MANEX/MASS.ILLUSION BUSINESS ACQUISITION AGREEMENT
THIS BUSINESS ACQUISITION AGREEMENT (the "Agreement") is entered into as
of this 15th day of September 1997 by and between CINERGI PRODUCTIONS INC.
(CALIFORNIA) doing business as MASS.ILLUSION, a California corporation
("Seller"), whose address is 0000 Xxxxxxxx, Xxxxx Xxxxxx, XX 00000 and
MASS.ILLUSIONS, LLC a Massachusetts limited liability company ("Buyer"),
whose principal place of business is 00 Xxxxxxxxx Xxxx, Xxxxx, XX 00000 and
sets forth the terms and conditions of Buyer's purchase of certain assets and
agreement to perform certain obligations on behalf of Seller with respect to
Seller's motion picture visual effects facility.
WITNESSETH
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell certain of its properties and assets to Buyer as well as Seller desires
to have certain obligations of Seller performed by Buyer, including without
limitation, certain rights, duties and obligations in connection with the
motion picture entitled "What Dreams May Come" (the "Picture");
WHEREAS, subject to the terms and conditions hereof, Buyer desires to
purchase said properties and assets as well as assume certain specified
obligations of Seller for the consideration specified herein; and
WHEREAS, Buyer and Seller are simultaneously executing agreements with
ATL Productions Inc. ("ATL") for the purpose of facilitating this Agreement.
NOW, THEREFORE, in order to consummate the Agreement and in
consideration of the mutual agreements set forth herein, the parties agree as
follows:
SECTION 1. PURCHASE AND SALE OF ASSETS
1.1 SALE AND DESCRIPTION OF ASSETS. Subject to the terms and conditions
specified herein, Seller agrees to sell and Buyer agrees to purchase, at the
Closing (as defined in Section 1.6 hereof), all of the assets set forth on
SCHEDULE A hereto (the "Subject Assets"), "AS IS," and "WITH ALL FAULTS"
without warranty or representation of any kind except as specifically set
forth herein in the form of the quitclaim contained herein as SCHEDULE B, but
specifically excluding any assets in which a party has a security interest
therein (e.g. Sony and ATL) as well as any assets transferred to the Xxxx
Disney Company relating to the motion picture library sale agreement entered
into with Seller's parent corporation Cinergi Pictures Entertainment Inc.
unless said party has consented to such a transfer in writing. At the
Closing, Seller shall deliver or cause to be delivered to Buyer a Xxxx of
Sale of the form of SCHEDULE C hereto, releasing to Buyer all of Seller's
title to the Subject Assets subject only to any liens or encumbrances which
are more fully set forth in SCHEDULE D. If Buyer elects to assume the
existing lease of the Lenox Massachusetts Facility (the "Lease"), where
certain of the Subject Assets are located (the "Lenox" Facility), and subject
to the landlord's permission (which Seller warrants that it will use
reasonable efforts to secure said permission), Seller shall cause
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the Lease to be assigned to Buyer and Buyer shall assume the Lease by
executing an Assignment and Assumption of Lease in the form of SCHEDULE E
attached hereto.
1.2 PAYMENT OF PAYROLL. Concurrently upon execution hereof, and
pursuant to the amounts specifically set forth in SCHEDULE F attached
hereto, Buyer will pay all payroll and related obligations listed thereon by
wire transfer or cashier's check. In furtherance thereof and upon execution
of this Agreement, Buyer will cause the sum of TWO HUNDRED FORTY-ONE THOUSAND
FOUR HUNDRED ELEVEN and 79/100 ($241,411.79) to be deposited into the Jeffer,
Mangels, Xxxxxx & Xxxxxxx LLP Trust Account ("Trust Account") from which
Seller will cause forthwith all such sums to be disbursed according to the
requirements of SCHEDULE F.
Thereafter and on such dates as listed on SCHEDULE F, Buyer shall
further pay into the Trust Account the sum of TWO HUNDRED AND TWENTY-FOUR
THOUSANDS NINE HUNDRED TWENTY NINE AND 73/100 ($224,929.73) from which Seller
will cause forthwith such sums to be disbursed according to the requirements
of SCHEDULE F plus Buyer will be responsible for and pay all payroll of
Seller's employees/subcontractors encompassed by SCHEDULE F for September 14
and 15, 1997.
1.3 ASSUMPTION OF LIABILITY OF CERTAIN TRADE CREDITORS. On or before
September 23, 1997, Buyer covenants to notify all of Seller's creditors set
forth on SCHEDULE G by way of the letter set forth in SCHEDULE H of Buyer's
agreement to assume the management of Seller's accounts payable in accordance
with paragraph 3.1(c) herein. Seller may also forward such letter to any such
creditor and Seller remains at liberty to compromise any creditor claim on
SCHEDULE G at its own expense.
1.4 Buyer covenants that simultaneous with the execution of this
Agreement, it will cause ALT to enter into a binding agreement with Buyer
which provides that Buyer will assume all of the obligations of Seller in
connection with that certain Short-Form Agreement set forth in paragraph 2.1
hereinbelow.
1.5 CONSIDERATION. In consideration of the transfer by Seller to Buyer
of the Subject Assets, Buyer agrees to perform all of the obligations set
forth in this Agreement, including without limitations, those obligations set
forth in this paragraph 1 and paragraph 3 hereinbelow. For purposes of the
parties, Buyer shall be considered to have purchased the Subject Assets for
the amount of TWO MILLION SIX HUNDRED THOUSAND DOLLAR ($2,600,000) (the
"Purchase Price").
1.6 CLOSING. The closing of this Agreement (herein called the
"Closing") shall be held at the offices of Xxxxxxxxx, Xxxxx and Xxxxxxx LLP,
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000 on 15 September
1997 or at such other time or place as may be fixed by mutual agreement of
Buyer and Seller.
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SECTION 2. ASSIGNMENT
2.1 Seller hereby assigns, grants, sells and sets over to Buyer without
any warranties expressed or implied all of its rights, duties, benefits and
obligations (past, present and future) in and to that certain Short-Form
Production Services Agreement dated as of 15 May 1997 ("Short-Form
Agreement") between ATL Productions, Inc. (a subsidiary of Interscope
Communications, Inc.) (collectively "Interscope") and Seller and all elements
thereof relating to the Picture. Buyer does hereby accept such assignment and
indemnifies and holds Seller harmless from any claims, losses, expenses,
damages and costs, including attorneys fees resulting from Buyer's failure to
perform Seller's obligations thereunder. Seller agrees to execute the Short
Form Assignment Agreement attached hereto as SCHEDULE I.
SECTION 3. CONDITIONS
3.1 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation to
consummate this Agreement and the transactions contemplated hereby is
subject, at the option of the Seller, to the fulfillment of the following
conditions whether occurring before or after Closing:
(a) Seller's receipt of a complete release from Interscope in a
form satisfactory to Seller relating to among other things Seller's
obligations to ATL pursuant to the Short-Form Agreement. Additionally, and as
part of Buyer's agreement with ATL, Buyer covenants to secure a covenant from
ATL to Buyer, by which Buyer hereby guarantees to Seller, that ATL will
satisfy all of the financial obligations with respect to the Cineon license
agreement (attached hereto as SCHEDULE J) entered into by Seller relating to
equipment, software and services to be provided on the Picture without
liability to Seller, and Buyer agrees to indemnify and hold Seller harmless
from ATL's inability or refusal to perform those executory obligations
remaining within the Cineon license agreement as they exist at the Closing,
including all expenses, damages, claims, and costs, including attorneys fees.
(b) Buyer's payment of all sums required to be paid pursuant to
paragraphs 1.2 and 1.3 herein; and
(c) As a pool of funds to be used to satisfy Seller's trade
creditors, Buyer shall expend the sum of TWO HUNDRED THOUSAND DOLLARS
($200,000) (the "Creditor Fund") within ninety (90) days of 15 September 1997
(or earlier if Buyer so elects) for the benefit of such trade creditors set
forth on SCHEDULE F subject to the following terms:
(1) The maximum amount any single creditor shall receive from
those funds set forth herein is an amount equal to a proration of those funds
available to pay the creditors divided by the creditors Buyer agrees to
manage less those creditors Buyer will not pay and which Buyer has notified
Seller of in writing. Buyer must indicate to Seller within fifteen (15) days
of Closing which trade creditors (and the respective amounts due such
creditors) Buyer will not pay as part of Buyer's managing of Seller's trade
creditor accounts payable. Prospectively, Buyer may continue to notify Seller
of additional creditors Buyer will not pay hereunder.
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Maximum settlement = Available Funds to Pay Creditors X 100
amount per creditor -----------------------------------------------
(expressed as cents Total Trade Creditors less Creditors Buyer
on the dollar) will not pay
Notwithstanding the foregoing, no payment to any one creditor shall
exceed TWENTY THOUSAND DOLLARS ($20,000) unless Seller agrees to the same in
writing.
(2) No payment to any creditor hereunder shall be made on
account of any open, prospective, or unmatured obligations of Seller up to
and including 15 September 1997 or of any new obligation of Buyer. To the
extent a dispute arises as to the validity of a particular obligation, the
decision of Seller shall conclusively be deemed final.
(3) REPORTING. Buyer shall deliver to Seller every fifteen
days (calculated from 15 September 1997) a report of the current status of
trade creditors paid to date and such report must indicate the creditor paid,
the date paid, the amount paid and all remaining outstanding trade creditors
as of the date of each report submitted to Seller.
(4) RELEASE. Buyer covenants that it will secure an
appropriate release from each creditor paid from the Creditor Fund indicating
Buyer and Seller have made payment in full accord and satisfaction of all
Seller's outstanding credit obligations with respect to said creditor and the
form of said release must be approved by Seller in writing in advance.
(5) Any unspent portion of the Creditor Fund on hand at the
end of the ninety (90) day period must be returned to the Trust Account to be
disbursed pursuant to Seller's instructions for the benefit of creditors.
(6) Buyer shall only be entitled to apply TWENTY-EIGHT
percent (28%) or FIFTY SIX THOUSAND DOLLARS ($56,000) of the Creditor Fund,
to fund trade creditors relating to the Picture.
(7) No part of the Creditor Fund shall be used to pay the
Cineon license agreement which shall be assumed in full by ATL.
SECTION 4. SECURITY INTEREST
Buyer hereby agrees to grant to Seller a first priority security
interest in certain of the Subject Assets in the amount of THREE HUNDRED
SEVENTEEN THOUSAND DOLLARS ($317,000) as a security for Buyer's covenant to
Seller to pay the requisite obligations of Buyer set forth in paragraph 1.2
and 3.1(c) herein as well as to secure Buyer's financial obligation to manage
Seller's trade creditors accounts payable as set forth in paragraph 1.3
herein. Buyer agrees to execute the appropriate UCC-1's (for the states of
California, New York, and Massachusetts) and the Security Agreement set forth
in SCHEDULE K concurrently upon execution of this Agreement and Seller
represents the Collateral (as that term is defined in SCHEDULE K) is not
required equipment relating to the Picture.
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Provided Buyer is not in default hereunder, and upon Buyer's payment of
all sums set forth in SCHEDULE F herein and Buyer's satisfactory performance
of all of its obligations contained in paragraphs 1.3 and 3.1(c) herein as
well as Buyer's return of all unused Creditor Fund amounts to the Trust
Account as set forth in paragraph 3.1(c)(4), Seller covenants to release and
discharge the security interest granted to Seller herein within ten (10) days
of Buyer's performance hereof and Seller agrees to execute the appropriate
documentation to evidence such termination, including without limitation,
UCC-3 financing statements.
SECTION 5. INDEMNITY AND RELEASE
Buyer does hereby agree and at all times indemnify and hold harmless
Seller, its directors, officers, agents, attorneys, parent, subsidiaries and
employees ("Indemnitees") from any claims, losses, expenses, damage and costs
incurred in investigating any claim or defending any suit or action initiated
by any third party, court costs and reasonable attorneys' fees and other
limitation expenses, resulting to Indemnitees, or which Indemnitees, or any
of them, may suffer, incur or sustain or for which any of them become liable
in connection with or resulting from or by reason of any breach by Buyer of
its obligations or covenants to Seller set forth hereunder.
Buyer does hereby release and forever discharge Seller and its
respective successors, predecessors, parents, subsidiaries and affiliated
entities (including without limitation Cinergi Pictures Entertainment Inc.)
together with their respective employees, officers, directors, shareholders,
attorneys, and heirs, from any and all claims, debts, liabilities, demands,
obligations, costs, expenses, actions and causes of action, of every nature,
character and description, suspected or unsuspected, known or unknown,
matured or unmatured, which Buyer and/or Manex Entertainment Ltd. now own or
hold, or have at any time heretofore owned or held, or may at any time own or
hold, by reason of any matter, cause or thing whatsoever occurred, done,
omitted or suffered to be done in connection with, arising out of or relating
directly or indirectly to this Agreement or the Picture or Seller's business
as set forth in this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 Buyer warrants and represents:
(a) Buyer is a duly organized limited liability company of
Massachusetts which is properly constituted and capitalized;
(b) Buyer has the full right, power and authority to enter into
this Agreement;
(c) Buyer has the financial capacity to enter into the transaction
with Interscope and complete all of the obligations set forth therein;
(d) Buyer will enter into the agreement with Interscope set forth
in paragraph 1.4; and,
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(e) Buyer has fully performed its due diligence with respect to the
Subject Assets and accepts the same where is and as is.
6.2 Seller warrants and represents:
(a) Seller has the full right, power and authority to enter into
this Agreement.
SECTION 7. MISCELLANEOUS
7.1 ENTRY UPON PREMISES. Buyer hereby agrees to provide Sony Pictures
Imageworks ("SPI") access to Buyer's premises for purposes of SPI retrieving
all materials SPI is entitled to under the Production Services Agreement
dated 24 February 1997 with respect to the motion picture "Starship Troopers"
and Buyer hereby grants to SPI a license to enter upon the premises for the
purpose set forth herein. Buyer covenants that it (and all of its employees)
will preserve the confidentiality of the Sony settlement agreement and any
breach thereof will be deemed a material breach of this Agreement.
Furthermore, Buyer covenants to make various of its employees available to
Seller (at no cost to Seller) in order for Seller to consummate certain
settlement transactions as more fully set forth in the attached ADDENDUM and
its accompanying SCHEDULE Z-1 attached hereto and incorporated by this
reference.
7.2 RETURN OF MATERIALS/PUBLICITY. All of the motion picture materials
(broadly defined to include, without limitation, all elements, tapes, logos,
digital assets, etc.) in the possession of Buyer must be returned forthwith
to Seller at Seller's cost. Buyer acknowledges and agrees that it may not
exploit any of these assets in any way, manner or form and that any breach of
this paragraph by Buyer will be considered a material breach of this
Agreement. Furthermore, Buyer shall have no right to publicize or utilize the
aforementioned materials in publicity materials to solicit new business to
prospective clients or otherwise.
7.3 ACCESS TO FINANCIAL RECORDS. Buyer covenants to allow Seller
access to the financial records of Mass.Illusion after Buyer's purchase
thereof for purposes of confirming Buyer's progress towards managing all
Seller's accounts payable as more fully set forth in paragraph 1.3 and 3.1(c)
herein. By way of example only, Seller will need access to Buyer's general
ledger to confirm any settlement with a specific trade creditor and Seller
may need to secure a copy of the general ledger of its own purposes.
7.4 FEES AND EXPENSES. Each of the parties will bear its own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement.
7.5 GOVERNING LAW/JURISDICTION. This Agreement shall be construed under
and governed by the internal laws of the State of California. Both parties
hereto consent to the exclusive jurisdiction of the state and federal courts
within the County of Los Angeles in the State of California.
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7.6 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to
have been given if delivered or sent by facsimile transmission, upon receipt,
or if sent by registered or certified mail, upon the sooner of the date on
which receipt is acknowledged or the expiration of three days after deposit
in United States post office facilities properly addressed with postage
prepaid. All notices to a party will be sent to the following addresses:
SELLER:
Cinergi Productions Inc. (California) Jeffer, Mangels, Xxxxxx & Xxxxxxx LLP
dba Mass.Illusion 2121 Avenue of the Stars
0000 Xxxxxxxx Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Santa Monica, California Phone: (000) 000-0000
Phone: (000) 000-0000 Fax: (000) 000-0000
Fax: (000) 000-0000 Contact: Xxx Xxxxxxxxx
Contact: Xxxxx Xxxxxxxxx
BUYER:
Mass.Illusions, LLC
00 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Contact: Xxxxxx X. Xxxxx
7.4 ENTIRE AGREEMENT. This Agreement, including the Addendum and any
Schedules referred to herein, is complete, reflects the entire agreement of
parties with respect to its subject matter, and supersedes all previous
written or oral negotiations, commitments and writings. Notwithstanding the
foregoing, this Agreement is contingent upon the simultaneous execution of
that certain agreement between Seller and Interscope of even date with
respect to the Short-Form Agreement and the Picture.
7.5 EXECUTION IN COUNTERPARTS. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
7.6 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition set forth herein be waived, except by a writing
duly and validly executed by each party hereto, or in the case of a waiver,
the party waiving compliance.
7.7 AGREEMENT NOT AN OFFER. Under no circumstances shall this Agreement
be deemed to be an offer by Seller to Buyer or Buyer to Seller regarding the
purchase and sale of the Subject Assets, and this Agreement shall only be
binding upon Buyer or Seller if first executed by a duly authorized officer
of Buyer and then counter-executed by an authorized officer of Seller.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
CINERGI PRODUCTIONS INC. (CALIFORNIA) d.b.a. MASS.ILLUSION
By: /s/ XXXXX XXXXXXXXX
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Xxxxx Xxxxxxxxx, Vice President
MASS.ILLUSIONS, LLC
By: /s/ XXXXXX X. XXXXX, MGR
-------------------------------------------
Xxxxxx X. Xxxxx, Manager
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