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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
By and Between
INDENET, INC.
A Delaware Corporation
and
DIGITAL GENERATION SYSTEMS, INC.
A California Corporation
July 18, 1997
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TABLE OF CONTENTS
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ARTICLE I - PURCHASE AND SALE OF STOCK........................................1
1.1 Transfer of Stock...........................................1
1.2 Consideration...............................................1
1.3 Adjustment with Respect to Purchaser Shares.................2
1.4 Purchase Price Adjustment...................................2
1.5 The Closing.................................................5
1.6 Closing Deliveries..........................................5
1.7 Further Assurances..........................................6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLER.........................6
2.1 Corporate Organization......................................6
2.2 Capitalization .............................................7
2.3 Ownership of Shares.........................................7
2.4 Authorization...............................................7
2.5 No Approvals or Conflicts...................................8
2.6 Financial Statements; Undisclosed Liabilities...............8
2.7 No Changes..................................................9
2.8 Tax Matters................................................11
2.9 Restrictions on Business Activities........................13
2.10 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment.....................................13
2.11 Intellectual Property......................................14
2.12 Agreements, Contracts and Commitments......................17
2.13 Customers and Suppliers....................................18
2.14 Interested Party Transactions..............................18
2.15 Governmental Authorization.................................19
2.16 Litigation.................................................19
2.17 Accounts Receivable........................................19
2.18 Minute Books...............................................19
2.19 Environmental Matters......................................19
2.20 Brokers' and Finders' Fees; Third Party Expenses...........20
2.21 Employee Benefit Plans and Compensation....................20
2.22 Insurance..................................................24
2.23 Compliance with Laws.......................................24
2.24 Lawful Transfer............................................24
2.25 Certain Business Practices.................................24
2.26 Warranties; Indemnities....................................24
2.27 Complete Copies of Materials...............................24
2.28 Representations Complete...................................24
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER....................25
3.1 Organization...............................................25
3.2 Capitalization.............................................25
3.3 Authorization..............................................26
3.4 No Approvals or Conflicts..................................26
3.5 SEC Reports; Financial Statements..........................26
3.6 Absence of Certain Changes.................................27
3.7 Compliance with Laws; Governmental Authorizations..........27
3.8 Litigation.................................................27
3.9 No Brokers' or Other Fees..................................27
3.10 Financing..................................................28
ARTICLE IV - CONDITIONS TO SELLER'S OBLIGATIONS..............................28
4.1 Representations and Warranties.............................28
4.2 Performance................................................28
4.3 Officer's Certificate......................................28
4.4 Good Standing Certificate..................................28
4.5 Secretary's Certificate....................................28
4.6 Injunctions................................................29
4.7 Litigation.................................................29
4.8 Governmental Approval......................................29
4.9 Republic Bank Release......................................29
4.10 No Material Adverse Changes................................29
4.11 Legal Opinion..............................................29
4.12 Registration Rights Agreement..............................29
ARTICLE V - CONDITIONS TO PURCHASER'S OBLIGATIONS............................30
5.1 Representations and Warranties.............................30
5.2 Performance................................................30
5.3 Officer's Certificate......................................30
5.4 Good Standing Certificate - Seller.........................30
5.5 Good Standing Certificate - Company........................30
5.6 Secretary's Certificate....................................30
5.7 No Material Adverse Changes................................30
5.8 Resignation of Directors...................................31
5.9 Injunctions................................................31
5.10 Litigation.................................................31
5.11 Governmental Approval......................................31
5.12 Consents and Approvals.....................................31
5.13 Consent of Lenders.........................................31
5.14 Customer Continuity........................................31
5.15 Vender Obligations.........................................31
5.16 Board Approval.............................................31
5.17 State "Blue Sky" Compliance................................32
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5.18 Legal Opinion..............................................32
5.19 Registration Rights Agreement..............................32
ARTICLE VI - COVENANTS AND AGREEMENTS........................................32
6.1 Conduct of Business of the Company.........................32
6.2 Tax Matters................................................34
6.3 WARN Act...................................................36
6.4 Supplements to Disclosure Schedule.........................37
6.5 Reasonable Efforts.........................................37
6.6 Access to Information......................................37
6.7 Publicity..................................................37
6.8 Non-competition and Non-solicitation.......................38
6.9 Transfer Restrictions......................................39
6.10 IndeNet Trademarks.........................................40
6.11 Debt Guarantees............................................40
6.12 Cooperation................................................40
6.13 State Qualification........................................41
ARTICLE VII - TERMINATION....................................................41
7.1 Termination................................................41
7.2 Procedure and Effect of Termination........................41
ARTICLE VIII - INDEMNIFICATION...............................................42
8.1 Indemnification............................................42
8.2 Arbitration Procedure......................................44
8.3 Remedies...................................................46
ARTICLE IX - MISCELLANEOUS...................................................46
9.1 Fees and Expenses..........................................46
9.2 Governing Law..............................................46
9.3 Amendment..................................................46
9.4 No Assignment..............................................46
9.5 Waiver.....................................................46
9.6 Notices....................................................46
9.7 Complete Agreement.........................................47
9.8 Counterparts...............................................48
9.9 Headings...................................................48
9.10 Severability...............................................48
9.11 Third Parties..............................................48
EXHIBITS
Exhibit 1.2(c) - Purchaser Note
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Exhibit 1.2(d)A - New Xxxx Note
Exhibit 1.2(d)B - Security Agreement
Exhibit 1.2(d)C - Old Xxxx Notes
Exhibit 2.6 - Audited Special-Purpose Balance Sheet
Exhibit 4.11 - Legal Opinion of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
Professional Corporation
Exhibit 4.12 - Rights Agreement
Exhibit 5.18 - Legal Opinion of Xxxx & Xxxxx Professional Corporation
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), is entered into as of
July 18, 1997, by and between IndeNet, Inc., a Delaware corporation ("Seller"),
and Digital Generation Systems, Inc., a California corporation ("Purchaser").
WITNESSETH
WHEREAS, Seller is the owner of 1,810 shares of common stock, no par
value (the "Shares"), of Starcom Mediatech, Inc., a Delaware corporation (the
"Company"), such Shares being all of the issued and outstanding shares of
capital stock of the Company; and
WHEREAS, Purchaser desires to purchase, and Seller desires to sell, the
Shares on the terms and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and agreements hereinafter set forth, the mutual benefits to be gained
by the performance thereof, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and accepted, the
parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Transfer of Stock. On the Closing Date (as defined in Section 1.4
hereof), and on the terms and subject to the conditions set forth herein, Seller
shall sell, assign, transfer and deliver to Purchaser the Shares, free and clear
of all options, pledges, security interests, voting trust or similar
arrangements, liens, charges or other encumbrances or restrictions on voting or
transfer ("Encumbrances"), other than the restrictions imposed by federal and
state securities laws.
1.2 Consideration. On the Closing Date, and on the terms and subject to
the conditions set forth herein, in reliance on the representations, warranties,
covenants and agreements of the parties set forth herein and in consideration of
the sale, assignment, transfer and delivery of the Shares in accordance with
Section 1.1 hereof, Purchaser shall deliver to Seller each of the following
(sometimes referred to herein as the "Purchase Price"):
(a) $13,988,730.00 in cash by wire transfer of immediately
available funds to an account designated by Seller (the "Cash Consideration");
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(b) 324,355 shares of Common Stock of Purchaser (the
"Purchaser Shares");
(c) the 9% Subordinated Promissory Note, in the form attached
as Exhibit 1.2(c) hereto, payable by Purchaser to the order of Seller in the
aggregate principal amount of $2,243,806.34 (the "Purchaser Note"); and
(d) the 9% Secured Subordinated Promissory Note, in the form
attached as Exhibit 1.2(d)A hereto, payable by Purchaser to the order of Xxxxxx
X. Xxxx in the aggregate principal amount of $2,206,193.66 (the "New Xxxx
Note"), and secured by all of the shares of the Company pursuant to that certain
Security Agreement in the form attached hereto as Exhibit 1.2(d) B (the
"Security Agreement"); pursuant to the New Xxxx Note, Purchaser shall substitute
its obligation for the obligations of certain promissory notes payable by Seller
to the order of Xxxxxx X. Xxxx in the aggregate principal amount of
$2,206,193.66, copies of which are attached as Exhibit 1.2(d)C hereto (the "Old
Xxxx Notes"); provided, however, that any reduction in the amount of debt
evidenced by the Old Xxxx Notes below $2,206,193.66 in the aggregate at the
Closing Date shall increase, dollar for dollar, the aggregate principal amount
of the Purchaser Note deliverable by Purchaser to Seller pursuant to Section
1.2(c) as consideration for the Shares.
1.3 Adjustment with Respect to Purchaser Shares. In the event that, on
or after the date hereof until the Closing Date, (i) Purchaser shall declare or
pay any cash or stock dividend or other distribution, or issue any rights with
respect to the outstanding Common Stock of Purchaser, payable or distributable
to holders of record of shares of Common Stock of Purchaser on or prior to the
Closing Date, or (ii) Purchaser shall effect, with respect to the outstanding
Common Stock of Purchaser, a merger, recapitalization, combination, conversion,
exchange of shares, issuance of shares or other transaction affecting the Common
Stock of Purchaser, effective on a date prior to the Closing Date, then at the
Closing, Purchaser shall deliver to Seller together with the Purchaser Shares
and the other consideration set forth in Section 1.2 hereof, such cash,
securities, assets or rights as Seller would have received pursuant to such
dividend, distribution, issuance of rights or other transaction set forth above
in this Section 1.3 had Seller been the holder of record of the Purchaser Shares
on the record date applicable to such dividend, distribution or issuance of any
rights or on the effective date of such other transaction with respect to the
outstanding Common Stock of Purchaser. In addition, after the Closing, Purchaser
shall deliver to Seller, contemporaneously with the delivery to other holders of
the Common Stock of Purchaser, all other cash, securities, assets or rights
distributed or issued with respect to the outstanding Common Stock of Purchaser
to holders of record of shares of Common Stock of Purchaser on or after the date
hereof not previously delivered to Seller pursuant to the foregoing provisions.
1.4 Purchase Price Adjustment.
(a) As soon as practicable, but in no event later than thirty (30)
days following the Closing Date, Seller shall prepare, at Seller's expense, a
Statement of Adjusted Working Capital of the Company as of the close of business
on the Closing Date (including the notes
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thereto, the "Closing Date Statement"). The Closing Date Statement shall
present, for the period commencing on June 30, 1997 and ending as of the Closing
Date.
(i) the "net working capital" of the Company, as defined
according to generally accepted accounting principles ("GAAP"), but excluding
(A) intercompany receivables and payables, (B) cash and cash equivalents, and
(C) borrowings, including the current portion of long-term borrowings (including
capitalized leases) (the "Net Working Capital Amount");
(ii) the "net debt" of the Company, as defined as the sum of
all borrowings of the Company (whether long-term or short-term and including
capitalized leases), less cash and cash equivalents (the "Net Debt Amount"); and
(iii) the "gross fixed asset additions" of the Company, as
defined as any additions to or investments in fixed assets necessary to the
operation of the business of the Company ("Gross Fixed Asset Additions").
(b) During the preparation of the Closing Date Statement and the
period of any dispute within the contemplation of this Section 1.4, Purchaser
shall cause the Company to (i) provide Seller and its authorized representatives
with access to the books, records, facilities and employees of the Company, (ii)
provide Seller as promptly as practicable after the Closing Date (but in no
event later than fifteen (15) days after the Closing Date) with normal periodic
financial information with respect to the Company for the period ending on the
Closing Date, and (iii) cooperate with Seller and its authorized representatives
with respect to the preparation of the Closing Date Statement, including the
provision on a timely basis of all information necessary for or useful in the
preparation of the Closing Date Statement.
(c) Seller shall deliver a copy of the Closing Date Statement,
together with the work papers used in the preparation thereof, to Purchaser
promptly after it has been prepared and in no event later than thirty (30) days
after the Closing Date. After receipt of the Closing Date Statement, Purchaser
shall have thirty (30) days to review the Closing Date Statement, together with
the work papers used in the preparation thereof. Purchaser and its authorized
representatives shall have full access to all books and records, employees and
accounts of Seller to the extent required to complete their review of the
Closing Date Statement. Unless Purchaser delivers written notice to Seller on or
prior to the 60th day after Purchaser's receipt of the Closing Date Statement
specifying in reasonable detail all disputed items and amounts with respect
thereto and the basis therefor, Purchaser shall be deemed to have accepted and
agreed to the Closing Date Statement. If Purchaser so notifies Seller of its
objection to the Closing Date Statement, Purchaser and Seller shall, within
thirty (30) days following such notice (the "Resolution Period"), attempt to
resolve their differences in good faith with respect to any such disputed items
and/or amounts, and any resolution by such parties as to any such disputed items
and/or amounts shall be final, binding and conclusive with respect to each of
such parties. If following resolution of any disputed items and/or amounts there
do not remain in dispute items and/or amounts the net effect of which exceeds
$50,000 in the aggregate, then all such items and/or amounts
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remaining in dispute shall be deemed to have been resolved in favor of the
Closing Date Statement delivered by Seller to Purchaser.
(d) If at the conclusion of the Resolution Period the net effect of
all remaining items and/or amounts shall exceed $50,000 in the aggregate, then
upon the request of Purchaser or Seller all items and amounts relating to the
Closing Date Statement which remain in dispute shall be submitted to a firm of
nationally recognized independent public accountants (the "Neutral Auditors")
selected by Seller and Purchaser within ten (10) days after the expiration of
the Resolution Period. If Seller and Purchaser are unable to agree on the
Neutral Auditors, Seller and Purchaser shall each have the right to request the
American Arbitration Association to appoint the Neutral Auditors who shall not
have had a material relationship with Seller, Purchaser or any of their
respective affiliates within the past four (4) years. Each party agrees to
execute, if requested by the Neutral Auditors, a reasonable engagement letter.
All fees and expenses relating to the work, if any, to be performed by the
Neutral Auditors shall be borne equally by Seller and Purchaser. The Neutral
Auditors shall act as an arbitrator to determine, based solely on presentations
by Seller and Purchaser, and not by independent review, only those items and/or
amounts with respect to the Closing Date Statement which remain in dispute. The
Neutral Auditors' determination shall be made within thirty (30) days of their
selection, whether or not such presentations by Seller and Purchaser have been
made within such period, shall be set forth in a written statement containing a
basis for such determination delivered to Seller and Purchaser, and shall be
final, binding and conclusive. The term "Adjusted Closing Date Statement," as
hereinafter used, shall mean the definitive Closing Date Statement agreed to by
Purchaser and Seller in accordance with Section 1.4(c) or the definitive Closing
Date Statement resulting from the determinations made by the Neutral Auditors in
accordance with this Section 1.4(d) (in addition to those items theretofore
agreed to by Seller and Purchaser), in each case prepared in the manner set
forth in the last sentence of Section 1.4(a) hereof.
(e) The Cash Consideration shall be increased or decreased, as the
case may be, dollar for dollar, to the extent that either the Net Working
Capital Amount or the Net Debt Amount reflected in the Adjusted Closing Date
Statement is greater than or less than, respectively, the Net Working Capital
Amount or the Net Debt Amount, as the case may be, reflected in the Audited
Special-Purpose Balance Sheet. In addition, the Cash Consideration shall be
increased, dollar for dollar, to the extent of any Gross Fixed Asset Additions,
if any, since the date of the Audited Special-Purpose Balance Sheet; provided,
however, that in no event shall the Cash Consideration be increased by an amount
in excess of $100,000 as a result of any Gross Fixed Asset Additions. The amount
of any increase to or reduction of the Cash Consideration pursuant to this
Section 1.4(e) shall bear interest from the Closing Date through the date of
payment at the publicly announced base interest rate of Bank of America NT&SA in
effect from time to time from the Closing Date to the date of such payment. The
amount of any increase to or reduction of the Cash Consideration pursuant to
this Section 1.4(e), together with interest thereon, shall be paid by wire
transfer in immediately available funds to the account designated by Seller or
Purchaser, as the case may be, within five (5) business days after the Adjusted
Closing Date Statement is agreed to by Seller and Purchaser pursuant to Section
1.4(c) hereof, or any remaining disputed items and/or amounts with respect
thereto are ultimately determined
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by the Neutral Auditors pursuant to Section 1.4(d) hereof; provided, however,
that in the event that the interest payable with respect to the increase or
decrease in the Cash Consideration pursuant to this Section 1.4(e), if any,
shall not exceed $5,000, then such interest shall not be due and payable.
1.5 The Closing. The closing (the "Closing") of the transactions
contemplated in this Agreement shall take place at the offices of Xxxx & Xxxxx
Professional Corporation, 0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx, at 9:00 A.M., Pacific Standard Time, on July 18, 1997 (the "Closing
Date"), or subject to the limitations set forth in Section 7.1 hereof, at such
other place and time as may be agreed upon by Seller and Purchaser after
satisfaction or waiver of the conditions set forth in Article IV and V hereof
assuming reasonable diligence by each of the parties hereto.
1.6 Closing Deliveries.
(a) Deliveries by Seller. At or prior to the Closing, Seller shall
deliver or cause to be delivered to Purchaser each of the following:
(i) a certificate evidencing the Shares, which certificate
shall be properly endorsed for transfer or accompanied by duly executed stock
powers, in either case executed in favor of Purchaser and otherwise in a form
acceptable for transfer on the books of the Company;
(ii) a certificate, dated the Closing Date and executed by the
Chief Financial Officer of Seller, certifying (A) that each of the
representations and warranties of Seller set forth in Article II hereof was
accurate in all respects as of the date hereof and is accurate in all respects
as of the Closing Date as if made on and as of the Closing Date, and (B) to the
fulfillment of the conditions set forth in Article V hereof; and
(iii) all other previously undelivered documents required to
be delivered by Seller to Purchaser at or prior to the Closing Date in
connection with the transactions contemplated hereby.
(b) Deliveries by Purchaser. At or prior to the Closing, Purchaser
shall deliver or cause to be delivered to Seller each of the following:
(i) the Cash Consideration by wire transfer of immediately
available funds to an account designated by Seller;
(ii) a certificate or certificates evidencing the Purchaser
Shares, duly executed by the President and the Secretary of Purchaser;
(iii) the Purchaser Note, executed by a duly authorized officer
of Purchaser;
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(iv) the New Xxxx Note, executed by a duly authorized officer
of Purchaser;
(v) a certificate, dated the Closing Date and executed by the
President and Chief Executive Officer of Purchaser, certifying (A) that each of
the representations and warranties of Purchaser set forth in Article III hereof
was accurate in all respects as of the date hereof and is accurate in all
respects as of the Closing Date as if made on and as of the Closing Date, and
(B) to the fulfillment of the conditions set forth in Article IV hereof; and
(vi) all other previously undelivered documents required to be
delivered by Purchaser to Seller at or prior to the Closing Date in connection
with the transactions contemplated hereby.
(c) All instruments and documents executed and delivered to
Purchaser pursuant hereto shall be in form and substance, and executed in a
manner, that is reasonably satisfactory to Purchaser. All instruments and
documents executed and delivered to Seller pursuant hereto shall be in form and
substance, and executed in a manner, that is reasonably satisfactory to Seller.
1.7 Further Assurances. After the Closing, each party hereto shall from
time to time, at the request of the other party and without further cost or
expense to such other party, execute and deliver such other instruments of
conveyance and transfer and take such other actions as such other party may
reasonably request in order to consummate the transactions contemplated hereby
and to vest in Purchaser good and valid title to the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser, subject to such
exceptions as are specifically disclosed in the disclosure letter of even date
herewith relating to this Agreement and delivered by Seller to Purchaser
herewith (the "Disclosure Letter"), as follows:
2.1 Corporate Organization. Each of Seller and the Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has full corporate power and authority to
own its properties and assets and to carry on its business as now being
conducted and is duly qualified or licensed to do business as a foreign
corporation in good standing in the jurisdictions in which the ownership of its
property or the conduct of its business requires such qualification, except
jurisdictions in which the failure to be so qualified or licensed would not have
a material adverse effect on the business, assets (including intangible assets),
operations, financial condition, results of operations or prospects of the
Company (hereinafter referred to as a "Material Adverse Effect"). Seller has
delivered to Purchaser complete and correct copies of the Certificate of
Incorporation of the Company and all amendments thereto to the date hereof, the
Bylaws of the Company as presently in effect, and
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the Minute Book of the Company. The Company does not own, directly or
indirectly, any capital stock or other equity securities of any other
corporation or have any direct or indirect equity or other ownership interest in
any partnership, association, joint venture or other business entity other than
equity securities or ownership interests which are immaterial in amount or
significance.
2.2 Capitalization. The authorized capital stock of the Company
consists of 5,000 shares of common stock, no par value, of which only the Shares
are issued and outstanding and no other shares of any other class or series of
capital stock or other equity security of the Company are issued and
outstanding. There are no subscriptions, options, warrants, calls, rights,
contracts, commitments, understandings, restrictions, agreements or any other
arrangements of any character (including any right of conversion or exchange
under any outstanding securities or other instruments of the Company), whether
written or oral, to which either Seller or the Company is a party or by which
any of their respective assets are or may be bound, pursuant to which Seller is
or may be obligated to cause the Company, or the Company is or may be obligated,
(i) to issue, sell, transfer, deliver, repurchase or redeem, or cause to be
issued, sold, transferred, delivered, repurchased or redeemed, any shares of
capital stock of the Company, or (ii) to grant, extend, accelerate the vesting
of, change the price of, or otherwise amend or enter into any such subscription,
option, warrant, call, right, contract, commitment, understanding, restriction,
agreement or other arrangement in respect of any shares of the capital stock of
the Company. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or other similar rights with respect to the Company.
As a result of the transactions contemplated hereby, at the Closing Purchaser
will be the record and beneficial owner of all of the outstanding capital stock
of the Company and rights to acquire capital stock of the Company. All of the
Shares have been duly authorized and are validly issued, fully paid,
nonassessable shares of Common Stock of the Company, free of any preemptive
rights created by statute, the Certificate of Incorporation of Seller or the
Company, the Bylaws of Seller or the Company, or any agreement to which Seller
or the Company is a party or by which Seller or the Company may be bound, and
have been issued in full compliance with all federal and state securities laws.
The Company has no authorized, issued or outstanding capital stock other than
the Shares.
2.3 Ownership of Shares. The Shares are owned by Seller, free and clear
of all Encumbrances, other than the restrictions imposed by federal and state
securities laws. Upon the consummation of the transactions contemplated hereby,
Purchaser will acquire title to the Shares, free and clear of all Encumbrances,
other than the restrictions imposed by federal and state securities laws and
Encumbrances arising as a result of any action taken by Purchaser or any of its
affiliates ("Affiliates"), as defined in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
2.4 Authorization. Seller has full corporate power and authority to
execute and deliver this Agreement and each of the related agreements
contemplated hereby and to be executed and delivered in connection herewith (the
"Related Agreements"), to perform its obligations hereunder and thereunder, and
to consummate the transactions contemplated hereby and thereby. The Board of
Directors of Seller has duly approved and authorized the execution and delivery
by Seller of this Agreement and each of the Related Agreements, the performance
by Seller of its obligations
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hereunder and thereunder, and the consummation by Seller of the transactions
contemplated hereby and thereby, and no other corporate proceedings on the part
of Seller are necessary to approve and authorize the execution and delivery by
Seller of this Agreement and each of the Related Agreements, the performance by
Seller of its obligations hereunder and thereunder, and the consummation by
Seller of the transactions contemplated hereby and thereby. This Agreement has
been, and each of the Related Agreements will be, duly and validly executed and
delivered by Seller, and this Agreement constitutes, and each of the Related
Agreements will constitute upon the execution and delivery thereof by Seller, a
valid and binding agreement of Seller enforceable against Seller in accordance
with its respective terms, except to the extent that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses.
2.5 No Approvals or Conflicts. The execution and delivery by Seller of
this Agreement does not, and the consummation by Seller of the transactions
contemplated hereby will not (i) violate, conflict with or result in a breach of
any provision of the Certificate of Incorporation or the Bylaws of Seller or the
Company, (ii) violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties of the Company or on Seller's interest in
the Shares under, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement or other instrument to which
Seller, the Company, or any of their respective properties or assets are or may
be bound, (iii) violate any order, injunction, judgment, ruling, law or
regulation of any court or governmental authority applicable to Seller, the
Company or any of their respective properties or assets, or (iv) except for
applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder, require any consent, approval or authorization of, or
notice to, or declaration, filing or registration with, any governmental or
regulatory authority or other third party.
2.6 Financial Statements; Undisclosed Liabilities. Attached hereto as
Exhibit 2.6 are (i) the audited special-purpose balance sheet of the Company as
of March 31, 1997 (the "Audited Special-Purpose Balance Sheet") and the combined
audited special-purpose statements of earnings and cash flows of the Company for
the fiscal year then ended, and (ii) the unaudited balance sheet of the Company
as of June 30, 1997. Such financial statements, including the related notes
thereto, if any, are sometimes referred to herein as the "Financial Statements."
Except as otherwise disclosed in the notes thereto, the Financial Statements
present fairly in all material respects the financial condition and results of
operations of the Company as of and for the period ended the date thereof. The
Company has no material liabilities, indebtedness, obligations, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, or unmatured, not required to be reflected on a balance
sheet prepared in accordance with generally accepted accounting principles
("GAAP"), other than (i) liabilities and obligations that are reflected, accrued
or reserved for in the Audited Special-Purpose Balance Sheet or disclosed in the
notes thereto, and (ii) obligations incurred in the ordinary course of
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business and consistent with past practice since the date of the Audited
Special-Purpose Balance Sheet.
2.7 No Changes. Since the date of the Audited Special-Purpose Balance
Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of its
business as conducted on that date and consistent with the past practices of the
Company;
(b) amendments or changes to the Certificate of Incorporation or
the Bylaws of the Company;
(c) capital expenditure or commitment by the Company exceeding
$50,000 in any individual case or in the aggregate;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company, or any change
in the independent accountants for the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the Shares, or any direct or indirect redemption,
purchase or other acquisition by the Company of its capital stock;
(i) increase in the salary or other compensation paid, payable or
to become payable by the Company to any of its officers, directors, employees,
consultants or advisors, other than cost-of-living adjustments made in the
ordinary course of the Company's business not exceeding five percent (5%) in any
individual case, or the declaration, payment or commitment or obligation of any
kind for the payment by the Company of a bonus or other additional salary or
compensation to any such person;
(j) agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is a party or by which the Company or any of its
assets is or may be bound, or any termination, extension, amendment or
modification the terms of any agreement, contract, covenant, instrument, lease,
license or commitment to which the Company is a party or by which the Company or
any of its assets is or may be bound involving a liability of the Company,
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15
whether fixed or contingent, in excess of $25,000 and other than in the ordinary
course of the Company's business;
(k) sale, lease, license or other disposition of any of the assets
or properties of the Company other than in the ordinary course of its business,
or any creation of any security interest in such assets or properties;
(l) loan by the Company to any person or entity, any incurrence by
the Company of any indebtedness other than in the ordinary course of its
business and in an amount not exceeding $25,000, any guaranteeing by the Company
of any indebtedness, any issuance or sale of any debt securities of the Company
or any guaranteeing of any debt securities of others, except for advances to
employees for travel and business expenses in the ordinary course of business
and in an amount not exceeding $25,000 in the aggregate, consistent with the
past practices of the Company;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company, in excess of $25,000 in the aggregate;
(n) the commencement, notice or threat of commencement of any
lawsuit or proceeding or investigation against the Company or its affiliates, or
any occurrence of an event giving rise to any reasonable basis therefor;
(o) notice of any claim or potential claim of ownership by any
person other than the Company of the Company Intellectual Property (as defined
in Section 2.10 hereof) or of infringement by the Company of any other person's
Intellectual Property (as defined in Section 2.10 hereof);
(p) issuance or sale, or contract to issue or sell, by the Company
of any shares of its capital stock or securities exchangeable, convertible or
exercisable therefor, or any securities, warrants, options or rights to purchase
any of the foregoing;
(q) change in pricing or royalties set or charged by the Company to
its customers or licensees, or in pricing or royalties set or charged by persons
who have licensed Intellectual Property to the Company;
(r) any event or condition of any character that has had a Material
Adverse Effect on the Company; or any
(s) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations regarding the transactions contemplated
hereby).
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2.8 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or, collectively, "Taxes," shall mean (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts, (ii) any liability for the payment of any amounts of
the type described in clause (i) of this Section 2.8(a) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any period,
and (iii) any liability for the payment of any amounts of the type described in
clause (i) or (ii) of this Section 2.8(a) as a result of any express or implied
obligation to indemnify any other person or as a result of any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) As of the Closing Date, Seller shall have prepared and
timely filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
concerning or attributable to the Company, or the operations of the Company, and
such Returns shall be true and correct and completed in accordance with
applicable law.
(ii) As of the Closing Date, Seller (A) shall have paid all
Taxes it is required to pay in respect of the Company and its operations, and
Seller or the Company shall have withheld with respect to employees of the
Company all federal and state income taxes, FICA, FUTA and other Taxes required
to be withheld in respect of the Company and its operations, and (B) shall have
accrued on the Audited Special-Purpose Balance Sheet all accrued and unpaid
Taxes concerning or attributable to the Company, or the operations of the
Company, for the periods covered thereby and will not have allowed the Company
to incur any liability for Taxes for the period prior to the Closing Date other
than in the ordinary course of its business.
(iii) Seller has not been delinquent in the payment of any Tax
concerning or attributable to the Company, or the operations of the Company, nor
is there any Tax deficiency outstanding, assessed or proposed against Seller
concerning or attributable to the Company, or the operations of the Company, nor
has Seller executed any waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax concerning or attributable to
the Company, or the operations of the Company.
(iv) No audit or other examination of any Return of Seller or
the Company is presently in progress concerning or attributable to the Company,
or the operations of the Company, nor has Seller or the Company been notified of
any request for such an audit or other examination.
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(v) Seller does not have any liabilities for unpaid federal,
state, local and foreign Taxes concerning or attributable to the Company, or the
operations of the Company, which have not been accrued or reserved against in
accordance with GAAP on the Audited Special-Purpose Balance Sheet, whether
asserted or unasserted, contingent or otherwise.
(vi) Seller has made available to Purchaser or its legal
counsel copies of all foreign, federal and state income and all state sales and
use Returns concerning or attributable to the Company, or the operations of the
Company, which are in the possession of Seller or the Company.
(vii) There are (and immediately following the Closing there
will be) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort (collectively,
"Liens") on the assets of the Company relating to or attributable to Taxes other
than Liens for Taxes not yet due and payable.
(viii) Seller has no knowledge of any basis for the assertion
of any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-exempt
use property," within the meaning of Section 168(h) of the Internal Revenue Code
of 1986, as amended (the "Code").
(x) As of the Closing Date, there will not be any contract,
agreement, plan or arrangement, including, but not limited to, the provisions of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible by the Company as an expense under applicable law.
(xi) Seller has not filed any consent agreement under Section
341(f) of the Code relating to the Company, or agreed to have Section 341(f)(4)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(xii) Neither Seller nor the Company is a party to any tax
sharing, indemnification or allocation agreement relating to the Company, nor
does Seller or the Company owe any amount under any such agreement, other than
this Agreement.
(xiii) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the tax books and records of Seller and
the Company.
(xiv) The Company is not, and has not been at any time, a
"United States Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code.
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(c) Executive Compensation Tax. The Company does not have, nor will
it have as a result of the transactions contemplated hereby, any liabilities for
Taxes (for example, under Section 280G of the Code) as a result of the amount of
remuneration paid or to be paid to its employees.
2.9 Restrictions on Business Activities. There is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree to
which Seller or the Company is a party, or otherwise binding upon Seller or the
Company, which has or may have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Neither
Seller nor the Company has entered into any agreement under which the Company is
restricted from selling, licensing or otherwise distributing any of its
technology or products to or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market.
2.10 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) Section 2.10(a) of the Disclosure Letter sets forth a list of
all real property currently owned or leased by the Company, and in the case of
leased property, the name of the lessor, the date of the lease and each
amendment thereto and, with respect to any current lease, the aggregate annual
rental and/or other fees payable under any such lease. All such current leases
are in full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) thereunder.
(b) The Company has good and valid title to or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Audited
Special-Purpose Balance Sheet and except for Liens for Taxes not yet due and
payable and such imperfections of title and encumbrances, if any, which are not
material in character, amount or extent, and which do not detract from the
value, or interfere with the present use, of the property subject thereto or
affected thereby.
(c) Section 2.10(c) of the Disclosure Letter sets forth a list of
all material items of equipment (the "Equipment") owned or leased by the Company
and such Equipment (i) is adequate for the conduct of the business of the
Company as currently conducted, and (ii) is in good operating condition,
regularly and properly maintained, subject to normal wear and tear.
(d) The Company has sole and exclusive ownership, free and clear of
any Liens, of all customer files and other customer information relating to
customers of the Company (the "Customer Information"). No person other than the
Company possesses any claims or rights with respect to use of the Customer
Information.
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2.11 Intellectual Property.
(a) For the purposes of this Agreement, the following terms shall
have the following respective meanings:
(i) "Intellectual Property" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (A) all
United States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (B) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (C) all copyrights, copyrights registrations
and applications therefor and all other rights corresponding thereto throughout
the world; (D) all mask works, mask work registrations and applications
therefor; (E) all industrial designs and any registrations and applications
therefor throughout the world; (F) all trade names, logos, common law trademarks
and service marks; trademark and service xxxx registrations and applications
therefor and all goodwill associated therewith throughout the world; (G) all
databases and data collections and all rights therein throughout the world; and
(H) all computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded, and (I) any similar, corresponding or equivalent rights
to any of the foregoing and (J) all documentation related to any of the
foregoing.
(ii) "Company Intellectual Property" shall mean any
Intellectual Property that is owned by, exclusively licensed to, or was
developed or created by the Company.
(iii) "Registered Intellectual Property" shall mean all United
States, international and foreign: (A) patents, patent applications (including
provisional applications); (B) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (C) registered copyrights and applications for copyright
registration; (D) any mask work registrations and applications to register mask
works; and (E) any other Company Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
(b) Section 2.11(b) of the Disclosure Letter sets forth a list of
all Registered Intellectual Property owned by, or filed in the name of, the
Company (the "Company Registered Intellectual Property") and lists any
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property.
(c) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property set forth in Section 2.11(b) of the
Disclosure Letter, is free and clear of any Liens. The Company is the exclusive
owner of all Company Intellectual Property.
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(d) To the extent that any Intellectual Property has been developed
or created by any person other than the Company for which the Company has,
directly or indirectly, paid, the Company has a written agreement with such
person with respect thereto and the Company thereby has obtained ownership of,
and is the exclusive owner of, all such Intellectual Property by operation of
law or by valid assignment.
(e) The Company has not transferred ownership of, granted any
license of or right to use, or authorized the retention of any rights to use,
any Intellectual Property that is or was Company Intellectual Property to any
other person.
(f) The Company owns or has a written license to all Intellectual
Property used in and/or necessary to the conduct of its business as it currently
is conducted or is reasonably contemplated to be conducted, including, without
limitation, the design, development, manufacture, use, import and sale of the
products, technology and services of the Company (including products, technology
or services currently under development).
(g) Other than "shrink-wrap" and similar widely available
commercial end-user licenses, the contracts, licenses and agreements listed in
Section 2.11(g) of the Disclosure Letter include all contracts, licenses and
agreements, to which the Company is a party with respect to any Intellectual
Property of any person other than the Company. No person other than the Company
has ownership rights to improvements made by the Company in Intellectual
Property which has been licensed to the Company.
(h) Section 2.11(h) of the Disclosure Letter lists all contracts,
licenses and agreements between the Company and any other person wherein or
whereby the Company has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other person of
the Intellectual Property of any person other than the Company.
(i) The operation of the business of the Company as currently
conducted or as reasonably contemplated to be conducted, including, but not
limited to, the Company's design, development, use, import, manufacture and sale
of the products, technology or services (including products, technology or
services currently under development) of the Company, does not infringe or
misappropriate the Intellectual Property of any person, violate the rights of
any person (including rights to privacy or publicity), or constitute unfair
competition or trade practices under the laws of any jurisdiction, and the
Company has not received written or oral notice from any person claiming that
such operation or any act, product, technology or service (including products,
technology or services currently under development) of the Company infringes or
misappropriates the Intellectual Property of any person or constitutes unfair
competition or trade practices under the laws of any jurisdiction, nor is Seller
aware of any basis therefor.
(j) Each item of Company Registered Intellectual Property is valid
and subsisting, all necessary registration, maintenance and renewal fees in
connection with such
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Company Registered Intellectual Property have been paid and all necessary
documents and certificates in connection with such Company Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Company Registered
Intellectual Property. Section 2.11(j) of the Disclosure Letter lists all
actions that must be taken by the Company within sixty (60) days of the Closing
Date, including the payment of any registration, maintenance or renewal fees or
the filing of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Company Intellectual
Property.
(k) There are no contracts, licenses or agreements between the
Company and any person with respect to Company Intellectual Property under which
there is any dispute regarding the scope of such agreement, or performance under
such agreement including with respect to any payments to be made or received by
the Company thereunder.
(l) To the knowledge of Seller, no person is infringing or
misappropriating any Company Intellectual Property.
(m) The Company has taken all steps that it deems necessary or
appropriate to protect the Company's rights in confidential information and
trade secrets possessed or used by the Company.
(n) No Company Intellectual Property or product, technology or
service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(o) No (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company, or (iii) conduct
or statement of Company, constitutes obscene material, a defamatory statement or
material, false advertising or otherwise violates any law or regulation in such
a manner or to a degree as to have a Material Adverse Effect.
(p) All of the Company's proprietary products, technology and
services (including products, technology and services currently under
development), and all of the Company's internal, proprietary computer and
technology products and systems are capable of fully performing at any and all
chronological dates (including, but not limited to, dates after the year 2000),
both currently and in the future without any adverse change or effect, or
without the need to modify or alter any such products or technology in any
respect.
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2.12 Agreements, Contracts and Commitments.
(a) The Company is not a party to nor is it bound by:
(i) any material employment or consulting agreement, contract
or commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization;
(ii) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
hereby, or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated hereby;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property having a value individually
in excess of $25,000;
(v) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any person;
(vi) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000 in any
individual case, or $25,000 in the aggregate;
(vii) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business;
(viii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, other than credit for trade payables incurred
in the ordinary course of its business;
(ix) any purchase order or contract for the purchase of
materials involving in excess of $10,000 in any individual case, or $50,000 in
the aggregate;
(x) any construction contracts;
(xi) any distribution, joint marketing or development
agreement; or
(xii) any other agreement, contract or commitment that involves
$25,000 or more or is not cancelable without penalty within thirty (30) days.
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(b) The Company is in compliance with and has not breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under, any of the terms or conditions of any agreement, contract,
covenant, instrument, lease, license or commitment to which the Company is a
party or by which it is or may be bound (collectively a "Contract"), nor is
Seller aware of any event that would constitute such a breach, violation or
default with the lapse of time, giving of notice or both. Each Contract is in
full force and effect and is not subject to any default thereunder by any party
obligated to the Company pursuant thereto. The Company has obtained, or will
obtain prior to the Closing Date, all necessary consents, waivers and approvals
of parties to any Contract as are required thereunder in connection with the
transactions contemplated hereby or for such Contracts to remain in effect
without modification after the Closing. Following the Closing, the Company will
be permitted to exercise all of the Company's rights under the Contracts without
the payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which the Company would otherwise be required to pay had
the transactions contemplated hereby not occurred.
2.13 Customers and Suppliers. Section 2.13 of the Disclosure Letter
sets forth a list of (i) the ten (10) largest customers of the Company in terms
of sales (the "Material Customers") during the fiscal year ended March 31, 1997,
and the three month period ended June 30, 1997, each setting forth the
approximate total sales revenue of the Company by customer during each of such
periods, and (ii) the ten (10) largest suppliers of the Company (the "Material
Suppliers") in terms of purchases during the fiscal year ended March 31, 1997,
and the three months ended June 30, 1997, each setting forth the approximate
total purchases by the Company from each such supplier during each such period.
Since June 30, 1997, there has not been any Material Adverse Change in the
business relationship of the Company with any Material Customer or Material
Supplier. Except for the Material Customers and the Material Suppliers, as the
case may be, the Company does not have any Customer that accounted for more than
five percent (5%) of the Company's sales revenue during the fiscal year ended
March 31, 1997, or any supplier from whom the Company purchased more than five
percent (5%) of the goods and services which the Company purchased during the
fiscal year ended March 31, 1997. Seller and the Company have not received any
notice, nor does Seller or the Company have knowledge of any facts,
circumstances or conditions that create a reasonable basis for believing, nor
does Seller or the Company believe, that any of the Material Customers or
Material Suppliers will terminate, or change in a manner materially adverse to
the Company, its business relationship with the Company, or its current level
utilization of the services of the Company, either before or within twelve (12)
months after the Closing Date.
2.14 Interested Party Transactions. No officer, director or shareholder
of the Company (nor any ancestor, sibling, descendant or spouse of any of such
persons, or any trust, partnership or corporation in which any of such persons
has or has had an interest), has or has had, directly or indirectly, (i) an
interest in any entity which furnished or sold, or furnishes or sells, services,
products or technology that the Company furnishes or sells, or proposes to
furnish or sell, (ii) any interest in any entity that purchases from or sells or
furnishes to the Company, any goods or services, or (iii) a beneficial interest
in any Contract; provided, however, that ownership of no
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24
more than one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "interest in any entity" for purposes of this
Section 2.14.
2.15 Governmental Authorizations. Section 2.15 of the Disclosure Letter
sets forth a list of each consent, license, permit, grant or other authorization
issued to Seller and/or the Company by a governmental or regulatory authority
(i) pursuant to which the Company currently operates or holds any interest in
any of its properties or assets, or (ii) which is required for the operation of
its business or the holding of any such interest (herein collectively called
"Company Authorizations"). The Company Authorizations are in full force and
effect and constitute all Company Authorizations required to permit the Company
to operate or conduct its business or hold any interest in its properties or
assets.
2.16 Litigation. There is no action, suit or proceeding of any nature
pending or, to Seller's knowledge, threatened, against the Company, its
properties or any of its officers or directors nor, to the knowledge of Seller,
is there any reasonable basis therefor. There is no investigation pending or, to
Seller's knowledge, threatened, against the Company, its properties or any of
its officers or directors by or before any governmental or regulatory authority
nor, to the best knowledge of Seller, is there any reasonable basis therefor. No
governmental or regulatory authority has at any time challenged or questioned
the legal right of the Company to conduct its operations as presently or
previously conducted.
2.17 Accounts Receivable.
(a) Seller has provided to Purchaser a list of all accounts
receivable of the Company ("Accounts Receivable") as of March 31, 1997 along
with a range of days elapsed since invoice.
(b) All Accounts Receivable of the Company arose in the ordinary
course of business and are carried at values determined in accordance with GAAP
consistently applied and Seller knows of no reasons why such receivables are not
collectible except to the extent of reserves therefor set forth in the Audited
Special-Purpose Balance Sheet. No person has any Lien on any of such Accounts
Receivable and no request or agreement for deduction or discount has been made
with respect to any of such Accounts Receivable.
2.18 Minute Books. The minutes of the Company made available to legal
counsel for Purchaser are the only minutes of the Company and contain a
reasonably accurate summary of all meetings of the Board of Directors (or
committees thereof) of the Company and its shareholders or actions by written
consent since the date of incorporation of the Company.
2.19 Environmental Matters.
(a) Hazardous Material. The Company has not (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased, or (ii) illegally released any material
amount of any substance that has been designated
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by any governmental or regulatory authority or by applicable federal, state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCBs, asbestos, petroleum, and
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "Hazardous Material"), but excluding office
and janitorial supplies properly and safely maintained. No Hazardous Materials
are present in, on or under any property, including, but not limited to, the
land, any improvements thereto, any ground water and surface water thereof, that
the Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has the Company disposed of, transported, sold,
or manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities") in
violation of any rule, regulation, treaty or statute promulgated by any
governmental or regulatory authority in effect prior to or as of the date hereof
to prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Seller's knowledge, threatened, concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. Seller is not aware
of any fact or circumstance which could involve the Company in any environmental
litigation or impose upon the Company any environmental liability.
2.20 Brokers' and Finders' Fees; Third Party Expenses. The Company has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.21 Employee Benefit Plans and Compensation.
(a) For purposes of this Section 2.21, the following terms shall
have the following respective meanings:
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(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder.
(ii) "Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for bonuses,
severance, termination pay, deferred compensation, pensions, profit sharing,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits of any kind, whether formal or informal, written or otherwise,
funded or unfunded and whether or not legally binding, including without
limitation, any plan which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate for the benefit
of any "Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability, contingent or otherwise.
(iii) "Employee" shall mean any current, former, or retired
employee, consultant, officer, or director of the Company or any Affiliate.
(iv) "Employee Agreement" shall mean each employment,
severance, consulting or similar agreement or contract between the Company or
any Affiliate and any Employee.
(b) Schedule. Section 2.21(b) of the Disclosure Letter sets forth a
list of each Employee Plan and each Employee Agreement, together with a schedule
of all liabilities, whether or not accrued, under each such Employee Plan. The
Company does not have any plan or commitment, whether legally binding or not, to
establish any new Employee Plan or Employee Agreement, to modify any Employee
Plan or Employee Agreement (except to the extent required by law or to conform
any such Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Employee Plan or Employee
Agreement, nor does Seller have any intention or commitment to do any of the
foregoing with respect to the Company.
(c) Documents. Seller has provided to Purchaser (i) correct and
complete copies of all documents embodying each Employee Plan and each Employee
Agreement including all amendments thereto and copies of all forms of agreement
and enrollment used therewith, (ii) the most recent annual actuarial valuations,
if any, prepared for each Employee Plan, (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Employee Plan or related trust, (iv) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Employee Plan, (v) all IRS determination letters and rulings relating to Company
Employee Plans and copies of all applications and correspondence to or from the
IRS or the Department of Labor ("DOL") with respect to any Employee Plan, (vi)
if the Employee Plan is funded, the most recent annual and periodic accounting
of Employee Plan assets, (vii) all material agreements and contracts relating to
each Employee Plan, including but not limited to, administrative service
agreements, group annuity
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contracts and group insurance contracts, and (viii) all communications material
to any Employee or Employees relating to any Employee Plan and any proposed
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any liability to the
Company.
(d) Employee Plan Compliance. (i) The Company has performed all
obligations required to be performed by it under each Employee Plan and each
Employee Plan has been established and maintained in accordance with its terms
and in compliance with all applicable laws, statutes, orders, rules and
regulations, including ERISA and the Code; (ii) each Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable determination
letter with respect to each such Plan from the IRS or has remaining a period of
time under applicable Treasury regulations or IRS pronouncements in which to
apply for such a determination letter and make any amendments necessary to
obtain a favorable determination; (iii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Section 406 or 407 of ERISA, has occurred
with respect to any Company Employee Plan; (iv) there are no actions, suits or
claims pending, or, to the knowledge of Seller threatened or anticipated (other
than routine claims for benefits), against any Employee Plan or against the
assets of any Employee Plan; (v) each Employee Plan can be amended, terminated
or otherwise discontinued after the Closing in accordance with its terms,
without liability to the Company, Purchaser or any Affiliate (other than
ordinary administration expenses typically incurred in a termination event);
(vi) there are no inquiries or proceedings pending or, to the knowledge of
Seller or any Affiliates, threatened by the IRS or DOL with respect to any
Employee Plan; and (vii) neither the Company nor any Affiliate is subject to any
penalty or tax with respect to any Employee Plan under Section 402(i) of ERISA
or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to
or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Employee Plan provides, or
has any liability to provide, life insurance, medical or other employee benefits
to any Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and neither the Company has
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
would be provided with life insurance, medical or other employee welfare
benefits upon their retirement or termination of employment, except to the
extent required by statute.
(h) No COBRA Violation. Neither the Company nor any Affiliate has
violated, nor will it prior to the Closing and in any material respect violate,
any of the health care
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continuation requirements of COBRA or any similar provisions of state law
applicable to its employees.
(i) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Employee Plan, Employee Agreement, trust or loan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(j) Employment Matters. Seller and/or the Company, as the case may
be, (i) is in compliance with all applicable laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii) has withheld
all amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to Employees or other persons who by virtue of their
activities performed on behalf of the Company may be deemed employees within the
meaning of applicable law; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and (iv)
is not liable for any payment to any trust or other fund or to any governmental
or administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees or other persons
who by virtue of their activities performed on behalf of the Company may be
deemed employees within the meaning of applicable law (other than routine
payments to be made in the normal course of business and consistent with past
practice).
(k) Labor. No work stoppage or labor strike against the Company is
pending or, to the knowledge of Seller, threatened. The Company is not involved
in or threatened with any labor dispute, grievance, or litigation relating to
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in liability to the Company or Purchaser. The Company has not
engaged in any unfair labor practices which could, in any individual case or in
the aggregate, directly or indirectly result in a liability to the Company or
any Affiliate. The Company is not presently, nor has it in the past, been a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company.
(l) No Interference or Conflict. To the knowledge of Seller, no
shareholder, officer, employee or consultant of the Company is or may be
obligated under any contract or agreement, or subject to any judgement, decree
or order of any court or administrative agency, that would interfere with such
person's efforts to promote the interests of the Company or that would interfere
with the Company's business. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business as presently conducted
or proposed to be conducted nor any activity of such officers, directors,
employees or consultants in connection with the carrying on of the Company's
business as presently conducted or proposed
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to be conducted, will, to Seller's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract or agreement under which any of such officer's, directors,
employees or consultants is now bound.
2.22 Insurance. Section 2.22 of the Disclosure Letter sets forth a list
of all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company. There is no claim by the Company pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid, and the Company is otherwise in
compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage). Seller has no
knowledge of any threatened termination of, or premium increase with respect to,
any of such policies.
2.23 Compliance with Laws. The Company has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation, which would have a
Material Adverse Effect.
2.24 Lawful Transfer. Seller will receive from Purchaser, and the
Purchase Price constitutes, reasonably equivalent value in exchange for the
transfer of the Shares pursuant hereto, and Seller is not insolvent, nor will it
become insolvent as a result of the execution and delivery of this Agreement,
the performance of its obligations hereunder, or the consummation of the
transactions contemplated hereby. Seller is not engaged, nor is Seller about to
engage, in a business or a transaction for which the assets of Seller remaining
after the consummation of the transactions contemplated hereby are unreasonably
small in relation to such business or transaction, and Seller does not intend to
incur, or believe that it will incur, debts beyond its ability to pay as such
debts become due.
2.25 Certain Business Practices. Seller, the Company and the officers,
directors, employees, agents and other representatives of Seller and the
Company, or any other person acting on behalf of Seller and/or the Company, have
not given, agreed to give, or caused to be given, directly or indirectly, within
the past five (5) years, any illegal gift or similar benefit to any customer,
supplier, governmental employee or other person in connection with any actual or
proposed transaction.
2.26 Warranties; Indemnities. The Company has not given any warranties
or indemnities relating to products or technology sold or services rendered by
the Company.
2.27 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document that has been requested by
Purchaser or its legal counsel.
2.28 Representations Complete. None of the representations or
warranties made by Seller (as modified by the Disclosure Letter), nor any
statement made in the Disclosure Letter or any certificate provided by Seller
pursuant to this Agreement contains or will contain at the
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Closing, any untrue statement of a material fact, or omits or will omit at the
Closing to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller, subject to such
exceptions as are specifically disclosed in the disclosure letter of even date
herewith relating to this Agreement and delivered by Purchaser to Seller
herewith (the "Purchaser Disclosure Letter"), as follows
3.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
Purchaser has full corporate power and authority to own its properties and
assets and to carry on its business as now being conducted and is duly qualified
or licensed to do business as a foreign corporation in good standing in the
jurisdictions in which the ownership of its property or the conduct of its
business requires such qualification, except jurisdictions in which the failure
to be so qualified or licensed would not have a material adverse effect on the
business, operations or financial condition of Purchaser (hereinafter referred
to as a "Purchaser Material Adverse Effect"). Purchaser has delivered to Seller
complete and correct copies of the Amended and Restated Articles of
Incorporation of Purchaser and all amendments thereto to the date hereof, and
the Bylaws of Purchaser as presently in effect.
3.2 Capitalization. The authorized capital stock of Purchaser consists
of thirty million (30,000,000) shares of common stock ("Purchaser Common Stock")
and five million (5,000,000) shares of preferred stock ("Purchaser Preferred
Stock"), of which 11,743,475 shares of Purchaser Common Stock and no shares of
Purchaser Preferred Stock are issued and outstanding as of the date hereof.
There are no subscriptions, options, warrants, calls, rights, contracts,
commitments, understandings, restrictions, agreements or any other arrangements
of any character (including any right of conversion or exchange under any
outstanding securities or other instruments of the Company), whether written or
oral, to which Purchaser is a party or by which any of its assets are or may be
bound, pursuant to which Purchaser is or may be obligated (i) to issue, sell,
transfer, deliver, repurchase or redeem, or cause to be issued, sold,
transferred, delivered, repurchased or redeemed, any shares of capital stock of
Purchaser, or (ii) to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such subscription, option, warrant,
call, right, contract, commitment, understanding, restriction, agreement or
other arrangement in respect of any shares of the capital stock of Purchaser.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation or other similar rights with respect to Purchaser. As a result of
the transactions contemplated hereby, at the Closing Seller will be the record
and beneficial owner of all of the Purchaser Shares and rights to acquire the
Purchaser Shares. All of the Purchaser Shares have been duly authorized and,
when issued and delivered in accordance with the terms and conditions hereof,
will be validly issued, fully paid, nonassessable shares of Common Stock of the
Company, free of any
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preemptive rights created by statute, the Amended and Restated Articles of
Incorporation of Purchaser, the Bylaws of Purchaser, or any agreement to which
Purchaser is a party or by which Purchaser may be bound, and have been issued in
full compliance with all federal and state securities laws.
3.3 Authorization. Purchaser has full corporate power and authority to
execute and deliver this Agreement and each of the Related Agreements, to
perform its obligations hereunder and thereunder, and to carry out the
transactions contemplated hereby and thereby. The Board of Directors of
Purchaser has duly approved and authorized the execution and delivery of this
Agreement and each of the Related Agreements, the performance by Purchaser of
its obligations hereunder and thereunder, and the consummation by Purchaser of
the transactions contemplated hereby and thereby, and no other corporate
proceedings on the part of Purchaser are necessary to approve and authorize the
execution and delivery by Purchaser of this Agreement and each of the Related
Agreements, the performance by Purchaser of its obligations hereunder and
thereunder, and the consummation by Purchaser of the transactions contemplated
hereby and thereby. This Agreement has been, and each of the Related Agreements
will be, duly and validly executed and delivered by Purchaser, and this
Agreement constitutes, and each of the Related Agreements will constitute upon
the execution and delivery thereof by Purchaser, a valid and binding agreement
of Purchaser, enforceable against Purchaser in accordance with its respective
terms, except that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses.
3.4 No Approvals or Conflicts. The execution and delivery by Purchaser
of this Agreement does not, and the consummation by Purchaser of the
transactions contemplated hereby will not (i) violate, conflict with or result
in a breach of any provision of the Amended and Restated Articles of
Incorporation or the Bylaws of Purchaser, (ii) violate, conflict with or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, give
rise to a right of termination, cancellation, modification or acceleration of
any obligation or loss of benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties of Purchaser
or on Purchaser's interest in the Purchaser Shares under, any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, contract,
agreement or other instrument to which Purchaser or any of its properties or
assets are or may be bound, (iii) violate any order, injunction, judgment,
ruling, law or regulation of any court or governmental authority applicable to
Purchaser or any of its properties or assets, or (iv) except for applicable
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any governmental or regulatory
authority or other third party.
3.5 SEC Reports; Financial Statements. Purchaser has filed each
statement, annual, quarterly and other report, registration statement and
definitive proxy statement (the "Purchaser SEC Documents") required to be filed
(other than preliminary material) by Purchaser with the Securities and Exchange
Commission (the "Commission") subsequent to February 6, 1996 (the effective date
of Purchaser's registration statement on Form S-1 for its initial public
offering of shares of its Common Stock). As of their respective filing dates,
the Purchaser SEC Documents
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complied in all material respects with the requirements of the Exchange Act and
none of the Purchaser SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by any
subsequently filed Purchaser SEC Document. Each of the balance sheets included
in or incorporated by reference into the Purchaser SEC Documents (including the
related notes and schedules) fairly presents in all material respects the
financial position of Purchaser and its subsidiaries as of its date, and each of
the statements of income and cash flows included in or incorporated by reference
into the Purchaser SEC Documents (including any related notes and schedules)
fairly presents in all material respects the results of operations, retained
earnings and cash flows, as the case may be, of Purchaser and its subsidiaries
for the periods set forth therein (in the case of unaudited statements, subject
to normal year-end audit adjustments which will not be material in amount or
effect), in each case in accordance with GAAP consistently applied during the
periods reported, except as otherwise noted therein.
3.6 Absence of Certain Changes. Since the date of the most recent
Purchaser SEC Document:
(a) the business of Purchaser has been conducted only in the
ordinary course of business and consistent with the past practices of Purchaser
in all material respects;
(b) there has been no direct or indirect redemption, purchase or
other acquisition by Purchaser of any shares of its capital stock, or any
declaration, setting aside or payment of any dividend or other distribution on
or in respect of any shares capital stock of Purchaser; and
(c) there has been no sale, assignment or transfer of any assets of
Purchaser which is material, individually or in the aggregate, to Purchaser,
other than sales, assignments or transfers of assets in the ordinary course of
business and consistent with the past practices of Purchaser.
3.7 Compliance with Laws; Governmental Authorizations. Purchaser is not
in violation of any order, injunction, judgment, ruling, law or regulation of
any court or governmental authority applicable to the property or business of
Purchaser which violation or violations in the aggregate would have a Purchaser
Material Adverse Effect. To the knowledge of Purchaser, the licenses, permits
and other governmental authorizations held by Purchaser are valid and sufficient
for the conduct of its business as currently conducted, except where the failure
to hold such licenses, permits and other governmental authorizations would not
have a Purchaser Material Adverse Effect.
3.8 Litigation. As of the date hereof, there are no claims, actions,
proceedings or investigations pending or, to the knowledge of Purchaser,
threatened against Purchaser, or the transactions contemplated hereby, before
any court or governmental or regulatory authority or
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body which would have a material adverse effect on Purchaser's ability to
consummate the transactions contemplated hereby.
3.9 No Brokers' or Other Fees. No broker, finder or investment banker
is entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Purchaser.
Seller will not incur any liability for any brokerage or finders' fee or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.10 Financing. At the Closing, Purchaser will have sufficient funds
available to deliver the Cash Consideration to Seller.
ARTICLE IV
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to effect the Closing under this Agreement
are subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, unless waived in writing by Seller.
4.1 Representations and Warranties. The representations and warranties
made by Purchaser in this Agreement shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made at and as of such date, except for changes expressly permitted or
contemplated by this Agreement.
4.2 Performance. Purchaser shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by Purchaser prior to or at
the Closing, including, but not limited to, the delivery of the Cash
Consideration, the Purchaser Shares, the Purchaser Note and the New Xxxx Note.
4.3 Officer's Certificate. Seller shall have received a certificate,
dated the Closing Date and executed by the President and Chief Executive Officer
of Purchaser, certifying (i) that each of the representations and warranties of
Purchaser set forth in Article III hereof was accurate in all respects as of the
date hereof and is accurate in all respects as of the Closing Date as if made on
and as of the Closing Date, and (ii) to the fulfillment of the conditions set
forth in this Article IV.
4.4 Good Standing Certificate. Seller shall have received a
certificate, dated as of the most recent practicable date prior to the Closing
Date, issued by the Secretary of State of the State of California certifying to
the effect that Purchaser is in good standing under the laws of the State of
California.
4.5 Secretary's Certificate. Seller shall have received a certificate,
dated the Closing Date and executed by the Secretary of Purchaser, certifying
the following matters: (i) the
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resolutions of the Board of Directors of Purchaser authorizing the execution and
delivery of this Agreement and each of the Related Agreements by Purchaser, the
performance by Purchaser of its obligations hereunder and thereunder, and the
consummation by Purchaser of the transactions contemplated hereby and thereby;
(ii) the Amended and Restated Articles of Incorporation of Purchaser; and (iii)
the Bylaws of Purchaser.
4.6 Injunctions. On the Closing Date, (i) there shall be no preliminary
or permanent injunction, writ, restraining order or other order of any nature
issued and in effect by a court or governmental agency of competent jurisdiction
directing that the transactions contemplated hereby not be consummated as
provided herein; (ii) nor shall any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending; (iii) nor shall
there be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the transactions contemplated hereby,
which renders such transactions illegal.
4.7 Litigation. There shall be no bona fide action, suit, claim or
proceeding of any nature pending, or overtly threatened, against Seller, the
Company or Purchaser, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the transactions
contemplated hereby.
4.8 Governmental Approval. Approvals from all governmental and
regulatory authorities, if any, deemed appropriate or necessary by any party
hereto shall have been timely obtained.
4.9 Republic Bank Release. Seller shall have obtained a written
instrument evidencing the consent of Republic Acceptance Corporation to a
general release of Seller from all liability under the current loan agreement(s)
between the Company and/or Seller and Republic Acceptance Corporation.
4.10 No Material Adverse Changes. There shall not have been a material
adverse change in the business, assets, liabilities, financial condition or
results of operations of the Purchaser since the date hereof.
4.11 Legal Opinion. Seller shall have received a legal opinion from
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, legal counsel to
Purchaser, in substantially the form set forth in Exhibit 4.11 hereof.
4.12 Registration Rights Agreement. Seller shall have received that
certain Digital Generation Systems, Inc. Amendment and Restatement No.5 to
Rights Agreement in the form attached as Exhibit 4.12 hereto (the "Rights
Agreement"), duly executed and delivered by (i) Purchaser and (ii) the holders
of a majority of the Registrable Securities pursuant to that certain Digital
Generation Systems, Inc. Amendment and Restatement No.4 to Rights Agreement.
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4.13 Cancellation of Old Xxxx Notes. Seller shall have received the Old
Xxxx Notes, marked for cancellation as to payment by Seller.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to effect the Closing under this Agreement
are subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, unless waived in writing by Purchaser.
5.1 Representations and Warranties. The representations and warranties
made by Seller in this Agreement shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made at and as of such date, except for changes expressly permitted or
contemplated by the terms of this Agreement.
5.2 Performance. Seller shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by Seller prior to or at the
Closing, including, but not limited to, delivery of a certificate or
certificates evidencing the Shares.
5.3 Officer's Certificate. Purchaser shall have received a certificate,
dated the Closing Date and executed by the Chief Financial Officer of Seller,
certifying (i) that each of the representations and warranties of Seller set
forth in Article II hereof was accurate in all respects as of the date hereof
and is accurate in all respects on the Closing Date as of made on and as of the
Closing Date, and (ii) to the fulfillment of the conditions set forth in this
Article V.
5.4 Good Standing Certificate - Seller. Purchaser shall have received a
certificate, dated as of the most recent practicable date prior to the Closing
Date, issued by the Secretary of State of the State of Delaware certifying to
the effect that Seller is in good standing under the laws of the State of
Delaware.
5.5 Good Standing Certificate - Company. Purchaser shall have received
a certificate, dated as of the most recent practicable date prior to the Closing
Date, issued by the Secretary of State of the State of Delaware certifying to
the effect that the Company is in good standing under the laws of the State of
Delaware.
5.6 Secretary's Certificate. Purchaser shall have received a
certificate, dated the Closing Date and executed by the Secretary of Seller,
certifying the following matters: (i) the resolutions of the Board of Directors
of Seller authorizing the execution and delivery of this Agreement and each of
the Related Agreements by Seller, the performance by Seller of its obligations
hereunder and thereunder, and the consummation by Seller of the transactions
contemplated hereby and thereby; (ii) the Certificate of Incorporation of the
Company; and (iii) the Bylaws of the Company.
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5.7 No Material Adverse Changes. There shall not have been a material
adverse change in the business, assets, liabilities, financial condition or
results of operations of the Company since the date hereof.
5.8 Resignation of Directors. Purchaser shall have received a written
resignation from all of the directors of the Company, except Xxxxxx X. Xxxx,
each effective as of the Closing Date.
5.9 Injunctions. On the Closing Date, (i) there shall be no preliminary
or permanent injunction, writ, restraining order or other order of any nature
issued and in effect by a court or governmental agency of competent jurisdiction
directing that the transactions contemplated hereby not be consummated as
provided herein; (ii) nor shall any proceeding brought by an administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, seeking any of the foregoing be pending; (iii) nor shall
there be any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the transactions contemplated hereby,
which renders such transactions illegal.
5.10 Litigation. There shall be no bona fide action, suit, claim or
proceeding of any nature pending, or overtly threatened, against Seller, the
Company or Purchaser, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the transactions
contemplated hereby.
5.11 Governmental Approval. Approvals from all governmental and
regulatory authorities, if any, deemed appropriate or necessary by any party
hereto shall have been timely obtained.
5.12 Consents and Approvals. Seller shall have obtained all consents,
waivers and approvals, and shall have given all notices, required to be obtained
in connection with the consummation of the transactions contemplated hereby and
as set forth in Section 2.5 of the Disclosure Schedule.
5.13 Consent of Lenders. Whether or not required by the terms and
provisions of any agreement or agreements therewith, Seller shall have obtained
a written consent from each of the lenders to the Company pursuant to which such
lenders shall have consented to the transactions contemplated hereby.
5.14 Customer Continuity. Since the date of this Agreement, none of the
customers or suppliers set forth in Exhibit 5.14 hereto shall have notified
Seller, the Company or Purchaser, orally or in writing, of its intention to
terminate or suspend its utilization of the Company's services, or otherwise
modify its business relationship with the Company in a manner materially adverse
the Company, after the Closing Date.
5.15 Vender Obligations. The Company's existing extended payment terms
with its venders shall not have been accelerated as a result of the transactions
contemplated hereby.
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5.16 Board Approval. The Board of Directors of Seller shall have
adopted resolutions authorizing and ratifying the execution and delivery of this
Agreement and each of the Related Agreements, the performance by Seller of its
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby.
5.17 State "Blue Sky" Compliance. Purchaser shall have received all
state securities or "blue sky" permits and other authorizations necessary to
issue the Purchaser Shares to Seller pursuant hereto.
5.18 Legal Opinion. Purchaser shall have received a legal opinion from
Xxxx & Xxxxx Professional Corporation, legal counsel to Seller, in substantially
the form set forth in Exhibit 5.18 hereof.
5.19 Registration Rights Agreement. Purchaser shall have received the
Rights Agreement, duly executed and delivered by (i) Seller and (ii) the holders
of a majority of the Registrable Securities pursuant to that certain Digital
Generation Systems, Inc. Amendment and Restatement No.4 to Rights Agreement.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 Conduct of Business of the Company. During the period from the date
hereof and continuing until the earlier of the Closing Date or the termination
of this Agreement pursuant to the terms of Section 7.1 hereof, Seller hereby
agrees to cause the Company to conduct its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, to pay
or cause to be paid the debts and Taxes of the Company when due, to pay or
perform other obligations when due and, to the extent consistent with such
business, use its reasonable best efforts consistent with past practice and
policies to preserve intact the Company's present business organizations, keep
available the services of the Company's present officers and key employees and
preserve the Company's relationships with customers, suppliers, distributors,
licensors, licensees and others having business dealings with it, all with the
goal of preserving unimpaired the Company's goodwill and ongoing businesses at
the Closing Date. Seller shall promptly notify Purchaser of any event,
occurrence or emergency not in the ordinary course of business of the Company,
and any material event involving the Company. Except as expressly contemplated
by this Agreement, Seller shall not permit the Company to, without the prior
written consent of Purchaser:
(a) enter into any commitment or transaction not in the ordinary
course of business or any commitment or transaction of the type described in
Section 2.7 hereof;
(b) enter into any license agreement with respect to the Company
Intellectual Property with any person or entity or with respect to the
Intellectual Property of any person or entity;
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(c) transfer to any person or entity any rights to the Company
Intellectual Property;
(d) enter into or amend any Contract pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products or technology of the Company;
(e) amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts set
forth or described in the Disclosure Letter;
(f) commence or settle any litigation;
(g) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of the capital
stock of the Company (or options, warrants or other rights exercisable
therefor);
(h) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue or purchase any such shares
or other convertible securities;
(i) cause or permit any amendments to the Certificate of
Incorporation or the Bylaws of the Company;
(j) acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the Company's
business;
(k) sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and consistent
with past practices;
(l) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;
(m) grant any loans to others or purchase debt securities of others
or amend the terms of any outstanding loan agreement, except in the ordinary
course of business and consistent with past practices;
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(n) grant any severance or termination pay to any director or
officer, or to any other employee except payments made pursuant to standard
written agreements outstanding on the date hereof;
(o) adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees or accelerate the vesting of any outstanding options or other
rights to purchase capital stock, or capital stock of the Company subject to
vesting;
(p) revalue any of its assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(q) pay, discharge or satisfy, in an amount in excess of $10,000 in
any individual case, or $25,000 in the aggregate, any claim, liability or
obligation, whether absolute, accrued, asserted or unasserted, contingent or
otherwise, other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the Audited
Special-Purpose Balance Sheet;
(r) make or change (or permit to be made or changed) any material
election in respect of Taxes, adopt or change (or permit to be adopted or
changed) any accounting method in respect of Taxes, enter into any closing
agreement or settle any claim or assessment in respect of Taxes (or permit the
same), or consent to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes (or permit the same);
(s) enter into any strategic alliance or joint marketing
arrangement or agreement;
(t) take, or agree in writing or otherwise to take, any of the
actions described in Sections 6.1(a) through 6.1(s) hereof, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder; or
(u) fail to take, or cause to be taken, any action that is
necessary or advisable to cause the representations and warranties of Seller set
forth in Article II hereof to be accurate as of the Closing Date.
6.2 Tax Matters.
(a) Liability of Seller for Taxable Periods Ending Before Closing
Date. Seller shall be liable for, and shall indemnify and hold Purchaser
harmless against, all income, franchise or similar Taxes of, or payable by, the
Company for any taxable year or taxable period ending before the Closing Date
(the "Pre-Closing Period"), and all other Taxes attributable to the Pre- Closing
Period, except to the extent such Taxes have been reserved for on the Audited
Special-
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Xxxxxxx Xxxxxxx Sheet. Seller shall file all Tax Returns relating to the Company
for the Pre-Closing Period. The amount of any liability for Taxes for the
Pre-Closing Period shall be determined on the basis of the Company's permanent
records and consistent with the past income tax accounting methods utilized in
preparing its prior income tax returns.
(b) Liability of Purchaser for Taxable Periods Commencing On or
After Closing Date. Except as otherwise provided in Section 6.2(a) hereof,
Purchaser and the Company shall be liable for, and shall indemnify and hold
Seller and any of its affiliates harmless against, (i) any and all Taxes of, or
payable by, the Company for any taxable year or taxable period commencing after
the Closing Date, or (ii) any Taxes relating to operations, acts or omissions of
Purchaser or the Company other than in the ordinary course of business that
occur after the Closing on the Closing Date. Purchaser shall file all Tax
Returns relating to the Company for any taxable period commencing after the
Closing Date.
(c) Taxable Period Commencing Before the Closing Date and Ending
After the Closing Date. Purchaser shall cause the Company to pay all Taxes of
the Company for any taxable year or taxable period commencing before and ending
after the Closing Date (the "Closing Period") and shall file all Tax Returns
relating to the Closing Period. Upon timely notice from the Purchaser, Seller
shall pay to the Company prior to the date any payment for Taxes described in
this Section 6.2(c) are due an amount equal to the excess, if any, of (i) the
Taxes that would have been due if the Closing Period had ended at the Closing,
over (ii) the Taxes which are described in this Section 6.2(c) and which have
been reserved for on the Audited Special-Purpose Balance Sheet.
(d) Refunds or Credits. Any refunds or credits of Taxes for which
Seller is liable pursuant to Section 6.2(a) or 6.2(c) hereof shall inure to the
benefit and be solely for the account of Seller and, to the extent that such
refunds or credits are attributable to Taxes for which Purchaser is liable
pursuant to Section 6.2(b) or 6.2(c) hereof (or which are reflected in the
Audited Special-Purpose Balance Sheet), such refunds or credits shall inure to
the benefit and be solely for the account of Purchaser. Purchaser shall cause
the Company promptly to forward to Seller or to reimburse Seller for any such
refunds or credits due Seller after receipt thereof by either Purchaser or the
Company, and Seller shall promptly forward to the Company or reimburse the
Company for any refunds or credits due the Company after receipt thereof by
Seller of such refunds or credits that are for the account of the Company
hereunder.
(e) Mutual Cooperation. As soon as practicable, but in any event
within thirty (30) days after Seller's or Purchaser's request, as the case may
be, Purchaser shall or shall cause the Company to deliver to Seller, or Seller
shall deliver to Purchaser, such information and other data in the possession of
Seller, Purchaser or the Company, as the case may be, relating to the Tax
Returns and Taxes of the Company, including such information and other data
customarily required by Seller or Purchaser, as the case may be, to cause the
payment of all Taxes or to permit the preparation of any Tax Returns for which
it has responsibility or liability or to respond to audits by any taxing
authorities with respect to any Tax Returns or Taxes for which it has any
responsibility or liability hereunder or otherwise or to otherwise enable Seller
or Purchaser, as
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the case may be, to satisfy its accounting or Tax requirements, and shall make
available such knowledgeable employees of the Company or Seller, as the case may
be, as Seller or Purchaser may reasonably request. For a period of seven (7)
years after the Closing and, if at the expiration thereof any Tax audit or
judicial proceeding is in progress or the applicable statute of limitations has
been extended, for such longer period as such audit or judicial proceeding is in
progress or such statutory period is extended, Purchaser shall, and shall cause
the Company to, maintain and make available to Seller, on Seller's reasonable
request, copies of any and all information, books and records referred to in
this Section 6.2(e). After such period, Purchaser or the Company may dispose of
such information, books and records, provided that prior to such disposition
Purchaser shall give Seller a reasonable opportunity to take possession of such
information, books and records.
(f) Contests. Whenever any taxing authority asserts a claim, makes
an assessment or otherwise disputes or affects the Tax reporting position of the
Company for periods ending on or prior to the Closing Date or the amount of
Taxes for which Seller is or may be liable hereunder, Purchaser shall, promptly
upon receipt by Purchaser or the Company of notice thereof, inform Seller, and
Seller shall have the right to control any resulting proceedings and to
determine whether and when to settle any such claim, assessment or dispute, to
the extent such proceedings or determinations affect the Tax reporting position
of the Company for periods ending on or prior to the Closing Date or the amount
of Taxes for which Seller is liable hereunder. Whenever any taxing authority
asserts a claim, makes an assessment or otherwise disputes the amount of Taxes
for which Purchaser is liable hereunder, Seller shall inform Purchaser promptly
upon receiving notice thereof. Purchaser shall have the right to control any
resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute, but only to the extent such proceedings affect the
amount of Taxes for which Purchaser is liable hereunder and otherwise Seller
shall control such proceedings and settlements; provided, however, that
Purchaser shall not, unless otherwise required by law, take any position on any
Tax Return or in any contest or proceeding that is inconsistent with this
Agreement or a position taken by Seller and its affiliates (including the
Company) with respect to Taxes incurred on or prior to the Closing Date.
(g) Resolution of Disagreements Between Seller and Purchaser. If
Seller and Purchaser disagree as to the amount for which each is liable under
this Section 6.2, Seller and Purchaser shall promptly consult with each other in
an effort to resolve such dispute. If any such point of disagreement cannot be
resolved within fifteen (15) days of the date of consultation, Seller and
Purchaser shall jointly select a Neutral Auditor to act as an arbitrator to
resolve all points of disagreement concerning Tax accounting matters with
respect to this Agreement. If the parties cannot agree on the selection of a
Neutral Auditor within fifteen (15) days, then such Neutral Auditor shall be
selected in accordance with the procedures set forth in Section 1.4(d) hereof.
6.3 WARN Act. Purchaser and Seller agree that for purposes of the
United States Worker Adjustment and Retraining Notification Act (the "WARN
Act"), the Closing Date shall be the "effective date" as such term is used in
the WARN Act. Purchaser acknowledges and
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represents that it has no present intent to engage in a "mass layoff" or "plant
closing" with respect to the Company as defined in the WARN Act. Purchaser
agrees that from and after the Closing Date it shall be responsible for any
notification required under the WARN Act with respect to the Company and shall
indemnify Seller and hold Seller harmless from and against all fines and other
payments which may become due under the WARN Act with respect to the Company.
6.4 Supplements to Disclosure Schedule. From time to time prior to the
Closing, Seller will promptly supplement or amend the sections of the Disclosure
Letter relating to its representations and warranties set forth in Article II
hereof with respect to any matter, condition or occurrence hereafter arising
which, if existing or occurring at the date hereof, would have been required to
be set forth or described in the Disclosure Letter. Except with respect to a
supplement or amendment not objected to in writing by Purchaser within five (5)
business days after receipt thereof, no supplement or amendment by Seller shall
be deemed to cure any breach of any representation or warranty made in this
Agreement by Seller or have any effect for the purpose of determining
satisfaction by Seller of the conditions set forth in Article V hereof or the
compliance by Seller with the covenant set forth in Section 6.1 hereof.
6.5 Reasonable Efforts. Subject to the terms and conditions set forth
herein, each party hereto agrees to use all commercially reasonable efforts (i)
to take promptly, or cause to be taken, all actions, and to do promptly, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to insure that the conditions set forth in Articles IV and
V hereof are satisfied, insofar as such matters are within the control of such
party, (ii) to obtain all necessary waivers, consents and approvals as may be
required in connection with the transactions contemplated hereby so as to
preserve all rights of, and benefits to, the Company thereunder after the
consummation of the transactions contemplated hereby, (iii) to effect all
necessary registrations and filings, if any, (iv) to remove any injunctions or
other impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated hereby, and (v) to consummate the
transactions contemplated hereby.
6.6 Access to Information. Seller shall afford Purchaser and its
accountants, legal counsel and other representatives, reasonable access during
normal business hours during the period prior to the Closing Date to (i) all of
the Company's properties, books, contracts, commitments and records, (ii) all
other information concerning the business, properties and personnel of the
Company as Purchaser may reasonably request, and (iii) all key employees of the
Company as identified by Purchaser. Seller agrees to provide to Purchaser and
its accountants, legal counsel and other representatives copies of internal
financial statements (including Tax Returns and supporting documentation)
promptly upon request. No information or knowledge obtained in any investigation
pursuant to this Section 6.6 shall affect or be deemed to modify any
representations or warranties set forth herein or the conditions to the
obligations of the parties to consummate the transactions contemplated hereby.
6.7 Publicity. Seller and Purchaser will consult with each other and
will mutually agree upon any publication or press release of any nature with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such publication or press release prior
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to such consultation and agreement except as may be required by applicable law
or by obligations pursuant to any listing agreement with any securities exchange
or any securities exchange regulation, in which case the party proposing to
issue such publication or press release shall use reasonable efforts to consult
in good faith with the other party before issuing any such publication or press
release.
6.8 Non-competition and Non-solicitation. As an inducement to Purchaser
to enter into this Agreement and consummate the transactions contemplated
hereby, Seller hereby agrees as follows:
(a) During the period from the Closing Date to and including the
fifth (5th) anniversary of the Closing Date (the "Non-Compete Period"), Seller
shall not compete in the United States of America, directly or indirectly, nor
have any affiliation (as defined below) with any person, corporation,
partnership or other business entity or enterprise which engages in, the "dub
and ship" business (whether manual, courier, electronic or any technological
extension of the foregoing) as that phrase is generally used and understood in
the radio, cable and television advertising distribution business. For purposes
of this Section 6.8(a), the term "affiliation" shall mean any direct or indirect
interest in such entity or enterprise, whether as an officer, director,
employee, investor, partner, stockholder, sole proprietor, trustee, consultant,
agent, representative, broker or promoter.
(b) During the Non-Compete Period, Seller shall not, and shall not
permit any of its officers, employees or subsidiaries to (i) induce or attempt
to induce any employee of the Company to leave the employ of the Company, or in
any way interfere with the relationship between the Company and any employee
thereof, or (iii) induce or attempt to induce any customer, supplier, licensee
or other business relation of the Company to cease doing business with Purchaser
or the Company or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation of the Company.
(c) Notwithstanding anything in this Section 6.8 to the contrary,
if at any time, in any judicial proceeding, any of the restrictions stated in
this Section 6.8 are found by a final order of a court of competent jurisdiction
to be unreasonable or otherwise unenforceable under circumstances then existing,
Seller agrees that the period, scope or geographical area, as the case may be,
shall be reduced to the extent necessary to enable the court to enforce the
restrictions to the extent such provisions are allowable under law, giving
effect to the agreement and intent of the parties that the restrictions
contained herein shall be effective to the fullest extent permissible.
(d) Seller acknowledges and agrees that money damages are an
adequate remedy for any breach or threatened breach of the provisions of this
Section 6.8, and therefore, that Purchaser or its successors or assigns may, in
addition to any other rights and remedies existing in its favor, apply to any
court of competent jurisdiction for specific performance, injunctive and/or
other relief in order to enforce or prevent any violations of the provisions of
this Section 6.8 (including the extension of the Non-Compete Period application
to Seller by a
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period equal to the length of court proceedings necessary to stop such
violation); provided, however, that Seller is found to have been in violation of
the provisions of this Section 6.8. Any injunction shall be available without
the posting of any bond or other security. In the event of an alleged breach or
violation by Seller of any of the provisions of this Section 6.8, the Non-
Compete Period will be tolled until such alleged breach or violation is
resolved; provided, however, that if Seller is found to have not violated the
provisions of this Section 6.8, then the Non-Compete Period will not be deemed
to have been tolled. Seller agrees that the restrictions set forth in this
Section 6.8 are reasonable in all respects.
6.9 Transfer Restrictions.
(a) Restrictions on Transfer. Without limiting the representations
set forth herein, Seller hereby further agrees not to sell, assign, transfer,
convey, dispose of, pledge or otherwise encumber (each, a "Transfer") all or any
portion of the Purchaser Shares unless and until:
(i) there is a registration statement filed by Purchaser with,
and declared or ordered effective by, the Commission under the Securities Act
covering such proposed Transfer of Purchaser Shares and such Transfer is made in
accordance with such registration statement;
(ii) the Transfer is effected in compliance with Rule 144
promulgated by the Commission under the Securities Act; or
(iii) Seller shall have (i) notified Purchaser in writing of
its intention to effect such proposed Transfer of Purchaser Shares, (ii)
furnished Purchaser with a statement in reasonable detail of the manner and
circumstances of such proposed Transfer, (iii) caused the proposed transferee of
such Purchaser Shares to agree in advance to take and hold such Purchaser Shares
on the terms set forth in this Section 6.9, and (iv) if requested by Purchaser,
furnished Purchaser with an unqualified written opinion of legal counsel (which
counsel shall be reasonably satisfactory to Purchaser), in form and substance
reasonably satisfactory to Purchaser, opining that such proposed Transfer may be
effected without registration thereof under the Securities Act; provided,
however, that this Section 6.9(a)(ii) shall not apply to any proposed Transfer
of Purchaser Shares (A) not involving a change in the beneficial ownership of
such Purchaser Shares, or (B) effected under and in compliance with Rule 144
promulgated by the Commission under the Securities Act.
(b) Restrictive Legends.
(i) Unless otherwise permitted under the terms of this Section
6.9, each certificate or instrument representing Purchaser Shares, and any other
securities issued on or in respect of the Purchaser Shares in connection with
(A) any stock split, stock dividend, subdivision, combination, consolidation,
reclassification or other similar event, or (B) any merger, consolidation,
reorganization or other similar event, shall be stamped or otherwise imprinted
with
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a legend, in addition to any other legends required under the laws of the State
of California or other applicable state "blue sky" securities laws, in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND ARE
"RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE DISTRIBUTED EXCEPT (I) PURSUANT TO A
REGISTRATION STATEMENT DECLARED OR ORDERED EFFECTIVE BY THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT COVERING SUCH
SECURITIES, OR (II) IN COMPLIANCE WITH RULE 144, OR (III) PURSUANT TO
AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF SUCH SECURITIES
THAT SUCH REGISTRATION OR RULE 144 COMPLIANCE IS NOT REQUIRED UNDER THE
SECURITIES ACT AS TO SUCH SALE, OFFER OF SALE, PLEDGE, HYPOTHECATION OR
OTHER DISTRIBUTION. THIS CERTIFICATE MUST BE SURRENDERED TO THE ISSUER
HEREOF OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE TRANSFER
OF ANY INTEREST IN THE SECURITIES REPRESENTED HEREBY.
(c) Seller Consent. Purchaser shall not be required to register any
Transfer of Purchaser Shares, and may instruct its transfer agent to disregard
any attempted Transfer of Purchaser Shares, unless the conditions set forth in
this Section 6.9 are satisfied to the extent applicable to any such Transfer.
Seller hereby consents to (i) the entry of a notation on the records of
Purchaser, and (ii) the delivery of instructions to the transfer agent of the
Purchaser Shares which Purchaser may deem necessary or advisable in order to
effectuate and implement the restrictions on transfer of Purchaser Shares set
forth in this Section 6.9.
6.10 IndeNet Trademarks. Purchaser shall not, and shall not permit any
of its subsidiaries or affiliates to, use, exploit, or otherwise hold out to the
public in any manner, any of the following trademarks of, or names used by,
Seller: "The IndeNet;" "IndeNet;" or "The IndeNet Digital Broadcast Network."
6.11 Debt Guarantees. Purchaser shall indemnify, defend and hold Seller
harmless from and against any and claims, costs, expenses and losses that Seller
may incur after the Closing arising out of any guarantee or other similar
agreement that Seller may have executed in connection with obligations that
Seller may have incurred (to the extent that such guarantees have been disclosed
to Purchaser) under (i) that certain loan agreement with Republic Acceptance
Corporation, (ii) the equipment leases of the Company, and (iii) all bonds
posted by the Company as set forth in the Disclosure Letter (collectively, the
"Guarantees"). In addition, after the Closing, at no cost to Seller, Purchaser
shall use commercially reasonable efforts to promptly cause all of the
Guarantees to be cancelled and to cause Seller to be relieved from any and all
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obligations under the Guarantees. In connection with the release of Seller under
the Guarantees, Purchaser shall, if and to the extent required, execute its own
guarantees to replace the Guarantees.
6.12 Cooperation. Seller shall at all times fully and promptly
cooperate with Purchaser to carry out the purposes of this Agreement and to
provide, at no cost to Purchaser, such assistance and information as Purchaser
shall reasonably require (i) to prepare, within forty five (45) days after the
Closing Date, the Company's audited financial statements for the fiscal years
ended March 31, 1996 and March 31, 1997, which financial statements shall be in
a form appropriate for filing with Purchaser's report on Form 8-K to be filed
with the Commission to report the transactions contemplated hereby, and (ii) to
complete any filings and reports relating to the Pre-Closing Period required to
be filed by the Company with the United States Internal Revenue Service.
6.13 State Qualification. Seller shall promptly pay all costs, fees,
charges, taxes and other expenses (including, without limitation, attorneys'
fees and expenses) (collectively, "Qualification Costs") incurred by the Company
and/or Purchaser after the Closing in connection with efforts to qualify the
Company to conduct business as a foreign corporation in good standing under the
laws of the States of Illinois and Kentucky. This covenant to pay such
Qualification Costs shall be in addition to any indemnification or other promise
to pay such Qualification Costs by Seller, and shall not be affected by any
disclosure to Purchaser (or Purchaser's knowledge) of the existence of such
potential payments for such Qualification Costs.
ARTICLE VII
TERMINATION
7.1 Termination.
(a) This Agreement may be terminated and abandoned at any time
prior to the Closing:
(i) by the mutual consent of Seller and Purchaser;
(ii) by either Seller or Purchaser in the event the Closing has
not occurred on or before August 30, 1997 (the "Cut-Off Date"), unless the
failure of such consummation shall be due to the failure of the party seeking to
terminate this Agreement to comply in all material respects with the agreements
and covenants set forth herein to be performed by such party on or before the
Cut-Off Date; and
(iii) by either Seller or Purchaser in the event any court or
governmental or regulatory agency of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree or ruling or other action shall have become final and nonappealable.
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7.2 Procedure and Effect of Termination. In the event of the
termination and abandonment of this Agreement by Seller or Purchaser pursuant to
Section 7.1 hereof, written notice thereof shall forthwith be given to the other
party. If the transactions contemplated by this Agreement are terminated as
provided herein:
(a) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) All confidential information received by any party hereto with
respect to the business of any other party or its subsidiaries shall be treated
in accordance with the provisions of the Confidentiality Agreement, dated as of
April 17, 1997, between Purchaser and Seller (the "Confidentiality Agreement"),
which shall survive the termination of this Agreement; and
(c) No party to this Agreement shall have any liability to the
other party hereto under this Agreement except (i) as stated in subparagraphs
(a) and (b) of this Section 7.2, (ii) for any willful breach of any provision of
this Agreement, and (iii) as provided in the Confidentiality Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. None of the provisions of this Section 8.1 shall
apply to the claims, obligations, liabilities, covenants and representations
regarding Taxes, which shall be governed solely by the terms of Section 6.2
hereof.
(a) Indemnification by Seller. Subject to the limits set forth in
Section 7.2(c) and in this Section 8.1, Seller hereby agrees to indemnify,
defend and hold Purchaser, its officers, directors, agents and affiliates,
harmless from and against any and all losses, damages, costs and reasonable
expenses, including, without limitation, reasonable expenses of investigation
and defense fees and disbursements of legal counsel and other professionals
(collectively, "Losses"), that they may incur (i) arising out of or due to any
inaccuracy of any representation or the breach of any warranty, covenant,
undertaking or other agreement of Seller set forth herein or the Disclosure
Letter; provided, however, that Seller shall have no liability to Purchaser as a
result of any inaccuracy of any representation or warranty to the extent that
Purchaser had written information prior to the Closing Date clearly indicating
that such representation or warranty was untrue or incorrect.
(b) Indemnification by Purchaser. Subject to the limits set forth
in this Section 8.1, Purchaser agrees to indemnify, defend and hold Seller, its
officers, directors, agents and affiliates, harmless from and against any and
all Losses that they may incur (i) arising out
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of or due to any inaccuracy of any representation or the breach of any warranty,
covenant, undertaking or other agreement of Purchaser set forth herein, or (ii)
arising out of any and all actions, suits, claims and administrative or other
proceedings of every kind and nature instituted against Seller at any time to
the extent that such Losses (A) relate to or arise out of or in connection with
the assets, businesses, operations, conduct, products and/or employees
(including former employees) of the Company, (B) relate to or arise out of or in
connection with events or omissions occurring after the Closing Date, and (C) do
not arise out of any inaccuracy of Seller's representations and warranties in,
or a default in the performance of any of Seller's covenants under, this
Agreement; provided, however, that Purchaser shall have no liability to Seller
as a result of the breach of any representation or warranty to the extent that
Seller had written information prior to the Closing Date clearly indicating that
such representation or warranty was untrue or incorrect.
(c) Survival of Representations and Warranties. The several
representations and warranties of the parties set forth herein or in any
instrument delivered pursuant hereto shall survive the Closing Date and shall
remain in full force and effect thereafter (i) for a period of five (5) years
from the Closing Date with respect to claims under Section 2.19 hereof, and (ii)
for a period of one (1) year from the Closing Date with respect to any other
claims; provided, however, that such representations or warranties shall survive
(if at all) beyond such period with respect to any inaccuracy therein or breach
thereof, notice of which shall have been duly given within such applicable
period in accordance with Section 8.1(d) hereof. Anything to the contrary set
forth herein notwithstanding, neither party hereto shall be entitled to recover
from the other unless and until the total of all claims of such party for
indemnity or damages with respect to any inaccuracy or breach of any such
representations or warranties or breach of any covenants, undertakings or other
agreements, whether such claims are brought under this Section 8.1 or otherwise,
shall exceed $300,000; provided, however, that in the event such claims of a
party hereto against the other for indemnity or damages exceed such amount, such
party may recover the total amount of such claims.
(d) Notice and Opportunity to Defend. If there occurs an event
which a party asserts is an indemnifiable event pursuant to Section 8.1(a) or
8.1(b) hereof, the party seeking indemnification shall promptly notify the other
party obligated to provide indemnification pursuant hereto (the "Indemnifying
Party"). If such event involves any claim or the commencement of any action or
proceeding by a third person, the party seeking indemnification will give such
Indemnifying Party prompt written notice of such claim or the commencement of
such action or proceeding; provided, however, that the failure to provide prompt
notice as provided herein will relieve the Indemnifying Party of its obligations
hereunder only to the extent that such failure prejudices the Indemnifying Party
hereunder. In case any such action shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof and, after notice
from the Indemnifying Party to such party seeking indemnification of such
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the party seeking indemnification hereunder for any legal expenses of
other legal counsel or any other expenses subsequently
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incurred by such party in connection with the defense thereof. The party seeking
indemnification agrees to cooperate fully with the Indemnifying Party and its
counsel in the defense against any such asserted liability. The party seeking
indemnification shall have the right to participate at its own expense in the
defense of such asserted liability. In no event shall an Indemnifying Party be
liable for any settlement effected without its prior written consent.
(e) Adjustment for Insurance and Taxes. The amount which an
Indemnifying Party is required to pay to, for or on behalf of any other party
(hereinafter referred to as an "Indemnitee") pursuant to this Section 8.1 shall
be adjusted (including, without limitation, retroactively) (i) by any insurance
proceeds actually recovered by or on behalf of such Indemnitee in reduction of
the related indemnifiable loss (the "Indemnifiable Loss"), and (ii) to take
account of any tax benefit actually realized as a result of any Indemnifiable
Loss. Amounts required to be paid, as so reduced, are hereafter sometimes called
an "Indemnity Payment." If an Indemnitee shall have received or shall have had
paid on its behalf an Indemnity Payment in respect of an Indemnifiable Loss and
shall subsequently receive insurance proceeds in respect of such Indemnifiable
Loss, or actually realize any tax benefit as a result of such Indemnifiable
Loss, then the Indemnitee shall pay to the Indemnifying Party the amount of such
insurance proceeds or tax benefit or, if lesser, the amount of the Indemnity
Payment.
8.2 Arbitration Procedure
(a) Purchaser and Seller agree that the arbitration procedure set
forth below shall be the sole and exclusive method for resolving and remedying
claims for money damages arising out of the provisions of Section 8.1 hereof
(the "Disputes"). Nothing in this Section 8.2 shall prohibit a party hereto from
instituting litigation to enforce any Final Determination (as defined below) or
availing itself of the other remedies set forth in Section 8.3 hereof. The
parties hereto hereby agree and acknowledge that, except as otherwise provided
in this Section 8.2 or in the Commercial Arbitration Rules of the American
Arbitration Association as in effect from time to time, the arbitration
procedures and any Final Determination hereunder shall be governed by, and shall
be enforced pursuant to the Uniform Arbitration Act and applicable provisions of
California law.
(b) In the event that any party hereto asserts that there exists a
Dispute, such party shall deliver a written notice to the other party hereto
specifying the nature of the asserted Dispute and requesting a meeting to
attempt to resolve the same. If no such resolution is reached within fifteen
(15) days after such delivery of such notice, the party delivering such notice
of Dispute (the "Disputing Person") may, within forty five (45) business days
after delivery of such notice, commence arbitration hereunder by delivering to
such other party a notice of arbitration (a "Notice of Arbitration") and by
filing a copy of such Notice of Arbitration with the Los Angeles office of the
American Arbitration Association. Such Notice of Arbitration shall specify the
matters as to which arbitration is sought, the nature of any Dispute, the claims
of each party to the arbitration and shall specify the amount and nature of any
damages, if any, sought to be recovered as a result of any alleged claim, and
any other matters required by the Commercial
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Arbitration Rules of the American Arbitration Association as in effect from time
to time to be included therein, if any.
(c) Purchaser and Seller each shall select one independent
arbitrator expert in the subject matter of the Dispute (the arbitrators so
selected shall be referred to herein as "Seller's Arbitrator" and "Buyer's
Arbitrator," respectively). In the event that either party fails to select an
independent arbitrator as set forth herein twenty (20) days from delivery of a
Notice of Arbitration, then the matter shall be resolved by the arbitrator
selected by the other party. Seller's Arbitrator and Buyer's Arbitrator shall
select a third independent arbitrator expert in the subject matter of the
dispute, and the three arbitrators so selected shall resolve the matter
according to the procedures set forth in this Section 8.2. If Seller's
Arbitrator and Buyer's Arbitrator are unable to agree on a third arbitrator
within twenty (20) days after their selection, Seller's Arbitrator and Buyer's
Arbitrator shall each prepare a list of three independent arbitrators. Seller's
Arbitrator and Buyer's Arbitrator shall each have the opportunity to designate
as objectionable and eliminate one arbitrator from the other arbitrator's list
within ten days after submission thereof, and the third arbitrator shall then be
selected by lot from the arbitrators remaining on the lists submitted by
Seller's Arbitrator and Buyer's Arbitrator.
(d) The arbitrator(s) selected pursuant to Section 8.2(c) hereof
will determine the allocation of the costs and expenses of arbitration based
upon the percentage which the portion of the contested amount not awarded to
each party bears to the amount actually contested by such party. For example, if
Purchaser submits a claim for $1,000, and if the Seller contests only $500 of
the amount claimed by Purchaser, and if the arbitrator(s) ultimately resolves
the dispute by awarding Purchaser $300 of the $500 contested, then the costs and
expenses of arbitration will be allocated 60% (i.e., $300 / $500) to the Seller
and 40% (i.e., $200 / $500) to Purchaser.
(e) The arbitration shall be conducted from the Commercial
Arbitration Rules of the American Arbitration Association as in effect from time
to time, except as otherwise set forth herein or as modified by the agreement of
all of the parties to this Agreement. The arbitrator(s) shall so conduct the
arbitration that a final result, determination, finding, judgment and/or award
(the "Final Determination") is made or rendered as soon as practicable, but in
no event later than ninety (90) days after the delivery of the Notice of
Arbitration nor later than ten days following completion of the arbitration. The
Final Determination must be agreed upon and signed by the sole arbitrator or by
at least two of the three arbitrators (as the case may be). The Final
Determination shall be final and binding on all parties and there shall be no
appeal from or reexamination of the Final Determination, except for fraud,
perjury, evident partiality or misconduct by an arbitrator prejudicing the
rights of any party and to correct manifest clerical errors.
(f) Purchaser and Seller may enforce any Final Determination in any
state or federal court having jurisdiction over the dispute. For the purpose of
any action or proceeding instituted with respect to any Final Determination,
each party hereto hereby irrevocably submits to the jurisdiction of such courts,
irrevocably consents to the service of process by registered mail
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or personal service and hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter have as to
personal jurisdiction, the laying of the venue of any such action or proceeding
brought in any such court and any claim that any such action or proceeding
brought in such court has been brought in an inconvenient forum.
(g) If any party shall fail to pay the amount of any damages, if
any, assessed against it within ten days of the delivery to such party of such
Final Determination, the unpaid amount shall bear interest from the date of such
delivery at the lesser of (i) the prime rate of interest announced by Bank of
America NT&SA from time to time (which rate shall be adjusted on the effective
date of each change in such prime rate) plus 3.00% and (ii) the maximum rate
permitted by applicable usury laws. Interest on any such unpaid amount shall be
compounded semi-annually, computed on the basis of a 360-day year consisting of
twelve 30-day months and shall be payable on demand. In addition, such party
shall promptly reimburse the other party for any and all costs or expenses of
any nature or kind whatsoever (including but not limited to all attorneys' fees)
incurred in seeking to collect such damages or to enforce any Final
Determination.
8.3 Remedies. Except as provided in Section 8.2 hereof, Purchaser and
Seller each have and will retain all other rights and remedies existing in their
favor at law or equity, including, without limitation, any actions for specific
performance and/or injunctive or other equitable relief (including, without
limitation, the remedy of rescission) to enforce or prevent any violations of
the provisions of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Fees and Expenses. Seller shall bear its own expenses and Purchaser
shall bear its own expenses in connection with the negotiation and consummation
of the transactions contemplated hereby, including the fees and expenses of any
broker or finder retained by the respective party in connection with the
transactions contemplated herein; provided, however, that Seller and Purchaser
shall each bear an equal portion of any costs and expenses associated with the
preparation and filing of additional audit material in respect of the Company
requested by the Securities and Exchange Commission in connection with or
resulting from the transactions contemplated hereby.
9.2 Governing Law. This Agreement shall be construed under and
governed by the laws of the State of California without regard to the principles
of conflicts of laws.
9.3 Amendment. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by each of the parties hereto.
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9.4 No Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party hereto.
9.5 Waiver. Any of the terms or conditions hereof which may be lawfully
waived may be waived in writing at any time by each party which is entitled to
the benefits thereof. Any waiver of any of the provisions hereof by any party
hereto shall be binding only if set forth in an written instrument signed on
behalf of such party. No failure to enforce any provision hereof shall be deemed
to or shall constitute a waiver of such provision and no waiver of any of the
provisions hereof shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
9.6 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and given by (i) physical delivery
(effective upon receipt thereof), (ii) by telecopier (effective upon receipt
thereof provided an original is received within one (1) business day of such
receipt), or (iii) by first class mail (registered or certified mail, postage
prepaid, return receipt requested) (effective upon receipt thereof) to the
respective parties hereto as follows:
If to Purchaser: Digital Generation Systems, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: President
with a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxx X. Xxxxxxxx, Esq.
If to Seller: IndeNet, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: President
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with a copy to: Xxxx & Xxxxx Professional Corporation
0000 Xxxxxxx Xxxx Xxxx
x0xx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
(000) 000-0000 (telecopier)
(000) 000-0000 (telephone)
Attention: Xxxxxx Xxxxx, Esq.
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
9.7 Complete Agreement. This Agreement and the other documents and
writings referred to herein or delivered pursuant hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
9.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
9.9 Headings. The headings set forth herein are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
the terms and provisions hereof.
9.10 Severability. Any provision of this Agreement which is determined
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering such or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
9.11 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation, other than the parties hereto
and their permitted successors or assigns, any rights or remedies under or by
reason of this Agreement.
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IN WITNESS WHEREOF, each of Purchaser and Seller has caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
INDENET, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxx
-----------------------
Title: Chief Executive Officer
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DIGITAL GENERATION SYSTEMS,INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------
Name: Xxxxx X. Xxxxxxxxx
-----------------------
Title: Chief Executive Officer
-----------------------
