EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
BY AND AMONG
VIDEO SYMPHONY, INC.,
DIGITAL DOCTORS, INC.,
FOUR MEDIA COMPANY, AND
VSDD ACQUISITION CORP.
TABLE OF CONTENTS
PAGE(S)
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ARTICLE 1. - Certain Definitions............................... 2
1.1 "Accounts Receivable"................................ 2
1.2 "Acquisition Price".................................. 2
1.3. "Affiliate"......................................... 2
1.4. "Assets"............................................ 2
1.5. "Audited Financial Statements"...................... 2
1.6. "Capitalized Lease"................................. 2
1.7. "Claims"............................................ 2
1.8. "Closing"........................................... 3
1.9. "Closing Date"...................................... 3
1.10. "Contract".......................................... 3
1.11. "Coopers"........................................... 3
1.12. "Enforceability Exceptions"......................... 3
1.13. "Environmental Law"................................. 3
1.14. "Environmental Liability"........................... 3
1.15. "Environmental Permit".............................. 3
1.16. "EPA"............................................... 3
1.17. "ERISA"............................................. 3
1.18. "Exchange Act"...................................... 3
1.19. "Excluded Assets"................................... 4
1.20. "4MC Acquisition Stock"............................. 4
1.21. "GAAP".............................................. 4
1.22. "Governmental Authority"............................ 4
1.23. "Governmental Licenses and Permits"................. 4
1.24. "Indebtedness"...................................... 4
1.25. "Intangible Personal Property"...................... 4
1.26. "Knowledge"......................................... 4
1.27. "Law"............................................... 5
1.28. "Leased Premises"................................... 5
TABLE OF CONTENTS
(Continued)
PAGE(S)
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1.29. "Liabilities"........................................ 5
1.30. "Liens".............................................. 5
1.31. "Losses"............................................. 6
1.32. "Material Adverse Effect"............................ 6
1.33. "Material Contract".................................. 6
1.34. "Newco".............................................. 6
1.35. "Newco Interest"..................................... 6
1.36. "90-day Receivables"................................. 6
1.37. "Permitted Liens".................................... 6
1.38. "Person"............................................. 7
1.39. "Personal Property".................................. 7
1.40. "Personal Property Leases"........................... 7
1.41. "Real Property"...................................... 7
1.42. "Real Property Leases"............................... 7
1.43. "Regulated Substance"................................ 7
1.44. "Required Consent"................................... 7
1.45. "Returns"............................................ 7
1.46. "Schedule"........................................... 7
1.47. "Securities Act"..................................... 7
1.48. "SEC"................................................ 7
1.49. "Stock Value"........................................ 8
1.50. "Subsidiary"......................................... 8
1.51. "Taxes".............................................. 8
1.52. "Transactions"....................................... 8
1.53. "Transfer"........................................... 8
1.54. "Transferred Assets"................................. 8
1.55. "Unaudited Financial Statements"..................... 8
1.56. "VSDD's Knowledge"................................... 8
1.57. "VSE"................................................ 8
1.58. "VSE Equipment"...................................... 8
TABLE OF CONTENTS
(continued)
PAGE(S)
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1.59. "VSE Equipment Leases".................................... 9
1.60. "VSE Leased Premises"..................................... 9
1.61. "VSE Real Property Leases"................................ 9
ARTICLE 2. - Transfer and Acquisition of Assets....................... 9
2.1. Transfer of Assets........................................ 9
2.2. Excluded Assets........................................... 11
2.3. Assumption of Liabilities................................. 11
2.4. Excluded Liabilities...................................... 12
2.5. Acquisition Price and Payment for Assets.................. 12
2.6. Employment Agreements..................................... 13
2.7. Covenants Not to Compete.................................. 13
2.8. Accounts Receivable....................................... 13
ARTICLE 3. - Representations and Warranties of Shareholders and VSDD... 14
3.1. Organization and Standing of VSDD......................... 14
3.2. Subsidiaries.............................................. 14
3.3. Authority of VSDD; Binding Agreement...................... 15
3.4. No Conflict............................................... 15
3.5. Financial Statements...................................... 16
3.6. Absence of Certain Changes or Events...................... 16
3.7. Assets.................................................... 18
3.8. Investments............................................... 18
3.9. Contracts................................................. 19
3.10. Litigation................................................ 19
3.11. Taxes..................................................... 19
3.12. Compliance With Laws...................................... 20
3.13. Government Licenses and Permits........................... 20
TABLE OF CONTENTS
(continued)
PAGE(S)
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3.14. Environmental Matters................................... 20
3.15. Insurance............................................... 21
3.16. Condition of Assets..................................... 22
3.17. Labor and Employment Agreements......................... 22
3.18. Employee Benefit Plans; ERISA........................... 23
3.19. Business Locations...................................... 23
3.20. Intangible Personal Property............................ 23
3.21. Customers; Existing Arrangements........................ 24
3.22. Governmental Approvals.................................. 24
3.23. Accounts Receivable; Accounts Payable................... 24
3.24. Liabilities............................................. 25
3.25. No Omissions or Untrue Statements....................... 25
3.26. Outstanding Bank Debt................................... 25
ARTICLE 4. - Representations and Warranties of 4MC and Acquisition..... 25
4.1. Organization and Standing of 4MC and Acquisition........ 25
4.2. Authority; Binding Agreement............................ 26
4.3. No Conflict............................................. 26
4.4. Capitalization.......................................... 26
4.5. Governmental Approval; Consents......................... 27
4.6. 4MC's SEC Reports....................................... 27
4.7. Compliance with Laws and Regulations.................... 28
4.8. Governmental Licenses and Permits....................... 28
4.9. No Omission or Untrue Statement......................... 28
4.10. No Adverse Actions...................................... 29
4.11. Absence of Certain Changes or Events.................... 29
4.12. Litigation.............................................. 30
4.13. Compliance With Laws.................................... 30
4.14. Labor................................................... 30
TABLE OF CONTENTS
(continued)
PAGE(S)
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ARTICLE 5. - Closing.................................................. 30
5.1. Closing Date............................................. 30
5.2. Closing Deliveries to Acquisition........................ 30
5.3. Closing Deliveries to VSDD............................... 31
ARTICLE 6. - Conditions to Obligations of VSDD........................ 32
6.1. Compliance by 4MC and Acquisition........................ 32
6.2. Accuracy of 4MC's and Acquisition's Representations...... 32
6.3. Material Adverse Change.................................. 33
6.4. Litigation............................................... 33
6.5. Documents................................................ 33
6.6. Personal Guarantees...................................... 33
ARTICLE 7. - Conditions to Obligations of 4MC......................... 33
7.1. Compliance by VSDD....................................... 33
7.2. Accuracy of VSDD's Representations....................... 33
7.3. Material Adverse Change.................................. 33
7.4. Litigation............................................... 34
7.5. Additional Agreements.................................... 34
7.6. Employment Agreements.................................... 34
7.7. Required Consents........................................ 34
7.8. Documents................................................ 34
7.9. Completion of Coopers Review............................. 34
7.10. Bank Approval............................................ 34
ARTICLE 8. - Termination.............................................. 34
8.1. Termination Prior to Closing............................. 34
8.2. Consequences of Termination.............................. 35
TABLE OF CONTENTS
(continued)
PAGE(S)
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ARTICLE 9. - Covenants................................................ 35
9.1. Access by 4MC............................................ 35
9.2. Conduct of Business...................................... 36
9.3. Exclusivity to 4MC....................................... 37
9.4. Agree to Cooperate; Consents; Further Assurances......... 37
9.5. Change of Name........................................... 38
9.6. Common Services.......................................... 38
9.7. Books and Records........................................ 38
9.8. Tax Treatment............................................ 39
ARTICLE 10. - Survival of Representations; Indemnification; Escrow.... 39
10.1. Survival................................................. 39
10.2. Indemnity................................................ 39
10.3. Time for Claims.......................................... 40
10.4. Claims for Indemnification............................... 40
10.5. Claims Procedure......................................... 40
10.6. Escrow................................................... 41
10.7. Limit on Indemnity....................................... 41
ARTICLE 11. - 4MC Acquisition Stock Restrictions; Registration Rights. 42
11.1. Restriction on Transfer.................................. 42
11.2. Restrictive Legends...................................... 43
11.3. Registration............................................. 43
ARTICLE 12. - Miscellaneous........................................... 43
12.1. Expenses................................................. 43
12.2. Publicity................................................ 43
12.3. Succession and Assignments; Third Party Beneficiaries.... 44
TABLE OF CONTENTS
(continued)
PAGE(S)
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12.4. Notices................................................ 44
12.5. Governing Law.......................................... 46
12.6. Counterparts........................................... 46
12.7. No Implied Waiver; Remedies............................ 46
12.8. Entire Agreement....................................... 46
12.9. Amendments; Actual Waivers............................. 46
12.10. Changes in Representations and Warranties of a Party... 47
12.11. Headings............................................... 47
12.12. Severability........................................... 47
12.13. No Broker or Other Fees................................ 47
12.14. Arbitration............................................ 47
12.15. Attorneys' Fees........................................ 48
ASSET PURCHASE AGREEMENT AND
PLAN OF REORGANIZATION
This Asset Purchase Agreement and Plan of Reorganization ("Agreement") is
made as of April 27, 1998, by and among Video Symphony, Inc., a California
corporation ("VS"); Digital Doctors, Inc., a California corporation ("DD") ("VS"
and "DD" shall be referred to collectively herein as "VSDD"); Xxxxxxx Xxxxxxx,
an individual ("Xxxxxxx"), Xxxx Xxxxxx, an individual ("Xxxxxx"), Xxxxxxx
Xxxxxxxx, an individual ("X. Xxxxxxxx"), and Xxxxxx Xxxxxxxx, an individual ("X.
Xxxxxxxx") (Herbert, Howard, X. Xxxxxxxx and X. Xxxxxxxx shall be referred to
collectively herein as "Shareholders"); Four Media Company, a Delaware
corporation ("4MC"); and VSDD Acquisition Corp., a Delaware corporation
("Acquisition"). VS, DD, Howard, X. Xxxxxxxx, X. Xxxxxxxx and Xxxxxxx, 4MC and
Acquisition are together herein referred to as the "Parties."
R E C I T A L S
A. 4MC, through its subsidiaries, is in the business of providing
technical and creative services to owners, producers and distributors of
television programming, feature films and other entertainment content in the
United States and Asia.
B. Acquisition is a wholly owned subsidiary of 4MC.
C. VS and DD are in the business of renting post-production equipment to
customers as well as providing certain repair services and selling post-
production equipment (the "Business").
X. X. Xxxxxxxx, T. Xxxxxxxx, Xxxxxxx and Xxxxxx are the holders of One
Million Twenty Thousand (1,020,000) shares of common stock, no par value, of
each of VS (the "VS Stock") and DD (the "DD Stock") (collectively, the "Stock"),
which constitutes all of the issued and outstanding capital stock of both VS and
DD.
E. Acquisition desires to acquire from VSDD and VSDD desires to transfer
to Acquisition substantially all of the assets used by VSDD in the operation of
the Business, all on the basis set forth in more detail in this Agreement.
G. The Parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and other provisions, and in reliance upon the
representations and warranties contained herein, the Parties hereto agree as
follows:
ARTICLE 1.
Certain Definitions
-------------------
As used in this Agreement, the following terms shall have the meaning set
forth below. All terms used in this Agreement that are not defined in this
Article 1 shall have the meanings set forth elsewhere in this Agreement.
1.1. "Accounts Receivable" shall mean all accounts, notes and/or rights to
payment which VSDD owns or which may arise in favor of VSDD in the future.
1.2. "Acquisition Price" is defined in Section 2.5(a).
1.3. "Affiliate" shall mean, with respect to any specified Person: (a) any
other Person which directly or indirectly owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person;
(b) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity securities of the specified Person or a Person described in clause (a) of
this Section;
(c) another Person of which the specified Person is a director, officer or
partner or is, directly or indirectly, the beneficial owner of ten percent (10%)
or more of any class of equity securities; (d) another Person in which the
specified Person has a substantial beneficial interest or as to which the
specified Person serves as trustee or in a similar capacity; (e) each Subsidiary
of such Persons; and/or (f) any relative or spouse of the specified Person or
any of the foregoing Persons, any relative of such spouse or any spouse of such
relative.
1.4. "Assets" shall mean the Transferred Assets and the Excluded Assets.
1.5. "Audited Financial Statements" is defined in Section 3.5(a).
1.6. "Capitalized Lease" shall mean a lease of real or personal property
which, in accordance with GAAP, has been or should have been capitalized by the
lessee.
1.7. "Claims" is defined in Section 10.4.
1.8. "Closing" shall mean the closing of the transactions contemplated by
this Agreement on the Closing Date in accordance with Articles 2 and 5 hereof
and subject to all of the other terms and conditions hereof.
1.9. "Closing Date" shall mean the date of Closing.
1.10. "Contract" shall mean any agreement, contract, plan, arrangement,
lease, commitment, license, or other instrument whether written or oral, which
is intended or purports to be binding and enforceable, or which is offered to
any Person and acted upon, or relied upon by such Person.
1.11. "Coopers" shall mean Coopers & Xxxxxxx LLC.
1.12. "Enforceability Exceptions" shall mean the extent to which
enforceability of an obligation may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies.
1.13. "Environmental Law" shall mean any federal, state, local and foreign
Law, concerning: (i) public health and safety relating to exposure of humans to
toxic or hazardous substances; or (ii) pollution or protection of the
environment or natural resources including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act ("RCRA"), the Clean Water Act of 1977, and any
other similar federal, state or local statutes, in each case including the
regulations promulgated thereunder, each as supplemented or amended from time to
time.
1.14. "Environmental Liability" shall mean any Liability arising out of or
based upon any Environmental Law.
1.15. "Environmental Permit" shall mean any permit, license, approval,
consent or other authorization required by, or pursuant to, any applicable
Environmental Law.
1.16. "EPA" shall mean the United States Environmental Protection Agency,
or any successor United States governmental agency.
1.17. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
1.18. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.19. "Excluded Assets" is defined in Section 2.2.
1.20. "4MC Acquisition Stock" shall mean the shares of 4MC Common Stock
originally issued on the Closing Date and any shares of capital stock received
in respect thereof, whether by reason of a dividend, stock split or share
reclassification.
1.21. "GAAP" shall mean United States Generally Accepted Accounting
Principles as in effect at the time in question.
1.22. "Governmental Authority" shall mean the government of the United
States, any foreign country, or any state or political subdivision thereof, and
any entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government entities,
established to perform such functions.
1.23. "Governmental Licenses and Permits" shall mean the licenses, permits
or other authorizations required by any law or Governmental Authority to be held
by a Person in order to operate the business of VSDD as it has been operated
historically.
1.24. "Indebtedness" shall mean at any date any of the following: (i) all
obligations, unconditional or contingent for borrowed money including, without
limitation, principal, interest, premium, penalties and costs (whether or not
the recourse of the lender is to the whole of the assets of VSDD or only to a
portion thereof, and including for this purpose all obligations incurred under
Capitalized Leases), or obligations evidenced by bonds, notes, debentures or
similar instruments (including, without limitation, obligations with respect to
letters of credit or bankers' acceptances); (ii) all obligations to pay the
balance deferred and unpaid of the purchase price of any business, real
property, other assets or interest therein, except any such balance that
constitutes a trade payable arising in the ordinary course of business; (iii)
all liabilities secured by any Lien on any property of VSDD even though VSDD has
not assumed or otherwise become liable for payment thereof; and (iv) all
guaranties made by VSDD.
1.25. "Intangible Personal Property" is defined in Section 3.20.
1.26. "Knowledge" shall mean with respect to a Person's awareness of the
presence or absence of a fact, event, or condition (a) actual knowledge plus, if
different, (b) the knowledge that would be obtained if such Person conducted
itself faithfully and exercised a sound discretion in the management of its own
affairs.
1.27. "Law" shall mean any law, common law, statute, regulation,
ordinance, rule, order, decree, judgment, permit, policy, guideline, settlement
agreement, standard, or other requirement enacted, promulgated, entered into,
agreed or imposed by any Governmental Authority.
1.28. "Leased Premises" shall mean the following premises: (1) 000 X.
Xxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxxx; both occupied pursuant to the Real
Property Leases; and (2) 000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx.
1.29. "Liabilities" shall mean all (a) obligations at any date which are
or, according to GAAP should be, reflected and classified as liabilities on
VSDD's balance sheet; (b) all contingent liabilities (including, without
limitation, guarantees, endorsements or obligations to pay, assume, or purchase
liabilities or any obligation to purchase, sell or otherwise furnish assets,
properties or services primarily for the purpose of enabling such other Person
to make payment of such liabilities or of assuring the owner of such liabilities
against loss with respect thereto); (c) amounts (calculated on an actuarial
basis) that could be payable pursuant to any contract or other plan or
arrangement by which VSDD is bound with respect to, or affecting, its employees,
officers, directors, representatives or agents; (d) penalties, charges and
assessments that are triggered by virtue of the occurrence of a transaction or
event; (e) liabilities secured by any Lien affecting any assets or properties
owned by VSDD (whether or not any such liability has been assumed by VSDD, and
whether it arises under a conditional sale or other retention agreement given as
a security devise); and (f) any other claims, indebtedness, responsibilities,
liabilities, losses, damages, deficiencies or obligations, regardless of whether
they are known or unknown, fixed or accrued,
absolute or contingent, determined or determinable, secured or unsecured, and
whether such claim, liability, responsibility, loss, damage, deficiency or
obligation has arisen, or has yet to arise or would be required to be recorded
or reflected on the books of VSDD.
1.30. "Liens" shall mean all, with respect to any given property(ies),
encumbrances, defects of title, deeds of trust, security agreements, pledges,
liens, conditional sales agreements, claims, restrictions, charges, options,
leases, subleases, encroachments, covenants, easements and/or rights of third
parties of every kind and character arising or existing by operation of law, by
judicial decree or judgment or arbitral decision, by contract or otherwise,
whether or not secured or fixed, absolute or contingent, known or unknown,
determined or determinable and whenever arising.
1.31. "Losses" shall mean all demands, claims, actions or causes of
action, assessments, losses, damages, costs, expenses, liabilities, judgments,
awards, fines, sanctions, penalties, charges and amounts paid in settlement, net
of insurance proceeds actually received, including without limitation (i)
interest on cash disbursements in respect of any of the foregoing at the Bank of
America Reference Rate, compounded quarterly, from the date each such cash
disbursement is made until the Person incurring the same shall have been
indemnified in respect thereof, and (ii) reasonable costs, fees and expenses of
attorneys, accountants, experts and other agents of such Person.
1.32. "Material Adverse Effect" or "Material Adverse Change" shall mean,
with respect to a Party, an occurrence, condition, event or change which would
have or changes which in the aggregate would have a material adverse effect on
the assets, liabilities (whether absolute, accrued, contingent or otherwise),
condition (financial or otherwise), results of operations, business or prospects
of such Party.
1.33. "Material Contract" is defined in Section 3.9.
1.34. "Newco" shall mean a newly formed Delaware limited liability company
which shall be a wholly owned Subsidiary of VS prior to Closing; or, at the
option of VSDD, "Newco" shall mean collectively two newly formed Delaware
limited liability companies, one of which shall be a wholly owned Subsidiary of
VS prior to Closing and one of which shall be a wholly owned Subsidiary of DD
prior to Closing.
1.35. "Newco Interest" shall mean all of the issued and outstanding
membership interests in Newco.
1.36. "90-day Receivables" shall mean Accounts Receivable of VSDD which
have been outstanding for more than ninety (90) days.
1.37. "Permitted Liens" means Liens for (i) the bank Indebtedness set
forth on Schedule 3.26; (ii) the Personal Property Leases set forth on Schedule
3.7, except for the VSE Equipment Leases; (iii) Liens for taxes, assessments or
governmental charges or levies not yet due or which are being contested in good
faith and for which reserves are maintained in accordance with GAAP; (iv)
statutory Liens such as materialman's Liens arising in the ordinary course of
business which are not delinquent or which are being contested in good faith; or
(v) deposits in connection with Workers' Compensation, unemployment insurance or
leases or services in the ordinary course.
1.38. "Person" shall mean an individual, corporation, limited liability
company, partnership, or other entity or organization, including, but not
limited to, a Governmental Authority.
1.39. "Personal Property" shall mean all machinery, equipment, vehicles,
tools, furniture and other tangible personal property owned or leased.
1.40. "Personal Property Leases" shall mean Personal Property lease
agreements, as
amended, to which VSDD is a party (as lessor or lessee).
1.41. "Real Property" shall mean real property, including tenant
improvements and fixtures.
1.42. "Real Property Leases" shall mean (1) that certain lease between
Burbank Personal Storage, as Landlord, and VS, as tenant, originally dated
October 30, 1997; and (2) that certain lease between Xxxxx X. Xxxxx and Xxxxx X.
Xxxxx, as Landlord, and VS, as tenant, originally dated November 20, 1996.
1.43. "Regulated Substance" shall mean any chemical or substance subject
to, or regulated under, any Environmental Law, whether injurious by itself or in
combination with other materials, including, without limitation, any "pollutant
or contaminant" or "hazardous substance," as those terms are defined in CERCLA;
any "hazardous waste" as that term is defined in RCRA; and any other hazardous
or toxic wastes, substances or materials; and including any material or
substance that contains petroleum.
1.44. "Required Consent" shall mean all consents required to be obtained
by any Party hereto, to comply with or eliminate the exceptions to the
performance of the Agreement.
1.45. "Returns" shall mean all returns (including, without limitation,
information returns and other material information), reports and forms relating
to Taxes.
1.46. "Schedule" shall mean any schedule, and the term Schedule shall mean
all schedules, attached hereto and incorporated herein.
1.47. "Securities Act" shall mean the Securities Act of 1933, as amended.
1.48. "SEC" shall mean the Securities and Exchange Commission.
1.49. "Stock Value" is defined in Section 2.5(b)(i).
1.50. "Subsidiary" with respect to a specified Person shall mean a
corporation or other legal entity which such Person beneficially owns, controls
or has the ability to control, directly or indirectly: (a) in excess of fifty
percent (50%) of the stock, the holders of which are ordinarily and generally in
the absence of contingencies entitled to vote for the election of a majority of
the directors; or (b) in excess of fifty percent (50%) of the aggregate total
ownership thereof.
1.51. "Taxes" shall mean, with respect to any Person, (a) any net income,
gross income, alternative or add-on minimum, business, gross receipts, sales,
use, ad valorem, franchise, custom duty or other tax, fee, assessment or charge
of any kind or nature whatsoever, together with any interest and any penalty
thereon or any other related addition to any such taxes imposed by any
Governmental Authority on such Person, or with respect to the assets or
operations of such Person, and (b) any liability of such Person for the payment
of any amount of the type described in the immediately preceding clause (a) as a
result of such Person's being a member of an affiliated or combined group.
1.52. "Transactions" shall mean, in respect of any Party, all transactions
set forth in or contemplated by this Agreement that involve, relate to or affect
such Party including, without limitation, the transfer of the Assets.
1.53. "Transfer" shall mean any sale, transfer, hypothecation, alienation
or other disposition of any 4MC Acquisition Stock or of any interest therein,
including any disposition which would constitute a sale thereof within the
meaning of the Securities Act.
1.54. "Transferred Assets" is defined in Section 2.1.
1.55. "Unaudited Financial Statements" is defined in Section 3.5(b).
1.56. "VSDD's Knowledge" shall mean the knowledge of VSDD by and through
its appropriate personnel.
1.57. "VSE" shall mean Video Symphony EnterTraining, Inc., a California
corporation.
1.58. "VSE Equipment" shall mean all of the equipment subject to the VSE
Equipment Leases and that equipment subject to other equipment leases which is
specifically set forth on Schedule 1.58.
1.59. "VSE Equipment Leases" shall mean the equipment leases set forth on
Schedule 1.59.
1.60. "VSE Leased Premises" shall mean the following premises: (1) 000
Xxxxxxxxx Xxx, Xxxxxxx, Xxxxxxxxxx; (2) 0000 X. Xxxxxxx, Xxxxxxx, Xxxxxxxxxx;
and (3) 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxx X, Xxxxxx, Xxxxx.
1.61. "VSE Real Property Leases" shall mean (1) that certain lease between
Caro J. Minas, as Landlord, and VS, as tenant, originally dated April 11, 1995;
(2) that certain lease between Del Rey Properties, as Landlord, and VS as
tenant, originally dated April 8, 1997; and (3) that certain lease between Faith
Community Church, as Landlord, and VS, as tenant, originally dated May 29, 1997.
ARTICLE 2.
Transfer and Acquisition of Assets
----------------------------------
2.1. Transfer of Assets. Upon the terms and subject to the conditions of
------------------
this Agreement, Acquisition agrees to acquire from VSDD and VSDD agrees to
transfer or cause to be transferred to Acquisition at the Closing, all of the
Newco Interests, free and clear of all Liens. VSDD, prior to Closing, shall
have transferred to Newco, free and clear of all Liens other than Permitted
Liens, all the assets, properties, rights, licenses, permits, contracts, causes
of action, claims, operations and businesses of VSDD of every kind and
description as the same shall exist immediately prior to the Closing Date (other
than the Excluded Assets or any of the foregoing that relate solely to the
Excluded Assets), wherever located, whether tangible or intangible, real,
personal or mixed, that are owned by, leased by or in the possession of VSDD,
whether or not reflected on the books and records of VSDD (the collective
assets, properties, rights, licenses, permits, contracts, causes of action,
claims, operations and businesses to be transferred to Newco, and by means of
the transfer of the Newco Interests, to Acquisition by VSDD pursuant hereto,
together with the Newco Interests, are referred to collectively herein as the
"Transferred Assets") and including without limitation all right, title and
interest of VSDD in, to and under:
2.1.(a) all machinery, equipment, furniture, office equipment,
computer equipment (including all hardware and software), communications
equipment, vehicles, spare and replacement parts and other tangible property
(and interests in any of the foregoing) of VSDD;
2.1.(b) all items of inventory notwithstanding how classified in the
financial records of VSDD, including all raw materials, work-in-progress,
finished goods, supplies, spare parts and samples;
2.1.(c) all contracts, agreements, options, leases, licenses, sales
and purchase orders, commitments and other instruments of any kind, whether
written or oral, to which VSDD is a party on the Closing Date;
2.1.(d) all accounts, Accounts Receivable and notes receivable,
together with any unpaid interest or fees accrued thereon or other amounts due
with respect thereto, of VSDD, and any security or collateral therefor,
including recoverable advances and deposits;
2.1.(e) all prepaid charges and expenses of VSDD, including any such
charges and expenses with respect to ad valorem taxes, leases, rentals and
utilities;
2.1.(f) all rights of VSDD to insurance proceeds;
2.1.(g) all of VSDD's rights, claims, credits, causes of action or
rights of set-off against third parties relating to the Business or the
Transferred Assets, whether liquidated or unliquidated, fixed or contingent,
including claims pursuant to all warranties, representations and guarantees made
by suppliers, manufacturers, contractors and other third parties in connection
with products or services purchased by or furnished to VSDD for use in the
Business or affecting any of the Transferred Assets;
2.1.(h) all of VSDD's licensed products or processes, patents,
copyrights, trademarks, trade names, service marks, service names, designs,
know-how, processes, trade secrets, inventions and other proprietary data;
2.1.(i) all transferable franchises, licenses, permits or other
authorizations issued or granted by any Governmental Authority that are owned
by, granted to or held or used by VSDD;
2.1.(j) to the extent available, all books, records, files and papers
of VSDD, whether in hard copy or computer format, including all documentation
developed or used for accounting, marketing, engineering, manufacturing or any
other purpose related to the conduct of the Business at any time prior to the
Closing;
2.1.(k) all lists of present customers and lists of former customers;
2.1.(l) all goodwill associated with the Business or the Transferred
Assets;
2.1.(m) except as specifically provided in Section 2.2, all other
assets and properties of VSDD which exist on the Closing Date, whether tangible
or intangible, real or personal; and
2.1.(n) all cash on hand or in accounts of VSDD.
2.2. Excluded Assets. Acquisition and VSDD expressly understand and agree
---------------
that the following assets and properties (the "Excluded Assets") shall be
excluded from the Transferred Assets:
2.2.(a) The 90-day Receivables;
2.2.(b) VSE Real Property Leases; and
2.2.(c) VSE Equipment Leases;
2.2.(d) VSE Equipment;
2.2.(e) Judgment in favor of VS against Xxxxxxx Xxxxxx, et al.; and
2.2.(f) Intercompany receivables from VSE.
2.3. Assumption of Liabilities. Upon the terms and subject to the
-------------------------
conditions of this Agreement, Acquisition agrees, effective at the time of the
transfer of the Transferred Assets to Newco, Newco shall assume, and effective
from and after the time of Closing Acquisition shall cause Newco to perform and
timely pay and discharge, the following Liabilities (subject to the conditions
below and excluding the Excluded Liabilities, the "Assumed Liabilities"):
2.3.(a) all obligations with respect to the Contracts to be performed
after Closing;
2.3.(b) all Indebtedness of VSDD to the extent set forth on the
Audited Financial Statements, the Unaudited Financial Statements or incurred in
the ordinary course of business thereafter and deducted in determining the Net
Acquisition Price; and
2.3.(c) any current accounts payable or accrued expenses of VSDD
incurred or accrued in the ordinary course of business, but only to the extent
that such current accounts payable or accrued expenses of VSDD have been
properly reflected on the Audited Financial Statements, the Unaudited Financial
Statements or incurred in the ordinary course of business thereafter.
2.4. Excluded Liabilities. Newco shall not assume, and shall not any time
--------------------
hereafter (including on or after the Closing Date) become liable for, and
Acquisition shall not be responsible for, any Liabilities of VSDD or any of its
Affiliates other than the Assumed Liabilities (the
"Excluded Liabilities"); the Excluded Liabilities shall include, but are not
limited to, the following:
2.4.(a) any Liability of VSDD that is not attributable to, or that
does not arise out of, the ordinary conduct of the Business except that
attorneys' fees or other costs arising out of the Transactions, not to exceed
Fifty Thousand Dollars ($50,000) less any amount of such fees and costs
previously paid by VSDD in excess of Five Thousand Dollars ($5,000), shall be
treated as if they were attributable to the ordinary course of business;
2.4.(b) any Liability whether presently in existence or arising
hereafter which is attributable to an Excluded Asset;
2.4.(c) any Environmental Liability of VSDD whether presently in
existence or arising hereafter;
2.4.(d) any Liability the existence of which constitutes a breach of
any representation or warranty hereunder;
2.4.(e) any Liability for any income or Franchise Taxes; and
2.4.(f) any intercompany payables to VSE.
2.5. Acquisition Price and Payment for Assets.
----------------------------------------
2.5.(a) The Acquisition Price shall be Five Million Five Hundred
Thousand Dollars ($5,500,000) less the Indebtedness of VSDD (or Newco) at
Closing (except for any Indebtedness not assumed by Newco or Acquisition), plus
the Assumed Liabilities. The Net Acquisition Price shall be Five Million Five
Hundred Thousand Dollars ($5,500,000), less the Indebtedness of VSDD (or Newco)
at Closing (except for any Indebtedness not assumed by Acquisition). For
purposes hereof, Indebtedness shall include all penalties or charges imposed by
any lender (including lessors under Capital Leases) in order to enable
Acquisition to prepay such Indebtedness.
2.5.(b) The Acquisition Price shall be paid by Acquisition as
follows:
2.5.(b)(i) The Net Acquisition Price shall be paid by
delivery to VSDD (or for the benefit of VSDD pursuant to section 2.5(b)(ii)
below) of 4MC Acquisition Stock valued at the amount of such Net Acquisition
Price. The value of each share of 4MC Acquisition Stock shall be $9.56 (the
"Stock Value"). For purposes of Closing, the amount of the Indebtedness shall be
estimated by 4MC based upon then-current internal statements and other relevant
information provided by VSDD immediately prior to Closing (the "Estimate"). The
actual Indebtedness of VSDD (or Newco) immediately prior to Closing shall be
determined in good faith as soon as practical after Closing, but in any event
within forty-five (45) days of the Closing, by 4MC's independent accountants. If
the Indebtedness as finally determined exceeds the Estimate, VSDD shall
forthwith return 4MC Acquisition Stock (valued at the Stock Value) to 4MC in the
amount of such excess; if the Indebtedness as finally determined is less than
the Estimate, 4MC will pay to VSDD in 4MC Acquisition Stock (valued at the Stock
Value) an amount equal to such difference.
2.5.(b)(ii) Ten percent (10%) of the 4MC Acquisition Stock
available at Closing shall be delivered into an escrow account established as
set forth in Section 10.6 hereof (the "Escrow").
2.5.(b)(iii) The balance of the Acquisition Price in excess
of the Net Acquisition Price shall be paid by assumption by Acquisition of the
Assumed Liabilities or the agreement of Acquisition to pay or cause Newco to pay
or perform the Assumed Liabilities.
2.6. Employment Agreements. 4MC and Xxxxxx shall enter into a mutually
---------------------
agreeable employment agreement consistent with the standard executive employment
agreements utilized at 4MC, which agreement shall be effective on the Effective
Date.
2.7. Covenants Not to Compete. 4MC and Shareholders shall enter into
------------------------
covenants not to
compete in the form and substance of Exhibit A attached hereto.
2.8. Accounts Receivable. At or as soon as practicable after the Closing,
-------------------
VSDD will provide Acquisition with a statement of Accounts Receivable
outstanding as of the Closing Date (the "Closing Receivables"), including a
statement of the 90-day Receivables. Acquisition agrees that for a period of
ninety (90) days after the Closing Date (the "Collection Period"), it will use
its good faith, best efforts, consistent with 4MC's general practices, to
collect the Closing Receivables. All payments received from clients having a
Closing Receivable shall be applied to such client's oldest Closing Receivable
unless otherwise designated in writing by such customer based upon a bona fide
dispute over prior receivables. Acquisition will on a monthly basis deliver to
VSDD a statement setting forth in reasonable detail the Closing Receivables
collected during such period. To the extent any such collection constitutes a
90-day Receivable, Acquisition shall remit such sum to VSDD together with such
statement. At the end of the Collection Period, Acquisition shall turn over to
VSDD the uncollected 90-day Receivables and thereafter have no obligations with
respect thereto.
VSDD may not make any effort to collect any Closing Receivables,
whether or not 90-day Receivables; provided, however, that VSDD may seek to
collect any 90-day Receivables turned over to VSDD at or after the end of the
Collection Period; and provided further that any 90-day Receivables from clients
who are no longer clients of VSDD at Closing may be excluded by VSDD by denoting
such exclusion upon the statement of Closing Receivables and such excluded
Accounts Receivable may be pursued for collection by VSDD and Acquisition will
have no obligation with respect thereto.
ARTICLE 3.
Representations and Warranties of Shareholders and VSDD
-------------------------------------------------------
Shareholders and VSDD jointly and severally represent and warrant to 4MC
and Acquisition as follows, as of the date hereof and as of the Closing Date:
3.1. Organization and Standing of VSDD. Both VS and DD are corporations
---------------------------------
duly organized, validly existing and in good standing under the laws of the
State of California; have full corporate power and authority to carry on their
business as now conducted and to own or lease their assets; and are qualified to
transact business as a foreign corporation in each state set forth on Schedule
3.1, which constitute all of the states in which such qualification is required
except where the failure to be so qualified does not have a Material Adverse
Effect on VSDD. VSDD has delivered to 4MC true and complete copies of the
Articles of Incorporation, Bylaws and Minutes of the Board of Directors and of
the shareholders of VSDD, together with all amendments to each of them.
3.2. Subsidiaries. VSDD does not own any Subsidiaries and does not own or
------------
have an interest in any other corporation, limited liability company,
partnership, association, business organization or other entity; provided,
however, that at or prior to Closing VS will have formed Newco and will own all
of the Newco Interest, all of which will have been duly authorized, validly
issued, fully paid and non-assessable, and will not have been issued in
violation of the preemptive rights, or any other rights, of any Person. There
will be no outstanding rights, subscriptions, warrants, puts, calls, unsatisfied
preemptive rights, option or other agreements of any kind relating to the
obligations, membership interest in Newco or rights to any membership interests
or any other security of Newco and there will be no authorized or outstanding
securities convertible into, or exchangeable for any such membership interest or
any other security, as the case may be. From and after the formation of Newco
and the transfer of the Transferred Assets to Newco, the
representations and warranties herein contained, to the extent applicable, shall
apply to Newco (adjusted for the fact that Newco is a limited liability company)
as well as to VSDD.
3.3. Authority of VSDD; Binding Agreement. VSDD has full corporate power
------------------------------------
and authority to execute, deliver and perform this Agreement and all other
agreements, instruments and certificates entered into, or delivered in
connection with, the Transactions, including the agreements of VSDD contained in
this Agreement. The execution, delivery, and performance of this Agreement have
been, and all other agreements, instruments and certificates entered into or
delivered in connection with the Transactions, have been duly and validly
authorized by all necessary corporate action of VSDD including, but not limited
to, the adoption of resolutions by the Board of Directors of VSDD and by
Shareholders who are the record and beneficial owners of all of the issued and
outstanding shares of capital stock of VSDD. This Agreement constitutes, and
all other agreements contemplated hereby shall constitute, when executed and
delivered by VSDD in accordance herewith, the valid and binding obligations of
VSDD, enforceable against VSDD in accordance with their respective terms,
subject to the Enforceability Exceptions.
3.4. No Conflict. Except as set forth in Schedule 3.4 setting forth
-----------
required consents, the execution, delivery and performance of this Agreement and
of the consummation of the Transactions by VSDD does not: (i) conflict with or
violate the Articles of Incorporation or the Bylaws of VSDD; or (ii) violate in
any material respect any laws, ordinances, rules or regulations or any order,
writ, injunction or decree to which VSDD is a party or by which VSDD or the
Transferred Assets may be bound or affected; (iii) result in any breach or
termination of, or constitute a material default under, or constitute an event
which, with notice or lapse of time or both, would become a material default
under, or create any rights of termination, cancellation or acceleration in any
Person under any Governmental License or Permit necessary to the Business, or
any of the Contracts, except for those defaults or rights which have no Material
Adverse Effect; or (iv) result in the creation of any encumbrance upon any
Transferred Asset.
3.5. Financial Statements. Attached hereto as Schedule 3.5 are the
--------------------
following financial statements of VSDD:
3.5.(a) true and complete copies of VSDD's audited balance sheets at
December 31, 1997 and the related statements of operations, stockholders' equity
and cash flows for the year then ended and the notes thereto (the "Audited
Financial Statements"). The Audited Financial Statements: (i) accurately
reflect the books and records of VSDD; (ii) have been prepared in accordance
with GAAP; and (iii) are complete and correct and fairly represent, in each case
in all material respects, the financial condition and results of operations of
VSDD as of the dates and for the periods indicated thereon.
3.5.(b) true and complete copies of VSDD's unaudited balance sheet at
March 31, 1998 (the "Unaudited Balance Sheet") and the related statement of
operations, stockholders equity and cash flows for the three months then ended
(collectively the "Unaudited Financial Statements"). The Unaudited Financial
Statements (i) accurately reflect the books and records of VSDD; and (ii) are
complete and correct and fairly represent, in each case in all material
respects, the financial condition and results of operations of VSDD as of the
date and for the period indicated thereon;
3.5.(c) the books of account of VSDD have been maintained in all
material respects in accordance with sound business practices and there have
been no transactions that properly should have been set forth therein in
accordance with GAAP that have not been accurately so set forth.
3.6. Absence of Certain Changes or Events. Except as set forth in Schedule
------------------------------------
3.6, since December 31, 1997 (the "Balance Sheet Date") there has not occurred
nor has any fact or circumstance arisen which may reasonably be expected to lead
to:
3.6.(a) any Material Adverse Change not reflected in the Audited
Financial Statements or the Unaudited Financial Statements;
3.6.(b) any material increase in liabilities over the level reflected
on the Audited Financial Statements or the Unaudited Financial Statements, any
guarantee by VSDD of any obligations or any mortgage, pledge or encumbrance on
any of the properties or assets of VSDD;
3.6.(c) any material amendment or modification of any Material
Contracts, or any termination (excluding expiration in the ordinary course) of
any agreement that would have been a Material Contract were such agreement in
existence on the date hereof;
3.6.(d) any entering into of any written or oral contracts or
transactions that extend beyond the first anniversary hereof or that have
obligations thereunder in excess of Twenty-five Thousand Dollars ($25,000);
3.6.(e) any increase in the compensation (including, without
limitation, the rate of commissions) payable to, or any payment of a cash bonus
to, any officer, director or employee of, or consultants to, VSDD in excess of
Ten Thousand Dollars ($10,000);
3.6.(f) any transaction or payment by VSDD, whether or not covered by
the foregoing, not in the ordinary course of business including, without
limitation, any sale or other disposition of any assets; provided, however, that
sale of assets not to exceed Fifty Thousand Dollars ($50,000) through March 31,
1998, and not to exceed Fifteen Thousand Dollars ($15,000) from April 1, 1998
through Closing shall be considered to be in the ordinary course; and, provided
further, that payment of attorneys' fees and the costs of the Transactions,
although not otherwise considered in the ordinary course, shall be permitted up
to the aggregate of Fifty Thousand Dollars ($50,000);
3.6.(g) any alteration in the manner of keeping the books, accounts
or records of VSDD, or in the accounting practices therein reflected;
3.6.(h) any declaration or payment or any dividends or distributions
by VSDD, any acquisition or redemption by VSDD of any of its equity securities,
or any loan by VSDD to any of its security holders or any other Person;
3.6.(i) any material damage or destruction to, or loss of, any assets
or property owned, leased or used by VSDD (whether or not covered by insurance);
3.6.(j) any adverse federal, state, local or foreign legislative or
regulatory change materially affecting the operations, business or prospects of
VSDD;
3.6.(k) any other Material Adverse Change; or
3.6.(l) any agreement to do any of the things described in the
preceding subsections (a)-(h) of this Section 3.6 or which would cause VSDD's
representations and warranties not to be true and correct in all material
respects on the Closing Date as if made on and as of such date.
3.7. Assets. Except for Transferred Assets and properties which are
------
subject to Licenses as set forth on Schedule 3.20, VSDD has good and marketable
title to all of the Transferred Assets and properties which it purports to own
as reflected on the Audited Financial Statements or the Unaudited Financial
Statements, or thereafter acquired. VSDD has a valid leasehold interest in all
material properties of which it is the lessee including the Personal Property
Leases set forth on Schedule 3.7 and the Real Property Leases, and each such
lease is valid, binding and enforceable against VSDD and, to VSDD's or
Shareholders' Knowledge, the other Parties thereto in accordance
with its terms. VSDD is not, nor to VSDD's or Shareholders' Knowledge is any
other Party in default in the performance of any material provision thereunder.
Except for the Permitted Liens as set forth on Schedule 3.7, no material portion
of the assets of VSDD is subject to any Lien, governmental decree or order to be
sold or is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor to VSDD's or
Shareholders' Knowledge has any such condemnation, expropriation or taking been
proposed. None of the material Transferred Assets of VSDD is subject to any
restriction which would prevent continuation of its current use or materially
adversely affect the value thereof. The Transferred Assets include all
significant items of Real and Personal Property used by VSDD in the conduct of
the Business. Except as set forth on Schedule 3.7, all of the Personal Property
located at the business premises of VSDD is owned or leased by VSDD and is not
owned or leased by any other Person.
3.8. Investments. Except for the Newco Stock, the Transferred Assets do
-----------
not include any stock or other securities of, or any debt or other interest of
any kind (except for trade accounts receivable) in any corporation, partnership,
joint venture, limited liability company, association or other organization.
Except for the fixtures and tenant improvements at the Leased Premises, the
Transferred Assets do not include any Real Property or any contracts or options
for the purchase of Real Property. Except for the Real Property Leases, the
Transferred Assets do not include any Leases of Real Property.
3.9. Contracts. Schedule 3.9 consists of a true and complete list of all
---------
Contracts in connection with the Business: (A) relating to the provision of
VSDD's services; and (B) all other Contracts except those: (i) requiring
payments or receipts less than Twenty-five Thousand Dollars ($25,000) per year;
and (ii) made in the ordinary course of business and terminable by VSDD on
notice of forty-five (45) days or less without penalty or VSDD being liable for
damages. All such contracts are herein referred to as "Material Contracts."
All of the Material Contracts are valid and binding upon VSDD, and to
VSDD"s Knowledge are binding upon the other Parties thereto; are in full force
and effect and enforceable in accordance with their terms; and neither VSDD, nor
any other Party to any Material Contract has breached any material provision of,
and no event has occurred which, with the lapse of time or action by a third
party, could result in a material default under the terms thereof.
3.10. Litigation. Except as set forth on Schedule 3.10, there is no
----------
claim, action, proceeding or investigation pending against or affecting VSDD
before or by any court, arbitrator or Governmental Authority which could have a
Material Adverse Effect on the Business or the Transferred Assets. Except as
set forth in Schedule 3.10, to VSDD's or Shareholders" Knowledge, there is no
claim, action, proceeding or investigation threatened against VSDD or affecting
VSDD before any court, arbitrator or Governmental Authority which could have a
Material Adverse Effect on the Business or the Transferred Assets. There are no
decrees, injunctions or orders of any court, Governmental Authority, or
arbitration outstanding against VSDD and, with respect to any action or claim
covered by insurance, VSDD has complied with all requirements of any such policy
which are conditions to the defense and continued defense of such claim or
action.
3.11. Taxes. VSDD has duly and timely filed all Returns required to be
-----
filed by it and has paid all Taxes shown to be due by such Returns and any
penalties and interest thereon. All such Returns when filed were, and to VSDD's
and Shareholders' Knowledge are, accurate and complete in all material respects
and were prepared in conformity with applicable laws and regulations. VSDD has
paid in full or has adequately reserved against all Taxes otherwise assessed or
assessable
against it, or payable with respect to its business or assets through the date
hereof.
VSDD is not a party to any pending action or proceeding by any
Governmental Authority for the assessment of any Tax and no claim for assessment
or collection of any Tax related to VSDD has been asserted against VSDD that has
not been paid. There are no Tax liens upon the assets (other than the lien of
property taxes not yet due and payable by VSDD). There is no valid basis, to
VSDD's or Shareholders' Knowledge, except as set forth in Schedule 3.11, for any
assessment, deficiency, notice, 30-day letter or similar intention to assess any
Tax to be issued to VSDD by any Governmental Authority.
3.12. Compliance With Laws. Except as set forth in Schedule 3.12, VSDD
--------------------
has complied and is complying in all material respects with all Laws applicable
to the operation of the Business in all jurisdictions where its business is
conducted or to which it is subject. Without limiting the foregoing, no written
notice from any Governmental Authority has been received by VSDD since January
1, 1997 claiming any violation of any Law or requiring any material work,
construction or expenditure. To VSDD's or Shareholders' Knowledge, no Person
has asserted that VSDD is in violation in material respect of any Law.
3.13. Government Licenses and Permits. VSDD is duly licensed and in
-------------------------------
compliance with all Governmental Licenses and Permits required by applicable law
for the purpose of conducting its business or owning its properties or both, in
each jurisdiction in which it does business or owns property or in which such
Governmental Licenses and Permits are otherwise required except where the
failure to be so qualified or authorized would not in the aggregate have a
Material Adverse Effect. Schedule 3.13 sets forth a list of all such
Governmental Licenses and Permits and the expiration dates thereof. There are
no proceedings pending or, to VSDD's or Shareholders' Knowledge, threatened to
revoke or terminate any such Governmental Licenses and Permits. VSDD is not a
"common carrier" as such term is interpreted by the FCC and, at the Closing,
will not hold any FCC or similar licenses or permits designated or limited to a
"common carrier."
3.14. Environmental Matters. Except as set forth in Schedule 3.14:
---------------------
3.14.(a) VSDD has obtained, and is in all material respects in
compliance with, all Environmental Permits required for the proper management
and operation of its business and all such Environmental Permits are in good
standing;
3.14.(b) VSDD has been and remains, in all material respects, in
full compliance with all Environmental Laws;
3.14.(c) VSDD's or Shareholders' Knowledge, no portion of the Leased
Premises or any other property previously owned or leased by VSDD has been
designated, listed or identified in any manner by any Governmental Authority or
under and pursuant to any Environmental Law as a hazardous waste or hazardous
substance disposal or removal site, Superfund or clean-up site; or candidate for
clean-up, investigation, removal or closure pursuant to any Environmental Law;
nor, to VSDD's or Shareholders' Knowledge, are any other Regulated Substances
present on any portion of the Leased Premises, except for Regulated Substances
present in amounts and used in a manner in compliance with Environmental Law and
consistent with normal and customary operation, maintenance and human occupation
of commercial office buildings; and
3.14.(d) VSDD has not received at any time prior to the date hereof
any summons, citation, notice, directive, letter or other written communication
of any potential claim or liability under any Environmental Law.
3.15. Insurance. VSDD is covered by insurance policies, or renewals
---------
thereof, as identified and described in Schedule 3.15 which set forth the
carrier, premium, coverage, deductible amount
and expiration date. Such policies are sufficient for compliance with (i) all
requirements of Law and (ii) all Contracts to which VSDD is a party. There is
no liability under any existing or expired insurance policy in the nature of a
retroactive rate adjustment or loss sharing or similar arrangement except as set
forth on Schedule 3.15. There are no outstanding requirements of
recommendations by any insurance company that issued any policy of insurance to
VSDD or by any Board of Fire Underwriters or other similar body exercising
similar functions or by any Governmental Authority exercising similar functions
that require or recommend any changes in the conduct of the business of VSDD or
any action to be undertaken with respect to any of their assets. Except as set
forth in Schedule 3.15, VSDD has not been refused any insurance with respect to
its assets or operations, nor has VSDD received any notice or other
communication from any insurance company within the two (2) years preceding the
date hereof canceling any of its insurance policies and, to VSDD's or
Shareholders' Knowledge, no such cancellation is threatened.
3.16. Condition of Assets. The tangible Transferred Assets of VSDD are in
-------------------
good operating condition and repair (ordinary wear and tear excepted) for the
conduct of its business as presently being conducted except as have no Material
Adverse Effect.
3.17. Labor and Employment Agreements.
-------------------------------
3.17.(a) Schedule 3.17 sets forth a complete and correct list of the
following labor and employment related agreements:
3.17.(a)(i) each collective bargaining agreement, if any,
and other labor or employment agreement, if any, to which VSDD is a party or by
which it is bound;
3.17.(a)(ii) each profit sharing, deferred compensation,
bonus, pension, retainer, consulting, retirement, health, welfare or incentive
plan or agreement to which VSDD is a party or by which it is or may be bound;
3.17.(a)(iii) each plan or agreement under which "fringe
benefits" (including, without limitation, vacation plans or programs, sick leave
plans or programs, dental or medical plans or programs and related or similar
benefits) are afforded to employees of VSDD;
3.17.(a)(iv) each informal arrangement or understanding for
the payment of post-retirement benefits; and
3.17.(a)(v) the name of each employee or agent of or
consultant to VSDD who since January 1, 1997, was or is being paid Forty
Thousand Dollars ($40,000) or more per year or Four Thousand Dollars ($4,000)
per month.
3.17.(b) No material union organization effort has been made in the
last twelve (12) months in respect of VSDD and no sex discrimination, racial
discrimination, age discrimination or other employment-related suit or
proceeding is pending, or to VSDD's or Shareholders' Knowledge threatened with
respect to the employees of VSDD;
3.17.(c) Except for obligations arising in the ordinary course of
business from the date thereof, the Unaudited Financial Statements reflect all
reasonably anticipated material obligations of VSDD, whether arising by
operation of law, contract, past custom or otherwise, for unemployment
compensation benefits, pension benefits, advances, salaries, bonuses, vacation
and holiday pay, sick leave and other forms of compensation payable to the
employees or agents of VSDD in respect of the services rendered by any of them
for VSDD or otherwise in the Business; and
3.17.(d) Except as otherwise indicated on Schedule 3.17, all
employees of VSDD are "at will" employees.
3.18. Employee Benefit Plans; ERISA. Except for those plans set forth on
-----------------------------
Schedule 3.18
hereto (the "Plans"), neither VSDD, nor any member of a "controlled group"
(within the meaning of Section 4971(e)92)(B) of the Code) of which VSDD is a
member has ever maintained or contributed to any "employee benefit plan," as
that term is defined in Section 3(3) of ERISA, or any stock purchase plan, stock
option plan, fringe benefit plan, bonus plan or any other deferred compensation
agreement, plan or funding arrangement, whether or not such plan has been
terminated, and whether or not such plan is of legally binding nature in the
form of an informal understanding. With respect to the Plans, the requirements
of ERISA and the Code, as applicable, have been fulfilled in all material
respects and no event has occurred nor does any condition exist which would
subject VSDD to any penalty, excise tax or liability.
3.19. Business Locations. Except as set forth on Schedule 3.19, VSDD does
------------------
not own or lease any Real or Personal Property in any state or country and has
no other executive offices or places of business except the Leased Premises.
3.20. Intangible Personal Property.
----------------------------
3.20.(a) Schedule 3.20 sets forth (i) a complete and correct list
of each patent and patent application and each copyright, copyright application,
trademark, trademark application (in any such case, whether registered or to be
registered in the United States of America or elsewhere), process, invention,
trade secret, trade name, computer program, formula and customer list
(collectively, the "Intangible Personal Property") of VSDD used in the Business
and included in the Transferred Assets, and (ii) a complete and correct list of
all material licenses or similar agreements ("Licenses") to which VSDD is a
party either as a licensee or licensor for each such item of Intangible Personal
Property.
3.20.(b) Except as set forth on Schedule 3.20:
3.20.(b)(i) there are no pending actions or other judicial
or adversary proceedings involving VSDD concerning any item of Intangible
Personal Property and, to VSDD's or Shareholders' Knowledge, no such action or
proceeding is threatened and no claim or other demand has been made or
threatened by any person relating to any item of Intangible Personal Property;
3.20.(b)(ii) VSDD has the right and authority to use each
item of Intangible Personal Property in connection with the conduct of its
businesses in the manner presently conducted and to convey such right and
authority, and to VSDD's or Shareholders' Knowledge such use does not conflict
with, infringe upon or violate any patent, trademark or registration of any
other person or entity;
3.20.(b)(iii) there are no outstanding or, to VSDD's
Knowledge, threatened disputes or disagreements with respect to any Licenses;
and
3.20.(b)(iv) the conduct by VSDD of the Business to VSDD's
or Shareholders' Knowledge does not conflict with the valid patents, trademarks,
trade secrets or trade names of others.
3.21. Customers; Existing Arrangements. Schedule 3.21 sets forth a list
--------------------------------
of the ten (10) largest customers of VSDD in terms of rental volume during its
year ended December 31, 1997 (the "Major Customers"). Except as set forth in
Schedule 3.21, there has not been any adverse change in the business
relationship, and there has been no material dispute, between VSDD and any Major
Customer, and, to the best of VSDD's Knowledge, (exclusive of expiration of a
Contract upon the passage of time), no entity doing business with VSDD plans to
terminate business with VSDD either as a result of the Transactions or
otherwise.
3.22. Governmental Approvals. Except as set forth in Schedule 3.22, no
----------------------
authorization,
license, permit, franchise, approval, order or consent of, and no registration,
declaration or filing by VSDD with, any Governmental Authority, domestic or
foreign, federal, state or local, is required in connection with VSDD's
execution, delivery and performance of this Agreement.
3.23. Accounts Receivable; Accounts Payable. Schedule 3.23 is an accurate
-------------------------------------
aging of the Accounts Receivable of VSDD, and accounts payable of VSDD, at April
27, 1998. To VSDD's or Shareholders' Knowledge, the Accounts Receivable,
including any Accounts Receivable arising since the date of the Audited
Financial Statements, are fully collectible, net of the reserves calculated in
the same manner as those reflected on the Audited Financial Statements.
3.24. Liabilities. VSDD has no material Liability other than (i)
-----------
Liabilities fully and adequately reflected or reserved against on the Audited
Balance Sheet; (ii) Liabilities incurred since the date of the Audited Balance
Sheet in the ordinary course of the business of VSDD; or (iii) Liabilities
otherwise disclosed in this Agreement, including the Exhibits and Schedules
hereto.
3.25. No Omissions or Untrue Statements. No representation or warranty
---------------------------------
made by VSDD or Shareholders, to 4MC or Acquisition in this Agreement, in the
Schedules or in any certificate of a VSDD officer required to be delivered to
4MC pursuant to the terms of this Agreement contains or shall contain any untrue
statement of a material fact or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein not misleading as
of the date hereof and as of the Closing Date in light of the circumstances
under which such statements are made.
3.26. Outstanding Bank Debt. Schedule 3.26 sets forth all amounts
---------------------
outstanding under VSDD's borrowing facilities with, or for money borrowed by
VSDD from, commercial lenders or other financial institutions. There is no
other bank debt, whether direct or indirect, outstanding or committed, by which
VSDD or its assets are bound whether as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise. All such indebtedness may be pre-paid
without penalty at any time by VSDD.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF 4MC AND ACQUISITION
-----------------------------------------------------
4MC and Acquisition, jointly and severally, represent and warrant to VSDD
and Shareholders as follows as of the date hereof and as of the closing date:
4.1. Organization and Standing of 4MC and Acquisition. 4MC and Acquisition
------------------------------------------------
are corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and have the corporate power to carry on their
business as now conducted and to own or lease their assets and are duly
qualified to transact business as foreign corporations in each state where such
qualification is necessary except where the failure to qualify (individually or
in the aggregate) will not have a Material Adverse Effect on 4MC or Acquisition
on a combined basis.
4.2. Authority; Binding Agreement. 4MC and Acquisition each have full
----------------------------
corporate power and authority to execute, deliver and perform this Agreement and
all other agreements, instruments and certificates entered into, or delivered in
connection with, the Transactions, including the agreements of each of 4MC and
Acquisition contained in this Agreement. The Boards of Directors of 4MC and
Acquisition have determined that the Transactions are fair to and in the best
interests of their stockholders and have approved, adopted and authorized the
delivery and execution of this Agreement. 4MC has approved this Agreement in
its capacity as the sole shareholder of Acquisition and has determined that
approval by the stockholders of 4MC is not required. This Agreement
constitutes, and all other agreements contemplated hereby shall constitute, when
executed and delivered to 4MC and Acquisition, the legal, valid and binding
obligations of each corporation, enforceable in accordance with their respective
terms, except for the Enforceability Exceptions.
4.3. No Conflict. Except as set forth in Schedule 4.3 setting forth
-----------
required consents, the execution, delivery and performance of this Agreement and
of the consummation of the Transactions by 4MC and Acquisition does not: (i)
conflict with the Certificate of Incorporation or the Bylaws of 4MC or the
Certificate of Incorporation or the Bylaws of Acquisition; (ii) violate in any
material respect any laws, ordinances, rules or regulations or any order, writ,
injunction or decree to which 4MC or Acquisition is a party or by which 4MC or
Acquisition or any of its material assets, business or operations may be bound
or affected; (iii) result in any breach or termination of, or constitute a
material default under, or constitute an event which, with notice or lapse of
time or both, would become a material default under, or create any rights of
termination, cancellation or acceleration in any Person under, any Governmental
License or Permit necessary to its business, or any of its material agreements,
arrangements or commitments, except for those defaults which have no Material
Adverse Effect; or (iv) result in the creation of any encumbrance upon any
material asset of 4MC or Acquisition.
4.4. Capitalization. The entire authorized capital stock of 4MC consists
--------------
of fifty million (50,000,000) shares of Common Stock, par value $.01, and five
million shares (5,000,000) of Preferred Stock, par value $.01. The entire
authorized capital stock of Acquisition consists of one hundred (100) shares of
common stock, no par value ("Acquisition Stock"). As of the date of this
Agreement, nine million five hundred fifty-two thousand five hundred two
(9,552,502) shares of Common Stock of 4MC, one hundred fifty thousand (150,000)
shares of Preferred Stock of 4MC, and one hundred (100) shares of Acquisition
Stock were issued and outstanding. All of such shares issued and outstanding of
Common Stock, Preferred Stock and Acquisition Stock are duly authorized, validly
issued, fully paid and non-assessable and were not issued in violation of the
preemptive rights, or any other rights, of any Person. The 4MC Acquisition
Stock to be issued pursuant to this Agreement, when issued in accordance with
the terms of this Agreement, shall be duly authorized, validly issued, fully
paid and non-assessable. Except for options to purchase shares issued pursuant
to various 4MC option or stock plans or as set forth in 4MC's SEC Reports as of
the date of this Agreement there are no outstanding rights, subscriptions,
warrants, puts, calls, unsatisfied preemptive rights, conversion rights, option
or other agreements of any kind relating to any of the outstanding authorized
but unissued, unauthorized or treasury shares of the capital stock or any other
security of 4MC or Acquisition and there are no authorized or outstanding
securities convertible into, or exchangeable for, any such capital stock or
other security of 4MC or Acquisition, as the case may be.
4.5. Governmental Approval; Consents. Except for the reports required to
-------------------------------
be filed in the future by 4MC as a mandatory reporting company under the
Exchange Act and under the Securities Act with the SEC or any national
securities exchange, no authorization, license, permit, franchise, approval,
order or consent of, and no registration, declaration or filing by 4MC or
Acquisition with any Governmental Authority, domestic or foreign, federal, state
or local, is required in connection with 4MC's or Acquisition's execution,
delivery and performance of this Agreement or the consummation of the
Transactions. Except for consents of certain contracting Parties as set forth
on Schedule 4.5, no consents of any other Parties are required to be received by
or on the part of 4MC or Acquisition to enable 4MC or Acquisition to enter into
and carry out this Agreement.
4.6. 4MC's SEC Reports. 4MC has filed all reports, registrations and other
-----------------
documents, together with any amendments thereto, required to be filed under the
Securities Act and the
Exchange Act (collectively, the "SEC Reports"). As of their respective dates,
4MC's SEC Reports complied in all respects with the requirements of the Exchange
Act or the Securities Act, and none of the SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except as
disclosed in the SEC Reports or in Schedule 4.12, there is no litigation pending
or, to the Knowledge of 4MC, threatened against 4MC or any of its subsidiaries,
any officer, director, employee or agent thereof, in his or her capacity as
such, or otherwise relating to 4MC, any of its subsidiaries or the securities of
any of them, or any property or rights of 4MC or any of its subsidiaries which
would have a Material Adverse Effect on 4MC. In addition, no event has occurred
as a consequence of which 4MC or any of its subsidiaries, or to the Knowledge of
4MC, any of its Shareholders, would be required to file a current report on Form
8-K or Form 13-D, 13-G, 3 or 4, pursuant to the requirements of the Exchange Act
and the rules thereunder (as distinct from an optional filing) other than those
events with respect to which such a report has been timely filed with the SEC.
4.7. Compliance with Laws and Regulations. 4MC has complied and is
------------------------------------
presently complying, in all material respects, with all Laws applicable to the
operation of its business in all jurisdictions where the business of 4MC is
conducted or to which 4MC is subject. Without limiting the foregoing, no
written notice from any Governmental Authority has been received by 4MC since
January 1, 1997 claiming any violation of any Law or requiring any material
work, construction or expenditure. To 4MC's Knowledge, no Person has asserted
that 4MC is in violation in material respect of any Law.
4.8. Governmental Licenses and Permits. 4MC is duly licensed and in
---------------------------------
compliance with all Governmental Licenses and Permits required by applicable law
for the purpose of conducting its business or owning its properties or both, in
each jurisdiction in which it does business or owns property or in which such
Governmental Licenses and Permits are otherwise required except where the
failure to be so qualified or authorized would not in the aggregate have a
Material Adverse Effect. There are no proceedings pending or, to 4MC's
Knowledge, threatened to revoke or terminate any such Governmental Licenses and
Permits.
4.9. No Omission or Untrue Statement. No representation or warranty made
-------------------------------
by 4MC or Acquisition to VSDD and Shareholders in this Agreement, in any
Schedule or in any certificate of a 4MC officer required to be delivered to VSDD
pursuant to the terms of this Agreement contains or shall contain any untrue
statement of a material fact, or omits or shall omit to state a material fact
necessary to make the statements contained herein or therein not misleading as
of the date hereof and as of the Closing Date in light of the circumstances
under which such statements are made.
4.10. No Adverse Actions. As of the date of this Agreement, there is no
------------------
existing, pending or, to the Knowledge of 4MC, threatened action by the SEC or
any termination, cancellation, limitation, modification or change in the
business relationship of 4MC or any of its subsidiaries, with any supplier,
customer or other Person except those which do not, or would not, have a
Material Adverse Effect.
4.11. Absence of Certain Changes or Events. Except as set forth in
------------------------------------
Schedule 4.11, since December 31, 1997, there has not occurred nor has any fact
or circumstance arisen which may lead to:
4.11.(a) any adverse change in the assets, liabilities (whether
absolute, accrued, contingent or otherwise), condition (financial or otherwise),
results of operations, business or prospects of 4MC, that has resulted, or may
result, in a Material Adverse Effect;
4.11.(b) any alteration in the manner of keeping the books, accounts
or records of 4MC, or in the accounting practices therein reflected;
4.11.(c) any declaration or payment or any dividends or
distributions by 4MC, any acquisition or redemption by 4MC of any of its equity
securities, or any loan by 4MC to any of its security holders or any other
Person;
4.11.(d) any material damage or destruction to, or loss of, any
assets or property owned, leased or used by 4MC (whether or not covered by
insurance);
4.11.(e) any adverse federal, state, local or foreign legislative or
regulatory change materially affecting the operations, business or prospects of
4MC; or
4.11.(f) any claim, action or proceeding threatened, pending or in
progress brought by any shareholder, underwriter, or promoter of 4MC.
4.11.(g) any adverse actions threatened, pending or in progress
brought by the NASD, NASDAQ or other public exchanges, SEC or other Person or
which may have the effect of impairing 4MC from conducting or continuing to
conduct its business and operations as a public traded company, including, but
not limited to, the withholding or delay of registration filings, notices of
delisting, and failure to meet listing requirements.
4.11.(h) any agreement to do any of the things described in the
preceding subsections (a)-(g) of this Section 4.11, or which would cause 4MC's
representations and warranties not to be true and correct in all material
respects on the Closing Date as if made on and as of such date.
4.12. Litigation. Except as set forth on Schedule 4.12, there is no claim,
----------
action, proceeding or investigation pending against or affecting 4MC before, or
by, any court, arbitrator or Governmental Authority which could have a Material
Adverse Effect on 4MC. There are no decrees, injunctions or orders of any
court, Governmental Authority or arbitration outstanding against 4MC and, with
respect to any action or claim covered by insurance, 4MC has complied with all
requirements of any such policy which are conditions to the defense and
continued defense of such claim or action.
4.13. Compliance With Laws. Except as set forth in Schedule 4.13, 4MC has
--------------------
complied and is complying in all material respects with all Laws applicable to
the operation of its business in all jurisdictions where its business is
conducted or to which it is subject.
4.14. Labor. Except as set forth in Schedule 4.14, no material union
-----
organization effort has been made in the last twelve (12) months with respect to
4MC, and no sex discrimination, racial discrimination, age discrimination or
other employment-related suit or proceeding is pending, or to 4MC's Knowledge,
threatened with respect to the employees of 4MC.
ARTICLE 5.
CLOSING
-------
5.1. Closing Date. Consummation of the Transactions shall be effected at
------------
the Closing, conducted pursuant to Article 5 hereof, which shall be held at the
offices of Xxxxxxxxx Xxxxxxx Fields Claman & Machtinger LLP, 0000 Xxxxxx xx xxx
Xxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, on the second business day
after the day on which all the conditions set forth in Articles 6 and 7 have
been satisfied or waived, or on such other day, time and place as the Parties
shall otherwise agree.
5.2. Closing Deliveries to Acquisition. At Closing, VSDD shall deliver or
---------------------------------
cause to be delivered to Acquisition:
5.2.(a) a Xxxx of Sale dated prior to Closing transferring all of the
tangible
Transferred Assets to Newco;
5.2.(b) an Assignment dated prior to Closing transferring all of the
intangible Transferred Assets to Newco;
5.2.(c) an Assignment transferring the Newco Interest to Acquisition;
5.2.(d) certificate of title to all vehicles;
5.2.(e) a certificate, dated as of the Closing Date, of the Secretary
of VS and of DD, evidencing all necessary or appropriate corporate action to
enable VSDD to comply with the terms of this Agreement;
5.2.(f) a certificate, dated as of the Closing Date, executed by the
Chief Executive Officer of VS and of DD, to the effect that the representations
and warranties contained in this Agreement are true and correct in all material
respects at and as of the Closing Date and that VSDD has complied with, or
performed in, all material respects all terms, covenants and conditions to be
complied with or performed by VSDD on or prior to the Closing Date;
5.2.(g) an opinion of VSDD's counsel satisfactory in form and
substance to 4MC and its counsel, for the benefit of 4MC, Acquisition and 4MC's
lenders;
5.2.(h) certificates of good standing for VS, DD and Newco;
5.2.(i) certificate of qualification in California for Newco;
5.2.(j) evidence of the existence of all Required Consents;
5.2.(k) non-competition agreements executed by each Shareholder;
5.2.(l) employment agreement with Xxxxxx, together with termination
of prior employment agreement with Xxxxxx;
5.2.(m) termination of employment and/or consulting agreements with
Xxxxxxx;
5.2.(n) an Escrow Agreement pursuant to Section 10.6; and
5.2.(o) such other documents as 4MC or its counsel may reasonably
require.
5.3. Closing Deliveries to VSDD. At the Closing, Acquisition or 4MC shall
--------------------------
deliver to VSDD:
5.3.(a) the 4MC Acquisition Stock, pursuant to section 2.5(b),
provided that a portion thereof shall be delivered into Escrow as provided in
Section 2.5(b)(ii);
5.3.(b) a certificate, dated as of the Closing Date, of the Secretary
of 4MC and of Acquisition, evidencing all necessary or appropriate corporate
action to enable 4MC and Acquisition to comply with the terms of this Agreement;
5.3.(c) a certificate, dated as of the Closing Date, executed by the
Chief Executive Officer of 4MC, and the Chief Executive Officer of Acquisition,
to the effect that representations and warranties contained in this Agreement
are true and correct in all material respects at, and as of, the Closing Date
and that 4MC and Acquisition have complied with or performed in all material
respects all terms, covenants and conditions to be complied with or performed by
4MC and Acquisition on or prior to the Closing Date;
5.3.(d) an opinion of 4MC's counsel, satisfactory in form and
substance to VSDD and its counsel hereto;
5.3.(e) a Registration Rights Agreement pursuant to Section 11.3; and
5.3.(f) such other documents as VSDD or its counsel may reasonably
require.
ARTICLE 6.
Conditions to Obligations of VSDD
---------------------------------
The obligation of VSDD to consummate the Transactions is subject to the
following conditions, any of which may be waived by it in its sole discretion:
6.1. Compliance by 4MC and Acquisition. 4MC and Acquisition shall have
---------------------------------
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by 4MC or
Acquisition prior to or on the Closing Date.
6.2. Accuracy of 4MC's and Acquisition's Representations. 4MC's and
---------------------------------------------------
Acquisition's representations and warranties contained in this Agreement or any
schedule, certificate or other instrument delivered pursuant to the provisions
hereof or in connection with the Transactions shall be true and correct in all
material respects at and as of the Closing Date (except for such changes
permitted by this Agreement) and shall be deemed to be made again as of the
Closing Date.
6.3. Material Adverse Change. No Material Adverse Change shall have
-----------------------
occurred subsequent to December 31, 1997 with respect to 4MC, nor shall any
event or circumstance have occurred which would result in a Material Adverse
Change with respect to 4MC.
6.4. Litigation. No litigation shall be threatened, pending or occurred
----------
seeking to enjoin the Transactions.
6.5. Documents. All documents, guarantees, and instruments required
---------
hereunder to be delivered by 4MC to VSDD at the Closing shall be delivered in
form and substance reasonably satisfactory to VSDD and its counsel.
6.6. Personal Guarantees. On or prior to the Closing, 4MC shall have taken
-------------------
all necessary actions to obtain the release of the Shareholders from personal
guarantees of VSDD Indebtedness (except for Indebtedness which is not required
to be assumed by Acquisition) or shall have indemnified the Shareholders against
such liabilities.
ARTICLE 7.
Conditions to Obligations of 4MC
--------------------------------
The obligation of 4MC to consummate the Transactions is subject to the
following conditions, any of which may be waived by it in its sole discretion:
7.1. Compliance by VSDD. VSDD shall have performed and complied in all
------------------
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by VSDD prior to or on the Closing Date.
7.2. Accuracy of VSDD's Representations. The representations and
----------------------------------
warranties of VSDD and Shareholders contained in this Agreement or any schedule,
certificate or other instrument delivered pursuant to the provisions hereof or
in connection with the Transactions shall be true and correct in all material
respects at and as of the Closing Date (except for such changes permitted by
this Agreement) and shall be deemed to be made again as of the Closing Date.
7.3. Material Adverse Change. No Material Adverse Change shall have
-----------------------
occurred subsequent to December 31, 1997, with respect to the Business or the
Transferred Assets, nor shall any event or circumstance have occurred which
would result in a Material Adverse Change with respect to the Business or the
Transferred Assets.
7.4. Litigation. No litigation shall be threatened, pending or occurred
----------
seeking to enjoin the Transactions.
7.5. Additional Agreements. 4MC shall have entered into non-compete
---------------------
agreements with each Shareholder in form and substance satisfactory to 4MC and
its counsel.
7.6. Employment Agreements. VSDD shall have terminated its existing
---------------------
employment or consulting agreements with Xxxxxx and Xxxxxxx. 4MC shall have
entered into a new employment agreement with Xxxxxx in form and substance
satisfactory to 4MC and its counsel.
7.7. Required Consents. VSDD shall have obtained the Required Consents in
-----------------
form and
substance satisfactory to 4MC.
7.8. Documents. All documents and instruments required hereunder to be
---------
delivered by VSDD to 4MC at the Closing shall be delivered in form and substance
reasonably satisfactory to 4MC and its counsel.
7.9. Completion of Coopers Review. Coopers shall have completed to its
----------------------------
satisfaction its audit of financial statements of VSDD for such periods as are
necessary to meet SEC reporting requirements and shall have concluded that the
earnings of VSDD before interest, income taxes, depreciation and amortization
for the year ended December 31, 1997 were not less than Two Million One Hundred
Forty Thousand Dollars ($2,140,000).
7.10. Bank Approval. Canadian Imperial Bank of Commerce and the lenders
-------------
in its syndicate shall have approved the Transactions
ARTICLE 8.
TERMINATION
-----------
8.1. Termination Prior to Closing.
----------------------------
8.1.(a) If the Closing has not occurred by May 31, 1998, either VSDD
or 4MC may terminate this Agreement at any time thereafter by giving written
notice of termination to the other; provided, however, that no party may
terminate this Agreement hereunder if such party has materially breached any of
the terms and conditions hereof;
8.1.(b) Prior to May 31, 1998, either VSDD or 4MC may terminate this
Agreement following the insolvency or bankruptcy of the other, or if any one or
more of the conditions to Closing set forth in Article 6 or Article 7 shall
become incapable of fulfillment or there shall have occurred a material breach
of this Agreement and either such condition or breach shall not have been waived
by the Party for whose benefit the condition was established or cured within ten
(10) business days after notice, then either VSDD (in the case of a condition in
Article 6 or a breach by 4MC or Acquisition), or 4MC (in the case of a condition
specified in Article 7 or a breach by VSDD) may terminate this Agreement;
8.2. Consequences of Termination. Upon termination of this Agreement
---------------------------
pursuant to this Article 8 or any other express right of termination provided
elsewhere in this Agreement, the Parties shall be relieved of any further
obligation to the others; provided, however, that no termination of this
Agreement, pursuant to this Article 8, or under any other express right of
termination provided elsewhere in this Agreement, shall operate to release any
Party from any liability to any other Party incurred before the date of such
termination or from any liability resulting from any material misrepresentation
made in connection with this Agreement or material breach hereof.
ARTICLE 9.
Covenants
---------
The Parties covenant that:
9.1. Access by 4MC. VSDD shall afford to 4MC and to 4MC's counsel,
-------------
accountants and other representatives, full access during normal business hours
and upon reasonable notice throughout the period prior to the Closing Date: (i)
to all of the books, contracts and records of VSDD and shall furnish 4MC during
such period with all information concerning VSDD that 4MC may reasonably
request; and (ii) to the properties of VSDD in order to conduct inspections at
4MC's expense to determine that VSDD is operating in material compliance with
all applicable federal, state and local statutes, rules and regulations, and
that the Transferred Assets are substantially in the condition and of the
capacities represented and warranted in this Agreement.
Any such investigation or inspection by 4MC shall not be deemed a waiver of, or
otherwise limit, the representations, warranties and covenants contained herein.
The Parties and their employees, consultants, agents and others exposed to such
information shall hold any such information which is nonpublic in strict
confidence until such time as such information otherwise becomes publicly
available through no wrongful act of either Party, or is required to be
disclosed pursuant to applicable law. In the event a Party believes that such
information is required to be disclosed pursuant to applicable law, it shall
notify the other Party so that such other Party may seek a protective order or
other appropriate remedy, and it will not oppose action by the other Party to
obtain such order or remedy. In the event that this Agreement is terminated in
accordance with its terms, each Party shall promptly return all nonpublic
documents provided by any other Party and any copies, extracts or other
reproductions in whole or in part of such documents. In addition, in the event
of such termination, all documents, memoranda, notes and other writing
whatsoever prepared by each Party based on the information in such non-public
material provided by any other Party shall be destroyed (and each Party shall
use its best efforts to cause its advisors and their representatives to
similarly destroy their respective documents, memoranda and notes), and such
destruction (and best efforts) shall be certified in writing to the other Party
by an authorized officer supervising such destruction.
9.2. Conduct of Business. During the period from the date hereof to the
-------------------
Closing Date, the business of VSDD shall be operated by VSDD in the usual and
ordinary course of such business and in material compliance with the terms of
this Agreement. Without limiting the generality of the foregoing:
9.2.(a) VSDD shall use its reasonable efforts to: (i) keep available
the services of the present employees and agents of VSDD; (ii) complete or
maintain all existing arrangements, including but not limited to, filings,
licensing, leases and other agreements and arrangements in full force and effect
in accordance with their existing terms; (iii) maintain the integrity of all
confidential information of VSDD; (iv) maintain in full force and effect the
existing insurance policies (or policies providing substantially the same
coverage, copies of which shall be made available to 4MC) insuring the business
and properties of VSDD; (v) comply in all material respects with all applicable
laws; and (vi) preserve the goodwill of, and VSDD's business and contractual
relationship with, suppliers, customers and others having business relations
with VSDD; and
9.2.(b) VSDD shall not: (i) sell or transfer any of its assets or
property except in the usual and ordinary course of business; (ii) make any
distribution, whether by dividend or otherwise, to any of its stockholders or
employees except for compensation to employees and payments to associated
companies for goods and services, in the usual and ordinary course of business;
(iii) declare any dividend or other distribution; (iv) redeem or otherwise
acquire any shares of its capital stock or other securities; (v) issue or grant
rights to acquire shares of its capital stock or other securities; (vi) do any
of the things specified in Sections 3.6(b) through (3.6(h); or (vii) agree to do
any of the foregoing.
Notwithstanding the foregoing, (i) VSDD may borrow up to One Hundred
Thousands Dollars ($100,000) from a bank and may distribute such funds, but such
loan shall be Indebtedness which shall be considered in calculating the
Acquisition Price and the Net Acquisition Price; and (ii) VSDD may utilize cash
to repay or prepay Indebtedness, provided that such Indebtedness would otherwise
be part of the Assumed Liabilities.
9.3. Exclusivity to 4MC. Shareholders, VSDD and its officers, directors,
------------------
representatives
and agents, from the date hereof until the Closing (unless this Agreement shall
be earlier terminated as hereinafter provided), shall not hold discussions with
any Person other than 4MC concerning the Transactions, or solicit, negotiate or
entertain any inquiries, proposals or offers to purchase the business or assets
of VSDD or the shares of capital stock of VSDD from or with any Person other
than 4MC or, except in connection with the normal operation of VSDD's business,
disclose any confidential information concerning VSDD to any Person other than
4MC and 4MC's representatives or agents.
9.4. Agree to Cooperate; Consents; Further Assurances. Subject to the
------------------------------------------------
terms and conditions of this Agreement, each of the Parties hereto shall use its
best efforts to take, or cause to be taken, all action to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Transactions, including
providing information and using reasonable efforts to obtain all necessary or
appropriate waivers, consents and approvals to the Merger, this Agreement and
the Transactions, to effect all necessary registrations and filings (including
filings under federal and state securities law) and to lift any injunctions or
other legal bar to the Transactions (and, in such case, to proceed with the
Transactions as expeditiously as possible). From time to time if 4MC or
Acquisition shall consider or be advised that any further deeds, assignments or
assurances in law or any other things necessary, desirable or proper to vest,
perfect or confirm, of record or otherwise, in Acquisition the title to any
property or rights of VSDD acquired or to be acquired by reason of, or as a
result of, the Transactions, Acquisition and VSDD agree that the proper
directors and officers of VSDD last in office shall use their best efforts to
and shall execute and deliver all such proper deeds, assignments, and assurances
in law and do all things necessary, desirable or proper to vest, perfect or
confirm title to such property or rights in 4MC and otherwise to carry out the
purposes of this Agreement, and that the proper officers and directors of VSDD
are fully authorized to take any and all such action.
9.5. Change of Name. VS and DD will each amend its Articles of
--------------
Incorporation within ten (10) business days after Closing so as to change its
respective corporate name to a name dissimilar to that of the Business.
9.6. Common Services. 4MC agrees that, after the Closing, VSE may continue
---------------
for a reasonable period of time (as determined by 4MC) to use certain common
services it now shares with VSDD, consisting principally of telephone and
Internet connections; provided, however, that such services shall belong to VS;
provided, further, that VSE shall pay VS for such services at market rate or
costs prevailing from time to time; and provided, further, that VSE shall
execute and deliver an indemnity agreement in form and substance satisfactory to
4MC providing for indemnity and protection from liability of 4MC, Acquisition
and VS.
9.7. Books and Records. For a period of three (3) years from the Closing
-----------------
Date (or such longer period as may be required by applicable law, any
governmental or regulatory agency, or as may be requested by Shareholders in
connection with disputes or litigation):
9.7.(a) 4MC shall not, and shall cause each of its Affiliates not to,
dispose of or destroy any of the books and records of VSDD relating to periods
prior to the Closing Date (the "Books and Records") without first offering to
turn over possession thereof to Shareholders by written notice to Shareholders
at least thirty (30) days prior to proposed date of such disposition or
destruction.
9.7.(b) 4MC shall, and shall cause each of its applicable Affiliates
to, allow Shareholders or their agents access to all Books and Records of VSDD
during regular business
hours and upon reasonable notice at 4MC's principal places of business, or at
any location where any Books and Records are stored, and Shareholders shall have
the right, at their own expense, to make copies of any such Books and Records;
provided, however, that 4MC shall not be obligated to provide Shareholders with
such access or copying in a manner which unreasonably interferes with the normal
conduct of 4MC's business in which case 4MC shall use its best efforts to
otherwise provide Shareholders with access to or copies of such documents on a
timely basis.
9.8. Tax Treatment. The parties shall treat the acquisition of assets from
-------------
each of VS and DD as a separate "reorganizations" within the meaning of Section
368 of the Code for tax purposes, and the parties shall each file the reports
required by Treasury Regulation Section 1.368-3 in connection with such asset
acquisitions. No party to this Agreement shall take, or fail to take, any
action inconsistent with such treatment.
ARTICLE 10.
Survival of Representations; Indemnification; Escrow
----------------------------------------------------
10.1. Survival. All statements contained in any certificate delivered by
--------
or on behalf of any Party pursuant to Article 5 of this Agreement shall be
deemed representations, warranties and covenants hereunder by such Party. All
representations, warranties and covenants made by any Party in this Agreement,
or pursuant thereto, shall survive the Closing, but shall terminate eighteen
(18) months from the Closing Date, except with respect to Losses constituting
Tax Claims or with respect to Losses relating to the ownership of the
Transferred Assets ("Ownership Claims") for which the representations,
warranties and covenants shall survive for the applicable period of the statutes
of limitations. Tax Claims are obligations asserted by an Governmental
Authority which would constitute a breach of Section 3.11 hereof.
10.2. Indemnity. Each Party hereto ("Indemnitor") shall indemnify, defend
---------
and hold the other Party (collectively "Indemnitee") harmless from and against
any and all Losses of every kind, nature and description, including any
unassumed liabilities and any undisclosed liabilities, including liability for
Taxes, that result from or arise out of (i) the breach by a Party of any
representation or warranty set forth in this Agreement (including the exhibits
hereto) or in any certificate, schedule or other instrument delivered pursuant
hereto; or (ii) the breach by a Party of any of the covenants contained in this
Agreement. Without limiting the generality of the foregoing, VSDD and
Shareholders shall indemnify, defend and hold harmless 4MC and Acquisition from
and against any Losses arising out of or any obligations whatever relating to
leases, Indebtedness, guarantees or other responsibility by VSDD for obligations
of VSE, including obligations to real property or equipment lessors for premises
or equipment utilized by VSE.
10.3. Time for Claims. No Indemnitee shall be entitled to indemnification
---------------
pursuant to this Article 10 unless a written claim for indemnification is made
upon the Indemnitor within eighteen (18) months from the Closing Date with
respect to all claims other than claims for Losses which are based upon Tax
Claims or Ownership Claims; claims for Losses which are based upon Tax Claims or
Ownership Claims may be made during the applicable period of the statute of
limitations.
10.4. Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification hereunder ("Claim"), the Indemnitee shall promptly notify in
writing the Indemnitor of the claim and, when known, the facts constituting the
basis for such claims. In the event of any claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to the Indemnitor shall specify,
if known, the amount or an estimate of the amount of the liability arising
therefrom.
10.5. Claims Procedure. In connection with any claim giving rise to
----------------
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a Party to this Agreement, the Indemnitor at
its sole cost and expense and with counsel reasonably satisfactory to the
Indemnitee may, upon written notice to the Indemnitee, assume the defense of any
such claim or legal proceeding if (a) the Indemnitor acknowledges to the
Indemnitee in writing, within fifteen (15) days after receipt of notice from the
Indemnitor, its obligations to indemnify the Indemnitee with respect to all
elements of such claim, (b) the Indemnitor shall have the financial resources to
defend against such third-party claim and fulfill its indemnification
obligations hereunder, (c) the third-party claim involves only money damages and
does not seek an injunction or other equitable relief, and (d) settlement or an
adverse judgment of the third-party claim is not, in the good faith judgment of
the Indemnitee, likely to establish a pattern or practice adverse to the
continuing business interests of the Indemnitee. The Indemnitee shall be
entitled to participate in (but not control) the defense of any such action,
with its counsel and at its own expense; provided, however, that if there are
one or more legal defenses available to the Indemnitee that conflict with those
available to the Indemnitor, or if the Indemnitor fails to take reasonable steps
necessary to defend diligently the claim after receiving notice from the
Indemnitee that it believes the Indemnitor has failed to do so, the Indemnitee
may assume the defense of such claim; provided, further, that the Indemnitee may
not settle such claim without the prior written consent of the Indemnitor, which
consent may not be unreasonably withheld. If the Indemnitee assumes the defense
of the claim, the Indemnitor shall reimburse the Indemnitee for the reasonable
fees and expenses of counsel retained by the Indemnitee and the Indemnitor shall
be entitled to participate in (but not control) the defense of such claim, with
its counsel at its own expense. The Parties agree to render, without
compensation, to each other such assistance as they may reasonably require of
each other in order to insure the proper and adequate defense of any action,
suit or proceeding, whether or not subject to indemnification hereunder.
10.6. Escrow. Upon Closing, the parties shall establish an escrow to
------
carry out the terms of this Agreement. An amount of 4MC Acquisition Stock set
forth in Section 2.5(b)(ii) shall be deposited into such escrow and shall
constitute the Escrow Fund. A licensed escrow company designated by 4MC, or
4MC's counsel if 4MC so elects, will act as escrow holder ("Escrow Agent") and
will hold and dispose of the Escrow Fund in accordance with the escrow agreement
attached hereto as Exhibit B (the "Escrow Agreement"). The terms of the Escrow
Agreement, upon execution, will be incorporated as part of this Agreement.
10.7. Limit on Indemnity. The liability of VSDD and Shareholders to 4MC
------------------
and Acquisition for Losses, and the liability of 4MC and Acquisition to VSDD and
Shareholders for Losses, shall be subject to the following limitations:
10.7.(a) VSDD and Shareholders shall not be liable to 4MC or
Acquisition for any Claim, and 4MC and Acquisition shall not be liable to VSDD
or Shareholders for any Claim, unless and until the aggregate amount of such
respective Claims exceeds Fifty Thousand Dollars ($50,000) (the "Threshold
Amount"). If the aggregate of Claims of Five Thousand Dollars ($5,000) or more
at any time exceeds the Threshold Amount, VSDD and Shareholders shall be
liable to 4MC and Acquisition, and 4MC and Acquisition shall be liable to VSDD
and Shareholders, for all Claims which individually equal or exceed Five
Thousand Dollars ($5,000), whether such Claim occurred or occurs prior to or
after the Threshold Amount has been reached, but in no event shall VSDD and
Shareholders at any time be liable to 4MC and Acquisition or 4MC and Acquisition
be liable to VSDD and Shareholders, for any individual Claim of less than Five
Thousand Dollars ($5,000). The liability of each Shareholder to 4MC and
Acquisition in respect of a Claim shall be limited to his Proportionate Share of
such Claim. "Proportionate Share" means, for each Shareholder, the following
percentages:
10.7.(a)(i) Xxxx Xxxxxx - 36.275%;
10.7.(a)(ii) Xxxxxxx Xxxxxxx - 1.960%;
10.7.(a)(iii) Xxxxxxx Xxxxxxxx - 50.392%; and
10.7.(a)(iv) Xxxxxx Xxxxxxxx - 11.373%.
10.7.(b) The aggregate maximum amount recoverable by 4MC and
Acquisition from VSDD and Shareholders in respect of Claims, and the aggregate
maximum amount recoverable by VSDD and Shareholders from 4MC and Acquisition,
shall be One Million Dollars ($1,000,000) (the "Maximum Recovery").
10.7.(c) 4MC and Acquisition shall proceed against the Escrow Fund
as distinguished from proceeding against VSDD and Shareholders directly in
respect of satisfaction of indemnity claims until the Escrow Fund is exhausted.
Thereafter, 4MC and Acquisition may proceed against VSDD and Shareholders
directly. 4MC and Acquisition understand that the Shareholders may agree among
themselves to deposit 4MC Acquisition Stock in Escrow disproportionately.
Notwithstanding such disproportionate deposit, and notwithstanding the provision
contained in Section 10.7(a) that the liability of each Shareholder shall be
limited to his Proportionate Share of any Claim, 4MC and Acquisition may (and
shall) proceed against the Escrow for 100% of each Claim; as against 4MC and
Acquisition, the limitation to a Proportionate Share shall apply only to the
extent 4MC and Acquisition proceed against the Shareholders after the Escrow
Fund is exhausted.
ARTICLE 11.
4MC Acquisition Stock Restrictions; Registration Rights
-------------------------------------------------------
11.1. Restriction on Transfer. Shareholders acknowledge that the 4MC
-----------------------
Acquisition Stock delivered to the Shareholders at Closing will not be
registered, but will be issued pursuant to appropriate exemptions from the
Securities Act of 1933. Shareholders represent and warrant that they are
acquiring the 4MC Acquisition Stock for investment and not for distribution.
The Shareholders will execute such documents and provide such information as may
be required to enable the issuance of such stock by 4MC to qualify for the
applicable exemptions. Shareholders further acknowledge that the 4MC
Acquisition Stock may be sold only pursuant to an effective registration
statement under the Securities Act or an exemption therefrom.
11.2. Restrictive Legends. Each certificate for the Restricted Securities
-------------------
shall be stamped or otherwise imprinted with a legend substantially in the
following manner:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, NOR UNDER APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF, UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH LAWS OR SUCH
DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM
REGISTRATION.
11.3. Registration. 4MC agrees, pursuant to the specific terms of the
------------
Registration Rights Agreement attached hereto as Exhibit C, to file a
registration statement for the 4MC Acquisition Stock as soon as practical after
Closing on a Form S-3 Registration Statement, and to use its best efforts to
cause such registration statement to become effective as soon as possible.
ARTICLE 12.
Miscellaneous
-------------
12.1. Expenses. Each party shall each pay its own expenses incident to
--------
the negotiation, preparation and carrying out of this Agreement, including all
fees and expenses of its counsel and accountants for all activities of such
counsel and accountants undertaken pursuant to this Agreement, irrespective of
whether or not the Transactions are consummated; provided, however, that except
as otherwise provided in Section 2.4(a) and 3.7(f), VSDD's payment of such
expenses shall not be made from the Business or the Transferred Assets, but only
from the Excluded Assets.
12.2. Publicity. No Party hereto shall issue any press release or make
---------
any other public statement relating to, in connection with or arising out of
this Agreement or the Transactions, without obtaining the prior written approval
of the other Parties, which shall not be unreasonably withheld or delayed,
except that prior approval shall not be required if, in the reasonable judgment
of 4MC, prior approval by VSDD would prevent the timely dissemination of such
release or statement in violation of applicable Federal securities laws, rules
or regulations or policies of NASDAQ.
12.3. Succession and Assignments; Third Party Beneficiaries. This
-----------------------------------------------------
Agreement may not be assigned (either voluntarily or involuntarily) by any Party
hereto without the express written consent of the other Party. Notwithstanding
the foregoing, (i) Acquisition may assign its right, under this Agreement to 4MC
at any time, and (ii) 4MC and Acquisition may assign its rights under this
Agreement to any Person effective from and after Closing. Any attempted
assignment in violation of this Section shall be void and ineffective for all
purposes. In the event of an assignment permitted by this Section, this
Agreement shall be binding upon the heirs, successors and assigns of the Parties
hereto. There shall be no third party beneficiaries of this Agreement.
12.4. Notices. All notices, requests, demands or other communications
-------
with respect to this Agreement shall be in writing and shall be: (i) personally
delivered; (ii) sent by facsimile transmission; (iii) sent by the United States
Postal Service registered or certified mail, return receipt requested, postage
prepaid; or (iv) delivered by a nationally recognized express overnight service,
charges prepaid, to the following addresses (or such other addresses as the
Parties may specify from time to time in accordance with this Section).
TO 4MC AND ACQUISITION: Four Media Company
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attn.: Xxxxxx X. Xxxxxxx
Chief Executive Officer
Fax No.: 818/000-0000
WITH A COPY TO: Xxxxxxxxx Glusker Fields Claman & Machtinger, LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn.: Xxxxxxx Xxxxxxx, Esq.
Fax No.: 310/000-0000
TO VSDD: Video Symphony, Inc.
000 Xxxxx Xxxxxxx Xxxx.
Xxxxxxx, XX 00000
Attn.: Xxxxxxx Xxxxxxx
Fax No.: 818/000-0000
TO SHAREHOLDERS: Xxxxxxx Xxxxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
Fax No.: 626/000-0000
Xxxx Xxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax No.: 626/000-0000
Xxxxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax No.: 626/000-0000
Xxxxxx Xxxxxxxx
000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax No.: 626/000-0000
WITH COPY OF NOTICES Xxxxxxx Coie LLP
TO VSDD AND/OR 1999 Avenue of the Stars, Ninth Floor
SHAREHOLDERS TO: Xxx Xxxxxxx, XX 00000
Attn.: Xxxxxx X. Xxxxxxx, Esq.
Fax No.: 310/000-0000
Any such notice shall, when sent in accordance with the preceding
sentence, be deemed to have been given and received on the earliest of: (i) the
day delivered to such address; (ii) the day received by facsimile transmission;
(iii) the fifth business day following the date deposited with the United States
Postal Service; or (iv) 24 hours after shipment by such courier service.
12.5. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the internal laws of the State of California without giving
effect to principles of conflicts of law thereof.
12.6. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
12.7. No Implied Waiver; Remedies. No failure or delay on the part of the
---------------------------
Parties hereto to exercise any right, power, or privilege hereunder or under any
instrument executed pursuant hereto, shall operate as a waiver, nor shall any
single or partial exercise of any right, power, or privilege. All rights,
powers, and privileges granted herein shall be in addition to other rights and
remedies to which the Parties may be entitled at law or in equity.
12.8. Entire Agreement. This Agreement, including the Exhibits and
----------------
Schedules attached hereto, sets forth the entire understandings of the Parties
with respect to the subject matter hereof, and incorporates and merges any and
all previous communications, understandings, oral or written, as to the subject
matter hereof.
12.9. Amendments; Actual Waivers. This Agreement may not be amended
--------------------------
except by an instrument in writing signed on behalf of each of the Parties
hereto. At any time prior to the Closing, the Parties hereto may: (i) extend
the time for the performance of any of the obligations or other acts of the
other Parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered by any of the other
Parties pursuant hereto; and (iii) waive compliance with any of the agreements
or conditions contained herein which are for the benefit of such Party. Any
agreement on the part hereto to any such extension or waiver shall be valid if
set forth in an instrument in writing signed on behalf of such Party.
12.10. Changes in Representations and Warranties of a Party. Between the
----------------------------------------------------
date of this
Agreement and the Closing Date, neither Party shall directly or indirectly enter
into any transaction, take any action, or by inaction permit an event to occur,
which would result in any of the representations and warranties of any Party
contained herein, not being true and correct at, and as of: (i) the time
immediately following the occurrence of such transaction or event; or (ii) the
Closing Date. A Party shall promptly give written notice to the other Party upon
becoming aware of: (A) any fact which, if known on the date hereof, would have
been required to be set forth or disclosed pursuant to this Agreement; and (B)
any impending or threatened breach in any material respect of any of the
representations and warranties contained in this Agreement and with respect to
the latter shall use all reasonable efforts to remedy the same.
12.11. Headings. The headings of the Sections of this Agreement, where
--------
employed, are for convenience only and do not form a part hereof and in no way
modify, interpret or construe the meanings of the Parties.
12.12. Severability. Any provision of this Agreement which is invalid or
------------
unenforceable shall be ineffective only to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions of this Agreement.
12.13. No Broker or Other Fees. Neither Acquisition nor VSDD has any
-----------------------
liability or obligation to pay any fees, commissions or other forms of
consideration to any broker, finder, investment banker or other similar Person
or entity with respect to the Transactions and/or undertakings contemplated or
effected by this Agreement.
12.14. Arbitration. Any controversy or claim arising out of or relating
-----------
to this Agreement, its enforcement or interpretation, or because of an alleged
breach, default or misrepresentation in connection with any of its provisions,
or arising out of or relating in any way to the relationship between the
parties, shall be determined by binding arbitration. The arbitration
proceedings shall be held and conducted in accordance with California Code of
Civil Procedure Sections 1282-1284.2, with the power to grant equitable relief,
including injunctions and temporary restraining orders. California Code of
Civil Procedure Section 1283.05, which provides for certain discovery rights,
shall apply to any such arbitration, and said code section is hereby
incorporated by reference. In reaching a decision, the arbitrator shall have no
authority to change, extend, modify or suspend any of the terms of this
Agreement. The arbitration shall be commenced and heard in Los Angeles County,
California. The arbitrator shall apply the substantive law (and the law of
remedies, if applicable) of California or federal law, or both, as applicable to
the claim(s) asserted. Judgment on the award may be entered in any court of
competent jurisdiction. The parties may seek, from a court of competent
jurisdiction, provisional remedies or injunctive relief in support of their
respective rights and remedies hereunder without waiving any right to
arbitration. However, the merits of any action that involves such provisional
remedies or injunctive relief, including, without limitation, the terms of any
permanent injunction, shall be determined by arbitration under this paragraph.
If the parties do not agree upon an arbitrator within ten (10) days after a
written demand for arbitration is served upon one party by the other, the
arbitrator shall be appointed pursuant to Section 1281.6 of the California Code
of Civil Procedure; provided, however, that only persons who are retired
Superior Court, California Appellate Court or federal judges or lawyers admitted
to the bar for at least twenty (20) years and classified as "A-v" by the
Martindale Xxxxxxx Law Directory shall be eligible to be selected as an
arbitrator.
12.15. Attorneys' Fees. If any legal action, arbitration or other
---------------
proceeding is brought for the enforcement of this Agreement, or because of any
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred therein,
in addition to any other relief to which it or they may be entitled. The court
or arbitrator shall consider, in determining the prevailing party, (i) which
party obtains relief which most nearly reflects the remedy or relief which the
parties sought, and (ii) any settlement offers made prior to commencement of the
trial in the proceeding.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement the day
and year first above written.
VIDEO SYMPHONY, INC.
By: /s/ Xxxxxxx Xxxxxxxx
____________________________________
Xxxxxxx Xxxxxxxx
President & Chief Executive Officer
/s/ Xxxxxxx Xxxxxxxx
_______________________________________
XXXXXXX XXXXXXXX
/s/ Xxxxxx Xxxxxxxx
_______________________________________
XXXXXX XXXXXXXX
/s/ Xxxx Xxxxxx
_______________________________________
XXXX XXXXXX
/s/ Xxxxxxx Xxxxxxx
_______________________________________
XXXXXXX XXXXXXX
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
DIGITAL DOCTORS, INC.
By: /s/ Xxxxxxx Xxxxxxxx
____________________________________
Xxxxxxx Xxxxxxxx
President & Chief Executive Officer
FOUR MEDIA COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
____________________________________
Xxxxxx X. Xxxxxxx
President & Chief Executive Officer
VSDD ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxx
____________________________________
Xxxxxx X. Xxxxxxx, President
