EXHIBIT 10.1
February 24, 1997
Xxxxxxxx Film Industries Corp.
d/b/a Xxxxxxxx Video
000 Xxxxxxxxx Xxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxxxxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, Chief Executive Officer
Dear Xx. Xxxxxxx:
This letter sets forth the principal terms and conditions under which Four
Media Company, its subsidiaries, affiliates and/or assigns ("4MC") will acquire
certain assets of, and claims against, Xxxxxxxx Film Industries Corp. d/b/a
Xxxxxxxx Video ("Xxxxxxxx Video"). Except as provided in Section 4 below, all
property purchased shall be free and clear of all liens, claims, interests and
encumbrances of any kind.
1. General Assignment. Subject to the terms and conditions set forth
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herein, Xxxxxxxx Video will make a general assignment for the benefit of its
creditors of all of its assets (the "Assignment").
2. Acquisition. A newly organized wholly-owned subsidiary of 4MC ("AV
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Acquisition Corp.") will acquire (the "Acquisition") certain assets of Xxxxxxxx
Video from the assignee for the benefit of creditors (the "Assignee"). The
terms and conditions of the Acquisition shall be consistent with the terms of
this Letter Agreement and shall be set forth in a definitive purchase and sale
agreement (the "Asset Purchase Agreement") to be entered into by AV Acquisition
Corp. and the Assignee. The assets to be sold to AV Acquisition Corp. will
include substantially all of the assets of Xxxxxxxx Video.
3. Representations and Warranties. In conjunction with the Assignment and
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the Acquisition, Xxxxxxx X. Xxxxxxxx and Xxxxxxx Xxxxxxx will join in certain
representations and warranties (the "Representations and Warranties") to be made
by Xxxxxxxx Video for the benefit of AV Acquisition Corp. The Representations
and Warranties, relating to certain significant aspects of the assets,
liabilities, business operations and history of Xxxxxxxx Video, among other
matters, will be made and delivered by Xxxxxxxx Video and such principals to the
Assignee for the express benefit of, and delivery to, AV Acquisition Corp. in
connection with the Acquisition.
4. No Assumption of Liabilities. Neither 4MC nor AV Acquisition Corp.
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will assume any debts, obligations or liabilities whatsoever of Xxxxxxxx Video.
However, the Acquisition will be subject to certain specified security interests
and leases which will exist as of the "Closing" (as defined below) and continue
after the Closing, as described in Paragraphs 6 and 7 below.
Xxxxxxxx Film Industries Corp.
Attention: Xxxxxxx Xxxxxxx, Chief Executive Officer
February 24, 1997
Page 2
5. Closing. The Closing of the Acquisition (the "Closing") will occur as
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soon as practicable following the making of the Assignment by Xxxxxxxx Video in
order to attempt to minimize disruption of the ongoing business operations of
Xxxxxxxx Video.
6. Settlement with Secured Creditors. Upon 4MC's satisfactory completion
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of negotiations with (a) third parties (the "Designated Secured Creditors")
holding material claims against Xxxxxxxx Video, which claims are secured by
certain personal property utilized in the operation of Xxxxxxxx Video's business
(the "Secured Claims") and (b) third parties ("Designated Personal Property
Lessors") holding leases of material personal property utilized in Xxxxxxxx
Video's business (the "Designated Personal Property Leases"), 4MC will enter
into written agreements for the purchase of the Secured Claims and all related
rights from the Designated Secured Creditors, and for the purchase of the
Designated Personal Property Leases and all related rights from the Designated
Personal Property Lessors. The Secured Claims and the Designated Personal
Property Leases are collectively referred to as the "Chattel Paper." The
purchase price to be paid by 4MC to each of the Designated Secured Creditors and
the Designated Secured Personal Property Lessors will be in 4MC's sole
discretion. AV Acquisition Corp. and 4MC, respectively, shall seek to negotiate
the most favorable pricing and terms in connection with the Acquisition and the
purchase of the Chattel Paper, respectively. The closing of each purchase of
Chattel Paper will be contingent upon the consummation of the Acquisition and
will occur immediately following the Closing. AV Acquisition Corp.'s obligation
to proceed with the Acquisition will be contingent upon the negotiation by 4MC
of agreements for the purchase of all the Chattel Paper satisfactory to 4MC in
its sole discretion.
7. Conditions to Closing. 4MC's and AV Acquisition Corp.'s obligation to
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close the Acquisition and to purchase the Chattel paper is subject to the
following:
a. Satisfactory completion of due diligence by 4MC and AV Acquisition
Corp. regarding the assets, operations, historic financial performance and
future prospects of Xxxxxxxx Video (including without limitation,
satisfactory completion of review by 4MC, its accountants and attorneys of
all of the books, records and financial information regarding Xxxxxxxx
Video's business);
b. Unanimous consent of Xxxxxxxx Video's Board of Directors and
consent of two-thirds of Xxxxxxxx Video's shareholders;
Xxxxxxxx Film Industries Corp.
Attention: Xxxxxxx Xxxxxxx, Chief Executive Officer
February 24, 1997
Page 3
c. Execution of employment contracts with Xxxxxxx X. Xxxxxxxx and
Xxxxxxx X. Xxxxxxx in substantially the form previously delivered to Mssrs.
Xxxxxxxx and Xxxxxxx;
d. Satisfactory negotiation with Xxxxxxxx Video's landlord;
e. No material deterioration of Xxxxxxxx Video's business operations
between the execution date hereof and the Closing;
f. All necessary consents shall have been obtained prior to Closing;
g. Satisfactory completion and execution of definitive documentation
regarding the Acquisition in substantially the form of the Asset Purchase
and Sale Agreement previously delivered to Xxxxxxxx Video; and
h. Satisfactory completion and execution of documentation regarding
the purchase of the Chattel Paper.
Xxxxxxxx Video's obligation to make Assignment and execute and deliver
the Representations and Warranties in connection with the Acquisition is subject
to the following:
a. Approval by the Board of Directors of 4MC and AV Acquisition Corp.
of the Acquisition and the agreements for the purchase of the Chattel
Paper;
b. Execution of employments contracts with Xxxxxxx X. Xxxxxxxx and
Xxxxxxx X. Xxxxxxx in substantially the form previously delivered to Mssrs.
Xxxxxxxx and Xxxxxxx;
c. Execution of definitive documentation regarding the Acquisition in
substantially the form of the Asset Purchase and Sale Agreement previously
delivered to Xxxxxxxx Video; and
d. Execution by 4MC of agreements for the purchase of the Chattel
Paper by 4MC.
8. Due Diligence Access. Xxxxxxxx Video's officers, directors,
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employees, agents and representatives will cooperate with all reasonable
requests for information regarding assets, liabilities, operations, customers
and any other such matters as 4MC deems relevant to its due diligence review.
Xxxxxxxx Video also authorizes 4MC to contact any Xxxxxxxx Video client,
creditor, agent or representative to discuss matters relevant to the
transactions contemplated hereby and agrees to cooperate with 4MC
Xxxxxxxx Film Industries Corp.
Attention: Xxxxxxx Xxxxxxx, Chief Executive Officer
February 24, 1997
Page 4
in connection with any such discussions, as reasonably requested by 4MC. 4MC
agrees to advise Xxxxxxxx Video prior to all such inquiries made to outside
persons or entities. 4MC shall only communicate with MCA regarding the Xxxxxxxx
Video facilities lease with an Xxxxxxxx Video representative.
9. Closing and Termination. The Closing shall take place as soon as
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practicable but in no event later than 12:00 noon P.S.T., March 20, 1997. If
the Closing does not occur by such date, this Agreement shall terminate.
10. Expenses. Each party agrees to pay its respective fees and expenses
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incurred in connection with the negotiation, preparation, execution and delivery
of this Letter Agreement and of the definitive agreements and/or documents
contemplated hereby. If the transactions contemplated hereby are not consummated
for any reason other than a breach of this Letter Agreement, neither party shall
be responsible for any of the other's expenses.
11. Dispute Resolution. Any controversy between the parties involving the
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construction or application of any of the terms, provisions or conditions of
this Letter Agreement shall be submitted to binding arbitration governed by the
Federal Arbitration Act, Title 9 of the United States Code. The arbitration
shall be administered by Judicial Arbitration & Mediation Services, Inc.
("JAMS") in accordance with the JAMS procedures then in effect. Any statutes of
limitations which would otherwise be applicable shall apply. Judgment upon the
award may be entered in any court having jurisdiction thereof. The prevailing
party in such arbitration proceeding shall be awarded all reasonable attorneys'
fees and costs incurred in such arbitration proceeding.
12. Announcements. 4MC and Xxxxxxxx Video agree that prior mutual consent
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is required with respect to the form and content of any press release or other
public announcement concerning this letter agreement or the transactions
contemplated hereby, except as required by law. Notwithstanding the foregoing,
Xxxxxxxx Video shall be permitted to disclose the terms of this transaction to
its shareholders, directors, lessors, employees, clients, consultants and
creditors, on an as-needed basis only.
13. Governing Law. California law shall govern this Letter Agreement and
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any and all definitive agreements between the parties.
14. Counterparts. This Letter Agreement may be executed in counterparts,
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each of which shall be deemed an original, but all of which together shall
constitute one document.
Xxxxxxxx Film Industries Corp.
Attention: Xxxxxxx Xxxxxxx, Chief Executive Officer
February 24, 1997
Page 5
If this Letter Agreement reflects your understanding of the transactions
described herein, please so indicate by executing the enclosed copy of this
letter.
Very truly yours,
FOUR MEDIA COMPANY
By: /s/ Xxxxxx X. Xxxxxxx, Chief
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Xxxxxx X. Xxxxxxx, Chief
Executive Officer
Acknowledged, Accepted and
Agreed to as of the date
hereof:
XXXXXXXX FILM INDUSTRIES CORP.
d/b/a XXXXXXXX VIDEO
By: /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx, Chief Executive Officer
