Seller is engaged in the business of 3D animation for the broadcast and film industries. Buyer desires to purchase, and Seller and Shareholders desire to sell to Buyer, substantially all of the assets and goodwill of Seller upon the terms and conditions of this Agreement. Buyer’s and Seller’s intent is that Buyer will purchase Seller’s goodwill and only the assets that are identified in schedules to this Agreement in exchange for cash, other potential consideration and the assumption of only those liabilities of Seller specifically set forth herein.
1.8 Taxes. Seller and Buyer shall each be liable for the payment of 50% of any and all sales and use taxes arising out of the transfer of the Purchased Assets and Seller shall be liable for all other taxes related to the Purchased Assets with respect to the period prior to the Closing.
1.9 Relocation of the Division. In the event that Buyer relocates the Division to Buyer’s existing WoodHolly facility in Hollywood, California, Buyer shall pay all costs and expenses of the relocation and build-out of such facility (including infrastructure, cabling, signage, etc.), including without limitation, the cost for movers and tenant improvements to such facility, and the Division’s resulting rent expense shall not exceed the square foot charge contained in Buyer’s current lease or as such lease may be extended. To the extent Buyer relocates the Division to a location other than the WoodHolly facility, Buyer shall pay all moving costs in connection with such relocation, and the Division shall pay the lease costs for such location.
1.10 Allocation of Purchase Price. The Purchase Price shall be allocated among the Purchased Assets as set forth in Schedule 1.10 hereof, which has been arrived at by arm’s length negotiation as required by Section 1060 of the Code and the Treasury regulations promulgated thereunder. Buyer and Seller shall (i) timely file all forms and tax returns required to be filed in connection with such allocation, and (ii) prepare and file tax returns on a basis consistent with such allocation. Seller and Buyer hereby agree to allocate $20,000 to the Noncompetition Agreements.
ARTICLE 2
SELLER’S AND SHAREHOLDERS’ REPRESENTATIONS AND WARRANTIES
Seller and each Shareholder, jointly and severally, hereby represent and warrant to Buyer as follows:
2.1 Organization and Good Standing of Seller. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of California.
2.2 Capitalization of Seller. The percentage ownership interest in Seller held by each Shareholder, is listed in Schedule 2.2 attached hereto.
2.3 Powers. Seller has and holds the appropriate right and power, and all licenses, permits, authorizations and approvals (governmental or otherwise), necessary to entitle it to use its name and to own the Purchased Assets.
2.4 Authority. Seller has the full right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. All acts and other proceedings required to be taken by Seller in order to enable it to carry out this Agreement and the transactions contemplated hereby have been taken. Shareholders have approved in writing Seller’s execution and delivery of this Agreement and consummation of the transactions contemplated hereby.
2.5 Binding Effect. This Agreement has been duly executed and delivered by Seller and Shareholders and constitutes a legal, valid and binding obligation of Seller and Shareholders, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally, general equity principles and the discretion of courts in granting equitable remedies.
2.6 No Breach. Neither the execution and delivery of this Agreement nor the consummation of any transaction contemplated hereby will (i) violate any law, regulation, judgment or order applicable to Seller, (ii) result in the acceleration of obligations, breach or termination of, or constitute a default under, any operating agreement, loan agreement, articles of organization, other charter document, lease, deed of trust or other agreement to which Seller is subject, or (iii) result in the creation of any lien or other encumbrance upon any of the Purchased Assets, except that the consent of (a) Technicolor Creative Services, the sublessor under the Sublease between sublessor and Seller, (b) the lessors of equipment leased or rented by Seller, (c) the licensors of third party software used by Seller (e.g., Microsoft) and (d) Sony Pictures Imageworks under the Independent Contractor Deal Memorandum dated February 15, 2007 is required but has not been sought nor obtained. To Seller's and Shareholder's knowledge, there are no defaults under the contracts to which Seller is a party (except for the uncashed rent checks issued to Tehnicolor Creative Services as described in Schedule 1.3) and Seller expects such contracts to continue after the Closing.
2.7 Consents. Neither the execution and delivery of this Agreement nor the consummation of any transaction contemplated hereby requires Seller to obtain any consent, permit or approval, or to make any filing or registration, under any law, regulation, judgment or order applicable to Seller or under any lease, deed of trust or other agreement to which Seller is subject, except that the consent of (a) Technicolor Creative Services, the sublessor under the Sublease between sublessor and Seller, (b) the lessors of equipment leased or rented by Seller, (c) the licensors of third party software used by Seller (e.g., Microsoft) and (d) Sony Pictures Imageworks under the Independent Contractor Deal Memorandum dated February 15, 2007 is required but has not been sought nor obtained.
2.8 Charter Documents. Schedule 2.8 is a copy of (i) the Articles of Incorporation of Seller, as amended to date, certified as true, correct and complete by the Secretary of State of California, and (ii) the Bylaws of Seller, as amended to date, certified as true, correct and complete by a duly authorized officer of Seller.
2.9 Interests of Shareholders. No Shareholder of Seller or any relative of any Shareholder of Seller has any direct or indirect ownership interest in any of the Purchased Assets (other than solely by reason of the Shareholder’s ownership interest in Seller).
2.10 Ownership and Use of Assets. Seller is the lawful owner of, and has the right to use and transfer to Buyer, the Purchased Assets; Seller owns each of the Purchased Assets free and clear of all liens, security interests or other claims or encumbrances; the delivery to Buyer of the instruments of transfer of ownership contemplated by this Agreement will vest good and marketable title to the Purchased Assets in Buyer, free and clear of all liens, security interests and other claims and encumbrances; and the Purchased Assets that consist of machinery, equipment or other tangible personal property or fixtures will be free of material defects, commercially usable and in good operating condition and repair. The leased or rented equipment of Seller is subject to the rights of the lessors/owners of such equipment.
2.11 Litigation. Except as described in Schedule 2.11 attached hereto, there is no litigation, arbitration, investigation or other proceeding pending or, to the best knowledge of Shareholders, threatened against Seller or any of the Purchased Assets.
2.12 Compliance with Laws. To the best knowledge of Shareholders, Seller is in compliance with all applicable statutes, regulations, ordinances and other laws pertaining to the Purchased Assets. No claim has been made to Seller by any governmental authority (and no such claim is anticipated) to the effect that a license, permit, certificate or authorization (which has not promptly thereafter been obtained) is required with respect to the Purchased Assets.
2.13 Environmental Matters. All operations and activities of Seller with respect to the Purchased Assets have been in all material respects in compliance with all state, federal and local laws and regulations and any and all permits or authorizations governing, or in any way relating to, the generation, handling, manufacturing, treatment, storage, use, transportation, spillage, leakage, dumping, discharge, emission, release or disposal (whether accidental or intentional) of any toxic or hazardous substances, materials or wastes, any petroleum or oil or any pollutant (“Hazardous Substances”). Seller has not received any written notice of claims or actions pending or threatened against it by any governmental entity or agency or any person relating to Hazardous Substances.
2.14 Proprietary Information. Schedule 2.14 attached hereto sets forth a list of all United States and foreign copyrights, service marks, trademarks, trademark applications, trade names, logos, patents, patent applications, licenses and royalty rights that relate to the Purchased Assets and in which Seller possesses an interest (collectively, the “Proprietary Rights”). Except as described in Schedule 2.14: (i) there are no assignments, licenses or sublicenses with respect to any of the Proprietary Rights; (ii) there are no pending or, to the best knowledge of Shareholders, threatened claims by any person with respect to Seller’s use of the Proprietary Rights; (iii) the Proprietary Rights are in good standing and are freely transferable to Buyer; and (iv) to the best knowledge of Shareholders, the Proprietary Rights do not infringe on the rights of any other person.
2.15 Finders and Brokers. No person has acted as a finder, broker or other intermediary on behalf of Seller or Shareholders in connection with this Agreement. No person is entitled to any broker’s or finder’s fee or similar fee with respect to this Agreement or such transactions as a result of actions taken by Seller or Shareholders.
2.16 Exclusivity. Seller shall not, through the Closing Date, negotiate with any other party for the sale of the Purchased Assets and shall not have entered or enter into any understanding about such a sale, whether binding or not. Unless this Agreement is first terminated, Seller shall not negotiate for the sale of or offer to sell the Purchased Assets to any other party without Buyer’s prior written consent. Through the Closing Date, Seller shall promptly notify Buyer if Seller is contacted by any person or group regarding a possible sale of the Purchased Assets.
2.17 Accuracy and Completeness. No representation or warranty of Seller or Shareholders in this Agreement or in any schedule, exhibit, agreement or document delivered pursuant hereto contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they are made, not misleading.
2.18 EBITDA. Schedule 2.18 is Seller’s income statement and a compilation of Seller’s EBITDA for the 12 months ended December 31, 2006. Schedule 2.18: (i) was prepared from the books and records of Seller, presents fairly in all material respects, the operations and EBITDA of Seller, (ii) is in accordance with GAAP, and (iii) reflects the consistent application of such accounting principles throughout the 12 month period presented.
2.19 No Other Representations or Warranties. EXECPT AS SET FORTH IN THIS ARTICLE 2, (a) SELLER AND SHAREHOLDERS MAKE NO OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ALL OF WHICH ARE HEREBY DISCLAIMED, INCLUDING, WITHOUT LIMITATION, WARRANTIES REGARDING MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE, SUITABILITY, DURABILITY, CONDITION, QUALITY, OR ANY OTHER CHARACTERISTIC, AND (b) BUYER TAKES THE PURCHASED ASSETS AND ASSUMED LIABILITIES “AS IS,” “WHERE IS” AND “WITH ALL FAULTS.”
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of California.
3.2 Corporate Powers. Buyer has and holds the corporate right and power, and all licenses, permits, authorizations and approvals (governmental or otherwise), necessary to entitle it to use its corporate name, to own and operate its properties and to carry on its business as such business exists as of the date hereof.
3.3 Authority. Buyer has the full right, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. All acts and other proceedings required to be taken by Buyer in order to enable it to carry out this Agreement and the transactions contemplated hereby have been taken.
3.4 Binding Effect. This Agreement has been duly executed and delivered by Buyer and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms.
3.5 Consents. Neither the execution and delivery of this Agreement nor the consummation of any transaction contemplated hereby requires Buyer to obtain any consent, permit or approval, or to make any filing or registration, under any law, regulation, judgment or order applicable to Buyer or under any lease, deed of trust or other agreement to which Buyer is subject, other than any filings that are required under applicable securities laws and regulations.
3.6 Finders and Brokers. No person has acted as a finder, broker or other intermediary on behalf of Buyer in connection with this Agreement or the transactions contemplated hereby, and no person is entitled to any broker’s or finder’s fee or similar fee with respect to this Agreement or such transactions as a result of actions taken by Buyer.
ARTICLE 4
AGREEMENTS OF THE PARTIES
In addition to their agreements contained in other sections of this Agreement, Buyer and Seller agree that:
4.1 Access to Purchased Assets. Prior to the Closing, Buyer and its authorized representatives shall have full access to the Purchased Assets, the liabilities of Seller reflected in Schedule 1.3 hereto and the books, records, agreements and other documents of Seller at all reasonable hours, and Buyer shall be furnished with copies of all such books, records, agreements and all other documents as may be requested by it. Prior to the Closing, Buyer shall maintain the confidentiality of such books, records, agreements and documents and information about Seller that it acquires in connection with such investigation, except to the extent that disclosure thereof is required by applicable law or such books, records, agreements, documents and information are otherwise publicly known. Prior to the Closing, Buyer (and its authorized representatives) shall also have the right to discuss the Purchased Assets with the officers, Shareholders and managers of Seller.
4.2 Seller’s Use of Purchased Assets Prior to the Closing. Prior to the Closing, Seller shall use the Purchased Assets only in the ordinary and regular course of business consistent with previous practices without any material change and shall not take any action with respect to any Purchased Asset or liability of Seller assumed by Buyer that is adverse to Buyer’s interests.
4.3 Reasonable Efforts. Each party to this Agreement agrees to provide reasonable cooperation to the other party in the performance of all obligations under this Agreement. Each party shall use its reasonable efforts to satisfy or cause to be satisfied, at or prior to the Closing, the conditions to the other party’s Closing obligations under this Agreement.
4.4 Publicity. Without the prior written approval of the other party, neither party shall disclose the existence and/or contents of any discussions between Buyer and Seller herein nor issue any press release or other public disclosure regarding the transactions contemplated by this Agreement, except as required by applicable securities or other laws. Notwithstanding the foregoing, the parties to this Agreement may disclose the contents of this Agreement in any legal proceedings between the parties relating to this Agreement.
4.5 Confidentiality. Seller and Shareholders agree that neither Seller nor any of its Shareholders shall, either before or after the Closing, use or disclose to any person, directly or indirectly, any confidential information concerning the business of Buyer, including, without limitation, any business secret, trade secret, financial information, software, internal procedure, business plan, marketing plan, pricing strategy or policy or client list, except to the extent that such use or disclosure is (i) required by an order of a court of competent jurisdiction, or (ii) authorized in writing by a duly authorized executive officer of Buyer. The prohibition that is contained in the preceding sentence shall not apply to any information that is or becomes generally available to the public other than through a disclosure by Seller or Shareholders.
ARTICLE 5
CLOSING
5.1 Time, Place and Date. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur effective as of 12:01 a.m. on the date on which this Agreement is executed and delivered by Buyer and Seller (the “Closing Date”).
5.2 Conditions Precedent to Buyer’s Closing Obligations. Each of the following shall be a condition to the obligation of Buyer to consummate the transactions contemplated by this Agreement, except to the extent that Buyer may elect to waive any of such conditions in writing:
(a) Each representation and warranty of Seller and Shareholders contained in this Agreement (including any exhibit, schedule or other agreement or document delivered pursuant hereto) shall be true and correct in all material respects on and as of the Closing Date with the same effect as if such representation and warranty had been made on and as of the Closing Date, and Seller and Shareholders shall have performed or complied in all material respects with all agreements required by this Agreement to be performed or complied with by Seller prior to or at the Closing.
(b) Seller and Shareholders shall have executed and delivered to Buyer a certificate to the effect that the conditions described in Section 5.2(a) above have been satisfied. Seller’s certificate shall be signed by its duly authorized officer.
(c) Seller shall have executed and delivered the agreements and documents that are described in Section 5.4 below.
(d) No claim, action, investigation or other proceeding shall be pending or threatened before any court or governmental agency that presents a substantial risk of the restraint or rescission of the transactions contemplated by this Agreement or that imposes a substantial risk to Buyer’s ability to obtain title to and possession of the Purchased Assets on the terms and conditions contemplated by this Agreement.
(e) There shall have been obtained all permits, approvals and consents from governmental agencies and third parties that Buyer determines are required in order to transfer the Purchased Assets to it.
(f) All actions required to be taken by Seller to authorize the execution, delivery and performance of this Agreement shall have been duly and validly taken.
(g) Buyer shall have conducted, at its expense, a due diligence examination of the Purchased Assets and, in its sole discretion, shall not have disapproved of the results of its review.
(h) Each of the Shareholders shall have entered into a Noncompetition Agreement in the forms attached hereto as Exhibits A-1 and A-2.
(i) Seller shall have entered into Loan Out Agreement in the form attached hereto as Exhibits B pertaining to the services of Mark Miller and John Gross.
5.3 Conditions Precedent to Seller’s and Shareholders’ Closing Obligations. Each of the following shall be a condition to the obligation of Seller to consummate the transactions contemplated by this Agreement, except to the extent that Seller may elect to waive any of such conditions in writing:
(a) Each representation and warranty of Buyer contained in this Agreement (including any exhibit, schedule or other agreement or document delivered pursuant hereto) shall be true and correct in all respects on and as of the Closing Date with the same effect as if such representation and warranty had been made on and as of the Closing Date, and Buyer shall have performed or complied with all agreements required by this Agreement to be performed or complied with by it prior to or at the Closing.
(b) No claim, action, investigation or other proceeding shall be pending or threatened before any court or governmental agency that presents a substantial risk of the restraint or rescission of the transactions contemplated by this Agreement.
(c) All actions required to be taken by Buyer to authorize the execution, delivery and performance of this Agreement shall have been duly and validly taken.
(d) Buyer shall have entered into Loan Out Agreement with Seller pertaining to the services of Mark Miller and John Gross.
(e) Buyer shall have executed and delivered to Seller a certificate to the effect that the conditions described in Section 5.3 have been satisfied.
5.4 Closing Deliveries of Seller.
(a) At or prior to the Closing, Seller shall execute and deliver to Buyer:
(i) Bills of sale and other such assignment instruments, in form and substance reasonably satisfactory to Buyer, covering the Purchased Assets and effecting the full sale and conveyance of the Purchased Assets to Buyer, free and clear of all liens, security interests and other encumbrances;
(ii) All books, records, correspondence and other documents in Seller’s possession or control that evidence or relate to the Purchased Assets;
(iii) The Closing certificate described above in Section 5.2(b);
(iv) A copy of resolutions of Shareholders and of the governing body of Seller authorizing the execution, delivery and performance of this Agreement and the other agreements and transactions contemplated hereby, which resolutions shall be certified by the Secretary (or comparable officer) of Seller and which certificate shall state that such resolutions have not subsequently been amended or rescinded;
(v) Such other closing documents as Buyer may reasonably request in order to consummate the transactions contemplated by this Agreement.
5.5 Termination of the Agreement. If the Closing has not occurred, for any reason, prior to the close of business on March 1, 2007 or prior to such later Closing deadline as the parties may mutually agree upon in writing, this Agreement automatically shall terminate and, except as provided in this Section 5.6, the parties hereto shall have no further rights or obligations hereunder. Notwithstanding the termination of this Agreement pursuant to the preceding sentence, the obligations of the parties described in the following Sections of this Agreement shall survive: 4.1 (second sentence); 4.4; 4.5; 7.11; 7.14; 7.15, and 7.16. Furthermore, the termination of this Agreement shall not adversely affect any right that a party may have against another party for breach of contract.
ARTICLE 6
INDEMNIFICATION
6.1 Survival of Representations and Warranties. All representations and warranties of the parties hereto (except for those set forth in Sections 2.2 and 2.13) shall survive until December 31, 2009. Representations and warranties set forth in Sections 2.2. and 2.13 hereof shall survive until the relevant statute of limitations has run. All representations, warranties and agreements of the parties made in any exhibit or schedule to this Agreement or in any other agreement or document delivered pursuant to this Agreement shall be deemed to be contained in this Agreement. A claim with respect to a breach of a representation or a warranty shall not be foreclosed if the maker of such claim shall have made such claim in writing to the other party prior to the expiration of the survival period described above.
6.2 Indemnification by Seller and Shareholders. Subject to the provisions of this Article 6, Seller and each Shareholder, individually, shall indemnify and hold harmless Buyer from and against any and all losses, damages, liabilities, costs and expenses, including, without limitation, settlement costs and reasonable legal, accounting and other expenses for investigating or defending any actions (collectively, “Losses”) that Buyer may incur resulting from (i) any breach of any representation or warranty of Seller or Shareholders made in this Agreement or the Bill of Sale, (ii) any breach of any agreement of Seller or Shareholders contained in this Agreement or the Bill of Sale, (iii) any violation of California’s Bulk Sales Law (if applicable to this Agreement by Seller or Shareholders), (iv) any claim by a finder, broker or other intermediary representing Seller or Shareholders, directors or officers in connection with this Agreement or the transactions contemplated hereby; and (v) any liability of Seller not specifically described in Schedule 1.3 attached hereto (including, without limitation, any claim or lawsuit by any governmental agency or other person or entity that is brought against Buyer and that relates to a liability of Seller).
6.3 Indemnification by Buyer. Subject to the provisions of this Article 6, Buyer shall indemnify and hold harmless Seller and Shareholders from and against any and all Losses that Seller may incur based upon, arising out of or resulting from (i) any breach of any representation or warranty of Buyer made in this Agreement or the Bill of Sale or (ii) any breach of any agreement of Buyer contained in this Agreement or the Bill of Sale, (iii) the Assumed Liabilities, and (iv) the ownership or operation of the Division after the Closing.
6.4 Notice of Claims; Contest of Claims.
(a) If the indemnified party believes that it has incurred any Losses, or if any action at law or suit in equity is instituted by a third party with respect to which the indemnified party intends to claim any Losses under this Article 6, the indemnified party shall so notify the indemnifying party. The notice shall describe such Losses, the amount thereof, if known, and the method of computation thereof, all with reasonable particularity and shall contain a reference to the provisions of this Agreement in respect of which such Losses shall have been incurred; and, in the case of an action or suit by a third party, shall include a copy of all documents received by the indemnified party in connection therewith and any other information known to the indemnified party with respect to such action or suit or the basis therefor. Such notice shall be given promptly after the indemnified party becomes aware of each such Loss, action or suit, but failure to give such prompt notice shall not affect the indemnifying party’s obligations hereunder unless such party has been prejudiced thereby.
The indemnifying party shall, within thirty days after receipt of such notice of Losses, (i) pay or cause to be paid to the indemnified party the amount of Losses specified in such notice which the indemnifying party does not contest, or (ii) notify the indemnified party if it wishes to contest the existence or amount of part or all of such Losses, stating with particularity the basis upon which it contests the existence or amount thereof. The indemnifying party shall, within thirty days after receipt of each notice with respect to an action or suit by a third party, notify the indemnified party if it elects to conduct and control such action or suit. If the indemnifying party does not give such notice in the case of an action or suit by a third party, the indemnified party shall have the right to defend, contest, settle or compromise such action or suit, and the indemnifying party shall, upon request from such indemnified party, promptly pay to such indemnified party, in accordance with the other terms of this Article 6, the amount of any Losses resulting from its liability to the third party claimant. If the indemnifying party gives such notice in the case of an action or suit by a third party, the indemnifying party shall have the right to undertake, conduct and control, through counsel of its own choosing and at the sole expense of the indemnifying party, the conduct and settlement of such action or suit, and the indemnified party shall cooperate with such indemnifying party in connection therewith. So long as the indemnifying party is contesting any such action or suit in good faith, the indemnified party shall not pay or settle any such action or suit. Notwithstanding the foregoing, the indemnified party shall have the right to pay or settle any such action or suit, provided that in such event the indemnified party shall waive any right to indemnity therefor by the indemnifying party, and no amount in respect thereof shall be claimed as a Loss under this Article 6.
6.5 Limitations. Notwithstanding any other provisions of this Agreement, including in this Article 6 above, but subject to Section 6.5(h) below:
(a) No party to this Agreement shall have any liability under this Article 6 unless and until the indemnified party has incurred Losses in excess of $40,000 (the “Basket Amount”) and such party’s liability under this Article 6 shall apply only to the amount in excess of the Basket Amount.
(b) Except for actual fraud, no party to this Agreement shall have any liability under this Article 6 in excess of 80% of the Purchase Price (including the earnout portion) paid by the Buyer.
(c) The provisions of Section 6.2 and 6.3 shall not apply to any breaches that have been waived by the party claiming indemnification.
(d) EXCEPT TO THE EXTENT REQUIRED UNDER SECTIONS 6.2 AND 6.3 WITH RESPECT TO THIRD PARTY CLAIMS, IN NO EVENT WILL ANY PARTY’S LIABILITY OF ANY KIND INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE LOSSES OR DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(e) The calculation of Buyer’s Losses will be net of any tax benefits received or to be received by Buyer in respect of such Buyer Losses.
(f) The parties hereto shall have no obligations under this Article 6 for any claim for indemnification that is not made in compliance with this Article 6 prior to December 31, 2009, provided; however, that Buyer may bring claims for indemnification for Seller’s or Shareholders’ breaches of Sections 2.2 and 2.13 at any time prior to the expiration of the applicable statute of limitations.
(g) The indemnification provisions of this Article 6 shall be the parties’ sole and exclusive remedy for any claims arising from this Agreement.
(h) The provisions of Sections 6.5(a)-(g) above do not apply to Buyer’s obligation to pay the Purchase Price, including the earnout, under this Agreement, and such obligation shall be independent of the provisions of Section 6.5(a)-(g) above.
ARTICLE 7
GENERAL PROVISIONS
7.1 Injunctive Relief. Each party to this Agreement agrees that damages would be an inadequate remedy for the other party’s breach of Section 4.5 hereof, and that the breach of such provision will result in immeasurable and irreparable harm to such party. Therefore, in addition to damages and any other remedy to which a party may be entitled by reason of a breach of any such provision, such party shall be entitled to seek and obtain temporary, preliminary and permanent injunctive relief from any court of competent jurisdiction restraining the other party from committing or continuing any breach of Section 4.5 hereof.
7.2 Notices. Any notice required or permitted by this Agreement to be given by one party to the other must be in writing and personally delivered or sent by registered or certified United States mail (postage prepaid and return receipt requested), by reputable overnight delivery service or by facsimile transmission, addressed to the address shown below or to such other address as such party may designate in the foregoing manner to the other party. Any such notice that is sent in the foregoing manner shall be deemed to have been delivered upon actual personal delivery or actual receipt by facsimile transmission or three days after deposit in the United States mail or one day after delivery to an overnight delivery service.
| | If to Buyer: | Point.360 Attn: CFO 2777 North Ontario Street Burbank, CA 91504 With a copy to: William D. Gould Troy & Gould Professional Corp. 1801 Century Park East Los Angeles, CA 90067 |
| | If to Seller: | Eden FX, Inc. 1438 N. Gower Street Box 19, Building 50 Hollywood, CA 90028 |
| | If to Mark Miller: | 494 Vineyard Drive Simi Valley, CA 93065 |
| | If to John Gross: | John Gross 800 Huntley Drive West Hollywood, CA 90069 |
| | With a copy to: | Silver & Freedman, APLC 2029 Century Park East, 19th Floor Los Angeles, CA 90067 Attn: Gregory N. Weisman, Esq. |
7.3 Amendments and Termination; Entire Agreement. This Agreement may be amended or terminated only by a writing executed by each party hereto. Together with the exhibits, schedules and other agreements and documents delivered pursuant hereto, this Agreement constitutes the entire agreement of the parties hereto relating to the subject matter hereof and supersedes all prior oral and written understandings and agreements relating to such subject matter.
7.4 Successors and Assigns. This Agreement shall be binding upon, and shall benefit, the parties hereto and their respective successors and assigns. Notwithstanding the foregoing, (i) the obligations of Seller and Shareholders hereunder are not assignable to another person without Buyer’s prior written consent, and (ii) Buyer’s obligations hereunder are assignable to another person without obtaining any other party’s consent only in connection with a transfer of substantially all of the assets of the Division or similar transaction in which Buyer’s successor or assign assumes all of Buyer’s obligations hereunder (whether by agreement or by operation of law).
7.5 Calculation of Time. Wherever in this Agreement a period of time is stated in a number of days, it shall be deemed to mean calendar days. However, when any period of time so stated would end upon a Saturday, Sunday or legal holiday, such period shall be deemed to end upon the next day following that is not a Saturday, Sunday or legal holiday.
7.6 Further Assurances. Each party shall perform any further acts and execute and deliver any further documents that may be reasonably necessary or advisable to carry out the provisions of this Agreement.
7.7 Severability.
(a) All provisions of this Agreement shall be applicable only to the extent that they do not violate any applicable law, and are intended to be limited to the extent necessary so that they will not render this Agreement invalid, illegal or unenforceable under any applicable law. If any provision of this Agreement or any application thereof shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of other provisions of this Agreement or of any other application of such provision shall in no way be affected thereby.
(b) Without limiting the generality of Section 7.7(a) above, if for any reason any term or provision containing a restriction set forth in this Agreement is held to cover an area or to be for a length of time which is unreasonable, or in any other way is construed to be too broad or to any extent invalid, such term or provision shall not be determined to be null, void and of no effect, but to the extent the same is or would be valid or enforceable under applicable law, any arbitrator or court of competent jurisdiction shall construe and interpret or reform this Agreement to provide for a restriction having the maximum enforceable area, time period and other provisions (not greater than those contained herein) as shall be valid and enforceable under applicable law.
7.8 Waiver of Rights. No party to this Agreement shall be deemed to have waived any right or remedy that it has under this Agreement unless this Agreement expressly provides a period of time within which such right or remedy must be exercised and such period has expired, or unless such party has expressly waived the same in writing. The waiver by a party of a right or remedy hereunder shall not be deemed to be a waiver of any other right or remedy or of any subsequent right or remedy of the same kind.
7.9 Headings; Gender and Number. The headings contained in this Agreement are for reference purposes only and shall not affect in any manner the meaning or interpretation of this Agreement. Where appropriate to the context of this Agreement, use of the singular shall be deemed also to refer to the plural, and use of the plural to the singular, and pronouns of certain gender shall be deemed to comprehend either or both of the other genders. The terms “hereof,” “herein,” “hereby” and variations thereof shall, whenever used in this Agreement, refer to this Agreement as a whole and not to any particular section hereof. The term “person” refers to any natural person, corporation, partnership or other association or entity. Any form of the word “include” when used in this Agreement is not intended to be exclusive (that is, the word “include” means “including, without limitation”). The disclosure of any matter in any Schedule to this Agreement shall not be deemed to constitute an admission by Seller or Shareholders.
7.10 Counterparts. This Agreement may be executed in counterparts, and by each party on a separate counterpart, each of which shall be deemed an original but all of which taken together shall constitute but one and the same instrument.
7.11 Expenses Incurred in Preparing This Agreement. Each of Buyer and Seller shall bear its own costs and expenses incurred in connection with the negotiation and preparation of this Agreement, whether or not Closing occurs.
7.12 No Strict Construction. The language of this Agreement is the language chosen by the parties hereto to express their mutual intent, and this Agreement shall be construed without regard to any presumption or rule requiring construction against the party causing the instrument to be drafted.
7.13 No Third Party Beneficiaries. No provision of this Agreement is intended to or shall create any rights with respect to the subject matter of this Agreement in any third party.
7.14 Governing Laws. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of California without giving effect to such state’s conflict-of-law principles.
7.15 Attorneys’ Fees and Other Expenses. The unsuccessful party to any arbitration proceeding or to any court action that is permitted by this Agreement shall pay to the prevailing party all costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred therein by the successful party, all of which shall be included in and as a part of the award rendered in such proceeding or action.
IN WITNESS WHEREOF, Buyer, Seller and Shareholders have executed and delivered this Agreement as of the date first above written.
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| | POINT.360 (“BUYER”) |
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| | By: | |
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Alan R. Steel |
| | Chief Financial Officer |
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| | EDEN FX (“SELLER”) |
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| | By: | |
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Mark Miller |
| | Co-President |
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| | By: | |
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John Gross |
| | Co-President |
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| | Mark Miller, as an individual |
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| | By: | |
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Mark Miller, |
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| | John Gross, as an individual |
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| | By: | /s/ |
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John Gross |
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Schedule 1.1 (Purchased Assets)
The following assets of Seller:
All of the assets of Seller other than the assets listed in Schedule 1.2. The physical assets of Seller are described in the attached spreadsheet.
Schedule 1.2 (Excluded Assets)
Corporate books and records
Financial and tax records (copies to be provided to Buyer at Seller’s cost.) Originals to be made available to Buyer upon request. Seller will retain copies of such financial and tax records for five years after the Closing Date.
Insurance contracts and claims
Personal property and effects, including, but not limited to, laptop computers, furniture, awards, models, toys, accessories, etc.
Accounts receivable in accordance with the Asset Purchase Agreement
Bank accounts
Security Deposits with landlords, which shall be paid over to Seller upon their return by the landlords. Seller shall be responsible for deductions from such security deposits resulting from damages caused on or before the Closing Date and Buyer shall be responsible for deductions from such security deposits resulting from damages caused on or after the Closing Date.
Schedule 1.2(f)
Accounts Receivable and Accounts Payable
Schedule 1.3 (Assumed Liabilities/Debts to be Paid by Buyer)
Debt | Amount | Date to be paid by Buyer |
1. Credit Cards American Express Platinum American Express Blue Advanta Bank of America Fleet Shell | $48,545.49 $26,827.85 $19,426.72 $23,658 $1,200.00 | Within 5 days after the Closing Within 5 days after the Closing Within 5 days after the Closing Within 5 days after the Closing Within 5 days after the Closing |
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| 2. Jeff Ross | $23,300 | On the Closing Date by check |
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| 3. John Gross | $39,000 | On the Closing Date by check |
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| 4. City National Bank | $152,166.69 | On the Closing Date by wire transfer |
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| 5. Wells Fargo Credit Line | $24,000 | On the Closing Date by check |
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| Total: | $358,124.75 | |
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Assumed Contracts
1. All contracts and purchase orders with customers and vendors
2. Sublease with Technicolor Creative Services - Hollywood for Building 50. This Sublease was not executed by the parties and calls for a month to month tenancy with a 5 month notice of termination.
3. All equipment leases and rentals, which are as follows:
a. Global Vantage (assigned to Tustin Community Bank)
Computer related hardware and software
$1,296.33 per month
b. Global Vantage (assigned to National City Commercial Capital Corporation)
Computer related hardware
$5,498.30 per month
4. All utilities after the Closing
5. Uncashed Checks to Technicolor Build 50 for September, October, and December 2006 rent ($48,616.55). Buyer shall assume this liability. To the extent that Technicolor claims all or a any portion of this amount and the Buyer pays Technicolor, such paid amount shall be deducted from the next earnout payment.
Schedule 1.6(b)
Budget
See Attached
Schedule 1.10
Purchase Price Allocation
See Attached
Schedule 2.2 (Capitalization of Seller)
Mark Miller = 50%
(500,000 SHARES OF COMMON STOCK, $0- PAR VALUE)
John Gross = 50%
(500,000 SHARES OF COMMON STOCK, $0- PAR VALUE)
TOTAL AUTHORIZED SHARES = 1,000,000- OF COMMON STOCK, $0- PAR VALUE
Schedule 2.8 (Seller’s Charter Documents)
See attached.
Schedule 2.11 (Seller’s Litigation)
NONE
Schedule 2.14 (Seller’s Intellectual Property)
The name “Eden FX”
Eden FX logo
Shot Tracker software
Render Controller software
Schedule 2.18
Financial Statements
See Attached
EXHIBIT A-1
NON-COMPETITION AGREEMENT WITH MARK MILLER
EXHIBIT A-2
NON-COMPETITION AGREEMENT WITH JOHN GROSS
EXHIBIT B
LOAN OUT AGREEMENT
