Exhibit 4.1
TERM SHEET FOR MODIFICATION OF LOAN AND CONSULTING
ARRANGEMENTS BY AND AMONG XXXXXXXXXX INVESTMENTS, LLC
("XXXXXXXXXX"), XXXXXX CHARITABLE REMAINDER TRUST ("TRUST"), XXXXXX XXXXXXX
PROMOTIONS, INC. ("CKP"), XXXXXX XXXXXXX PROMOTIONS, LTD.
("PROMOTIONS") AND XXXXXX XXXXXXX BOXING, INC. ("BOXING")
Release of Loan: The outstanding principal of the $1,000,000 loan and all
accrued but unpaid interest thereon made by the Trust and evidenced by the
Promissory Note dated March 15, 2002 made by Boxing in favor of the Trust (the
"Loan") will be repaid as follows: CKP will pay an aggregate of $335,000 in cash
to Xxxxxxxxxx and/or the Trust according to such allocations as shall be
determined by Xxxxxxxxxx and the Trust and notified to CKP by Xxxxxxxxxx and the
Trust (the payment will be made in three (3) installments with a payment of
$110,000 having been made on or about January 14, 2005, a second payment of not
less than $110,000 to be made on March 1, 2005 and the remaining balance of the
$335,000 to be paid on April 1, 2005). The balance of the Loan will be forgiven
in return for the following consideration: (i) CKP will xxxxx Xxxxxxxxxx
warrants (the "Warrants") to purchase 7,500,000 shares of CKP's common stock,
par value $.01 per share ("Common Stock"), at a purchase price of $.10 per share
(the right to purchase is more fully described below under "Warrants"), and (ii)
CKP will grant English Distribution, LLC ("Distribution") the exclusive
worldwide right, but not including the United States, to license the electronic
media rights to the boxing libraries owned by CKP's subsidiaries. The terms of
such license will provide that (x) Distribution will be entitled to a twenty
(20%) percent commission from the license fees received by Distribution (the
"Commission") and (y) the proceeds of the license fees received by Distribution,
net of the Commission, will be paid as follows: Distribution shall retain
seventy-five (75%) percent of such net proceeds and CKP will receive twenty-five
(25%) percent of the net proceeds. In addition to the forgiveness of the balance
of the Loan, Xxxxxxxxxx, upon receipt in full of the above-referenced payment of
$335,000 and the consideration referred to in clauses (i) and (ii) above, will
(1) agree to the termination of the Consulting Agreement, dated as of April 30,
2002, by and among Zenascent, Inc., Big Content, Inc., Promotions, Boxing and
Xxxxxxxxxx (the "Consulting Agreement") and forgive all payments currently due
and to be due thereunder, including the $336,000 in fees currently in arrears,
(2) waive Xxxxxxxxxx'x rights to accelerate the Consulting Agreement; (3) cause
the Trust to waive its rights to accelerate the Loan, (4) agree to pay CKP an
amount equal to the proceeds from the sale, if any, by an affiliate of
Xxxxxxxxxx of 66,658 shares of the capital stock in M.P.I.-Media Partners
International BV, a Netherlands company engaged in television rights management
as well as sponsorship and advertising rights management ("MPI"). Nothing
contained in the foregoing, however, shall require such affiliate of Xxxxxxxxxx
to dispose of any of the shares of MPI that it has an ownership interest in. In
the event either of the payments required to be made by CKP on March 1, 2005 and
April 1, 2005 are not made on such dates, in addition to all rights and remedies
of Xxxxxxxxxx and the Trust, Xxxxxxxxxx'x obligation to make the payment
referred to in clause (4) above relating to 66,658 shares of capital stock of
MPI shall be null and void.
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Release of Security Interest: The Loan is currently secured by a lien on the
boxing film library owned by Big Content, Inc., an affiliate of CKP. Upon
payment in full of the consideration referred to in "Release of Loan" above and
forgiveness of the Loan, the security interest in the boxing library will be
released.
Release of Other Loans: Approximately $220,000 of other loans have been made by
Xxxxxxxxxx and its affiliates to CKP (the "Other Loans"). In consideration for
CKP's issuance to Xxxxxxxxxx of 800,000 shares of Common Stock, Xxxxxxxxxx will
forgive, and will cause its affiliates to forgive, the Other Loans and all
accrued but unpaid interest thereon. Upon the forgiveness of the Other Loans,
Xxxxxxxxxx shall concurrently release Xx. Xxxxx XxXxxxxxx from his guaranty of
$100,000 of the Other Loans.
Warrants: The term of the Warrants shall be ten (10) years with vesting of
Warrants to purchase 1,500,000 shares of Common Stock thereunder annually
commencing on the first anniversary of the grant until all such Warrants are
fully vested. The shares of Common Stock underlying the Warrants will have full
"piggy-back" registration rights which rights will provide that the number of
shares of Common Stock registrable by Xxxxxxxxxx are not subject to any
cutbacks. In the event that Xxxxxxxxxx is not able to utilize such piggy-back
registration rights within 24 months of the date of grant, Xxxxxxxxxx will have
the right to demand that the shares of Common Stock underlying the Warrants be
registered on a Registration Statement on Form S-3. In the event CKP is not
eligible to file a Registration Statement on Form S-3 at the time of
Xxxxxxxxxx'x exercise of its demand rights, CKP will file a Registration
Statement on Form S-1 or other appropriate form of registration statement under
the Securities Act of 1933, as amended. All fees, disbursements and expenses in
connection with the Registration Statement and compliance with securities laws
shall be borne by CKP except that Xxxxxxxxxx will bear the cost of underwriting
and/or brokerage discounts, fees and commissions and its counsel fees. CKP will
maintain the effectiveness of the Registration Statement so filed and will
timely file with the Securities and Exchange Commission all required filings so
as not to affect the availability of such Registration Statement. Except as
provided hereinafter, the Registration Statement so filed will only include the
shares of Common Stock issuable upon exercise of the Warrants issued to
Xxxxxxxxxx.
Xxxxxxxxxx may exercise the Warrants at any time by giving written notice of
exercise to CKP specifying the number of shares of Common Stock with respect to
which the Warrants are being exercised, and delivering to CKP: (A) a copy of an
irrevocable instruction from Xxxxxxxxxx to an underwriter or broker directing
such underwriter or broker to sell shares of Common Stock to be acquired by the
exercise of such Warrants in an amount (net of brokers' and underwriters' fees,
commissions or discounts) sufficient to pay such exercise price in full, and
promptly remit to CKP the amount of such exercise price, all of which
arrangements shall be reasonably satisfactory to CKP; (B) irrevocable
instructions from Xxxxxxxxxx to CKP to withhold from the shares of Common Stock
to be acquired by the exercise of such Warrants a number of shares having a fair
market value on the date of exercise sufficient to pay such exercise price in
full; or (C) a combination of the foregoing (A) or (B), a "Cashless Exercise".
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Upon a change of control of CKP all Warrants that have not previously become
exercisable shall be accelerated and shall become exercisable.
In case of any reclassification or change of outstanding Common Stock or other
securities purchasable upon exercise of the Warrants (other than a change in par
value or as a result of a subdivision or combination of shares of Common Stock),
recapitalization, separation (including a spin-off or other distribution of
stock or property of CKP), reorganization, or any consolidation or merger of CKP
with another corporation (other than a consolidation or merger in which CKP is
the surviving corporation that does not result in any reclassification of or
change in the outstanding shares of Common Stock) or partial or complete
liquidation, or any sale or conveyance to another corporation of all or
substantially all of the assets of CKP (other than by mortgage or pledge), then
CKP or such successor or purchasing corporation, as the case may be, shall
undertake to assure that: (A) the options/warrants shall be exercisable, upon
payment of the applicable exercise price in effect immediately before such
action, for the kind and amount of shares that Xxxxxxxxxx would have owned
and/or been entitled to receive after such action, had such Warrants been
exercised immediately before such action; and (B) each such Warrants, and the
applicable exercise price, shall be subject to adjustments, which shall, to the
greatest extent practicable, be equivalent to, and subject to the same terms and
provisions as, the adjustments provided for herein. The provisions of this
paragraph shall similarly apply to successive reclassifications, consolidations,
mergers, sales and conveyances.
The number and kind of securities purchasable upon the exercise of the
options/warrants and the exercise price of the Warrants shall be subject to
adjustment from time to time upon certain events, as follows:
(A) If CKP pays a dividend in shares of Common Stock, makes a distribution to
all holders of shares of any class of its capital stock in shares of Common
Stock, subdivides its outstanding shares of Common Stock into a greater number
of shares, or combines its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then the number of shares of Common Stock
purchasable upon exercise of the Warrants shall be adjusted so that Xxxxxxxxxx
shall be entitled to receive the kind and number of shares or other securities
of CKP that it would have owned and/or been entitled to receive as a result of
any of the events described above, had such Warrants been exercised immediately
before such event, effective immediately after the effective date of such event.
(B) Whenever the number of shares of Common Stock purchasable upon the exercise
of the Warrants is adjusted, the exercise price per share shall also be adjusted
(to the nearest cent) by multiplying the exercise price per share immediately
before such adjustment by a fraction, the numerator of which is the number of
shares of Common Stock purchasable upon the exercise of the Warrants immediately
before such adjustment, and the denominator of which is the number of shares of
Common Stock so purchasable immediately thereafter.
(C) In the event that at any time, as a result of an adjustment made, the
Warrants shall become exercisable for any securities of CKP other than shares of
Common Stock, thereafter the number of such other securities so purchasable upon
exercise of the Warrants and the exercise price of such securities shall be
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subject to adjustment from time to time in a manner and on terms as equivalent
as practicable to the provisions herein with respect to the shares of Common
Stock.
Following the effectiveness of the Registration Statement referred to above, CKP
shall reissue all certificates representing the shares of Common Stock then
owned by Xxxxxxxxxx free and clear of any restrictive legend, and deliver such
"clean" certificates to Xxxxxxxxxx. CKP warrants that the shares shall be freely
transferable on its books and records. It is the obligation of Xxxxxxxxxx to
comply with all applicable securities laws upon resale of the shares. CKP
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to Xxxxxxxxxx by violating the intent and purpose of the
transaction contemplated hereby. Accordingly, CKP acknowledges that the remedy
at law for a breach of its obligations hereunder will be inadequate and agrees,
in the event of a breach or threatened breach by CKP, that Xxxxxxxxxx shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
Xxxxxxxxxx understands and agrees that (a) it will not be treated as an employee
of CKP for Federal tax purposes; (b) CKP will not withhold on behalf of
Xxxxxxxxxx pursuant to this Term Sheet any sums for income tax, unemployment
insurance, social security, or any other withholding pursuant to any law or
requirement of any governmental body relating to Xxxxxxxxxx; and (c) all of such
payments, withholdings and benefits, if any, are the sole responsibility of
Xxxxxxxxxx. In the event the Internal Revenue Service or any other governmental
agency should question or challenge the status of Xxxxxxxxxx, the parties agree
that Xxxxxxxxxx and CKP shall have the right to participate in any discussion or
negotiation occurring with such agency or agencies, irrespective of who
initiates the discussion or negotiations.
CKP will provide Xxxxxxxxxx with annual financial statements and copies of other
documents that are provided to shareholders and the SEC and any other
information as might be reasonably requested by Xxxxxxxxxx during the term of
the Warrants.
Notwithstanding anything to the contrary contained herein, Xxxxxxxxxx shall have
the right, at any time and from time to time, to surrender all or any portion of
the Warrants (which shall include the underlying Common Stock) to CKP with no
consideration being paid by CKP for such surrendered Warrants. Thereafter,
Xxxxxxxxxx shall have no claim against CKP for compensation, consideration or
any claims for damages arising from such surrender(s). The issuance of the
Warrants by CKP, whether or not returned by Xxxxxxxxxx, shall constitute CKP's
fulfillment of CKP's obligation with respect to such issuance. The remaining
terms and conditions of this Term Sheet shall continue to be in full force and
effect.
Registration of Shares: The (i) 800,000 shares of Common Stock referred to in
"Release of Other Loans" above and (ii) 500,000 shares of Common Stock issuable
pursuant to the Warrant to Purchase Common Stock, dated April 30, 2002, executed
by Xxxxxxxxx, Inc. in favor of Xxxxxxxxxx Investments, LLC, as amended by letter
agreement on September 10, 2002 will be registered on the same basis as, and in
the same Registration Statement covering, the 7,500,000 shares of Common Stock
underlying the Warrants.
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Documentation: The foregoing transactions shall be further evidenced by mutually
satisfactory documentation customary for transactions of this nature, including,
without limitation, representations and warranties, a release of loan agreement,
license agreement, warrant agreement and registration rights agreement. The
parties hereto acknowledge that the more definitive documentation will, inter
alia, amend or terminate, as appropriate, the documents listed on Schedule A
annexed hereto.
Public Announcements: CKP, Boxing and Promotions agree that each of such
entities will not, and will cause their respective affiliates not to, issue any
press release or any other public announcement, including posting any
announcement on the internet, without Xxxxxxxxxx'x prior consent, such consent
not to be unreasonably withheld.
Governing Law: This Term Sheet will be governed by and construed in accordance
with the laws of the State of New York (without regard to the choice of law
principles thereof).
The parties understand and agree that this term sheet is binding on the parties.
Nevertheless, the parties intend to enter into more definitive documentation as
provided for in the third preceding paragraph.
Xxxxxx to and accepted as of the 10th day of February, 2005.
XXXXXXXXXX INVESTMENTS, LLC
By: /s/ Xxxxxxx X. English III
--------------------------
Xxxxxxx X. English III
Managing Member
XXXXXX CHARITABLE REMAINDER TRUST
By: /s/ Adrenee English
-------------------
Name: Adrenee English
Title: Trustee
XXXXXX XXXXXXX PROMOTIONS, INC.
By: /s/ Xxxxx XxXxxxxxx
-------------------
Name: Xxxxx XxXxxxxxx
Title: Executive Vice President
XXXXXX XXXXXXX PROMOTIONS, LTD.
By: /s/ Xxxxx XxXxxxxxx
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Name: Xxxxx XxXxxxxxx
Title: Executive Vice President
XXXXXX XXXXXXX BOXING, INC.
By: /s/ Xxxxx XxXxxxxxx
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Name: Xxxxx XxXxxxxxx
Title: Executive Vice President
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