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EXHIBIT 10.67
THE XXXXXX ENTERTAINMENT COMPANY
1999 AVENUE OF THE STARS
SUITE 0000
XXX XXXXXXX, XX 00000
September 24, 1999
Xxxx Xxxxx
Xxxxxx Xxxxx
Xxxxxx Xxxxxxx
PM Entertainment, Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Gentlemen:
This Letter of Intent sets forth the intention of The Xxxxxx
Entertainment Company, a California corporation ("Xxxxxx"), to enter into a
definitive acquisition agreement and related documents (the "Definitive
Agreement") for the acquisition by Xxxxxx from the existing shareholders
("Sellers") of 100% of the outstanding shares of PM Entertainment, Inc. (the
"Company") on the following terms and conditions:
1. PURCHASE PRICE: The purchase price will be $10.0 million of which
Xxxxxx will pay $6.0 million in cash at the Closing, and $4.0 million through
delivery of a promissory note issued by Xxxxxx with interest at 10% per annum
and with a 15 month maturity ("Note"). The Note will be payable $875,000 plus
interest for each of the four quarters following the closing and $500,000 plus
interest on the 15th month anniversary of the closing. Breaches of
representations and warranties may be offset against the last payment on the
Note The Note may be prepaid by Xxxxxx at any time. It is anticipated that the
cash portion and the Note will be paid to the Sellers as their interests appear.
In addition to the cash purchase xxxxx, Xxxxxx agrees to acquire the Company
subject to the approximate $13 million of bank debt, payables and other
liabilities which currently burden the Company.
2. CLOSING: The Closing shall occur on the date selected by Xxxxxx (not
later than December 15, 1999) and will be subject to normal closing conditions
including receipt of all necessary regulatory approvals, Board of Director
approvals, and so forth, including, if and to the extent necessary, approvals
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act.
3. CONDITIONS TO CLOSING: The Closing will be subject to completion of
Xxxxxx'x due diligence examination to its satisfaction; negotiation and
execution of a Definitive Agreement and any related agreements containing the
terms set forth therein; negotiation and execution of a lease and purchase
option satisfactory to Xxxxxx for the Company's headquarters premises; obtaining
all governmental and third party consents and approvals; absence of any material
adverse change, absence of a material pending or threatened litigation and
continued truth and accuracy of all representations and warranties and
compliance with all covenants.
4. DUE DILIGENCE: Xxxxxx has not had an opportunity to review detailed
financial and related information regarding Company, nor to review various
operational and employee
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PM Entertainment Board of Directors
September 24, 1999
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matters. In reliance upon the agreements herein, Xxxxxx will promptly commence a
due diligence investigation of the Company. Such due diligence investigation
will include a review of the Company's film library and rights, current
production arrangements, bank facilities, all tax returns and tax issues, all
compensation and employment practices, workers compensation, ERISA and
environmental issues, compliance with licensing and other legal requirements,
all pending and threatened litigation, all material contracts, agreements and
commitments. The Company, its affiliates, counsel and accountants shall afford
to Xxxxxx and its accountants, counsel, and other representatives reasonable
access to the Company, its key employees and suppliers, and shall furnish to
Xxxxxx all information concerning the business, assets, copyrights, film
licensing agreements, customers, prospects, financial condition, litigation,
material contracts, real property leases, and other properties of the Company
for the purpose of making such financial, accounting, legal, and other review
and due diligence investigation and examination deemed desirable by Xxxxxx. The
Company and its affiliates, attorneys and accountants will also cooperate and
provide to Xxxxxx or its lenders and investors such information and
documentation as may be necessary. Absent matters which are discovered during
the initial due diligence period and which require follow-up or more detailed
review and examination, Xxxxxx anticipates concluding its due diligence on or
before November 30, 1999.
5. XXXXXXX AGREEMENTS: Execution of a Definitive Agreement and closing
of the transaction contemplated herein is contingent upon Xxxxxx entering into
an exclusive employment agreement with Xxxxxx Xxxxxxx ("Xxxxxxx") which will
provide that Xxxxxxx will act as the President of a new division to be formed at
Xxxxxx to operate the assets currently held by the Company. This agreement will
include reporting requirements, duties, responsibilities and incentives. A
second agreement with Xxxxxxx and his wholly owned corporation ACI will provide
for an output and distribution deal for the ACI library and its current
productions. After these productions are completed, ACI will become dormant as
Xxxxxxx will be exclusive to Xxxxxx. Both agreements must be on terms
satisfactory to Xxxxxx.
6. OPERATION OF THE BUSINESS: Pending the Closing, the business of the
Company will be conducted in the ordinary course and in a manner consistent with
prior practice unless the parties agree otherwise. No dividends, new issuance of
securities, non-customary bonuses or pay increases, financings or library sales
will be permitted between the date hereof and the Closing.
7. OWNERSHIP OF THE COMPANY: By signing this Letter of Intent, the
Company represents to Xxxxxx that the only outstanding equity security of the
Company is its common stock and that the persons signing the letter of intent as
Sellers constitute all of the shareholders. No option plans or other classes of
securities exist.
8. DEFINITIVE AGREEMENT: The parties will in good faith negotiate and
sign a Definitive Agreement as soon after acceptance hereof as is practicable,
which agreement shall include such warranties, representations and
indemnification provisions as are customary in definitive agreements of this
sort. Furthermore, representations and warranties shall survive the
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PM Entertainment Board of Directors
September 24, 1999
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Closing for a period to be determined (tax ERISA and environmental
representations and warranties shall survive for the applicable statutes of
limitations). Upon execution of the Definitive Agreement, the provisions of this
Letter of Intent shall lapse.
9. ASSET SALE: Xxxxxx may determine, in lieu of purchasing 100% of the
stock of the Company, to acquire 100% of the assets and assume those disclosed
liabilities acceptable to Xxxxxx. Xxxxxx'x decision of whether to acquire stock
or assets shall be made within thirty (30) days of the execution of this Letter
of Intent.
10. EXCLUSIVE NEGOTIATIONS: Sellers understand that Xxxxxx will incur
substantial third party fees and internal costs in performing its due diligence
and in negotiating the Definitive Agreement in reliance upon the agreements
hereunder. In consideration of the efforts Xxxxxx proposes to undertake and in
order to facilitate our continuing discussions, you have agreed that from this
date until the earlier of the Closing or ninety (90) days from the date of
acceptance of this Letter of Intent, neither the Company, any Seller, nor any of
the Company's affiliates, nor anyone acting on behalf of the Company or Seller
will solicit, negotiate, act upon or entertain in any way an offer from any
other person or entity to purchase either the Company, its securities or any
material assets of the Company or furnish any information to any other person in
that regard, and you and Company and Sellers agree promptly (within two (2)
business days) to notify Xxxxxx upon the receipt of any of them of an
unsolicited competing offer in respect of such a purchase and of the proposed
terms of the offer.
11. INFORMATION IN CONFIDENCE: All information and documentation
provided by Company to Xxxxxx or its representatives shall be kept strictly
confidential by Xxxxxx and its representatives and will not be used or disclosed
by Xxxxxx or such representative for purposes other than its consideration of
the transaction contemplated hereby except to the extent that (i) it was already
known to Xxxxxx or its representatives or available to Xxxxxx on a
non-confidential basis when received, (ii) it hereafter becomes lawfully
obtainable from other sources, or (iii) it must be disclosed by Xxxxxx or its
affiliates in any document filed with any government agency or authority and
available for public inspection. This covenant will survive for a period of two
(2) years from the date of termination of the letter of intent. In the event the
Closing fails to occur within ninety (90) days from the date hereof, Xxxxxx will
return all confidential documents received from Company and will take reasonable
steps to assure Company that all copies given by Xxxxxx to its representatives
or affiliates are returned or destroyed.
12. CONFIDENTIALITY OF THE LETTER OF INTENT: Except as required by law
or in connection with the implementation of this Letter of Intent, the terms of
this Letter will be kept strictly confidential. To the extent that any
disclosure becomes legally required, the Company or Xxxxxx, as the case may be,
shall be notified promptly and before the required disclosure is made.
13. EXPENSES: All fees, costs and expenses of Xxxxxx, as one party, or
the Company and Sellers as one party, relating to the preparation of this Letter
of Intent, the Definitive
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PM Entertainment Board of Directors
September 24, 1999
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Agreement and all other matters in connection with the acquisition, including
but not limited to, legal, accounting, and filing fees will be borne by Xxxxxx
if incurred by it or on its behalf, and will be borne by Sellers if incurred by
Company or Sellers or on their behalf. Sellers and Xxxxxx will indemnify the
other against any liability for broker's fees, finder's fees, investment banking
fees, or commissions claimed by anyone hired or contracted by the indemnifying
party.
14. COUNTERPARTS: This Letter of Intent may be signed by facsimile and
may be executed in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same document.
15. TERMINATION AND BINDING AGREEMENT: This Letter of Intent shall
expire and terminate after September 27, 1999 if not sooner accepted by the
Company or revoked by Xxxxxx. Upon acceptance by the Company, this Letter of
Intent shall be binding and may not be terminated by either party except as
provided herein. This Letter of Intent is an expression of interest only and
neither party shall be bound to enter into the Definitive Agreement or to
effectuate the purchase and sale prior to executing the Definitive Agreement.
Pending execution of the Definitive Agreement, only the provisions of Paragraphs
8, 10, 11, 12, 13 and 15 hereof shall bind the parties.
If you agree to the foregoing, please sign and return the enclosed copy
of this Letter of Intent to the undersigned for receipt no later than September
27, 1999.
Very truly yours,
THE XXXXXX ENTERTAINMENT COMPANY
By: ______________________________
Name:
Title:
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PM Entertainment Board of Directors
September 24, 1999
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AGREED TO:
"The Company" Sellers:
PM ENTERTAINMENT, INC.
Xxxx Xxxxx
By: _______________________________
Name:
Title: Xxxxxx Xxxxx
Xxxxxx Xxxxxxx
