EXCHANGE AGREEMENT
AMONG
PARADISE MUSIC & ENTERTAINMENT, INC.
XXXXX XXXXX
XXXXXXX XXXXX
XXXX XXXXXXXX
And
XXX XXXXX
AS OF OCTOBER 9, 1996
TABLE OF CONTENTS
Page
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1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Exchange of Target Shares . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Basic Transaction. . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Exchange Consideration . . . . . . . . . . . . . . . . . . . . . . 5
(c) Delivery on the Effective Date . . . . . . . . . . . . . . . . . . 5
3. Representations and Warranties Concerning the Transaction . . . . . . . 5
(a) Representations and Warranties of the Transferee . . . . . . . . . 5
(b) Representations and Warranties of the Transferors. . . . . . . . . 6
4. Representations and Warranties Concerning each of the Targets and
its Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Representations and Warranties by Xxxxx Xxxxx and Xxxxxxx Xxxxx
Regarding All Access. . . . . . . . . . . . . . . . . . . . . . . 10
(b) Representations and Warranties of Xxxx Xxxxxxxx Regarding Rave . . 14
(c) Representations and Warranties of Xxx Xxxxx Regarding Picture
Vision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5. Post-Effective Date Covenants . . . . . . . . . . . . . . . . . . . . . 23
(a) General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6. Conditions to Obligation to Make this Agreement Effective . . . . . . . 24
(a) Conditions to Obligation of the Transferee . . . . . . . . . . . . 24
(b) Conditions to Obligation of the Transferors. . . . . . . . . . . . 25
7. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . 26
(a) Survival of Representations and Warranties . . . . . . . . . . . . 26
(b) Indemnification Provisions for Benefit of the Transferee . . . . . 26
(c) Indemnification Provisions for Benefit of the Transferors. . . . . 27
(d) Matters Involving Third Parties. . . . . . . . . . . . . . . . . . 27
(e) Other Indemnification Provisions . . . . . . . . . . . . . . . . . 28
8. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Tax Periods Ending on or Before the Effective Date . . . . . . . . 29
(b) Tax Periods Beginning Before and Ending After the Effective
Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) Cooperation on Tax Matters . . . . . . . . . . . . . . . . . . . . 30
-i-
Page
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(d) Tax Sharing Agreements . . . . . . . . . . . . . . . . . . . . . . 30
(e) Certain Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9. Exclusion of Transferors, Readjustment of Share Allocation. . . . . . . 31
(a) Exclusion of Transferor. . . . . . . . . . . . . . . . . . . . . . 31
(b) Allocation of Expenses . . . . . . . . . . . . . . . . . . . . . . 31
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Press Releases and Public Announcements. . . . . . . . . . . . . . 31
(b) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . 31
(c) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Succession and Assignment. . . . . . . . . . . . . . . . . . . . . 31
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(g) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(i) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . 32
(j) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(k) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(l) Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(m) Incorporation of Exhibits, Annexes, and Schedules. . . . . . . . . 33
(n) Specific Performance . . . . . . . . . . . . . . . . . . . . . . . 33
(o) Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . 33
Exhibit A -- Forms of Employment Agreement between the
Transferee and each of the Transferors
Exhibit B -- Form of Expense Allocation Agreement
Schedule A -- Distribution of Shares among Transferors
Schedule B -- Schedule of Costs Incurred
Disclosure Schedule -- Exceptions to Representations and Warranties
Concerning the Target and Its Subsidiaries
-ii-
EXCHANGE AGREEMENT
Agreement entered into as of October 9, 1996, by and among PARADISE
MUSIC & ENTERTAINMENT, INC., a Delaware corporation (the "TRANSFEREE"), XXXXX
XXXXX and XXXXXXX XXXXX, individuals whotogether own all of the outstanding
capital stock of All Access Entertainment Management Group, Inc., a New York
corporation ("ALL ACCESS"), XXXX XXXXXXXX, an individual who owns all of the
outstanding capital stock of Xxxx Xxxxxxx Music, Inc. d/b/a Rave Music Group,
Inc., a New York corporation ("RAVE"), and XXX XXXXX, an individual who owns
all of the outstanding capital stock of Picture Vision, Inc., a Tennessee
corporation ("PICTURE VISION"). Xxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxx Xxxxxxxx
and Xxx Xxxxx are collectively referred to herein as the "TRANSFERORS," the
Transferee and the each of the Transferors are collectively referred to
herein as the "PARTIES," and All Access, Picture Vision and Rave are
collectively referred to herein as the "TARGETS."
This Agreement contemplates a transaction qualifying as a tax-free
incorporation under Section 351 of the Code in which the Transferee will acquire
from each of the Transferors, and each of the Transferors will transfer to the
Transferee, all of the shares of capital stock of each of the Targets owned
respectively by each of the Transferors in return for the Shares (as such term
is hereinafter defined).
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation D promulgated
under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"ALL ACCESS" has the meaning set forth in the preface above.
"ALL ACCESS FINANCIAL INFORMATION" means the financial information with
respect to All Access delivered by Xxxxx Xxxxx and Xxxxxxx Xxxxx to the
Transferee as of July 31, 1996.
"ALL ACCESS SHARE" means any share of the Common Stock, no par value per
share, of All Access.
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4 below.
"EFFECTIVE DATE" means the date of this Agreement, October 9, 1996.
"EMPLOYMENT AGREEMENTS" mean the employment agreements entered into between
the Transferee and each of the Transferors, the forms of which are attached
hereto as EXHIBIT A.
"EXCHANGE CONSIDERATION" has the meaning set forth in Section 2(b) below.
"EXPENSE ALLOCATION AGREEMENT" means the Expense Allocation Agreement
between the Transferee and each of the Targets, the form of which is attached
hereto as EXHIBIT B.
"FINANCIAL INFORMATION" means the All Access Financial Information, the
Picture Vision Financial Information and the Rave Financial Information.
"INDEMNIFIED PARTY" has the meaning set forth in Section 7(d) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 7(d) below.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
cus-
2
tomer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"IPO" means the initial public offering of the Transferee.
"LIABILITY" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTIES" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"PICTURE VISION" has the meaning set forth in the preface above.
"PICTURE VISION FINANCIAL INFORMATION" means the financial information with
respect to Picture Vision delivered to the Transferee by Xxx Xxxxx as of July
31, 1996.
"PICTURE VISION SHARE" means any share of the Common Stock, no par value
per share, of Picture Vision.
"RAVE" has the meaning set forth in the preface above.
"RAVE FINANCIAL INFORMATION" means the financial information with respect
to Rave delivered to the Transferee by Xxxx Xxxxxxxx as of July 31, 1996.
"RAVE SHARE" means any share of the Common Stock, no par value per share,
of Rave.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for
3
Taxes not yet due and payable or for Taxes that the taxpayer is contesting in
good faith through appropriate proceedings, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
"SHARES" has the meaning set forth in Section 2(b) below.
"SUBSIDIARY" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"TARGETS" has the meaning set forth in the preface above.
"TARGET SHARES" means the All Access Shares, the Picture Vision Shares and
the Rave Shares.
"TAX" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in Section 7(d) below.
"TRANSFEREE" has the meaning set forth in the preface above.
"TRANSFEREE SHARE" means any share of the Common Stock, par value $.01 per
share, of the Transferee.
"TRANSFERORS" has the meaning set forth in the preface above.
2. EXCHANGE OF TARGET SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of this
Agreement, the Transferee agrees to acquire from each of the Transferors, and
each of the Transferors agrees to transfer to the Transferee, all of the Target
Shares owned by the Transferors in exchange for the consideration specified in
Section 2(b) below.
4
(b) EXCHANGE CONSIDERATION. The Transferee agrees to issue to the
Transferors on the Effective Date (the EXCHANGE CONSIDERATION") an aggregate of
873,000 Transferee Shares (the "SHARES"), with the Shares being distributed
among the Transferors as set forth on SCHEDULE A attached hereto.
(c) DELIVERY ON THE EFFECTIVE DATE. On the Effective Date, (A) each of the
Transferors shall deliver to the Transferee the various certificates,
instruments, and documents referred to in Section 6(a) below, (B) the Transferee
shall deliver to each of the Transferors the various certificates, instruments,
and documents referred to in Section 6(b) below, (C) each of the Transferors
shall deliver to Transferee the stock certificates representing all of the
Target Shares owned by the Transferors, endorsed in blank or accompanied by duly
executed assignment documents, and (D) the Transferee shall deliver to each of
the Transferors the consideration listed in Section 2(b) above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE. The Transferee
represents and warrants to the Transferors that the statements contained in this
Section 3(a) are correct and complete as of the Effective Date.
(i) ORGANIZATION OF THE TRANSFEREE. The Transferee is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware.
(ii) AUTHORIZATION OF TRANSACTION. The Transferee has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Transferee, enforceable in accordance with its terms and conditions. Other
than any state and federal securities filings related to the IPO, the
Transferee need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of, any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement.
(iii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which
the Transferee is subject or any provision of its charter or bylaws or (B)
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 the
Transferee is a party or by which it is bound or to which any of its assets
is subject.
5
(iv) BROKERS' FEES. The Transferee has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which any Transferor
could become liable or obligated.
(v) INVESTMENT. The Transferee is not acquiring the Target
Shares with a view to, or for sale in connection with, any distribution
thereof within the meaning of the Securities Act.
(b) REPRESENTATIONS AND WARRANTIES OF THE TRANSFERORS.
(i) REPRESENTATIONS AND WARRANTIES OF XXXXX XXXXX AND XXXXXXX
XXXXX. Each of Xxxxx Xxxxx and Xxxxxxx Xxxxx jointly and severally
represents and warrants to the Transferee that the statements contained in
this Section 3(b)(i) are correct and complete as of the Effective Date with
respect to each of Xxxxx Xxxxx and Xxxxxxx Xxxxx.
a. AUTHORIZATION OF TRANSACTION. Each of Xxxxx Xxxxx and Xxxxxxx
Xxxxx has full power and authority to execute and deliver this Agreement
and to perform his obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of each of Xxxxx Xxxxx and Xxxxxxx
Xxxxx, enforceable in accordance with its terms and conditions. Other than
any state or federal securities filings related to the IPO, neither Xxxxx
Xxxxx nor Xxxxxxx Xxxxx need give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated
by this Agreement.
b. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which either Xxxxx Xxxxx or
Xxxxxxx Xxxxx is subject or (B) 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 either Xxxxx Xxxxx or Xxxxxxx Xxxxx is a party or by
which either of them is bound or to which any of their assets is subject.
c. BROKERS' FEES. Neither Xxxxx Xxxxx nor Xxxxxxx Xxxxx has any
Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement for which the Transferee could become liable or obligated.
6
d. INVESTMENT. Each of Xxxxx Xxxxx and Xxxxxxx Xxxxx (A) understands
that the Shares have not been registered under the Securities Act, or under
any state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public
offering, (B) is acquiring the Shares for his own account for investment
purposes, and not with a view to the distribution thereof, (C) is a
sophisticated investor with knowledge and experience in business and
financial matters, (D) has received certain information concerning the
Transferee and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding
the Shares, and (E) is able to bear the economic risk and lack of liquidity
inherent in holding the Shares.
e. ALL ACCESS SHARES. Xxxxx Xxxxx and Xxxxxxx Xxxxx each hold of
record and own beneficially ten (10) All Access Shares, free and clear of
any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. Other than this Agreement, neither Xxxxx Xxxxx nor
Xxxxxxx Xxxxx is a party to any option, warrant, purchase right, or other
contract or commitment that could require either of them to sell, transfer,
or otherwise dispose of any capital stock of All Access. Neither Xxxxx
Xxxxx nor Xxxxxxx Xxxxx is a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock
of All Access. The All Access Shares owned by Xxxxx Xxxxx and Xxxxxxx
Xxxxx constitute all of the shares of capital stock of All Access.
f. ALL ACCESS FINANCIAL INFORMATION. Xxxxx Xxxxx and Xxxxxxx Xxxxx
do hereby certify that the All Access Financial Information is accurate in
all material respects.
(ii) REPRESENTATIONS AND WARRANTIES OF XXXX XXXXXXXX. Xxxx
Xxxxxxxx represents and warrants to the Transferee that the statements
contained in this Section 3(b)(ii) are correct and complete as of the
Effective Date with respect to himself.
a. AUTHORIZATION OF TRANSACTION. Xxxx Xxxxxxxx has full power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of Xxxx Xxxxxxxx, enforceable in accordance with its
terms and conditions. Other than any state or federal securities filings
related to the IPO, Xxxx Xxxxxxxx need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
b. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling,
7
charge, or other restriction of any government, governmental agency, or
court to which Xxxx Xxxxxxxx is subject or (B) 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 Xxxx Xxxxxxxx is a party or by
which he or it is bound or to which any of his or its assets is subject.
c. BROKERS' FEES. Xxxx Xxxxxxxx has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Transferee
could become liable or obligated.
d. INVESTMENT. Xxxx Xxxxxxxx (A) understands that the Shares have
not been registered under the Securities Act, or under any state securities
laws, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (B) is
acquiring the Shares for his own account for investment purposes, and not
with a view to the distribution thereof, (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received certain information concerning the Transferee and has had the
opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding the Shares, and (E)
is able to bear the economic risk and lack of liquidity inherent in holding
the Shares.
e. RAVE SHARES. Xxxx Xxxxxxxx holds of record and owns beneficially
200 Rave Shares, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws),
Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. Other than this Agreement, Xxxx
Xxxxxxxx is not a party to any option, warrant, purchase right, or other
contract or commitment that could require him to sell, transfer, or
otherwise dispose of any capital stock of the Target. Xxxx Xxxxxxxx is not
a party to any voting trust, proxy, or other agreement or understanding
with respect to the voting of any capital stock of Rave. The Rave Shares
owned by Xxxx Xxxxxxxx constitute all of the shares of capital stock of
Rave.
f. RAVE FINANCIAL INFORMATION. Xxxx Xxxxxxxx does hereby certify
that the Rave Financial Information is accurate in all material respects.
(iii) REPRESENTATIONS AND WARRANTIES OF XXX XXXXX. Xxx Xxxxx
represents and warrants to the Transferee that the statements contained in
this Section 3(b)(iii) are correct and complete as of the Effective Date
with respect to himself.
a. AUTHORIZATION OF TRANSACTION. Xxx Xxxxx has full power and
authority to execute and deliver this Agreement and to perform his
obligations hereunder. This
8
Agreement constitutes the valid and legally binding obligation of Xxx
Xxxxx, enforce able in accordance with its terms and conditions. Other than
any state or federal securities filings related to the IPO, Xxx Xxxxx need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
b. NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Xxx Xxxxx is subject or
(B) 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 Xxx
Xxxxx is a party or by which he or it is bound or to which any of his or
its assets is subject.
c. BROKERS' FEES. Xxx Xxxxx has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Transferee could
become liable or obligated.
d. INVESTMENT. The Transferor (A) understands that the Shares have
not been registered under the Securities Act, or under any state securities
laws, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (B) is
acquiring the Shares for his own account for investment purposes, and not
with a view to the distribution thereof, (C) is a sophisticated investor
with knowledge and experience in business and financial matters, (D) has
received certain information concerning the Transferee and has had the
opportunity to obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding the Shares, and (E)
is able to bear the economic risk and lack of liquidity inherent in holding
the Shares.
e. PICTURE VISION SHARES. Xxx Xxxxx holds of record and owns
beneficially one hundred (100) Picture Vision Shares, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. Other than this Agreement, Xxx Xxxxx is not a party to any option,
warrant, purchase right, or other contract or commitment that could require
him to sell, transfer, or otherwise dispose of any capital stock of Picture
Vision. Xxx Xxxxx is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock
of Picture Vision. The Picture Vision
9
Shares owned by Xxx Xxxxx constitute all of the shares of capital stock of
Picture Vision.
f. PICTURE VISION FINANCIAL INFORMATION. Xxx Xxxxx does hereby
certify that the Picture Vision Financial Information is accurate in all
material respects.
4. REPRESENTATIONS AND WARRANTIES CONCERNING EACH OF THE TARGETS AND ITS
SUBSIDIARIES. Each of (i) Xxxxx Xxxxx and Xxxxxxx Xxxxx with respect to All
Access only, (ii) Xxxx Xxxxxxxx with respect to Rave only and (iii) Xxx Xxxxx
with respect to Picture Vision only, severally represents and warrants to the
Transferee that the statements contained in this Section 4 with respect to the
respective entities named together with each of the individuals set forth above
are correct and complete as of the Effective Date, except as set forth in the
disclosure schedule delivered by the Transferors to the Transferee on the date
hereof and initialed by the Parties (the "DISCLOSURE SCHEDULE"). Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
(a) REPRESENTATIONS AND WARRANTIES BY XXXXX XXXXX AND XXXXXXX XXXXX
REGARDING ALL ACCESS.
(i) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of
All Access and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of All Access and its Subsidiaries is duly authorized
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each of All Access and
its Subsidiaries has full corporate power and authority and all licenses,
permits, and authorizations necessary to carry on the businesses in which
it is engaged and in which it presently proposes to engage and to own and
use the properties owned and used by it. SECTION 4(a)(i) OF THE DISCLOSURE
SCHEDULE lists the directors and officers of each of All Access and its
Subsidiaries. Xxxxx Xxxxx and Xxxxxxx Xxxxx have delivered to the
Transferee correct and complete copies of the charter and bylaws of All
Access and its Subsidiaries (as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of each of All Access and its
Subsidiaries are correct and complete. None of All Access and its
Subsidiaries is in default under or in violation of any provision of its
charter or bylaws. Transferor acknowledges receipt of the above items.
10
(ii) CAPITALIZATION. The entire authorized capital stock of All
Access consists of two hundred (200) All Access Shares, twenty (20) of
which are issued and outstanding. All of the issued and outstanding All
Access Shares have been duly authorized, are validly issued, fully paid,
and nonassessable, and are held of record by the Person's set forth in
SECTION 4(a)(ii) OF THE DISCLOSURE SCHEDULE. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that
could require All Access to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to All Access. There are no voting trusts,
proxies, or other agreements or understandings with respect to the voting
of the capital stock of All Access.
(iii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, 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
any of All Access and its Subsidiaries is subject or any provision of the
charter or bylaws of any of All Access and its Subsidiaries 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 any of
All Access and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Other than any state or federal
securities filings related to the IPO, none of All Access and its
Subsidiaries 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.
(iv) BROKERS' FEES. None of All Access and its Subsidiaries has
any Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(v) INTELLECTUAL PROPERTY.
a. All Access and its Subsidiaries own or have the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the All Access
and its Subsidiaries as presently conducted. Each item of Intellectual
Property owned or used by any of All Access and its Subsidiaries
immediately prior to the Effective Date hereunder will be owned or
available for use by the All Access or the Subsidiary on identical terms
and conditions immediately subsequent to the Effective Date hereunder. Each
of All Access and its
11
Subsidiaries has taken all necessary action to maintain and protect each
item of Intellectual Property that it owns or uses.
b. None of All Access and its Subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of Xxxxx Xxxxx and
Xxxxxxx Xxxxx and the directors and officers (and employees with
responsibility for Intellectual Property matters) of All Access and its
Subsidiaries has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that any of All Access and its Subsidiaries
must license or refrain from using any Intellectual Property rights of any
third party). To the Knowledge of any of Xxxxx Xxxxx and Xxxxxxx Xxxxx and
the directors and officers (and employees with responsibility for
Intellectual Property matters) of All Access and its Subsidiaries, no third
party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of any of All
Access and its Subsidiaries.
c. Section 4(a)(v)(c) of the Disclosure Schedule identifies each
item of Intellectual Property owned by All Access and its Subsidiaries, and
identifies each license, agreement, or other permission which any of All
Access and its Subsidiaries has granted to any third party with respect to
any of its Intellectual Property (together with any exceptions). With
respect to each item of Intellectual Property required to be identified in
Section 4(a)(v)(c) of the Disclosure Schedule:
(A) All Access and its Subsidiaries possess all right, title,
and interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of any of
Xxxxx Xxxxx and Xxxxxxx Xxxxx and the directors and officers (and
employees with responsibility for Intellectual Property matters) of
All Access and its Subsidiaries, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item; and
(D) none of All Access and its Subsidiaries has ever agreed to
indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
12
d. Section 4(a)(v)(d) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that any of All
Access and its Subsidiaries uses pursuant to license, sublicense,
agreement, or permission. All Access has delivered to the Transferee
correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in Section 4(a)(v)(d) of
the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of any of
Xxxxx Xxxxx and Xxxxxxx Xxxxx and the directors and officers (and
employees with responsibility for Intellectual Property matters) of
All Access and its Subsidiaries, is threatened which challenges the
legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(H) none of All Access and its Subsidiaries has granted any
sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
e. To the Knowledge of any of Xxxxx Xxxxx and Xxxxxxx Xxxxx and the
directors and officers (and employees with responsibility for Intellectual
Property matters) of All Access and its Subsidiaries, none of All Access
and its Subsidiaries will
13
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a
result of the continued operation of its businesses as presently conducted
and as presently proposed to be conducted.
(vi) TITLE TO ASSETS. Except as set forth in Section
4(a)(vi) of the DISCLOSURE SCHEDULE, all Access and its Subsidiaries have
good and marketable title to, or a valid leasehold interest in, the
properties and assets used by them or located on their premises, free and
clear of all Security Interests.
(vii) SUBSIDIARIES. All Access has no Subsidiaries.
(viii) UNDISCLOSED LIABILITIES. None of All Access and its
Subsidiaries has any Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability), which
is not included in the All Access Financial Information.
(ix) LEGAL COMPLIANCE. Each of All Access, its Subsidiaries,
and their respective predecessors and Affiliates has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies thereof), and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging
any failure to so comply.
(x) CONTRACTS. Prior to the date of this Agreement, All
Access has disclosed to the Transferee all material contracts of All Access
dated prior to the date of this Agreement, and All Access has either
delivered to the Transferee, or given the Transferee the opportunity to
review, all such material contracts.
(xi) DISCLOSURE. The representations and warranties
contained in this Section 4 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 4 not misleading.
(b) REPRESENTATIONS AND WARRANTIES OF XXXX XXXXXXXX REGARDING RAVE.
(i) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of
Rave and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of Rave and its Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each of Rave and its
Subsidiaries has full corporate power and authority and all licenses,
permits, and
14
authorizations necessary to carry on the businesses in which it is engaged
and in which it presently proposes to engage and to own and use the
properties owned and used by it. SECTION 4(b)(i) OF THE DISCLOSURE SCHEDULE
lists the directors and officers of each of Rave and its Subsidiaries. Xxxx
Xxxxxxxx has delivered to the Transferee correct and complete copies of the
charter and bylaws of each of Rave and its Subsidiaries (as amended to
date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of each
of Rave and its Subsidiaries are correct and complete. None of Rave and its
Subsidiaries is in default under or in violation of any provision of its
charter or bylaws.
(ii) CAPITALIZATION. The entire authorized capital stock of
Rave consists of 200 Rave Shares all of which are issued and outstanding.
All of the issued and outstanding Rave Shares have been duly authorized,
are validly issued, fully paid, and nonassessable, and are held of record
by the Person's set forth in SECTION 4(b)(ii) OF THE DISCLOSURE SCHEDULE.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or commitments that could require Rave to issue, sell, or otherwise cause
to become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to Rave. There are no voting trusts, proxies,
or other agreements or understandings with respect to the voting of the
capital stock of Rave.
(iii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, 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
any of Rave and its Subsidiaries is subject or any provision of the charter
or bylaws of any of Rave and its Subsidiaries 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 any of Rave and its Subsidiaries
is a party or by which it is bound or to which any of its assets is subject
(or result in the imposition of any Security Interest upon any of its
assets). Other than any state or federal securities filings related to the
IPO, none of Rave and its Subsidiaries 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.
(iv) BROKERS' FEES. None of Rave and its Subsidiaries has
any Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
15
(v) INTELLECTUAL PROPERTY.
a. Rave and its Subsidiaries own or have the right to use pursuant
to license, sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Rave and its
Subsidiaries as presently conducted. Each item of Intellectual Property
owned or used by any of Rave and its Subsidiaries immediately prior to the
Effective Date hereunder will be owned or available for use by the Rave or
the Subsidiary on identical terms and conditions immediately subsequent to
the Effective Date hereunder. Each of Rave and its Subsidiaries has taken
all necessary action to maintain and protect each item of Intellectual
Property that it owns or uses.
b. None of Rave and its Subsidiaries has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of Xxxx Xxxxxxxx
and the directors and officers (and employees with responsibility for
Intellectual Property matters) of Rave and its Subsidiaries has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any
claim that any of Rave and its Subsidiaries must license or refrain from
using any Intellectual Property rights of any third party). To the
Knowledge of any of Xxxx Xxxxxxxx and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Rave
and its Subsidiaries, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of any of Rave and its Subsidiaries.
c. Section 4(b)(v)(c) of the Disclosure Schedule identifies each
item of Intellectual Property owned by Rave and its Subsidiaries, and
identifies each license, agreement, or other permission which any of Rave
and its Subsidiaries has granted to any third party with respect to any of
its Intellectual Property (together with any exceptions). With respect to
each item of Intellectual Property required to be identified in Section
4(b)(v)(c) of the Disclosure Schedule:
(A) Rave and its Subsidiaries possess all right, title, and
interest in and to the item, free and clear of any Security Interest,
license, or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of any of
Xxxx Xxxxxxxx and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Rave and its
Subsidiaries, is threatened which
16
challenges the legality, validity, enforceability, use, or ownership
of the item; and
(D) none of Rave and its Subsidiaries has ever agreed to
indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
d. Section 4(b)(v)(d) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that any of
Rave and its Subsidiaries uses pursuant to license, sublicense, agreement,
or permission. Rave has delivered to the Transferee correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property
required to be identified in Section 4(b)(v)(d) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of any of
Xxxx Xxxxxxxx and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Rave and its
Subsidiaries, is threatened which challenges the legality, validity,
or enforceability of the underlying item of Intellectual Property; and
17
(H) none of Rave and its Subsidiaries has granted any sublicense
or similar right with respect to the license, sublicense, agreement,
or permission.
e. To the Knowledge of any of Xxxx Xxxxxxxx and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of Rave and its Subsidiaries, none of Rave and its Subsidiaries
will interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a
result of the continued operation of its businesses as presently conducted
and as presently proposed to be conducted.
(vi) TITLE TO ASSETS. Rave and its Subsidiaries have good
and marketable title to, or a valid leasehold interest in, the properties
and assets used by them or located on their premises, free and clear of all
Security Interests.
(vii) SUBSIDIARIES. Except as set forth in Section 4(b)(vii)
of the Disclosure Schedule, Rave has no Subsidiaries.
(viii) UNDISCLOSED LIABILITIES. None of Rave and its
Subsidiaries has any Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability), which
is not included in the Rave Financial Information.
(ix) LEGAL COMPLIANCE. Each of Rave, its Subsidiaries, and
their respective predecessors and Affiliates has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local, and foreign governments (and all agencies thereof), and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging
any failure to so comply.
(x) CONTRACTS. Prior to the date of this Agreement, Rave
has disclosed to the Transferee all material contracts of Rave dated prior
to the date of this Agreement, and Rave has either delivered to the
Transferee, or given the Transferee the opportunity to review, all such
material contracts.
(xi) DISCLOSURE. The representations and warranties
contained in this Section 4 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 4 not misleading.
18
(c) REPRESENTATIONS AND WARRANTIES OF XXX XXXXX REGARDING PICTURE VISION.
(i) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each
of Picture Vision and its Subsidiaries is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction
of its incorporation. Each of Picture Vision and its Subsidiaries is duly
authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required. Each of Picture
Vision and its Subsidiaries has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged and in which it presently proposes to engage and to
own and use the properties owned and used by it. SECTION 4(c)(i) OF THE
DISCLOSURE SCHEDULE lists the directors and officers of each of Picture
Vision and its Subsidiaries. Xxx Xxxxx has delivered to the Transferee
correct and complete copies of the charter and bylaws of each of Picture
Vision and its Subsidiaries (as amended to date). The minute books
(containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of each of Picture Vision and
its Subsidiaries are correct and complete. None of Picture Vision and its
Subsidiaries is in default under or in violation of any provision of its
charter or bylaws.
(ii) CAPITALIZATION. The entire authorized capital stock of
Picture Vision consists of one-thousand (1000) Picture Vision Shares, one-
hundred (100) of which are issued and outstanding. All of the issued and
outstanding Picture Vision Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the
Person's set forth in SECTION 4(c)(ii) OF THE DISCLOSURE SCHEDULE. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or commitments that could require Picture Vision to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Picture Vision. There are
no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of Picture Vision.
(iii) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, 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
any of Picture Vision and its Subsidiaries is subject or any provision of
the charter or bylaws of any of Picture Vision and its Subsidiaries 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 any of
Picture Vision and its Subsidiaries is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of any
Security Interest
19
upon any of its assets). Other than any state or federal securities filings
related to the IPO, none of Picture Vision and its Subsidiaries 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.
(iv) BROKERS' FEES. None of Picture Vision and its Subsidiaries
has any Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
(v) INTELLECTUAL PROPERTY.
a. Picture Vision and its Subsidiaries own or have the right to use
pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Picture
Vision and its Subsidiaries as presently conducted. Each item of
Intellectual Property owned or used by any of Picture Vision and its
Subsidiaries immediately prior to the Effective Date hereunder will be
owned or available for use by the Picture Vision or the Subsidiary on
identical terms and conditions immediately subsequent to the Effective Date
hereunder. Each of Picture Vision and its Subsidiaries has taken all
necessary action to maintain and protect each item of Intellectual Property
that it owns or uses.
b. None of Picture Vision and its Subsidiaries has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of Xxx Xxxxx and
the directors and officers (and employees with responsibility for
Intellectual Property matters) of Picture Vision and its Subsidiaries has
ever received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation (including
any claim that any of Picture Vision and its Subsidiaries must license or
refrain from using any Intellectual Property rights of any third party). To
the Knowledge of any of Xxx Xxxxx and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Picture
Vision and its Subsidiaries, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of any of Picture Vision and its Subsidiaries.
c. Section 4(c)(v)(c) of the Disclosure Schedule identifies each
item of Intellectual Property owned by Picture Vision and its Subsidiaries,
and identifies each license, agreement, or other permission which any of
Picture Vision and its Subsidiaries has granted to any third party with
respect to any of its Intellectual Property (together with any exceptions).
With respect to each item of Intellectual Property required to be
identified in Section 4(c)(v)(c) of the Disclosure Schedule:
20
(A) Picture Vision and its Subsidiaries possess all right,
title, and interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of any of
Xxx Xxxxx and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Picture Vision
and its Subsidiaries, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(D) none of Picture Vision and its Subsidiaries has ever agreed
to indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
d. Section 4(c)(v)(d) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that any of
Picture Vision and its Subsidiaries uses pursuant to license, sublicense,
agreement, or permission. Picture Vision has delivered to the Transferee
correct and complete copies of all such licenses, sublicenses, agreements,
and permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in Section 4(c)(v)(d) of
the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
21
(F) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of any of
Xxx Xxxxx and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Picture Vision
and its Subsidiaries, is threatened which challenges the legality,
validity, or enforceability of the underlying item of Intellectual
Property; and
(H) none of Picture Vision and its Subsidiaries has granted any
sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
e. To the Knowledge of any of Xxx Xxxxx and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of Picture Vision and its Subsidiaries, none of Picture Vision and
its Subsidiaries will interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of
third parties as a result of the continued operation of its businesses as
presently conducted and as presently proposed to be conducted.
(vi) TITLE TO ASSETS. Picture Vision and its Subsidiaries
have good and marketable title to, or a valid leasehold interest in, the
properties and assets used by them or located on their premises, free and
clear of all Security Interests.
(vii) SUBSIDIARIES. Except as set forth in Section 4(c)(vii)
of the Disclosure Schedule, Picture Vision has no Subsidiaries.
(viii) UNDISCLOSED LIABILITIES. None of Picture Vision and its
Subsidiaries has any Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any Liability), which
is not included in the Picture Vision Financial Information.
(ix) LEGAL COMPLIANCE. Each of Picture Vision, its
Subsidiaries, and their respective predecessors and Affiliates has complied
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any
of them alleging any failure to so comply.
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(x) CONTRACTS. Prior to the date of this Agreement, Picture
Vision has disclosed to the Transferee all material contracts of Picture
Vision dated prior to the date of this Agreement, and Picture Vision has
either delivered to the Transferee, or given the Transferee the opportunity
to review, all such material contracts.
(xi) DISCLOSURE. The representations and warranties contained in
this Section 4 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 4 not misleading.
5. POST-EFFECTIVE DATE COVENANTS. The Parties agree as follows with
respect to the period following the Effective Date.
(a) GENERAL. In case at any time after the Effective Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 7 below). The Transferors acknowledge and agree that from and after the
Effective Date the Transferee will be entitled to possession of all documents,
books, records (including Tax records), agreements, and financial data of any
sort relating to the Targets and their Subsidiaries.
(b) LITIGATION SUPPORT. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Effective
Date involving any of the Targets and their Subsidiaries, each of the other
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Section 7 below).
(c) TRANSITION.
(i) The Transferors will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
artist, client, supplier, or other business associate of any of the Targets
and their Subsidiaries from maintaining the same business relationships
with the Targets and their Subsidiaries after the Effective Date as it
maintained with the Targets and their Subsidiaries prior to the Effective
Date;
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(ii) The Transferors and Transferee agree to take any and all
actions reasonably necessary and appropriate to implement the business
plans described in the prospectus used in connection with the IPO and to
reimburse the Transferors as provided in Schedule B.
(d) CERTIFICATES. Each certificate representing the Shares will be
imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT.
Each holder desiring to transfer any of the Shares first must furnish the
Transferee with (i) a written opinion reasonably satisfactory to the Transferee
in form and substance from counsel reasonably satisfactory to the Transferee by
reason of experience to the effect that the holder may transfer the Shares as
desired without registration under the Securities Act and (ii) a written
undertaking executed by the desired transferee reasonably satisfactory to the
Transferee in form and substance agreeing to be bound by the recoupment
provisions and the restrictions on transfer contained herein.
6. CONDITIONS TO OBLIGATION TO MAKE THIS AGREEMENT EFFECTIVE.
(a) CONDITIONS TO OBLIGATION OF THE TRANSFEREE. The obligation of the
Transferee to consummate the transactions to be performed by it in connection
with this Agreement is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section
3(b) and Section 4 above shall be true and correct in all material respects
at and as of the Effective Date;
(ii) the Transferors shall have performed and complied with all
of their covenants hereunder in all material respects through the Effective
Date;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, (C)
affect adversely the right of the Transferee to own the Target Shares and
to control the
24
Targets and their Subsidiaries, or (D) affect adversely the right of any of
the Targets and their Subsidiaries to own their assets and to operate their
businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(iv) each of the Transferors shall have entered into an
employment agreement with the Transferee substantially similar to the
Employment Agreements;
(v) each of the Targets shall have entered into the Expense
Allocation Agreement;
(vi) the Board of Directors of each of the Targets shall have
adopted resolutions approving the transfer, in accordance with the
provisions of this Agreement, of the Target Shares owned by the
Transferors, and such resolutions shall be in full force and effect on and
as of the Effective Date; and
(vii) all actions to be taken by the Transferors in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect
the transactions contemplated hereby will, unless otherwise set forth in
this Agreement, be reasonably satisfactory in form and substance to the
Transferee.
The Transferee may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Effective Date.
(b) CONDITIONS TO OBLIGATION OF THE TRANSFERORS. The obligation of the
Transferors to consummate the transactions to be performed by the Transferors in
connection with this Agreement are subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section 3(a)
above shall be true and correct in all material respects at and as of the
Effective Date;
(ii) the Transferee shall have performed and complied with all of
its covenants hereunder in all material respects through the Effective
Date;
(iii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect); and
25
(iv) the Transferee shall have entered into definitive Employment
Agreements with each of the Transferors;
(v) all actions to be taken by the Transferee in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will, unless otherwise set forth in this
Agreement, be reasonably satisfactory in form and substance to the
Transferors; and
(vi) Transferee shall have received (a) executed Board
resolutions extending the term of its private placement, (b) executed
consents of all subscribers in such private placement to the extension of
the term thereof, and (c) shall be reasonably satisfied that all
appropriate Blue Sky filings have been made.
The Transferors may waive any condition specified in this Section 6(b) if they
execute a writing so stating at or prior to the Effective Date.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Effective Date hereunder (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of warranty or
covenant at the time of Effective Date) and continue in full force and effect
for a period of one year from the Effective Date (subject to any applicable
statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE TRANSFEREE.
(i) In the event any of the Transferors breach (or in the event
any third party alleges facts that, if true, would mean any of the
Transferors has breached) any of their representations, warranties, and
covenants contained herein, and, if there is an applicable survival period
pursuant to Section 7(a) above, provided that the Transferee makes a
written claim for indemnification against any such Transferor pursuant to
Section 11(g) below within such survival period, then such Transferor
agrees to indemnify the Transferee from and against the entirety of any
Adverse Consequences the Transferee may suffer through and after the date
of the claim for indemnification (including any Adverse Consequences the
Transferee may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by
the breach (or the alleged breach).
(ii) Each Transferor agrees to indemnify the Transferee from and
against the entirety of any Adverse Consequences the Transferee may suffer
resulting
26
from, arising out of, relating to, in the nature of, or caused by any
Liability of the Target controlled by such Transferor immediately prior to
the Effective Date and its Subsidiaries for any Taxes of such Target and
its Subsidiaries with respect to any Tax year or portion thereof ending on
or before the Effective Date (or for any Tax year beginning before and
ending after the Effective Date to the extent allocable (determined in a
manner consistent with Section 8(c)) to the portion of such period
beginning before and ending on the Effective Date), to the extent such
Taxes are not reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of such Targets most recent
financial statements (rather than in any notes thereto), as such reserve is
adjusted for the passage of time through the Effective Date in accordance
with the past custom and practice of such Target and its Subsidiaries in
filing their Tax Returns.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE TRANSFERORS. In the
event the Transferee breaches (or in the event any third party alleges facts
that, if true, would mean the Transferee has breached) any of its
representations, warranties, and covenants contained herein, and, if there is an
applicable survival period pursuant to Section 7(a) above, provided that the
Transferors make a written claim for indemnification against the Transferee
pursuant to Section 11(g) below within such survival period, then the Transferee
agrees to indemnify the Transferors from and against the entirety of any Adverse
Consequences the Transferors may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Transferors may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach (or the alleged
breach).
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give
rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 7, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing; PROVIDED,
HOWEVER, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the
27
Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder,
(C) the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the continuing business interests
of the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7(d)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim, (B)
the Indemnified Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
(iv) In the event any of the conditions in Section 7(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in connection
therewith), (B) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending against the
Third Party Claim (including reasonable attorneys' fees and expenses), and
(C) the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this Section 7.
(v) Notwithstanding anything contained in this Section 7(d),
in no event shall the liability to or obligation to indemnify any other
Party of any Transferor exceed the value of his ownership interest in the
Transferee.
(e) OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant. The Transferors hereby agrees that they will not make any
claim for indemnification against any of the Targets and their Subsidiaries by
reason of the fact that they were a director, officer, employee, or agent of any
such entity or were serving at the request of any such entity as a partner,
trustee, director, officer, employee, or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses, or otherwise and whether
28
such claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand brought by the Transferee against the Transferors (whether such action,
suit, proceeding, complaint, claim, or demand is pursuant to this Agreement,
applicable law, or otherwise).
8. TAX MATTERS. The following provisions shall govern the allocation of
responsibility as between the Transferee and the Transferors for certain tax
matters following the Effective Date:
(a) TAX PERIODS ENDING ON OR BEFORE THE EFFECTIVE DATE. The Transferee
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the Targets and their Subsidiaries for all periods ending on or
prior to the Effective Date which are filed after the Effective Date. The
Transferee shall permit the Transferors to review and comment on each such Tax
Return of their respective Target described in the preceding sentence prior to
filing. The Transferors shall reimburse the Transferee for Taxes of their
respective Targets and their Subsidiaries with respect to such periods within
fifteen (15) days after payment by the Transferee or the Targets and their
Subsidiaries of such Taxes to the extent such Taxes are not reflected in the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the last balance sheet of the Targets prepared prior to the
Effective Date.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE EFFECTIVE DATE. The
Transferee shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Targets and their Subsidiaries for Tax periods which
begin before the Effective Date and end after the Effective Date. The
Transferors shall pay to the Transferee within fifteen (15) days after the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such Taxable period ending
on the Effective Date to the extent such Taxes are not reflected in the reserve
for Tax Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) shown on the face of the
last balance sheet of their respective Targets prepared prior to the Effective
Date. For purposes of this Section, in the case of any Taxes that are imposed on
a periodic basis and are payable for a Taxable period that includes (but does
not end on) the Effective Date, the portion of such Tax which relates to the
portion of such Taxable period ending on the Effective Date shall (x) in the
case of any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire Taxable period multiplied
by a fraction the numerator of which is the number of days in the Taxable period
ending on the Effective Date and the denominator of which is the number of days
in the entire Taxable period, and (y) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount which would be
payable if the relevant Taxable period ended on the Effective Date. Any credits
relating to a Taxable period that begins before and ends after the Effective
Date shall be taken into account as though the relevant Taxable period ended on
the Effective Date. All determinations necessary to give
29
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Targets and their Subsidiaries.
(c) COOPERATION ON TAX MATTERS.
(i) The Transferee, the Targets and their Subsidiaries and the
Transferors shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon
the other party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder.
The Targets and their Subsidiaries and the Transferors agree (A) to retain
all books and records with respect to Tax matters pertinent to the Targets
and their Subsidiaries relating to any taxable period beginning before the
Effective Date until the expiration of the statute of limitations (and, to
the extent notified by the Transferee or the Transferors, any extensions
thereof) of the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party
so requests, the Targets and their Subsidiaries or the Transferors, as the
case may be, shall allow the other party to take possession of such books
and records.
(ii) The Transferee and the Transferors further agree, upon
request, to use their best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) The Transferee and the Transferors further agree, upon
request, to provide the other party with all information that either party
may be required to report pursuant to Section 6043 of the Code and all
Treasury Department Regulations promulgated thereunder.
(d) TAX SHARING AGREEMENTS. All tax sharing agreements or similar
agreements with respect to or involving the Targets and their Subsidiaries shall
be terminated as of the Effective Date and, after the Effective Date, the
Targets and their Subsidiaries shall not be bound thereby or have any liability
thereunder.
(e) CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
City Transfer Tax and any similar tax imposed in
30
other states or subdivisions), shall be paid by the Transferors when due, and
the Transferors will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
law, the Transferee will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
9. EXCLUSION OF TRANSFERORS, READJUSTMENT OF SHARE ALLOCATION.
(a) EXCLUSION OF TRANSFEROR. If, prior to the Effective Date, it is
determined by the Transferee that the Financial Information of any Target is not
accurate in any material respect then the Parties, other than the Transferor who
controlled such Target prior to the Effective Date, shall determine, in their
sole discretion, whether to renegotiate the amount of Shares allocated to each
Transferor pursuant to this Agreement or to exclude such Transferor from the
Agreement. If any Transferor is so excluded from this Agreement, then the
remaining parties shall readjust the Share allocation set forth on SCHEDULE A.
(b) ALLOCATION OF EXPENSES. Each Transferor will cause his respective
Target to enter into the Expense Allocation Agreement, pursuant to which each
Target shall agree to be liable for one third of the expenses of the Transferee
in connection with the IPO up to the sooner of the date such Target is, for
whatever reason, no longer involved in the transactions, or the Transferee
determines that the IPO will not occur, provided, however, that no Target shall
be responsible for more than $50,000 of such expenses.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Effective Date without the prior written approval of
the Transferee and the Transferors; PROVIDED, HOWEVER, that any Party may make
any public disclosure it believes in good faith is required by applicable law
(in which case the disclosing Party will use its reasonable best efforts to
advise the other Parties prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns.
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No Party may assign either this Agreement or any of his or its rights,
interests, or obligations hereunder without the prior written approval of the
Transferee and the Transferors; PROVIDED, HOWEVER, that the Transferee may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Transferee nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) 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.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient at the
addresses set forth on the signature page hereto. Any Party may send any
notice, request, demand, claim, or other communication hereunder to the intended
recipient at the address set on the signature page hereto using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Transferee and the Transferors. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
32
(j) SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) EXPENSES. Each of the Parties, the Targets, and their Subsidiaries
will bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby over and above the reimbursed amount set forth in Section 5(d). The
Transferors agree that none of the Targets or their Subsidiaries has borne or
will bear any of the Transferors' costs and expenses (including any of their
legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby.
(l) 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. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(m) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees that
the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10(o) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(o) SUBMISSION TO JURISDICTION. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in New York, New York, in any
action or proceeding arising out
33
of or relating to this Agreement and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each Party
also agrees not to bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto.
34
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
TRANSFEREE: PARADISE MUSIC & ENTERTAINMENT, INC.
By:________________________________
Xxxx Xxxxxxxx
President
Address for notice:
000 Xxxx 00xx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
With a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
TRANSFERORS: ________________________________
Name: Xxxxx Xxxxx
Address for notice:
All Access Entertainment Management Group, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
With a copy to:
Xxxxxx X. Xxxxx III, Esq.
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
________________________________
Name: Xxxxxxx Xxxxx
35
Address for notice:
All Access Entertainment Management Group, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
With a copy to:
Xxxxxx X. Xxxxx III, Esq.
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
________________________________
Name: Xxxx Xxxxxxxx
Address for notice:
Rave Music Group, Inc.
000 Xxxx 00xx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
________________________________
Name: Xxx Xxxxx
Address for notice:
Picture Vision, Inc.
000 00xx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
36
SCHEDULE A
DISTRIBUTION OF SHARES AMONG TRANSFERORS
Transferor Number of Shares
---------- ----------------
Xxxxx Xxxxx 145,500
Xxxxxxx Xxxxx 145,500
Xxxx Xxxxxxxx 291,000
Xxx Xxxxx 291,000
SCHEDULE B
SCHEDULE OF COSTS INCURRED
Transferor Expenses
---------- --------
All Access $13,000
Picture Vision $ 9,000
Rave $ 9,000
DISCLOSURE SCHEDULE
Section 4(a)(i) Directors of All Access
-----------------------
Xxxxx Xxxxx
Xxxxxxx Xxxxx
Officers of All Access
-----------------------
Name Title
---------------------- -----
Xxxxx Xxxxx President
Xxxxxxx Xxxxx Vice President, Secretary
& Treasurer
All Access has no Subsidiaries
Section 4(a)(ii) Record Holders of All Access Shares(a)(b)
-----------------------------------------
Name Amount
------------------------------------------ ------
Xxxxx Xxxxx 10
Xxxxxxx Xxxxx 10
Section 4(a)(v)(c) Items of Intellectual Property owned by All Access
--------------------------------------------------
None
---------------
(a) Specifically excluded from the Exchange Agreement to which this Schedule is
a part are securities or ownership interests owned by Messrs. Xxxxx and
Xxxxx in projects set forth on Schedule A to their respective Employment
Agreements.
(b) While not representing ownership interests in All Access or its
Subsidiaries, it is All Access' policy, consistent with industry standards,
to pay certain employees who either identify, develop and/or manage artists
up to 5% of the revenues payable to All Access as a result of its
representation of such artists.
Licenses, Agreements, or other permissions
which All Access has granted to third parties
with respect to any of its Intellectual Property
------------------------------------------------
None
Section 4(a)(v)(d) Items of Intellectual Property owned by
third parties and used by All Access pursuant
to license, sublicense, agreement, or permission
------------------------------------------------
None
Section 4(a)(vi) All Access leases its office space at 000 Xxxxxxx
Xxxxxx, Xxxxx 000, and the copier and telecopier used
therein; Certain of the computers used by All Access,
or its business, are leased.
Section 4(b)(i) Directors of Rave
-----------------
Xxxx Xxxxxxxx
Officers of Rave
----------------
Name Title
---------------- -----
Xxxx Xxxxxxxx President
Section 4(b)(ii) Record Holders of Rave Shares
-----------------------------
Name Amount
----------------------------- ------
Xxxx Xxxxxxxx 200
Section 4(b)(v)(c) Items of Intellectual Property owned by Rave
--------------------------------------------
All items of Intellectual Property including all
musical works, compositions and publishing owned by
Xxxx Xxxxxxx Music, Inc. except for Xxxx Xxxxxxxx'x
five CD stock music library and any musical works,
compositions or publishing contained therein. Copies
of such Intellectual Property can be inspected at
Rave's offices.
Licenses, Agreements, or other permissions
which Rave has granted to third parties
with respect to any of its Intellectual Property
------------------------------------------------
All Licenses, Agreements, or other permissions which
Rave has granted to third parties with respect to any
of its Intellectual Property other than Licenses,
Agreements, or other permissions which Rave has granted
to third parties with respect to Xxxx Xxxxxxxx'x five
CD stock music library and any musical works,
compositions or publishing contained therein. Copies
of such Licenses can be inspected at Rave's offices.
Section 4(b)(v)(d) Items of Intellectual Property owned by
third parties and used by Rave pursuant
to license, sublicense, agreement, or permission
------------------------------------------------
None
Section 4(b)(vii) Rave has no Subsidiaries
Section 4(c)(i) Directors of Picture Vision
---------------------------
Xxx Xxxxx
Officers of Picture Vision
--------------------------
Name Title
-------------------------- -----
Xxx Xxxxx President
Xxxxxxx Small Vice President
Section 4(c)(ii) Record Holders of Picture Vision Shares
---------------------------------------
Name Amount
--------------------------------------- ------
Xxx Xxxxx 100
Section 4(c)(v)(c) Items of Intellectual Property
owned by Picture Vision
------------------------------
None
Licenses, Agreements, or other permissions
which Picture Vision has granted to third parties
with respect to any of its Intellectual Property
-------------------------------------------------
None
Section 4(c)(v)(d) Items of Intellectual Property owned by
third parties and used by Picture Vision pursuant
to license, sublicense, agreement, or permission
-------------------------------------------------
None
Section 4(c)(vii) Picture Vision has no Subsidiaries
