other interactive and/or multimedia devices, on
Videograms, video on demand, near-video on demand and any other means,
methods or devices now known or hereafter created or devised, and to
perform and otherwise use and deal with the Entertainment Assets
(including the soundtracks thereof and/or any part(s) thereof), on
film, tapes, digital reproductions and/or transmissions and other
manners or media of any size or kind, publicly and privately, for any
uses or purposes;
(b) the right to advertise, promote and publicize the
Entertainment Assets by any and every means and in every medium,
including the use of synopses of or brief excerpts from the
Entertainment Assets, the Literary Properties on which the
Entertainment Assets are based, the music and dialogue of the
Entertainment Assets, and the names, voices, likenesses and biographies
of the cast, director, producer, writers, composers, music performers
and other personnel or entities rendering services on or connected with
the Entertainment Assets, to the fullest extent possible;
(c) the right to make and exploit English language and foreign
versions (meaning versions in every other language) of the
Entertainment Assets (including dubbed and subtitled versions);
(d) the right to make such changes in the Entertainment Assets
and the titles thereof (including cutting, re-editing, rescoring, and
photographing and recording new material) from time to time as any
Seller or any of its Affiliates may deem to be necessary or desirable,
including, without limitation, colorization rights, changes required by
censorship authorities, changes for purposes of reissue,
53
television, or substandard release, shorter versions, and changes
designed to improve exhibition or audience reception of the
Entertainment Assets;
(e) the right to authorize the exhibition of segments of the
Entertainment Assets and to authorize the exhibition of the
Entertainment Assets in two or more segments;
(f) the right to use the names, trademarks, service marks,
trade names, logos and brands of any Seller, any of its Affiliates
and/or any of its subdistributors or licensees on and in relation to
the Entertainment Assets for the purpose of indicating on the
Entertainment Assets or otherwise that any Seller or any of its
Affiliates is the distributor of the Entertainment Assets;
(g) the right to perform, copy, record, rerecord, produce,
reproduce and/or synchronize all music and musical compositions created
for, purchased for or used in connection with the Entertainment Assets
in all media either separately (including, without limitation
soundtrack albums and singles) or as part of and in connection with the
exhibition of the Entertainment Assets, and as part of and in
connection with the exhibition of trailers and other advertising and
publicity of or relating to the Entertainment Assets to publish any and
all of said music and musical compositions and to exercise any and all
other rights of every kind and nature in and to such music and musical
compositions, including, without limitation, the right to edit, alter,
record new music and audio material and replace existing musical and
audio material;
(h) the right to produce, distribute, exhibit and broadcast,
by all manner and means, trailers, spots and promos and excerpts from
the Entertainment Assets for the purpose of advertising, publicizing or
exploiting the Entertainment Assets;
(i) the right to use the present titles of the Entertainment
Assets or any other title or titles as the titles of the Entertainment
Assets;
(j) the right to authorize television stations to broadcast
commercial advertising and other announcements during or between the
telecasting of segments of the Entertainment Assets and during, before
and after telecasting the Entertainment Assets;
(k) all collateral, allied, ancillary and subsidiary rights of
every kind and nature in and to the Entertainment Assets and the
Literary Properties, whether now known or hereafter created or devised
(e.g., merchandising, commercial tie-up, novelization and print and
electronic publishing rights);
(l) the right in perpetuity to use all existing names,
credits, logos, trademarks and titles contained in or incorporated into
the Entertainment Assets, trailers, positive prints, preprint materials
and video masters of the Entertainment Assets and advertising and
publicity materials relating to the Entertainment Assets, including
without limitation the names, credits, logos and trademarks of any
Seller,
54
any of its Affiliates and/or any of its predecessors-in-interest of any
of the foregoing and of the licensees and subdistributors of the
foregoing;
(m) all sequel, prequel, remake, series, miniseries spinoff
(generic and planted) and other production rights, both with respect to
the Entertainment Assets and the Literary Properties;
(n) all worldwide copyrights and rights of a copyright
proprietor, together with all related registrations, renewals and
extensions, and all worldwide trademarks, service marks, tradenames,
domain names and logos, together with all related registrations,
renewals, extensions and goodwill, and all rights to apply for, extend
and renew such copyrights, trademarks, service marks and domain names,
including, without limitation, all rights to the "Xxxxxx" and "Xxxxxx
Entertainment" name in whatever form, together with all related
goodwill.
"Royalties and Participations" shall mean the amounts payable by any
Seller or any of its Affiliates under the Acquisition Agreements to Persons that
granted rights in the Entertainment Assets to any Seller or any of its
Affiliates under the Acquisition Agreements, or the amounts payable by any
Seller or any of its Affiliates under the Underlying Agreements to Persons that
rendered services in connection with the development and/or production of the
Entertainment Assets, the payment of which is contingent upon and payable only
to the extent of the receipt by any Seller or any of its Affiliates of revenues
from the exploitation of the Entertainment Assets.
"SEC" means the Securities and Exchange Commission or any successor
agency.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series A Preferred Stock" means the Series A Convertible Preferred
Stock, no par value per share, of the Company.
"Series B Preferred Stock" means the Series B Convertible Preferred
Stock, no par value per share, of the Company.
"Subsidiary" shall mean, with respect to any Person, any other Person
of which more than fifty percent (50.0%) of the total voting power of capital
stock entitled to vote (without regard to the occurrence of any contingency) in
the election of directors or other persons performing similar functions are at
the time directly or indirectly owned by such Person. When used in this
Agreement or the other Transaction Documents, the term "Subsidiary" shall mean a
Subsidiary of the Company, unless the context otherwise requires.
"Tax" or "Taxes" shall mean Income Tax or Other Tax, as the case may
be.
"Tax Returns" shall mean any return, report, information return,
schedule, certificate, statement or other document (including any related or
supporting information) filed or required to be filed with, or, where none is
required to be filed with a Taxing Authority, the statement or other document
issued by, a Taxing Authority in connection with any Tax.
55
"Taxing Authority" shall mean any Governmental or Regulatory Authority
having or purporting to exercise jurisdiction with respect to any Tax.
"Transaction Documents" shall mean this Agreement, the Settlement and
Release of Claims, the Instrument of Assignment and Assumption, the Joint Escrow
Directions and each and every other agreement, instrument or other document
contemplated hereby, related hereto or required to be executed and delivered in
connection herewith, provided that the term Transaction Documents shall not
include the Letter of Intent or the Escrow Agreement.
"Underlying Agreements" shall mean any and all agreements with writers,
directors, producers, actors, composers, animators, designers, artists or other
Persons (or any of their loan-out companies) who rendered or furnished rights
and/or services or otherwise participate or participated in the preparation or
production of Entertainment Assets, and/or under or pursuant to which any
Seller, any Affiliate of Sellers or any of its or their predecessors-in-interest
acquired any rights in or to any Entertainment Related Assets, Literary
Properties and/or music for or in connection with the Entertainment Assets.
"Videograms" shall mean any and all forms of videocassette, videodisc,
video cartridge, tape, phonogram or other similar device now known or hereafter
devised and designed primarily for home use in conjunction with a reproduction
apparatus that causes a visual image (whether or not synchronized with sound) to
be seen on the screen of a television receiver or any comparable device now
known or hereafter devised.
56
OTHER DEFINITIONS
"AAA"....................................................... Section 9.12(a)
"Acquisition"............................................... Recitals
"Assigned Contracts"........................................ Section 1.1(c)
"Assigned Receivables"...................................... Section 1.1(d)
"Assigned Receivables Collection Amount".................... Section 2.3
"Assumed Liabilities"....................................... Section 1.3
"August 24 Letter of Intent"................................ Recitals
"BHP"....................................................... Preamble
"Closing Date".............................................. Section 1.3
"Closing"................................................... Section 1.3
"Company"................................................... Preamble
"Deposit"................................................... Recitals
"Employee Benefit Plan"..................................... Section 3.16
"ERISA"..................................................... Section 3.16
"ERISA Affiliate"........................................... Section 3.16
"Escrow Agreement".......................................... Recitals
"Escrow Funds".............................................. Section 8.3(b)
"Xxxxxx Entertainment Assets"............................... Section 1.1
"Xxxxxx Entertainment Business"............................. Recitals
"Xxxxxx Sale Transaction"................................... Section 5.3
"HCI"....................................................... Preamble
"Indemnified Party"......................................... Section 7.4
"Indemnifying Party"........................................ Section 7.4
"Instrument of Assignment and Assumption"................... Section 6.2(e)(iv)
"Joint Escrow Directions"................................... Section 2.2(a)
"Xxxxxxx Settlement Agreement".............................. Section 1.2(k)
"Other Filings"............................................. Section 5.5(b)
"Permitted Liens"........................................... Section 3.6(a)
"Physical Properties Schedule".............................. Section 3.7(b)
"PM Entertainment".......................................... Section 1.2(a)
"PM Entertainment Characters"............................... Recitals
"Proration Adjustment"...................................... Section 2.4
"Proxy Statement"........................................... Section 5.5(a)
"Purchase Price"............................................ Section 2.1
"Purchaser Indemnified Persons"............................. Section 7.3
"Purchaser Material Breach"................................. Section 8.1(d)
"Purchaser"................................................. Preamble
"Restraints"................................................ Section 6.1(b)
"Retained Assets"........................................... Section 1.2
"Retained Liabilities"...................................... Section 1.4
"Retained Receivables"...................................... Section 1.2(c)
"Seller Indemnified Persons"................................ Section 7.2
"Seller Material Breach".................................... Section 8.1(c)(i)
"Seller" or "Sellers"....................................... Preamble
57
"Sellers' knowledge," "knowledge of Sellers" or
"to the best knowledge of Sellers".......................... Section 9.11
"Settlement and Release of Claims".......................... Section 6.2(e)(v)
"Swen"...................................................... Section 5.12
58
EXHIBIT A
FORM OF
SETTLEMENT AGREEMENT AND
MUTUAL RELEASE OF CLAIMS
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE OF CLAIMS is effective as
of the ___ day of ___________ 2001 (this "Agreement and Release"), by and
between THE XXXXXX ENTERTAINMENT COMPANY, a California corporation ("Xxxxxx"),
and CLASSIC MEDIA, LLC, a Delaware limited liability company ("Classic" or
"Purchaser").
R E C I T A L S
X. Xxxxxx and certain of its Affiliates (collectively, "Sellers"), on
the one hand, and Classic, on the other, have entered into an Asset Purchase and
Sale Agreement dated as of March 6, 2001 (the "Asset Purchase Agreement"),
pursuant to which Sellers agreed to sell, assign and transfer to Purchaser, and
Purchaser agreed to purchase from Sellers, all assets, properties and rights
owned or held by Sellers and used in the conduct of the Xxxxxx Entertainment
Business, all on the terms and subject to the conditions set forth therein.
Unless otherwise indicated, capitalized terms used in this Agreement and Release
have the meanings set forth in the Asset Purchase Agreement.
X. Xxxxxx and Classic entered into a Letter of Intent dated August 24,
2000 (as amended by an amendment to Letter of Intent dated September 28, 2000,
the "LOI"), which sets forth, among other things, the principal terms with
respect to a proposed investment transaction in which Classic would purchase
shares of a newly designated series of preferred stock of Xxxxxx.
C. In addition, Xxxxxx, Classic and Sidley & Austin, as escrow holder
(in such capacity, the "Escrow Holder"), entered into an Escrow Agreement dated
as of August 24, 2000 (the "Escrow Agreement"), pursuant to which Classic
deposited with the Escrow Holder the aggregate amount of $1,000,000 (together
with an additional deposit of $500,000 made by Classic pursuant to the Asset
Purchase Agreement and all accretions thereto, interest and dividends earned or
accrued thereon, and any property substituted therefor, the "Escrow Funds") to
be held and disbursed by the Escrow Holder in accordance with the terms set
forth therein and in the LOI.
D. Classic previously terminated the LOI, and Xxxxxx and Classic have
each made claims against one another with respect to alleged breaches or
defaults under the LOI. Furthermore, Xxxxxx and Classic have each filed with the
Escrow Holder claims notices and objection notices under the Escrow Agreement
regarding its entitlement to the Escrow Funds.
59
E. Pursuant to the terms of the Asset Purchase Agreement, the Escrow
Funds are being [refunded to Classic/released to the Company] and, in connection
therewith, the parties intend to settle and conclude any and all claims and
disputes relating to the parties' performance under the LOI and the Escrow
Agreement, all on the terms and subject to the conditions set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration for the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Mutual Release.
(a) Release of Classic Parties.
Except as expressly set forth in this Agreement and Release,
Xxxxxx, for itself and its predecessors, successors, heirs, assigns, executors,
administrators, agents, employees, partners, officers, directors, shareholders,
representatives, attorneys, insurers, affiliates, subsidiaries, parents and
sister companies, and all persons acting by, under, through or in concert with
any of them (collectively, the "Xxxxxx Parties"), do hereby fully release and
forever discharge Classic and its predecessors, successors, heirs, assigns,
executors, administrators, agents, employees, partners, officers, directors,
shareholders, representatives, attorneys, insurers, affiliates, subsidiaries,
parents and sister companies, and all persons acting by, under, through or in
concert with any of them (the "Classic Parties"), from and against any and all
claims, damages, actions, causes of action, claims of indemnity, claims of
contribution, liabilities, judgments, liens, contracts, agreements, rights,
debts, suits, obligations, promises, acts, costs and expenses and charges of
whatsoever nature, whether at law or in equity, whether known or unknown,
suspected or unsuspected, foreseen or unforeseen, fixed or contingent, which the
Xxxxxx Parties (or any of them) now have or claim to have, or at any time
heretofore had or claimed to have, against the Classic Parties (or any of them)
based upon, or by reason of, in whole or in part, the performance or
non-performance by Classic of its obligations under the LOI or the Escrow
Agreement; provided, however, that nothing contained in this Section 1(a) shall
be construed or otherwise be deemed to release or otherwise discharge Classic or
any other Classic Party from any of its obligations, liabilities or commitments
under, or in connection with, the Asset Purchase Agreement, the agreements,
instruments or other documents executed and delivered in connection therewith
(including, without limitation, the Transaction Documents), or the consummation
of the transactions contemplated thereby.
(b) Release of Xxxxxx Parties.
Except as expressly set forth in this Agreement and Release, the Classic Parties
do hereby fully release and forever discharge the Xxxxxx Parties from and
against any and all claims, damages, actions, causes of action, claims of
indemnity, claims of contribution, liabilities, judgments, liens, contracts,
agreements, rights, debts, suits, obligations, promises, acts, costs and
expenses and charges of whatsoever nature, whether at
60
law or in equity, whether known or unknown, suspected or unsuspected, foreseen
or unforeseen, fixed or contingent, which the Classic Parties (or any of them)
now have or claim to have, or at any time heretofore had or claimed to have,
against the Xxxxxx Parties (or any of them) based upon, or by reason of, in
whole or in part, the performance or non-performance by Xxxxxx of its
obligations under the LOI or the Escrow Agreement; provided, however, that
nothing contained in this Section 1(b) shall be construed or otherwise be deemed
to release or otherwise discharge Xxxxxx or any other Xxxxxx Party from any of
its obligations, liabilities or commitments under, or in connection with, the
Asset Purchase Agreement, the agreements, instruments or other documents
executed and delivered in connection therewith (including, without limitation,
the Transaction Documents), or the consummation of the transactions contemplated
thereby.
(c) Release of Escrow Holder.
Except as expressly set forth in this Agreement and Release,
the Classic Parties and the Xxxxxx Parties do hereby fully release and forever
discharge the Escrow Holder from and against any and all claims, damages,
actions, causes of action, claims of indemnity, claims of contribution,
liabilities, judgments, liens, contracts, agreements, rights, debts, suits,
obligations, promises, acts, costs and expenses and charges of whatsoever
nature, whether at law or in equity, whether known or unknown, suspected or
unsuspected, foreseen or unforeseen, fixed or contingent, which the Classic
Parties (or any of them) or the Xxxxxx Parties (or any of them) now have or
claim to have, or at any time heretofore had or claimed to have, against the
Escrow Holder based upon, or by reason of, in whole or in part, the performance
or non-performance by the Escrow Holder of its obligations under the Escrow
Agreement.
2. Unknown Claims and Waiver of Civil Code Section 1542.
Each party acknowledges and agrees that this Agreement and
Release applies to all claims for damages, actions, causes of action, claims of
indemnity, claims of contribution, liabilities, judgments, liens, contracts,
agreements, rights, debts, suits, obligations, promises, acts, costs and
expenses and charges of whatsoever nature, whether at law or in equity, whether
known or unknown, suspected or unsuspected, foreseen or unforeseen, that each
may have against the other with respect to the matters being released under
Section 1. In addition, each party hereby acknowledges that it has had the
benefit of counsel, has been advised of, understands, and knowingly and
specifically waives the provisions of Section 1542 of the California Civil Code
(and any similar statute, code, law or regulation of any state in the United
States), to the fullest extent that they may waive such rights and benefits.
Section 1542 of the California Civil Code provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Each party acknowledges that the significance and consequence
of this waiver
61
of Section 1542 of the California Civil Code is that even if it should
eventually suffer additional damages arising out of the facts referred to in
this Agreement and Release, it will not be able to make any claim for those
damages. Furthermore, each party acknowledges that it intends these consequences
even as to claims for damages that may exist as of the date of this Agreement
and Release but which the party does not know exist, and which, if known, would
materially affect the party's decision to execute this Agreement and Release.
3. Covenant Not to Xxx.
Xxxxxx, for itself and the other Xxxxxx Parties, and Classic,
for itself and the other Classic Parties, covenant and agree that neither it nor
any of its affiliates will initiate or commence any legal action, suit or other
proceeding, at law or in equity, against the other based, in whole or in part,
on any claims, demands, claims of indemnity, claims of contribution,
liabilities, judgments, contracts, agreements, rights, debts, obligations, costs
or expenses arising out of or relating to the matters being released under
Section 1. This Section 3 may be pleaded as a full and complete defense to any
legal action, suit or other proceeding initiated or commenced by or on behalf of
either party as provided above.
4. No Admission; Liability Under this Agreement and
Release.
This Agreement and Release is not an admission of liability.
The purpose of this Agreement and Release is to settle claims which are disputed
and contested, or are potential, and this Agreement and Release is the result of
a compromise over such disputed or contested claims. Nothing contained herein
shall be deemed an admission of any kind to any other party. In addition, the
parties recognize and acknowledge that this Agreement and Release is not
intended to and shall not release any party from any liability or damage caused
by, related to or arising out of such party's failure or refusal to perform the
acts required to be performed by it under this Agreement and Release in
accordance with the terms hereof.
5. Authority.
Each party hereby represents and warrants that it has the
exclusive right and authority to execute this Agreement and Release on behalf of
itself and its affiliates and has not sold, assigned, transferred or otherwise
disposed of any interest in any claims released hereby.
6. Succession.
Subject to the provisions otherwise contained in this
Agreement and Release, this Agreement and Release shall inure to the benefit of
and be binding upon the parties, their affiliates and their respective
successors and assigns.
7. Waiver; Amendment.
Any of the terms and conditions of this Agreement and Release
may be waived at any time by the party entitled to the benefit thereof, but only
by a writing signed by that party, and no such waiver shall affect or impair the
right of the waiving party to require observance, performance or satisfaction
either of that term or condition as it applies on a subsequent occasion or of
any other term or condition thereof. The provisions of this Agreement and
Release may be amended or modified at any time by a writing signed by the party
or parties against whom enforcement of such amendment or modification is sought.
62
8. Representation by Counsel.
This Agreement and Release has been carefully read by the
parties and the contents hereof are known and understood by the parties. The
parties have each received independent legal advice from attorneys of their
choice with respect to the preparation, review and advisability of executing
this Agreement and Release. Prior to the execution of this Agreement and Release
by each party, the party's attorney has reviewed this Agreement and Release and
each party acknowledges that it has executed this Agreement and Release after
independent investigation and without fraud, duress or undue influence.
9. Captions; Rules of Construction.
The captions contained in this Agreement and Release are for
convenience of reference only and are not be considered in construing or
interpreting this Agreement and Release. Section, paragraph, clause, recital or
party references are to this Agreement and Release unless otherwise stated. Each
party and its counsel have reviewed this Agreement and Release and agree that
they have participated in the drafting hereof and that each party has agreed to
the language contained herein and has had the opportunity to make all changes
and alterations desired. The parties agree that any rule of construction to the
effect that ambiguities in the interpretation of this Agreement and Release or
any amendment hereto are to be resolved against the drafting party, including,
without limitation, Section 1654 of the California Civil Code, shall not apply
to the interpretation of this Agreement and Release.
10. Attorneys' Fees.
In any action, suit, arbitration or other proceeding in
connection with this Agreement, the prevailing party shall be entitled to
recover from the non-prevailing party all of its costs and expenses, including,
without limitation, reasonable attorneys' fees and expenses, incurred by such
prevailing party.
11. Severability.
If any provision of this Agreement and Release is held by a
court of competent jurisdiction to be invalid or unenforceable, the remainder of
this Agreement and Release which can be given effect without the invalid
provision shall continue in full force and effect and shall in no way be
impaired or invalidated.
12. Governing Law.
The rights and obligations of the parties under, and the
interpretation and performance of, this Agreement and Release shall be governed
by the laws of the State of California, without regard to choice of law or
conflict of laws principles.
13. Parties in Interest.
Nothing contained in this Agreement and Release, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement and Release on any persons other than the parties and
their respective successors and assigns, nor is anything contained in this
Agreement and Release intended to relieve or discharge the obligation or
liability of any third persons to any party, nor shall any provision give any
third persons any right of subrogation or action over against any party.
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14. Counterparts.
This Agreement and Release may be executed in any number of
counterparts and by facsimile, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
15. Arbitration.
Any and all claims, controversies and disputes arising out of
this Agreement and Release shall be finally settled by arbitration in accordance
with the procedures set forth in Section 9.12 of the Asset Purchase Agreement.
16. WAIVER OF TRIAL BY JURY.
EACH PARTY HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND RELEASE OR THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF
WHICH PARTY INITIATES THE ACTION, SUIT, PROCEEDING OR COUNTERCLAIM.
IN WITNESS WHEREOF, the parties have caused this Agreement and
Release to be executed and delivered as of the first date written above.
COMPANY
THE XXXXXX ENTERTAINMENT COMPANY,
a California corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CLASSIC
CLASSIC MEDIA, LLC, a Delaware limited
liability company
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
64
EXHIBIT B
FORMS OF
LEGAL OPINIONS OF COUNSEL TO SELLERS
1. Each Seller is duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, and has the corporate power and authority to own, operate and
lease its assets and properties and to conduct its business as it is currently
being conducted.
2. Each Seller has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Asset Purchase Agreement
and the other Transaction Documents to which it is a party and to consummate the
Acquisition and the other transactions contemplated thereby. All action on the
part of each Seller necessary to execute, deliver and perform its obligations
under the Asset Purchase Agreement and the other Transaction Documents to which
it is a party and to consummate the Acquisition and the other transactions
contemplated thereby has been duly and validly taken.
3. The Asset Purchase Agreement and each other Transaction Document to
which each Seller is a party has been duly and validly authorized, executed and
delivered by such Seller and constitutes the legal, valid and binding obligation
of such Seller, enforceable against such Seller in accordance with the terms
thereof.
4. Neither the execution, delivery or performance by each Seller of the
Asset Purchase Agreement or the other Transaction Documents to which it is a
party, nor the consummation by any Seller of the Acquisition and the other
transactions contemplated thereby will violate any provision of the charter or
bylaws of any Seller, as currently in effect, or violate or contravene any Laws
applicable to any Seller that, in such counsel's experience, are generally
applicable to transactions of the type contemplated by the Transaction
Documents.
5. No consent, approval, authorization or permit of, or filing with or
notice to, any Governmental or Regulatory Authority is required in connection
with the execution, delivery or performance by any Seller of the Asset Purchase
Agreement and the other Transaction Documents or the consummation of the
Acquisition or the other transactions contemplated thereby, other than those
that have been obtained, waived or made prior to or on the date hereof and other
than those the absence of which would not have a material adverse effect on the
ability of Sellers to perform their respective obligations under the Transaction
Documents.
Such opinion may expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Sellers or appropriate governmental
officials and may contain such exceptions and qualifications as are customary
under the circumstances.
65
EXHIBIT C
FORM OF
OPINIONS OF COUNSEL FOR PURCHASER
1. Purchaser is a duly formed limited liability company and is existing
in good standing under the laws of the State of Delaware and has the limited
liability company power and authority to own, lease and operate its assets and
properties and to conduct its business as it is currently being conducted.
2. Purchaser has the requisite limited liability power and authority to
execute, deliver and perform its obligations under the Asset Purchase Agreement
and the other Transaction Documents to which it is a party and to consummate the
Acquisition and the other transactions contemplated thereby.
3. The Asset Purchase Agreement and each other Transaction Document to
which Purchaser is a party has been duly and validly authorized by Purchaser,
and the Asset Purchase Agreement and each of the other Transaction Documents to
which it is a party has been duly executed and delivered by Purchaser and,
assuming the due authorization, execution and delivery by each other party
thereto, constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms.
4. Neither the execution, delivery or performance by Purchaser of the
Asset Purchase Agreement or the other Transaction Documents to which it is a
party, nor the consummation by Purchaser of the Acquisition and the other
transactions contemplated thereby will violate any provision of the certificate
of formation or operating agreement of Purchaser, as currently in effect, or
will violate or contravene any Laws applicable to Purchaser that, in such
counsel's experience, are generally applicable to transactions of the type
contemplated by the Transaction Documents, other than violations and
contraventions that would not have a material adverse effect on the ability of
Purchaser to perform its obligations under the Transaction Documents.
5. No consent, approval, authorization or permit of, or filing with or
notice to, any Governmental or Regulatory Authority is required on the part of
Purchaser in connection with the execution, delivery or performance by Purchaser
of the Asset Purchase Agreement and the other Transaction Documents or the
consummation by Purchaser of the Acquisition or the other transactions
contemplated thereby, other than those that have been obtained, waived or made
prior to or on the date hereof and other than those the absence of which would
not have a material adverse effect on the ability of Purchaser to perform its
obligations under the Transaction Documents.
Such opinion may expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Purchaser or appropriate governmental
officials and may contain such exceptions and qualifications as are customary
under the circumstances.
