AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
between
THE TODD-AO CORPORATION,
TODD-AO HD, INC.
and
HOLLYWOOD DIGITAL LIMITED PARTNERSHIP
and
ITS PARTNERS
June 18, 1997
AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS ("Agreement"), is made
and entered into as of this 18th day of June, 1997, by and among The Todd-AO
Corporation, a Delaware corporation ("Todd"), Todd-AO HD, Inc., a California
corporation ("THD") (Todd and THD are sometimes collectively referred to as the
"Purchaser"), and Hollywood Digital Limited Partnership, a Delaware limited
partnership (the "Seller"), and Hollywood Digital, Inc., a Delaware corporation;
The Palladion Limited Partnership, a Delaware limited partnership; HDZ Digital
Limited Partnership, a Massachusetts limited partnership; Phemus Corporation, a
Massachusetts corporation; Rand Gladden; William Romeo; David Cottrell; and
Michael Jackson (each, a "Partner" and collectively, the "Partners"), with
reference to the following facts:
A. The Seller is engaged in the video, audio and film post-production
business at a facility located at 6660 and 6690 Sunset Boulevard, Hollywood,
California 90028. Seller is developing a second facility located at 1661
Lincoln Boulevard, Santa Monica, California. The Hollywood and Santa Monica
facilities are referred to as the "Premises."
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B. The Seller wishes to sell all of its business and assets to the
Purchaser, and the Purchaser wishes to acquire all of such business and assets
from Seller on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and the mutual agreements,
covenants and other provisions herein contained, the parties agree as follows.
1. PURCHASE OF ASSETS.
1.1. On the basis of the representations and warranties herein
contained, subject to the terms and conditions herein set forth, and for the
consideration described below, on the Closing Date (as defined in Section 10),
the Seller agrees to sell and convey to THD, and THD agrees to purchase all of
the business and assets of the Seller, tangible and intangible, of whatever
type, quality and location, as of the Closing Date (collectively, the "Assets"),
including but not limited to:
(a) all of its cash on hand, deposits and accounts receivable;
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(b) all work in process, customer orders and customer contracts;
(c) all of its operable fixed assets including, without
limitation, leasehold improvements, trade fixtures, machinery, furniture, motor
vehicles, equipment and supplies (the "Fixed Assets"), which assets are more
particularly described on Schedule 1.1(c) attached hereto;
(d) all of its records relating to the Assets, all records
relating to liabilities assumed or incurred by the Purchaser pursuant to this
Agreement, all of its vendor files, account receivable files and all of its
personnel records;
(e) pre-paid items and security deposits under real property
leases in the amounts noted in Schedule 1.1(e) attached hereto; and
(f) all of its good will, customer lists, office and warehouse
supplies, catalogs, packaging materials, telephone numbers, credit files and
forms, and all of its trade names including, without limitation, "Hollywood
Digital."
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1.2. Except as specifically provided in this Agreement, the
Purchaser is not assuming any of the liabilities or obligations of the Seller
other than liabilities set forth on Seller's March 31, 1997 balance sheet and
those subsequently incurred in the ordinary course of Seller's business.
2. PURCHASE PRICE.
2.1. As the purchase price for the Assets to be purchased under this
Agreement (the "Purchase Price"), the Purchaser agrees to pay to the Seller the
sum of Thirty Million Four Hundred Thousand Dollars ($30,400,000), reduced by
the Adjustment Factor as provided in Section 2.2, payable as follows at the
Closing:
(a) payment at the Closing of the outstanding indebtedness as of
the Closing of Seller to CIT (the "CIT Debt"), to Orix Corporation (the "Orix
Debt"), and the funded indebtedness of Seller, all as set forth on Schedule
2.1(a) hereto (the "Funded Debt");
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(b) cash in an amount equal to Seller's indebtedness to Phemus
Corporation ("Phemus") outstanding as of the Closing (the "Phemus Debt"), paid
to Phemus at the Closing; and
(c) cash in the amount of Four Hundred Sixty-Five Thousand
Dollars ($465,000), representing an investment banking fee payable by Seller to
HD Venture Capital, Inc., to be paid to HD Venture Capital, Inc. at the Closing;
and
(d) the difference between the Purchase Price and the sum of
items (a), (b) and (c) above (except that any portion of the CIT Debt used to
fund Santa Monica improvements approved by Purchaser shall be excluded from item
(a) for this purpose) by issuance of two convertible notes of Todd (the "Todd
Notes"), one in the amount of the difference between $27,000,000 and items (a),
(b) and (c) above (adjusted to exclude such Santa Monica improvements) (the
"First Note") to be delivered to Seller at the Closing, and one in the amount of
the difference between the Purchase Price and $27,000,000 (the "Second Note") to
be delivered to an escrow holder at the Closing as provided in Section 2.3. The
First Note and the Second Note shall be in substantially the form of Exhibits
"A" and "B" hereto respectively. The Todd Notes shall
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be convertible into the Class A Common Stock of Todd (the "Todd Shares").
Todd's obligation to register the Todd Shares under the Securities Act of 1933
is provided for in a Registration Rights Agreement in substantially the form of
Exhibit "C" hereto.
2.2. The Purchase Price shall be reduced by the Adjustment Factor if
and only if the Operating Profit (as defined below) is less than Five Million
Five Hundred Thousand Dollars ($5,500,000). For purposes of this Section 2.2:
(a) The Adjustment Factor shall be six (6) times the amount by
which Five Million Five Hundred Thousand Dollars ($5,500,000) exceeds the Cash
Flow From Operating Activities. For example, if the Cash Flow From Operating
Activities is $5,400,000, the Adjustment Factor shall be 6 times $100,000, or
$600,000, and accordingly, the Purchase Price shall be $29,800,000.
(b) Cash Flow From Operating Activities means the pre-tax income
or loss of Seller computed without deduction for depreciation, amortization,
interest expense and non-recurring expenses of the Seller for the period July 1,
1996 through the Closing and of the Assets determined on a stand-alone basis for
the
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period from the Closing through June 30, 1997, computed in accordance with the
principles employed in preparing the Financial Statements (as defined below).
Seller's Cash Flow From Operating Activities for the period July 1, 1996 through
March 31, 1997 is the amount set forth as "operating profit" in the summary
statement of operations which is an exhibit to Seller's audited financial
statement for such period. Cash Flow From Operating Activities for the period
April 1, 1997 through June 30, 1997 shall be determined by Seller's auditors as
soon as practicable after June 30, 1997. Seller's auditors shall provide
Purchaser and Seller with a preliminary statement of such computation. Each
party shall have the right for a period of fifteen (15) days after receipt of
such preliminary statement (the "Comment Period") to comment in writing upon
such statement, and Seller's auditors shall consider any comments of either
party in determining whether to revise its preliminary statement of Cash Flow
From Operating Activities. Failure of a party to provide such written comments
within the Comment Period shall be deemed acceptance of the preliminary
statement. In computing Cash Flow From Operating Activities, the following
items shall not be deducted: (1) any costs of developing Seller's Santa Monica
facility which are approved by Purchaser; (2) the payment of approximately
$75,000 advanced to Seller by Halpern,
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Denny & Co. ("HD") for legal fees and other fees and expenses prior to the
Closing; (3) the payment of an investment banking fee of $465,000 to HD Venture
Capital, Inc.; (4) the payment of Seller's legal fees and costs related to this
transaction; (5) repayment of the Phemus Debt; and (6) payment of any other
non-recurring fees and costs of Seller, including fees and expenses relating to
litigation settlements and management fees and expenses paid to HD. Seller's
auditors shall notify the parties of its final computation of Cash Flow From
Operating Activities after considering any comments on its preliminary statement
made by either party. Each party shall have fifteen (15) days from the date
upon which it receives the final statement of Seller's auditor to notify the
other party that it disagrees with such computation, and the grounds therefor
(the "Disagreement Notice"). If a party timely delivers to the other party a
Disagreement Notice, Purchaser and Seller shall designate a national accounting
firm other than Arthur Andersen or Deloitte Touche to determine such Cash Flow
From Operating Activities in accordance with this Section 2.2. The
determination of Cash Flow From Operating Activities of such national accounting
firm shall be final and binding on the parties. Purchaser and Seller shall each
bear one-half of the costs of such
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accounting firm in making its determination of Cash Flow From Operating
Activities.
2.3. At the Closing, Purchaser shall deliver the Second Note to
Greenberg Glusker Fields Claman & Machtinger LLP as escrow holder. For this
purpose, the Second Note shall be in the principal amount of Three Million Four
Hundred Thousand Dollars ($3,400,000). Purchaser and Seller each shall notify
the escrow holder in writing of the amount of the Purchase Price, as finally
determined pursuant to Section 2.2. Escrow holder shall hold the Second Note
until it receives notice from both Purchaser and Seller that the Purchase Price
has been finally determined to be Thirty Million Four Hundred Thousand Dollars
($30,400,000). Upon receipt of such notices, escrow holder shall then deliver
the Second Note to Seller. If the escrow holder has received notices from both
Purchaser and Seller that the Purchase Price is determined to be less than
$30,400,000 by virtue of the Adjustment Factor, Purchaser and Seller shall
deliver to escrow holder instructions to exchange the original Second Note for a
substitute Second Note in the principal amount of the difference between the
Purchase Price and $27,000,000, Todd and escrow holder shall then exchange such
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original and substitute Second Notes, and escrow holder shall then deliver the
substitute Second Note to Seller.
2.4. In addition to the foregoing, and except for the items set
forth on Schedule 2.4 hereto, THD shall assume and discharge the liabilities of
Seller outstanding on the Closing Date which were set forth on Seller's balance
sheet dated March 31, 1997 or were subsequently incurred by Seller in the
ordinary course of its business.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARTNERS. The Seller and
each of the Partners represent and warrant to the Purchaser as follows, such
representations and warranties being several as to the Partners in proportion to
their equity interests in Seller as set forth on Schedule 3.0 hereto, except
that (1) the representations and warranties of the HD-Related Partners (as
identified on Schedule 3.0) are joint and several as to their aggregate equity
interest in Seller; (2) except that representations and warranties in Section
3.2 relating to Phemus, Gladden, Romeo, Cottrell and Jackson are made only by
each such person separately, and (3) the representations and warranties in
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Section 3.2 relating to any of the HD-Related Partners are made jointly only by
the HD-Related Partners:
3.1. The Seller is a limited partnership duly organized, validly
existing and in good standing under the laws of Delaware and has all requisite
power and authority to own and operate its properties and to carry on its
business as now being conducted and to own, sell and dispose of the Assets in
accordance with this Agreement. The Seller has full power and authority to
execute, deliver and perform this Agreement and doing so will not violate any
provision of law or contravene any provisions of its Certificate of Limited
Partnership or its partnership agreement.
3.2. This Agreement and the transactions provided for in this
Agreement by the Seller and its Partners have been duly authorized by the
Partners of the Seller on behalf of the Seller and by each of the Partners on
behalf of itself or himself, no other authorization being necessary. This
Agreement has been duly executed on behalf of the Seller and each of the
Partners and constitutes a legal, valid and binding obligation of the Seller and
each of the Partners. Neither the execution of this Agreement nor the
transactions provided for, including the sale of the Assets,
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will violate, or result in a breach of, or constitute a default under, any law
or any agreement or any instrument, order, judgment or decree to which the
Seller or any Partner is a party or to which Seller or any Partner or any of
their respective properties are subject.
3.3. The Seller has good and marketable title to all of the Assets,
and all of the Assets are free and clear of all pledges, liens (except liens for
taxes not yet due), security interests or other burdens, charges or encumbrances
of any kind or nature whatsoever, except for the CIT Debt, the Orix Debt, the
Funded Debt, the Phemus Debt or as otherwise disclosed in Schedule 3.3 attached
hereto.
3.4. All leases pursuant to which the Seller leases to or from
others any property are listed in Schedule 3.4 attached hereto. To Seller's
Best Knowledge (as defined below), all such leases are legally valid, and there
is not under any of such leases any existing default or any event of default or
event which with notice or lapse of time or both would constitute such a default
by the Seller or by any other party thereto. The Seller is not a
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party to and is not bound by any other lease or amendment or supplement thereto.
3.5. The Seller has all material licenses necessary for the conduct
of its business, and all license taxes have been paid if due or accrued if not
yet due. All copyrights, patents, trademarks, tradenames and other licenses
used by the Seller in the conduct of its business are listed in Schedule 3.5
attached hereto. The Seller has not received any notice of conflict with the
asserted rights of others thereto and to Seller's Best Knowledge it is not
infringing such rights of others.
3.6. Except as otherwise disclosed in Schedule 3.6 attached hereto,
all tax returns of the Seller, including but not limited to, returns of sales,
social security, personal property, withholding and unemployment taxes, which
are required to have been filed by the Seller to date, have been duly prepared,
timely filed and are true and correct, and all taxes, interest and penalties
shown thereon or due in connection therewith have been paid, if due, or accrued,
if not yet due. No deficiency has been proposed and not paid with respect to
any tax return filed by the Seller as
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of the date hereof. All payroll taxes that the Seller is required by law to
withhold have been withheld and properly deposited.
3.7. Except as otherwise disclosed in Schedule 3.7(a), the Seller
does not have any bonus, deferred compensation, profit sharing, pension,
retirement or stock option plan or agreement, or any other type of employee
benefit plan or any accrued obligation thereunder, or any current or prospective
obligation for the payment of severance pay to any current or former employee.
The Seller has delivered to the Purchaser copies of all documents governing any
plan, agreement or obligation disclosed in Schedule 3.7(a) and copies of all
reports applicable thereto. All accrued vacation pay and sick pay due to the
Seller's employees is set forth in Schedule 3.7(b).
3.8. The Seller is not now nor has it ever been a party to any labor
union contract or collective bargaining agreement.
3.9. Except as disclosed in Schedule 3.9 attached hereto, the Seller
has no knowledge and has received no notice to the effect that the Seller has
failed to comply with any laws, regulations or orders applicable to its business
or properties or
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that the present uses by the Seller of its properties violate any such laws,
regulations or orders, where such failure would have a material adverse effect
on Seller's business.
3.10. Except as otherwise disclosed in Schedule 3.10 attached hereto,
the Seller is not involved in any pending or threatened litigation or any
investigation by any governmental body or any legal, administrative or
arbitration proceeding. Except as otherwise disclosed in Schedule 3.10 attached
hereto, to the Best Knowledge of the Seller, the Seller is not materially in
default under any contract, and there is no action, claim, suit, proceeding or
investigation threatened against or affecting the Seller or any of its
properties or assets. Except as otherwise disclosed in Schedule 3.10 attached
hereto, the Seller is not subject to any judgment, award, order or decree and is
not involved in any governmental action or proceeding in which relief is sought
affecting the operation of its business or its assets. Except as otherwise
disclosed in Schedule 3.10 attached hereto, no current or former partner of the
Seller has any claim against the Seller or any of its assets.
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3.11. The Seller maintains in full force and effect the insurance
policies listed in Schedule 3.11 attached hereto. There has been no default in
the payment of premiums on any such policy, and to Seller's Best Knowledge there
is no ground for cancellation or avoidance of any such policy or for reduction
of the coverage provided thereby.
3.12. Except as otherwise disclosed in Schedule 3.12 attached hereto,
to Seller's Best Knowledge, the Seller does not have any employment, service or
consulting agreement with any person or entity which cannot be terminated at any
time without liability to the Seller.
3.13. All of the Seller's open orders as of the date hereof in excess
of $25,000 are listed in Schedule 3.13 attached hereto.
3.14. The Seller has delivered to the Purchaser copies of its audited
financial statements for its fiscal years ended June 30, 1994, June 30, 1995,
June 30, 1996, its short fiscal year beginning July 1, 1996 and ending December
31, 1996, and the nine months beginning July 1, 1996 and ending March 31, 1997
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(collectively, the "Financial Statements"). Each of the Financial Statements
accurately reflects the books and records of Seller, fairly and accurately
presents the financial condition of Seller and the results of its operations for
the period covered, and has been prepared in accordance with generally accepted
accounting principles, consistently applied ("GAAP"). All accounts receivable
set forth in the Financial Statements are valid and enforceable to Seller's Best
Knowledge and provisions for uncollectible receivables were determined in good
faith and on a basis consistent with GAAP and past practice. Seller has
furnished to Purchaser for its inspection all readily available working papers,
supporting schedules and other materials with respect to Seller which were
utilized in preparing the Financial Statements. Except as set forth on the
Financial Statements or the Schedules to this Agreement, for the period covered,
to Seller's Best Knowledge, Seller did not have any liabilities of any nature,
whether accrued or contingent, including without limitation, tax liabilities.
3.15. Since March 31, 1997, except as set forth on Schedule 3.15,
(i) there have been no changes in the condition, financial or otherwise, assets,
liabilities, properties, labor relations or business of the Seller from that
shown in the Seller's
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balance sheet as of that date, other than events and conditions generally
affecting the economy, which have materially adversely affected the business,
assets, properties, condition or prospects of the Seller; (ii) there has not
been any damage, destruction or loss, whether covered by insurance or not,
materially or adversely affecting any of the properties or the business of the
Seller; (iii) there has not been any material increase in the compensation
payable by the Seller to any officer or employee, except for increases in
compensation provided for in employment agreements in force on March 31, 1997,
or any material increase in any bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such officer or
employee; (iv) the Seller has not sold or otherwise disposed of any of its
trademarks, trade names, copyrights, other intangible assets, machinery,
equipment (including motor vehicles), leasehold improvements, furniture or
fixtures other than in the ordinary course of its business; (v) except for
expenditures related to development of the Santa Monica facility approved by
Purchaser, there has not been any expenditure or contract for the acquisition of
assets of any kind, or any obligations or liabilities incurred or any
cancellation of any debts or claims by Seller or any discharge or satisfaction
of any lien or encumbrance by Seller,
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other than in the ordinary course of its business; (vi) there has not been any
declaration or payment by Seller of any distribution of any kind to any of the
Partners or in discharge or cancellation, in whole or in part, of any
indebtedness owing to any of the Partners; (vii) there has not been any issuance
or grant of any options, warrants or other rights for the purchase of equity
interests in Seller; (viii) there has not been any mortgage, pledge, subjection
to lien, charge or encumbrance of any kind of any of the Assets, or any
amendment or termination of any contract, agreement or license to which Seller
is a party other than in the ordinary course of its business; and (ix) Seller
has not entered into any contract or commitment except for normal month-to-month
commitments for the purchase of supplies and merchandise and for the furnishing
of services to customers in the ordinary course of its business.
3.16. Except for the payment of an investment banking fee of $465,000
to HD, neither Seller nor any of the Partners, nor any of their employees or
agents have incurred any liability to any broker, finder, or agent for any
brokerage fees, finder's fees, investment banking fees or commissions with
respect to the transactions contemplated by this Agreement.
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3.17. The Todd Notes are being acquired, and upon conversion of the
Todd Notes, the Todd Shares will be acquired, for investment purposes, and not
with a view to transfer or distribution to others, except for a distribution by
Seller to the Partners.
As used in this Article 3, Seller's Best Knowledge means the actual knowledge of
any of David P. Malm, Rand Gladden, William Romeo or David Cottrell, after
reasonable inquiry.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Each of Todd and THD
represents and warrants to the Seller as follows:
4.1. It is a corporation duly organized, validly existing, and in
good standing under the laws of Delaware. It has full power and authority to
execute, deliver and perform this Agreement, and doing so will not violate any
provision of law or contravene any provision of its Certificate of Incorporation
or Bylaws.
4.2. This Agreement and the transactions provided for in this
Agreement by each Purchaser have been duly authorized by each
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Purchaser, and this Agreement constitutes a legal, valid and binding obligation
of each Purchaser.
4.3. The execution and delivery of this Agreement by each Purchaser
and the consummation and documentation of the transactions provided for herein
do not and will not constitute breach of, or default under, any commitment,
agreement, judgment or pending suit or court proceeding to which the Purchaser
is a party or to which any or its assets is subject and will not create, or
cause the acceleration of the maturity of, any debt, liability or obligation of
the Purchaser.
4.4. The Todd Shares will, when delivered to the Seller or the
Partners upon conversion of the Todd Notes, be duly issued, fully paid and
non-assessable.
4.5. No consent of any federal, state or local authority is required
in connection with the consummation of the transactions contemplated by this
Agreement by each Purchaser.
4.6. No written representation or warranty made by the Purchaser in
this Agreement, or in any written statement,
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certificate or other instrument furnished to the Seller pursuant hereto, or in
connection with the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
4.7. Todd's annual report (Form 10-K) for its fiscal year ended
August 31, 1996 and its quarterly report (Form 10-Q) for the period ended
February 28, 1997, as filed with the Securities and Exchange Commission are true
and correct in all material respects and contain no material omissions, and
there has been no material adverse change in Todd's financial condition since
the last date covered by such Form 10-Q.
4.8. Neither Purchaser nor any of their employees or agents has
incurred any liability to any broker, finder or agent for any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this Agreement.
5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligations of the
Purchaser under this Agreement to consummate the
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purchase of the Assets are subject to the fulfillment on or before the Closing
Date of each of the following conditions:
5.1. Except as disclosed in writing to Purchaser and not disapproved
by them, all representations and warranties of the Seller and the Partners
contained in this Agreement shall (except as affected by the transactions
contemplated by this Agreement and except to the extent made as of a specified
date) be true in all material respects on the Closing Date with the same effect
as though such representations and warranties had been made on and as of the
Closing Date, and all of the actions of Seller and each of the Partners to be
performed on or before the Closing Date pursuant to the terms hereof shall have
been duly performed in all material respects.
5.2. Purchaser shall have received certificates, dated as of the
Closing Date, of Seller and each of the Partners to the effect that the
conditions specified in Section 5.1 have been fulfilled.
5.3. Purchaser shall have received an opinion of counsel to Seller
and the HD-Related Partners, and an opinion of counsel to
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Phemus in substantially the form of Exhibits "D-1" and "D-2" hereto.
5.4. Neither the Assets nor the Premises shall have suffered
material damage by fire, flood or other casualty.
5.5. There shall be no pending or threatened litigation or any
investigation by any governmental body or any legal, administrative or
arbitration proceeding pending or threatened that may have a material adverse
effect of the operation of the Assets by THD.
5.6. No governmental inquiry, action or proceeding shall have been
asserted, threatened or initiated to enjoin the transactions contemplated by
this Agreement.
5.7. The Seller shall have delivered to THD at the Premises all of
the records referred to in Section 1.1(d) above.
5.8. The Seller shall have delivered to THD assignment agreements in
the form of Exhibits "E", "F" and "G" attached hereto
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with respect to the Premises, and the landlord's Consent in the form of Exhibit
"H" with respect to 1661 Lincoln Boulevard.
5.9. The Seller shall have executed a bill of sale and assignment in
substantially the form of Exhibit "I" transferring all of the Assets to THD.
5.10. Each of Rand Gladden, William Romeo and David Cottrell each
shall have entered into an Employment Agreement with Purchaser effective as of
the Closing Date.
5.11. The Seller and Todd shall have entered into the Registration
Rights Agreement in substantially the form of Exhibit "C".
5.12. Seller and each of the Partners shall release any security
interest any of them may have in any of the Assets.
5.13. Seller shall have satisfied the rights or options of Michael
Jackson to acquire equity interests in Seller or profit participations in
Seller's business, evidenced by a certificate executed by Michael Jackson in
form satisfactory to Purchaser.
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5.14. The Seller, the HD-Related Partners and Phemus shall have
delivered to the Purchaser its or his respective Noncompetition Agreement in
substantially the form of Exhibits "J" and "K" hereto.
5.15. The Partners shall have delivered to the Purchaser the
Indemnification Agreement in substantially the form of Exhibit "L" hereto.
5.16. As of the Closing, no event shall have occurred and no
circumstance shall exist which may materially and adversely affect or, in the
reasonable judgment of the Purchaser, threaten to affect the Seller's business,
assets, properties, condition or prospects.
6. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of the
Seller under this Agreement are subject to the fulfillment on or before the
Closing Date of each of the following conditions:
6.1. Except as disclosed in writing to Seller and not disapproved by
it, the representations and warranties of Purchaser contained in Section 4
hereof shall (except as affected by the
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transactions contemplated by this Agreement and except to the extent that any
such representations and warranties are made as of a specified date) be true in
all material respects on the Closing Date with the same effect as though such
representations and warranties had been made on and as of the Closing Date, and
all of the actions of Purchaser to be performed on or before the Closing Date
pursuant to the terms hereof shall have been duly performed in all material
respects.
6.2. Seller shall have received a certificate, dated as of the
Closing Date, of an officer of Todd to the effect that the conditions specified
in Section 6.1 have been fulfilled.
6.3. The Seller and the Partners shall have received an opinion of
counsel to Purchaser in substantially the form of Exhibit "M" hereto.
6.4. No governmental inquiry, action or proceeding shall have been
asserted, threatened or instituted to restrain or enjoin the transactions
contemplated by this Agreement.
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6.5. The Purchaser shall have paid to the Seller the Purchase Price
(for this purpose, delivery of the Second Note to the escrow holder as provided
in Section 2.3 shall be considered as payment).
6.6. The Purchaser shall have delivered to Seller the undertakings
of Marshall Naify and Robert Naify to vote in favor of David P. Malm as a
director of Todd, in substantially the form of Exhibits "N" and "O" hereto.
6.7. The Seller and the Partners shall have received the
Registration Rights Agreement duly executed by Todd and the Indemnification
Agreement duly executed by the Purchaser.
6.8. As of the Closing, no event shall have occurred and no
circumstance shall exist which may materially and adversely affect or, in the
reasonable judgment of the Seller, threaten to affect, the Purchaser's business,
conditions or prospects.
7. SURVIVAL OF REPRESENTATIONS. All representations, warranties and
covenants made by Purchaser or Seller and the Partners shall survive the Closing
Date, provided, however, that
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the liability of Seller and the Partners shall be limited as set forth in the
Indemnification Agreement, and the time periods for actions and claims by
Purchaser against Seller and the Partners shall be limited as set forth in the
Indemnification Agreement.
8. EFFECT OF CLOSING OVER KNOWN UNSATISFIED CONDITIONS. If any of the
parties hereto elects to proceed with the Closing knowing of any failure of any
condition or breach of any representation and warranty by any other party
hereto, the condition that is unsatisfied or the representation and warranty
which is breached at the Closing Date shall be deemed to be waived by such
party, and the party so electing to proceed shall be deemed to fully release and
forever discharge such other party hereto on account of any and all claims,
demands or charges with respect to the same.
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9. ACTIONS TO BE TAKEN SUBSEQUENT TO CLOSING.
9.1. Each of the Seller and the Purchaser agrees that it will at any
time and from time to time after the Closing Date, upon reasonable request of
the other party, do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may be required for
the complete assigning, transferring, granting, assuring and confirming to the
Purchaser and to its successors and assigns, and for aiding and assisting in
obtaining or collecting and reducing to possession, any or all of the Assets.
9.2. At the next meeting of the Board of Directors of Todd following
the Closing, the Board of Directors of Todd shall have elected David P. Malm
("Malm") to the Board as a Member of the Board to serve until the next annual
meeting of the shareholders of Todd and until his successor is elected and
qualified. Todd agrees that it shall nominate Malm for re-election as director
at any election of directors occurring before the earlier of (1) the third
anniversary of the Closing or (2) the date upon which the HD-Related Partners
have disposed of more than 50% of the Todd Shares
30
issued to them upon conversion of their interests in the Todd Notes, provided
that Malm has consented to serve as a director and no grounds exist for his
removal for cause.
9.3. As soon as practicable following the receipt of written demand
in accordance with the Registration Rights Agreement, Todd shall, at its own
expense, register the Todd Shares with the Securities and Exchange Commission.
9.4. From the Closing through June 30, 1997, Purchaser will not
incur additional liabilities related to the Assets except in the ordinary course
of business, and except for a possible refinancing of the CIT Debt and/or the
Orix Debt.
9.5. The Seller shall pay as they become due all liabilities of the
Seller not assumed by the Purchaser pursuant to the terms of this Agreement, and
the Purchaser shall pay as they become due all liabilities of the Seller assumed
by the Purchaser pursuant to the terms of this Agreement and all liabilities and
expenses arising from the operation of the Assets following the Closing.
31
9.6. In the event the transactions provided for in this Agreement
fail to close, neither Purchaser will solicit for employment Rand Gladden,
William Romeo, David Cottrell or Michael Jackson for a period of eighteen (18)
months from April 17, 1997.
9.7. Each of the Partners covenants and agrees that, for the
Retention Period (as defined below), it or he will retain, and will not dispose
of in any manner, other than a sale for full and adequate consideration, any
Todd Notes, Todd Shares, or the gross proceeds from the sale of any Todd Notes
or Todd Shares which it or he may acquire from Seller. For this purpose, the
Retention Period is the period commencing on the Closing Date and ending on the
later of (1) the second anniversary of the Closing Date (the "Claim Period") or
(2) if as of such last date one or more timely-noticed claims are outstanding,
the date on which the last such claim has been fully satisfied; provided,
however, that if at the expiration of the Claim Period, one or more
timely-noticed claims are outstanding, the maximum amount each Partner is
required to retain under this Section 9.7 is 100% of the amount of such
Partner's maximum possible liability under the Indemnification Agreement to
which it or he is a party. Phemus shall be considered to have complied with
this Section 9.7 notwithstanding that its Todd Notes,
32
Todd Shares or proceeds from the sale thereof, are transferred to another entity
which meets the following requirements: (1) it is controlled by the President
and Fellows of Harvard College, (2) it is not bankrupt or insolvent and (3) it
becomes a party to and agrees to assume Phemus' liabilities under the
Indemnification Agreement.
9.8. During the term that any of the Todd Notes is outstanding, Todd
shall not incur any indebtedness which, by its terms, prohibits payment of the
Todd Notes when due (except for, with respect to any indebtedness which is
Senior Indebtedness as defined in the Todd Notes, the subordination provisions
of Article 1 of the Todd Notes).
10. THE CLOSING. The Closing hereunder shall take place at the offices of
Greenberg Glusker Fields Claman & Machtinger LLP 1900 Avenue of the Stars, Suite
2200, Los Angeles, CA 90067 at 10 a.m. on June 20, 1997, or at such other time
and place as the parties may agree (the "Closing Date").
11. RETENTION OF RECORDS. The Purchaser agrees that for a period of six
years from their respective dates, the Purchaser will
33
notify the Seller before discarding any records and other data delivered by the
Seller to the Purchaser as part of the Assets and that upon request by the
Seller will make available at reasonable times to the Seller and its
representatives all such records and data. The Seller may, at its expense, make
copies of such records and data.
12. EMPLOYEES. The Purchaser will use reasonable efforts to offer
employment to the Seller's employees who are not specified in Section 5.10. Any
of the Seller's employees hired by the Purchaser following the Closing will have
continuing medical insurance benefits without any waiting period. For purposes
of determining eligibility for participation in Todd's employee benefit plans,
such employees will be given credit for any past service with the Seller.
13. RIGHT OF FIRST PURCHASE. Each time the Seller or any Partner proposes
to transfer, assign or sell all or any part of the Todd Notes or the Todd
Shares, the Seller or such Partner (an "Offeror") shall first offer such Todd
Notes of Todd Shares to Todd in accordance with the following provisions:
34
13.1. The Offeror shall deliver a written notice (the "Offer Notice")
to Todd stating (i) the Offeror's bona fide intention to transfer such Todd
Notes or Todd Shares, (ii) the name and address of the proposed transferee if
known or otherwise the means of transfer, (iii) the Todd Notes or Todd Shares to
be transferred and (iv) the purchase price in terms of payment for which the
Offeror proposes to transfer such Todd Notes or Todd Shares.
13.2. Within seven (7) days after receipt of the Offer Notice, Todd
shall notify the Offeror in writing of its desire to purchase all or any portion
of the Todd Notes or Todd Shares being so transferred, and within such 7-day
period, Todd shall have the first right to purchase such Todd Notes or Todd
Shares upon the price and terms of payment designated in the Offer Notice. If
the Offer Notice provides for the payment of non-cash consideration, Todd may
elect to pay the consideration in cash equal to the present fair market value of
the non-cash consideration offered. If Todd elects to exercise its first right
to purchase, it shall deliver the purchase price to the Offeror either (1) at
the time specified in the Offer Notice or (2) within ninety (90) days after the
date of delivery of the Offer Notice,
35
provided the buyer is the same party identified in the Offer Notice, whichever
is greater, except that, in the case of any Todd Shares held by Phemus, the
7-day and 90-day periods referred to above shall instead be 24-hours and 30
days, respectively.
13.3. If Todd elects not to purchase all of the Todd Notes or Todd
Shares designated in the Offer Notice, then the Offeror may transfer the Todd
Notes or Todd Shares with respect to which Todd has elected not to exercise its
right of first refusal in the manner described in the Offer Notice, providing
such transfer (i) is completed within the time period specified in Section 13.2,
and (ii) is made at the price, on the terms and to the same buyer designated in
the Offer Notice. If such Todd Notes or Todd Shares are not so transferred, the
Offeror must give notice in accordance with this Article 13 prior to any other
or subsequent transfer of such Todd Notes or Todd Shares.
13.4. The Todd Notes and Todd Shares shall each bear a legend stating
that such Todd Notes and Todd Shares are subject to the right of first refusal
provided herein.
36
13.5. Nothing in this Article 13 shall prohibit transfers of Todd
Shares meeting the requirements of the last sentence of Section 9.7, which
transfers shall not be subject to this Article 13.
14. EXPENSES.
14.1. Except as specifically provided herein, Seller, the Partners
and Purchaser each shall be responsible for its own expenses incurred in
connection with this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants employed by the
parties hereto in connection with the preparation of this Agreement and the
consummation of the transactions contemplated by this Agreement.
14.2. All state transactional taxes due and payable upon the sale of
the Assets to the Purchaser shall be paid by the Seller. The foregoing shall
not be interpreted as a limitation of the Purchaser's rights to indemnification
under the Indemnification Agreement with respect to any other taxes, including
but not limited to, income taxes and any related penalties payable by the Seller
or the Partners.
37
15. CHANGE OF NAME. The Seller and the Partners acknowledge that the
trade name "Hollywood Digital" is being sold to the Purchaser as part of the
Assets. Accordingly, the Seller and the Partners shall cease as of the Closing
Date hereof using the name "Hollywood Digital" or any substantially similar
variation thereof in any partnership, corporate or trade name or in any
advertisement for any business following the Closing Date.
16. INTERIM OPERATION OF BUSINESS. The Seller covenants and agrees that
from the date hereof to the Closing Date it shall:
16.1. Conduct its business only in the ordinary course and incur no
liabilities, direct or contingent, except in the ordinary course of business
consistent with past practices;
16.2. Use its commercially reasonable efforts to preserve its
business intact, keeping available the services of the present officers and
employees thereof and preserving the relationships thereof with suppliers,
customers and others with whom the Seller has business dealings;
38
16.3. Maintain all of its properties in customary repair, order and
condition, reasonable wear and tear excepted, and maintain in full force and
effect all licenses, franchises, and other intangible assets owned by the
Seller;
16.4. Maintain in full force and effect all policies of insurance in
effect on the date hereof and renewals thereof;
16.5. Maintain its books of account and records in the usual, regular
and ordinary manner, in accordance with GAAP;
16.6. Timely file all reports required to be filed with governmental
authorities and conform in all material respects to all laws, regulations and
orders relating to its business;
16.7. Except as required under employment agreements in force on
March 31, 1997, not pay or commit to pay any salary increases, not make or
commit to make any distribution of assets, not make or commit to make any loans
or otherwise dispose of its assets except in the ordinary course of business
consistent with past practices;
39
16.8. Not execute any purchase orders in excess of $25,000 without
the consent of Todd;
16.9. Promptly advise the Purchaser in writing of any material
adverse change, known or threatened, in the financial condition, business or
affairs of the Seller; and
16.10. Not make any purchases inconsistent with past practices as to
type or quantity of merchandise.
Nothing in this Agreement shall be deemed to prevent Seller from paying expenses
and incurring capital expenditures either (1) to develop the Santa Monica
facility, if such items are consented to by Todd, or (2) to purchase equipment
from March 31, 1997 to the Closing in the ordinary course of its business in the
aggregate amount not to exceed $25,000.
40
17. DISPUTE RESOLUTION; ATTORNEYS' FEES.
17.1. Any controversy or claim arising out of or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach or
default or misrepresentation in connection with any of its provisions shall be
submitted to a retired judge (the "Referee") pursuant to California Code of
Civil Procedure, Section 638, ET SEQ. The Referee will serve as an all purpose
judge and his or her determinations will include, but will not be limited to,
discovery and other law and motion matters and provisional remedies, as well as
the trial itself. In all respects, including, but not limited to, the right of
appeal and review, the proceedings will be governed by the Code of Civil
Procedure, as if the Referee were a sitting judge of the Superior Court. The
Referee will be selected by the following process:
17.2. Within ten (10) days after a party has notified the other
party, in writing, that such party elects to exercise such party's rights under
this Section 17, each party will serve on the other party a list of five (5)
nominees who are retired superior court or federal judges.
41
17.3. Within ten (10) days after the expiration of the 10-day period
referenced in Section 17.2 above, each party will serve on the other party a
copy of the entire list of all nominees with each nominee numbered in the order
of that party's preference, its first choice being number one, its next choice,
number two, etc.
17.4. The nominee with the lowest numerical total will then be
designated as the Referee, subject to being duly challenged by any of the
parties. Each party will have 1 peremptory challenge. A peremptory challenge
may only be exercised by filing it with the court (and serving it upon the
party's counsel of record) within five (5) business days after the parties have
designated the order of their preference. Peremptory challenges need not be in
any particular form and need only state that the challenging party peremptorily
challenges a particular nominee. If both parties exercise a peremptory
challenge against the same nominee each will be deemed to have exercised its 1
peremptory challenge. The exercise of the peremptory challenge described herein
does not affect or limit the right of any party to object to the appointment of
the Referee pursuant to Code of Civil Procedure Section 641.
42
17.5. If the designated Referee is duly challenged and disqualified
or becomes unwilling or unable to serve, the nominee with the next lowest
numerical total will be designated the Referee, subject, in turn to challenge
(in the manner specified in this Section 17) or unwillingness or inability to
serve; and this procedure will be repeated until a Referee is selected. The
trial will be held as expeditiously as practicable in light of law and motion
and discovery proceedings.
17.6. The Referee shall hear, try and determine all issues in the
case, whether fact or law, and issue a statement of decision, and a judgment.
No party shall seek, and the Referee shall not be authorized to award, any
punitive damages. The parties intend this general reference agreement to be
specifically enforceable. If the parties do not agree upon the fees to be paid
to the selected or appointed Referee, the fees shall be fixed and paid, as if
the reference to such Referee were involuntary, pursuant to California Code of
Civil Procedure Sections 645.1 and 1023. Any retrial of any issue shall be
subject to the provisions of this Section 17, in the same manner as specified
hereinabove.
43
17.7. If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of any alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred therein, in addition to any
other relief to which it or they may be entitled. The court or Referee shall
consider, in determining the prevailing party, (i) which party obtains relief
which most nearly reflects the remedy or relief which the parties sought, and
(ii) any settlement offers made prior to commencement of the trial in the
proceeding.
18. PUBLIC DISCLOSURE.
Seller shall make no press release or public disclosure of the
transactions contemplated by this Agreement other than a joint press release
with Todd unless approved in writing by Todd. Todd may, prior to the Closing,
make public disclosure of the transactions contemplated by this Agreement, with
or without the approval of Sellers, if it believes on the advice of counsel that
such disclosure is legally required.
44
19. OTHER OFFERS AND EXCLUSIVE DEALING.
From and after the date of this Agreement and until the earlier of the
termination of this Agreement or the Closing, whichever shall occur first,
Seller and the Partners shall not, and shall use their best efforts to ensure
that their officers, directors, employees, advisors and agents shall not,
directly or indirectly, (a) solicit, initiate or authorize any inquiries,
discussions, negotiations or submission of proposals or offers to or from any
person, corporation or other entity, or participate in any discussion regarding
any such inquiry or proposal relating to any merger or purchase of any equity
interest in, all or a material amount of the equity interests or the assets of
Seller or approve or undertake any such transaction, or (b) knowingly provide or
furnish to any person other than Purchaser and their agents any non-public
information about or with respect to Seller. Seller and the Partners shall
respond to all unsolicited inquiries and proposals, and to inquiries or
proposals resulting from actions of persons not controlling or controlled by
Seller or any of the Partners or subject to this Agreement, seeking information
or indications of interest regarding any merger or purchase of any equity
interest in, all or a material amount of the equity
45
interests, or the assets of Seller, by clearly communicating to the inquiring or
proposing party that the Seller or the Partner, as the case may be, is unwilling
to respond to the proposal or inquiry at that time.
20. CONFIDENTIALITY.
Each party shall maintain the confidentiality of all information
furnished to it by the other party hereto concerning the business, operations
and financial condition of the party furnishing such information, and shall not
use any such information except in furtherance of the completion of the
transactions contemplated by this Agreement. If such transactions are not
completed, each party hereto shall promptly return all documents and copies
thereof received from the other parties hereto. The obligations of
confidentiality under this Section 20 shall survive any termination of this
Agreement and shall remain in effect, except to the extent that (a) the
transactions contemplated by this Agreement shall have been completed or (b) as
to any particular information if such information (i) shall have become
generally available to the other party or (ii) was available to the other
46
party on a non-confidential basis prior to its disclosure by the first party.
21. TERMINATION.
Either Purchaser or Seller may terminate this Agreement on or prior to
the Closing Date without liability to the other of them if a bona fide
governmental action or proceeding shall be pending against either party on the
Closing Date wherein an unfavorable judgment, decree or order would prevent or
make unlawful the carrying out of the transaction contemplated by this
Agreement. This Agreement may be terminated by either Purchaser or Seller if
the Closing does not occur on or before 5:00 PM P.D.T. June 27, 1997. Seller
may not terminate this Agreement pursuant to the preceding sentence if the
Closing has not occurred by reason of the failure of Seller or any Partner to
have performed his or its obligations hereunder; and Purchaser may not terminate
this Agreement pursuant to the preceding sentence if the Closing does not occur
by reason of Purchaser's failure to perform its obligations hereunder; provided,
further, that the outside date for the Closing shall be extended during the
period that a procedure to
47
resolve a dispute under this Agreement is pending as provided in Section 17.
22. MISCELLANEOUS.
22.1. All notices and other communications provided for hereunder
shall be in writing, unless otherwise specified, and shall be deemed to have
been duly given if delivered personally or by facsimile transmission or three
(3) days after the date mailed, postage prepaid, registered or certified mail,
to the following addresses or at such other addresses as the parties hereto may
designate from time to time in writing:
If to the Seller: Hollywood Digital Limited Partnership
c/o Halpern, Denny & Co.
500 Boylston Street
Suite 1880
Boston, Massachusetts 02116
Attention: David P. Malm
FAX: (617) 536-8535
With a copy to: Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Roslyn G. Daum, Esq.
FAX: (617) 248-4000
If to the Partners: Halpern, Denny & Co.
500 Boylston Street
Suite 1880
48
Boston, Massachusetts 02116
Attention: David P. Malm
FAX: (617) 536-8535
If to Phemus: Phemus Corporation
c/o Harvard Private Capital Group, Inc.
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
FAX: (617) 523-1063
with a copy to: Larry Rowe, Esq.
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
If to Gladden: Rand Gladden
c/o Hollywood Digital
6660 Sunset Boulevard
Hollywood, California 90028
FAX: (213) 468-5584
with a copy to: Anthony Iler, Esq.
Irell & Manella LLP
333 South Hope Street, Suite 3300
Los Angeles, California 90071-3042
FAX: (213) 229-0516
If to Romeo: William Romeo
c/o Hollywood Digital
6660 Sunset Boulevard
Hollywood, California 90028
FAX: (213) 468-5584
If to Cottrell: David Cottrell
c/o Hollywood Digital
6660 Sunset Boulevard
Hollywood, California 90028
FAX: (213) 468-5584
If to Jackson: Michael Jackson
c/o Hollywood Digital
6660 Sunset Boulevard
Hollywood, California 90028
FAX: (213) 468-5584
49
If to the Purchaser: The Todd-AO Corporation
900 North Seward Street
Hollywood, California 90038
Attention: Salah M. Hassanein,
President and Chief Executive Officer
FAX: (213) 466-2327
With a copy to: Greenberg Glusker Fields
Claman & Machtinger LLP
1900 Avenue of the Stars, Suite 2200
Los Angeles, California 90067
Attention: Gary L. Kaplan, Esq.
FAX: (310) 553-0687
22.2. This Agreement shall be governed by and construed and enforced
in accordance with the laws of California. The section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
22.3. This Agreement may be amended, modified, superseded or
cancelled only by a written instrument executed by all of the parties hereto.
The waiver by any party of any breach of any provision shall not be construed as
a waiver of any other provision by such party. Each party shall have the right
to waive fulfillment of a condition or covenant or compliance with a
representation or warranty of which it is the beneficiary, but, except as
provided in Section 8, such waiver may be made only by written instrument
executed by such party.
50
22.4. All understandings and agreements of the parties are merged
into this Agreement and the instruments and agreements specifically referred to
herein. This Agreement inures to the benefit of and shall be binding on each of
the parties hereto or any of them, their respective representatives and
successors; provided, however, this Agreement and the rights and obligations
hereunder shall not be assignable by any party.
22.5. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
22.6. In the event any provision of this Agreement is deemed to be
unenforceable, the remainder of this Agreement shall not be affected thereby and
each provision hereof shall be valid and enforced to the fullest extent
permitted by law.
22.7. All schedules to this Agreement whether attached hereto or
delivered prior to the Closing are hereby incorporated into and made a part of
this Agreement.
51
22.8. This Agreement, the Schedules attached hereto, and the other
agreements referred to herein constitute the entire agreement among the parties
hereto and supersede all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether oral
or written, express or implied, with respect to the subject matter hereof. None
of the parties hereto shall be bound by or charged with any oral or prior
written agreements, representations, warranties, statements, promises,
information, arrangements or understandings not specifically set forth in this
Agreement and the other documents and instruments delivered concurrently
herewith or to be delivered on or before the Closing Date pursuant to this
Agreement. The parties hereto further acknowledge and agree that, in entering
into this Agreement and in delivering the schedules, documents and instruments
heretofore delivered or to be delivered on or before the Closing Date, they have
not in any way relied, and will not in any way rely, upon any oral or prior
written
52
agreements, representations, warranties, statements, promises, information,
arrangements or understandings, express or implied, not specifically set forth
in this Agreement, or the other written agreements referred to herein or
delivered concurrently herewith, or in such schedules, documents or instruments.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first above written.
"Purchaser"
THE TODD-AO CORPORATION
By:
-----------------------------
Its:
-----------------------------
TODD-AO HD, INC.
By:
-----------------------------
Its:
-----------------------------
53
"Seller"
HOLLYWOOD DIGITAL LIMITED PARTNERSHIP
By: HOLLYWOOD DIGITAL, INC., Its General Partner
By:
--------------------------
Its:
--------------------------
"Partners"
HOLLYWOOD DIGITAL, INC.
By:
--------------------------
Its:
-------------------------
THE PALLADION LIMITED PARTNERSHIP
By: HALPERN, DENNY AND ZOOK, INC.,
Its general partner
By:
--------------------------
Its:
-------------------------
HDZ DIGITAL LIMITED PARTNERSHIP
By: HALPERN, DENNY AND ZOOK LIMITED
PARTNERSHIP II
By: HALPERN, DENNY AND ZOOK,
INC., Its general partner
By:
---------------------
Its:
--------------------
54
PHEMUS CORPORATION
By:
--------------------------
Its:
-------------------------
By:
--------------------------
Its:
-------------------------
------------------------------
Rand Gladden
------------------------------
William Romeo
------------------------------
David Cottrell
------------------------------
Michael Jackson
55
TABLE OF CONTENTS
PAGE(S)
-------
1. Purchase of Assets . . . . . . . . . . . . . . . . . . . . . . . 2
2. Purchase Price.. . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties of Seller and Partners. . . . . . 8
4. Representations and Warranties of the Purchaser. . . . . . . . . 17
5. Conditions to Obligations of the Purchaser . . . . . . . . . . . 19
6. Conditions to Obligations of the Seller. . . . . . . . . . . . . 22
7. Survival of Representations. . . . . . . . . . . . . . . . . . . 24
8. Effect of Closing Over Known Unsatisfied Conditions. . . . . . . 24
9. Actions to be Taken Subsequent to Closing. . . . . . . . . . . . 25
10. The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11. Retention of Records . . . . . . . . . . . . . . . . . . . . . . 28
12. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13. Right of First Purchase. . . . . . . . . . . . . . . . . . . . . 29
14. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15. Change of Name . . . . . . . . . . . . . . . . . . . . . . . . . 31
16. Interim Operation of Business. . . . . . . . . . . . . . . . . . 32
17. Dispute Resolution; Attorneys' Fees. . . . . . . . . . . . . . . 34
18. Public Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 37
19. Other Offers and Exclusive Dealing . . . . . . . . . . . . . . . 37
i
20. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 38
21. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
22. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 40