THQ Asset Purchase Agreement
On August 3, 2009, Midway Games Inc. (the “Registrant”) and two of its United States subsidiaries, Midway Home Entertainment Inc. (“MHE”) and Midway Studios Los-Angeles Inc. (“MSLA,” together with the Registrant and MHE, the “Sellers”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with THQ Inc. (“THQ”).
Under the terms of the Asset Purchase Agreement, THQ will purchase substantially all of the assets used in connection with and arising out of the operation of the video game design and development studio operating out of the Registrant’s San Diego, California facility (the “CA Facility”), with certain exclusions, including, but not limited to, the TNA iMPACT! video game (the “Excluded Game”) and certain third party licenses related to the Excluded Game. The purchase price for the assets is Two Hundred Thousand Dollars ($200,000) plus the aggregate of any cure amounts and other assumed liabilities under assumed contracts and accrued unpaid time off for employees hired by THQ. THQ extended offers of at-will employment to at least forty employees at the CA Facility as of August 4, 2009 on terms and conditions at least as favorable as their current terms of employment and, pursuant to the terms of the Asset Purchase Agreement, shall have reasonable access to the Registrant’s employees to conduct additional interviews and, in its discretion, offer additional employment. As previously reported, on July 1, 2009, the Registrant complied with the federal Worker Adjustment and Retraining Notification Act (the “WARN Act”) and provided a 60-day notification to the employees of the CA Facility, including employees of MSLA, of its intention to close the CA Facility. Due to THQ’s offer of at-will employment to certain employees, the Registrant expects a payroll cost savings as it is no longer required to pay salaries and accrued paid time off for the remainder of the WARN Act notice period to those employees that accept THQ’s offer of employment. See the Registrant’s Current Report on Form 8-K filed on July 8, 2009 for more information about the notification under the WARN Act at the CA Facility.
The consummation of the transaction contemplated by the Asset Purchase Agreement is subject to (i) entry of an order of the United States Bankruptcy Court for the District of Delaware (the “Court”) approving the proposed transaction, (ii) entry into a license agreement between THQ and Warner Bros. Entertainment Inc. in connection with a shared engine developed by or on behalf of Sellers and their affiliates prior to July 10, 2009 (the terms of which have been agreed) and (iii) other customary closing conditions.
The above description of the Asset Purchase Agreement is qualified in its entirety by reference to the terms of the Asset Purchase Agreement, attached hereto as Exhibit 2.1 and incorporated herein by reference.
European Subsidiaries Share Purchase Agreements
On August 5, 2009, MHE entered into a Stock Purchase Agreement with F+F Publishing GmbH, a German limited liability company (“F+F”), whereby MHE intends to sell all of the shares of its wholly-owned German subsidiary, Midway Games GmbH (“MGG”) to F+F (the “F+F SPA”). Also on August 5, 2009, MHE entered into a Stock Purchase Agreement with Spiess Media Holding UG (Limited Liability), a German enterprise company with limited liability (“SMH”), whereby MHE intends to sell all of the shares of its wholly-owned subsidiaries (i) Midway Games SAS, a company organized under the laws of France (“MGS”), and (ii) Midway Games Limited, an English limited liability private company (“MGL”), to SMH (the “SMH SPA,” together with the F+F SPA, the “Europe Purchase Agreements”). The aggregate purchase price for the shares of MGL and MGS shall be One Euro ( € 1) allocated 50% towards the purchase of the shares of MGL and 50% towards the purchase of the shares of MGS. The purchase price for the shares of MGG shall be One Euro ( € 1). In addition, pursuant to the terms of the Europe Purchase Agreements, it is a condition of closing that at, or prior to, closing MHE and its affiliates enter into an Intercompany Agreement (the “Intercompany Agreement”) to resolve certain intercompany obligations so that there shall be no intercompany obligations outstanding among MGL, MGS, MGG and any of MHE or its affiliates at closing. The Intercompany Agreement will result in a payment of approximately One Million Seven Hundred Thousand Dollars ($1,700,000) from MGL to MHE at the closing of the transactions.
The consummation of the transactions contemplated by the Europe Purchase Agreements and the Intercompany Agreement are subject to entry of an order of the Court approving the proposed transactions and other customary closing conditions.