AMENDMENT TO
ASSET PURCHASE AND SALE AGREEMENT
THIS AMENDMENT TO ASSET PURCHASE AND SALE AGREEMENT is entered into
effective as of the 4th day of May 2001 (this "AMENDMENT"), by and between THE
XXXXXX ENTERTAINMENT COMPANY, a California corporation (the "COMPANY"), XXXXXX
COMICS, INC., a New York corporation and a wholly owned subsidiary of the
Company, and BHP PRODUCTIONS, INC., a California corporation and a wholly owned
subsidiary of the Company, on the one hand (each individually a "SELLER" and,
collectively, "SELLERS"), and XXXXXX ENTERTAINMENT, INC., a Delaware corporation
("PURCHASER") and the assignee of Classic Media, LLC, a Delaware limited
liability company ("CLASSIC"), on the other hand.
R E C I T A L S
A. Sellers, on the one hand, and Classic, on the other hand, entered
into an Asset Purchase and Sale Agreement dated as of March 7, 2001 (the "ASSET
PURCHASE AGREEMENT"), pursuant to which Sellers agreed to sell, assign and
transfer to Classic, and Classic agreed to purchase from Sellers, substantially
all of the assets, properties and rights owned or held by Sellers and used in
the conduct of the Xxxxxx Entertainment Business, all on the terms and subject
to the conditions set forth therein. Unless otherwise indicated, capitalized
terms used in this Amendment have the meanings set forth in the Asset Purchase
Agreement.
B. Pursuant to Section 9.4 of the Asset Purchase Agreement, Classic
and Purchaser entered into an Assignment and Assumption Agreement dated as of
March 28, 2001, pursuant to which Classic assigned to Purchaser all of Classic's
right, title and interest in and to the Asset Purchase Agreement and delegated
to Purchaser all of its obligations thereunder, and Purchaser accepted the
assignment of the Asset Purchase Agreement and assumed the obligations of
Classic under the Asset Purchase Agreement.
C. A third party recently engaged in an attempted "topping bid" and, as
a consequence thereof, Purchaser agreed, among other things, to increase the
Purchase Price.
X. Xxxxxxx and Purchaser wish to enter into this Amendment to
memorialize certain legally binding agreements previously made by or on behalf
of the parties, and Classic has consented and agreed to such agreements.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, conditions and provisions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMENDMENTS TO ASSET PURCHASE AGREEMENT.
(a) AMENDMENT TO SECTION 2.1 (PURCHASE PRICE). Section 2.1
of the Asset Purchase Agreement is hereby amended by deleting "$16,000,000" and
replacing it with "$17,000,000".
(b) AMENDMENT TO SECTION 2.2 (PAYMENT OF PURCHASE PRICE).
Section 2.2 of the Asset Purchase Agreement is hereby amended as follows:
(i) Section 2.2(a) of the Asset Purchase Agreement is
hereby amended by deleting the parenthetical
"(i.e., $1,500,000)" in its entirety.
(ii) Section 2.2(b) of the Asset Purchase Agreement
is hereby amended by deleting "$14,500,000" in clause (i) in
such Section and replacing it with "$17,000,000 MINUS the
Deposit".
(c) AMENDMENT TO SECTION 5.6 (REASONABLE EFFORTS;
NOTIFICATION). Section 5.6 of the Asset Purchase Agreement is hereby amended by
adding the following to the end of such Section:
"At the Closing, Purchaser shall close the purchase and sale
of the Xxxxxx Entertainment Assets notwithstanding the fact
that Sellers have not, after using their best efforts,
obtained all consents or approvals of third parties required
to transfer to Purchaser one or more Assigned Contracts which
by their terms require the consent or approval of any other
contracting party thereto to the assignment thereof. With
respect to each such Assigned Contract that is not assigned on
the Closing Date, after the Closing Date, Sellers shall, to
the extent necessary, continue to deal with the other
contracting party(ies) to such Assigned Contract as the prime
contracting party, and Sellers shall continue to use their
best efforts to obtain the consent of all required third
parties to the assignment of such Assigned Contract to
Purchaser. Notwithstanding the absence of any consent or
approval to the assignment of any Assigned Contract to
Purchaser, Purchaser shall be entitled to receive the benefits
of such Assigned Contract accruing on and after February 1,
2001."
(d) AMENDMENT TO SECTION 5.15 (LITIGATION COOPERATION; CERTAIN
REIMBURSEMENT PAYMENT). Section 5.15(d) of the Asset Purchase Agreement is
hereby amended by deleting the last three (3) sentences of such Section and
replacing them with the following:
"Sellers and Purchaser acknowledge that the Company had been
negotiating with Entertainment Rights plc with respect to a
Xxxxxx Sale Transaction, and that the Company may determine,
without any obligation to do so, to reimburse such Person for
its expenses and time as compensation for its efforts and in
consideration of any consents required to be obtained from
such Person or its affiliates in connection with the
transactions contemplated by this Agreement. Subject to the
last sentence of this Section 5.15(d), Purchaser agrees to
contribute one-half of any such reimbursement payment,
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up to an aggregate of $250,000 from Purchaser, whether such
payment is made by the Company before, on or after the
Closing, and Sellers shall be responsible for paying all
amounts in excess of Purchaser's contribution.
Alternatively, at the election of the Company, Purchaser
shall pay to the Company up to $250,000 for reimbursement
of legal fees and related expenses incurred by Sellers in
connection with the transactions contemplated by this
Agreement and the August 24 Letter of Intent.
Notwithstanding anything to the contrary contained herein
or otherwise, Purchaser shall not be required to make any
payment to Sellers pursuant to either of the two (2)
immediately preceding sentences unless and until (i)
Entertainment Rights Distribution Limited consents in
writing to the assignment to Purchaser of the Distribution
Agreement between it and the Company or (ii) Purchaser has
received such other documentation or written assurances, in
form and substance reasonably satisfactory to Purchaser,
which makes such consent unnecessary in order for Purchaser
to receive economically equivalent value with respect to
such Distribution Agreement."
(e) AMENDMENT TO SECTION 6.2 (CONDITIONS TO OBLIGATION OF
PURCHASER). Section 6.2(d) of the Asset Purchase Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the following:
"(d) CONSENTS AND APPROVALS. All consents, approvals,
authorizations and permits of any Governmental and Regulatory
Authorities required to assign or otherwise transfer any
Xxxxxx Entertainment Assets shall have been obtained, except
where the failure to obtain the same could not reasonably be
expected to result in a Material Adverse Effect."
(f) AMENDMENT TO SECTION 8.3 (FEES AND EXPENSES).
(i) Section 8.3(c) of the Asset Purchase Agreement is
hereby amended by deleting "$350,000" in clause (ii) of such
Section and replacing it with "$1,000,000."
(ii) Section 8.3(d) of the Asset Purchase Agreement
is hereby amended by deleting "$350,000" in clause (B) of such
Section and replacing it with "$1,000,000."
(iii) Section 8.3(e) of the Asset Purchase Agreement
is hereby amended by deleting the phrase "the failure to
obtain third-party consents necessary to assign and transfer
the Assigned Contracts (subject to Section 6.2(d))" in the
parenthetical contained in such Section.
2. INCREASE IN DEPOSIT. Pursuant to the terms of an Escrow Agreement
dated August 24, 2000 (as amended by a letter amendment dated March 23, 2001,
the "Escrow Agreement"), by and among the Company, Classic and Escrow Holder (as
defined therein), Classic previously deposited with Escrow Holder the aggregate
amount of $1,500,000 (the "DEPOSIT") to be held and disbursed by Escrow Holder
in accordance with the terms of the Escrow Agreement. Purchaser and Classic
agree to increase the Deposit to $3,000,000 by depositing an additional
$1,500,000 with Escrow Holder not later than fifteen (15) business
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days after the date of mailing of the Company's definitive Proxy Statement to
its shareholders. Purchaser's or Classic's failure to so increase the Deposit
on or before such date shall be deemed to be a Purchaser Material Breach. At
the time such additional deposit is made, the parties to the Escrow Agreement
will enter into a second amendment to the Escrow Agreement in substantially
the form of the letter amendment dated March 23, 2001.
3. WAIVER OF CERTAIN CLAIMS BY PURCHASER.
(a) Pursuant to Section 1.1(d) of the Asset Purchase
Agreement, at the Closing, Sellers have agreed to sell, assign and transfer to
Purchaser the Assigned Receivables, including, without limitation, proceeds from
the distribution of the motion picture "CASPER'S HAUNTED CHRISTMAS" previously
estimated by Universal to be approximately $1,700,000. Sellers have recently
advised Purchaser that Universal has revised its prior estimate of the amount of
such proceeds to approximately $1,300,000. Purchaser acknowledges that such
revised estimate shall not give rise to any claim by Purchaser against Sellers.
(b) Pursuant to Section 1.3(d) of the Asset Purchase
Agreement, at the Closing, Purchaser has agreed to assume any liabilities for
the audit adjustment, if any, due from the Company to Universal regarding past
licensing and merchandising for the character "CASPER" as set forth in Section
1.1(f). The Company has advised Purchaser that it received from Universal a
letter dated April 2, 2001, a copy of which has been furnished to Purchaser,
asserting that, based upon its audit, Universal believes that Xxxxxx owes to
Universal the amount of $405,665 with respect to such licensing and
merchandising activities. Sellers had previously estimated the amount of such
liability to Universal to be approximately $205,000. The Company has advised
Purchaser that the Company is disputing such claim by Universal. Purchaser
acknowledges that Universal's revised claim against the Company for such
increased amount shall not give rise to any claim by Purchaser against Sellers.
(c) Pursuant to Section 5.15(c) of the Asset Purchase
Agreement, the Company is obligated to provide copies of drafts of the Proxy
Statement to Purchaser and its counsel at least two (2) business days prior to
the date of filing of such document with the SEC so as to allow Purchaser to
review and comment on such documents. The Company has advised Purchaser that it
intends to file with the SEC on or about May 8, 2001, an amendment to the
preliminary Proxy Statement it filed with the SEC on April 18, 2001. Purchaser
waives any claim it may have under Section 5.15(c) with respect to the Company's
failure to provide such two (2) business day notice, PROVIDED that the Company
uses its reasonable best efforts to provide Purchaser and its counsel with
copies at least twelve (12) hours prior to the time of filing of such document
with the SEC.
(d) Purchaser hereby waives any claims it may have against
Sellers with respect to Sellers' responses to the "topping bid" made by a third
party on or about April 27, 2001, and Sellers' subsequent discussions with such
third party through May 4, 2001, with respect thereto. The waiver provided for
in this Section 3(d) shall neither constitute an acknowledgment or admission by
Purchaser that Sellers' responses were permitted under Section 5.3(b) of the
Asset Purchase Agreement nor act as a waiver of any claims that Purchaser may
have against Sellers with respect to any future action taken or purported to be
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taken by Sellers pursuant to the provisions of Section 5.3(b) of the Asset
Purchase Agreement or otherwise.
4. ACKNOWLEDGMENT REGARDING THIRD PARTY CONSENTS. Purchaser hereby
acknowledges that Sellers have not yet obtained the consents of all third
parties necessary to assign to Purchaser the Assigned Contracts listed on
Schedule 3.4. Nothing contained in this Amendment or otherwise shall be deemed
to release Sellers from their obligations under the Asset Purchase Agreement to
use their best efforts to obtain all third party consents necessary to assign
the Xxxxxx Entertainment Assets to Purchaser at the Closing.
5. REPRESENTATIONS AND WARRANTIES. Each Seller, on the one hand, and
Purchaser, on the other, hereby represents and warrants to the other that the
execution, delivery and performance of this Amendment have been duly authorized
by all requisite action on the part of such party.
6. FULL FORCE AND EFFECT. Except as set forth in Section 1, the Asset
Purchase Agreement shall remain in full force and effect as amended hereby. The
Asset Purchase Agreement (including, without limitation, the provisions of
Section 9.4), as amended hereby, is hereby ratified and affirmed in all
respects. This Amendment supersedes that certain letter agreement dated May 4,
2001, entered into by or on behalf of the Company and Purchaser.
7. MISCELLANEOUS. This Amendment may be executed in any number of
counterparts or by facsimile, each of which will be deemed an original, but all
of which together will constitute one and the same instrument. All recital,
section, clause and party references are to this Amendment unless otherwise
stated. This Amendment shall be governed by and construed in accordance with the
internal laws of the State of California, without giving effect to any choice of
law or conflict of law provision or rule that would cause the application of the
laws of any jurisdiction other than the State of California. This Amendment
shall inure to the benefit of, and be binding upon, the parties and their
respective successors and permitted assigns.
8. DISPUTE RESOLUTION. All claims, controversies and disputes arising
out of or related to this Amendment shall be finally settled by arbitration
pursuant to Section 9.12 of the Asset Purchase Agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their duly authorized representatives as of the first
date written above.
SELLERS
THE XXXXXX ENTERTAINMENT COMPANY,
a California corporation
By: /s/ XXXXX X. XXXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
XXXXXX COMICS, INC.,
a New York corporation
By: /s/ XXXXX X. XXXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------------------
Title: Chief Executive Officer
-----------------------------------
BHP PRODUCTIONS, INC.,
a California corporation
By: /s/ XXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxx Xxxxx
-----------------------------------
Title: Chairman
-----------------------------------
PURCHASER
XXXXXX ENTERTAINMENT, INC.,
a Delaware corporation
By: /s/ XXXX XXXXXXXXXX
-----------------------------------
Name: Xxxx Xxxxxxxxxx
-----------------------------------
Title: President & Chief Executive Officer
------------------------------------
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ACKNOWLEDGMENT AND CONSENT
OF CLASSIC MEDIA, LLC
Classic Media, LLC ("CLASSIC") hereby acknowledges that it has read the
foregoing Amendment to Asset Purchase and Sale Agreement (the "AMENDMENT") and
consents to its terms. In addition, Classic agrees to be bound by the terms of
Section 2 of the Amendment only as if it were a party thereto.
Classic hereby further acknowledges that it may deemed to be a
guarantor or surety of Purchaser by reason of the fact that, pursuant to an
Assignment and Assumption Agreement dated as of March 28, 2001, Classic assigned
to Purchaser all of Classic's right, title and interest in and to the Asset
Purchase Agreement and delegated to Purchaser its obligations thereunder and,
pursuant to Section 9.4, such assignment and delegation does not relieve Classic
of its obligations thereunder. As such, Classic may be entitled, as a guarantor
or surety of Purchaser's obligations, to certain rights and defenses under
applicable Laws, including, without limitation, the rights and defenses
described in Section 2856(a) of the Civil Code of the State of California.
Nevertheless, it is the intention of Classic to waive, and Classic hereby
waives, any and all such rights and defenses available to it under applicable
Laws, including, without limitation, those described under Section 2856(a) of
the Civil Code of the State of California. This paragraph is intended to be an
unconditional and irrevocable waiver of any rights and defenses Classic may have
if Classic is deemed to be a guarantor or surety of Purchaser.
Classic hereby represents and warrants to Sellers that the execution,
delivery and performance of this Acknowledgment and Consent have been duly
authorized by all requisite action on the part of Classic.
CLASSIC MEDIA, LLC,
a Delaware limited liability company
By: /s/ XXXX XXXXXXXXXX
-----------------------------------
Name: Xxxx Xxxxxxxxxx
-----------------------------------
Title: President & Chief Executive Officer
------------------------------------
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