EXHIBIT 10.18
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement ("Agreement") is entered into as of
November 7, 2001, by and among Reality Networks, Inc., a Delaware corporation
("Reality Networks"), the shareholders of Reality Networks listed on the
attached Schedule A (individually, a "Reality Networks Shareholder" and
collectively, the "Reality Networks Shareholders") and Dicom Imaging Systems,
Inc., a Nevada corporation ("Dicom").
RECITALS
A. Dicom wishes to acquire from the Reality Networks Shareholders, on
the terms and conditions set forth in this Agreement, all of the issued and
outstanding shares of Reality Networks.
B. Together, the Reality Networks Shareholders are the owners of
8,000,000 shares of common stock of Reality Networks as shown on Schedule A (the
"Reality Networks Shares"), which Reality Networks Shares represent all issued
and outstanding capital stock of Reality Networks.
C. The Reality Networks Shareholders desire to exchange the Reality
Networks Shares for a total of 8,000,000 shares of the common stock of Dicom
(the "Dicom Shares") so as to accomplish and effect a share exchange under the
General Corporation Law of the State of Nevada.
D. It is the intent of the parties that the share exchange qualify as a
corporate reorganization under Section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended (the "Code").
Accordingly, the parties agree as follows:
1. SHARE EXCHANGE.
1.1 Exchange of Reality Networks Shares. Subject to the terms and
conditions of this Agreement, at the Effective Time (as defined below), the
Reality Networks Shares owned by each Reality Networks Shareholder shown on
Schedule A shall automatically be exchanged for the right to receive that number
of the Dicom Shares determined by application of the Exchange Ratio described in
Section 1.3 (the "Share Exchange"). At the Effective Time and upon the
effectiveness of the Share Exchange, Dicom shall be deemed to be the holder of
record of all the Reality Networks Shares, and Reality Networks shall continue
to be governed by the laws of the State of Delaware.
1.2 Articles of Exchange. The Share Exchange shall be effectuated at
the Effective Time pursuant to Articles of Exchange ("Articles of Exchange")
filed in accordance with applicable provisions of the General Corporation Law of
the State of Nevada. The Articles of Exchange shall be filed with the Nevada
Secretary of State together with any other filings or recordings required by
Nevada law in connection with the Share Exchange as soon as practicable after
the Closing (as defined below). The term "Effective Time" as used in this
Agreement means the time at which the Share Exchange becomes effective under the
laws of the State of Nevada.
1.3 Exchange Ratio. At the Effective Time, each of the Reality Networks
Shares issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Share Exchange and without any action on the part of the Reality
Networks Shareholders, be cancelled and extinguished and automatically converted
into the right to receive that number of Dicom Shares equal to 8,000,000 (the
"Exchange Ratio"). Each certificate evidencing ownership of the Reality Networks
Shares outstanding immediately prior to the Effective Time shall, immediately
after the Effective Time, be exchanged for a certificate or certificates
evidencing ownership of the applicable number of the Dicom Shares. After
effectiveness of the reverse stock split contemplated by Section 6.3, 8,000,000
shares of the common stock of Dicom (the "Closing Shares") identical to the
currently issued and outstanding shares of Dicom common stock (the "Common
Stock") shall be delivered to the Reality Networks Shareholders. The Exchange
Ratio shall be adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into or exercisable for Dicom Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Dicom Common Stock occurring on or after the date hereof and prior to
the Effective Time.
1.4 Options and Warrants.
1.4.1 Effective upon Closing, Dicom shall adopt and assume the
Reality Networks, Inc. 2001 Stock Option Plan and any of the outstanding options
to purchase the common stock of Reality Networks shown on Schedule 4.3 (the
"Reality Networks Options"), converted at the Exchange Ratio into options to
purchase shares of Common Stock, in which event such options shall continue in
effect after the Closing in accordance with their original vesting schedules. In
the event such option is not exercised by Dicom as to any or all of the Reality
Networks Options, any Reality Networks Options not so assumed and converted, and
all warrants listed on Schedule 4.3, shall vest immediately prior to Closing as
set forth in the applicable option and warrant agreements.
1.4.2 At the Effective Time, all convertible securities,
including but not limited to, convertible promissory notes, options to purchase
shares of Common Stock of Dicom and stock appreciation rights then outstanding
under any Dicom stock option or employee benefit plan and all warrants to
purchase Dicom Common Stock shall be cancelled and extinguished.
2. CLOSING AND CLOSING DOCUMENTS.
2.1 Date, Time and Place of Closing. The Share Exchange contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at the
offices of The Xxxx Law Group, PLLC, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxxxx 00000, on a date and at a time convenient to the parties. The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date."
2.2 Reality Networks Shareholders Closing Documents. At the Closing,
the Reality Networks Shareholders shall deliver or cause to be delivered to or
at the direction of Dicom the following documents (collectively, the "Reality
Networks Shareholders Closing Documents"):
2.2.1 Reality Networks Share Certificates. Certificates,
executed in blank by the Reality Networks Shareholders, or accompanied by
assignments separate from certificate executed by the Reality Networks
Shareholders, representing all of the Reality Networks Shares;
2.2.2 Good Standing Certificates. A certificate issued by the
Delaware Secretary of State indicating that Reality Networks is qualified and in
good standing within such jurisdiction;
2.2.3 Reality Networks Officer's Certificate. A certificate
dated as of the Closing Date executed by a duly authorized officer of Reality
Networks certifying that all necessary actions have been taken by Reality
Networks' shareholders and directors to authorize the transactions contemplated
by this Agreement and that all representations and warranties made by Reality
Networks in this Agreement are complete and correct in all material respects as
of the Closing Date as if made on the Closing Date; and
2.2.4 Other Documents and Instruments. Such other documents
and instruments as Dicom's counsel may deem to be necessary or advisable to
effect the transactions contemplated by this Agreement.
2.3 Dicom Closing Documents. At the Closing, Dicom shall deliver or
cause to be delivered to the Reality Networks Shareholders the following
documents (collectively, the "Dicom Closing Documents"):
2.3.1 Articles of Exchange. The Articles of Exchange, executed
by Dicom;
2.3.2 Dicom Share Certificates. One or more stock certificates
in the name of each of the Reality Networks Shareholders representing such
Reality Networks Shareholder's ownership of the Dicom Shares;
2
2.3.3 Good Standing Certificate. A certificate issued by the
Nevada Secretary of State indicating that Dicom is qualified and in good
standing within such jurisdiction;
2.3.4 Dicom Officer's Certificate. A certificate dated as of
the Closing Date executed by a duly authorized officer of Dicom certifying that
all necessary actions have been taken by Dicom's shareholders and directors to
authorize the transactions contemplated by this Agreement and that all
representations and warranties made by Dicom in this Agreement are complete and
correct in all material respects as of the Closing Date as if made on the
Closing Date; and
2.3.5 Other Documents and Instruments. Such other documents
and instruments as Reality Networks' counsel may deem to be necessary or
advisable to effect the transactions contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF DICOM.
Dicom represents and warrants to each of the Reality Networks
Shareholders that the statements contained in this Section 3 are correct and
complete as of the date of this Agreement.
3.1 Organization of Dicom. Dicom is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada.
Dicom has all the requisite power and authority to own, lease and operate all of
its properties and assets and to carry on its business as currently conducted
and as proposed to be conducted. Dicom is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the nature of the
business conducted by it makes such licensing or qualification necessary and
where the failure to be so qualified would, individually or in the aggregate,
have a Material Adverse Effect upon it. As used in this Agreement, the term
"Material Adverse Effect" with respect to any party, shall mean any change or
effect that is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities of such party and such party's subsidiaries taken as a whole.
3.2 Authorization. Subject to the approval of its shareholders, Dicom
has full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and the Dicom Closing Documents and to
perform its obligations hereunder and thereunder. This Agreement constitutes,
and the Dicom Closing Documents will constitute, valid and legally binding
obligations of Dicom, enforceable in accordance with their respective terms and
conditions.
3.3 Noncontravention. Neither the execution and the delivery of this
Agreement or the Dicom Closing Documents, nor the consummation of the
transactions contemplated hereby or thereby by Dicom, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Dicom is subject or any provision of its articles of
incorporation or bylaws, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Dicom is a party or by which it is bound or to which any of its assets
is subject. Dicom does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the parties to consummate the transactions contemplated by
this Agreement.
3.4 Limited Representations and Warranties. Except for the
representations and warranties of the Warranting Shareholders expressly set
forth in Section 4, below, Dicom has not relied upon any representation and
warranty made by Reality Networks or the Reality Networks Shareholders in making
its determination to enter into this Agreement and consummate the transactions
contemplated by this Agreement.
3.5 Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
3
3.6 Capitalization. The authorized capital stock of Dicom consists of
50,000,000 shares of common stock, $0.001 par value per share, of which
26,632,653 shares are issued and outstanding, and 10,000,000 shares of preferred
stock, $0.001 par value per share, none of which is issued and outstanding. All
issued and outstanding shares have been duly authorized and validly issued, and
are fully paid and nonassessable. All of the outstanding shares of Common Stock
(and options to purchase Common Stock) and other outstanding securities of Dicom
have been, and the Dicom Shares will be, duly and validly issued in compliance
with federal and state securities laws. There are no outstanding or authorized
subscriptions, options, warrants, plans or, other agreements or rights of any
kind to purchase or otherwise receive or be issued, or securities or obligations
of any kind convertible into, any shares of capital stock or other securities of
Dicom, and there are no dividends which have accrued or been declared but are
unpaid on the capital stock of Dicom. There are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to Dicom.
Except as disclosed on Schedule 3.6, Dicom does not own, directly or indirectly,
any capital stock or other equity interest in any corporation, partnership or
other entity. The Closing Shares are duly authorized and, when issued in
accordance with the terms and conditions of this Agreement, shall be validly
issued, fully paid and nonassessable. Except as contemplated by this Agreement,
the Dicom Shares are not subject to any preemptive rights or other similar
restrictions.
3.7 Securities and Exchange Commission ("SEC") Reports and Financial
Statements. Dicom has filed with the SEC, and has heretofore made available to
the Reality Networks Shareholders, complete and correct copies of all forms,
reports, schedules, statements and other documents required to be filed by Dicom
under the Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (as such
documents have been amended or supplemented since the time of their filing,
collectively, the "SEC Reports"). As of their respective dates, the SEC Reports
(including without limitation, any financial statements or schedules included
therein) (a) did not contain any untrue statement of a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading, and (b)
complied in all material respects with the applicable requirements of the
Securities Act and Exchange Act (as the case may be) and all applicable rules
and regulations of the SEC promulgated thereunder. Each of the financial
statements included in the SEC Reports has been prepared from, and is in
accordance with, the books and records of Dicom, complies with all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, has been prepared in accordance
with U.S. generally accepted accounting principles ("U.S. GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presents in all material respects the consolidated
results of operations and cash flows (and changes in financial position, if any)
of Dicom, as at the date(s) thereof or for the period(s) presented therein.
3.8 Disclosed Liabilities. Except as described in the SEC Reports and
as disclosed on Schedule 3.8, Dicom has no debts, liabilities or obligations of
any kind, whether accrued, absolute, contingent or other, whether due or to
become due, except as incurred in the ordinary course of business, that could
have a Material Adverse Effect on Dicom.
3.9 Legal Proceedings, Claims, etc. Except as described in the SEC
Reports and as disclosed on Schedule 3.9, there is no legal or arbitration
proceeding pending against Dicom or any of its directors, officers, or
employees. Except as set forth in the SEC Reports, Dicom is not subject to any
judgment, order, injunction or decree of any court or arbitral authority that
could have a Material Adverse Effect on Dicom.
3.10 Tax Treatment. As of the date of this Agreement, Dicom has no
reason to believe that the Share Exchange will not qualify as a "reorganization"
within the meaning of Section 368(a) of the Code.
3.11 Employees. Schedule 3.11 is a list of all salaried persons
employed by Dicom and a description of their salaries and deferred compensation.
3.11.1 Except as set forth on Schedule 3.11, no officer or
employee of Dicom is receiving aggregate remuneration (bonus, salary, deferred
compensation and commissions) at a rate, which if annualized, would exceed
$75,000 in the year 2001.
3.11.2 Except as set forth on Schedule 3.11.2, Dicom is not a
party to, or bound by, any contract, arrangement or understanding (whether
written or oral) with respect to the employment or compensation of any officers,
4
employees or consultants and except as provided in this Agreement, consummation
of the transactions contemplated by this Agreement will not result in any
payment (whether of severance pay or otherwise) becoming due from Dicom to any
officer or employee thereof. Dicom has previously delivered or made available to
Dicom true and complete copies of all written employment, consulting and
deferred compensation agreements to which Dicom is a party.
3.11.3 Except as disclosed in the SEC reports and on Schedule
3.9, there are not, and have not been at any time in the past three years, any
actions, suits, claims or proceedings before any court tribunal, commission,
bureau, regulatory, administrative or governmental agency, arbitrator, body or
authority pending or threatened, by any employees, former employees or other
persons relating to the employment practices or activities of Dicom (except for
actions which have subsequently been resolved) which involves or could involve
aggregate future payments by Dicom of more than $2,000. Dicom is not a party to
any collective bargaining agreement, and no union organization efforts with
respect to Dicom are pending or threatened or have any occurred during the last
three years.
3.11.4 Dicom has made available to Reality Networks true and
complete copies of all personnel codes, practices, procedures, policies,
manuals, affirmative action programs and similar materials of Dicom.
3.12 Compliance with Applicable Law.
3.12.1 Dicom holds all licenses, certificates, franchises,
permits and other governmental authorizations ("Dicom Permits") necessary for
the lawful conduct of its business and such Dicom Permits are in full force and
effect, and Dicom is, in all material respects, complying therewith, except
where the failure to possess or comply with such Dicom Permits would not have,
in the aggregate, a Material Adverse Effect on Dicom.
3.12.2 Dicom is and for the past three years has been in
compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules, regulations and orders applicable to the operation, conduct
or ownership of their businesses or properties except for any noncompliance
which is not reasonably likely to have, in the aggregate, a Material Adverse
Effect on Dicom.
3.13 Contracts and Agreements. Except with respect to any agreement
Dicom has entered into regarding those certain liabilities disclosed on Schedule
3.8, (i) Dicom is not a party to or bound by any commitment, contract, agreement
or other instrument which involves or could involve aggregate future payments by
Dicom of more than $1,000, (ii) Dicom is not a party to or bound by any
commitment, contract, agreement or other instrument which is material to the
business, operations, properties, assets or financial condition of Dicom, and
(iii) no commitment, contract, agreement or other instrument, other than charter
documents, to which Dicom is a party or by which Dicom is bound, limits the
freedom of Dicom to compete in any line of business or with any person. The
commitments, contracts, agreements or other instruments listed on Schedule 3.13
(the "Material Contracts") are valid and binding obligations and Dicom is not in
default therewith, except as listed on Schedule 3.13 and except where any such
defaults are not reasonably likely to have in the aggregate a Material Adverse
Effect on Dicom.
3.14 Affiliate Transactions.
3.14.1 Except as specifically contemplated by this Agreement
and as disclosed on Schedule 3.14, Dicom has not engaged in, and is not
currently obligated to engage in (whether in writing or orally), any transaction
with any Affiliated Person (as defined below) involving aggregate payments by or
to Dicom.
3.14.2 For purposes of this Section 3.14, "Affiliated
Person" means:
(a) a director, executive officer or Controlling
Person (as defined below) of Dicom;
(b) a spouse of a director, executive officer or
Controlling Person of Dicom;
(c) a member of the immediate family of a director,
executive officer, or Controlling Person of Dicom who has the same home as such
person;
5
(d) any corporation or organization (other than
Dicom) of which a director, executive officer or Controlling Person of Dicom is
a chief executive officer, chief financial officer, or a person performing
similar functions or is a Controlling Person of such other corporation or
organization;
(e) any trust or estate in which a director,
executive officer, or Controlling Person of Dicom or the spouse of such person
has a substantial beneficial interest or as to which such person or his spouse
serves as trustee or in a similar fiduciary capacity; and
(f) for purposes of this Section 3.14, "Controlling
Person" means any person or entity which, either directly or indirectly, or
acting in concert with one or more other persons or entities owns, controls or
holds with power to vote, or holds proxies representing ten percent or more of
the outstanding common stock or equity securities.
3.15 Limited Representations and Warranties. Except for the
representations and warranties of Dicom expressly set forth in Section 3,
neither Reality Networks nor Reality Networks Shareholders has relied upon any
representation and warranty made by or on behalf of Dicom in making its
determination to enter into this Agreement and consummate the transactions
contemplated by this Agreement.
3.16 Disclosure. No representation or warranty made by Dicom contained
in this Agreement, and no statement contained in the Schedules delivered by
Dicom hereunder, contains any untrue statement of a material fact or omits any
material fact necessary in order to make a statement herein or therein, in light
of the circumstances under which it is made, not misleading.
3.17 Title to Property.
3.17.1 Real Property. Dicom has no interest in real property,
whether owned, leased or otherwise claimed, including a list of all leases of
real property, in which Dicom has or claims an interest and any guarantees of
any such leases by Dicom.
3.18 Personal Property. Dicom has no interest, whether owned, leased or
otherwise claimed of any machinery, equipment, or furniture, including without
limitation computers or vehicle.
3.19 Intellectual Property. Schedule 3.19 is a true and complete list
of:
3.19.1 All patents, patent applications, trademarks, trademark
registrations, applications for trademark registration, trade names, service
marks, registered Internet domain names, and other intangible property currently
used, owned, or registered for use by Dicom; and
3.19.2 All license and other agreements with respect to any of
the foregoing as to which Dicom is licensor or licensee.
3.19.3 Except as disclosed on Schedule 3.19.3, there are no
pending or threatened claims against Dicom by any person as to any of the items,
or their use, listed in Schedule 3.19 or claims of infringement by Dicom on the
rights of any person and no valid basis exists for any such claims.
3.20 Insurance. Schedule 3.20 is a true and complete list and a brief
description (including name of insurer, agent, type of coverage and expiration
date) of all insurance policies in force with respect to the business and assets
of Dicom. Dicom is in compliance with all of the material provisions of their
insurance policies and are not in default under any of the terms thereof. Each
such policy is outstanding and in full force and effect and Dicom is the sole
beneficiary of such policies. All premiums and other payments due under any such
policy have been paid or arrangements for payment are being made. Dicom has
previously delivered to, or made available for inspection by Dicom, each
insurance policy to which Dicom is a party (other than insurance policies under
which Dicom is named as a loss payee or additional insured as a result of its
position as a secured lender).
6
3.21 Powers of Attorney. Dicom has no powers of attorney outstanding
other than those in the ordinary course of business with respect to routine
matters.
3.22 Bank Accounts. Dicom has no bank accounts, safe deposit boxes or
lock boxes.
3.23 Product Claims. No product or service liability claim is pending
against Dicom or against any other party with respect to the products or
services of Dicom.
3.24 Reverse Stock Split. Immediately prior to the Closing Date, Dicom
shall have effected a reverse stock split so that no more than 1,000,000 shares
of Dicom Common Stock are issued and outstanding.
4. REPRESENTATIONS AND WARRANTIES OF WARRANTING SHAREHOLDERS.
Xxxx Xxxxxxx and Xxxxx Xxxxxx (each a "Warranting Shareholder" and
together the "Warranting Shareholders"), jointly and severally represent and
warrant to Dicom that the statements contained in this Section 4 are correct and
complete as of the date of this Agreement.
4.1 Organization. Reality Networks is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Reality Networks has all the requisite power and authority to own, lease and
operate all of its properties and assets and to carry on its business as
currently conducted and as proposed to be conducted. Reality Networks is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it makes such
licensing or qualification necessary and where the failure to be so qualified
would, individually or in the aggregate, have a Material Adverse Effect upon it.
4.2 Authorization of Transaction. Each of the Reality Networks
Shareholders has appointed Xxxxx Xxxxxx and Xxxx Xxxxxxx, or either of them
acting alone, as such Reality Networks Shareholder's attorney for the purpose of
executing this Agreement or waivers related to this Agreement on behalf of such
Reality Networks Shareholder, including any consents under Section 9.3. This
Agreement constitutes, and the Reality Networks Shareholders Closing Documents
will constitute, the valid and legally binding obligation of Reality Networks
Shareholders, enforceable in accordance with their respective terms and
conditions. Each Reality Networks Shareholder severally makes the
representations and warranties set forth in this Section 4.2 to Dicom.
4.3 Capitalization. The authorized capital stock of Reality Networks
consists of 150,000,000 shares of common stock, of which 8,000,000 shares are
issued and outstanding, and 50,000,000 shares of preferred stock, of which no
shares are issued and outstanding. All issued and outstanding shares of Reality
Networks stock have been duly authorized and validly issued, and are fully paid
and nonassessable. All of the outstanding shares of common stock (and options to
purchase common stock) and other outstanding securities of Reality Networks have
been duly and validly issued in compliance with federal and state securities
laws. Except as set forth in Schedule 4.3, there are no outstanding or
authorized subscriptions, options, warrants, plans or, except for this Agreement
and as contemplated by this Agreement, other agreements or rights of any kind to
purchase or otherwise receive or be issued, or securities or obligations of any
kind convertible into, any shares of capital stock or other securities of
Reality Networks, and there are no dividends which have accrued or been declared
but are unpaid on the capital stock of Reality Networks. There are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to Reality Networks. The Reality Networks Shares are duly
authorized and validly issued, fully paid and nonassessable. The Reality
Networks Shares are not subject to any preemptive rights or other similar
restrictions.
4.4 Subsidiaries. Reality Networks does not own, directly or
indirectly, any capital stock or other equity interest in any corporation,
partnership or other entity.
4.5 Ownership of Reality Networks Shares. Each of the Reality Networks
Shareholders owns and holds of record that number of Reality Networks Shares
shown on Schedule A. Each Reality Networks Shareholder has good title to such
Reality Networks Shareholder's Reality Networks Shares, free and clear of all
claims, charges, liens and other encumbrances. Each Reality Networks Shareholder
has full power over such Reality Networks Shareholder's Reality Networks Shares,
subject to no proxy, shareholders' or voting agreement.
7
4.6 Noncontravention. Neither the execution and the delivery of this
Agreement or the Reality Networks Shareholders Closing Documents, nor the
consummation of the transactions contemplated hereby or thereby, by Reality
Networks or such Reality Networks Shareholder will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Reality Networks or such Reality Networks Shareholder is subject, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Reality Networks or such Reality
Networks Shareholder is a party or by which Reality Networks or such Reality
Networks Shareholder is bound or to which Reality Networks or any of such
Reality Networks Shareholder's assets is subject. Neither Reality Networks nor
such Reality Networks Shareholder needs to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the parties to consummate the transactions
contemplated by this Agreement.
4.7 Financial Statements and Financial Condition. Attached as Schedule
4.7 are the following financial statements: (a) for Reality Networks (i) its
unaudited consolidated balance sheet as of October 1, 2001, and the related
unaudited consolidated statements of income and retained earnings and of cash
flows, and (ii) its unaudited consolidated balance sheet as of October 1, 2001,
and the related unaudited consolidated statements of income and retained
earnings and of cash flows for the period ended October 1, 2001. The Financial
Statements, including any related notes and schedules, have been prepared in
accordance with U.S. GAAP consistently applied, are based on the books, records
and work papers of Reality Networks, as the case may be, and present fairly the
financial position of Reality Networks as of the dates of such statements and
the results of operations for the periods covered by such statements, subject to
normal year-end adjustments and the absence of footnotes.
4.8 Absence of Material Change. Since November 7, 2001, there has been
no change in the business, operations, financial condition or liabilities of
Reality Networks that would result in a Material Adverse Effect on Reality
Networks.
4.9 Litigation. There are no actions, suits, claims, inquiries,
proceedings or investigations before any court, tribunal, commission, bureau,
regulatory, administrative or governmental agency, arbitrator, body or authority
pending or, to the knowledge of such Warranting Shareholder, threatened against
Reality Networks which would reasonably be expected to result in any
liabilities, including defense costs, in excess of $10,000 in the aggregate.
Reality Networks is not the named subject of any order, judgment or decree and
is not in default with respect to any such order, judgment or decree.
4.10 Taxes and Tax Returns. Reality Networks has timely and correctly
filed tax returns and reports (collectively, "Returns") required by applicable
law to be filed (including, without limitation, estimated tax returns, income
tax returns, excise tax returns, sales tax returns, use tax returns, property
tax returns, franchise tax returns, information returns and withholding,
employment and payroll tax returns) and all such returns were (at the time they
were filed) correct in all material respects, and have paid all taxes, levies,
license and registration fees, charges or withholdings of any nature whatsoever
reflected on such Returns to be owed and which have become due and payable
except for any that is being contested in good faith. The unpaid U.S. Federal
income taxes, interest and penalties of Reality Networks does not exceed $20,000
in the aggregate.
4.11 Compliance with Applicable Law.
4.11.1 Reality Networks hold all licenses, certificates,
franchises, permits and other governmental authorizations ("Reality Networks
Permits") necessary for the lawful conduct of their businesses and such Reality
Networks Permits are in full force and effect, and Reality Networks is in all
material respects complying therewith, except where the failure to possess or
comply with such Reality Networks Permits would not have, in the aggregate, a
Material Adverse Effect on Reality Networks.
4.11.2 Reality Networks is and for the past three years has
been in compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules, regulations and orders applicable to the operation, conduct
8
or ownership of their businesses or properties except for any noncompliance
which is not reasonably likely to have, in the aggregate, a Material Adverse
Effect on Reality Networks.
4.12 Contracts and Agreements. Except as disclosed on Schedule 4.12,
(i) Reality Networks is not a party to or bound by any commitment, contract,
agreement or other instrument which involves or could involve aggregate future
payments by Reality Networks of more than $20,000, (ii) Reality Networks is not
a party to or bound by any commitment, contract, agreement or other instrument
which is material to the business, operations, properties, assets or financial
condition of Reality Networks, and (iii) no commitment, contract, agreement or
other instrument, other than charter documents, to which Reality Networks is a
party or by which Reality Networks is bound, limits the freedom of Reality
Networks to compete in any line of business or with any person. The commitments,
contracts, agreements or other instruments listed on Schedule 4.12 (the "Reality
Material Contracts") are valid and binding obligations and Reality Networks is
not in default therewith, except as listed on Schedule 4.12 and except where any
such defaults are not reasonably likely to have in the aggregate a Material
Adverse Effect on Reality Networks.
4.13 Affiliate Transactions.
4.13.1 Reality Networks has not engaged in, and is not
currently obligated to engage in (whether in writing or orally), any transaction
with any Affiliated Person (as defined below) involving aggregate payments by or
to Reality Networks of $20,000 or more.
4.13.2 For purposes of this Section 4.13, "Affiliated
Person" means:
(a) a director, executive officer or Controlling
Person (as defined below) of Reality Networks;
(b) a spouse of a director, executive officer or
Controlling Person of Reality Networks;
(c) a member of the immediate family of a director,
executive officer, or Controlling Person of Reality Networks who has the same
home as such person;
(d) any corporation or organization (other than
Reality Networks) of which a director, executive officer or Controlling Person
of Reality Networks is a chief executive officer, chief financial officer, or a
person performing similar functions or is a Controlling Person of such other
corporation or organization;
(e) any trust or estate in which a director,
executive officer, or Controlling Person of Reality Networks or the spouse of
such person has a substantial beneficial interest or as to which such person or
his spouse serves as trustee or in a similar fiduciary capacity; and
(f) for purposes of this Section 4.13, "Controlling
Person" means any person or entity which, either directly or indirectly, or
acting in concert with one or more other persons or entities owns, controls or
holds with power to vote, or holds proxies representing ten percent or more of
the outstanding common stock or equity securities.
4.14 Limited Representations and Warranties. Except for the
representations and warranties of Reality Networks and the Warranting
Shareholders expressly set forth in Section 4, Dicom has not relied upon any
representation and warranty made by or on behalf of Reality Networks or the
Warranting Shareholders in making its determination to enter into this Agreement
and consummate the transactions contemplated by this Agreement.
4.15 Disclosure. No representation or warranty made by a Reality
Networks Shareholder contained in this Agreement, and no statement contained in
the Schedules delivered by Reality Networks and the Reality Networks
Shareholders hereunder, contains any untrue statement of a material fact or
omits any material fact necessary in order to make a statement herein or
therein, in light of the circumstances under which it is made, not misleading.
9
4.16 Title to Property.
4.16.1 Real Property. Schedule 4.16.1 is a true and complete
description of all interests in real property (other than real property security
interests received in the ordinary course of business), whether owned, leased or
otherwise claimed, including a list of all leases of real property, in which
Reality Networks has or claims an interest and any guarantees of any such leases
by Reality Networks. True and complete copies of such leases have previously
been delivered or made available to Dicom, together with all amendments,
modifications, agreements or other writings related thereto. Each such lease is
legal, valid and binding as between Reality Networks and the other party or
parties thereto, and the occupant is a tenant or possessor in good standing
thereunder, free of any default or breach whatsoever and quietly enjoys the
premises provided for therein. Reality Networks has good, valid and marketable
title to all real property owned by it, free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever, except liens for
current taxes not yet due and payable, and such encumbrances and imperfections
of title, if any, as do not materially detract from the value of the properties
and do not materially interfere with the present or proposed use of such
properties or otherwise materially impair such operations. All real property and
fixtures material to the business, operations or financial condition of Reality
Networks are in substantially good condition and repair.
4.17.2 Environmental Matters. The real property owned or
leased by Reality Networks is not in a condition that may give rise to financial
liability under any environmental laws applicable to Reality Networks or such
property.
4.18 Personal Property. Schedule 4.18 is a true and complete list of
(i) each item of machinery, equipment, or furniture, including without
limitation computers and vehicles, of Reality Networks and (ii) each lease or
other agreement under which any such item of personal property is leased,
rented, held or operated where the current fair market value of such item is
more than $1,000. Reality Networks has good, valid and marketable title to all
personal property owned by them, free and clear of all liens, pledges, charges
or encumbrances o any nature whatsoever.
4.19 Intellectual Property. Schedule 4.19 is a true and complete list
of:
4.19.1 All patents, patent applications, trademarks, trademark
registrations, applications for trademark registration, trade names, service
marks, registered Internet domain names, and other intangible property currently
used, owned, or registered for use by Reality Networks; and
4.19.2 All license and other agreements with respect to any of
the foregoing as to which Reality Networks is licensor or licensee.
4.19.3 There are no pending or, to such Warranting
Shareholder's knowledge, threatened, claims against Reality Networks by any
person as to any of the items, or their use, listed in Schedule 4.19 or claims
of infringement by Reality Networks on the rights of any person and no valid
basis exists for any such claims.
4.20 Insurance. Schedule 4.20 is a true and complete list and a brief
description (including name of insurer, agent, coverage and expiration date) of
all insurance policies in force with respect to the business and assets of
Reality Networks. Reality Networks is in compliance with all of the material
provisions of their insurance policies and are not in default under any of the
terms thereof. Each such policy is outstanding and in full force and effect and
Reality Networks is the sole beneficiary of such policies. All premiums and
other payments due under any such policy have been paid or arrangements for
payment are being made. Reality Networks has previously delivered to, or made
available for inspection by Dicom, each insurance policy to which Reality
Networks is a party (other than insurance policies under which Reality Networks
is named as a loss payee or additional insured as a result of its position as a
secured lender).
4.21 Powers of Attorney. Reality Networks has no powers of attorney
outstanding other than those in the ordinary course of business with respect to
routine matters.
5. COVENANTS AND OTHER AGREEMENTS OF THE PARTIES.
5.1 Conduct of the Business of Dicom. During the period from the date
of this Agreement to the Closing Date, Dicom will conduct its business and
engage in transactions only in the ordinary course consistent with past practice
since September 5, 2001. During such period, Dicom will use its best efforts to
10
(a) preserve its business organization intact, (b) keep available the present
services of its employees, and (c) preserve the goodwill of its customers and
others with whom business relationships exist. In addition, without limiting the
generality of the foregoing, Dicom agrees that from the date of this Agreement
to the Closing Date, except as otherwise consented to or approved by Dicom in
writing (which consent or approval shall not be unreasonably withheld, delayed
or conditioned) or as permitted or required by this Agreement or as required by
law, Dicom will not:
5.1.1 grant any severance or termination pay to or enter into
or amend any employment agreement with, or increase the amount of payments or
fees to, any of its employees, officers or directors other than salary increases
to employees consistent with past increases;
5.1.2 make any capital expenditures in excess of (i) $500 (per
project or related series of projects) or (ii) $2,000 in the aggregate, other
than pursuant to binding commitments existing on the date of this Agreement and
expenditures necessary to maintain existing assets in good repair;
5.1.3 change in any material manner pricing policies or any
other material business or customer policies;
5.1.4 guarantee the obligations of any other person except in
the ordinary course of business consistent with past practice;
5.1.5 acquire assets other than those necessary in the conduct
of its business in the ordinary course;
5.1.6 sell, transfer, assign, encumber or otherwise dispose of
assets with a value in excess of $500;
5.1.7 enter into or amend or terminate any long term (one year
or more) contract (including real property leases) except in the ordinary course
of business consistent with past practice;
5.1.8 enter into or amend any contract that calls for the
payment by Dicom of $500 or more after the date of this Agreement or for a term
exceeding two years that cannot be terminated on not more than 30 days' notice
without cause and without payment or loss of any material amount as a penalty,
bonus, premium or other compensation for termination;
5.1.9 engage or participate in any material transaction or
incur or sustain any material obligation otherwise than in the ordinary course
of business consistent with past practice;
5.1.10 contribute to any benefit plans except in such amounts
and at such times as consistent with past practice;
5.1.11 increase the number of full-time equivalent employees
other than in the ordinary course of business consistent with past practice;
5.1.12 acquire any real property except after having followed
reasonable procedures with respect to the investigation of potential
environmental problems, which procedures have been approved in writing by
Reality Networks (which approval shall not be unreasonably withheld, delayed or
conditioned); or
5.1.13 agree to do any of the foregoing.
5.2 No Solicitation and Liquidated Damages. During the period beginning
on the date of this Agreement and ending on the Closing Date, neither Dicom nor
any of its directors, officers, shareholders, representatives, agents or other
persons controlled by any of them, shall, directly or indirectly encourage or
solicit, or hold discussions or negotiations with, or provide any information
to, any persons, entity or group other than Reality Networks concerning any
merger, sale of substantial assets not in the ordinary course of business, sale
of shares of capital stock or similar transactions involving Dicom. Dicom will
promptly communicate to reality Networks the identity of any interested or
inquiring party, all relevant information surrounding the interest or inquiry,
as well as the terms of any proposal that it may receive in respect of any such
transaction.
11
5.3 Access to Properties and Records; Confidentiality.
5.3.1 Dicom shall permit Reality Networks and its
representatives reasonable access to its properties and shall disclose and make
available to Reality Networks all books, papers and records relating to the
assets, stock, ownership, properties, obligations, operations and liabilities of
Dicom, including but not limited to, all books of account (including the general
ledger), tax records, minute books of directors and stockholders meetings,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants work papers, litigation files, plans
affecting employees, and any other business activities or prospects in which
Dicom may have a reasonable interest, in each case during normal business hours
and upon reasonable notice. Dicom shall not be required to provide access to or
disclose information where such access or disclosure would jeopardize the
attorney-client privilege or would contravene any law, rule, regulation, order,
judgment, decree or binding agreement entered into prior to the date of this
Agreement. The parties will use all reasonable efforts to make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply.
5.3.2 All information furnished by Dicom to Reality Networks
or the representatives or affiliates of Reality Networks pursuant to, or in any
negotiation in connection with, this Agreement shall be treated as the sole
property of Dicom until consummation of the Share Exchange and if the Share
Exchange shall not occur Reality Networks and its affiliates, agents and
advisors shall upon written request return to Dicom all documents or other
materials containing, reflecting, referring to such information, and shall keep
confidential all such information and shall not disclose or use such information
for competitive purposes. The obligation to keep such information confidential
shall not apply to (i) any information which (w) Reality Networks can establish
by evidence was already in its possession (subject to no obligation of
confidentiality) prior to the disclosure thereof by Dicom; (x) was then
generally known to the public; (y) becomes known to the public other than as a
result of actions by Reality Networks or by the directors, officers, employees,
agents or representatives of Reality Networks; or (z) was disclosed to Reality
Networks, or to the directors, officers, employees or representatives of Reality
Networks, solely by a third party not bound by any obligation of
confidentiality; or (ii) disclosure in accordance with the federal securities
laws, a federal banking laws, or pursuant to an order of a court or agency of
competent jurisdiction.
5.4 Regulatory Matters.
5.4.1 The parties will cooperate with each other and use all
reasonable efforts to prepare all necessary documentation, to effect all
necessary filings and to obtain all necessary permits, consents, approvals, and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement including, without
limitation, those that may be required from the SEC, other regulatory
authorities, or Dicom's shareholders. Reality Networks and Dicom shall each have
the right to review reasonably in advance all information relating to Reality
Networks or Dicom, as the case may be, and any of their respective subsidiaries,
together with any other information reasonably requested, which appears in any
filing made with or written material submitted to any governmental body in
connection with the transactions contemplated by this Agreement. Dicom shall
bear all expenses associated with SEC filings.
5.4.2 Reality Networks and Dicom will promptly furnish each
other with copies of written communications received by Reality Networks or
Dicom or any of their respective subsidiaries from, or delivered by any of the
foregoing to, any governmental body in respect of the transactions contemplated
by this Agreement.
5.5 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all action and 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 contemplated by this Agreement.
5.6 Public Announcements. No party will issue or distribute any
information to its shareholders or employees, any news releases or any other
public information disclosures with respect to this Agreement or any of the
transactions contemplated by this Agreement without the consent of the other
parties or their designated representative, except as may be otherwise required
by law.
12
5.7 Post-Closing Appointments. As soon as reasonable after the Closing,
the Dicom Board of Directors shall take all actions necessary to nominate, vote,
appoint or elect Xxxx Xxxxxxx, Xxxxx Xxxxxx and a nominee of the Torchmark
Holdings Ltd. ("Torchmark"), if any, acceptable to Dicom to the Board of
Directors of Dicom.
5.8 Completion of Reality Audit. Reality Networks shall promptly direct
an independent accounting firm to complete an audit according to generally
accepted auditing standards of Reality's balance sheet as of the Effective Time,
and statements of income, equity and cash flow for the 12 month periods ended
December 31, 2000 and 1999 and the notes thereto, and shall cause such
independent accounting firm to issue to Reality a report by independent auditors
with respect to such audit.
5.9 Completion of Dicom Audit. For the purposes of this Section 5.9,
"Excess Liabilities" shall be the amount by which (i) the liabilities as of the
Closing Date and identified in Dicom's audit for the year ended 2001 exceeds
(ii) the liabilities identified in the attached Schedule 3.8, which schedule
shall be updated by Dicom as of the Closing and delivered to Reality Networks
and the Reality Networks Shareholders at Closing. To the extent that the Reality
Networks Shareholders identify a breach of the representations and warranties
set forth in Section 3 during the period beginning on the Closing Date and
ending prior 30 days after the completion of Dicom's audit for the year ended
2001 (the "Post-Closing Period"), the Reality Networks and the Reality Networks
Shareholders shall provide written notice of such breach to Dicom, which notice
shall include a description of the breach and the dollar amount of damages
sustained by Reality Networks and the Reality Networks Shareholders as a result
of such breach (a "Breach Notice"). If Dicom does not dispute a Breach Notice in
a writing delivered to it within 30 days after its receipt of a Breach Notice,
Dicom shall issue that number of shares of Common Stock of Dicom with an
aggregate fair market value, as of the date of the Breach Notice, equal to the
amount of damages claimed in the Breach Notice (the "Excess Liabilities Shares")
to the Reality Networks Shareholders. If Dicom disputes a Breach Notice, the
dispute shall be submitted to arbitration in accordance with Section 9.14 of
this Agreement. Dicom shall issue Excess Liabilities Shares, if any, to the
Reality Networks Shareholders in proportion to their respective interests in the
Dicom Shares.
5.10 Restrictions on Transfer. Xxxx Xxxxxxx, Xxxxx Xxxxxx, and
Torchmark and its affiliates, Gannett International Ltd. ("Gannett"), Lexicon
International Ltd. ("Lexicon") and Santa Fe Pacific Holdings Ltd. ("Santa Fe"),
shall each hold not less than 50% their respective shares of Dicom Common Stock
held in their names personally and shall not transfer such Dicom shares for a
period equal to 12 months after Closing.
5.11 Registration, Transfer and Sale Restrictions. All necessary
actions shall be taken not less than 120 days after the Effective Time to freely
register with the SEC or transfer not less than 50% of the Closing Shares or
issued Common Stock, as the case may be, held by Xxxxx Xxxxxx, Xxxx Xxxxxxx, and
Torchmark and its affiliates Gannett, Lexicon and Santa Fe. Until such time as
any registration, transfer, or sale rights are received by Torchmark, Gannett,
Lexicon and Santa Fe, the registration, transfer and sale rights of the Xxxxx
Xxxxxx and Xxxx Xxxxxxx as to their Dicom Shares shall be the same as those of
Torchmark, Gannett, Lexicon and Santa Fe. Xxxxx Xxxxxx and Xxxx Xxxxxxx
acknowledge that the receipt of any such registration, transfer, and sale rights
does not exempt them from the applicable regulations of SEC Rule 144.
6. CONDITIONS PRECEDENT TO REALITY NETWORKS SHAREHOLDERS' OBLIGATIONS.
The obligations of the Reality Networks Shareholders to consummate the
transactions contemplated by this Agreement are subject to satisfaction of the
following conditions at or before the Closing:
6.1 SEC Schedule 14C. On or before the Closing Date, Dicom shall
transmit a written information statement containing the information specified in
Schedule 14C, and containing the information specified in such form, to every
security holder of the class that is entitled to vote or give an authorization
or consent with respect regard to any matter to be acted upon as contemplated by
this Agreement. Further, Reality Networks waives any right to terminate the
transactions contemplated by this Agreement irrespective of whether or not Dicom
has complied with or breached any representation, warranty, covenant, condition,
or term of this Agreement after November 7, 2001, provided, however, that if
Dicom does not fulfill its obligation under this Section 6 to distribute and
file a Schedule 14C as contemplated by this Section 6.1, Reality Networks may
terminate the transactions contemplated by this Agreement.
13
6.2 Dicom Shareholder Approval. This Agreement and the transactions
contemplated herein shall have been approved and adopted by the affirmative
votes of the holders of at least a majority of each class of Dicom's outstanding
capital stock.
6.3 Reverse Stock Split. Dicom shall have taken all action necessary to
authorize and effect a reverse stock split so that all issued and outstanding
shares of Common Stock of Dicom equals no more than 1,000,000 shares.
7. CONDITIONS PRECEDENT TO DICOM'S OBLIGATIONS.
The obligations of Dicom to consummate the transactions contemplated by
this Agreement are subject to satisfaction of the following conditions at or
before the Closing Date and may be waived only in writing by Dicom:
7.1 Reality Networks Shareholders' Covenants, Representations and
Warranties. All the covenants, terms and conditions of this Agreement to be
complied with or performed by Reality Networks or the Reality Networks
Shareholders on or before the Closing Date shall have been complied with and
performed in all respects. The representations and warranties made by the
Warranting Shareholders in this Agreement shall be complete and correct at and
as of the Closing Date with the same force and effect as though such
representations and warranties had been made at and as of the Closing Date.
7.2 Reality Networks Shareholders' Delivery of Documents. Reality
Networks Shareholders shall have duly executed and delivered, or caused to be
executed and delivered, to Dicom or at its direction this Agreement and the
Reality Networks Shareholders Closing Documents.
7.3 Other Approvals. All authorizations, consents, orders or approvals
of any United States federal or state governmental agency necessary for the
consummation of the Share Exchange or the transactions contemplated by this
Agreement (other than such actions, approvals or filings which, pursuant to the
terms of this Agreement, are to take place on or after the Closing) shall have
been filed, occurred or been obtained.
7.4 Reality Networks Shareholder Approval. This Agreement shall have
been approved and adopted by the affirmative votes of the holders of at least
two thirds of each class of Reality Networks' outstanding capital stock.
7.5 No Litigation. No administrative investigation, action, suit or
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement shall be pending or threatened.
7.6 Execution of Agreement. Each Reality Networks Shareholder shall
have executed this Agreement.
8. TERMINATION.
8.1 Termination of Agreement. This Agreement shall terminate as
follows:
(a) at any time prior to the Effective Time by the mutual
written agreement of all parties;
(b) by Dicom in the event the closing price of the Common
Stock on the Over-the-Counter Electronic Bulletin Board equals or exceeds $0.50
per share at any time prior to effectiveness of the reverse stock split
contemplated by Section 6.3 of this Agreement and required by SEC Rule 10b-17.
(c) by (i) the Reality Networks Shareholders if the conditions
set forth in Section 6 have not been satisfied or waived by the Upset Date
(defined below); or (ii) Dicom if the conditions set forth in Section 7 have not
been satisfied or waived by the Upset Date (defined below);
(d) by Dicom, in the event of a breach of any of the
representations or warranties made by the Warranting Shareholders, or covenants
made by the Reality Networks Shareholders, in this Agreement that has not been
14
cured within 30 days after notice of such breach as delivered to Reality
Networks and the Reality Networks Shareholders by Dicom;
(e) by Reality Networks and the Reality Networks Shareholders
in the event of any of the representations or warranties made by Dicom in this
Agreement that has not been cured within 30 days after notice of such breach as
delivered to Dicom by Reality Networks and/or the Reality Networks Shareholders;
or
(f) by either the Reality Networks Shareholders or Dicom if
the Closing shall have not occurred by November 20, 2001 (the "Upset Date")
provided, however, that the right to terminate this Agreement pursuant to this
clause shall not be available to any party whose failure to fulfill any
obligation of this Agreement has been the cause of, or resulted in, the failure
of the closing to have been effected on or prior to such date.
9. MISCELLANEOUS.
9.1 Tax Treatment by the Parties. Unless otherwise required by law, the
parties shall treat the Share Exchange as a reorganization under Section 368 of
the Code and applicable British law for all tax reporting purposes; furthermore,
the parties shall not take, and have not taken, any action that is inconsistent
with reorganization treatment under Section 368 of the Code or applicable
British law.
9.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties and their
respective successors and assigns.
9.3 Successors and Assigns. No party may assign either this Agreement
or any of its rights, interests, or obligations under this Agreement without the
prior written consent of all other parties. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties and
their respective permitted successors and assigns.
9.4 Notices. All notices, requests, demands, claims, consents and other
communications required or permitted under this Agreement shall be in writing.
Any notice, request, demand, claim , communication or consent under this
Agreement shall be deemed duly given if (and shall be effective two business
days after) it is sent by certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to Dicom: Dicom Imaging Systems, Inc.
Suite 201 - 00000 Xxxxxx Xxxxx
Xxxxx Xxxx, X.X.
Xxxxxx X0X 0X0
If to Reality Networks: Reality Networks, Inc.
000 X. Xxxxxxxx Xxx., Xxxxx X
Xxxxxxxx, Xxxxxxxxxx 00000
If to the Reality Networks c/o Reality Networks, Inc.
Shareholders: 000 X. Xxxxxxxx Xxx., Xxxxx X
Xxxxxxxx, Xxxxxxxxxx 00000
If to Torchmark, Gannett
Lexicon or Santa Fe: Torchmark Holdings Ltd.
P.O. Box 290
Caribbean Place
Leeward Highway, Providenciales
Turks & Caicos Islands
9.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Washington without giving
effect to any choice or conflict of law provision or rule (whether of the State
15
of Washington or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Washington.
9.6 Amendments and Waivers.
9.6.1 Subject to subsection 9.6.1, this Agreement may be
amended or waived only in writing signed by the party against which enforcement
of the amendment or waiver is sought.
9.6.2 For the purposes of this Section 9.6.2, each of the
Reality Networks Shareholders appoints Xxxxx Xxxxxx and Xxxx Xxxxxxx, or either
of them acting alone, as such Reality Networks Shareholder's attorney for the
purpose of executing amendments of or waivers related to this Agreement on
behalf of such Reality Networks Shareholder, including any consents under
Section 9.3.
9.7 Survival of Representations and Warranties. The representations and
warranties set forth in Sections 3 and 4 of this Agreement shall survive the
Closing and continue in full force and effect for a period of two years after
the Closing.
9.8 Severability. Any term or provision of this Agreement that is found
to be invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of its remaining terms and provisions or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.9 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.10 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
9.11 Incorporation of Schedules. The Schedules referred to in and/or
attached to this Agreement are incorporated in this Agreement by this reference.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same document. This Agreement may be
executed by facsimile.
9.13 Entire Agreement. This Agreement (including the Schedules referred
to in and/or attached to this Agreement) constitutes the entire agreement among
the parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral (including but not
limited to that certain letter of intent dated September 28, 2001, amended by
Amendment #1 dated October 10, 2001) to the extent they relate in any way to the
subject matter of this Agreement.
9.14 Arbitration. Any controversies or claims arising out of or
relating to this Agreement shall be fully and finally settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA Rules"), conducted by a single arbitrator either mutually
agreed upon by Dicom and the Reality Networks Shareholders disputing the Breach
Notice or chosen in accordance with the AAA Rules, except that the parties shall
have any right to discovery as would be permitted by the Federal Rules of Civil
Procedure for a period of 90 days following the commencement of such
arbitration, and the arbitrator shall resolve any dispute which arises in
connection with such discovery. The prevailing party or parties shall be
entitled to costs, expenses and attorneys' fees from the non-prevailing party or
parties, and judgment upon the award rendered by the arbitrator may be entered
in any court of competent jurisdiction.
[signature pages follow]
16
REALITY NETWORKS, INC.:
By: ________________________________
Name: Xxxxx Xxxxxx
Title: Chief Executive Officer
Reality Networks Shareholders:
----------------------------------
Xxxxx Xxxxxx
-----------------------------------
Xxxx Xxxxxxx
DICOM IMAGING SYSTEMS INC.
By: ________________________________
Name: Xx. Xxxxx Xxxx
Title: Director and President, Secretary and Treasurer
TORCHMARK HOLDINGS LTD.,
signature limited to Sections 5.7, 5.10, 5.11 and 9.4
By: _______________________________
Name: Xxxx Xxxxxxxxx
Title: Director
GANNETT INTERNATIONAL LTD.,
signature limited to Sections 5.10, 5.11 and 9.4
By: ______________________________
Name: Xxxx Xxxxxxxxx
Title: Director
17
LEXICON INTERNATIONAL LTD.,
signature limited to Sections 5.10, 5.11 and 9.4
By: ______________________________
Name: Xxxx Xxxxxxxxx
Title: Director
SANTA FE HOLDINGS LTD.,
signature limited to Sections 5.10, 5.11 and 9.4
By: ______________________________
Name: Xxxx Xxxxxxxxx
Title: Director
18
