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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of June 28, 1996 and effective as of
July 1, 1996, among TH-Q, Inc., a New York corporation (the "Buyer"), Inland
Productions, Inc., an Illinois corporation (the "Company"), Xxxxx Xxxxxxxxxx
and Xxxxxxx Xxxxx (collectively, the "Principal Stockholders").
The Company proposes to issue and sell for an aggregate purchase price
of $600,000 to the Buyer, two hundred fifty (250) shares (the "Shares") of its
common stock, no par value (the "Common Stock"). The Shares will be issued
pursuant to and subject to all of the terms and conditions of this Agreement.
In connection with the foregoing, the parties agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale of Shares. On the Closing Date (as defined in
Section 2), the Company shall sell the Shares to the Buyer and the Buyer shall
purchase the Shares for the purchase price provided in Section 1.2. The Buyer
will have piggyback registration rights with respect to the Shares as set forth
in the Registration Rights Agreement dated as of June 28, 1996 between the
Company and the Buyer.
1.2 Purchase Price. The aggregate purchase price for the
Shares (the "Purchase Price") is $600,000. The Purchase Price shall be paid by
the Buyer as follows:
(i) on the Closing Date, the Buyer shall pay to
the Company an aggregate of $300,000 in cash;
(ii) the balance of the Purchase Price shall be
paid by the Buyer on the Closing Date in shares of common stock, par
value $.0001 (the "TH-Q Stock"), of the Buyer with an aggregate fair
market value equal to $300,000. For purposes of this provision "fair
market value" is to be determined on the basis of the average per
share trading price of the TH-Q Stock over the twenty (20) days
immediately prior to June 25, 1996. The Company will have certain
demand and piggyback registration rights with respect to the TH-Q
Stock obtained pursuant to this Agreement as set forth in the
Registration Rights Agreement dated as of June 28, 1996 between the
Buyer and the Company.
1.3 Delivery of Shares. On the Closing Date (as defined
in Section 2), the Company shall deliver to the escrow agent for the Shares
(the "Stock Escrow Agent") under the escrow agreement referred to in Section
7.1, stock certificates representing the Shares in proper form for transfer.
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2. Closing; Closing Date. The closing of the sale and purchase
of the Shares contemplated hereby (the "Closing") shall take place upon
satisfaction of the conditions precedent in Sections 6 and 7 on June 28, 1996,
or such other time or date as the Buyer, the Company and the Principal
Stockholders agree in writing. The date upon which the Closing occurs is
herein called the "Closing Date."
3. Representations and Warranties. The Company and the Principal
Stockholders, jointly and severally, represent and warrant to the Buyer as
follows:
3.1 Principal Stockholders. Each Principal Stockholder
represents and warrants to the Buyer that such Principal Stockholder has the
full legal right and power and all authority and approval required to enter
into, execute and deliver this Agreement and to perform fully such Principal
Stockholder's obligations hereunder. This Agreement has been duly executed
and delivered and is the valid and binding obligation of the Principal
Stockholder enforceable in accordance with its terms. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and the performance by the Principal Stockholder of this
Agreement in accordance with its respective terms and conditions will not (i)
require the approval or consent of any governmental or regulatory body or the
approval or consent of any other person; or (ii) constitute (or with notice or
lapse of time or both constitute) a default under any instrument, contract or
other agreement to which the Principal Stockholder is a party or by or to which
the Company is or the Shares are bound or subject. There are no shareholder
agreements relating to the Common Stock of the Company, including the Shares.
3.2 Due Incorporation. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois. The Company does not do business in or own or lease property in any
jurisdiction other than its jurisdiction of incorporation.
3.3 Corporate Power. The Company has the requisite
corporate power and authority to execute, deliver and carry out this Agreement
and all other instruments, documents and agreements contemplated or required by
the provisions of this Agreement to be executed, delivered or carried out by
the Company. The Company has all requisite corporate power and lawful
authority to own, lease and operate its assets, properties and business and to
carry on its business as now being and as heretofore conducted. The Company
has taken all necessary corporate action to approve this Agreement and to
authorize the execution, delivery and performance of this Agreement by the
Company, the issuance by the Company of the Shares, and the
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consummation of the transactions contemplated hereby. This Agreement has been
duly and properly executed and delivered by the Company and constitutes the
legally valid and binding obligations of the Company enforceable against it in
accordance with its terms.
3.4 Outstanding Capital Stock. The Company is authorized
to issue 1,000,000 shares of common stock, no par value, seven hundred fifty
(750) shares of which are issued and outstanding and owned by the Principal
Stockholders. No other class of capital stock of the Company is authorized or
outstanding. The Company does not own, directly or indirectly, any shares of
capital stock of any corporation or any equity investment in any partnership,
association or any other business organization. All of the Shares are duly
authorized and are validly issued, fully paid and non-assessable.
3.5 Options or Other Rights. There is no outstanding
right, subscription, warrant, call, unsatisfied preemptive right, option or
other agreement or commitment of any kind to purchase or otherwise to receive
from the Company any of the outstanding, authorized but unissued, unauthorized
or treasury shares of the capital stock or any other security of the Company,
and there is no outstanding security of any kind convertible into such capital
stock.
3.6 Organizational Documents. The Company has delivered
to the Buyer true and complete copies of the Articles of Incorporation and
By-laws of the Company as in effect on the date hereof. The minute books of
the Company contain true and complete records of all meetings and consents in
lieu of meeting of the Board of Directors and of the stockholders since the
time of incorporation and accurately reflect all transactions referred to in
such minutes and consents in lieu of meeting. The stock books of the Company
are true and complete.
3.7 Tax Matters. The Company has paid all federal,
state, county, local, foreign and other taxes (hereinafter, "Taxes" or,
individually, a "Tax") required to be paid by it through the date hereof, and
all deficiencies or other additions to tax, interest and penalties owed by it,
in connection with any such Taxes. The Company has filed all returns for Taxes
that it is required to file through the date hereof. No penalties or other
charges are or will become due with respect to the late filing of any return
required to be filed by the Company through the date hereof.
3.8 Compliance with Laws; Permits. The Company and all
products sold or services provided by it are in compliance in all material
respects with all federal, state, local and foreign statutes, laws, ordinances,
regulations, rules, judgments, orders
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and decrees applicable to it or its respective assets, properties, business or
operations. The Company has all licenses, permits, orders or approvals of any
federal, state, local or foreign governmental or regulatory body (collectively,
"Permits") that are material to or necessary for the conduct of the Company
Business (as defined in Section 8.1); such Permits are in full force and
effect; no violations are or have been recorded in respect of any Permit; and
no proceeding is pending or, to the knowledge of the Company, threatened to
revoke or limit any Permit.
3.9 No Breach. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not (i) violate any provision of the Articles of Incorporation or By-laws
of the Company; (ii) violate, conflict with or result in the breach of any of
the terms of, result in a material modification of the effect of, otherwise
give any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any contract or
other agreement to which the Company or any Principal Stockholder is a party or
by or to which it or any of its assets or properties may be bound or subject;
(iii) violate any order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon, the
Company or upon the securities, properties or Company Business; (iv) violate
any statute, law or regulation of any jurisdiction as such statute, law or
regulation relates to the Company or to the securities, properties or Company
Business; or (v) violate any Permit.
3.10 Actions and Proceedings. There are no outstanding
orders, judgments, injunctions, awards or decrees of any court, governmental or
regulatory body or arbitration tribunal against or involving the Company or a
Principal Stockholder relating to the Company Business. There are no actions,
suits or claims or legal, administrative or arbitral proceedings or, to the
knowledge of the Company, investigations pending or, to the knowledge of the
Company, threatened against or involving the Company or any of its properties
or assets or any Principal Stockholder, that, individually or in the aggregate,
could have a material adverse effect upon the transactions contemplated hereby
or upon the assets, properties, business, operations, or condition (financial
or otherwise) of the Company.
3.11 Contracts and Other Agreements; Consents. Schedule
3.11 sets forth all of the material contracts and other agreements to which the
Company or a Principal Stockholder is a party or by or to which they or their
assets or properties are bound or subject, relating to the Company Business.
All of such contracts and other agreements are valid, subsisting, in full
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force and effect and binding upon the parties thereto in accordance with their
terms, and the Company or Principal Stockholder, as the case may be, has paid
in full or accrued all amounts due thereunder and has satisfied in full or
provided for all of its liabilities and obligations thereunder, and is not in
default under any of them, nor does any condition exist that with notice or
lapse of time or both would constitute a default thereunder. Neither the
Company nor any Principal Stockholder is a party to or bound by a contract or
other agreement that either individually or in the aggregate materially
adversely affects the Company's assets, properties, business, operations or
condition (financial or otherwise). Except as separately identified on
Schedule 3.11, no approval or consent of any person is needed in order that the
contracts and other agreements continue in full force and effect following the
consummation of the transactions contemplated by this Agreement.
3.12 Real Estate. Schedule 3.12 sets forth a list and
summary description of all leases, subleases or other agreements under which
the Company or contractual obligations on their part to purchase or acquire any
interest in real property. The Company is the lessee under the leases or
holder of the options, as the case may be, of each of the items set forth on
Schedule 3.12. Such leases, subleases and other agreements are in full force
and effect and the Company has not received any notice of any default
thereunder. The leasehold interests of the Company are subject to no lien or
other encumbrance and enjoy a right of quiet possession as against any lien or
other encumbrance on the property.
3.13 Tangible Property. All interests owned or claimed by
the Company or a Principal Stockholder in or to the plant, machinery,
equipment, furniture, leasehold improvements, fixtures, vehicles, structures,
any related capitalized items and other tangible property material to the
Company Business and material leases, conditional sale contracts, franchises or
licenses pursuant to which the Company may hold or use and any interest owned
or claimed by the Company in or to such property and all other depreciable or
amortizable property owned by the Company ("Tangible Property") are in full
force and effect and, with respect to the performance of the Company, there is
no default or event of default or event which with notice or lapse of time or
both would constitute a default. The Tangible Property is in good operating
condition and repair, and neither the Company nor any Principal Stockholder has
received notice that it is in violation of any existing law or any building,
zoning, health, safety or other ordinance, code or regulation.
3.14 Intangible Property. Schedule 3.14 sets forth all
patents, trademarks, service marks, trade names and franchises, all
applications for any of the foregoing, and all
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permits, grants and licenses or other rights running to or from the Company or
a Principal Stockholder relating to any of the foregoing that are material to
the Company Business. Except as set forth on Schedule 3.14, the rights of the
Company or the Principal Stockholder, as the case may be, in the property set
forth on Schedule 3.14 are free and clear of any liens or other encumbrances.
Except as set forth on Schedule 3.14, the Company has no notice of any
adversely held patent, invention, trademark, service xxxx or trade name of any
other person relating to any of the property set forth on Schedules 3.13 and
3.14 or any process or confidential information of the Company, and the Company
knows of no basis for any such charge or claim.
3.15 Liens. The Company owns outright and has good and
marketable title to all of its assets and properties, in each case free and
clear of any lien or other encumbrance, except for (i) immaterial assets and
properties; (ii) assets and properties disposed of, or subject to purchase or
sales orders, in the ordinary course of business; or (iii) liens or other
encumbrances securing taxes, assessments, governmental charges or levies, or
the claims of materialmen, carriers, landlords and like person, all of which
are not yet due and payable.
3.16 Liabilities. Except as set forth on Schedule 3.16,
the Company does not have any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, known or
unknown, fixed or unfixed, xxxxxx or inchoate, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise, including,
without limitation, liabilities on account of Taxes, other governmental charges
or lawsuits brought, whether or not of a kind required by generally accepted
accounting principles to be set forth on a financial statement ("Liabilities").
The Company has no knowledge of any circumstance, condition, event or
arrangement that may hereafter give rise to any Liabilities of the Company
except in the ordinary course of business or as otherwise set forth on Schedule
3.16.
3.17 Employee Benefit Plans. The Company has no pension,
profit sharing, retirement, deferred compensation, stock purchase, stock
option, incentive, bonus, vacation, severance, disability, hospitalization,
medical insurance, life insurance and other employee benefit plans, programs or
arrangements, maintained by the Company or under which the Company has any
obligations in respect of, or which otherwise cover, any of the current or
former officers or employees of the Company or its beneficiaries (hereinafter
individually referred to as a "Plan" and collectively referred to as the
"Plans").
3.18 Insurance. Schedule 3.18 sets forth a list and brief
description of all policies or binders of fire, liability,
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product liability, workmen's compensation, vehicular and other insurance held
by or on behalf of the Company or Principal Stockholder relating to the Company
Business. Such policies and binders are valid and enforceable in accordance
with their terms, are in full force and effect. The Company is not in default
with respect to any provision contained in any such policy or binder. There
are no outstanding unpaid claims under any such policy or binder.
3.19 Officers, Directors and Key Employees. Schedule 3.19
sets forth (i) the name and total compensation of each officer and director of
the Company and of each other key employee, consultant, agent or other
representative of the Company. None of such persons has made a written threat
to the Company or to any of their officers or directors to cancel or otherwise
terminate such person's relationship with the Company.
3.20 Section 341(f) of Internal Revenue Code. The Company
has not at any time consented under section 341(f)(1) of the Code to have the
provisions of section 341(f)(2) of the Code apply to any sale of its stock.
3.21 TH-Q Stock Not Registered. The Company acknowledges
that the TH-Q Stock issued as part of the Purchase Price is not being
registered under the Securities Act of 1933, as amended (the "Act") based upon
an exemption from registration under Section 4(2) and Regulation D of the Act,
in that the issuance of the TH-Q Stock does not involve any public offering.
The Company represents that it is buying the TH-Q Stock for investment and not
for resale or distribution.
4. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Company and the Principal Stockholders as
follows:
4.1 Due Incorporation. The Buyer is duly organized,
validly existing and in good standing under the laws of the State of New York.
4.2 Corporate Power of the Buyer. The Buyer has the
corporate power and authority to own, lease and operate its assets, properties
and business and to carry on its business as now being and as heretofore
conducted. The Buyer has the requisite corporate power and authority to
execute, deliver and carry out this Agreement and all other instruments,
documents and agreements contemplated or required by the provisions of this
Agreement to be executed, delivered or carried out by the Buyer. The Buyer has
taken all necessary corporate action to approve this Agreement and to authorize
the execution, delivery and performance of this Agreement by the Buyer, the
issuance by the Buyer of the TH-Q Stock, and the consummation of the
transactions
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contemplated hereby. This Agreement has been duly and properly executed and
delivered by the Buyer and constitutes the legally valid and binding
obligations of the Buyer enforceable in accordance with its terms.
4.3 Purchase for Investment. The Buyer acknowledges that
the Shares are not registered under the Act based on an exemption from
registration under Section 4(2) of the Act, in that the issuance of the Shares
does not involve any public offering. The Buyer represents that it is an
"accredited investor" as defined under Regulation D the Act and is purchasing
the Shares for investment and not for resale or distribution.
4.4 No Breach. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not (i) violate any provision of the Articles of Incorporation or By-laws
of the Buyer; (ii) violate, conflict with or result in the breach of any of the
terms of, result in a material modification of the effect of, otherwise give
any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any contract or
other agreement to which the Buyer is a party or by or to which it or any of
its assets or properties may be bound or subject; (iii) violate any order,
judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory body against, or binding upon, the Buyer or upon the securities
or properties of the Buyer; (iv) violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation relates to the Buyer or to the
securities, properties or business of the Buyer; or (v) violate any Permit.
4.5 Actions and Proceedings. There are no actions, suits
or claims or legal, administrative or arbitral proceedings or, to the knowledge
of the Buyer, investigations pending or, to the knowledge of the Buyer,
threatened against or involving the Buyer or any of its properties or assets,
that, individually or in the aggregate, could have a material adverse effect
upon the transactions contemplated hereby or upon the assets, properties,
business, operations, or condition (financial or otherwise) of the Buyer.
4.6 Financial Condition. The Buyer has previously
delivered to the Company its Annual Report on Form 10-K for the Buyer's Fiscal
Year 1995 and its Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996, including financial statements (the "Financial Statements").
The Buyer has no knowledge of any material adverse change in the financial
condition of the Company since the date of the Financial Statements.
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5. Covenants and Agreements. The parties covenant and agree as
follows:
5.1 Financial Information. The Company shall furnish to
the Buyer financial statements as soon as available after the close of each
fiscal year of the Company, balance sheet of the Company and the related
statement of earnings and stockholders' equity and statement of cash flows of
the Company.
5.2 Access to Information. The Company shall provide to
the Buyer such information concerning the operations of the Company as the
Buyer may from time to time reasonably request in writing and discuss the
affairs, accounts and finances of the Company with the financial and management
personnel of the Buyer. All such information shall be treated by the Buyer as
confidential.
5.3 Notice of Certain Events. The Company shall promptly
give written notice to the Buyer of (i) any casualty to any property, force
majeure, legislative or regulatory change, revocation of license or right to do
business, accident, labor dispute, confiscation or condemnation, the result of
any of which might have an adverse effect upon the financial condition,
business or prospects of the Company or (ii) any litigation, action,
proceeding, investigation or claim, including, without limitation, those
involving a governmental agency or regulatory body, which relates in whole or
in part to any of the transactions contemplated by this Agreement.
5.4 Insurance. The Company shall maintain insurance with
respect to its properties and business against such casualties and
contingencies of such types in such amounts and with such deductible amounts as
is customary in the case of corporations of established reputations engaged in
the same or a similar business and similarly situated.
5.5 Maintenance of Company Business. The Company shall
maintain and preserve its existence, present form of Company Business, and all
rights, privileges and franchises necessary or desirable in the normal course
of its business; continue to engage in businesses of the same general type as
now conducted by the Company; and keep all of its property necessary to operate
its business in good working order and condition, ordinary wear and tear
excepted.
5.6 Compliance With Laws. The Company and the Principal
Stockholders shall comply in all respects with all laws, rules, regulations,
orders and directives of any governmental or regulatory authority having
jurisdiction over the Company and the Company Business and with all agreements
to which the Company or a Principal Stockholder is a party, provided the
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Company or Principal Stockholder, as the case may be, may in good faith contest
any ruling or directive.
5.7 Taxes and Other Liabilities. The Company shall pay
all of its obligations when due; pay all taxes and other governmental or
regulatory assessments before delinquency or before any penalty attaches
thereto, except as may be contested in good faith by the appropriate
procedures; and timely file all required tax returns.
5.8 Environmental Matters. The Company shall comply with
all federal, state and local environmental laws.
5.9 Board Representation. As set forth in the
Stockholder's Agreement, the Buyer may designate (the "Designated Director") up
to twenty-five percent (25%) of the members of the Board of Directors of the
Company. Initially, one (1) of the three (3) members of the Company's Board of
Directors shall be a Designated Director.
5.10 Organic Changes. The Company shall not allow or
cause the occurrence of any Organic Change (as defined below) unless it has
received the affirmative vote of all Designated Directors for such Organic
Change. For purposes of this Section 5.10, "Organic Change" means (i) any
sale, lease or exchange of property or assets of the Company in a transaction
involving One Million Dollars ($1,000,000) or more whether or not in the
ordinary course of business; (ii) the issuance by the Company of any capital
stock in excess of five percent (5%) of the outstanding capital stock of the
Company; (iii) any merger or consolidation to which the Company is party; (iv)
the direct or indirect acquisition of any business by the Company, whether by
purchase of assets, stock or otherwise, for consideration having a price of
fair value of One Million Dollars ($1,000,000) or more; or (v) an initial
public offering of the capital stock of the Company; provided, that in
determining the value of consideration given or the amount involved in a
transaction described in the foregoing clauses (i) through (iv), there shall be
included the fair value of cash and non-cash consideration, deferred payments,
and all liabilities assumed by the purchaser or acquirer.
5.11 Compensation. The Company will maintain a
compensation committee (the "Compensation Committee") comprised of certain
members of the Board of Directors and performing the functions set forth in the
Stockholders Agreement.
5.12 Consent to Jurisdiction and Service of Process. Any
legal action, suit or proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby shall be instituted in any state or
federal court located in Los
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Angeles County, State of California, and each party agrees not to assert, by
way of motion, as a defense, or otherwise, in any such action, suit or
proceeding, any claim that it is not subject personally to the jurisdiction of
such court, that its property is exempt or immune from attachment or execution,
that the action, suit or proceeding is brought in an inconvenient forum, that
the venue of the action, suit or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced in or by such court, and
hereby waives any offsets or counterclaims in any such action, suit or
proceeding. Each party further irrevocably subjects to the jurisdiction of any
such court in any such action, suit or proceeding.
5.13 Employment Agreements. The Company and each of the
Principal Stockholders shall enter into employment agreements setting forth
terms of employment, including non-competition provisions, within a reasonable
period after the Closing Date.
6. Conditions precedent to the Obligation of the Buyer to Close.
The obligation of the Buyer to enter into and complete the Closing is subject
to the fulfillment on or prior to the Closing Date of the following conditions,
any one or more of which may be waived by it:
6.1 Third-Party Consents. All Permits and governmental
approvals and consents, permits and approvals from parties to contracts or
other agreements with the Company or any Principal Stockholder that may be
required in connection with the performance by the Company or the Principal
Stockholders of its obligations under this Agreement or the continuance of such
contracts or other agreements with the Company after the Closing shall have
been obtained.
6.2 Opinion of Counsel to the Principal Shareholders and
the Company. The Buyer shall have received the opinion of Huck, Bouma, Xxxxxx,
Xxxxxxxx & Xxxxxxxx, P.C., counsel to the Company, dated the Closing Date,
addressed to the Buyer, in a form satisfactory to the Buyer.
6.3 Escrow Agent Letter Agreement. Counsel to the
Company, or such other agent as designated by the Company (the "Escrow Agent"),
shall have delivered to the Buyer and the Company a completed and executed
escrow letter agreement substantially in the form of Exhibit A.
6.4 Stockholders Agreement. The parties hereto shall
have entered into a Stockholders Agreement.
6.5 Appointment of Directors. The Designated Director(s)
shall have been designated in accordance with the Stockholders Agreement.
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6.6 Delivery of Stock Certificates. The Company shall
have delivered to the Stock Escrow Agent on the Closing Date stock certificates
representing the Shares in proper form for transfer.
7. Conditions Precedent to the Obligation of the Company and
Principal Stockholders to Close. The obligation of the Company and Principal
Stockholders to enter into and complete the Closing is subject, to the
fulfillment of the following conditions, any one or more of which may be
waived:
7.1 Stock Escrow Agent Letter. Counsel to the Buyer, or
such other agent as designated by the Buyer, shall have delivered to Buyer and
the Company a completed and executed escrow agreement substantially in the form
of Exhibit A.
7.2 Opinion of Counsel to the Buyer. The Company shall
have received the opinion of Sidley & Austin, counsel to the Buyer, dated the
Closing Date, addressed to the Company and the Principal Stockholders, in a
form acceptable to the Company.
7.3 Stockholders Agreement. The parties hereto shall have
entered into a Stockholders Agreement.
7.4 Delivery of Payment of Purchase Price. The Buyer
shall have delivered to the Escrow Agent, the TH-Q Stock and cash comprising
the Purchase Price.
8. Covenants of the Principal Stockholders.
8.1 Covenants Against Competition. Each Principal
Stockholder acknowledges that (i) the Company is engaged in the business of
software development for video games and video game platform conversions (the
"Company Business"); (ii) his work for the Company has given him and will
continue to give him access to trade secrets of and confidential information
concerning the Company; (iii) the agreements and covenants contained in this
Section 8 are essential to protect the Company Business and the equity interest
purchased by the Buyer; (iv) the Buyer would not purchase the Shares but for
such agreements and covenants; and (v) he has means to support himself and his
dependents other than by engaging in the Company Business and the provisions of
this Section 8 will not impair such ability. Accordingly, each covenants and
agrees, with respect to himself, as follows:
8.1.1 Non-Compete. During the term of the
Principal Stockholder's employment with the Company or any of its affiliates
and for a period of eighteen (18) months following the termination, for cause
or otherwise, of the Principal Stockholder's employment with the Company (the
"Restricted Period"), the Principal Stockholder shall not in any state or
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county of the United States and any other location where the Company is engaged
in the Company Business, directly or indirectly, (i) engage in the Company
Business for the Principal Stockholder's own account with respect to any video
game or game platform that the Company has marketed within two (2) years prior
to such time, is then marketing or is then developing (i.e., wrestling game
versus wrestling game; racing game versus racing game; fishing game versus
fishing game); (ii) enter the employ of, or render any services to, any person
engaged in such activities; or (iii) have an economic interest in any such
person in any capacity, including, without limitation, as an individual,
partner, shareholder, officer, director, principal, agent, trustee or
consultant; provided, however, the Principal Stockholder may own, directly or
indirectly, solely as an investment, securities of any person traded on any
national securities exchange if the Principal Stockholder is not a controlling
person of, or a member of a group which controls, such person and does not,
directly or indirectly, own 1% or more of any class of securities of such
person.
8.1.2 Confidential Information. During and after
the Restricted Period, the Principal Stockholder shall keep secret and retain
in strictest confidence, and shall not use for the benefit of himself or
others, all confidential matters of the Company and its affiliates, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans,
business acquisition plans, new personnel acquisition plans, technical
processes, designs and design projects, inventions and research projects of the
Company or its affiliates learned by the Principal Stockholder heretofore or
hereafter.
8.1.3 Property of the Company. All memoranda,
notes, lists, records and other documents or papers (and all copies thereof),
including such items stored in computer memories, on microfiche or by any other
means, including, but not limited to, programs, utilities, routines and tools
made or compiled by or on behalf of the Principal Stockholder, or made
available to the Principal Stockholder relating to the Company Business, the
Company or its affiliates, are and shall be the Company's property and shall be
delivered to the Company promptly upon the termination of the Principal
Stockholder's employment with the Company or its affiliates or at any other
time on request of the Company.
8.1.4 Employees and Consultants of the Company.
During the Restricted Period, the Principal Stockholder shall not, directly or
indirectly, hire or solicit any employee of the Company or its affiliates or
consultants then under contract with
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the Company or encourage any such employee to leave such employment or to
terminate such consulting relationship.
8.2 Rights and Remedies Upon Breach. If the Principal
Stockholder breaches, or threatens to commit a breach of, any of the provisions
of Section 8.1 (the "Restrictive Covenants"), the Company shall have the
following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity:
8.2.1 Specific Performance. The right and remedy
to have the Restrictive Covenants specifically enforced by any court of
competent jurisdiction, it being agreed that any breach or threatened breach of
the Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
8.2.2 Accounting. The right and remedy to require
the Principal Stockholder to account for and pay over to the Company, as the
case may be, all compensation, profits, monies, accruals, increments or other
benefits derived or received by the Principal Stockholder as the result of any
transactions constituting a breach of the Restrictive Covenants.
8.3 Severability of Covenants. Each Principal
Stockholder acknowledges and agrees that the Restrictive Covenants are
reasonable and valid in geographical and temporal scope and in all other
respects. If any court determines that any of the Restrictive Covenants, or
any part thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect, without
regard to the invalid portions.
8.4 Blue-Pencilling. If any court determines that any of
the Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall have the power
to reduce the duration or scope of such provision, as the case may be, and, in
its reduced form, such provision shall then be enforceable.
8.5 Enforceability in Jurisdiction. The Buyer, the
Company and the Principal Stockholders intend to and hereby confer jurisdiction
to enforce the Restrictive Covenants upon the courts of any jurisdiction within
the geographical scope of such Covenants. If the courts of any one or more of
such jurisdictions hold the Restrictive Covenants unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of the Buyer and
the Principal Stockholders that such determination not bar or in any way affect
the Company's right to
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the relief provided above in the courts of any other jurisdiction within the
geographical scope of such Covenants, as to breaches of such Covenants in such
other respective jurisdiction, such Covenants, as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants.
9. Survival of Representations and Warranties of the Sellers.
Notwithstanding any right of the Buyer fully to investigate the affairs of the
Company and notwithstanding any knowledge of facts determined or determinable
by the Buyer pursuant to such investigation or right of investigation, the
Buyer has the right to rely fully upon the representations, warranties,
covenants and agreements of the Company and of each Principal Stockholder
contained in this Agreement. All such representation, warranties, covenants
and agreements shall survive the execution and delivery hereof and the Closing
hereunder.
10. Indemnification.
10.1 Obligation of the Company and Principal Stockholders
to Indemnify. Subject to the limitations contained herein, the Company and the
Principal Stockholders jointly and severally agree to indemnify, defend and
hold harmless the Buyer (and its directors, officers, employees, affiliates and
assigns) from and against all losses, liabilities, damages, deficiencies, costs
or expenses (including interest, penalties and reasonable attorneys' fees and
disbursements) ("Losses") based upon, arising out of or otherwise in respect of
any inaccuracy in or any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement. Each Principal
Stockholder agrees to indemnify, defend and hold harmless the Buyer (and its
directors, officers, employees, affiliates and assigns) from and against any
Losses based upon, arising out of or otherwise in respect of any inaccuracy in
or any breach of any representation, warranty, covenant or agreement of such
Principal Stockholder contained in Section 3.1.
10.2 Obligation of the Buyer to Indemnify. The Buyer
agrees to indemnify, defend and hold harmless the Company and Principal
Stockholders from and against any Losses based upon, arising out of or
otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement of the Buyer contained in Section 4.
11. Miscellaneous.
11.1 Certain Definitions. As used in this Agreement, the
following terms have the following meanings unless the context otherwise
requires:
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(i) "affiliate" with respect to any person, means
any other person controlling, controlled by or under common control with such
person.
(ii) "contracts and other agreements" means all
contracts, agreements, understandings, indentures, notes, bonds, loans,
instruments, leases, mortgages, franchises, licenses, commitments or other
binding arrangements, express or implied.
(iii) "document or other papers" means any
document, agreement, instrument, certificate, notice, consent, affidavit,
letter, telegram, telex, statement, schedule (including any Schedule to this
Agreement), exhibit (including any Exhibit to this Agreement) or any other
paper whatsoever.
(iv) "governmental or regulatory body" means any
government or political subdivision thereof, whether federal, state, local or
foreign, or any agency or instrumentality of any such government or political
subdivision.
(v) "lien or other encumbrance" means any lien,
pledge, mortgage, security interest, claim, lease, charge, option, right of
first refusal, easement, servitude, transfer restriction under any shareholder
or similar agreement, encumbrance or any other restriction or limitation
whatsoever.
(vi) "person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory body or other entity.
(vii) "property" means real, personal or mixed
property, tangible or intangible.
11.2 Knowledge. As used in this Agreement, the term
"knowledge," with respect to the Company or the Buyer, means the actual
knowledge of its officers, directors or shareholders.
11.3 Publicity. No publicity release or announcement
concerning this Agreement or the transactions contemplated hereby shall be made
without advance approval thereof by the Company and the Buyer.
11.4 Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed two days after the date of deposit in the United
States mails, as follows:
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(i) if to the Buyer, to:
TH-Q, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Sidley & Austin
000 Xxxx Xxxxx Xxxxxx, 00xx Xxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
(ii) if to the Company or Principal
Stockholders, to:
Inland Productions, Inc.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxx
with a copy to:
Huck, Bouma, Xxxxxx, Xxxxxxxx & Xxxxxxxx,
P.C.
0000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
11.5 Entire Agreement. This Agreement (including the
Schedules) and the collateral agreements executed in connection with the
consummation of the transactions contemplated herein contain the entire
agreement among the parties with respect to the purchase of the Shares and
related transactions, and supersedes all prior agreements, written or oral,
with respect thereto.
11.6 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or
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privilege hereunder shall operate as a waiver thereof. Nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
The rights and remedies of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant or agreement contained in this Agreement shall in no way be limited by
the fact that the act, omission, occurrence or other state of facts upon which
any claim of any such inaccuracy or breach is based may also be the subject
matter of any other representation, warranty, covenant or agreement contained
in this agreement (or in any other agreement between the parties) as to which
there is no inaccuracy or breach.
11.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California.
11.8 Further Assurances. The Company and the Buyer will,
at any and all times, execute and deliver all such further documents,
resolutions, assignments, transfers and assurances as may be necessary or
desirable for the better assuring and confirming of all of the rights and
remedies hereunder and to comply with applicable law.
11.9 Legend. The Company and the Buyer shall place
appropriate legends on the certificates evidencing the Shares and TH-Q Stock,
respectively, as set forth in the Stockholders Agreement.
11.10 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and legal representatives.
11.11 Variations in Pronouns. All pronouns and any
variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the context may require. The term "or" is not exclusive.
11.12 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
11.13 Exhibits and Schedules. The Exhibits and Schedules
are a part of this Agreement as if fully set forth
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herein. All references herein to Sections, subsections, clauses, Exhibits and
Schedules shall be deemed references to such parts of this Agreement, unless
the context shall otherwise require.
11.14 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TH-Q, INC.
/s/Xxxxx X. Xxxxxxx
---------------------------------------
By: Xxxxx X. Xxxxxxx
Title: President
INLAND PRODUCTIONS, INC.
/s/ Xxxxxxx Xxxxx
---------------------------------------
By: Xxxxxxx Xxxxx
Title:President
XXXXX XXXXXXXXXX
/s/Xxxxx Xxxxxxxxxx
---------------------------------------
XXXXXXX XXXXX
---------------------------------------
/s/Xxxxxxx Xxxxx
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