CONTRIBUTION AGREEMENT
This
CONTRIBUTION AGREEMENT (this “Agreement”),
dated
as of April 16, 2007, is by and among Point.360, a California corporation
(“Point.360”),
New
360, a California corporation and wholly owned subsidiary of Point.360
(“New
360”),
and
DG FastChannel, Inc., a Delaware corporation (“DG”).
All
capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Merger Agreement (as defined below).
WHEREAS,
Point.360, New 360, and DG are parties to an Agreement and Plan of Merger and
Reorganization, dated as of the date hereof (the “Merger
Agreement”),
pursuant to which, among other things, DG will acquire the ADS Business of
Point.360;
WHEREAS,
pursuant to the Merger Agreement, DG has agreed to commence an exchange offer
(the “Exchange
Offer”)
to
acquire all of the issued and outstanding shares (the “Point.360
Shares”)
of the
common stock, no par value per share, of Point.360, in which Exchange Offer
each
Point.360 Share validly tendered and not properly withdrawn will be exchanged
for a certain number of shares of common stock, par value $0.001 per share,
of
DG (the “DG
Common Stock”)
as
provided in the Merger Agreement (such amount of shares of DG Common Stock
paid
per Point.360 Share pursuant to the Exchange Offer, the “Exchange
Offer Consideration”);
WHEREAS,
the Merger Agreement provides that, following the date (the “Acceptance
Date”)
on
which DG accepts for exchange, and exchanges the Exchange Offer Consideration
for, all Point.360 Shares validly tendered and not withdrawn pursuant to the
Exchange Offer, Point.360 will be merged with and into DG, with DG continuing
as
the surviving corporation;
WHEREAS,
the Merger Agreement contemplates that, on the Acceptance Date immediately
prior
to the consummation of the Exchange Offer: (i) Point.360 will contribute to
New
360 all of the Excluded Assets in exchange for shares of New 360 common stock;
(ii) New 360 will assume all of the Assumed Liabilities; and (iii) immediately
thereafter, Point.360 will distribute to its shareholders (other than DG),
on a
pro
rata
basis,
without consideration being paid by such shareholders, all then-outstanding
shares of New 360 common stock (the “Spin-Off”);
WHEREAS,
it is the intention of the parties to this Agreement that the contribution
by
Point.360 of the Excluded Assets to New 360 and the assumption of the Assumed
Liabilities by New 360, together with the Spin-Off, will qualify as a
reorganization within the meaning of Sections 368(a)(1)(D) and 355 of the
Internal Revenue Code of 1986, as amended;
NOW,
THEREFORE, in consideration of the mutual covenants and promises contained
in
this Agreement and in the Merger Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
the
parties to this Agreement hereby agree as follows:
SECTION
1. DEFINITIONS
For
purposes of this Agreement, the following terms shall have the respective
meanings set forth below:
(a) “Acceptance
Date”
has
the
meaning set forth in the recitals to this Agreement.
(b) “Agreement”
has
the
meaning set forth in the first paragraph of this Agreement.
(c) “Assumption
of Assumed Liabilities”
has
the
meaning set forth in Section
2(b).
(d) “Books
and Records”
means
all books of account, ledgers, general, financial, legal, regulatory, Tax,
accounting, personnel and employment records, files, customer lists, sales
and
promotional literature, correspondence, manuals, data, papers and other
information, whether in hard copy or computer or other format, of Point.360
and/or IVC.
(e) “Cash”
as
of
any specified date means cash and cash equivalents calculated net of issued
but
uncleared checks and drafts.
(f) “CBS
Agreement”
has
the
meaning set forth in Section
2(f)
of this
Agreement.
(g) “Contribution”
has
the
meaning set forth in Section
2(b).
(h) “DG”
has
the
meaning set forth in the first paragraph of this Agreement.
(i) “DG
Common Stock”
has
the
meaning set forth in the recitals to this Agreement.
(j) “DG
Confidentiality Agreement”
has
the
meaning set forth in Section
3(b)(ii).
(k) “Exchange
Offer”
has
the
meaning set forth in the recitals to this Agreement.
(l) “Exchange
Offer Consideration”
has
the
meaning set forth in the recitals to this Agreement.
(m) “Indemnification
Agreement”
has
the
meaning set forth in Section
6.
(n) “IVC”
means
International Video Conversions, Inc., a California corporation and wholly
owned
subsidiary of Point.360.
(o) “Licensed
IP”
has
the
meaning set forth in Section
4(a).
(p) “Merger
Agreement”
has
the
meaning set forth in the recitals to this Agreement.
(q) “Merger
Effective Time”
means
the time at which the merger of Point.360 with and into DG that is contemplated
by the Merger Agreement becomes effective in accordance with the Delaware
General Corporation Law and the California General Corporation Law.
(r) “New
360”
has
the
meaning set forth in the first paragraph of this Agreement.
2
(s) “Non-ADS
Real Property Leases”
means
the six (6) leases or sub-leases by Point.360 of real property that are
described in Schedule
A
to this
Agreement.
(t) “Point.360”
has
the
meaning set forth in the first paragraph of this Agreement.
(u) “Point.360
Shares”
has
the
meaning set forth in the recitals to this Agreement.
(v) “Spin-Off”
has
the
meaning set forth in the recitals to this Agreement.
(w) “Tax
Attribute”
means
a
net operating loss, net capital loss, investment credit, foreign Tax credit,
excess charitable contribution, general business credit or any other item of
loss, deduction or credit that could reduce a Tax liability.
(x) “Tax
Item”
means
any item of income, gain, loss, deduction, credit, recapture of credit or any
other item (including the basis or adjusted basis of property) which increases
or decreases Income Taxes paid or payable in any taxable period.
(y) “Tentative
Tax Item Allocation”
has
the
meaning set forth in Section
7.
(z) “Tentative
Tax Item Allocation Date”
has
the
meaning set forth in Section
7.
(aa) “Transfer”
or
“Transfers”
means
the contribution, assignment, conveyance and transfer.
(bb) “Transfer
of Excluded Assets”
has
the
meaning set forth in Section
2(a).
SECTION
2. CONTRIBUTION
AND SPIN-OFF
(a) Transfer
of Excluded Assets by Point.360 to New 360.
Effective as of immediately prior to DG’s consummation of the Exchange Offer on
the Acceptance Date, Point.360 hereby Transfers to New 360 (the “Transfer
of Excluded Assets”),
in
exchange for the concurrent issuance by New 360 to Point.360 of a number of
shares of New 360 common stock equal to the number of Point.360 Shares
outstanding on the Acceptance Date (other than Point.360 Shares owned by DG),
all of the right, title and interest of Point.360 and/or IVC in and to all
of
the Excluded Assets. Point.360 shall retain all of its right, title and interest
in and to all of the Acquired Assets.
(b) Assumption
of Assumed Liabilities by New 360.
Effective as of immediately prior to DG’s consummation of the Exchange Offer on
the Acceptance Date, Point.360 hereby delegates to New 360, and New 360 hereby
assumes from Point.360, and agrees to pay, perform, discharge and fulfill,
all
of the Assumed Liabilities (the “Assumption
of Assumed Liabilities”
and,
together with the Transfer of Excluded Assets, the “Contribution”).
(c) Spin-Off
of New 360 Common Stock.
On the
Acceptance Date immediately following the Contribution but immediately prior
to
DG’s consummation of the Exchange Offer, Point.360 shall distribute to its
shareholders (other than DG), on a pro
rata
basis,
without consideration being paid by such shareholders, all of the outstanding
shares of New 360 common stock. Subject to any limitations imposed by applicable
law, Point.360 shall be entitled to select the record date to be used in
determining the shareholders entitled to receive the distribution of shares
of
New 360 common stock in the Spin-Off; provided
that
such record date must be prior to the Acceptance Date.
3
(d) Further
Assurances.
This
Agreement is intended by the parties to fully evidence and carry out (without
the need for additional documents) the Acceptance Date Transfer of the Excluded
Assets by Point.360 to New 360 pursuant to Section
2(a)
and the
Acceptance Date assumption by New 360 of the Assumed Liabilities pursuant to
Section
2(b);
provided,
however,
from
and after the Acceptance Date, (i) if requested by New 360, Point.360 shall
execute and deliver to New 360 a xxxx of sale or similar instrument that further
evidences the Transfer of the Excluded Assets to New 360 and/or stock powers
with respect to the Transfer of the capital stock of IVC to New 360, and (ii)
if
requested by Point.360 or DG, New 360 shall execute and deliver to Point.360
an
assumption agreement or similar instrument that further evidences New 360’s
assumption of the Assumed Liabilities. Each such instrument must be in form
and
substance reasonably satisfactory to Point.360, New 360 and DG. Without limiting
the generality of the foregoing, from and after the Acceptance Date, each of
Point.360, New 360 and DG shall cooperate with the other parties in executing
and delivering any other instruments necessary to effectuate the Contribution
as
may be reasonably requested by any other party from time to time, in each case
consistent with the terms of this Agreement.
(e) Conditions
to Point.360’s Obligations.
Point.360 shall not be obligated to Transfer the Excluded Assets to New 360,
and
New 360 shall not be obligated to assume the Assumed Liabilities, unless and
until (i) the Form 10 to be filed by New 360 with the SEC has been declared
effective under the Exchange Act, and no stop order with respect thereto is
in
effect and (ii) DG has given Point.360 at least one (1) business day’s prior
written notice of the Acceptance Date.
(f) CBS
Agreement.
Point.360 and CBS Worldwide Distribution, CBS Broadcasting, Inc. are parties
to
an Agreement, dated January 31, 2006 (the “CBS
Agreement”),
that
constitutes an Excluded Asset. New 360 hereby agrees that: (i) it shall comply
with the terms of the CBS Agreement from and after the Acceptance Date; (ii)
it
shall not use any products or services under the CBS Agreement from and after
the Acceptance Date; and (iii) it shall not allow any renewal, extension or
further assignment of the CBS Agreement.
(g) No
Representations or Warranties.
This
Agreement shall not be construed as containing, expressly or by implication,
any
representations or warranties by Point.360, New 360 or DG regarding (i) the
nature, condition, amount or value of any Acquired Assets, Assumed Liabilities,
Excluded Assets or Retained Liabilities, (ii) any consents, waivers or approvals
from Governmental Entities and other third parties that are required to be
obtained in connection with the transactions contemplated by this Agreement
or
(iii) the absence of security interests, liens, claims and other encumbrances
with respect to any Acquired Assets or Excluded Assets. All Acquired Assets
and
Excluded Assets are being transferred or retained, as applicable, on an “as is,”
“where is” basis.
4
SECTION
3. RETENTION
BY POINT.360 OF THE ACQUIRED ASSETS AND RETAINED LIABILITIES
(a) For
the
avoidance of doubt, from and after the Contribution: (i) Point.360 shall retain
all of its right, title and interest in and to the Acquired Assets to the same
extent that such right, title, and interest existed immediately prior to the
Contribution; (ii) Point.360 shall retain the obligation to pay, perform,
discharge and fulfill all of the Retained Liabilities; (iii) New 360 shall
have
no right, title or interest in or to any of the Acquired Assets; and (iv) New
360 shall have no obligation to pay, perform, discharge or fulfill any of the
Retained Liabilities.
(b) Books
and Records.
(i) For
a
period of at least five years after the Acceptance Date (or the later of the
applicable statute of limitations for Books and Records relating to Taxes),
New
360 shall retain the Books and Records that constitute Excluded Assets. For
a
period of at least five years after the Acceptance Date (or the later of the
applicable statute of limitations for Books and Records relating to Taxes),
Point.360 and DG shall retain the minute books and share record books relating
to Point.360 and the Books and Records that constitute Acquired
Assets.
(ii) During
the five-year period after the Acceptance Date (or the later period described
in
Section
3(b)(i)
for
Books and Records relating to Taxes), each of New 360, on the one hand, and
DG
and Point.360, on the other hand, shall provide to the other party and its
authorized accountants, counsel and other designated representatives, promptly
after receipt of a written request from the requesting party and with any
related out-of-pocket expenses to be paid by the requesting party, reasonable
access during normal business hours to the Books and Records that such providing
party is required to retain pursuant to the terms of Section
3(b)(i),
subject
to appropriate restrictions for classified, privileged or confidential
information; provided,
however,
a
request for access that is made by New 360, DG or Point.360, as applicable,
must
specify in reasonable detail the Books and Records to which such requesting
party desires access, and such request must specify a legitimate business
purpose for such access; provided,
further,
however,
(i) in
the case of a request by DG or Point.360, such request must relate solely to
Books and Records relating to the Acquired Assets, the Retained Liabilities
or
the ADS Business and (ii) in the case of a request by New 360, such request
must
relate solely to Books and Records relating to the Excluded Assets, the Assumed
Liabilities or Point.360’s business prior to the Merger Effective Time. The
confidentiality provisions contained in Section 1 of the Noncompetition
Agreement to be entered into by and between DG and New 360 shall govern the
use
and disclosure of any ADS Confidential Information (as defined in said
agreement) that is obtained by New 360 pursuant to this Section
3(b)(ii).
The
Confidentiality Agreement, dated August 16, 2006, by and between DG and
Point.360, as amended on April 16, 2007 to add New 360 as a party thereto (the
“DG
Confidentiality Agreement”),
shall
govern the obligations owed to New 360 regarding the use and disclosure of
any
Confidential Information (as defined in said agreement) that is obtained by
DG
or Point.360 pursuant to this Section
3(b)(ii).
5
(iii) Nothing
in this Section
3(b)
shall
require any party to violate any agreement with any third party regarding the
confidentiality of confidential and proprietary information relating to that
third party or its business; provided,
however,
that in
the event that a party is otherwise required to disclose any such information
pursuant to this Section
3(b),
such
party shall use commercially reasonable efforts to seek to obtain a consent
from
such third party to the disclosure of such information.
(iv) After
the
Acceptance Date, each of New 360, Point.360 and DG may receive from third
parties mail, packages and other communications properly belonging to another
party. The receiving party shall promptly deliver such mail, packages or other
communications at its expense to the proper party.
(v) New
360
shall promptly deliver any Books and Records which are in electronic format
or
otherwise and which constitute Acquired Assets to DG upon written request;
provided
that
such Books and Records are identified with reasonable specificity in such
request. Notwithstanding anything in this Agreement to the contrary, New 360
shall not be obligated to deliver any Books and Records which are in electronic
format (other than those Books and Record specifically identified in
Schedule
C)
unless
and until a request for such Books and Records is received in accordance with
the immediately preceding sentence.
(c) Point.360
Lockbox.
From
and after the Acceptance Date, New 360 shall remit to DG on a weekly basis
any
payments received by New 360 in respect of accounts receivable constituting
Acquired Assets (regardless of the manner in which such payments are received
by
New 360).
SECTION
4. INTELLECTUAL
PROPERTY LICENSES
(a) Effective
upon the consummation of the Contribution, New 360 hereby grants to Point.360
and DG a non-exclusive, non-transferable, royalty-free license for a term of
five (5) years after the Acceptance Date to use, solely in connection with
the
operation of the ADS Business, all Intellectual Property constituting Excluded
Assets that is currently used in the conduct of the ADS Business (the
“Licensed
IP”);
provided
that New
360 shall not further license the Licensed IP to any third party engaged in
a
business equivalent to the ADS Business. Neither Point.360 nor New 360 makes
any
representation or warranty, expressed or implied, regarding any of the Licensed
IP. Neither Point.360 nor DG shall have the right to use any of the Licensed
IP
after the expiration of the five-year term described in this Section
4(a).
DG
hereby agrees to pay any license fees or other fees owed by New 360 to third
party licensors in respect of the Licensed IP arising from DG’s use of the
Licensed IP; provided
that DG
shall be responsible to pay only the incremental fees owed by New 360 arising
out of DG’s use of the Licensed IP in a manner other than the manner in which
Point.360 currently uses the Licensed IP to conduct the ADS
Business.
(b) After
the
Acceptance Date, New 360 shall cooperate with DG and Point.360 in permitting
such parties to use the Licensed IP to the same extent and in the same manner
that Point.360 currently uses the Licensed IP to conduct the ADS Business.
DG
and Point.360 agree to comply with any reasonable quality control standards
and
confidentiality requirements regarding the Licensed IP that may be delivered
to
them from time to time by New 360, and New 360 shall be entitled to terminate
the license granted pursuant to Section
4(a)
if DG or
Point.360 fails in any material respect to comply with the requirements of
this
sentence and such failure remains uncured after ten (10) business days following
DG’s receipt of written notice thereof.
6
(c) From
the
consummation of the Contribution through and until the Merger Effective Time,
New 360 hereby grants to Point.360 an exclusive, non-transferable, royalty-free
license to use and display the trademark “Point.360” solely in connection with
the conduct of the ADS Business.
(d) From
and
after the Merger Effective Time, (i) neither Point.360 nor DG shall have any
right to use the trademark “Point.360” and (ii) each of Point.360 and DG shall
use its best efforts to remove or strike “Point.360” from the Acquired Assets,
including stationery, websites, e-mail and other documents as soon as
practicable thereafter.
SECTION
5. NON-ADS
REAL PROPERTY LEASES
(a) Notwithstanding
anything else in this Agreement to the contrary, with respect to each Non-ADS
Real Property Lease for which a lessor’s consent to the Transfer of such lease
to New 360 has not been obtained prior to the Acceptance Date but for which
a
lessor’s consent to a sublease to New 360 has been obtained prior to the
Acceptance Date, (i) such Non-ADS Real Property Lease shall be deemed to be
an
Acquired Asset until such time, if any, as the lessor’s consent to the Transfer
of such lease to New 360 is obtained and (ii) Point.360 and New 360 shall enter
into a sublease regarding such Non-ADS Real Property Lease prior to the
Acceptance Date, such sublease to have substantially the same terms as such
Non-ADS Real Property Lease.
(b) Notwithstanding
anything else in this Agreement to the contrary, with respect to each Non-ADS
Real Property Lease for which a lessor has neither consented to the Transfer
of
such lease to New 360 nor consented to a sublease to New 360 (a “Problematic
Lease”),
(i)
such Problematic Lease shall be deemed to be an Acquired Asset until such time,
if any, as the lessor’s consent to the Transfer of such lease to New 360 is
obtained; (ii) Point.360 shall use its reasonable commercial efforts to
cooperate in any reasonable and lawful arrangement to permit New 360 to occupy
and use the real property and improvements covered by such Problematic Lease
in
the ordinary course of business in accordance with past practice, including
accepting such reasonable direction as New 360 shall request of Point.360;
and
(iii) New 360 shall pay and remit to Point.360 at the beginning of each month
following the Acceptance Date, an amount equal to the sum of the rent and any
other amounts payable to the lessor under such Problematic Lease for such month.
Notwithstanding anything else in this Agreement to the contrary, this Agreement
shall not constitute an agreement to assign, license, sublicense, lease,
sublease, convey or transfer any Problematic Lease or any claim or right or
any
benefit arising thereunder or resulting therefrom unless and until the lessor’s
consent to the Transfer of such lease to New 360 or the sublease to New 360
has
been obtained.
(c) From
and
after the Acceptance Date, DG shall cooperate, at New 360’s sole cost and
expense, with New 360 to obtain the lessor’s consent to the Transfer of any
Non-ADS Real Property Lease deemed to be an Acquired Asset pursuant to this
Section
5
to New
360.
7
SECTION
6. INDEMNIFICATION
On
the
Acceptance Date, New 360 and DG will become parties to an Indemnification and
Tax Matters Agreement (the “Indemnification
Agreement”)
substantially in the form of Exhibit F to the Merger Agreement. The
Indemnification Agreement will set forth certain indemnification and other
obligations of New 360 and DG regarding the Assumed Liabilities, the Retained
Liabilities, Taxes and other matters.
SECTION
7. TAX
MATTERS
Any
Tax
Items or Tax Attributes required or permitted to be allocated to or between
Point.360 and New 360 for taxable periods ending on or before the Acceptance
Date shall be allocated to or between Point.360 and New 360 in accordance with
applicable Tax law. Within sixty (60) days of the Contribution (the
“Tentative
Tax Item Allocation Date”),
the
accountants for New 360 shall tentatively determine (or cause to be determined)
reasonably and in good faith the amounts and proper allocation of such items
and
attributes to and between Point.360 and New 360, and the Tax basis of the
assets and liabilities transferred to New 360 in connection with the
Contribution (the tentative determination and allocation of such Tax Items,
Tax
Attributes and tax basis information, the “Tentative
Tax Item Allocation”).
On
the Tax Item Tentative Allocation Date, New 360 shall forward to DG the
Tentative Tax Item Allocation and information in adequate detail to explain
the
basis of such calculation. New 360 shall provide DG with access to the Books
and
Records used by New 360 to determine the Tentative Tax Items Allocation and
such
other information as DG reasonably requests that may be pertinent to its review
of the Tentative Tax Items Allocation. DG may dispute the calculation of the
Tentative Tax Item Allocation or any element thereof by notifying New 360 of
such disagreement in writing, setting forth in reasonable detail the particulars
of such disagreement, within thirty (30) days after its receipt of the Tentative
Tax Item Allocation. In the event that DG does not provide such a notice of
disagreement within such thirty (30) day period, it shall be deemed to have
accepted the accuracy of such Tentative Tax Item Allocation, which shall be
final, binding and conclusive for all purposes hereunder. In the event any
such
notice of disagreement is timely provided, New 360 and DG shall use their
commercially reasonable efforts for a period of thirty (30) days (or such longer
period as they may mutually agree) to resolve any disagreements with respect
to
the calculation of the Tentative Tax Item Allocation. If New 360 and DG are
unable to resolve such disagreements then, at any time thereafter, either New
360 or DG may require that an independent accounting firm of recognized national
standing mutually selected by New 360 and DG (the “Auditor”)
shall
resolve any remaining disagreements. The Auditor shall determine as promptly
as
practicable whether the Tentative Tax Item Allocation is correct under
applicable Tax law and (only with respect to the remaining disagreements
submitted to the Auditor) whether and to what extent (if any) the Tentative
Tax
Item Allocation requires adjustment. The fees and expenses of the Auditor shall
be shared equally by New 360 and DG. The determination of the Auditor shall
be
final, conclusive and binding on the parties. The Tax Item Allocation as finally
determined in accordance with this Section
7
is
hereinafter referred as to the “Final
Tax Item Allocation”.
New
360 and Point.360 agree to compute their Tax liabilities for taxable periods
after the Acceptance Date consistent with the Final Tax Item Allocation and
treat the Tax Attributes and Tax Items as reflected on any federal (or
applicable state, local or foreign) income Tax Return filed by the parties
as
presumptively correct.
8
SECTION
8. MISCELLANEOUS
(a) Notices.
All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally (notice deemed given upon receipt),
telecopied (notice deemed given upon confirmation of receipt), or sent by a
nationally recognized overnight courier service, such as Federal Express (notice
deemed given upon receipt of proof of delivery), to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if
to DG,
or to Point.360 after the Acceptance Date, to:
DG
FastChannel, Inc.
000
X.
Xxxx Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Attention:
Chief Financial Officer
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
with
a
copy to:
Xxxxxx
& Xxxxxxx LLP
000
Xxxxxxxx Xxxxxx XX, Xxxxx 0000
Xxxxxxxxxx,
XX 00000
Attention:
Xxxxxxx X. X’Xxxxx
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
and
(ii) if
to New
360, or to Point.360 prior to the Acceptance Date, to:
New
360
(to be renamed Point.360 after the Merger Effective Time)
0000
Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Attention:
Chief Financial Officer
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
with
a
copy to:
Xxxx
& Xxxxx PC
0000
Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxxxx Xxxxx
Telephone
No.: (000) 000-0000
Facsimile
No.: (000) 000-0000
9
(b) Counterparts;
Facsimile.
This
Agreement may be executed manually or by facsimile by the parties hereto, in
any
number of counterparts, each of which shall be considered one and the same
agreement and shall become effective when a counterpart hereof shall have been
signed by each party and delivered to the other party.
(c) Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of California, without giving effect to conflicts of laws principles
that would result in the application of the law of any other state.
(d) Assignment.
This
Agreement shall not be assigned by any party hereto (whether by operation of
law
or otherwise) without the prior written consent of the other party. Subject
to
the preceding sentence, but without relieving any party hereto of any obligation
hereunder, this Agreement will be binding upon, inure to the benefit of, and
be
enforceable by the parties and their respective successors and
assigns.
(e) Amendments;
Waiver.
This
Agreement may be amended or modified only by a written instrument signed by
each
of the parties hereto. Any party may waive any provision of this Agreement
or
compliance therewith; provided
that
such waiver is set forth in an instrument in writing signed by the party to
be
bound thereby. Any waiver or failure to insist on strict compliance with any
agreement or obligation contained herein shall not operate as a waiver of,
or
estoppel with respect to, any subsequent or other failure.
(f) Severability.
If any
term or other provision of this Agreement is invalid, illegal, or incapable
of
being enforced by rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
by
this Agreement are not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal, or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are fulfilled to the extent possible.
(g) WAIVER
OF JURY TRIAL.
EACH
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO
A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO REPRESENTATIVE, AGENT, OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF
SUCH WAIVERS, (2) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
SUCH WAIVERS, (3) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (4) IT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8(g).
10
(h) Termination.
This
Agreement, and all rights and obligations of the parties hereunder, shall
terminate on the date the Merger Agreement is terminated in accordance with
its
terms; provided,
however,
that
this Section
8
shall
survive any termination of this Agreement.
[remainder
of this page intentionally left blank]
11
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by
their respective officers thereunto duly authorized as of the date first written
above.
|
POINT.360
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||
| |
|
|
| By: | ||
|
Name: Xxxx
X. Bagerdjian
Title: Chairman,
President and CEO
|
||
|
NEW
360
|
||
| |
|
|
| By: | ||
|
Name: Xxxx
X. Bagerdjian
Title: Chairman,
President and CEO
|
||
|
DG
FASTCHANNEL, INC.
|
||
| |
|
|
| By: | ||
|
Name: Xxxxx
X. Xxxxxxxx
Title: Chairman
and CEO
|
||
12
Schedule
A
Excluded
Assets
“Excluded
Assets”
means
all of the Assets not used exclusively in connection with the ADS Business,
including, without limitation, those Assets set forth in this Schedule
A.
(1) The
severance and change-in-control agreements between Point.360 and each of Xxxx
X.
Bagerdjian and Xxxx X. Steel;
(2) All
employees of Point.360 and/or IVC, other than employees listed in Schedule C
to this
Agreement;
(3) The
“Point.360” trademark and all other Intellectual Property (including Software
and the trademarks “Reel-Safe”, “Vision.360”, “Spot.360”, “Point Perfect”,
“Vault.360”, “Audio.360” and “Post.360”);
(4) All
IVC
capital stock owned by Point.360;
(5) All
Cash
(including proceeds from the exercise prior to the Merger Effective Time of
the
Company Options) and bank accounts;
(6) All
Non-ADS Real Property Leases, which consist of:
(a) Building
Lease (0000 Xxxxxxxxx Xxx, Xxxxxxx Facility) dated June 11, 1998 between
Point.360 and Hollywood Way Office Ventures LLC;
(b) Standard
Industrial / Commercial Single - Tenant Lease - Net (712 X. Xxxxxx St., Los
Angeles facility) dated January 24, 1997 between Point.360 and Xxxxxxx
Xxxxxxxxxx as amended in July 2002;
(c) Standard
Industrial / Commercial Multi-Tenant Lease-Net (West Los Angeles facility)
dated
March 17, 2004 between Point.360 and Xxxxxx Xxxxxxxx, as co-Trustee of the
Xxxxxxxx Family Trust of 1988;
(d) Standard
Industrial Lease - Net (Highland facility) dated April 3, 1989 between Point.360
and Xxxx Xxxx FBO for Xxxx Xxxx Living Trust, as amended;
(e) Standard
Industrial / Commercial Multi-Tenant Lease -Net (IVC facility) dated March
1,
2002 between Point.360 and 2777 LLC, as amended; and
(f) Lease
Agreement (Media Center) dated March 29, 2006 between Point.360 and LEAFS
Properties, LP;
(7)
All
security deposits delivered in connection with the Non-ADS Real Property Leases,
other than the security deposit under any Non-ADS Real Property Lease for which
the lessor’s consent to the Transfer of such lease to New 360 is not obtained
within 45 days after the Closing Date;
A-1
(8) All
Company Agreements (including the CBS Agreement and the DG Confidentiality
Agreement), other than Company Agreements that constitute Acquired Assets;
(9) All
Tax
refunds and other Tax benefits arising from any activities of Point.360 and/or
IVC conducted during the Pre-Acceptance Date Tax Period (as such term is defined
in the Indemnification Agreement);
(10) All
Books
and Records, other than minute books and share records relating to Point.360
and
other than Books and Records pertaining exclusively to the ADS Business, any
Acquired Asset or any Retained Liability;
(11) Assets
identified in the attached general ledger of Point.360 (as updated through
the
Acceptance Date) under the “Post Group” heading; and
(12) Asset
Purchase Agreement, dated March 7, 2007, by and among Point.360, Eden FX and
the
shareholders of Eden FX.
Notwithstanding
the foregoing provisions of this Schedule
A,
the
Excluded Assets shall not include any of the Assets set forth in the
Schedule C
to this
Agreement and any Assets identified after the date hereof but prior to the
Acceptance Date by Point.360’s independent public accountants that should have
been set forth in Schedule
C
to this
Agreement (including the general ledger attached hereto) but for the fact that
such accountants have not completed the audit of the ADS Business as of the
date
hereof.
A-2
Schedule
B
Assumed
Liabilities
“Assumed
Liabilities”
means
(i) accounts payable and other accrued expenses not exclusively related to
the
ADS Business; (ii) accrued wages and benefits of the employees of Point.360
and/or IVC (other than the employees listed in Schedule
C
to this
Agreement); (iii) any indebtedness in excess of $7,000,000 under (x) that
certain Standard Loan Agreement, dated March 29, 2006, between Point.360
and
Bank of America, N.A. and (y) those certain Promissory Notes between General
Electric Capital Corporation and Point.360, dated December 30, 2005 and March
30, 2007, respectively, (iv) any and all Liabilities of Point.360 and/or
IVC,
whether arising before, on or after the consummation of the Contribution,
to the
extent resulting from or arising out of (x) the operation or conduct of
Point.360’s business (other than the ADS Business) prior to the consummation of
the Contribution on the Acceptance Date or (y) the past, present or future
ownership or use of any of the Excluded Assets, (v) all Liabilities for Taxes
of
Point.360 and/or IVC for any Pre-Acceptance Date Tax Period (as such term
is
defined in the Indemnification Agreement) and (vi) those Liabilities set
forth
in this Schedule
B.
(1) Liabilities
arising under the Company Agreements described in Schedule
A
to this
Agreement; and
(2) Liabilities
identified in the attached general ledger of Point.360 (as updated through
the
Acceptance Date) under the “Post Group” heading.
Notwithstanding
the foregoing provisions of this Schedule
B,
the
Assumed Liabilities shall not include any of the Retained
Liabilities.
B-1
Schedule
C
Acquired
Assets
“Acquired
Assets”
means
all of
the
Assets set forth in this Schedule C
and any
Assets identified after the date hereof but prior to the Acceptance Date
by
Point.360’s independent public accountants that should have been set forth in
this Schedule
C
(including the general ledger attached hereto) but for the fact that such
accountants have not completed the audit of the ADS Business as of the date
hereof.
(1) The
severance contract between Point.360 and Xxxxxxxx Xxxxx, dated March 2, 2007,
and the severance contract between Point.360 and Xxxx Xxxxxx, dated February
15,
2007;
(2) Change
in
Control Agreements between Point.360 and the following employees of the ADS
Business: Xxxxxxxx Xxxxx; Xxxx Xxxx; Xxxxx Xxxxx; Xxxx XxXxxxxx; Xxxx Xxxxxxxx;
and Xxxxxx Xxxxx;
(3) The
following employees of Point.360 and/or IVC: Xxxxxxx, Xxxxxxxx Xxxx; Xxxxx,
Xxxxxxxx; Xxxxxxx, Xxxxx Xxx; Xxxxx, Xxxxxx X.; Xxxx, Xxxx X.; Xxxxxxx, Xxxxxxx
X.; Xxxxxxx, Xxxxxxxx; Xxxxx, Xxxxxxx X.; Xxxxxx, Xxxx X.; Xxxxxx, Xxxx X.;
Xxxx, Xxxxx X.; Xxxxxx, Xxxx X.; Xxxxx, Xxxxx X.; XxXxxxxx, Xxxxxxx Xxxxxx;
Xxxxx Xxxxx, Xxxxx Xxxxxx; Ruhtz, Xxxxx X.; Xxxxxx, Xxxxx; Xxxx, Xxxxx X.;
Xxxxxxxxx, Xxxx X.; Xxxxxxxx, Xxxxxxxx X.; Xxxxxxx, Xxxxxx; Xxxxxxxx, Xxxxx
Xxxxxx X.; Xxxxxxxx, Xxxxx; Xxxxxx, Xxxx; Xxxxx, Xxxxx; Xxxxxxx, Xxxxx X.;
Xxxxxxxx, Xxxxxxxx; Xxxxxxxx, Xxxxxxx X.; Xxxxxxxx, Xxxxxxx X.; Xxxxxxxxx,
Xxxxxxxxx; Xxxxxx, Xxxxxx Xxxx; Kachoian, Xxxxxx Xxxxxx; Xxxxx, Xxxxxxxxx
Xxxxx;
Lives, Xxxxxx X.; Xxxxxx, Xxxxxx X.; Xxxxxx, Xxxxxx; Xxxxxxxxx, Xxxxxx Xxx;
Xxxxxxx, Xxxxx Xxx; Xxxxxxx, Xxxxxx; Xxxxxxxx, Xxxx X.; Xxxxxxx, Xxxxxx;
Xxxx,
Xxxxxx; Xxxxxxx, Xxxx; Xxxxxxxxxx, Xxxxx Xxxxxxx; Xxxxxxxxxx, Xxxxx Xxxxxxxxx;
Xxxxxxxxx, Xxxxxxx; Xxx, Xxxxx; Xxxx, Xxxxx X.; Xxxxxxx, Xxxxxx; Xxxxxx,
Xxxxxx;
Xxxxx, Xxxxxx X.; Xxxxxxx, Xxxxxxx X.; Xxxxxxx, Xxxxx; Xxxxxxxx, Xxxxx X.;
Xxxxxxx, Xxxxxx; Xxxxxx, Xxxxxx X.; Xxxxxx, Xxxxxxx; Xxxxxxxx, Xxxxxxx X.;
Xxxxxxxx, Xxxxx X.; Xxxxx, Xxxxxxxx X.; Xxxxx, Xxxx X.; Xxxxxx, Xxxxx; Xxxxx,
Xxxxx X.; Xxxxxxxxx, Xxxx; Xxxxxx, Xxxxxxx X.; Xxxx Xxxx, Xxxx Xxxxx; Xxxxx,
Xxx; XxXxxxxx, Xxxx; Xxxxxx, Xxxxxx X.; Xxxxxx, Xxxxx X.; Xxxxxxx, Xxxxxxx;
Xxxxxxxx, Xxxxx; Xxxxxx, Xxxxxx X; Xxxxxx, Xxxxxxxx X.; Xxxxx, Xxxxx X.;
Xxx
Xxxxx, Xxxx X.; Xxxxxxx, Xxxxxxxx X.; Xxxxxxx, Xxxxxx X.; Xxxxxx, Xxxx X.;
Xxxxxx, Xxxxx X.; Xxxxxx, Xxxxx X.; XxXxxxxxxx, Xxxxx X.; Xxxxx, Xxxx Xxx;
Xxxxxx, Xxxxxx X.; Xxxxx, Xxxx Xxxxxxx; Xxxxxxxx, Xxxxx Xxxxx; Xxxxx, Xxxx
X.;
Xxxxxx, Xxxxxx; Xxxxxxxxx, Xxxxxxx Xxxxxx; Xxxxx, Xxxxxx X.; Xxxxxxxxxx Xxxxx
Xxxxxxxx;
(4) Accounts
receivable, deposits, inventory (including, without limitation, tape stock
and
labels), and prepaid expenses exclusively related to the ADS
Business;
(5) Security
deposits delivered in connection with any Non-ADS Real Property Lease for
which
the lessor’s consent to the Transfer of such lease to New 360 is not obtained
within 45 days after the Closing Date;
(6) The
following Company Agreements:
(a) Commercial
Lease Agreement (Dallas Facility) dated August 1, 2000 between VDI Multimedia
(now Point.360) and JLCX Property Fund, Ltd., as amended February 28,
2005;
C-1
(b) Lease
(Chicago Facility) dated May 8, 1992 between Multimedia Services, Inc. (now
Point.360) and ZVI/430 Associates Limited Partnership, as amended on August
28,
1996, July 10, 1998 and September 16, 2002;
(c) Office
Building Lease (San Francisco Facility) dated October 30, 2002 between Point.360
and Xxxxxx Corporation;
(d) Agreement
of Lease (New York Facility) dated December 10, 1998 between VDI Media Co.
(now
Point.360) and 000 Xxxx 00xx
Xxxxxx
Associates, L.P.;
(e) AIR
Commercial Real Estate Association Standard Industrial / Commercial Single
-
Tenant Lease (Los Angeles- McCadden Facility) dated August 16, 2005 between
Point.360 and Xxxxxxx X. Xxxxx, d/b/a I.M. Chait Gallery /
Auctioneers;
(f) Services
Agreement dated July 1, 2005 between Point.360 and Burger King
Corporation;
(g) FedEx
Pricing Agreement dated May 2, 2005 among Point.360, Federal Express
Corporation, and FedEx Ground Package System, Inc. as amended on June 9,
2005;
(h) Letter
Agreement dated June 23, 2005 among Point.360, Digital Generation Systems,
Inc.
Pepsi-Cola Advertising and Marketing, Inc., Frito-Lay, Inc., and Quaker Oats
Company, as amended December 13, 2005;
(i) Letter
Agreement dated July 26, 2001 between Point.360 and Audio Audit, Inc.;
and
(j) Various
agreements related exclusively to telephone, data, copier, utility, and other
services at the five Point.360 offices described in sub-paragraphs (a) to
(e) of
this paragraph (6);
(7) Minute
books and share record books relating to Point.360;
(8) Books
and
Records pertaining exclusively to the ADS Business, any Acquired Asset or
any
Retained Liability, including, without limitation, invoices and order history,
rate cards, historical monthly financial statements, detailed inventory of
the
boxed or pallet storage of media assets (regardless of where stored) attached
hereto, customers’ media files, customer lists and employee/payroll files of the
employees listed in this Schedule
C;
(9) Assets
identified in the attached general ledger of Point.360 (as updated through
the
Acceptance Date) under the “ADS Group” heading; and
(10) Any
shares of DG Common Stock owned, beneficially or of record, by
Point.360.
C-2
Schedule
D
Retained
Liabilities
“Retained
Liabilities”
means
(i) accounts payable and other accrued expenses exclusively related to the
ADS
Business; (ii) accrued wages and benefits of the employees listed in
Schedule
C
to this
Agreement; (iii) no more than $7,000,000 of indebtedness (“Specified
Indebtedness”)
under
(x) that certain Standard Loan Agreement, dated March 29, 2006, between
Point.360 and Bank of America, N.A. and (y) those certain Promissory Notes
between General Electric Capital Corporation and Point.360, dated December
30,
2005 and March 30, 2007, respectively; (iv) any and all Liabilities (other
than
for Taxes) of Point.360 and/or IVC, whether arising before, on or after the
Acceptance Date, to the extent not inconsistent with any Liabilities set
forth
in the definition of “Assumed Liabilities” or identified in Schedule B
to this
Agreement and resulting exclusively from or arising exclusively out of (x)
the
operation or conduct of the ADS Business prior to or after the consummation
of
the Contribution, (y) the operation or conduct of Point.360’s business after the
consummation of the Contribution or (z) the past, present or future ownership
or
use of any of the Acquired Assets; (v) all Liabilities for Taxes of Point.360
for any Post-Acceptance Date Tax Period (as such term is defined in the
Indemnification Agreement); and (vi) those Liabilities set forth in this
Schedule
D.
(1) Liabilities
arising under the Company Agreements described in Schedule
C
to this
Agreement; and
(2) Liabilities
identified in the attached general ledger of Point.360 (as updated through
the
Acceptance Date) under the “ADS Group” heading; provided
that,
notwithstanding anything to the contrary in such general ledger, it is
understood and agreed by the parties hereto that Retained Liabilities shall
include up to $7,000,000 of Specified Indebtedness.
D-1
General
Ledger
(See
attached.)
Inventory
of ADS Customers’ Vaulted Media Elements
(See
attached.)
