1
EXHIBIT 2.1
Pursuant to Item 601(b)(2) of Regulation S-K, the exhibits and
schedules to this Agreement of Purchase and Sale of Assets have been omitted.
Such exhibits and schedules will be submitted to the Securities and Exchange
Commission upon request.
SALE AND PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 10th day of September, 1998.
BETWEEN:
XXXXX XXXXXXXX LIMITED, in its capacity as Receiver-Manager of Digital
Courier International Corp. and Digital Courier International Inc.,
with an office at 2800, 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx
Xxxxxxxx, X0X 0X0
(hereinafter called the "Vendor")
OF THE FIRST PART,
AND:
DIGITAL GENERATION SYSTEMS, INC. a corporation incorporated under the
laws of the State of California, with an office at 000 Xxxxxxx Xxxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx, 00000, or its nominee
(hereinafter called the "Purchaser")
OF THE SECOND PART.
WHEREAS:
A. Digital Courier International Inc. ("DCII") is in the business of
supplying electronic distribution and communication services for the radio
broadcast industry in the United States and Canada (the "Business").
B. DCII is the wholly owned subsidiary of Digital Courier International
Corp. ("DCIC");
C. Xxxxx Xxxxxxxx Limited was appointed as Receiver-Manager of all the
property, assets and undertakings of DCII and DCIC on July 14, 1998, by Order of
the Supreme Court of British Columbia, Action No. C983285, Vancouver Registry;
D. The Vendor has agreed to sell to the Purchaser or the Purchaser's
nominee, and the Purchaser or the Purchaser's nominee has agreed to purchase the
Vendor's right, title and
5
2
interest in and to certain of the property and assets comprising, or used in
connection with, the Business.
NOW THEREFORE in consideration of the premises and the covenants and
agreements of the respective parties hereto as hereinafter set forth, the
parties hereto covenant and agree as follows:
SECTION 1 - DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. In this Agreement including the recitals hereof and the
schedules attached hereto, the following words and expressions have the
following meanings:
(a) "ACCOUNTS RECEIVABLE" means all accounts, debts, claims, dues,
demands and choses in action of a trade nature owing to the
Vendor at the Closing Date, but not including all cash on hand,
money on deposit in the bank account or accounts, the Vendor's
right, title and interest in and to all cash, securities and
other property held in trust, and any tax refunds relating to the
Business or the business of DCIC (including GST, QST and HST
refunds).
(b) "AGREEMENT" means this document including the recitals hereto and
all schedules referred to herein and attached hereto, all as may
be amended from time to time by agreement in writing between the
Vendor and the Purchaser.
(c) "ARBITRATION" means the resolution of a dispute under paragraph
8.2(b) to be heard by a single arbitrator appointed jointly by
the Vendor and Purchaser under the Rules of the British Columbia
International Commercial Arbitration Centre in accordance with
the Commercial Arbitration Act (British Columbia) which decision
will be binding on both the Vendor and the Purchaser.
(d) "BOOKS AND RECORDS" means all books, records, files, documents
and other written information relating to the Purchased Property
which are situated on the Premises, or in the possession of the
Vendor including, without limitation, the following:
(i) lists of customers and suppliers (past, present and
potential);
(ii) price lists;
(iii) records with respect to production, engineering, product
development, costs, inventory, machinery and equipment;
(iv) business development plans;
(v) advertising matter, catalogues, correspondence, manuals,
mailing lists, photographs, sales materials and records,
purchasing materials and records;
(vi) personnel records of employees;
6
3
(vii) design and quality control records and procedures;
(viii) research and development files;
(ix) media materials and plates; and
(x) sales order and purchase order files.
but excluding the accounting and financial records of DCII (copies of
which will be provided to the Purchaser upon request).
(e) "BUSINESS DAY" means a day on which banks are generally open for
business to the public in San Francisco, California or Vancouver,
British Columbia;
(f) "CLOSING DATE" means the date specified in paragraph 4.1 as the
date for closing to accomplish Completion pursuant to Section 9
hereof.
(g) "CONTRACTS" means the benefit of the Contracts listed in Schedule
"A".
(h) "COMPLETION" means the time when the funds and documents held in
escrow pursuant to paragraphs 9.1 and 9.2 have been released to
the Vendor and Purchaser as provided in paragraph 9.4.
(i) "COURT APPROVAL" means an Order of the Court in British Columbia
Supreme Court, Action No. C983285, Vancouver Registry, approving
the sale and purchase which is the subject matter of this
Agreement, and authorizing the Vendor to complete the transaction
and transferring the Purchased Property to the Purchaser free and
clear of all the Registered Encumbrances, substantially in the
form attached as Schedule "G".
(j) "CUSTOMER LOCATIONS" means all of the locations which the Vendor
services, which are set forth in Schedule "B" hereto.
(k) "DEPOSITS" means the deposits on account of the Purchase Price
payable by the Purchaser as provided in paragraphs 3.2(a), (b)
and (c).
(l) "EQUIPMENT" means all equipment, computer equipment, office
equipment, furniture, and furnishings of all kinds owned by the
Vendor, wherever located and used or intended for use in
connection with the Business and which machinery, equipment and
other property is described in Schedule "C" hereto.
(m) "ESCROW AGREEMENT" means the escrow agreement entered into among
the Vendor, the Purchaser and the Solicitors for the Purchaser,
an executed copy of which is attached as Schedule "D" hereto.
(n) "GENERAL ASSIGNMENT AGREEMENT" means the assignment and
assumption agreement between the Vendor and the Purchaser
substantially in the form attached as Schedule "E" hereto,
whereby the Vendor transfers to the Purchaser
7
4
the Vendor's right, title and interest in, to and under the Books
and Records, Warranties, Intangible Assets and Real Property
Leases.
(o) "INFORMATION MEMORANDUM" means the information memorandum dated
June 30, 1998 relating to DCIC and DCII, prepared by the Vendor
on the basis of information provided by the management of DCIC
and DCII, copies of which have been provided to certain
prospective purchasers of the Vendor's assets.
(p) "INTANGIBLE ASSETS" means all right, title and interest of the
Vendor in and to any patents, trademarks, logos, designs,
copyrights, trade and brand names, licenses, technical processes,
production tooling, compression software documentation and design
customer lists, outstanding orders, brochures, samples, price
lists, computer software, source codes, the goodwill of the
Business and the use of the name "Digital Courier International",
or any variation thereof, in connection with the Business.
(q) "INVENTORIES" means the Vendor's ownership interest in all
inventories of the Business situate on the Premises on the
Closing Date including, without limitation, all of the Vendor's
ownership interest in computer related supplies.
(r) The "PREMISES" means the real property civically described as:
(i) 0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
(ii) Storage facility of the Vendor
0000 Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
(s) "PURCHASE PRICE" means the aggregate of the amounts payable by
the Purchaser to the Vendor for the Purchased Property, as set
forth in paragraph 3.1.
(t) "PURCHASED PROPERTY" means the:
(i) Accounts Receivable:
(ii) Inventories;
(iii) Contracts;
(iv) Equipment;
(v) Intangible Assets;
(vi) Books and Records;
(vii) Warranties; and
(viii) Real Property Leases.
8
5
(u) "REAL PROPERTY LEASES" means the leasehold interest of the Vendor
in respect of the Premises as set forth in the following lease
agreements:
(i) dated November 20, 1996 between 2725321 Canada Inc., as
landlord and DCII, as tenant, and
(ii) dated April 25, 1996 between Maple Leaf Self Storage Inc.,
as landlord and DCII, as tenant.
(v) "REGISTERED ENCUMBRANCES" means the registered charges,
mortgages, liens, encumbrances, restrictions and registrations
encumbering or creating a security interest in the Purchased
Property and described in Schedule "F" hereto.
(w) "SOLICITORS FOR THE PURCHASER" means Xxxxxx Xxxxxxx Xxxxxx &
XxXxxxxx, Barristers and Solicitors.
(x) "SOLICITORS FOR THE VENDOR" means Xxxxx & Xxxxx, Barristers and
Solicitors.
(y) "STATUTORY LIENS" means any lien, charge, encumbrance or security
interest created pursuant to any Canadian provincial, Canadian
federal or United States federal or state legislation, statute,
regulation or by other governmental authority.
(z) "WARRANTIES" means the Vendor's right, title and interest in, to
and under all warranties, guarantees or indemnities granted to or
issued in favour of DCII and DCIC or the Vendor by third parties
in connection with the sale or supply to the Vendor or DCIC and
DCII of tangible assets that form part of the Purchased Property.
1.2 NUMBER AND GENDER. All words contained in this Agreement shall be read
as the singular or the plural and as the masculine, feminine or gender neutral
as may be applicable in the particular context and shall result in the
particular clause being given the most reasonable interpretation.
1.3 VENDOR'S INTEREST IN PURCHASED PROPERTY. Any reference to the Vendor's
interest in the Purchased Property includes the interest of DCIC and DCII held
jointly or the interest held by either of DCIC or DCII.
1.4 REFERENCES WITH AGREEMENT. The words "herein", "hereby", "hereunder",
"hereof", "hereto", and words of similar import, refer to this Agreement as a
whole and not to any particular section, paragraph or clause of this Agreement.
References to sections, paragraphs or clauses refer to the sections, paragraphs
and clauses of this Agreement unless otherwise stated.
1.5 CURRENCY. All sums of money expressed in this Agreement are expressed
in lawful money of Canada.
1.6 INDEX, HEADINGS AND CAPTIONS. The index of this Agreement and the
headings and captions of sections and paragraphs contained in this Agreement are
all inserted for convenience of reference only and are not to be considered when
interpreting this Agreement.
9
6
1.7 APPLICABLE LAW. Except as otherwise provided herein, this Agreement
shall be governed by and construed in accordance with the laws of the Province
of British Columbia and the laws of Canada applicable therein. Each party hereby
attorns to the jurisdiction of courts of competent jurisdiction in the Province
of British Columbia.
1.8 ENTIRE AGREEMENT. This Agreement contains the whole agreement between
the parties in respect of the subject matters hereof and there are no
warranties, representations, terms, conditions or collateral agreements,
express, implied or statutory, other than as expressly set forth in this
Agreement, and this Agreement supersedes all previous invitations, proposals,
letters, correspondence, negotiations, promises, agreements, covenants,
conditions, representations, warranties and understanding, whether oral or
written, between the parties hereto.
1.9 SCHEDULES. The following schedules are attached hereto and, subject to
the qualifications set out in paragraph 5.3 hereof, form part of this Agreement:
Schedule Description
-------- -----------
"A" Contracts
"B" Customer Locations
"C" Equipment
"D" Escrow Agreement
"E" General Assignment Agreement
"F" Registered Encumbrances
"G" Court Approval Order
1.9(A) PURCHASER'S DESIGNATION OF NOMINEE. Notwithstanding that the Purchaser
may designate a nominee to take title to the Purchased Property on closing,
Digital Generations Systems, Inc. shall remain liable, jointly and severally
with such nominee, for all the obligations of the Purchaser under this
Agreement.
SECTION 2 - PURCHASE AND SALE
2.1 PURCHASED PROPERTY. The Vendor hereby agrees to sell to the Purchaser
or the Purchaser's nominee and the Purchaser directly or through its nominee
hereby agrees to purchase from the Vendor, on the Closing Date, upon and subject
to the terms and conditions herein contained, the Vendor's right, title and
interest in the Purchased Property free and clear of the Registered Encumbrances
and Statutory Liens.
10
7
SECTION 3 - PURCHASE PRICE, ADJUSTMENTS AND PAYMENT
3.1 PURCHASE PRICE. Subject to adjustment as provided in paragraphs 3.4
and 8.2, the Purchase Price for the Purchased Property shall be the sum of
$13,500,000.00.
3.2 PAYMENT OF PURCHASE PRICE. The Purchaser shall pay the Purchase Price
to the Vendor as follows:
(a) on the execution and delivery of this Agreement by the
Purchaser, the Purchaser shall pay to or to the order of the
Vendor by bank draft or certified cheque a deposit in the sum
of $100,000.00 (the "First Deposit");
(b) on the date of written acceptance of this Agreement by the
Vendor, the Purchaser shall pay to the Vendor by bank draft, a
further deposit in the sum of $150,000.00 (the "Second
Deposit"); and
(c) on the Closing Date, the Purchaser shall pay to the Vendor, by
bank draft payable to the Vendor, the sum of $13,250,000.00
(the balance of the amount in 3.1), subject to adjustment in
accordance with paragraphs 3.4 and 8.2 of this Agreement.
3.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price for the Purchased
Property shall be allocated in a manner to be agreed upon by the Vendor and the
Purchaser on commercially reasonable terms. The Vendor and the Purchaser agree
to report the sale and purchase of the Purchased Property for all tax purposes
in a manner consistent with such allocation. If an allocation is not agreed upon
prior to the Closing Date, the Vendor may make a commercially reasonable
allocation for the purposes of collecting and remitting any taxes.
3.4 CLOSING ADJUSTMENTS. As of 5:00, p.m. P.D.S.T. on the day immediately
preceding the Closing Date, there shall be adjusted between the Vendor and the
Purchaser, utility rates and charges, water rates, sewer rates, rents,
percentage rents, and, all other items normally adjusted between a vendor and
purchaser in the sale of similar assets and property so that the Vendor will
bear and pay all expenses and receive all cash receipts relative to the
Purchased Property (including cash receipts in respect of the such adjusted
items to which the Vendor may become entitled relative to the Purchased Property
for the period prior to the Closing Date, but which funds are received after the
Closing Date) up to and including the day immediately preceding the Closing Date
and the Purchaser shall bear and pay all expenses and receive all income
relative to the Purchased Property after and including the Closing Date,
including the benefit of the Accounts Receivable which form part of the
Purchased Property.
3.5 DEPOSITS. The Deposits shall be held in trust on the conditions herein
contained and placed by the Vendor in an interest bearing account. The Deposit
and all interest thereon shall be credited and paid as follows:
(a) upon Completion, the Deposits and all interest thereon shall
be retained by the Vendor, and the Deposits and interest
thereon that has accrued until the Closing Date shall be
credited to the Purchaser on account of that portion of the
Purchase Price payable on the Closing Date;
11
8
(b) if the sale and purchase of the Purchased Property
contemplated by this Agreement is not completed by the Closing
Date by reason of any default on the part of the Purchaser,
the Deposits and all interest thereon shall, at the Vendor's
option, from and after the Closing Date, be retained by the
Vendor:
(i) as liquidated damages;
(ii) on account of damages; or
(iii) on account of the Purchase price if the Vendor elects
specific performance;
(c) if the purchase and sale of the Purchased Property
contemplated by this Agreement is not completed because one of
the Conditions to Closing could not be fulfilled or for any
reason other than as set forth in paragraph 3.5(b), the
Deposits and all interest thereon shall be paid to the
Purchaser, on demand, on or after the Closing Date;
(d) if the Vendor does not accept the offer of the Purchaser, the
First Deposit and all interest thereon that has accrued shall
be paid to the Purchaser, on demand; and
(e) if the Vendor does not obtain Court Approval, the First
Deposit and the Second Deposit and all interest thereon that
has accrued shall be paid to the Purchaser, on demand.
SECTION 4 - CLOSING, COMPLETION AND POSSESSION
4.1 CLOSING DATE. The date for closing (the "Closing Date") shall be the
date 2 Business Days after Court Approval or such other date as the Vendor and
the Purchaser may agree upon in writing.
4.2 TIME AND PLACE OF CLOSING. The time for closing shall be 2:00 p.m.
P.D.S.T. on the Closing Date, or such other time as the Vendor and the Purchaser
may agree upon in writing. The place for closing shall be at the offices of
Messrs. Xxxxx & Leigh, Barristers and Solicitors, Vancouver, British Columbia,
or at such other place as the Vendor and the Purchaser may agree upon in
writing.
4.3 POSSESSION. Subject to Completion occurring, the Purchaser shall be
entitled to have possession of the Purchased Property as of and from Completion,
and the Vendor will, on Completion, forthwith deliver to the Purchaser all keys,
security pass codes, and computer passwords in the possession of the Vendor
relative to the Purchased Property.
SECTION 5 - REPRESENTATIONS AND WARRANTIES
5.1 BY VENDOR. The Vendor hereby represents and warrants to the Purchaser,
and covenants and agrees with the Purchaser, subject to the qualifications set
out in paragraph 5.3, as follows:
12
9
(a) the Vendor has the power and authority to enter into this
Agreement and, subject to the satisfaction of the conditions
set out in paragraphs 7.1 (a) to (d) will on the Closing Date
have the power and authority to perform its obligations
hereunder;
(b) to the best of its information and belief:
(i) the Purchased Property is free and clear of all
liens, charges or encumbrances other than Statutory
Liens and the Registered Encumbrances; and
(ii) the Contracts are all of the material contracts of
the Vendor used in the Business, other than those
contracts the benefit of which form part of the other
categories of Purchased Property set forth in 1.1(f).
(c) the Vendor is registered under 140155268RT0001 pursuant to
Subdivision d of Division V of Part IX of the Excise Tax Act
of Canada; and
(d) the Vendor is not, and will not on the Closing Date be, a
non-resident of Canada within the meaning of the Income Tax
Act of Canada.
(e) since the date of its appointment, Xxxxx Xxxxxxxx Limited has
carried on the Business in the ordinary course.
5.2 BY PURCHASER. The Purchaser hereby represents and warrants to the
Vendor, and covenants and agrees with the Vendor, as follows:
(a) the Purchaser is a corporation duly established and existing
under the laws of the State of California, and the Purchaser's
nominee will on the Closing Date be a corporation duly
established and existing under the laws the Province of
British Columbia or the Yukon Territory and the Purchaser has
now and the Purchaser's nominee will on the Closing Date have
the power, authority and capacity to perform its obligations
under this Agreement, the performance of which obligations
have been duly and validly authorized by all necessary
corporate proceedings of the Purchaser or the Purchaser's
nominee;
(b) that at the date of this Agreement there are no actions, suits
or proceedings, commenced or threatened, of which the
Purchaser has received written notice, that could prevent or
interfere with the Purchaser entering into this Agreement,
performing its obligations under this Agreement and the
documents and agreements to be delivered pursuant to this
Agreement or consummating the transactions contemplated by
this Agreement;
(c) the entering into of this Agreement and the transactions
contemplated hereby will not now nor at the Closing Date,
result in the violation of any of the terms of the constating
documents, charter documents or bylaws of the Purchaser or, as
at the date hereof, any law, judgment, decree, order,
injunction, rule, statute or regulation of any court,
arbitrator or governmental authority by which the Purchaser is
bound or to which the Purchaser is subject; and
13
10
(d) the Purchaser or the Purchaser's nominee will on the Closing
Date be registered pursuant to Subdivision d of Division V of
Part IX of the Excise Tax Act of Canada.
5.3 BASIS OF PURCHASE. The Purchaser acknowledges to and agrees with the
Vendor that:
(a) the Purchaser is purchasing only the Vendor's right, title and
interest in and to the Purchased Property; the Vendor makes no
representations or warranties, express, implied, statutory or
other, with respect to its right, title and interest in and to
the Purchased Property, other than as set forth herein; the
Purchaser has assumed and will assume all responsibility for
satisfying itself as to the ownership of and state of title to
the Purchased Property; the Purchaser has assumed and will
assume all responsibility for satisfying itself as to the
accuracy and adequacy of all information contained in this
Agreement and in the schedules hereto, other than information
which is the subject matter of the representations and
warranties contained in paragraph 5.1; and, except as
expressly provided in this Agreement, there will be no
adjustment to the Purchase Price payable hereunder and no
liability whatsoever on the part of the Vendor to the
Purchaser in connection with the transactions contemplated
hereby;
(b) the Purchaser is purchasing the Purchased Property on an "as
is, where is" basis as to its physical condition and location;
the Vendor makes no representations or warranties, express,
implied, statutory or other, with respect to the physical
condition and location of such property, its fitness for any
particular purpose or the quantity or quality thereof; the
Purchaser has assumed and will assume all responsibility for
satisfying itself as to the physical condition and location of
the Purchased Property;
(c) certain of the Contracts may not be transferred or assigned
without the consent or approval of one or more third parties,
and the Vendor shall not be responsible for obtaining such
approvals or consents, other than to co-operate with and
assist the Purchaser in so obtaining, nor shall the Vendor be
liable for a failure to obtain, any of such consents or
approvals and provided that the failure of the Purchaser to
obtain any of such consents or approvals shall not relieve the
Purchaser from its obligation to complete the purchase and
sale of the Purchased Property hereunder;
(a) the Vendor is acting only in its representative capacity as
Receiver-Manager of DCII and DCIC, and, for greater certainty,
is not acting in its personal capacity; the Vendor has no duty
or obligation to the Purchaser with respect to the preparation
or disclosure of the Information Memorandum, or the appendices
thereto; or with respect to any statements, written or oral,
made by any of the Vendors, employees, agents, consultant
advisors or other representatives and the Vendor shall incur
or suffer no liability under or in connection with any of the
foregoing, this Agreement or the transactions contemplated
hereby except in its capacity as Receiver-Manager of DCIC and
DCII and, for greater certainty, will not incur any such
liability in its personal capacity; and
14
11
(e) the Vendor will use the proceeds of the Purchase Price to pay
and discharge the Statutory Liens which rank in priority to
the Registered Encumbrances and may use the proceeds of the
Purchase Price to pay and discharge other Statutory Liens.
5.4 RELEASE The Purchaser, its successors and assigns (in this paragraph
collectively called the "Releasors"), hereby remises, releases and forever
discharges the Vendor and its directors, officers, employees, agents,
consultants and advisors and their respective heirs, executors, administrators,
successors and assigns (in this paragraph collectively called the "Releasees")
of and from any and all claims, demands, actions, causes of action and suits
which the Releasors or any of them now have or may hereafter have or may
hereafter bring against all or any of the Releasees for, or by reason of,
arising from, in connection with or relating to:
(a) the Information Memorandum; and
(b) any statements, written or oral, made by any of the Vendor's
employees, agents, consultants, advisors or representatives
other than as set forth in this Agreement.
SECTION 6 - COVENANTS
6.1 COVENANTS OF VENDOR. The Vendor hereby covenants and agrees with the
Purchaser that:
(a) from and after Court Approval, the Vendor will provide the
Purchaser and its representatives with controlled access to
the Purchased Property at the Vendor's sole discretion for all
purposes reasonably necessary or desirable in connection with
the sale and purchase contemplated by this Agreement including
such further investigations and inspections as the Purchaser
may wish to make, provided that such access will be at
reasonable times and on reasonable notice to the Vendor and,
at the option of the Vendor, subject to the Vendor's
supervision, will cause no disruption to the operation of the
Business, will be at the Purchaser's sole risk and expense and
will be subject to the Purchaser indemnifying the Vendor in
accordance with paragraph 6.2(a);
(b) from and after Court Approval, the Vendor will allow the
Purchaser and its representatives controlled access to the
Books and Records for the purpose of any further reviews or
investigations the Purchaser may wish to carry out;
(c) except in the ordinary course of business, the Vendor will not
encumber, sell, transfer or dispose of the Purchased Property,
without the prior written consent of the Purchaser;
(d) the Vendor will not acquire, nor make any commitments to
acquire, any capital assets;
(e) at the Purchaser's request and expense, the Vendor will
cooperate with the Purchaser in its efforts to obtain the
consents and approvals referred to in paragraph 5.3(c) hereof;
15
12
(f) at its sole cost and expense, the Vendor will maintain
insurance coverage over the Purchased Property to and
including the Closing Date;
(g) from the Proceeds of the Purchase Price, the Vendor will
deposit in trust the sum of $1,000,000.00 which will be held
as a holdback for payment of any liens for U.S. Federal, state
or county sales and use or other taxes (including any
interest, penalties or filing fees in connection therewith)
for which the Vendor is liable for the period up to the
Closing Date, which holdback funds can only be utilised by the
Vendor to discharge these liabilities. After such time as the
Vendor has received written confirmation from the appropriate
governmental authorities that the aforesaid liens have been
satisfied in full, the balance of the holdback funds may be
released from trust to the Vendor.
(h) after the funds have been deposited in trust with the
Solicitors for the Purchaser pursuant to the Escrow Agreement,
give the Purchaser controlled access to the employees of the
Vendor, in the presence of an officer of the Vendor;
(i) Accounts Receivable as at the Closing Date will have a minimum
book value of $1,600,000.00, provided that if the Accounts
Receivable have a book value less than $1,600,000.00, the
Purchaser will be entitled to have the Purchase Price reduced
by the amount by which the book value of the Accounts
Receivable is less than $1,600,000.00. The book value of the
Accounts Receivable will be deemed to include an estimate of
unbooked xxxxxxxx related to the Business from and including
the first day of the month in which closing occurs to the
Closing Date; and
(j) the Vendor will retain and preserve the original accounting
and financial records of DCII for a period of six years
immediately following the Closing Date and will permit access
to the Purchaser or the Purchaser's representatives upon
reasonable request during such six year period.
6.2 COVENANTS OF PURCHASER. The Purchaser hereby covenants and agrees with
the Vendor that the Purchaser will:
(a) indemnify the Vendor and save the Vendor harmless from and
against any and all damages, losses, liabilities, costs and
expenses (including legal fees) at any time suffered or
incurred by the Vendor as a result of any damage or injury to
the Purchased Property resulting from the exercise by the
Purchaser of its rights under paragraph 6.1(a), or as a result
of any personal injury (including death resulting at any time
therefrom) occurring on or about the Premises or any loss of
or damage to property occurring on or about the Premises
resulting from the exercise by the Purchaser of its rights
under paragraph 6.1(a);
(b) pay all social service tax, sales taxes, goods and services
tax, registration charges, and transfer fees payable as a
result of the purchase, sale and transfer of the Purchased
Property, provided that it is understood that the Purchaser
shall not be responsible for any costs of the Vendor, as
Receiver-Manager, in respect of the transactions contemplated
hereunder;
16
13
(c) from and after the Closing Date, at the request and expense of
the Vendor, provide the Vendor with access to such former
employees of the Vendor and/or DCII and access to or copies of
Books and Records as are required by the Vendor in order to
properly discharge its duties as the Receiver-Manager of DCIC
and DCII;
(d) assume all obligations of DCIC, DCII or the Receiver-Manager
relating to the Purchased Property and will indemnify and save
harmless the Vendor from any and all loss whatsoever arising
out of, or pursuant to any claims, demands, suits, actions,
costs and expenses suffered or incurred by, or brought
against, the Vendor in respect of the obligations referred to
above; and
(e) on or before 4:00 p.m. PDST, September 11, 1998, the
Purchasers will place in trust with the Solicitors for the
Purchaser the sum of $13,250,000.00, which funds will be held
pursuant to the terms of the Escrow Agreement. Failing such
payment, the Vendor shall have no obligation to seek Court
Approval and the Vendor shall be at liberty to exercise all
other rights and remedies under this Agreement.
SECTION 7 - CONDITIONS OF CLOSING
7.1 VENDOR'S CONDITIONS. The obligation of the Vendor to complete the
transactions contemplated herein shall be subject to the following conditions,
each of which is for the exclusive benefit of the Vendor and may be waived in
whole or in part by the Vendor by written notice to the Purchaser:
(a) that on the Closing Date, all of the representations and
warranties of the Purchaser contained in paragraph 5.2 shall
be true and correct in all material respects;
(b) that at or before the Closing Date, the bank drafts and other
documents referred to in paragraph 9.2 shall have been
delivered by the Purchaser, and where required, executed by
the Purchaser and any and all required third parties, as
therein provided; and
(c) that from the date hereof to and including the Closing Date,
the Purchaser shall perform and shall have performed, in all
material respects, as and when required, all of its other
covenants and agreements under this Agreement to be performed
or to have been performed by the Purchaser on or before the
Closing Date.
(d) that on or before September 23, 1998, the Vendor obtains Court
Approval.
7.2 PURCHASER'S CONDITIONS. The obligation of the Purchaser to complete
the transactions contemplated herein shall be subject to the following
conditions, each of which is for the exclusive benefit of the Purchaser and may
be waived in whole or in part by the Purchaser by written notice to the Vendor:
(a) that on Completion, the representations, warranties, covenants
and agreements of the Vendor contained in paragraph 5.1 shall
be true and correct in all material respects;
17
14
(b) that at or before the Closing Date, the documents referred to
in paragraphs 9.1 shall have been executed and delivered by
the Vendor and any and all required third parties, as therein
provided;
(c) that from the date hereof to and including the Closing Date,
the Vendor shall perform and shall have performed, in all
material respects, as and when required, all of its other
covenants and agreements under this Agreement to be performed
or to have been performed by the Vendor on or before the
Closing Date; and
(d) that on or before September 23, 1998, the Vendor obtains Court
Approval.
7.3 WAIVER AND TERMINATION. If any of the conditions referred to in
paragraphs 7.1 or 7.2 shall not be wholly satisfied at or before the time
specified for such condition, then the party for whose benefit such condition
has been included herein may, at its option, either:
(a) complete the transactions contemplated by this Agreement, in
which event such party shall be deemed to have waived such
conditions; or
(b) elect not to complete, in which event the Deposit and interest
thereon shall be dealt with in accordance with paragraph 3.5
and subject to paragraph 7.4, neither party shall otherwise be
under any obligation to the other pursuant to this Agreement.
7.4 NO PREJUDICE TO OTHER RIGHTS. No waiver by either party of the
conditions set forth in paragraphs 7.1 or 7.2 in whole or in part shall in any
way prejudice or limit the rights and remedies of either party to claim or
recover damages and compensation from the other party in respect of any
inaccuracy in any representation or warranty that is not the subject of the
waiver, or, in respect of any breach or non-performance of any covenant or
agreement of the other party contained in this Agreement that is not the subject
of such waiver.
SECTION 8 - RISK
8.1 RISK. Subject to paragraph 8.2, the Purchased Property shall be at the
risk of the Vendor until Completion, after which time the Purchased Property
shall be at the risk of the Purchaser.
8.2 LOSS OR DAMAGE. In the event of any loss or damage to the Purchased
Property occurring prior to the Closing Date, the Purchaser shall not by reason
thereof be relieved of its obligation to complete the transactions contemplated
by this Agreement. The following terms shall apply in case of any such loss or
damage:
(a) the Vendor shall immediately notify the Purchaser and the
applicable insurer of any loss or damage to the Purchased
Property which occurs prior to the Closing provided that the
Vendor shall have no obligation to repair or replace the loss
or damage, and the Purchaser shall have the right to receive
on Completion the proceeds of all insurance theretofore
received by the Vendor in respect of such loss or damage, and
to have assigned to it as of the Closing Date the proceeds of
all insurance, if any, receivable by the Vendor in respect of
such loss or damage,
18
15
together in either case with any deductible amount (which the
Vendor shall pay to the Purchaser);
(b) should the proceeds of insurance payable pursuant to
subparagraph 8.2(a) be insufficient to repair or complete the
repair of any damage to the Purchased Property and provided
and to the extent that the damages are of the nature which a
prudent owner would insure, the Purchaser will be credited as
of the Closing Date with the amount of such deficiency. If the
parties are unable to agree on the cost to repair or complete
the repair of such damage for the purposes of adjustment as of
the Closing Date, then the sale and purchase contemplated
hereby shall complete in accordance with the foregoing
provisions of this paragraph 8.2, with such cost to repair to
be determined by Arbitration and to be paid by the Vendor to
the Purchaser within 30 days after a final determination
pursuant to such arbitration; and
(c) Notwithstanding the above, if the loss or damage to the
Purchased Property exceeds $1,000,000.00, or, if the loss or
damage results in the Vendor being unable, regardless of the
amount of the loss or damage, to transmit or otherwise conduct
business with its customers for a period of 72 Business Day
hours, the Purchaser shall have no obligation to complete the
sale and purchase.
SECTION 9 - CLOSING DELIVERIES AND TRANSACTIONS
9.1 DELIVERIES BY VENDOR. The Vendor agrees to deliver the following
documents in trust to the Solicitors for the Purchaser, which documents shall be
delivered on the Closing Date, and all such documents to be held by such
solicitors in escrow and dealt with in accordance with this Agreement:
(a) a xxxx of sale absolute transferring to the Purchaser the
Vendor's right, title and interest in and to the tangible
personal property owned by the Vendor and included in the
Purchased Property, executed by the Vendor under seal and in
registrable form;
(b) the General Assignment Agreement executed by the Vendor under
seal;
(c) registerable assignment of the trademarks of the Vendor;
(d) the Vendor's statement of adjustments (prepared by the
Purchaser's solicitors), executed by the Vendor; and
(e) such further deeds, assurances and other documentation as the
Purchaser's solicitors may reasonable require for the purposes
of completing the transactions contemplated by this Agreement;
and the Vendor will execute and deliver in escrow, following delivery of same
into escrow by the Purchaser, any documents and instruments to be delivered into
escrow by the Purchaser requiring execution by the Vendor, in each case under
seal, if appropriate, and in registrable form where registration is
contemplated.
19
16
9.2 DELIVERIES BY PURCHASER. The Purchaser agrees to deliver the following
documents in trust to the Solicitors for the Vendor, which documents shall be
delivered on the Closing Date, and all such documents to be held by such
solicitors in escrow and dealt with in accordance with this Agreement:
(a) a bank draft payable to the Vendor, in an amount equal to the
portion of the Purchase Price, as adjusted hereunder, payable
to the Vendor on the Closing Date;
(b) a certified copy of a resolution of the Board of Directors of
the Purchaser authorizing the execution and implementation of
this Agreement and the transactions contemplated hereunder;
(c) any remittance forms and declarations for social service tax
and, unless the parties have made the election, goods and
services tax, duly completed and executed by the Purchaser,
with respect to the transfer of interests hereunder in respect
of which such taxes are exigible, together with a cheque
payable to the appropriate governmental authorities for the
amount of such taxes payable with respect to the transfer of
such property hereunder;
(d) such further deeds, assurances and other documentation as the
Vendor's solicitors may reasonably require for the purposes of
completing the transactions contemplated by this Agreement;
and will execute and deliver in escrow, following delivery of same into escrow
by the Vendor, the General Assignment Agreement, and any other documents or
instruments to be delivered into escrow by the Vendor requiring execution by the
Purchaser, in each case under seal, if appropriate, and in registrable form
where registration is contemplated.
9.3 FORMS OF DOCUMENTS. All documents to be delivered into escrow pursuant
to paragraphs 9.1 and 9.2 shall, to the extent that the form and substance
thereof have not been agreed upon under the terms of this Agreement, be
satisfactory in form and substance to both parties acting reasonably.
9.4 COMPLETION. Upon all documents and bank drafts being delivered into
escrow as aforesaid:
(a) the funds and interest thereon held by the Solicitors for the
Vendor shall immediately be released from escrow and delivered
to the Vendor;
(b) all social service taxes and any and all goods and services
taxes required to be paid by the Purchaser under paragraph
9.2(c) hereof shall promptly be paid and the forms therefor
shall promptly be filed with the applicable government office;
(c) the documents referred to in paragraph 9.2(d) shall promptly
be delivered to the parties which require the same in
connection with the transfer of the Purchased Property; and
(d) all other documents held in escrow by the Purchaser's
solicitors shall immediately be released from escrow and
shall:
20
17
(i) if delivered under paragraph 9.1, be delivered to the
Purchaser;
(ii) if delivered under paragraph 9.2, be delivered to the
Vendor; and
(iii) if delivered under both paragraphs 9.1 and 9.2, be
delivered to both the Vendor and the Purchaser.
(e) all matters of payment (other than payment of the Deposit),
execution, delivery and registration of documents shall be
deemed to be concurrent requirements and it is specifically
agreed that nothing will be completed until everything
required to achieve Completion has been paid, executed,
delivered or registered, as the case may be.
SECTION 10 - NOTICES
10.1 NOTICES. Any notice, direction, request or other communication
required or contemplated by any provision of this Agreement shall be given in
writing and shall be given by delivering and/or faxing same to the Vendor or the
Purchaser, as the case may be, as follows:
(a) To the Vendor at:
Xxxxx Xxxxxxxx Limited
X.X. Xxx 0000, Xxxxx Xxxxxx
0000 - 0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxx
(b) To the Purchaser at:
Digital Generation Systems, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx
00000
Fax: (000) 000-0000
Attention: Mr. Xxxx Xxxxx
and any such notice, direction, request or other communication shall be deemed
to have been given or made on the date on which it was delivered or, in the case
of a fax, on the date of receipt of transmission. Either party may change its
fax number or address for service from time to time by notice in accordance with
the foregoing.
21
18
SECTION 11 - GENERAL PROVISIONS
11.1 SURVIVAL OF TERMS. All representations, warranties, covenants,
conditions and other terms of this Agreement shall survive the Closing Date, the
closing of the transactions contemplated by this Agreement and Completion and
shall not be merged in the sale and transfer of the Purchased Property or in any
document delivered pursuant to this Agreement.
11.2 TIME. Time shall be of the essence of this Agreement and of the
transactions contemplated by this Agreement.
11.3 FURTHER ASSURANCES. Each of the parties shall, after the Closing Date,
at the cost and expense of the other party, execute and deliver all such further
documents and do such further acts and things, as the other party may reasonably
request from time to time to give full effect to this Agreement and the
transactions contemplated hereby.
11.4 ASSIGNMENT. Neither party may assign this Agreement nor its interest
herein, either in whole or in part, without the prior written consent of the
other party.
11.5 NO FORFEITURE. The Purchaser acknowledges and agrees that neither the
establishment of the Escrow Fund which is the subject of the Escrow Agreement
nor the retention of the Deposit or any other monies hereunder by the Vendor in
the exercise by the Vendor of its rights under or contemplated by this Agreement
or any documents referred to in this Agreement shall constitute a forfeiture by
the Purchaser or penalty suffered by the Purchaser and the Purchaser expressly
waives any right to seek and covenants not to seek relief against forfeiture or
penalty with respect thereto.
11.6 PAYMENT OF LEGAL COSTS. Each party shall pay its own legal fees and
disbursements incurred in connection with this Agreement and the completion of
the transactions contemplated hereby.
11.7 SEVERABILITY. If any provision of this Agreement shall for any reason
be held to be illegal or unenforceable, then such illegal or unenforceable
provision shall be severable from this Agreement and the other provisions of
this Agreement shall not be affected thereby but shall be and remain in full
force and effect.
22
19
11.8 BINDING EFFECT. Subject to the restrictions contained herein, this
Agreement shall enure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
under seal in the presence of their respective officers duly authorized in that
behalf, the day and year first above written.
THE CORPORATE SEAL of XXXXX XXXXXXXX )
LIMITED, in its capacity as Receiver-Manager of )
Digital Courier International Corp. and )
Digital Courier International Inc. was )
hereunto affixed in the presence of: )
)
(signed) "Xxxxx Xxxxxx" )
-----------------------------------------------------
Witness (Signature) )
Xxxxx X.X. Xxxxxx )
-----------------------------------------------------
Print Name )
2800 - 0000 Xxxx Xxxxxxx Xxxxxx )
-----------------------------------------------------
Address )
Vancouver, B.C. Canada )
-----------------------------------------------------
Chartered Insolvency Practitioner )
-----------------------------------------------------
Occupation ) c/s
THE CORPORATE SEAL of DIGITAL GENERATION
SYSTEMS, INC. )
was hereunto affixed in the presence of: )
)
(signed) "Xxxx Xxxxx II" )
----------------------------------------------------
Authorized Signatory )
Xxxx X. Xxxxx XX )
-----------------------------------------------------
Print Name )
000 Xxxxxxx Xxxxxx )
-----------------------------------------------------
Address )
Xxx Xxxxxxxxx, XX 00000 )
-----------------------------------------------------
CFO )
-----------------------------------------------------
Occupation ) c/s
23
