EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
AMONG
POINT.360,
a California corporation,
INTERNATIONAL VIDEO CONVERSIONS, INC.,
a California corporation,
AND
THE STOCKHOLDERS OF INTERNATIONAL VIDEO CONVERSIONS, INC.,
NAMED IN EXHIBIT A
Dated as of June 23, 2004
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of June
23, 2004, by and among Point.360, a California corporation ("Purchaser"),
International Video Conversions, Inc., a California corporation (the "Company"),
Kenneth F. Holland, individually, and the stockholders of the Company identified
on Exhibit A (the "Stockholders").
A. Purchaser desires to acquire the Company.
B. Collectively, the Stockholders own all of the issued and outstanding
capital stock of the Company.
C. The capital stock of the Company is made up of Common "A" voting
Stock, Common "B" non voting Stock and Preferred "A" non-voting Stock
(collectively, "Stock").
D. The Stockholders desire to sell, and Purchaser desires to purchase,
all of the issued and outstanding Stock of the Company at the price and upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. For all purposes of this Agreement, certain capitalized
terms specified in Exhibit B shall have the meanings set forth in that Exhibit
B, except as otherwise expressly provided.
ARTICLE II
SALE AND PURCHASE OF STOCK
2.1 SALE AND PURCHASE OF STOCK. On the basis of the representations,
warranties and agreements contained herein, and subject to the terms and
conditions hereof, each Stockholder severally agrees to sell to Purchaser, and
Purchaser agrees to purchase from each Stockholder, the number of shares of
issued and outstanding Stock of the Company set forth opposite the name of the
Stockholder in Exhibit A for the purchase price specified in Section 2.2.
2.2 PURCHASE PRICE. The purchase price for the Stock shall be
$7,000,000.00 plus any earnouts paid pursuant to Section 2.3 hereof (the
"Purchase Price") and shall be payable at Closing by bank wire of immediately
available funds allocated among the Stockholders as set forth in Exhibit A. The
funds shall be wired to the accounts specified by the Stockholders at the
Closing.
2.3 EARNOUT. Provided the Actual EBITDA of the Company exceeds 70% of
the following target EBITDA of the Company in connection with the period from
Closing through December 31, 2004 (the "Short Period") or the calendar years
2005 or 2006, as applicable, Purchaser shall make earnout payments to
Stockholders pursuant to the allocation set forth in Exhibit A within ninety
(90) days after the end of any such calendar year as follows:
(a) With respect to the Short Period, a total of $1,000,000 ("2004
Maximum Earnout"), if the Company's actual EBITDA for the Short Period ("Short
Period Actual EBITDA") equals or exceeds $3,066,000 multiplied by a fraction,
the numerator of which is the number of days in the Short Period and the
denominator of which is 365 ("Short Period Target EBITDA").
(b) With respect to calendar year 2005, a total of $2,000,000 ("2005
Maximum Earnout"), if the Company's actual EBITDA for 2005 ("2005 Actual
EBITDA") equals $3,598,000 or more ("2005 Target EBITDA");
(c) With respect to calendar year 2006, a total of $2,000,000 ("2006
Maximum Earnout"), if the Company's actual EBITDA for 2006 ("2006 Actual
EBITDA") equals $4,008,000 or more ("2006 Target EBITDA").
(d) If the Company achieves more than 70% but less than 100% of any
Target EBITDA for the Short Period, 2005 or 2006, the earnout payments payable
to Stockholders in accordance with Exhibit A in connection with such calendar
year shall be computed by multiplying the applicable Maximum Earnout by a
fraction, the numerator of which is the amount by which the applicable Actual
EBITDA exceeds 70% of the applicable Target EBITDA and the denominator of which
is the difference between the applicable Target EBITDA and 70% of the applicable
Target EBITDA. For illustration purposes only, if hypothetically 2005 Actual
EBITDA is $3,200,000, the total earnout payment for 2005 would be computed as
follows:
2005 Maximum Earnout = $2,000,000 (A)
2005 Target EBITDA = $3,598,000
Numerator:
2005 Actual EBITDA $3,200,000
70% of 2005 Target EBITDA (2,518,600)
Difference $ 681,400 (B)
Denominator:
2005 Target EBITDA $3,598,000
70% of 2005 Target EBITDA (2,518,600)
Difference $1,079,400 (C)
Fraction (B divided by C) 63.13% (D)
Earnout To Be Paid (A x D) $1,262,553
(e) No earnout payments shall be made with respect to any of the Short
Period or the 2005 or 2006 calendar years for any such period in which the
Company achieves 70% or less of Target EBITDA for the Short Period, 2005 or
2006, respectively.
(f) In the event the determination of the earnout for any applicable
period has not become final within ninety (90) days from the end of any
applicable period by reason of the implementation by Stockholders of the
procedures for objecting to a Determination set forth in Section 3.8, then the
amount of the earnout set forth in the Determination shall be paid within such
ninety (90)-day period. The balance of the earnout, if any, shall be paid to
Stockholders or refunded to Purchaser, as applicable, within thirty (30) days
after the Determination becomes final.
ARTICLE III
ADDITIONAL UNDERTAKINGS AND COVENANTS
Purchaser, on the one hand, and the Company and the Stockholders on the
other hand, hereby covenant and agree with each other as follows:
3.1 CONSENTS AND APPROVALS.
(a) Subject to the terms and conditions herein provided, Purchaser, the
Company and the Stockholders shall use reasonable efforts to secure such
consents, authorizations and approvals of governmental authorities and of
private persons or entities with respect to the transactions contemplated by
this Agreement, and to the performance of all other obligations of such parties
hereunder, as may be required by any applicable statute or regulation of the
United States or any country, state or other jurisdiction or by any Agreement of
any kind whatsoever to which Purchaser, the Company or any Stockholder is a
party or by which Purchaser, the Company or any Stockholder is bound.
(b) Purchaser, the Company and the Stockholders shall (i) cooperate in
the filing of all forms, notifications, reports and information, if any,
required or reasonably deemed advisable pursuant to applicable statutes, rules,
regulations or orders of any governmental authority in connection with the
transactions contemplated by this Agreement.
3.2 ACCESS; INVESTIGATIONS BY PURCHASER. The Company shall, and the
Stockholders shall cause the Company to, through the Closing Date, provide to
representatives of Purchaser full access during normal business hours to its
offices, premises, laboratories, equipment, properties (real, personal, mixed,
tangible and intangible), books, agreements, leases, files of every kind,
records (including, without limitation, tax returns and correspondence with
accountants), officers, directors, shareholders, employees, customers, vendors,
suppliers, lessors, licensors, consultants and contractors and will facilitate
and/or make available to representatives of Purchaser financial and operating
data and other information with respect to the businesses and assets of the
Company as Purchaser may request.
3.3 OPERATION OF BUSINESS OF THE COMPANY.
(a) The Company shall use its best efforts, through the Closing Date, to
preserve its business organizations and its present relationships with
customers, lessors, lessees, financial institutions, customers, suppliers,
consultants, employees, contractors, subcontractors, developers and any other
persons having business relations with it.
(b) The Company shall, through the Closing Date, conduct its business
only in the Ordinary Course of Business and, in addition, shall not: (i) issue
any type of stock, or any options, warrants or other rights to subscribe for or
purchase any of its stock or any securities convertible into or exchangeable for
its stock; (ii) declare, set aside or pay any dividend or distribution with
respect to its stock to Stockholders; (iii) directly or indirectly redeem,
purchase or otherwise acquire any of its stock; (iv) effect a split,
reclassification or other change in or of any of its stock; (v) amend its
articles of incorporation or bylaws; (vi) grant any increase in the compensation
payable or to become payable by the Company to its officers or employees, or
enter into any bonus, insurance, pension or other benefit plan, payment or
arrangement for or with any of those officers or employees other than in the
Ordinary Course of Business; (vii) borrow or agree to borrow any funds, or
directly or indirectly guarantee or agree to guarantee the obligations of others
other than in the Ordinary Course of Business; (viii) place, or allow to be
placed, an Encumbrance on any of its Assets except as required in the Ordinary
Course of Business; (ix) cancel any material indebtedness owing to the Company
or any material Claims which the Company may possess, or waive any rights of
substantial value; (x) sell, assign, license or transfer any Intellectual
Property; (xi) sell or otherwise dispose of any interest in any Asset except in
the Ordinary Course of Business; or (xii) make any loan or advance to any
stockholder, officer or director of the Company or to any other person, firm or
corporation other than in the Ordinary Course of Business. Through the Closing
Date, the Company will maintain insurance in the Ordinary Course of Business.
(c) Through the Closing Date, the Company shall keep proper books of
record and account in which true and complete entries will be made of all
transactions and shall provide to Purchaser a monthly unaudited balance sheet
and statement of income of the Company, as soon as practicable after the end of
each month, and such other Documents (financial or otherwise) as Purchaser shall
reasonably request.
(d) Through the Closing Date, the Company shall inform and discuss with
Purchaser on a regular and ongoing basis (but in no event less frequently than
monthly) the management of its business and Assets, including, without
limitation, any significant new Agreements or transactions proposed to be
entered into or persons proposed to be employed or terminated by the Company or
any other significant developments relating to the business or Assets of the
Company;
(e) The Company will pay, or will, to the extent required by generally
accepted accounting principles, establish in its financial statements furnished
to Purchaser pursuant to Section 3.3(c) or 4.6 adequate reserves for the payment
of, all Taxes payable for or with respect to the period up to and including the
Closing Date (without regard to whether or not such Taxes are disputed or are
due and payable on or before the Closing Date).
3.4 NO INCONSISTENT ACTIONS. The Company and the Stockholders shall
each: (i) use their best efforts to take all measures necessary or advisable to
accomplish the transactions contemplated by this Agreement; (ii) use their best
efforts to satisfy or cause to be satisfied all of the conditions to Closing and
all of the other obligations of the Company and the Stockholders, as the case
may be, under this Agreement which are required to be satisfied prior to the
Closing; and (iii) refrain from, and use their best efforts to cause the
directors, officers, employees or other agents of the Company to refrain from,
taking any action inconsistent with this Agreement, including without
limitation, any action to solicit, initiate, encourage the submission of, assist
with or negotiate a Proposal. The Company will notify Purchaser immediately if
any Person makes any Proposal.
3.5 NEWS RELEASES. Prior to Closing, without the prior written consent
of the other party, (i) neither party will, and each party will direct its
stockholders, directors, officers, employees, representatives and advisors not
to, disclose to any Person other than its stockholders, directors, officers,
employees, representatives or advisors the fact that discussions or negotiations
are taking place concerning the transactions contemplated hereby or the
existence of this Agreement or any of the terms, conditions or other facts with
respect thereto and (ii) except for filings required by law, neither party will
issue any press release or otherwise making any public statements with respect
to this Agreement and the transactions contemplated hereby.
3.6 SUBSEQUENT EVENTS.
(a) The Company and the Stockholders shall notify Purchaser promptly in
writing upon becoming aware of the occurrence of any event, or the failure of
any event to occur, prior to the Closing that results in a material omission
from, or material breach of, any of the covenants, representations or warranties
made by or on behalf of the Company, Kenneth F. Holland, individually and
Kenneth F. Holland and Judith Anne Holland, as Trustees of the Holland Family
Trust, or the Stockholders in this Agreement, but the notification shall not
excuse breaches of representations, warranties, covenants or agreements
disclosed in such notification.
(b) Purchaser shall notify the Company and the Stockholders promptly in
writing of the occurrence of any event, or the failure of any event to occur,
prior to the Closing that results in a material omission from, or material
breach of, any of the covenants, representations or warranties made by or on
behalf of Purchaser in this Agreement, but the notification shall not excuse
breaches or representations, warranties, covenants or agreements disclosed in
the notification.
3.7 CONDUCT OF BUSINESS DURING EARNOUT PERIOD. During the period
commencing on the Closing Date and ending on December 31, 2006 (the "Earnout
Period"):
(a) The Company shall operate as a stand alone, independent subsidiary
or division of Purchaser, shall continue to conduct its business in the Ordinary
Course of Business, and shall be subject to Purchaser's standard reporting
requirements.
(b) Kenneth Holland shall be the Chief Executive Officer ("CEO") of the
Company pursuant to an Employment Agreement in the form of Exhibit C attached
hereto.
(c) Michael Kelfer shall be the Chief Financial Officer of the Company,
Revis S. Call shall be the Vice President and General Manager of the Company and
William Infuso shall be the Vice President of Operations of the Company, subject
to terms and conditions of their respective Employment Agreements with the
Company. The compensation of Messrs. Kelfer, Call and Infuso shall be
established at their present compensation, subject to increases at the
discretion of the Company.
(d) Without limiting the generality of Section 3.7(a) hereof and subject
to Purchaser's normal capital expenditure approval process with respect to the
period commencing March 31, 2005, it is expressly understood that the Company
shall be entitled to acquire equipment required to implement the operation of
its business in the Ordinary Course of Business, including, but not limited to,
the acquisition of the equipment contemplated by its current capital budget
previously provided to Purchaser, which is deemed approved by Purchaser. Cash
received or used in the Company's operations shall be deposited in, or withdrawn
from, Purchaser's cash concentration account(s). The Company will earn or be
charged interest on the net interest on any balance at Purchaser's term loan
effective borrowing rate. Purchaser shall accommodate the Company's cash needs.
(e) The Company and Purchaser shall evaluate whether the Company should
retain any or all of the employee benefit plans of the Company existing
immediately prior to the Closing Date; in the event the Purchaser's benefit
package is elected, the Company would pay the expenses normally charged by
Purchaser to its facilities. In no event shall the charge to EBITDA for the
expense of employee benefit plans be in excess of the Company's existing costs,
as adjusted in the future for increased numbers of employees and general
insurance increases.
(f) Except as provided in Sections 3.7(e) and 3.7(h), Purchaser shall
not charge or allocate any overhead of Purchaser to Company for the purpose of
calculating EBITDA.
(g) Purchaser may provide specific support services to Company, such as
engineering or information technology, if the CEO approves such services, at the
rates agreed to between the CEO and Purchaser.
(h) Purchaser shall provide accounting and administrative services to
Company including, but not limited to, the provision of monthly financial
statements for the Company within twenty (20) business days of any month other
than December (for December the monthly financial statements shall be provided
within forty-five (45) business days); provided, however, that the charge to
Company for such services shall be 50% of the then-current actual costs, not to
exceed the costs to the Company of its existing costs for such services.
Services provided for the benefit of the Company by any third party consultants,
including, without limitation, legal services, shall be billed to the Company at
actual rates.
(i) After the Closing and through 2006, any services to be rendered to
Purchaser by the Company shall be at prices no less favorable than those offered
to any other customer of the Company.
3.8 EARNOUT DETERMINATION. As soon as practical after December 31 of
each year during the Earnout Period, but in no event later than sixty (60) days
after Purchaser shall have received from the Company all information, books and
records reasonably requested by them in order to make an EBITDA calculation, the
Purchaser shall prepare a statement of the EBITDA of the Company for each period
of the earnout, prepared in accordance with GAAP (the "Determination"). If the
Stockholders do not agree that such Determination correctly states EBITDA for
the relevant period, the Stockholders shall promptly (but not later than twenty
(20) days after delivery of the Determination) give written notice to Purchaser
of any exceptions thereto. If the Stockholders and the Purchaser reconcile their
differences, the EBITDA for such period shall be adjusted accordingly and shall
thereupon become final and conclusive upon all the parties hereto. If the
Stockholders and the Purchaser are unable to reconcile their differences in
writing within twenty (20) days after written notice of the exceptions is
delivered to the Purchaser, the items in dispute shall be submitted to a
mutually acceptable accounting firm for final determination (the "Determining
Accountants") and the EBITDA shall be deemed adjusted in accordance with the
determination of the Determining Accountants and shall become final and
conclusive upon all parties hereto. The Determining Accountants shall consider
only the items in dispute and shall be instructed to act within thirty (30) days
(or such longer period as the Stockholders and the Purchaser may agree) to
resolve all claims and dispute. If the Stockholders do not give notice of any
exception within twenty (20) days after the delivery of the Determination, or if
the Stockholders give written notice of their acceptance of the Determination
prior to the end of such twenty (20)-day period, the EBITDA calculations set
forth in the Determination shall thereupon become final and conclusive.
(a) The Stockholders hereby designate Kenneth Holland their
representative. All decisions of the Stockholders hereunder shall be rendered by
Kenneth Holland, as representative of Stockholders, or, in the event of his
inability to act as representative, by a person designated by him or his
successor.
(b) The Determining Accountants shall determine the party (i.e., the
Purchaser or the Stockholders as the case may be) whose asserted position as to
the EBITDA for the period under examination before the Determining Accountants
is furthest from the determination of EBITDA by the Determining Accountants,
which non-prevailing party shall pay the reasonable fees and expenses of the
Determining Accountants and JAMS.
(c) In the event the parties are unable to agree upon a mutually
acceptable accounting firm to act as Determining Accountant, either Stockholders
or Purchaser may request that the Determining Accountant be selected by JAMS.
Stockholders and Purchaser shall each designate up to three accounting firms.
JAMS shall select one of such accounting firms to act as the Determining
Accountants. To the extent consistent with the foregoing, and the limited role
of JAMS, the Streamlined Arbitration Rules and Procedures of JAMS shall be
applicable. In the first instance, each party shall pay one-half (1/2) of the
fees and expenses of JAMS. The non-prevailing party, as determined pursuant to
Subsection 3.8(b), shall reimburse the other party for such fees and expenses
paid by such other party upon delivery of the Determination by the Determining
Accountants.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE PRINCIPAL STOCKHOLDER
Except as specifically set forth in the Schedules, the Company, Kenneth
F. Holland, individually, and Kenneth F. Holland and Judith Anne Holland as
Trustees of the Holland Family Trust, jointly and severally, represent and
warrant (which representation and warranty shall be deemed to include the
disclosure with respect thereto so specified in any of Schedules) to Purchaser
as follows:
4.1 ORGANIZATION AND STANDING. The Company is duly organized, validly
existing and in good standing under the laws of the State of California, and has
the corporate power and corporate authority to own, operate and lease its
Assets, to carry on its business as currently conducted, to execute and deliver
this Agreement and to carry out the transactions contemplated hereby. The
Company is duly qualified to conduct business as a foreign corporation and is in
good standing in the states listed next to its name in Schedule 4.1. The Company
is not qualified to conduct business in any other jurisdiction, and neither the
nature of the business conducted nor the character of the Assets owned, leased
or otherwise held by the Company makes any such qualification necessary except
where the absence of licensing or qualification as a foreign corporation would
have a material adverse effect upon the business of the Company as currently
conducted.
4.2 SUBSIDIARIES. The Company has no Subsidiaries or any equity
investments or other interests in, and has made no advances or loans to, any
officer, director, employee, stockholder, corporation, association, partnership,
joint venture or other entity.
4.3 ARTICLES OF INCORPORATION AND BYLAWS. The Company has furnished to
Purchaser a true and complete copy of its articles of incorporation, as
currently in effect, certified as of a recent date by the Secretary of State of
California and a true and complete copy of its bylaws, as currently in effect,
certified by its corporate secretary. The certified copies are attached as
exhibits to, and part of, Schedule 4.3.
4.4 CAPITALIZATION. All of the authorized and issued and outstanding
Stock of the Company is as set forth in Schedule 4.4. All of the issued and
outstanding shares of Stock are duly authorized and validly issued and
outstanding, fully paid and nonassessable. No shares of capital stock of the
Company have been reserved for any purpose. There are no outstanding securities
convertible into or exchangeable for the Stock of the Company and no outstanding
options, rights (preemptive or otherwise), or warrants to purchase or to
subscribe for any shares of such Stock or other securities of the Company.
Except as set forth on Schedule 4.4, there are no outstanding Agreements
affecting or relating to the voting, issuance, purchase, redemption, repurchase
or transfer of the Company's Stock or any other securities of the Company,
except as contemplated hereunder.
4.5 DIRECTORS, OFFICERS AND EMPLOYEES. Schedule 4.5 lists all current
directors, officers and employees of the Company, showing each person's name,
position, annual remuneration, bonuses and fringe benefits for the current
fiscal year.
4.6 FINANCIAL STATEMENTS. The Company has prepared and furnished to
Purchaser and there are attached as Schedule 4.6(a), the unaudited consolidated
balance sheets of the Company as of the end of each fiscal year ending March 31
of 2004, 2003 and 2002 and the unaudited consolidated statements of income,
stockholders' equity and changes in financial position for each of such fiscal
years, each accompanied by the related review by Spector & Wong, LLP,
independent certified public accountants. Except as disclosed in Schedule
4.6(b), all such financial statements (i) are in accordance with the books and
records of the Company, (ii) present fairly in all material respects the
financial position of the Company as of the respective dates and the results of
operations and changes in financial position for the respective periods
indicated, and (iii) have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior accounting
periods.
4.7 NO UNDISCLOSED LIABILITIES. Except as reflected in the financial
statements furnished pursuant to this Agreement or as described in Schedule 4.7
at March 31, 2004, there existed no liabilities (whether contingent or absolute,
matured or unmatured, known or unknown) of the Company of a nature required
under generally accepted accounting principles to be shown in the financial
statements. Except as described in Schedule 4.7, since March 31, 2004, the
Company has not incurred any material liabilities (whether contingent or
absolute, matured or unmatured, known or unknown) other than in the Ordinary
Course of Business.
4.8 TAXES.
(a) The Company has (or, in the case of returns becoming due after the
date hereof and on or before the Closing Date, will have prior to the Closing
Date) duly filed all Company Tax Returns required to be filed by the Company on
or before the Closing Date with respect to all applicable Taxes; provided,
however, that such Tax Returns will not be deemed to have been required to be
filed so long as a valid extension is effective. No penalties or other charges
are or will become due with respect to any of the Company Tax Returns as the
result of the late filing thereof. All of the Company Tax Returns are (or, in
the case of returns becoming due after the date hereof and on or before the
Closing Date, will be) true and complete in all material respects. The Company:
(i) has paid all Taxes due or claimed to be due by any Taxing authority in
connection with any of the Company Tax Returns (without regard to whether or not
such Taxes are shown as due on such Company Tax Returns); or (ii) has
established (or, in the case of amounts becoming due after the date hereof,
prior to the Closing Date will have paid or established) in financial statements
provided to Purchaser pursuant to Section 3.3(c) or 4.6 adequate reserves (in
conformity with generally accepted accounting principles consistently applied)
for the payment of such Taxes. Except as set forth in Schedule 4.8, the amounts
set up as reserves for Taxes on the financial statements of the Company
furnished pursuant to Section 3.3(c) or 4.6 are sufficient for the payment of
all unpaid Taxes, whether or not such Taxes are disputed or are yet due and
payable, for or with respect to the period, and for which the Company may be
liable in its own right (including, without limitation, by reason of being a
member of the same affiliated group) or as a transferee of the Assets of, or
successor to, any corporation, person, association, partnership, joint venture
or other entity.
(b) Except as disclosed in Schedule 4.8, none of the Company Tax Returns
have been examined by the relevant taxing authorities within the last three (3)
years, and there are no deficiencies proposed as a result of any such
examinations that are disclosed on such Schedule. There is no action, suit,
proceeding, audit, claim pending or, to the best knowledge of the Company, or
Kenneth F. Holland, as an individual, threatened and, to the best knowledge of
the Company or Kenneth F. Holland, there is no investigation pending or
threatened, in respect of any Taxes for which the Company is or may become
liable, nor has any material deficiency or claim for any Taxes been proposed,
asserted or threatened. The Company has not consented to any waivers or
extensions of any statute of limitations with respect to any taxable year, which
are currently in force. There are no agreements, waivers or consents providing
for an extension of time with respect to the assessment or collection of any
Taxes against the Company currently in force, and no power of attorney granted
by the Company with respect to any tax matters is currently in force.
(c) The Company has made available to Purchaser true and complete copies
of all Company Tax Returns and all written communications relating to the
Company Tax Returns or to any deficiency or claim proposed and/or asserted,
irrespective of the outcome of the matter, but only to the extent the items
relate to tax years (i) which are subject to an audit, investigation,
examination or other proceeding, or (ii) with respect to which the statute of
limitations has not expired.
(d) Schedule 4.8 sets forth (i) all federal tax elections that currently
are in effect with respect to the Company, and (ii) all elections for purposes
of foreign, state or local Taxes and all consents or Agreements for purposes of
federal, foreign, state or local Taxes in each case that reasonably could be
expected to affect or be binding upon the Company or its Assets or operations
after the Closing.
(e) Except as set forth in Schedule 4.8, the Company (i) is not, nor has
it ever been a partner in a partnership or an owner of an interest in an entity
treated as a partnership for federal income tax purposes; (ii) has not executed
of filed with the Internal Revenue Service any consent to have the provisions of
Section 341(f) of the Code apply to it; (iii) is not subject to Section 999 of
the Code; (iv) is not a passive foreign investment company as defined in Section
1296(a) of the Code; or (v) is not a party to an Agreement relating to the
sharing, allocation or payment of, or indemnity for, Taxes.
(f) All transactions that could give rise to an understatement of U.S.
federal income tax within the meaning of Section 6662 of the Code have been
adequately disclosed in accordance with Section 6662 of the Code.
(g) The Company has paid or prepaid all taxes due on income earned
through March 31, 2004.
4.9 CONDUCT OF BUSINESS; ABSENCE OF MATERIAL ADVERSE CHANGE. Other than
as set forth in Schedule 4.9, since March 31, 2004, there has been no material
adverse change in the business, operations, condition (financial or otherwise),
Assets or liabilities of the Company. Except as set forth in Schedule 4.9, since
March 31, 2004, the Company has conducted its business substantially in the
manner heretofore conducted and only in the Ordinary Course of Business, and the
Company has not (i) incurred loss of, or significant injury to, any material
Assets as the result of any fire, explosion, flood, windstorm, earthquake, labor
trouble, riot, accident, act of God or public enemy or armed forces, or other
casualty which would have a material adverse effect on the business of the
Company as currently conducted; (ii) issued any capital stock, bonds or other
corporate securities or debt instruments, granted any options, warrants or other
rights calling for the issuance thereof, or, except in the Ordinary Course of
Business, borrowed any funds; (iii) discharged or satisfied any Encumbrances or
paid any obligation or liability (absolute or contingent, matured or unmatured,
known or unknown) other than current liabilities shown in the balance sheets
furnished pursuant to Section 3.3(c) or 4.6, and current liabilities incurred
since March 31, 2004 in the Ordinary Course of Business; (iv) declared or made
payment of, or set aside for payment, any dividends or distributions of any
Assets, or purchased, redeemed or otherwise acquired any of its capital stock,
any securities convertible into capital stock, or any other securities; (v)
mortgaged, pledged or subjected to any Encumbrances any of its Assets; (vi)
sold, exchanged, transferred or otherwise disposed of any of its Assets, or
canceled any debts or claims, except in each case in the Ordinary Course of
Business; (vii) written down the value of any Assets or written off as
uncollectible any notes or accounts receivable, except write-downs and
write-offs in the Ordinary Course of Business, none of which, individually or in
the aggregate, are material (viii) increased the rate of compensation payable,
or to become payable, by it to any of its officers, or, except in the Ordinary
Course of Business, to its employees over the rate being paid to them on March
31, 2004; (ix) made or permitted any amendment of, or terminated, any material
Agreement to which it is a party; (x) through negotiation or otherwise made any
commitment or incurred any liability to any labor organization; (xi) made any
accrual or arrangement for, or payment of, bonuses or special compensation of
any kind to any director, officer or, except in the Ordinary Course of Business,
to any employee; (xii) directly or indirectly paid any severance or termination
pay to any officer or employee in excess of one (1) month's salary; (xiii) made
capital expenditures, or entered into commitments therefor, aggregating more
than $200,000; (xiv) made any change in any method of accounting or accounting
practice; (xv) entered into any transaction of the type described in Section
4.21; (xvi) made any charitable contributions or pledges; or (xvii) made an
Agreement to do any of the foregoing.
4.10 PROPERTIES.
(a) Company does not own and never has owned any real property. Schedule
4.10 hereto sets forth a true, complete and correct list of all real property
currently, or at any time in the past five (5) years, leased (whether leased as
lessor, sublessor, lessee, sublessee or otherwise) by Company. With respect to
all real property currently leased by Company, a copy of each lease and each
amendment thereto, has been made available to Company prior to the Closing Date.
All such current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not any existing material
default or event of default under any such lease (or event which with notice or
lapse of time, or both, would constitute such a material default) by Company or,
to the best knowledge of Company, or Kenneth F. Holland, as an individual, by
any other party to such lease.
(b) Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, except as reflected in Schedule 4.10 and
except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
4.11 ASSETS.
(a) The Company has good, and valid title to all personal property and
Assets it owns, including, without limitation, all personal property and Assets
reflected in the balance sheets furnished pursuant to Section 3.3(c) and 4.6 and
all personal property and Assets purchased by the Company since March 31, 2004
(except for personal property and Assets reflected in such balance sheets or
acquired since the dates of the latest balance sheets for the Company furnished
to Purchaser which have been sold or otherwise disposed of in the Ordinary
Course of Business), is free and clear of all Encumbrances, except Encumbrances
that would not have a material adverse effect on the business of the Company as
currently conducted or except as set forth on Schedule 4.11(a). The Company owns
or leases all Assets necessary to conduct its business as it has been conducted
in the past and in accordance with industry standards.
(b) All inventory of the Company is marketable and of a quality salable
in the Ordinary Course of Business and consistent with the practices and
standards of the post production industry in the County of Los Angeles,
California.
4.12 INSURANCE. Schedule 4.12 lists all policies of fire, hazard,
casualty, liability, life, worker's compensation and other forms of insurance of
any kind owned or held by the Company. All such policies: (i) are with insurance
companies reasonably believed by the Company to be financially sound and
reputable; (ii) are in full force and effect; (iii) are believed by the Company
to be sufficient for compliance by the Company with all requirements of Law and
of all Agreements to which the Company is a party; (iv) are valid and
outstanding policies enforceable against the insurer; (v) are believed by the
Company to insure against risks of the kind customarily insured against and in
amounts customarily carried by companies similarly situated and by companies
engaged in similar businesses and owning similar properties; and (vi) provide
that they will remain in full force and effect through the respective dates set
forth in Schedule 4.12.
4.13 INTELLECTUAL PROPERTY. Schedule 4.13 lists all Intellectual
Property owned or licensed by or registered in the name of the Company. The
Company owns or licenses all of the Intellectual Property listed next to its
name in Schedule 4.13 purported to be owned by it, pays no royalty to anyone
with respect to any Intellectual Property and has the right to bring action for
the infringement of the Intellectual Property. The Company owns or licenses all
of the Intellectual Property and associated equipment, including, without,
limitation, computers, necessary to operate the Company in the Ordinary Course
of Business. The Intellectual Property of the Company does not in any way
defame, violate or infringe any rights of any third party, including, without
limitation, intellectual property rights.
4.14 DEBT INSTRUMENTS. Schedule 4.14 lists all mortgages, indentures,
notes, guarantees and other Agreements for or relating to borrowed money
(including, without limitation, conditional sales agreements and capital leases)
to which the Company is a party or which have been assumed by the Company or to
which any Assets of the Company are subject and, with respect to each
arrangement so listed, briefly describes the principal amount, interest rate,
original and maturity dates and any sinking fund installments, prepayment
premiums, restrictive covenants and any other material provisions. The Company
has performed all the material obligations required to be performed by it to
date and is not in default in any respect under any of the foregoing, and there
has not occurred any event that (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute such a
default.
4.15 MATERIAL AGREEMENTS. Except as set forth in Schedule 4.15, the
Company is not a party to any (i) Agreement for the employment of any officer,
employee, consultant or independent contractor; (ii) license agreement or
distributor, dealer, manufacturer's representative, sales agency, advertising,
property management or brokerage agreement; (iii) Agreement with any labor
organization or other collective bargaining unit; (iv) Agreement for the future
purchase of materials, supplies, services, merchandise or equipment involving
payments of more than $20,000 over its remaining term (including, without
limitation, periods covered by any option to renew by either party) and which
are not terminable by the Company on ninety (90 )-days' notice; (v) Agreement
for the purchase, sale or lease of any real estate except in the Ordinary Course
of Business; (vi) profit-sharing, bonus, incentive compensation, deferred
compensation, stock option, severance pay, stock purchase, employee benefit,
insurance, hospitalization, pension, retirement or other similar plan or
Agreement; (vii) Agreement for the sale of any of its Assets or the grant of any
preferential rights to purchase any of its Assets or rights, other than in the
Ordinary Course of Business; (viii) Agreement which contains any provisions
requiring the Company to indemnify any other party thereto; (ix) joint venture
agreement or other Agreement involving the sharing of profits; (x) outstanding
loan to any person or entity or receivable due from any Stockholder or persons
or entities controlling, controlled by or under common control with the Company;
or (xi) any Agreement (including, without limitation, Agreements not to compete
and exclusivity Agreements) that reasonably could be interpreted to impose any
restriction on any business operations of the Company (each a "Material
Agreement" and collectively, the "Material Agreements"). Each Material Agreement
is in full force and effect and constitutes a legal, valid and binding
obligation of, and is legally enforceable against, the respective parties
thereto. There have been no threatened cancellations of, and no material dispute
exists under any Material Agreement. No other party is in default in any respect
under any Material Agreement, and there has not occurred any event that (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute such a default.
4.16 LITIGATION. Except as set forth in Schedule 4.16, there are no
actions, suits, claims, arbitrations or proceedings pending or threatened by an
attorney in writing or, to the best knowledge of Company , and Kenneth F.
Holland, as an individual, investigations pending or threatened, against the
Company or its business, or Assets, or the transactions contemplated by this
Agreement, at law or in equity or admiralty, or before or by any court,
arbitrator or governmental authority, domestic or foreign. The Company is not
operating under, subject to or in default with respect to any order, award,
writ, injunction, decree or judgment of any court, arbitrator or governmental
authority.
4.17 LABOR RELATIONS. There are no strikes, work stoppages, grievance
proceedings, union organization efforts or other controversies pending or
threatened, between the Company and (i) its employees or (ii) any union or other
collective bargaining unit representing such employees. The Company is in
substantial compliance with all Laws relating to employment or the workplace,
including, without limitation, provisions relating to wages, hours, collective
bargaining, safety and health, work authorization, equal employment opportunity,
immigration, withholding, unemployment compensation, worker's compensation,
employee privacy and right to know. There are no collective bargaining
agreements, employment agreements between the Company and its employees, or
professional service agreements not terminable at will relating to the
businesses and Assets of the Company. The consummation of the transactions
contemplated hereby will not cause Purchaser or the Company to incur or suffer
any liability relating to, or obligation to pay, severance, termination or other
similar payments to any person or entity.
4.18 EMPLOYEE PLANS.
(a) Except as set forth in Schedule 4.18, the Company (i) does not
maintain and never has maintained any Plan or Other Arrangement, (ii) is not and
never has been a party to any Plan or Other Arrangement or (iii) has no
obligations under any Plan or Other Arrangement. No Plan is a Multiemployer
Plan, an ESOP, or a Defined Benefit Plan.
(b) The Company has made available to Purchaser true and complete copies
of each of the following Documents: (i) the Documents setting forth the terms of
each Plan; (ii) all related trust agreements or annuity agreements (and any
other funding Document) for each Plan; (iii) for the three most recent plan
years, all annual reports on each Plan that have been filed with any
governmental agency; (iv) the current summary plan description and subsequent
summaries of material modifications for each Title I Plan; (v) all DOL opinions
on any Plan and all correspondence relating to the request for and receipt of
each opinion; (vi) all IRS rulings, opinions or technical advice relating to any
Plan and a copy of the most recent IRS determination letter for each Plan, if
applicable; and (vii) all Agreements with service providers or fiduciaries for
providing services on behalf of any Plan. For each Other Arrangement, the
Company has furnished to Purchaser true and complete copies of each policy,
Agreement or other Document setting forth or explaining the terms of the Other
Arrangement, all related trust agreements or other funding Documents (including,
without limitation, insurance contracts, certificates of deposit, money market
accounts, etc.), all employee communications, all correspondence or other
submissions with any governmental agency, and all Agreements with service
providers or fiduciaries for providing services on behalf of any Other
Arrangement.
(c) The Company has made all contributions and other payments required
by and due under the terms of each Plan and Other Arrangement and has taken no
action (including, without limitation, actions required by Law) relating to any
Plan or Other Arrangement that will increase Purchaser's or the Company's
obligation under any Plan or Other Arrangement.
(d) Schedule 4.18 sets forth a list of all Qualified Plans. All
Qualified Plans and any related trust agreements or annuity agreements (or any
other funding Document) comply and have complied with ERISA, the Code
(including, without limitation, the requirements for Tax qualification described
in Section 401 thereof), and all other Laws. The trusts established under such
Plans are exempt from federal income taxes under Section 501(a) of the Code. The
Company has received determination letters issued by the IRS with respect to
each Qualified Plan, and the Company has furnished to Purchaser true and
complete copies of all such determination letters and all correspondence
relating to the applications therefor. All statements made by or on behalf of
the Company to the IRS in connection with applications for determinations with
respect to each Qualified Plan were true and complete when made and continue to
be true and complete. Nothing has occurred since the date of the most recent
applicable determination letter that would adversely affect the tax-qualified
status of any Qualified Plan.
(e) The Company has complied in all material respects with the
applicable provisions of the Code, ERISA, the National Labor Relations Act,
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Fair Labor Standards Act, the Securities Act, the Securities Exchange
Act of 1934, and all other Laws pertaining to the Plans, Other Arrangements and
other employee or employment related benefits, and all premiums and assessments
relating to all Plans or Other Arrangements. The Company has no pending unfair
labor practice charges, contract grievances under any collective bargaining
agreement, other administrative charges, claims, grievances or lawsuits before
any court, governmental agency, regulatory body, or arbiter arising under any
Law governing any Plan, and there exist no facts that could give rise to such a
claim.
(f) Neither the Company nor any of the Plans has engaged in any
"prohibited transaction" (as such term is defined in Section 4975 of the Code
and Section 408 of ERISA), for which no exemption exists under the Code or ERISA
and for which the Company has not requested or received a prohibited transaction
exemption.
(g) No Plan that covered any current or former Company employees has
been terminated.
(h) No Plan or Other Arrangement, individually or collectively, provides
for any payment by the Company to any employee or independent contractor that is
not otherwise limited by Section 280G of the Code or that is an "excess
parachute payment" pursuant to Section 280G of the Code.
(i) No Plan has experienced a "reportable event" (as such term is
defined in Section 4043 of ERISA) that is not subject to an administrative or
statutory waiver from the reporting requirement.
(j) No Plan is a "qualified foreign plan" (as such term is defined in
Section 404A(e) of the Code), and no Plan is subject to the Laws of any
jurisdiction other than the United States of America or one of its political
subdivisions.
(k) No Plan is a funded Welfare Plan.
(l) No Plan promises or provides post-retirement medical, life insurance
or other benefits due now or in the future to current, former or retired
employees of the Company.
(m) All Welfare Plans have been administered in material compliance with
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.
(n) The Company has (i) filed or caused to be filed all returns and
reports on the Plans that is required to file (including Form 5500 annual
reports, summary annual reports, pbgc-1's, and summary plan descriptions, if
applicable) and (ii) paid or made adequate provision for all fees, interest,
penalties, assessments or deficiencies that have become due pursuant to those
returns or reports or pursuant to any assessment or adjustment that has been
made relating to those returns or reports. There are no unpaid fees, penalties,
interest or assessments due from the Company or from any other person that are
or could become a lien on any Asset of the Company or could otherwise adversely
affect the business or Assets of the Company. The Company has collected or
withheld all amounts that are required to be collected or withheld by it to
discharge its obligations, and all of those amounts have been paid to the
appropriate governmental agencies or set aside in appropriate accounts for
future payment when due.
4.19 ENVIRONMENTAL.
Except as set forth in Schedule 4.19:
(a) With respect to real property owned, leased or used by the Company
and all improvements thereon, the Company has complied materially and is in
material compliance with all Environmental Laws as such term is defined in
Section 4.19(c) below.
(b) (i) The Company is not, and within applicable statutes of
limitation, has not been, in violation of any Environmental Law (as such term is
defined in Section 4.19(c) below) which violation could reasonably be expected
to result in a material adverse effect on the Company; (ii) there has been no
disposal, spill, discharge, or release in violation of any Environmental Law of
any Hazardous Material by the Company on, at, under or migrating to any property
presently or formerly owned, leased or operated by the Company; (iii) although
the Company may store, use and dispose of Hazardous Materials normally stored,
used or disposed of by a business such as that operated by the Company, the
Company has caused no Hazardous Materials to be located in, at, on, or under
such facility or property or at any other location, that could reasonably be
expected to require investigation, removal, material remedial or material
corrective action by the Company or that would reasonably likely result in
material liabilities of, or material losses, damages or costs to the Company
under any Environmental Law; (iv) there is currently no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation, notice
or demand letter or request for information pending or, to the best knowledge of
the Company, the Stockholders and Kenneth F. Holland, as an individual,
investigations pending or threatened, which asserts liability under any
Environmental Law against the Company or any Stockholder; (v) The Stockholders,
the Company and Kenneth F. Holland, as an individual, are not aware that there
has been any underground or aboveground storage tank, or any impoundment or
other disposal area in each case containing Hazardous Materials located at any
property owned, leased, or operated by the Company at the time of such
ownership, lease, or operation; (vi) no polychlorinated biphenyls have been used
or disposed of by the Company or have been caused by the Company to be located
at, on, or under any property leased, or operated by the Company at the time of
such lease or operation; and (vii) the Company has provided or made available to
Purchaser all records and files in possession of the Company and Kenneth F.
Holland, as an individual, concerning the existence of Hazardous Materials or
any other environmental concern at properties, assets, or facilities currently
or formerly operated or leased by the Company, any present or former subsidiary
of the Company, or predecessor in interest of the Company, or concerning
compliance by the Company with, or liability under, any Environmental Laws.
(c) For purposes of this Agreement, "Environmental Law" means all
federal, state, and local laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, and decrees, now or previously in effect and
regulating, relating to, or imposing liability or standards of conduct
concerning air emissions, water discharges, noise emissions, the release or
threatened release of any Hazardous Material into the environment, the
generation, handling, treatment, storage, transport or disposal of any Hazardous
Material, or otherwise concerning pollution or the protection of the outdoor or
indoor environment, or human health or safety. "Hazardous Material" means any
pollutant, contaminant, or hazardous, toxic, medical, infectious or dangerous
waste, substance, constituent or material, defined or regulated as such in, or
for purposes of, any Environmental Law, including without limitation, any
asbestos, petroleum, oil, radioactive substance, polychlorinated biphenyls,
toxin, chemical, infectious or disease-causing agent, and any other substance
that can give rise to liability under any Environmental Law.
4.20 TRANSACTIONS WITH RELATED PARTIES. Except as set forth in Schedule
4.20, Company is not a party to any transactions, loans or other arrangements or
understandings with its Stockholders, directors and/or officers (or any member
of their respective immediate families or any trustee or beneficiary of any
Stockholder) that are in effect as of the date of this Agreement and/or are
currently proposed to be carried out in the future. Schedule 4.20 identifies and
describes the interest or interests, if any, in any property, real or personal,
tangible or intangible, used in or pertaining to the business of Company, now
held by any Stockholder, director and/or officer (or any member of their
respective immediate families or any trustee or beneficiary of any Stockholder)
of Company.
4.21 RESTRICTIONS AND CONSENTS. Except as set forth in Schedule 4.21,
there are no Agreements, Laws or other restrictions of any kind to which the
Company (or any asset thereof) is party or subject that would prevent or
restrict the execution, delivery or performance of this Agreement or result in
any penalty, forfeiture, Agreement termination, or restriction on business
operations of the Company as a result of the Agreements and laws that reasonably
could be interpreted or expected to require the consent or acquiescence of any
person or entity not party to this Agreement with respect to any aspect of the
execution, delivery or performance of this Agreement by the Company except such
as would not have a material adverse effect on the business of the Company as
currently conducted.
4.22 AUTHORIZATION. Except for the required consents as set forth in
Section 4.21, the execution, delivery and performance by the Company of this
Agreement and all other Documents contemplated hereby, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by the Company of the transactions contemplated hereby and thereby,
do not and will not: (i) require any consent or approval of the Stockholders
that has not already been obtained; (ii) conflict with, or violate any provision
of, any Law having applicability to the Company or any of its Assets, or any
provision of the articles of incorporation or bylaws of the Company; (iii)
conflict with, or result in any breach of, or constitute a default under any
Agreement to which the Company is a party or by which it or any of its Assets
may be bound; or (iv) result in or require the creation or imposition of or
result in the acceleration of any indebtedness, or of any Encumbrance of any
nature upon, or with respect to, the Company or any of the Assets now owned or
hereafter acquired by the Company.
4.23 ABSENCE OF VIOLATION. The Company is not in violation of or default
under, nor has it breached, any term or provision of its certificate or articles
of incorporation or bylaws or any material Agreement or restriction to which the
Company is a party or by which the Company or any Asset thereof is bound or
affected. The Company is in substantial compliance with all Laws.
4.24 ABSENCE OF FURTHER REQUIREMENTS. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
court or governmental authority or agency is necessary or required for the
performance by the Company of its obligations hereunder, in connection with the
sale of the Stock under this Agreement or the consummation of the transactions
contemplated by this Agreement.
4.25 ACCOUNTING AND OTHER CONTROLS. The Company has established a system
of internal accounting controls sufficient to provide reasonable assurances that
(i) transactions were, are and will be executed in accordance with management's
general or specific authorization; (ii) transactions were, are and will be
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; and (iii) the recorded accountability for Assets was,
is and will be compared with existing Assets at reasonable intervals and
appropriate action was, is and will be taken with respect to any differences.
4.26 BANK ACCOUNTS. Schedule 4.26 lists any and all accounts the Company
maintains with any and all financial institutions, including, without
limitation, any and all banks, showing all relevant account information,
including, without limitation, the names, addresses, phone numbers, fax numbers
and e-mail addresses of such financial institutions and any and all relevant
account numbers. and all persons authorized to sign on such accounts.
4.27 BINDING OBLIGATION. This Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms; and each
Document to be executed by the Company pursuant hereto, when executed and
delivered in accordance with the provisions hereof, shall be a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
such enforcement may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors generally, or (b) by general equitable principles.
4.28 DISCLOSURE. None of the representations and warranties of the
Company made in this Article IV of this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder hereby severally represents and warrants to Purchaser
as follows:
5.1 TITLE TO STOCK. The Stockholder is, and on the Closing Date will be,
the lawful owner of the number of shares of Stock set forth opposite the name of
the Stockholder in Exhibit A. Since the date of the issuance or sale of such
shares of Stock to the Stockholder, there has been no event, or action taken (or
failure to take action) by or against the Stockholder, which has resulted or
might result in the creation of any Encumbrance on such shares. The Stockholder
has, and on the Closing Date the Stockholder will have, good, valid and
marketable title, free and clear of all Encumbrances, to the number of shares of
Stock so set forth in Exhibit A, with full right and lawful authority to sell
and transfer the shares to Purchaser pursuant to this Agreement.
5.2 AUTHORITY AND CAPACITY. The Stockholder has full legal right,
capacity, power and authority (corporate or otherwise) to execute this Agreement
and to consummate the transactions contemplated hereby.
5.3 ABSENCE OF VIOLATION. The execution, delivery and performance by the
Stockholder of this Agreement and all other Documents contemplated hereby, the
fulfillment of and the compliance with the respective terms and provisions
hereof and thereof, and the consummation of the transactions contemplated hereby
and thereby, do not and will not (i) conflict with, or violate any provision of,
any Law having applicability to the Company or the Stockholder; or (ii) conflict
with, or result in any breach of, or constitute a default under, any Agreement
to which the Company or the Stockholder is a party, except that certain consents
may be required as set forth in Schedule 4.21.
5.4 RESTRICTIONS AND CONSENTS. There are no Agreements, Laws or other
restrictions of any kind to which the Stockholder is party or subject that would
prevent or restrict the execution, delivery or performance of this Agreement or
result in any penalty, forfeiture, Agreement termination, or restriction on
business operations of Purchaser or the Company as a result of the execution,
delivery or performance of this Agreement. Schedule 5.4 lists all such
Agreements and Laws that reasonably could be interpreted or expected to require
the consent or acquiescence of any person or entity not party to this Agreement
with respect to any aspect of the execution, delivery or performance of this
Agreement by the Company.
5.5 BINDING OBLIGATION. This Agreement constitutes a valid and binding
obligation of such Stockholder, enforceable in accordance with its terms. Each
Document to be executed by the Stockholder pursuant hereto, when executed and
delivered in accordance with the provisions hereof, will be a valid and binding
obligation of such Stockholder, enforceable in accordance with its terms, except
as such enforcement may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors generally, or (b) by general equitable
principles.
5.6 TRANSFER OF TITLE. Upon payment for the Stock to be purchased from
each Stockholder in accordance with Exhibit A and pursuant to the terms of this
Agreement, Purchaser will acquire good and valid title thereto, free and clear
of all Encumbrances.
5.7 ABSENCE OF FURTHER REQUIREMENTS. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
court or governmental authority or agency is necessary or required for the
performance by the Stockholders of its obligations hereunder, in connection with
the sale of the Stock under this Agreement or the consummation of the
transactions contemplated by this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Company and the Stockholders
as follows:
6.1 ORGANIZATION AND STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has the full and unrestricted corporate power and authority to
carry on its business as currently conducted, to enter into this Agreement and
to carry out the transactions contemplated hereby.
6.2 AUTHORIZATION. The execution, delivery and performance by Purchaser
of this Agreement and all other Documents contemplated hereby, the fulfillment
of and compliance with the respective terms and provisions hereof and thereof,
and the consummation by Purchaser of the transactions contemplated hereby and
thereby, do not and will not: (i) require any consent or approval of Purchaser
that has not already been obtained; or (ii) conflict with, or violate any
provision of, any Law having applicability to Purchaser, or any provision of the
certificate or articles of incorporation or bylaws of Purchaser.
6.3 BINDING OBLIGATION. This Agreement constitutes a valid and binding
obligation of Purchaser, enforceable in accordance with its terms; and each
Document to be executed by Purchaser pursuant hereto, when executed and
delivered in accordance with the provisions hereof, shall be a valid and binding
obligation of Purchaser, enforceable in accordance with its terms, except as
such enforcement may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors generally, or (b) by general equitable principles.
6.4 DISCLOSURE. None of the representations and warranties of Purchaser
made in this Article VI of this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS
The obligations of the Company and the Stockholders under this Agreement
are subject to the fulfillment, at or prior to the Closing, of each of the
following conditions, and failure to satisfy any such condition shall, without
liability whatsoever to the Company and the Stockholders excuse and discharge
all obligations of the Company and the Stockholders to carry out the provisions
of this Agreement, unless such failure is agreed to in writing by the Company
and the Stockholders:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Purchaser in this Agreement and the statements contained in any
applicable Schedules and Exhibits attached hereto or in any Document furnished
by Purchaser pursuant to this Agreement shall be true and complete in all
material respects when made, and on and as of the Closing Date as though such
representations and warranties were made on and as of such date.
7.2 CONSENTS. All registrations, filings, applications, notices,
consents, orders, approvals, qualifications or waivers listed in Schedule 7.2
and indicated therein as being a condition to the Closing for the Company and
the Stockholders shall have been filed, made or obtained and all waiting periods
specified by law with respect thereto shall have expired or been terminated.
7.3 DOCUMENTS AT CLOSING. All documents required to be furnished by
Purchaser to the Company or the Stockholders prior to or at the Closing shall
have been so furnished.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are subject to the
fulfillment, at or prior to the Closing, of each of the following conditions,
and failure to satisfy any such condition, shall, without any liability
whatsoever to Purchaser, excuse and discharge all obligations of Purchaser to
carry out the provisions of this Agreement, unless such failure is agreed to in
writing by Purchaser:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made (jointly or individually) by the Company and the Stockholders in this
Agreement and the statements contained in any applicable Schedules and Exhibits
attached hereto or in any Document furnished by the Company or the Stockholders
pursuant to this Agreement shall be true and complete in all material respects
when made, and on and as of the Closing Date as though such representations and
warranties were made on and as of such date.
8.2 PERFORMANCE. The Company and Stockholder shall have performed and
complied with in all material respects all agreements and conditions required by
this Agreement to be performed or complied with prior to the Closing Date.
8.3 ABSENCE OF ADVERSE CHANGES. There shall have been no material
adverse changes since March 31, 2004 in the business, capital structure,
operations, customer list, condition (financial or otherwise), Assets or
liabilities of the Company (regardless of whether or not such events or changes
are inconsistent with the representations and warranties given herein by the
Company and the Stockholders).
8.4 LEGAL PROCEEDINGS. No action or proceeding by or before any
governmental authority shall have been instituted (and not subsequently settled,
dismissed or otherwise terminated) which is reasonably expected to restrain,
prohibit or invalidate the transactions contemplated by this Agreement other
than an action or proceeding instituted or threatened by Purchaser.
8.5 NONCOMPETITION. The individuals listed in Schedule 8.5 (all of whom
are Stockholders other than Kenneth F. Holland, individually) shall have entered
into a Noncompetition Agreements in the forms attached hereto as Exhibits D-1,
D-2 and D-3, respectively, effective as of the Closing Date.
8.6 RESIGNATIONS OF OFFICERS AND DIRECTORS. Purchaser shall have
received the written resignations of all of the officers of the Company who are
not subject to an Employment Agreement whose expiry occurs after the Closing and
all of the members of the Board of Directors of the Company (effective as of the
Closing).
8.7 CONSENTS. All registrations, filings, applications, notices,
consents, orders, approvals, qualifications or waivers listed in Schedule 8.7
and indicated therein as being a condition to the Closing for Purchaser shall
have been filed, made or obtained and all waiting periods specified by law with
respect thereto shall have expired or been terminated.
8.8 LEASES. All landlord consents in connection with the change in
control of the Company contemplated by this Agreement shall have been obtained
by Purchaser.
8.9 SCHEDULES. There shall have been no material amendments or
modifications to any Schedule referred to in Articles IV or V hereof.
8.10 DOCUMENTS AT CLOSING. All documents required to be furnished by the
Company and/or the Stockholders to Purchaser prior to or at the Closing shall
have been so furnished.
8.11 FINANCING. Purchaser's procurement of satisfactory financing in
Purchaser's sole and absolute discretion.
ARTICLE IX
CLOSING
9.1 CLOSING OF SALE AND PURCHASE. Subject to the terms and conditions of
this Agreement, the Closing shall take place at 7083 Hollywood Boulevard, 2nd
Floor, Los Angeles, California 90028 on the Closing Date.
9.2 DELIVERIES BY THE STOCKHOLDERS. At the Closing, the Stockholders
shall deliver to Purchaser the following:
(a) certificates representing the shares of Stock being sold to
Purchaser pursuant to Section 2.1, duly endorsed in blank or with duly executed
stock powers attached;
(b) a certificate from each Stockholder dated as of the Closing Date
certifying to the fulfillment of the conditions as applicable to such
Stockholder specified in Sections 8.1, 8.2, 8.3, 8.4, 8.5 and 8.9; and
(c) such other documents as Purchaser may reasonably request.
9.3 DELIVERIES BY COMPANY. At the Closing, the Company shall deliver to
Purchaser the following:
(a) a certified copy of the resolutions adopted by the Board of
Directors of the Company authorizing the transactions contemplated by this
Agreement;
(b) the written resignations of all the members of the Board of
Directors of the Company (effective as of the Closing Date), as required by
Section 8.6;
(c) the written resignations of all of the officers of the Company
(effective as of the Closing Date), as required by Section 8.6;
(d) fully executed Noncompetition Agreements as required by Section 8.5;
(e) a certificate from the Company dated as of the Closing Date and
executed by the Company's President, in his capacity as such, certifying to the
fulfillment of the conditions specified in Sections 8.1, 8.2, 8.3, 8.4 and 9.9;
(f) an opinion of Greenberg Glusker Fields Claman Machtinger & Kinsella
LLP, counsel for the Company, dated as of the Closing Date, substantially to the
effect of Exhibit E;
(g) certificates of incumbency and specimen signatures of the signatory
officers of the Company;
(h) good standing certificate as of a date not more than five (5) days
prior to the Closing Date issued by the Secretary of State of California;
(i) the articles of incorporation, bylaws, minute books and stock books
of the Company and all other books and records reasonably requested by
Purchaser; and
(j) such other Documents as Purchaser may reasonably request.
9.4 DELIVERIES BY PURCHASER. At the Closing, Purchaser shall deliver the
following:
(a) $7,000,000 to the Stockholders in accordance with Section 2.2;
(b) to Company and the Stockholders, a certified copy of the resolutions
adopted by the Board of Directors of Purchaser authorizing the transactions
contemplated by this Agreement;
(c) a certificate from Purchaser dated as of the Closing Date and
executed by Purchaser's Chief Executive Officer, in his capacity as such,
certifying to the fulfillment of the conditions specified in Sections 7.1, 7.2
and 7.3;
(d) an opinion of Troy & Gould Professional Corporation, counsel for
Purchaser, dated as of the Closing Date, substantially to the effect of Exhibit
F;
(e) certificates of incumbency and specimen signatures of the signatory
officers of Purchaser;
(f) a guarantee by Purchaser of the Company's obligations under the
Lease indicated as Item 1 of Schedule 4.10; and
(g) such other Documents as the Company may reasonably request.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
10.1 SURVIVAL.
(a) Except as otherwise set forth in this Section 10.1, the
representations and warranties made in this Agreement or in any agreement,
certificate or other document executed on or prior to the Closing in connection
herewith (each an "Ancillary Document") shall survive through December 31, 2006
(the "Survival Date"), after which time such representations and warranties
shall terminate and shall be of no further force or effect.
(i) The representations and warranties set forth in Section 4.8
of this Agreement shall survive until the expiration of the applicable
tax statutes of limitation (including extensions) plus a period of sixty
(60) days (the "Tax Survival Date"), after which time such
representations and warranties shall terminate and shall be of no
further force or effect. The representations and warranties set forth in
Sections 5.1 and 5.2 shall survive the Closing, the Survival Date and
the Tax Survival Date indefinitely and the representations and
warranties set forth in Section 4.19 shall survive until February 28,
2012.
(ii) No investigation by Purchaser or on Purchaser's behalf
heretofore or hereafter conducted shall affect the representations,
warranties or covenants of Company or the Stockholders set forth in this
Agreement and in any Ancillary Document. No investigation by Company or
the Stockholders or on their behalf heretofore or hereafter conducted
shall affect the representations, warranties or covenants of Purchaser
set forth in this Agreement and in any Ancillary Document.
10.2 INDEMNIFICATION; LIMITATION OF LIABILITY.
(a) To the fullest extent permitted by law, Kenneth F. Holland shall
individually, and Kenneth F. Holland and Judith Anne Holland as Trustees of the
Holland Family Trust, shall jointly and severally defend, indemnify and hold
harmless Purchaser, the Company and all officers, directors and stockholders of
Purchaser and their successors and permitted assigns ("Purchaser Indemnified
Persons"), from and against any and all claims, losses, liabilities, taxes,
interest, fines, penalties, suits, actions, proceedings, demands, damages, costs
and expenses (including reasonable attorneys', accountants' and experts' fees
and court costs) of every kind and nature (collectively, "Losses") arising out
of or resulting from any breach by Company, Kenneth F. Holland, individually or
Kenneth F. Holland and Judith Anne Holland, as Trustees of the Holland Family
Trust, of any representation, warranty, agreement or covenant made by any of
them in this Agreement or any Ancillary Document. Each Stockholder shall
severally defend, indemnify and hold harmless Purchaser Indemnified Persons from
all Losses arising out of or resulting from any breach by such Stockholder of
any representation or warranty made by such Stockholder under Article V.
(b) In addition to subsection (a) above, until February 28, 2012,
Kenneth F. Holland, individually, and Kenneth F. Holland and Judith Anne Holland
as Trustees of the Holland Family Trust, shall jointly and severally indemnify
Purchaser Indemnified Persons from and against all Losses relating to any
violation of any Environmental Law with respect to conditions existing at any
time prior to the Closing Date or any claims for environmental clean up arising
out of conditions existing at anytime on or prior to the Closing Date, in each
case with respect to any property owned, leased or operated by the Company at
any time prior to the Closing Date.
(c) Notwithstanding anything contained in (a) or (b) hereof (i) except
with respect to Losses under Article V, Kenneth F. Holland, as an individual,
and Kenneth F. Holland and Judith Anne Holland as Trustees of the Holland Family
Trust, shall be liable for indemnification under this Article X, and Purchaser
shall be entitled to deliver a Claim Notice only when, and only with respect to
amounts by which, the aggregate of all Losses subject to such indemnification
exceeds $100,000, (ii) Kenneth F. Holland, individually or Kenneth F. Holland
and Judith Anne Holland as Trustees of the Holland Family Trust, shall not be
liable for an aggregate amount of all such Losses in excess of sixty percent
(60%) of the Purchase Price, and (iii) each of the Stockholders (other than
Kenneth F. Holland and Judith Anne Holland as Trustees of the Holland Family
Trust) shall not be liable for an amount of such Losses in excess of sixty
percent (60%) of his or her portion of the Purchased Price.
(d) Purchaser shall indemnify Kenneth F. Holland, individually, and
Kenneth F. Holland and Judith Anne Holland as Trustees of the Holland Family
Trust, from and against all Losses arising out of any violation of any
Environmental Law with respect to conditions arising at any time after the
Closing Date or any claims for environmental cleanup arising out of any
conditions arising at any time after the Closing Date and caused by the Company
or Purchaser, in each case with respect to any property, owned, leased or
operated by the Company at any time after the Closing Date.
(e) In the event Purchaser reasonably believes that it is entitled to be
indemnified pursuant to this Section 10, it may withhold from the Earn Out, an
amount equal to the loss for which Purchaser reasonably believes it should be
indemnified, and shall promptly notify the Stockholders of its decision to
withhold. If the Stockholders do not agree with such withholding, the
Stockholders shall promptly give written notice to Purchase of any exceptions
thereto. If the Stockholders and the Purchaser are unable to reconcile their
differences in writing within twenty (20) days after written notice of the
exceptions is delivered to the Purchaser, the issues in dispute shall be
submitted to arbitration in accordance with Section 12.17 hereof.
10.3 INDEMNIFICATION PROCEDURES. To Promptly after the incurrence of any
Loss or receipt by a Purchaser Indemnified Person under this Section of notice
of the commencement of any action, such Purchaser Indemnified Person will, if a
claim in respect of such action is to be made against any indemnifying party
under this Section, notify the indemnifying party in writing of the commencement
of such action. Such notice shall include the amount of such claim and a
reasonably detailed statement as to the basis for the assertion of the claim.
Upon receipt of such notice the indemnifying party or parties shall have the
right to assume and control the defense of such action with counsel of its
choice, subject to the approval of the Purchaser Indemnified Person, which
approval shall not be unreasonably withheld. The Purchaser Indemnified Person
shall have the right to participate in the defense of any action and to be
represented by counsel of its or their own selection in connection with such
action and to be kept fully and completely informed by the indemnifying party
and its counsel as to the status of the action at all stages of the proceedings
in such action, all at the indemnifying party's cost and expense. The Purchaser
Indemnified Person shall cooperate with the indemnifying party in any defense,
which the indemnifying party assumes. Purchaser shall be entitled to settle any
action solely for monetary damages with respect to which it controls the
defense. The Stockholders shall be entitled to settle any action solely for
monetary damages with respect to which they control the defense, subject to the
prior consent of Purchaser, which consent shall not be unreasonably withheld.
The failure to notify an indemnifying party promptly of the commencement of any
such action will not relieve him or her or it of any liability that he, she, or
it may have except to the extent the indemnifying party has suffered actual
prejudice thereby.
10.4 STOCKHOLDER LIABILITY. The liability of Kenneth F. Holland,
individually, and Kenneth F. Holland and Judith Anne Holland as Trustees of the
Holland Family Trust under this Article X shall be joint and several.
10.5 CLAIM NOTICE. Any claim for indemnification shall commence with the
delivery of Purchaser of a Claim Notice to the indemnifying party(ies) on or
prior to the Survival Date or the Tax Survival Date, as applicable, after which
date the obligation to indemnify shall terminate with respect to any claim
except those which were specifically identified in a Claim Notice prior to such
date.
10.6 CLAIMS RESOLUTION PROCEDURE. The parties shall act in good faith as
expeditiously as possible to resolve any and all claims for indemnification. To
the extent any claims are not so resolved by the parties, any party may initiate
the arbitration procedures set forth in Section 12.17 hereof.
10.7 REMEDIES. Purchaser's right to indemnification as provided in this
Article X for a breach of a representation, warranty or covenant contained in
this Agreement or any Ancillary Document shall constitute Purchaser's sole
remedy for such breach, except for injunctive relief where applicable, and
Stockholders shall have no other liability for such a breach.
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Purchase Agreement may be terminated at any time
before the Closing Date under any one or more of the following circumstances:
(a) by the mutual consent of the parties hereto;
(b) by the Company, if any event occurs which renders impossible
compliance with one or more of the conditions set forth in Article VII hereof,
which condition or conditions are not waived by the Company; provided that
neither the Company nor any Stockholder contributed to Purchaser's failure to
fulfill the conditions set forth in Article VII and the Company has notified
Purchaser of the occurrence of such event and Purchaser has not within thirty
(30) days after the delivery of such notice, complied with such condition;
(c) by Purchaser, if any event occurs which renders impossible
compliance with one or more of the conditions set forth in Article VIII hereof,
which condition or conditions are not waived by Purchaser; provided that
Purchaser did not contribute to either the Company's or any Stockholder's
failure to fulfill the conditions set forth in Article VIII and Purchaser has
notified the Company and the Stockholders of the occurrence of such event and
the Company and the Stockholders have not within thirty (30) days after the
delivery of such notice, complied with such condition.
(d) by the Company or Purchaser, by written notice of termination to the
other parties hereto, if the Closing has not occurred by June 30, 2004.
11.2 EFFECT OF TERMINATION. In the event this Agreement is terminated as
provided herein, the obligations of Purchaser, the Company and the Stockholders
as to confidentiality provided in Section 12.15 and the provisions of Section
12.4 relating to the payment of expenses, shall not be extinguished but shall
survive such termination. The parties hereto shall have any and all remedies to
enforce such obligations provided at law or in equity (including, without
limitation, specific performance) by and through an arbitration proceeding, and
nothing in this section shall terminate the ability of any party to maintain an
arbitration proceeding (in law or equity) against any other party for a willful
breach of this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 ADDITIONAL ACTIONS AND DOCUMENTS. Each of the parties hereto hereby
agrees to use reasonable efforts to take or cause to be taken such further
actions, to execute, deliver and file or cause to be executed, delivered and
filed such further Documents, and to obtain such consents, as may be necessary
or as may be reasonably requested in order to fully effectuate the purposes,
terms and conditions of this Agreement.
12.2 DISCLOSURE SCHEDULES. Any matter disclosed for any purpose in any
Schedule shall be deemed disclosed for any other purpose in such or any other
Schedule unless expressly provided otherwise herein.
12.3 NO BROKERS. The parties hereto represent and warrant to the other
parties (and to each of them) that such party has not engaged any broker, finder
or agent in connection with the transactions contemplated by this Agreement and
has not incurred (and will not incur) and unpaid liability to any broker, finder
or agent for any brokerage fees, finders' fees or commissions, with respect to
the transactions contemplated by this Agreement. Each party agrees to indemnify,
defend and hold harmless each of the other parties from and against any and all
claims asserted against such parties for any such fees or commissions by any
persons purporting to act or to have acted for or on behalf of the indemnifying
party.
12.4 EXPENSES. Purchaser and the Company (with respect to expenses
incurred by or on behalf of the Company or the Stockholders) shall each pay
their own expenses incident to this Agreement and the transactions contemplated
hereunder including all legal, accounting and investment banking fees and
disbursements.
12.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no party hereto will assign its rights or delegate its
obligations under this Agreement without the express prior written consent of
each other party hereto, except that Purchaser may assign its right, title and
interest under this Agreement to a wholly-owned subsidiary or affiliate;
provided, that in the event of such assignment, Purchaser shall not be released
from any obligations under this Agreement.
12.6 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the
Schedules, the Exhibits and other Documents referred to herein or furnished
pursuant hereto, constitutes the entire Agreement among the parties hereto with
respect to the transactions contemplated herein, and it supersedes all prior
oral or written agreements, commitments or understandings with respect to the
matters provided for herein. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing and duly
executed and delivered by the party against whom enforcement of the amendment,
modification, or discharge is sought.
12.7 WAIVER. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
Documents furnished in connection with or pursuant to this Agreement shall
impair any such right, power or privilege or be construed as a waiver of any
default or any acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of such right,
power or privilege, or the exercise of any right, power or privilege. No waiver
shall be valid against any party hereto unless made in writing and signed by the
party against whom enforcement of such waiver is sought and then only to the
extent expressly specified therein.
12.8 SEVERABILITY. If any part of any provision of this Agreement or any
other Agreement or document given pursuant to or in connection with this
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Agreement.
12.9 GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of California
(excluding the choice of law rules thereof).
12.10 NOTICE. Any notice required to be given hereunder shall be in
writing and shall be deemed delivered (i) upon delivery if sent by facsimile
transmission (confirmed by any of the methods that follow), (ii) upon delivery
if sent by overnight courier service (with proof of service) or hand delivery
and (iii) three (3) days after mailing by certified or registered mail (return
receipt requested and first-class postage prepaid) and addressed as follows:
If to Company:
International Video Conversions, Inc.
2777 Ontario Street
Burbank, CA 91504
Attn: President
Fax: (818) 569-3734
If to Stockholders or to Kenneth F. Holland,
individually or to Kenneth F. Holland and
Judith Anne Holland, as Trustees of the Holland Family Trust:
c/o Kenneth F. Holland
Tel.: 26301 Ravenhill Road
Santa Clarita, CA 91387
Fax: (661) 298-7210
If to Purchaser:
Point.360
P.O. Box 1830
Hollywood, CA 90028
Attn: President
Fax: (323) 957-2297
Attn: President
or to such other address as any party shall specify by written notice so given.
12.11 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. For purposes of this Agreement, the words "includes" and
"including" shall mean "including without limitation." All accounting terms not
defined in this Agreement shall have the meaning determined by generally
accepted accounting principles. All capitalized terms defined herein are equally
applicable to both the singular and plural forms.
12.12 LIMITATION ON BENEFITS. The covenants, undertakings and agreements
set forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto and their respective successors, heirs,
executors, administrators, legal representatives and permitted assigns, except
that the agreements set forth in Article X shall be for the benefit of, and
enforceable by, Purchaser Indemnified Persons and their respective successors,
heirs, executors, administrators, legal representatives or permitted assigns.
12.13 BINDING EFFECT. Subject to any provisions hereof restricting
assignment, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
12.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.15 CONFIDENTIALITY. Except as provided below, each party hereto
agrees that, except with the prior written permission of the other party (ies),
it shall at all times keep confidential and not divulge, furnish or make
accessible to anyone any confidential information, knowledge or data concerning
or relating to the business or financial affairs of the other party to which
such party has been or shall become privy by reason of the Agreement,
discussions or negotiations relating to the Agreement, the performance of its
obligations thereunder or the ownership of Stock purchased hereunder. The
provisions of this Section 12.14 shall be in addition to, and not in
substitution for, the provisions of any separate nondisclosure agreement
executed by the parties hereto with respect to the transactions contemplated by
the Agreement. Notwithstanding the foregoing, nothing herein shall prevent any
party from disclosing (i) such information that has been publicly disclosed,
(ii) such information that becomes available to the party on a non-confidential
basis from a source other than the other party hereto, provided that such source
is not bound by a confidentiality agreement with such other party, (iii)
information required to be disclosed pursuant to subpoena or other court process
or otherwise required to be disclosed by law or the regulations of any
securities exchange (provided that, to the extent practicable, advance notice is
given to the party whose confidential information is to be disclosed so that
such party can attempt to obtain a protective order) and (iv) such information
that was known to the party prior to its first receipt from the other party.
12.16 INCORPORATION. The Schedules and Exhibits hereto and referred to
in this Agreement are hereby incorporated and made a part hereof by this
reference for all purposes as if fully set forth in this Agreement.
12.17 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement or the Ancillary Documents, their enforcement or
interpretation, or because of an alleged breach, default or misrepresentation in
connection with any of their provisions, shall be determined by binding
arbitration. The arbitration proceedings shall be held and conducted by a single
arbitrator in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA Rules"). Such arbitration shall occur in Los
Angeles, California, and be initiated by any party in accordance with the AAA
Rules. The demand for arbitration shall be made by any party hereto within a
reasonable time after the claim, dispute or other matter in question has arisen,
and in any event shall not be made after the date when institution of legal
proceeding, based on such claim, dispute or other matter in question, would be
barred by the applicable statute of limitations. The party requesting the
arbitration shall promptly notify the arbitrator in writing of his selection,
who shall then hold a hearing(s) within sixty (60) days of the arbitrator's
receipt of the notice. Reasonable discovery, including depositions, shall be
permitted. Discovery issues shall be decided by the arbitrator. Post-hearing
briefs shall be permitted. The arbitrator shall render a decision within twenty
(20) days after the conclusion of the hearing(s). In reaching a decision, the
arbitrator shall have no authority to change, extend, modify or suspend any of
the terms of this Agreement, or to grant an award or remedy any greater than
that which would be available from a court under the statutory or common law
theory asserted. The arbitrator shall issue a written opinion that includes the
factual and legal basis for any decision and award. The arbitrator shall apply
the substantive law (and the law of remedies, if applicable) of California or
federal law, or any of them, as applicable to the claim(s) asserted. Judgment on
the award may be entered in any court of competent jurisdiction. The parties may
seek, from a court of competent jurisdiction, provisional remedies or injunctive
relief in support of their respective rights and remedies hereunder without
waiving any right to arbitration. However, the merits of any action that
involves such provisional remedies or injunctive relief, including, without
limitation, the terms of any permanent injunction, shall be determined by
arbitration under this paragraph. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The
arbitrator shall allocate all costs and expenses of the arbitration (including
legal and accounting fees and expenses of the respective parties) to the parties
in the proportions that reflect their relative success on the merits (including
the successful assertion of any defenses).
12.18 STOCKHOLDER APPROVAL. Each Stockholder, by execution of this
Agreement, acknowledges and agrees that such Stockholder has voted in favor of
the approval and adoption of this Agreement and the transactions contemplated
hereby. By execution of this Agreement, each Stockholder and the Company
acknowledge and agree that (i) every outstanding Stock Repurchase Agreement
between the Company and any Stockholder, including without limitation, those set
forth on Schedule 4.4 hereof, shall be terminated as of the Closing and any and
all Company obligations under such Purchase Agreements, if any, shall be
extinguished as of such termination and (ii) all rights conferred by Section 8
of the Company's By-laws are hereby waived. Each Stockholder also by execution
of this Agreement constitutes Kenneth F. Holland as his or her attorney in fact
to sign all documents (other than employment agreements and noncompetition
agreements) and to accept or waive all deliveries on behalf of each Stockholder.
[Signatures on Following Page]
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed.
"COMPANY"
INTERNATIONAL VIDEO CONVERSIONS, INC.,
a California corporation
By:
-----------------------------------
Name:
-----------------------------------
Title:
----------------------------------
"PURCHASER"
POINT.360,
a California corporation
By:
-----------------------------------
Name:
-----------------------------------
Title:
----------------------------------
KENNETH F. HOLLAND
----------------------------------------
Kenneth F. Holland
"STOCKHOLDERS"
COMMON CLASS "A" (Voting)
Kenneth F. Holland and Judith Anne
Holland, as Trustees of the Holland
Family Trust dated October 28, 1993,
as amended in its entirety March 9, 1995
By:
----------------------------------
Kenneth F. Holland, Trustee
And By:
----------------------------------
Judith Anne Holland, Trustee
COMMON CLASS "B" (Non-Voting)
----------------------------------------
Revis S. Call
----------------------------------------
Debra G. Dwinell
----------------------------------------
Brent A. Eldridge
----------------------------------------
Kristin Garner
----------------------------------------
Robert J. Garner
----------------------------------------
Robert Holland
----------------------------------------
William Infuso
----------------------------------------
Michael S. Kelfer
----------------------------------------
Richard Millais
----------------------------------------
Mark S. Nakamine
Kenneth F. Holland and Judith Anne
Holland, as Trustees of the Holland
Family Trust dated October 28, 1993,
as amended
By:
----------------------------------
Kenneth F. Holland, Trustee
And By:
----------------------------------
Judith Anne Holland, Trustee
PREFERRED CLASS "A" (Non-Voting)
Kenneth F. Holland and Judith Anne
Holland, as Trustees of the Holland
Family Trust dated October 28, 1993,
as amended
By:
----------------------------------
Kenneth F. Holland, Trustee
And By:
----------------------------------
Judith Anne Holland, Trustee
----------------------------------------
Robert Holland
----------------------------------------
Kristin Holland
EXHIBIT A
STOCKHOLDERS
ALLOCATION OF ALLOCATION OF
NAME NO. OF SHARES DOWN PAYMENT EARNOUT*
- ----------------------------------------------------- -------------- --------------- -------------
COMMON CLASS "A" (VOTING)
Kenneth F. Holland and Judith Anne Holland,
Trustees of the Holland Family Trust dated
October 28, 1993, as amended in its entirety
March 9, 1995 1,000 583 417
COMMON CLASS "B" (NON-VOTING)
Call, Revis S. 300,000 $175,020 $124,980
Dwinell, Debra G. 50,000 29,170 20,830
Eldridge, Brent A. 100,000 58,340 41,660
Garner, Kristin 150,000 87,510 62,490
Garner, Robert J. 150,000 87,510 62,490
Holland, Robert 150,000 87,510 62,490
Infuso, William 250,000 145,850 104,150
Kelfer, Michael S. 300,000 175,020 124,980
Millais, Richard 100,000 58,340 41,660
Nakamine, Mark S. 100,000 58,340 41,660
Kenneth F. Holland and Judith Anne Holland,
Trustees of the Holland Family Trust dated
October 28, 1993, as amended 1,750,500 1,021,242 729,258
-------------- --------------- ------------
3,400,500 1,983,852 1,416,648
PREFERRED CLASS "A" (NON-VOTING)
Kenneth F. Holland and Judith Anne Holland,
Trustees of the Holland Family Trust dated
October 28, 1993, as amended, in its entirety
March 9, 1995 13,334,875 5,000,518 3,572,186
Robert Holland 20,063 7,524 5,374
Kristin Holland 20,062 7,523 5,375
-------------- --------------- -------------
13,375,000 5,015,565 3,582,935
*The allocation of the earnout to the Common Class "B" Non-Voting shares is
based upon the maximum earnout of $5,000,000. Accordingly, 28.333 cents out
of each $1.00 of earnout is allocated to the aggregate holdings of the Common
"B" Non-Voting shares. Such allocated amount is then payable to each such
holder based upon the proportion of such holder's shares to the total number
of such shares. By way of example, if $1,000,000 were paid in 2005 for the
Short Period, Mr. Call would receive $24,996 ($1,000,000 times .28333 times
300,000 divided by 3,400,500) and Mr. Holland, as Trustee, would receive
$145,851 for his Common "B" Non-Voting shares. Mr. Holland, as Trustee, would
receive .0083 cents out of each $1.00 of earnout for the Common Class "A"
Voting shares. The balance of each earnout payment would be payable to the
holder of the Preferred Class "A" Non-Voting shares, proportionate to the
holdings of each such holder.
EXHIBIT B
DEFINITIONS
"Affiliate" means: (a) with respect to a person, any member of such
person's family; (b) with respect to an entity, any officer, director,
stockholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a person or entity, any person or entity
which directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such person or entity.
"Agreement" means any concurrence of understanding and intention between
two or more persons (or entities) with respect to their relative rights and/or
obligations or with respect to a thing done or to be done (whether or not
conditional, executory, express, implied, in writing or meeting the requirements
of contract), including without limitation, contracts, leases, promissory notes,
covenants, easements, rights of way, covenants, commitments, arrangements,
arrangements and understandings.
"Assets" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"Closing" means the closing of the sale and purchase of shares of Stock
pursuant to the Agreement.
"Closing Date" means July 1, 2004 or such other date agreed to by the
parties hereto.
"Code" means the Internal Revenue Code of 1986, as amended, and all Laws
promulgated pursuant thereto or in connection therewith.
"Company" is defined in the preamble to this Agreement.
"Company Tax Returns" means all federal, state, local, foreign and other
applicable tax returns, declarations of estimated tax reports required to be
filed by the Company (without regard to extensions of time permitted by law or
otherwise).
"Control" means possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
voting securities, by Agreement or otherwise).
"Defined Benefit Plan" means a Plan that is or was a "defined benefit
plan" as such term is defined in Section 1002(35) of ERISA.
"Documents" means any paper or other material (including, without
limitation, computer storage media) on which is recorded (by letters, numbers or
other marks) information including, without limitation, legal opinions,
mortgages, indentures, notes, instruments, leases, Agreements, insurance
policies, reports, studies, financial statements (including, without limitation,
the notes thereto), other written financial information, schedules,
certificates, charts, maps, plans, photographs, letters, memoranda and all
similar materials.
"DOL" means the Department of Labor or its successors.
"EBITDA" means earnings before interest, income taxes, depreciation and
amortization determined in accordance with generally accepted accounting
principles, subject to the modifications and limitations set forth at Section
3.7.
"Encumbrance" means any mortgage, lien, pledge, encumbrance, security
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Agreement, claim or equity of any
kind.
"Environmental Laws" is defined at Section 4.19(c).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"ESOP" means an "employee stock ownership plan" as such term is defined
in ERISA.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exhibit" means an exhibit attached to the Agreement.
"Hazardous Materials" is defined at Section 4.19(c).
"Holland Family Trust" means the Holland Family Trust dated October 28,
1993, as amended in its entirety March 9, 1995.
"Individual Account Plan" means a Plan that is or was an "individual
account plan" as such term is defined in ERISA.
"Intellectual Property" means all franchises, patents, patent
qualifications, trademarks, service marks, trade names, trade styles, brands,
private labels, copyrights, know-how, industrial designs and drawings and
general intangibles of a like nature, trade secrets, licenses, and rights and
filings with respect to the foregoing, and all reissues, extensions and renewals
thereof.
"Inventory" means all new materials, work in process and finished goods
and inventoriable supplies.
"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, determinations, writs,
injunctions, awards (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified persons or entities and to the
businesses and Assets thereof.
"Material Agreement" is defined in Section 4.15.
"Minimum-Funding Plan" means a Pension Plan that is subject to
"Multiemployer Plan" means a "multiemployer plan" as such term is
defined in ERISA.
"Other Arrangement" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan.
"Ordinary Course of Business" means ordinary course of business
consistent with past practices.
"Pension Plan" means an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA.
"Permitted Encumbrances" means (i) liens for current state and local
property taxes or assessments not yet due or delinquent or which are being
contested in good faith; and (ii) mechanics', carriers' workers' repairers' and
other similar liens arising or incurred in the Ordinary Course of Business
relating to obligations as to which there is no default on the part of the
Company.
"Plan" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by the Company;
(b) to which the Company contributed or was obligated to contribute or to fund
or provide benefits; or (c) which provides or promises benefits to any person
who performs or who has performed services for the Company and because of those
services is or has been (i) a participant therein or (ii) entitled to benefits
thereunder.
"Proposal" means any proposal, offer or indication of interest from any
person, entity or group relating to any acquisition or purchase of all or (other
than in the Ordinary Course of Business) any portion of the assets of, or any
equity in, the Company or any business combination with the Company, other than
the transactions contemplated by the Agreement.
"Purchase Price" means the purchase price for the shares of Stock to be
sold and purchased pursuant to the Agreement.
"Purchaser" means Point.360, a California corporation.
"Purchaser Indemnified Persons" means Purchaser and its Affiliates,
employees, representatives, agents, officers and directors.
"Qualified Plan" means a Pension Plan that satisfies, or is intended by
Company to satisfy, the requirements for tax qualification described in Section
401 of the Code.
"Section" means a Section (or a subsection) of the Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholders" means the stockholders of the Company identified on
Exhibit A attached to the Agreement.
"Subsidiary" means a corporation or other entity of which at least 50%
of the outstanding securities or other interests having right to vote or
otherwise exercise Control are held, directly or indirectly, by the Company.
"Taxes" means all federal, state, local and foreign taxes (including,
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or description
imposed by any governmental or quasi-governmental authorities, and any interest,
penalties or additions to tax imposed thereon or in connection therewith.
"Title I Plan" means a Plan that is subject to Title I of ERISA.
"Welfare Plan" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
EXHIBIT C
KENNETH HOLLAND EMPLOYMENT AGREEMENT
1. IDENTIFICATION.
This Agreement (the "Agreement"), dated for identification purposes only
June 23, 2004, is entered into by and between International Video Conversions,
Inc., a California corporation ("Company"), and Kenneth F. Holland
("Executive").
2. RECITALS.
2.1 The execution of this Agreement is a condition of closing under a
certain Stock Purchase Agreement dated as of June 23, 2004 (the "Purchase
Agreement") pursuant to which Point.360, a California corporation, is acquiring
all of the issued and outstanding capital stock of the Company.
2.2 Executive was employed as Chief Executive Officer of the Company and
was a principal stockholder of the Company.
2.3 Company desires to employ Executive, and Executive is willing to
undertake such employment on the terms and conditions set forth in this
Agreement.
3. EMPLOYMENT, DUTIES AND COVENANTS.
3.1 Employment. Company hereby employs Executive, and Executive hereby
accepts employment, as Chief Executive Officer of the Company.
3.2 Duties. The powers, duties and responsibilities to be held or
performed by Executive hereunder shall be such as inhere in the position of
Chief Executive Officer, and such other powers, duties and responsibilities as
may be delegated or assigned to Executive by the Board of Directors (the
"Board") of the Company; provided, however, that such other powers, duties and
responsibilities shall be consistent with Executive's position, experience and
level of compensation; and, provided further, subject to the approval of the
Board of Directors consistent with Section 3.7 of the Purchase Agreement, the
Executive shall have the power and authority to cause the business of the
Company to be operated in conformity with the provisions of Section 3.7 of the
Purchase Agreement.
3.3 Performance of Duties. Executive shall discharge the duties
described herein in a diligent and professional manner. Executive shall render
services incidental to his position, during normal business hours, primarily at
Company's place or places of business in Los Angeles County.
3.4 Extent of Services. Executive shall devote approximately one-half of
his productive time and not less than 20 hours per week to the performance of
his duties as set forth above. Executive agrees not to perform services or to
engage in activities of any kind that could reasonably be expected to interfere
with Executive's services hereunder or be detrimental to the Company unless
specifically authorized in advance to do so by the Board of Directors of the
Company. Executive shall not, directly or indirectly, at any time during the
Term, render services to any other person, firm or entity engaged in competition
with the Company.
3.5 Reporting. Executive shall report to the Board or, if the Board so
directs, to the Chief Executive Officer of Point.360.
4. TERM AND TERMINATION.
4.1 Term of Employment. Executive's employment under this Agreement
shall commence on the date of Closing under the Purchase Agreement and extend
through the close of business on December 31, 2006 (the "Term"). Thereafter,
Executive's employment shall be at will. Executive shall have the right to
terminate Executive's employment under this Agreement upon ninety days written
notice to the Company.
4.2 Termination for Cause.
4.2(a) Company may terminate Executive's employment at any time for
"Cause." Any termination of Executive's employment hereunder shall be deemed to
be for Cause if:
4.2(a)(i) Executive has materially breached a provision of this
Agreement;
4.2(a)(ii) Executive has failed to substantially perform services in
keeping with applicable professional standards.
4.2(a)(iii) Executive has materially violated Company written policies.
4.2(a)(iv) Executive has failed to comply with reasonable directions of
the Company's Board of Directors consistent with the provisions of Section 3
hereof.
4.2(a)(v) Executive has committed any act constituting fraud or
dishonesty relating to the business of the Company or the Executive's services.
4.2(a)(vi) Executive is convicted of or pleads guilty to a felony or
misdemeanor charge involving financial misconduct or moral turpitude.
With respect to (i), (ii), (iii) and (iv) above, in the event that a
cure of any such breach or failure is possible, Executive shall have ten (10)
days after written notice from the Company to cure.
4.3 Death. In the event of Executive's death during the Term,
Executive's employment with Company shall terminate.
4.4 Disability. For purposes of this Agreement, Executive shall be
deemed to be subject to a "Disability" only if, because of a physical or mental
disability, Executive becomes unable to perform the essential functions of his
job for a period of sixty (60) consecutive days or ninety (90) days in any
calendar year. In the event of such Disability, Company shall have the right to
terminate Executive's employment.
4.5 Legal Obligations Following Termination.
4.5(a) If Executive's employment hereunder is terminated as provided
hereunder, Company shall be liable to pay Executive only the following amounts:
(i) Executive's salary through and including the "Effective Date of
Termination," which for purposes of this Agreement shall be the last day on
which Executive performed full-time services pursuant to the terms of this
Agreement or, if termination is by reason of Disability, the date of notice of
termination, less the amount of any sums owed by Executive to Company and which
are unpaid on the Effective Date of Termination; and (ii) Executive's salary for
the pro rata portion of any vacation to which he was entitled but which he has
not taken.
4.5(b) The termination of this Agreement and Executive's employment
hereunder shall not relieve either party from any liability or damage directly
or indirectly arising out of any breach of or default under this Agreement or
any failure to comply with or perform any obligations under this Agreement.
5. COMPENSATION AND OTHER BENEFITS.
5.1 Salary. As compensation for services rendered by Executive to
Company, Company shall pay Executive salary in the amount of [Twelve Thousand
Five Hundred Dollars ($12,500) per month]. The salary shall be payable in
accordance with Company's regular payroll practices.
5.2 Employment Taxes. All compensation shall be subject to the customary
withholding tax and other employment taxes as required with respect to
compensation paid by a corporation to an employee.
5.3 Expenses. Company shall reimburse Executive for ordinary and
necessary business expenses incurred by Executive in the performance of his
duties hereunder if such expenses have previously been approved by Company or if
reimbursement is otherwise appropriate in accordance with Company's established
policies and if Company receives such reasonable verification thereof as Company
may require.
5.4 Other Benefits. Executive shall receive such health insurance,
pension plan, holiday, vacation and sick pay benefits which Company extends, as
a matter of policy, to its executive employees. Specifically, Executive shall be
entitled to a three-week vacation each year.
6. CONFIDENTIALITY.
6.1 "Confidential Information." "Confidential Information" means all
information of a business, professional or technical nature relating to
Company's business or operations, information which is not generally known
outside of Company or information entrusted to Company by third parties, and
includes information known to Executive as confidential or secret or which
Executive shall have reason to know or reasonably should know is confidential or
secret, in each case to the extent that such information derives independent
economic value from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from this disclosure or use and is the subject of efforts reasonable under the
circumstances to maintain its secrecy. This information may relate, for example,
to trade secrets, customers' names and requirements, business methods, business
or marketing plans, personnel information, credit information, financial
information, the names and locations of vendors and suppliers, equipment design,
research, development, engineering, manufacturing, purchasing, accounting,
selling, or marketing. This information may be contained in materials such as
books, records, files, notes, lists, computer programs, computer printouts, data
input to computers, drawings, documents, data, reports, customer, price and
supplier lists, specifications, or other miscellaneous embodiments or may be in
the nature of, or consist of, unwritten knowledge, techniques, formulas,
processes, practices or know-how.
6.2 No Use or Disclosure. Without Company's prior written authorization,
Executive shall not communicate, use, divulge, or disclose to any other person,
firm or entity any Confidential Information or any copy, reproduction or summary
thereof, in any manner, at any time, whether during the Term or after
Executive's employment with Company has terminated, other than as expressly
required by Company in Executive's work for Company.
6.3 Non-Competition. During the Term hereof and for two years
thereafter, Executive shall not, directly or indirectly, be involved in any
capacity, or make any loan or investment in, or otherwise assist any person or
entity that competes in any way with any business presently being conducted by
the Company in any county in the State of California in which the Company
conducts business or performs services.
7. GENERAL PROVISIONS.
7.1 Assignment. Executive may not assign, transfer, pledge or
hypothecate this Agreement or any rights or benefits hereunder without the prior
written consent of Company. Company may assign this Agreement only to a person,
firm, or corporation, which may succeed to its business by merger, purchase of
stock or assets, or otherwise; provided, however, that in the event of such
assignment, Executive may terminate this Agreement. Subject to the foregoing,
this Agreement and all of the terms and conditions hereof shall benefit and bind
Company and its successors and assigns and shall benefit and bind Executive and
its successors.
7.2 Integration. This Agreement embodies the entire understanding of the
parties with respect to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations, or understandings,
written or oral, between the parties. This Agreement may be amended or modified
only by a written agreement, signed by the parties hereto.
7.3 Notices.
7.3(a) All notices, payments, statements, demands or other
communications given under this Agreement (collectively "Communications") shall
be in writing. They shall be served either personally, by certified mail or
facsimile. If served personally, service conclusively shall be deemed made at
the time of service. If served by mail, service shall be deemed made when
actually received. If served by facsimile, service conclusively shall be deemed
made at the time of the electronic confirmation on the sender's equipment of
receipt at the recipient's facsimile number. All Communications shall be
addressed to the parties as follows:
If to Company: International Video Conversions, Inc.
2777 Ontario Street
Burbank, CA 91504
Facsimile: (818) 569-3734
Attention: Alan Steel, Director of the Company
If to Executive: Kenneth F. Holland
26301 Ravenhill Road
Santa Clarita, CA 91387
Facsimile: (661) 298-7210
7.3(b) Either party may change its address for purposes of this Section
10.5 by notifying the other party of its new address in the manner set forth in
this Section 10.5.
7.4 Attorneys' Fees. Subject to Section 7.6, If either party hereto
shall bring any action, suit or proceeding against the other party arising out
of or relating to this Agreement, the validity hereof, or any of the terms or
provisions thereof, the prevailing party in such action or proceeding shall be
entitled to recover from the losing party all reasonable costs and expenses
incurred in such action, suit or proceeding, including any attorneys' fees and
court costs incurred in connection therewith, in such amount as may be
determined by the court having jurisdiction of such action.
7.5 Governing Law; Severability. This Agreement is made under and shall
be construed in accordance with the substantive laws of the state of California,
without giving effect to principles relating to conflicts of law. Nothing in
this Agreement shall be construed to require the commission of any act contrary
to law, and wherever there is any conflict between any provision of this
Agreement and any present or future statute, law, ordinance or regulation
contrary to which the parties have no legal right to contract, the latter shall
prevail, but in such event the provision of this Agreement so affected shall be
curtailed and limited only to the extent necessary to bring it within the
requirement of the law. If any provision of this Agreement, or portion thereof,
shall be held invalid or unenforceable by a court of competent jurisdiction,
such invalidity or unenforceability shall attach only to such provision or
portion thereof, and shall not in any manner affect or render invalid or
unenforceable any other provision of this Agreement or portion thereof, and this
Agreement shall be carried out as if any such invalid or unenforceable provision
or portion thereof were not contained herein. In addition, any such invalid or
unenforceable provision or portion thereof shall be deemed, without further
action on the part of the parties hereto, modified, amended or limited to the
extent necessary to render the same valid and enforceable.
7.6 Arbitration. Any controversy, claim or dispute arising out of or in
any way relating to this Agreement, the alleged breach thereof, and/or
Executive's employment with the Company or termination therefrom, including
without limitation, any and all claims for employment discrimination or
harassment, shall be determined by binding arbitration administered by the
American Arbitration Association under its National Rules for Resolution of
Employment Disputes ("Rules") which are in effect at the time of the arbitration
or the demand therefor. The Rules are hereby incorporated by reference.
California Code of Civil Procedure ss.1283.05, which provides for certain
discovery rights, shall apply to any such arbitration, and said code section is
also hereby incorporated by reference. In reaching a decision, the arbitrator
shall have no authority to change, extend, modify or suspend any of the terms of
this Agreement. The arbitration shall be commenced and heard in Los Angeles
County, California. The arbitrator(s) shall apply the substantive law (and the
law of remedies, if applicable) of California or federal law, or both, as
applicable to the claim(s) asserted. Judgment on the award may be entered in any
court of competent jurisdiction, even if a party who received notice under the
Rules fails to appear at the arbitration hearing(s). The parties may seek, from
a court of competent jurisdiction, provisional remedies or injunctive relief in
support of their respective rights and remedies hereunder without waiving any
right to arbitration. However, the merits of any action that involves such
provisional remedies or injunctive relief, including, without limitation, the
terms of any permanent injunction, shall be determined by arbitration under this
paragraph.
7.7 Waiver. A waiver of any of the terms and conditions hereof shall not
constitute a waiver of any other term or condition hereof, nor shall it
constitute a waiver of any future breach of any term, condition or provision of
this Agreement.
7.8 Headings. The Article and Section headings used herein are for
convenience only and are not a part of this Agreement.
7.9 Counterparts. This instrument may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and at the place indicated opposite their respective signatures
below.
"COMPANY"
INTERNATIONAL VIDEO CONVERSIONS,
INC., a California corporation
By:
----------------------------------
Name: Kenneth F. Holland
Title: President
"EXECUTIVE"
- --------------------------
Kenneth F. Holland
EXHIBIT D
KENNETH HOLLAND NONCOMPETITION AGREEMENT
THIS AGREEMENT, effective as of July 1, 2004, is by and between
Point.360, a California corporation ("Purchaser"), and Kenneth Holland as an
individual and Kenneth Holland and Judith Anne Holland, as trustees of the
Holland Family Trust dated October 28, 1993, as amended (collectively
"Stockholder").
WHEREAS, Stockholder is a shareholder of International Video
Conversions, Inc., a California corporation (the "Company"); and
WHEREAS, Stockholder has entered into a certain Stock Purchase Agreement
dated as of June 23, 2004 (the "Purchase Agreement") pursuant to which Purchaser
is acquiring all of the issued and outstanding capital stock of the Company
including all of the shares of capital stock owned by Stockholder; and
WHEREAS, the Purchase Agreement is, in substance, an agreement providing
for the sale and transfer of goodwill of the Company; and
WHEREAS, the execution of this Agreement is a condition to the
consummation of the transaction contemplated by the Purchase Agreement; and
WHEREAS, Stockholder has, or may have, developed substantial expertise
and experience in the business conducted by the Company and has, or may have,
access to proprietary and confidential business and technical information
relating to the business of the Company; and
WHEREAS, Purchaser desires to secure from Stockholder an agreement not
to compete with the Company, not to solicit employees and customers and not to
disclose certain information belonging to the Company;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein, and for other good and valuable consideration the receipt of which is
hereby acknowledged, and intending to be legally bound, the parties agree as
follows:
A G R E E M E N T
1. NONCOMPETITION. Stockholder agrees that he shall not:
(a) During the period commencing on the date hereof, and ending on
December 31, 2009 (the "Non-Compete Period"), within any county or state in
which the Company transacts business, (i) carry on (whether for his own account
or for the account of any other person or entity), or render services (whether
or not for compensation), to any person or entity who or which is directly or
indirectly engaged in any type of business that is competitive with the business
as presently conducted by the Company (a "Competing Business"); or (ii) share in
the earnings of, or beneficially own or hold any security issued by, or
otherwise own or hold any interest in, any person who or which is directly or
indirectly engaged in a Competing Business in any county within the State of
California or any state in which the Company transacts business. Without
limiting the generality of the foregoing, Stockholder shall be deemed to be
engaged in a particular business if he is an owner, proprietor, partner,
stockholder, officer, employee, independent contractor, director or joint
venturer of, or a consultant or lender to, or an investor in any manner in, in
any such business (including any investment in such business through his spouse
or children ). Notwithstanding the foregoing, nothing herein shall prohibit
Stockholder, from (i) leasing or providing real property to a Competing
Business; (ii) working for a major motion picture company other than in the
post-production unit of such company; or (iii) making or holding investments in
companies whose stock is publicly traded on any national securities exchange or
over-the-counter market; provided that: (a) such investment does not give
Stockholder the right to control or influence the policy decisions of any
Competing Business and (b) such investment represents an aggregate ownership
interest of less than 5% of any such Competing Business;
(b) During the Non-Compete Period, except as permitted in (a) above,
communicate with any customers, employees or suppliers of the Company regarding
the Company or its business without the Company's prior approval, or directly or
indirectly consult with or render services to any party who is known by
Stockholder to be a former or present customer of the Company regarding the
Company or its business; or
(c) During the Non-Compete Period, directly or indirectly, solicit the
employment or services of, or cause or attempt to cause to leave the employment
or services of the Company any person who or which is employed by, or otherwise
engaged to perform services for the Company.
2. SEVERABLE COVENANTS. The parties acknowledge that the covenants
contained in Section 1 hereof are reasonable in geographical and temporal scope
and in all other respects. The parties hereto intend that the covenants set
forth in Section 1 hereof shall be construed as a series of separate covenants.
It is the desire and intent of the parties hereto that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought. If
any particular provision or portion of this Agreement shall be adjudicated to be
invalid or unenforceable, such adjudication shall apply only with respect to the
operation of this Agreement in the particular jurisdiction in which such
adjudication is made.
3. INJUNCTIVE RELIEF. Stockholder hereby acknowledges and agrees that
any breach of or default under this Agreement will cause damage to Purchaser in
an amount difficult to ascertain. Accordingly, in addition to any other relief
to which Purchaser may be entitled, Purchaser shall be entitled, without proof
of actual damages, to such injunctive relief as may be ordered by any court of
competent jurisdiction.
4. NOTICES. All notices, requests, and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given: when received, if delivered personally or by
fax, or five business days after such notice, request, demand claim or other
communication is sent, if sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Purchaser, addressed to:
Point.360
P.O. Box 1830
Hollywood, CA 90028
Attention: President
Fax: (323) 957-2297
If to Stockholder, addressed to:
Kenneth Holland
26301 Ravenhill Road
Santa Clarita, CA 91387
Fax: (661) 298-7210
Either party may change the address to which notices, requests, and other
communications which are required or may be given under this Agreement are to be
delivered by giving the other party or parties notice in the manner set forth
above.
5. GOVERNING LAW. The terms and provisions of this Agreement shall be
construed in accordance with, and governed by, the internal laws of the State of
California without regard to principles of conflict of laws thereof.
6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7. AMENDMENTS; WAIVERS. This Agreement may be amended only by an
agreement in writing of each party. No waiver of any provision nor consent to
any exception to the terms of this Agreement shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
8. ATTORNEY'S FEES. If either party hereto brings an action or
proceeding hereunder to enforce the terms hereof, the prevailing party shall be
entitled to recover from the other party all of such prevailing party's
attorneys' fees, costs and expenses incurred in such action or proceeding.
IN WITNESS WHEREOF, each of the parties hereto has or has caused this
Noncompetition Agreement to be executed as of the day and year first above
written.
PURCHASER
STOCKHOLDER POINT.360
By:
- ------------------------------ ------------------------------
Kenneth Holland, individually Haig S. Bagerdjian,
Chairman of the Board
Kenneth Holland and Judith Anne Holland
of the Holland Family Trust
By:
------------------------------
Kenneth Holland
By:
------------------------------
Judith Anne Holland
EXHIBIT D-1
NONCOMPETITION AGREEMENT
THIS AGREEMENT, effective as of July 1, 2004, is by and between
Point.360, a California corporation ("Purchaser"), and William Infuso
("Stockholder").
WHEREAS, Stockholder is a shareholder of International Video
Conversions, Inc., a California corporation (the "Company"); and
WHEREAS, Stockholder has entered into a certain Stock Purchase Agreement
dated as of June 23, 2004 (the "Purchase Agreement") pursuant to which Purchaser
is acquiring all of the issued and outstanding capital stock of the Company
including all of the shares of capital stock owned by Stockholder; and
WHEREAS, the Purchase Agreement is, in substance, an agreement providing
for the sale and transfer of goodwill of the Company; and
WHEREAS, the execution of this Agreement is a condition to the
consummation of the transaction contemplated by the Purchase Agreement; and
WHEREAS, Stockholder has, or may have, developed substantial expertise
and experience in the business conducted by the Company and has, or may have,
access to proprietary and confidential business and technical information
relating to the business of the Company; and
WHEREAS, Purchaser desires to secure from Stockholder an agreement not
to compete with the Company, not to solicit employees and customers and not to
disclose certain information belonging to the Company;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein, and for other good and valuable consideration the receipt of which is
hereby acknowledged, and intending to be legally bound, the parties agree as
follows:
A G R E E M E N T
1. NONCOMPETITION. Stockholder agrees that he shall not:
(a) During the period commencing on the date hereof, and ending on
December 31, 2006 (the "Non-Compete Period"), within Santa Barbara, Ventura, Los
Angeles, Orange, San Bernardino and San Diego counties (the "Counties") of
California, (i) carry on (whether for his own account or for the account of any
other person or entity), or render services (whether or not for compensation),
to any person or entity who or which is directly or indirectly engaged in any
type of business that is competitive with the business as presently conducted by
the Company (a "Competing Business"); or (ii) share in the earnings of, or
beneficially own or hold any security issued by, or otherwise own or hold any
interest in, any person who or which is directly or indirectly engaged in a
Competing Business in the Counties. Without limiting the generality of the
foregoing, Stockholder shall be deemed to be engaged in a particular business if
he is an owner, proprietor, partner, stockholder, officer, employee, independent
contractor, director or joint venturer of, or a consultant or lender to, or an
investor in any manner in, in any such business (including any investment in
such business through his spouse or children ). Notwithstanding the foregoing,
nothing herein shall prohibit Stockholder, from (i) leasing or providing real
property to a Competing Business; (ii) working for a major motion picture
company other than in a position that influences the placing of post-production
works, or (iii) making or holding investments in companies whose stock is
publicly traded on any national securities exchange or over-the-counter market;
provided that: (a) such investment does not give Stockholder the right to
control or influence the policy decisions of any Competing Business and (b) such
investment represents an aggregate ownership interest of less than 5% of any
such Competing Business;
(b) During the Non-Compete Period, except as permitted in (a) above,
communicate with any customers, employees or suppliers of the Company regarding
the Company or its business without the Company's prior approval, or directly or
indirectly consult with or render services to any party who is known by
Stockholder to be a former or present customer of the Company regarding the
Company or its business; or
(c) During the Non-Compete Period, directly or indirectly, solicit the
employment or services of, or cause or attempt to cause to leave the employment
or services of the Company any person who or which is employed by, or otherwise
engaged to perform services for the Company.
2. SEVERABLE COVENANTS. The parties acknowledge that the covenants
contained in Section 1 hereof are reasonable in geographical and temporal scope
and in all other respects. The parties hereto intend that the covenants set
forth in Section 1 hereof shall be construed as a series of separate covenants.
It is the desire and intent of the parties hereto that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought. If
any particular provision or portion of this Agreement shall be adjudicated to be
invalid or unenforceable, such adjudication shall apply only with respect to the
operation of this Agreement in the particular jurisdiction in which such
adjudication is made.
3. INJUNCTIVE RELIEF. Stockholder hereby acknowledges and agrees that
any breach of or default under this Agreement will cause damage to Purchaser in
an amount difficult to ascertain. Accordingly, in addition to any other relief
to which Purchaser may be entitled, Purchaser shall be entitled, without proof
of actual damages, to such injunctive relief as may be ordered by any court of
competent jurisdiction.
4. NOTICES. All notices, requests, and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given: when received, if delivered personally or by
fax, or five business days after such notice, request, demand claim or other
communication is sent, if sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Purchaser, addressed to:
Point.360
P.O. Box 1830
Hollywood, CA 90028
Attention: President
Fax: (323) 957-2297
If to Stockholder, addressed to:
William Infuso
30560 Park Vista Dr.
Castaic, CA 91384
Either party may change the address to which notices, requests, and other
communications which are required or may be given under this Agreement are to be
delivered by giving the other party or parties notice in the manner set forth
above.
5. GOVERNING LAW. The terms and provisions of this Agreement shall be
construed in accordance with, and governed by, the internal laws of the State of
California without regard to principles of conflict of laws thereof.
6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7. AMENDMENTS; WAIVERS. This Agreement may be amended only by an
agreement in writing of each party. No waiver of any provision nor consent to
any exception to the terms of this Agreement shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
8. ATTORNEY'S FEES. If either party hereto brings an action or
proceeding hereunder to enforce the terms hereof, the prevailing party shall be
entitled to recover from the other party all of such prevailing party's
attorneys' fees, costs and expenses incurred in such action or proceeding.
9. TERMINATION. If Stockholder is terminated by the Company other than
for cause (as defined in the Stockholder's employment agreement with the Company
dated March 24, 2004) this Agreement shall become null and void.
IN WITNESS WHEREOF, each of the parties hereto has or has caused this
Noncompetition Agreement to be executed as of the day and year first above
written.
PURCHASER
STOCKHOLDER POINT.360
By:
- ------------------------------ ------------------------------
William Infuso Haig S. Bagerdjian,
Chairman of the Board
EXHIBIT D-2
NONCOMPETITION AGREEMENT
THIS AGREEMENT, effective as of July 1, 2004, is by and between
Point.360, a California corporation ("Purchaser"), and Revis S. Call
("Stockholder").
WHEREAS, Stockholder is a shareholder of International Video
Conversions, Inc., a California corporation (the "Company"); and
WHEREAS, Stockholder has entered into a certain Stock Purchase Agreement
dated as of June 23, 2004 (the "Purchase Agreement") pursuant to which Purchaser
is acquiring all of the issued and outstanding capital stock of the Company
including all of the shares of capital stock owned by Stockholder; and
WHEREAS, the Purchase Agreement is, in substance, an agreement providing
for the sale and transfer of goodwill of the Company; and
WHEREAS, the execution of this Agreement is a condition to the
consummation of the transaction contemplated by the Purchase Agreement; and
WHEREAS, Stockholder has, or may have, developed substantial expertise
and experience in the business conducted by the Company and has, or may have,
access to proprietary and confidential business and technical information
relating to the business of the Company; and
WHEREAS, Purchaser desires to secure from Stockholder an agreement not
to compete with the Company, not to solicit employees and customers and not to
disclose certain information belonging to the Company;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein, and for other good and valuable consideration the receipt of which is
hereby acknowledged, and intending to be legally bound, the parties agree as
follows:
A G R E E M E N T
1. NONCOMPETITION. Stockholder agrees that he shall not:
(a) During the period commencing on the date hereof, and ending on
December 31, 2006 (the "Non-Compete Period"), within Santa Barbara, Ventura, Los
Angeles, Orange, San Bernardino and San Diego counties (the "Counties") of
California, (i) carry on (whether for his own account or for the account of any
other person or entity), or render services (whether or not for compensation),
to any person or entity who or which is directly or indirectly engaged in any
type of business that is competitive with the business as presently conducted by
the Company (a "Competing Business"); or (ii) share in the earnings of, or
beneficially own or hold any security issued by, or otherwise own or hold any
interest in, any person who or which is directly or indirectly engaged in a
Competing Business in the Counties. Without limiting the generality of the
foregoing, Stockholder shall be deemed to be engaged in a particular business if
he is an owner, proprietor, partner, stockholder, officer, employee, independent
contractor, director or joint venturer of, or a consultant or lender to, or an
investor in any manner in, in any such business (including any investment in
such business through his spouse or children ). Notwithstanding the foregoing,
nothing herein shall prohibit Stockholder, from (i) leasing or providing real
property to a Competing Business; (ii) working for a major motion picture
company other than in a position that influences the placing of post-production
work, or (iii) making or holding investments in companies whose stock is
publicly traded on any national securities exchange or over-the-counter market;
provided that: (a) such investment does not give Stockholder the right to
control or influence the policy decisions of any Competing Business and (b) such
investment represents an aggregate ownership interest of less than 5% of any
such Competing Business;
(b) During the Non-Compete Period, except as permitted in (a) above,
communicate with any customers, employees or suppliers of the Company regarding
the Company or its business without the Company's prior approval, or directly or
indirectly consult with or render services to any party who is known by
Stockholder to be a former or present customer of the Company regarding the
Company or its business; or
(c) During the Non-Compete Period, directly or indirectly, solicit the
employment or services of, or cause or attempt to cause to leave the employment
or services of the Company any person who or which is employed by, or otherwise
engaged to perform services for the Company.
2. SEVERABLE COVENANTS. The parties acknowledge that the covenants
contained in Section 1 hereof are reasonable in geographical and temporal scope
and in all other respects. The parties hereto intend that the covenants set
forth in Section 1 hereof shall be construed as a series of separate covenants.
It is the desire and intent of the parties hereto that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought. If
any particular provision or portion of this Agreement shall be adjudicated to be
invalid or unenforceable, such adjudication shall apply only with respect to the
operation of this Agreement in the particular jurisdiction in which such
adjudication is made.
3. INJUNCTIVE RELIEF. Stockholder hereby acknowledges and agrees that
any breach of or default under this Agreement will cause damage to Purchaser in
an amount difficult to ascertain. Accordingly, in addition to any other relief
to which Purchaser may be entitled, Purchaser shall be entitled, without proof
of actual damages, to such injunctive relief as may be ordered by any court of
competent jurisdiction.
4. NOTICES. All notices, requests, and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given: when received, if delivered personally or by
fax, or five business days after such notice, request, demand claim or other
communication is sent, if sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Purchaser, addressed to:
Point.360
P.O. Box 1830
Hollywood, CA 90028
Attention: President
Fax: (323) 957-2297
If to Stockholder, addressed to:
Revis S. Call
920 E. Grinnell Dr.
Burbank, CA 91501
Either party may change the address to which notices, requests, and other
communications which are required or may be given under this Agreement are to be
delivered by giving the other party or parties notice in the manner set forth
above.
5. GOVERNING LAW. The terms and provisions of this Agreement shall be
construed in accordance with, and governed by, the internal laws of the State of
California without regard to principles of conflict of laws thereof.
6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7. AMENDMENTS; WAIVERS. This Agreement may be amended only by an
agreement in writing of each party. No waiver of any provision nor consent to
any exception to the terms of this Agreement shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
8. ATTORNEY'S FEES. If either party hereto brings an action or
proceeding hereunder to enforce the terms hereof, the prevailing party shall be
entitled to recover from the other party all of such prevailing party's
attorneys' fees, costs and expenses incurred in such action or proceeding.
9. TERMINATION. If Stockholder is terminated by the Company other than
for cause (as defined in the Stockholder's employment agreement with the Company
dated October 28, 2002), this Agreement shall become null and void.
IN WITNESS WHEREOF, each of the parties hereto has or has caused this
Noncompetition Agreement to be executed as of the day and year first above
written.
PURCHASER
STOCKHOLDER POINT.360
By:
- ------------------------------ ------------------------------
Revis S. Call Haig S. Bagerdjian,
Chairman of the Board
EXHIBIT E
OPINION LETTER OF
GREENBERG GLUSKER FIELDS CLAMAN
MACHTINGER & KINSELLA LLP
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California.
2. The Company has the requisite corporate power to (i) own its property
and assets and conduct its business, as presently conducted, (ii) execute and
deliver the Documents, and (iii) perform its obligations under the Purchase
Agreement.
3. The Stockholders have the requisite authority to execute and deliver
the Purchase Agreement, and perform their respective obligations under the
Purchase Agreement.
4. The Purchase Agreement has been duly and validly authorized, executed
and delivered by the Company and the Stockholders and constitute valid and
binding agreements of the Company and the Stockholders, enforceable against the
Company and the Stockholders in accordance with their terms.
5. The execution of and delivery by the Company and the Stockholders of
the Purchase Agreement and the consummation thereof of the transactions
contemplated thereby will not (a) violate any Laws, or (b) violate any provision
of the Company's Articles of Incorporation or Bylaws, as presently in effect.
6. All of the outstanding shares of capital stock of the Company have
been duly authorized and are validly issued and outstanding, fully paid and
nonassessable.
EXHIBIT F
OPINION LETTER OF
TROY & GOULD PROFESSIONAL CORPORATION
1. The Purchaser has the requisite corporate power to execute and
deliver the Documents, and perform its obligations under the Documents.
2. The Documents have been duly and validly authorized, executed and
delivered by the Purchaser and constitute valid and binding agreements of the
Purchaser, enforceable against the Purchaser in accordance with their terms.
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..................................................1
1.1 DEFINITIONS..................................................1
ARTICLE II SALE AND PURCHASE OF STOCK...................................1
2.1 SALE AND PURCHASE OF STOCK...................................1
2.2 PURCHASE PRICE...............................................1
2.3 EARNOUT......................................................2
ARTICLE III ADDITIONAL UNDERTAKINGS AND COVENANTS........................3
3.1 CONSENTS AND APPROVALS.......................................3
3.2 ACCESS; INVESTIGATIONS BY PURCHASER..........................3
3.3 OPERATION OF BUSINESS OF THE COMPANY.........................4
3.4 NO INCONSISTENT ACTIONS......................................5
3.5 NEWS RELEASES................................................5
3.6 SUBSEQUENT EVENTS............................................5
3.7 CONDUCT OF BUSINESS DURING EARNOUT PERIOD....................6
3.8 EARNOUT DETERMINATION........................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE PRINCIPAL STOCKHOLDER....................................8
4.1 ORGANIZATION AND STANDING....................................8
4.2 SUBSIDIARIES.................................................8
4.3 ARTICLES OF INCORPORATION AND BYLAWS.........................9
4.4 CAPITALIZATION...............................................9
4.5 DIRECTORS, OFFICERS AND EMPLOYEES............................9
4.6 FINANCIAL STATEMENTS.........................................9
4.7 NO UNDISCLOSED LIABILITIES...................................9
4.8 TAXES........................................................10
4.9 CONDUCT OF BUSINESS; ABSENCE OF MATERIAL ADVERSE CHANGE......11
4.10 PROPERTIES...................................................12
4.11 ASSETS.......................................................12
4.12 INSURANCE....................................................13
4.13 INTELLECTUAL PROPERTY........................................13
4.14 DEBT INSTRUMENTS.............................................13
4.15 MATERIAL AGREEMENTS..........................................13
4.16 LITIGATION...................................................14
4.17 LABOR RELATIONS..............................................14
4.18 EMPLOYEE PLANS...............................................15
4.19 ENVIRONMENTAL................................................17
4.20 TRANSACTIONS WITH RELATED PARTIES............................18
4.21 RESTRICTIONS AND CONSENTS....................................18
4.22 AUTHORIZATION................................................18
4.23 ABSENCE OF VIOLATION.........................................19
4.24 ABSENCE OF FURTHER REQUIREMENTS..............................19
4.25 ACCOUNTING AND OTHER CONTROLS................................19
4.26 BANK ACCOUNTS................................................19
4.27 BINDING OBLIGATION...........................................19
4.28 DISCLOSURE...................................................20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER...........20
5.1 TITLE TO STOCK...............................................20
5.2 AUTHORITY AND CAPACITY.......................................20
5.3 ABSENCE OF VIOLATION.........................................20
5.4 RESTRICTIONS AND CONSENTS....................................20
5.5 BINDING OBLIGATION...........................................21
5.6 TRANSFER OF TITLE............................................21
5.7 ABSENCE OF FURTHER REQUIREMENTS..............................21
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER..................21
6.1 ORGANIZATION AND STANDING....................................21
6.2 AUTHORIZATION................................................21
6.3 BINDING OBLIGATION...........................................21
6.4 DISCLOSURE...................................................22
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
AND THE STOCKHOLDERS.........................................22
7.1 REPRESENTATIONS AND WARRANTIES...............................22
7.2 CONSENTS.....................................................22
7.3 DOCUMENTS AT CLOSING.........................................22
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.............22
8.1 REPRESENTATIONS AND WARRANTIES...............................22
8.2 PERFORMANCE..................................................23
8.3 ABSENCE OF ADVERSE CHANGES...................................23
8.4 LEGAL PROCEEDINGS............................................23
8.5 NONCOMPETITION...............................................23
8.6 RESIGNATIONS OF OFFICERS AND DIRECTORS.......................23
8.7 CONSENTS.....................................................23
8.8 LEASES.......................................................23
8.9 SCHEDULES....................................................23
8.10 DOCUMENTS AT CLOSING.........................................23
8.11 FINANCING....................................................24
ARTICLE IX CLOSING......................................................24
9.1 CLOSING OF SALE AND PURCHASE.................................24
9.2 DELIVERIES BY THE STOCKHOLDERS...............................24
9.3 DELIVERIES BY COMPANY........................................24
9.4 DELIVERIES BY PURCHASER......................................25
ARTICLE X SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES.......25
10.1 SURVIVAL.....................................................25
10.2 INDEMNIFICATION; LIMITATION OF LIABILITY.....................26
10.3 INDEMNIFICATION PROCEDURES...................................27
10.4 STOCKHOLDER LIABILITY........................................28
10.5 CLAIM NOTICE.................................................28
10.6 CLAIMS RESOLUTION PROCEDURE..................................28
10.7 REMEDIES.....................................................28
ARTICLE XI TERMINATION..................................................28
11.1 TERMINATION..................................................28
11.2 EFFECT OF TERMINATION........................................29
ARTICLE XII MISCELLANEOUS................................................29
12.1 ADDITIONAL ACTIONS AND DOCUMENTS.............................29
12.2 DISCLOSURE SCHEDULES.........................................29
12.3 NO BROKERS...................................................29
12.4 EXPENSES.....................................................29
12.5 SUCCESSORS AND ASSIGNS.......................................29
12.6 ENTIRE AGREEMENT; AMENDMENT..................................30
12.7 WAIVER.......................................................30
12.8 SEVERABILITY.................................................30
12.9 GOVERNING LAW................................................30
12.10 NOTICE.......................................................30
12.11 INTERPRETATION...............................................31
12.12 LIMITATION ON BENEFITS.......................................31
12.13 BINDING EFFECT...............................................32
12.14 COUNTERPARTS.................................................32
12.15 CONFIDENTIALITY..............................................32
12.16 INCORPORATION................................................32
12.17 ARBITRATION..................................................32
12.18 STOCKHOLDER APPROVAL.........................................33