EXHIBIT 1 TO SCHEDULE 13D
NOTE: CERTAIN TEXT (IDENTIFIED BY ASTERISKS AND BRACKETS) HAS BEEN
OMITTED FROM THIS AGREEMENT PURSUANT TO A REQUEST FOR CONFIDENTIALITY
FILED WITH THE SEC
Modification Agreement
This Modification Agreement is entered into as of this 1st day of December,
2000, by and among Xxxxxxxx Broadcast Group, Inc., a Maryland corporation
("Xxxxxxxx"), Synergy Brands Inc., a Delaware corporation ("Synergy") and
XxxxxxXxxx.xxx Inc., a New Jersey corporation ("BeautyBuys").
WHEREAS, Xxxxxxxx and Synergy are parties to a Stock Purchase Agreement,
dated as of November 23, 1999 (the "Synergy SPA"), pursuant to which Xxxxxxxx
acquired the "Synergy Shares" (as defined in the Synergy SPA); and
WHEREAS, Xxxxxxxx and BeautyBuys are parties to a Stock Purchase Agreement,
dated as of November 23, 1999 the "BB SPA"), pursuant to which Xxxxxxxx acquired
900,000 shares of BeautyBuys Class B Common Stock (the "BeautyBuys Stock"); and
WHEREAS, Xxxxxxxx and BeautyBuys are parties to an Option Agreement, dated
as of November 23, 1999 (the "Option Agreement"), pursuant to which Xxxxxxxx has
the right to purchase 8,100,000 shares of BeautyBuys Class A Common Stock (the
"Option Shares"); and
WHEREAS, Xxxxxxxx also has been or may be granted options (the "Plan
Options") to purchase shares of BeautyBuys Common Stock (the "Plan Option
Shares") pursuant to the XxxxxxXxxx.Xxx Inc. 1999 Long Term Incentive Plan; and
WHEREAS, in consideration of the grant of the "Option" (as defined in the
BB SPA) Xxxxxxxx agreed to provide BeautyBuys with $50 million of "Advertising"
and "Promos" (as defined in, and accordance with the terms of the BB SPA and the
Option Agreement), subject to Xxxxxxxx'x right to terminate its obligation to
provide "Unearned Advertising Time" (as defined in the BB SPA) in any calendar
year after calendar year 2001; and
WHEREAS, BeautyBuys is currently indebted to Xxxxxxxx in the principal
amount of $555,762.50, plus accrued but unpaid interest pursuant to the
Promissory Note, dated April 11, 2000, effective as of December 15, 1999, and
issued by BeautyBuys (the "Note"); and
WHEREAS, the parties hereto desire to modify certain of the terms of the BB
SPA and the Option Agreement in order to reduce the amount of Advertising and
Promos to which BeautyBuys is entitled and to allow BeautyBuys to assign its
right to Advertising and Promos; and
WHEREAS, the parties hereto desire to eliminate any equity ownership by
Xxxxxxxx in BeautyBuys, to cancel the Option and to issue additional shares of
Synergy's common stock, $.001 par value, to Xxxxxxxx.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
1. The Options and all Plan Options now outstanding are hereby terminated
and Xxxxxxxx shall have no further right to (a) acquire the Option Shares or any
Plan Option Shares, or (b) receive any further Plan Options.
2. The "Advertising Time" (as defined in the BB SPA) is hereby reduced from
$50 million to $12 million and BeautyBuys shall have no right after the date
hereof to receive Advertising Time from Xxxxxxxx or its affiliates as a result
of the BB SPA or the Option Agreement in an amount greater than the excess of
(a) $12 million over (b) $5 million dollars (such excess being the "Remaining Ad
Obligation"). $30 million of the Advertising Time is being eliminated in
accordance with Section 2.2.1.2 of the Option Agreement as a result of
Xxxxxxxx'x termination thereof and $8 million of the Advertising Time is being
eliminated in consideration of Xxxxxxxx'x agreement to enter into the "BB-Icon
Agreement" (as defined below), pursuant to which BeautyBuys will be permitted to
assign the Remaining Ad Obligation.
3. The obligation of Xxxxxxxx to provide "In-Kind Services" (as defined in
the BB SPA) to Beauty Buys pursuant to Section 2.3(b) of the BB SPA, or
otherwise, is hereby terminated to the extent not used by BeautyBuys prior to
the date hereof.
4. Xxxxxxxx is hereby relieved of any obligation to return to BeautyBuys
any of the BeautyBuys Stock (pursuant to Section 2.3(a)(iv) of the BB SPA, or
otherwise) and immediately following the execution hereof, Xxxxxxxx shall
transfer the BeautyBuys Stock to Synergy in exchange for Synergy's issuance to
Xxxxxxxx of 500,000 shares of Synergy's common stock, $.001 par value (the
"Synergy Common Stock") and options (the "Synergy Options") to acquire 500,000
additional shares of Synergy Common Stock, on the following terms: (i) fully
vested upon grant, (ii) exercise price of seventy cents ($.70) per share of
Synergy Common Stock, (iii) ten year term, and (iv) partial exercises permitted.
Promptly following the execution of this Modification Agreement, Xxxxxxxx and
Synergy will enter into an option agreement including the above terms, together
with other standard provisions, including (without limitation) to provide right
to Xxxxxxxx similar to the rights provided in Sections 3, 4 and 5 of the Option
Agreement.
NOTE: CERTAIN TEXT (IDENTIFIED BY ASTERISKS AND BRACKETS) HAS BEEN OMITTED FROM
PARAGRAPH 5 BELOW PURSUANT TO A REQUEST FOR CONFIDENTIALITY FILED WITH THE SEC.
5. Concurrently with the execution of this Agreement, Xxxxxxxx and
BeautyBuys shall enter into an Agreement with Icon International, Inc. ("Icon"),
a Connecticut corporation (the "BB-Icon Agreement") pursuant to which BeautyBuys
sells to Icon the Remaining Ad Obligation in exchange for cash equal to [* * *]%
of the value of the Remaining Ad Obligation and "Straight Trade Credits" (as
defined in the BB-Icon Agreement) in an amount equal to [* * *]% of the
Remaining Ad Obligation. In the event the BB-Icon Agreement is terminated by
BeautyBuys in accordance with the terms
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thereof, as a result of Icon's failure to make a cash payment to BeautyBuys,
then BeautyBuys may resell all or a portion of the Remaining Ad Obligation to
any other purchaser to which Xxxxxxxx consents, such consent not to be
unreasonably withheld. The character of the Remaining Ad Obligation shall not
change as a result of the sale thereof, whether such sale is to Icon or to any
other purchaser.
NOTE: CERTAIN TEXT (IDENTIFIED BY ASTERISKS AND BRACKETS) HAS BEEN OMITTED FROM
PARAGRAPH 6 BELOW PURSUANT TO A REQUEST FOR CONFIDENTIALITY FILED WITH THE SEC.
6. Pursuant to the BB-Icon Agreement, [* * *] of the cash proceeds,
representing the unpaid balance of [* * *] of the amounts owed by BeautyBuys and
by Xxxxxxxxx.xxx, Inc, a wholly-owned subsidiary of BeautyBuys, to G1440, Inc.,
a Maryland corporation ("G1440"), will be paid, on BeautyBuys' behalf (and on
behalf of Xxxxxxxxx.xxx, Inc.), directly to G1440 by Icon out of the cash
portion of the purchase price being paid by Icon. Xxxxxxxx shall pay G1440 the
remaining [* * *] of the amounts owed by BeautyBuys and Dealbynet, Inc to G1440,
each of which will thereafter no longer be indebted to G1440 for work performed
prior to the date hereof (or after the date hereof as part of an ongoing project
involving 244 hours of work). BeautyBuys agrees that any web design or similar
work to be performed after the date hereof for BeautyBuys or Xxxxxxxxx.xxx, Inc.
shall be offered to G1440 so long as the quality and pricing of G1440s work is
consistent with industry standards. Xxxxxxxx will consider in good faith whether
or not it will bear any portion of the cost of such work performed by G1440;
provided, any decision as to whether or not to do so will be made by Xxxxxxxx in
its sole discretion.
7. BeautyBuys agrees that the proceeds of any sales of assets by BeautyBuys
outside the ordinary course of business, the proceeds of any bank indebtedness
and the cash value of any and all Straight Trade Credits which are utilized by
BeautyBuys will be paid to Xxxxxxxx immediately upon the receipt of such
proceeds and/or such use until such time as all amounts (principal and interest)
due and owing under the Note are paid in full; provided, that the failure of
BeautyBuys to pay amounts due under the Note when and as due in accordance with
this Paragraph 7 shall not relieve BeautyBuys from any obligations under the
Note; provided, that as long as BeautyBuys is not in breach of its obligations
hereunder, Xxxxxxxx hereby agrees not to demand payment under the Note during
the two-year period commencing on the date hereof. As used herein, the "cash
value" of Straight Trade Credits means the difference between (a) the purchase
price paid by BeautyBuys for each quantity of goods purchased pursuant to the
BB-Icon Agreement and (b) the amount of cash paid by BeautyBuys for such goods,
and such Straight Trade Credits shall be deemed to have been utilized by
BeautyBuys as provided herein upon receipt by BeautyBuys of the proceeds of its
resale of such goods (or upon BeautyBuys putting such goods into service without
resale). BeautyBuys further agrees that the Note will be repaid in full in
connection with any sale of the entire business of BeautyBuys whether by sale of
assets, sale of stock, merger, consolidation or otherwise.
8. For all purposes of the Synergy SPA (including, without limitation,
Section 2.5 thereof), the Synergy Common Stock issued hereunder and pursuant to
the
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exercise of the Synergy Options shall be treated as Synergy Shares; provided,
Xxxxxxxx shall, in addition to such rights as are included in the Synergy SPA,
have the right to demand registration of the Synergy Common Stock issued
hereunder (including as a result of the exercise of the Synergy Options), in
accordance with the demand registration rights set forth in Exhibit 1 hereto;
provided further, Xxxxxxxx shall have no further rights under Section 2.4 of the
Synergy SPA (with respect to any of the Synergy Shares), which Section the
parties agree is hereby deleted in its entirety.
9. Synergy hereby represents and warrants to Xxxxxxxx that, except as set
forth on Schedule A hereto, each of the representations and warranties set forth
in Article III of the Synergy SPA is true and correct as of the date hereof as
written therein and as modified by inserting a reference to this Modification
Agreement each place such representations and warranties contain a reference to
the Synergy SPA.
10. Xxxxxxxx hereby represents and warrants to Synergy that, except as set
forth on Schedule B hereto, each of the representations and warranties set forth
in Article IV of the Synergy SPA is true and correct as of the date hereof as
written therein and as modified by inserting a reference to this Modification
Agreement each place such representations and warranties contain a reference to
the Synergy SPA.
11. BeautyBuys hereby represents and warrants to Xxxxxxxx that, except as
set forth on Exhibit C hereto, each of the representations and warranties given
in Sections 3.1, 3.2, 3.3 and 3.4 of the BB SPA (as modified to substitute a
reference to this Modification Agreement rather than to the BB SPA, the
Transaction Documents and the issuance of the BB Shares) is true and correct as
of the date hereof.
12. Section 2.5, 2.6, 2.7 and 2.8 of the BB SPA are hereby cancelled and
Xxxxxxxx will cause all directors of BeautyBuys designated by it to resign as
directors as promptly as possible after the date hereof.
13. Except as expressly modified hereby, each of the Synergy SPA, the BB
SPA and the Option Agreement will remain in full force and effect without
amendment or modification.
14. The provisions of Article VII of the Synergy SPA are hereby incorporate
by reference and will apply, mutatis mutandis, with full force and effect to
this Modification Agreement as if included herein in their entirety.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this Modification
Agreement as of the first date written above.
SYNERGY BRANDS INC.
By: /s/ [Illegible]
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Name: [Illegible]
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Title: Chairman
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XXXXXXXX BROADCAST GROUP, INC.
By: /s/ Xxxxx X. Xxx
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Name: Xxxxx X. Xxx
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Title: EVP
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XXXXXXXXXX.XXX INC.
By: /s/ [Illegible]
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Name: Beauty Xxxx.xxx
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Title: President
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