EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
CARY BROKAW PRODUCTIONS, INC., A DELAWARE CORPORATION
CARY BROKAW
AVENUE ENTERTAINMENT GROUP, INC., A DELAWARE CORPORATION
AND
AVENUE PICTURES, INC., A DELAWARE CORPORATION
September 2, 2005
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of September 2, 2005, by and among
CARY BROKAW PRODUCTIONS, INC., a Delaware corporation ("BUYER"), Cary Brokaw, an
individual ("BROKAW"), Avenue Pictures, Inc., a Delaware corporation ("SELLER"),
and Avenue Entertainment Group, Inc., a Delaware corporation ("PARENT"). Buyer,
Brokaw, Seller and Parent are hereinafter referred to collectively herein as the
"PARTIES."
RECITALS
A. Seller wishes to sell and transfer, and Buyer wishes to purchase and
receive, certain assets and certain related liabilities of Seller.
B. Brokaw is the sole member of Buyer and, in consideration for the
asset sale and transfer described above, wishes to surrender certain rights and
certain securities of Seller and Parent held by Brokaw.
AGREEMENT
In consideration of the representations, warranties and covenants
herein contained, the Parties agree as follows:
ARTICLE I
THE PURCHASE
1.1 PURCHASE AND SALE OF ASSETS.
(a) Upon and subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 1.6(a)), Buyer shall purchase
from Seller, and Seller shall sell, transfer, convey, assign and deliver to
Buyer, in consideration of the payment of the Purchase Consideration to Seller
as described in Section 1.3, all right, title and interest, free and clear of
all Liens in and to the following assets of Seller (collectively, the "ACQUIRED
ASSETS"):
(i) ASSIGNED CONTRACTS. All rights of Seller under
the agreements identified in SCHEDULE 1.1(A)(I) (collectively, the "ASSIGNED
CONTRACTS"). For purposes of clarity, Buyer shall assume such Assigned Contracts
as of the Closing. All royalties and other payments paid or payable to Seller
under such Assigned Contracts following the Closing (including all accrued but
unpaid royalties and other payments) shall become the property of Buyer as of
the Closing, and all claims of Seller under such Assigned Contracts (whether or
not such claims have arisen or been asserted prior to the Closing) shall become
the property of Buyer as of the Closing.
(ii) ASSETS RELATED TO THE ASSIGNED CONTRACTS. All
goodwill, Intellectual Property (as hereinafter defined), and other assets
owned, controlled by, or licensed to Seller that, directly or indirectly, arises
out of, or relates to, the Assigned Contracts or the properties or assets to
which the Assigned Contracts pertain.
(iii) TRADEMARKS. All Trademark and other
Intellectual Property associated with the "Avenue Pictures" and "Avenue
Entertainment" names (the "AVENUE TRADEMARKS"); PROVIDED HOWEVER that, effective
upon the Closing, Buyer hereby grants Seller a limited, non-transferable,
royalty-free, worldwide license to use the Avenue Trademarks for the sole
purpose of conducting business under such name until the corporate name of
Seller has been altered pursuant to Section 6.1 below.
(iv) TANGIBLE ASSETS. The tangible assets of Seller
set forth on SCHEDULE 1.1(A)(IV).
(v) PRE-CLOSING REVENUES. Any revenues received by
Seller or Parent pursuant to the Assigned Contracts subsequent to September 30,
2004 and prior to the Closing (as defined below). Any such revenues received by
Seller and Parent shall be segregated and set aside for the benefit of Buyer,
and shall be paid to Buyer at the Closing (subject to any Participation Rights
of Seller pursuant to Section 1.3(a) below).
(b) Buyer shall not acquire anything from Seller other than
the Acquired Assets.
1.2 ASSUMPTION OF LIABILITIES. Upon and subject to the terms and
conditions of this Agreement, Buyer shall assume and become responsible for, and
perform, from and after the Closing, Seller's obligations under each of the
Assigned Contracts and only such other obligations and liabilities as are
specifically described in SCHEDULE 1.2 (the "ASSUMED LIABILITIES"). Buyer shall
not assume or become responsible for, and Seller shall remain liable for and
responsible for the performance of, any and all obligations and liabilities of
Seller existing as of the Closing (or arising after the Closing) other than the
Assumed Liabilities (collectively, Seller's "RETAINED LIABILITIES"). The
Retained Liabilities shall include, without limitation, any and all liabilities
and obligations relating to the Assigned Contracts that arose prior to the
Closing Time.
1.3 PURCHASE CONSIDERATION. In full consideration of Seller's sale,
transfer, conveyance, assignment and delivery to Buyer at the Closing of the
Acquired Assets, Buyer and Brokaw shall deliver to Seller at the Closing the
"PURCHASE CONSIDERATION" consisting exclusively of the following:
(a) Buyer shall grant Seller certain continuing interests in
the revenue and/or compensation of certain of the projects that are subject to
the Assigned Contracts, all on the terms set forth on SCHEDULE 1.3(A) hereto
(the "PARTICIPATION RIGHTS");
(b) Brokaw shall transfer and assign to Seller 711,250 shares
of common stock of Parent ("COMMON STOCK OF PARENT") held by Brokaw, free and
clear of all liens and encumbrances, other than any liens or encumbrances
created by Seller or Parent. For avoidance of doubt, Brokaw shall retain all
other shares of Common Stock of Parent currently held by Brokaw, or 700,000
shares (the "BROKAW SHARES").
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(c) Brokaw shall tender to Parent for cancellation all options
to purchase shares of Common Stock of Parent (other than the option described in
Section 1.4 below).
(d) Brokaw shall agree, until the 18-month anniversary of the
Closing Date, (i) not to sell, or make any short sale of, the Brokaw Shares or
any shares issued upon exercise of the Amended Option, without the prior written
consent of the Parent, and (ii) not to execute any agreement regarding (i)
above; provided however that the foregoing restriction shall be binding on
Brokaw only for so long as all executive officers and directors of Parent agree
to be similarly bound.
(E) Brokaw shall undertake that, in the event that Buyer
engages in a Sale or an Initial Public Offering with five (5) years from the
date of this Agreement, Brokaw shall pay or transfer to Parent (subject to any
restrictions on transfer applicable to any non-cash consideration), promptly
following the closing of such Sale or Initial Public Offering, an amount of
consideration equal to the difference between (i) twenty percent (20%) of the
proceeds Brokaw receives in such Sale or Initial Public Offering (if any) with
respect to Brokaw's interest in Buyer, and (ii) the aggregate value of all
consideration paid prior to such date to Seller and/or Parent pursuant to this
Section 1.3.
1.4 STOCK OPTION ISSUANCE. At the Closing, Parent shall issue and
deliver to Brokaw an option to purchase 500,000 shares of Parent at an exercise
price of $.50 per share, and with an exercise period terminating on the fifth
anniversary of the Closing.
1.5 ALLOCATION OF PURCHASE CONSIDERATION. The Purchase Consideration
plus, to the extent applicable, any Assumed Liabilities shall be allocated among
the Acquired Assets in the manner mutually agreed by the parties, such agreement
to be concluded within 90 days of the date of this Agreement. Each Party hereto
shall file all tax returns in a manner consistent with such allocation. The
Parties agree that the transactions contemplated by this Agreement constitute a
sale, rather than a license, of the Acquired Assets for United States federal
income tax purposes, and to file all tax returns in a manner consistent with
such treatment. The payment by Buyer to Seller of the Purchase Consideration
shall be free and clear of any deduction or withholding for or on account of any
taxes, charges, or remittance fees. Buyer and Seller agree to cooperate to
provide such withholding or other certificates as are necessary to provide for
the foregoing.
1.6 THE CLOSING.
(a) The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Alschuler Grossman
Stein & Kahan, 1620 26th Street, North Tower, Santa Monica, California 90404, at
12:00 p.m. local time on September 2, 2005, or, if all of the conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
have not been satisfied or waived by such date, on such mutually agreeable later
date as soon as practicable after the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transactions contemplated
hereby (the "CLOSING DATE"). The time of day on the Closing Date that the
Closing occurs is hereinafter called the "CLOSING TIME."
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(b) At the Closing:
(i) Seller shall deliver to Buyer the various
certificates, instruments and documents referred to in Section 5.1;
(ii) Buyer shall deliver to Seller the various
certificates, instruments and documents referred to in Section 5.2;
(iii) Seller shall deliver to Buyer a certificate of
the secretary of Seller, dated as of the date hereof, certifying as to (i) the
Certificate of Incorporation of Seller as in effect as of the date hereof, (ii)
the Bylaws of Seller as in effect as of the date hereof, (iii) resolutions
approved by the board of directors of Seller and the board of directors of
Parent authorizing this Agreement, the Ancillary Documents, and the transactions
contemplated hereby and thereby, and (iv) resolutions approved by the required
vote of Seller's stockholders and Parent's shareholders authorizing this
Agreement, the Ancillary Documents, and the transactions contemplated hereby and
thereby;
(iv) Seller shall execute and deliver to Buyer: (A)
the bill of sale in the form attached hereto as EXHIBIT A (the "BILL OF SALE"),
(B) the Assignment and Assumption Agreement in the form attached hereto as
EXHIBIT B (the "ASSIGNMENT AGREEMENT"), and (C) such other instruments of
conveyance and supporting documents as Buyer may reasonably request in order to
effect the sale, transfer, conveyance and assignment to Buyer of valid ownership
of the Acquired Assets (the "ADDITIONAL CONVEYANCE Agreements") even if after
the Closing;
(v) Buyer and Brokaw shall deliver to Seller the
Purchase Consideration;
(vi) Buyer and Brokaw shall deliver to Seller the
Voting Agreement in the form attached hereto as EXHIBIT C (the "VOTING
AGREEMENT"), duly executed by Brokaw;
(vii) Buyer and Brokaw shall deliver to Seller all
books and records of Seller in Buyer and Brokaw's possession that are not
directly related to the Acquired Assets;
(viii) Seller shall deliver to Buyer, or otherwise
put Buyer in possession and control of, all of the Acquired Assets of a tangible
nature; and
(ix) Parent and Seller shall deliver to Buyer and
Brokaw the Voting Agreement duly executed by Parent;
(x) Seller shall pay to Buyer any amount due pursuant
to Section 1.1(a)(v) hereof.
The Bill of Sale, Assignment Agreement, Voting Agreement, and the
Additional Conveyance Agreements are hereinafter referred to collectively as the
"ANCILLARY DOCUMENTS".
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1.7 FURTHER ASSURANCES. Purchaser and Brokaw will deliver to a
representative designated by the Company, at the Closing or as soon as
practicable thereafter, copies of all material corporate books and records in
Purchaser's or Brokaw's possession, including copies of all material agreements
to which the Company is a party, provided that Purchaser and Brokaw may keep
copies of such books and records for their files. At any time and from time to
time after the Closing, at the request of any Party and without further
consideration, each Party shall execute and deliver such other instruments of
sale, transfer, conveyance and assignment or assumption and take such action as
another Party may reasonably determine is necessary to transfer, convey and
assign to Buyer, and to confirm Buyer's rights to, title in and ownership of,
the Acquired Assets, to place Buyer in actual possession and operating control
thereof, to confirm Buyer's assumption of the Assumed Liabilities and/or to
confirm Seller' retention of the Retained Liabilities (as the case may be) and
to carry out the purposes and intent of this Agreement. Without limiting the
foregoing, (i) at all times from and after the Closing, in event that Seller
receives any payments or other consideration pursuant to any Assigned Agreement,
Seller shall promptly transfer such payments or other consideration over to the
Buyer, and (ii) Buyer and Seller shall execute and deliver such agreements and
instruments as any of the parties to the Assigned Contracts may reasonably
require to evidence the assignment and assumption of the Assigned Contracts and
the rights and obligations of Seller thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Parent jointly and severally represent and warrant to Buyer
that the statements contained in this Article II are true, correct and complete
as of the date of this Agreement, except to the extent that of any exceptions to
the following that would reasonably be expected to be known to Buyer or Brokaw:
2.1 ORGANIZATION; CAPITALIZATION. Each of Seller and Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite power and authority to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which a failure to so qualify, individually or in the
aggregate, would have a material adverse effect on the condition (financial or
otherwise), results of operations, business, properties, assets or prospects of
Seller (a "MATERIAL ADVERSE EFFECT"). Seller is a wholly owned subsidiary of
Parent, and no Person other than Parent has any equity interest, or any other
interest of any kind convertible into an equity interest, in Seller.
2.2 AUTHORIZATION. The execution and delivery by Seller and Parent of
this Agreement and the Ancillary Documents, and the consummation by Seller and
Parent of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action on the part of Seller and Parent.
This Agreement and the Ancillary Documents, when executed and delivered by
Seller and Parent, constitute, or will constitute, the valid and legally binding
obligations of Seller and Parent, enforceable against Seller and Parent in
accordance with their respective terms, except as the same may be limited by
bankruptcy, insolvency, moratorium and other laws generally affecting the
enforcement of creditors rights, or by principles of equity (regardless of
whether considered in a proceeding in equity or at law).
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2.3 NONCONTRAVENTION. The execution and delivery by Seller and Parent
of this Agreement and the Ancillary Documents and the consummation by Seller and
Parent of the transactions contemplated hereby and thereby will not, with or
without the giving of notice or the passage of time or both: (a) violate the
provisions of any law, rule or regulation applicable to Seller or Parent; (b)
violate the provisions of Seller's or Parent's Certificate of Incorporation,
Bylaws, or other organizational documents; (c) violate any judgment, decree,
order or award of any court, Governmental Body or arbitrator applicable to
Seller or Parent or any of the Acquired Assets; or (d) conflict with or result
in the breach or termination of any term or provision of, or constitute a
default under, or require any consent under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon any of the Acquired
Assets, pursuant to any indenture, mortgage or deed of trust or other agreement
or instrument to which Seller or Parent is a party or by which Seller or Parent
or any of their respective assets is bound.
2.4 INTELLECTUAL PROPERTY.
(a) Seller and Parent own or have the right to use all
Intellectual Property used in the operation of its business or necessary for the
operation of their business as presently conducted. Each item of Intellectual
Property owned by or used by Seller in the operation of its business that is
acquired by Buyer pursuant to this Agreement and the Ancillary Documents will be
owned or available for use by Buyer on substantially identical terms and
conditions immediately following the Closing.
(b) There are no legal or governmental proceedings (other than
current Trademark applications) pending which relate to the Intellectual
Property of Seller, and Seller is not aware of any information indicating that
such proceedings are contemplated or threatened by any Governmental Body or
other person.
2.5 OWNERSHIP OF ASSETS. Seller is the true and lawful owner of, and
has good and marketable title to, or leasehold interest in, all of the Acquired
Assets, free and clear of all Liens. Buyer is hereby acquiring, and immediately
following the Closing Buyer will own and lawfully possess, good and marketable
title to all of the Acquired Assets, free and clear of all Liens. No Person
other than Seller owns, controls, or has any interest in, any of the Acquired
Assets other than, with respect to the Assigned Contracts, Persons (other than
Seller) that are parties thereto.
2.6 COMPLIANCE WITH CONTRACTS.
(a) Each Assigned Contract is a valid and binding agreement of
Seller, and Seller does not have any knowledge that any Contract is not a valid
and binding agreement of the other parties thereto;
(b) Seller has fulfilled all its material obligations required
pursuant to each Assigned Contract prior to the Closing Time, and Seller has no
reason to believe that, but for the execution of this Agreement and the
consummation of the transactions contemplated herein, the obligations of Seller
under each Assigned Contract which remain to be performed after the Closing Time
could not be performed in accordance with their terms;
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(c) Seller is not in material breach of or default under any
Assigned Contract, and no event has occurred that would, with the passage of
time or the giving of notice or both, constitute such a default, result in a
loss of rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto;
(d) The continuation, validity and effectiveness of each
Assigned Contract will not be affected by the transfer thereof to Buyer under
this Agreement, and all the Assigned Contracts are assignable to Buyer without
the consent of any third party; other than the Assigned Contract Consents
described in Section 4.2 below.
2.7 BROKERS' FEES. There is no investment banker, broker, finder or
other intermediary who has been retained or is authorized to act for Seller or
Parent who is entitled to a fee or commission from Seller or Buyer upon
consummation of the transactions contemplated hereby.
2.8 DISCLOSURE. No representation or warranty by Seller or Seller
contained in this Agreement, and no statement contained in the Disclosure
Schedule or any other document, certificate or other instrument delivered to or
to be delivered by or on behalf of Seller or Parent pursuant to this Agreement
or the Ancillary Documents, contains or upon delivery will contain any untrue
statement of a material fact or omits or upon delivery will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and Parent that the statements
contained in this Article III are true, correct and complete as of the date of
this Agreement.
3.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and authority to execute and deliver this Agreement and the
Ancillary Documents, and to consummate the transactions contemplated hereby and
thereby.
3.2 AUTHORIZATION. The execution and delivery by Buyer of this
Agreement and the Ancillary Documents, and the consummation by Buyer of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement and the
Ancillary Documents, when executed and delivered by Buyer, constitute, or will
constitute, the valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their respective terms, except as the same may be
limited by bankruptcy, insolvency, moratorium and other laws generally affecting
the enforcement of creditors rights, or by principles of equity.
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3.3 NONCONTRAVENTION. The execution and delivery by Buyer of this
Agreement and the Ancillary Documents and the consummation by Buyer of the
transactions contemplated hereby and thereby will not, with or without the
giving of notice or the passage of time or both: (a) violate the provisions of
any law, rule or regulation applicable to Buyer; (b) violate the provisions of
the charter or by-laws of Buyer; (c) violate any judgment, decree, order or
award of any court, Governmental Body or arbitrator applicable to Buyer; or (d)
result in the breach of, or constitute a default under, any indenture, mortgage
or deed of trust or other agreement or instrument to which Buyer is a party that
would materially adversely affect Buyer's ability to perform its obligations
hereunder.
3.4 BROKERS' FEES. There is no investment banker, broker, finder or
other intermediary who has been retained or is authorized to act for Buyer who
is entitled to a fee or commission from Seller or Buyer upon consummation of the
transactions contemplated hereby.
3.5 DISCLOSURE. No representation or warranty by Buyer contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered to or to be delivered
by or on behalf of Buyer pursuant to this Agreement or the Ancillary Documents,
contains or upon delivery will contain any untrue statement of a material fact
or omits or upon delivery will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
ARTICLE IV
COVENANTS
4.1 BEST EFFORTS. Each of the Parties shall use its best efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement and the Ancillary
Documents.
4.2 NOTICES AND CONSENTS. Each Party shall obtain, at its expense, all
such waivers, releases, permits, consents, approvals or other authorizations
from third parties and Governmental Bodies as are necessary to consummate the
transactions contemplated by this Agreement and the Ancillary Documents,
including, without limitation, in the case of Seller, the written consent to the
assignment of each Assigned Contract listed in Schedule 4.2 hereto from each of
the parties thereto to the extent required by the terms of the Assigned Contract
(the "ASSIGNED CONTRACT CONSENTS").
4.3 FINANCIAL STATEMENTS; AUDIT. Buyer will keep and maintain accurate
books and records adequate for Seller to ascertain the amounts payable to Seller
pursuant to Section 1.3(a) hereof for a period of two (2) years from the end of
each quarter when such amounts are payable. In connection therewith, promptly
after the end of each calendar quarter after the Closing Date through June 30,
2008, and promptly after the end of the six-month periods ending December 31,
2008, June 30, 2009, December 31, 2009, and June 30, 2010, Buyer will deliver to
Seller a report setting forth sufficient detail to accurately ascertain the
amounts payable to Seller pursuant to Section 1.3(a) hereof for the applicable
quarter or six-month period. Such bi-annual reports will continue to be
delivered after June 30, 2010 to the extent that material payments continue to
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be due under this Agreement subsequent to such date. Buyer will furnish Seller
with such report whether or not any amounts are payable by Buyer to Seller for
such quarter or six-month period. Seller will have the right to audit the books
and records of Buyer relating to such payments for the sole purpose of verifying
such amounts, not more than once per calendar year upon providing at least sixty
(60) days prior written notice to Buyer. All such audits will be conducted
during reasonable business hours of Buyer, and in a manner that does not
unreasonably interfere with Buyer's normal business activities, by an
independent certified public accountant or equivalent (the "AUDITOR"). Except
for a statement of the payments due pursuant to this Agreement, the Auditor will
not disclose any information learned during the audit to Seller. Any such audit
will be conducted at Seller's expense unless such audit reveals a deficiency of
10% or more in payments due to Seller, in which case Buyer shall reimburse
Seller for the reasonable cost of such audit.
4.4 APPOINTMENT OF NEW DIRECTORS. As it is envisioned that Brokaw and
Sheri Halfon will resign as directors and officer of the Seller as of the
Closing, promptly after the Closing Date, the Company shall take all reasonable
steps necessary to cause at least two (2) individuals to be appointed to the
Company's board of directors.
ARTICLE V
CONDITIONS TO CLOSING
5.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate the transactions contemplated hereby is subject to the satisfaction
or waiver of the following additional conditions:
(a) Other than approval by applicable Governmental Bodies of
the assignment of Trademarks and Copyrights (which may be obtained after, but
must be filed for at or prior to, the Closing), Seller shall have obtained all
of the waivers, releases, permits, consents, approvals or other authorizations,
and effected all of the registrations, filings and notices, referred to in
Section 4.2, including without limitation, having obtained the Assigned Contract
Consents.
(b) No action, suit or proceeding shall be pending or, to the
knowledge of Seller or Parent, threatened wherein an unfavorable judgment,
order, decree, stipulation or injunction would (i) prevent consummation of any
of the transactions contemplated by this Agreement or the Ancillary Documents,
(ii) cause any of the transactions contemplated by this Agreement or the
Ancillary Documents to be rescinded following consummation, or (iii) affect
materially and adversely, in Buyer's sole reasonable judgment, the right of
Buyer to own, operate or control any of the Acquired Assets following the
Closing, and no such judgment, order, decree, stipulation or injunction shall be
in effect.
(c) The representations and warranties of Seller set forth in
Article II shall be true, correct and complete when made on the date hereof and
shall be true, correct and complete as of the Closing Time as if made as of the
Closing Time (except for representations and warranties made as of a specific
date, which shall be true, correct and complete as of such date).
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(d) Each of Seller and Parent shall have performed or complied
with its agreements and covenants required to be performed or complied with
under this Agreement and the Ancillary Documents as of or prior to the Closing
Time.
(e) All corporate and other proceedings required to be taken
on the part of Seller and Parent to authorize or carry out this Agreement and to
convey, assign, transfer and deliver the Acquired Assets shall have been taken.
(f) Seller and Parent shall have executed and delivered this
Agreement and the Ancillary Documents.
(g) All actions to be taken by Seller or Parent in connection
with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to Buyer.
5.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller to
consummate the transactions contemplated hereby is subject to the satisfaction
or waiver of the following additional conditions:
(a) The representations and warranties of Buyer set forth in
Article III shall be true, correct and complete in all respects when made on the
date hereof and shall be true, correct and complete as of the Closing Time as if
made as of the Closing Time (except for representations and warranties made as
of a specific date, which shall be true and correct as of such date).
(b) Buyer shall have performed or complied with its agreements
and covenants required to be performed or complied with under this Agreement and
the Ancillary Documents as of the Closing Time.
(c) No action, suit, or proceeding shall be pending, or to the
knowledge of Buyer, threatened, wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement or the Ancillary Documents, or (ii)
cause any of the transactions contemplated by this Agreement or the Ancillary
Documents to be rescinded following consummation, and no such judgment, order,
decree, stipulation or injunction shall be in effect.
(d) All actions to be taken by Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates,
instruments and other documents required to effect the transactions contemplated
hereby shall be reasonably satisfactory in form and substance to Seller.
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ARTICLE VI
POST-CLOSING COVENANTS
6.1 USE OF NAME. As soon as practicable following the Closing, Seller
and Parent will take all actions necessary to change their respective corporate
names and to cease, and cause any affiliated entities to cease, using the names
"Avenue Entertainment Group," "Avenue Pictures," and any other name, Trademark,
brand, or logo similar thereto, after the Closing.
6.2 TRANSFER AND SALES TAX. Buyer and Seller agree to use reasonable
efforts to minimize all sales, use and transfer taxes and other similar taxes
and fees (including penalties and interest) ("TRANSFER TAXES"), if any, arising
out of or in connection with or attributable to the consummation of the
transactions contemplated by this Agreement. Seller shall be responsible under
this Agreement for the timely payment of any such Transfer Tax. Buyer and Seller
shall cooperate in all reasonable respects in the preparation and timely filing
of all tax returns and other documentation required to be filed in respect of
any Transfer Tax.
6.3 SHARING OF DATA. Promptly upon request by Buyer made at any time
following the Closing Date, Seller shall authorize the release to Buyer of all
files pertaining to the Acquired Assets held by any Governmental Body or other
third party.
6.4 INDEMNIFICATION OF BROKAW. Seller and Parent shall indemnify Brokaw
if Brokaw is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding or any alternative
dispute resolution mechanism, whether civil, criminal, administrative or
investigative by reason of the fact that Brokaw is or was a director, officer,
employee or agent of Seller or Parent, or any subsidiary of Seller or Parent, or
by reason of the fact that Brokaw is or was serving at the request of Seller or
Parent as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement (if
such settlement is approved in advance by Seller or Parent, which approval shall
not be unreasonably withheld) actually and reasonably incurred by Brokaw in
connection with such action, suit or proceeding if Brokaw acted in good faith
and in a manner Brokaw reasonably believed to be in or not opposed to the best
interests of Seller or Parent, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Brokaw's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that Brokaw did not act in good faith
and in a manner which Brokaw reasonably believed to be in or not opposed to the
best interests of Seller or Parent, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that Brokaw's conduct was unlawful.
Seller and Parent shall advance all expenses incurred by Brokaw in connection
with the investigation, defense, settlement or appeal of any civil or criminal
action, suit or proceeding referenced in this Section 6.4. Brokaw hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Brokaw is not entitled to be indemnified by
Seller and Parent as authorized hereby. The advances to be made hereunder shall
be paid by Seller and Parent to Brokaw within thirty (30) days following
delivery of a written request therefor by Brokaw to Seller and Parent.
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6.5 REPORTS. Parent and Seller shall make and file all required
reports, notices and other instruments required in connection with the
transactions contemplated hereby with any Governmental Body or regulatory or
trade association, including without limitation filing a Current Report on Form
8-K with the U.S. Securities and Exchange Commission. Parent and Seller shall
provide Buyer with an opportunity to review and comment on each such report or
notice.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY SELLER. Seller and Parent shall indemnify and
hold harmless Buyer and its officers, directors, agents and affiliates from and
against any and all claims, debts, obligations and other liabilities, monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation) ("DAMAGES") as incurred or
suffered resulting from, relating to or constituting:
(a) any inaccuracy in, or breach of, any material
representation or warranty or failure to perform any covenant or agreement of
Seller contained in this Agreement or any of the Ancillary Documents;
(b) any Retained Liabilities; and
(c) any liability or obligation to pay severance benefits to
any employee of Seller or Parent whose employment is terminated in connection
with the consummation of the transactions contemplated by this Agreement, and
all liabilities resulting from the termination of employment of employees of
Seller or Parent prior to the Closing Time that arose under any federal, state
or foreign law or under any employee benefit plan or policies established or
maintained by Seller.
7.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold harmless
Seller and its officers, directors, agents and affiliates from and against any
and all Damages as incurred or suffered resulting from, relating to or
constituting any inaccuracy in, or breach of, any material representation or
warranty or failure to perform any covenant or agreement of Buyer contained in
this Agreement or any of the Ancillary Documents.
7.3 SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION. All
representations and warranties made by the Parties herein or in any instrument
or document furnished in connection herewith shall survive the Closing and
continue until the second anniversary of the Closing Date.
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ARTICLE VIII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
8.1 "ACQUIRED ASSETS" has the meaning set forth in Section 1.1(a).
8.2 "ADDITIONAL CONVEYANCE AGREEMENTS" has the meaning set forth in
Section 1.6(b).
8.3 "ANCILLARY DOCUMENTS" has the meaning set forth in Section 1.6(b).
8.4 "PARENT" has the meaning set forth in the Introduction.
8.5 "ASSIGNED CONTRACTS" has the meaning set forth in Section
1.1(a)(i).
8.6 "ASSIGNED CONTRACT CONSENTS" has the meaning set forth in Section
4.2.
8.7 "ASSIGNMENT AGREEMENTS" has the meaning set forth in Section
1.6(b).
8.8 "ASSUMED LIABILITIES" has the meaning set forth in Section 1.2.
8.9 "BILLS OF SALE" has the meaning set forth in Section 1.6(b).
8.10 "BUYER" has the meaning set forth in the Introduction.
8.11 "CLOSING" has the meaning set forth in Section 1.6(a).
8.12 "CLOSING DATE" has the meaning set forth in Section 1.6(a).
8.13 "CLOSING TIME" has the meaning set forth in Section 1.6(a).
8.14 "DAMAGES" has the meaning set forth in Section 7.1.
8.15 "GOVERNMENTAL BODY" means and includes any: (a) nation, state,
county, city, town, village, district, or other jurisdiction of any nature; (b)
federal, state, local, municipal, foreign, or other government; (c) governmental
or quasi-governmental authority of any nature (including any governmental
agency, commission, branch, department, official, or entity and any court or
other tribunal); (d) multi-national organization or body; or (e) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.
8.16 "INITIAL PUBLIC OFFERING" shall mean an initial public offering of
shares of Buyer or any successor entity pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
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8.17 "INTELLECTUAL PROPERTY" means any and all of the following and all
statutory and/or common law rights throughout the world in, arising out of or
associated therewith: (A) all works of authorship, copyrights (registered or
otherwise), copyrightable works, and all applications, registrations and
renewals in connection therewith, and all other rights corresponding thereto
throughout the world (individually a "COPYRIGHT" and collectively the
"COPYRIGHTS"); (B) all inventions (whether or not patentable, reduced to
practice or made the subject of a pending patent application); (C) all
trademarks, service marks, trade dress, logos, trade names, domain names and
corporate names (whether or not registered) together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith, and all rights therein provided by international treaties
or conventions (individually a "TRADEMARK" and collectively the "TRADEMARKS");
(D) all United States and foreign patents, patent applications (including all
provisional applications), patent disclosures, together with all reissuances,
divisions, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof (individually a "PATENT" and collectively the "PATENTS");
(E) all computer software and firmware, including data, databases and related
documentation in both tangible and intangible form, and any and all code,
including assemblers, applets, compilers, source code, object code, data
(including sound and image data), HTML code, operating systems and
specifications, design tools and user interfaces, in any form or format; (F) all
trade secrets and confidential business information, know-how, formulas, ideas,
concepts, technology and technical data, research and development information,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information; (G) all
licenses, agreements and other rights in any third party intellectual property
and other proprietary rights, including moral and economic rights of authors and
inventors (however denominated) and industrial rights, relating to any of the
foregoing, in each case (to the extent assignable), including remedies against
infringements thereof and rights of protection of interest therein under the
laws of all jurisdictions; and (H) all causes of action, rights and remedies
relating to the Intellectual Property..
8.18 "LIEN" means any mortgage, hypothecation, pledge, lien, security
interest, claim, encumbrance, easement, right-of-way, building or use
restriction, exception, variance, reservation, charge, restriction or limitation
of any kind or nature.
8.19 "MATERIAL ADVERSE EFFECT" has the meaning set forth in Section
2.1.
8.20 "PARTIES" has the meaning set forth in the Introduction.
8.21 "PERSON" includes any individual, corporation, partnership, joint
venture, limited liability company, limited liability partnership, association,
trust or other entity or organization, whether or not a legal entity and whether
foreign or domestic, or any Governmental Body.
8.22 "PURCHASE CONSIDERATION" has the meaning set forth in Section 1.3.
8.23 "RETAINED LIABILITIES" has the meaning set forth in Section 1.2.
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8.24 "SALE" means any sale of all or substantially all assets of Buyer,
or any merger, consolidation or similar transaction as a result of which the
members of Buyer hold less than 50% of the voting interests of the surviving
entity.
8.25 "SELLER" has the meaning set forth in the Introduction.
8.26 "TAXES" means all taxes, charges, fees and similar assessments of
any nature (including those relating to income, receipts, excise, real property,
personal property, sales, use, transfer, estate or inheritance, withholding,
employment, payroll and franchises) imposed by any federal, state, local or
foreign taxing authority or Governmental Body.
8.27 "TRADEMARKS" has the meaning set forth in Section 8.17.
8.28 "TRANSFER TAXES" has the meaning set forth in Section 6.2.
ARTICLE IX
MISCELLANEOUS
9.1 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
9.2 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and, except as
specifically set forth herein, supersedes any prior understandings, agreements,
or representations between the Parties, written or oral, that may have related
in any way to the subject matter hereof.
9.3 SUCCESSION AND ASSIGNMENT. This Agreement may not be transferred,
assigned, pledged or hypothecated by any Party hereto, other than with the
consent of all other Parties hereto. Subject to the limitations set forth in the
immediately preceding sentence, this Agreement shall be binding upon and inure
to the benefit of the Parties named herein and their respective successors and
permitted assigns.
9.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by facsimile, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
9.5 HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.6 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered (a) one
day after it is sent via a reputable nationwide overnight courier service, (b)
on the date of delivery if delivered by personal delivery, (c) on the date the
return receipt is signed if sent by registered or certified mail or, (d) in the
case of a facsimile or electronic transmission, upon confirmation of completed
transmission, in each case to the intended recipient as set forth below:
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If to Seller or Parent: Avenue Pictures, Inc.
---------------------- Attn: Gene Feldman
c/o Gene Feldman Productions, LLC
10 West 55th Street, Apt. 26B
New York, NY 10023
Facsimile:
If to Buyer or Brokaw: Cary Brokaw Productions, Inc.
--------------------- Attn.: Mr. Cary Brokaw
10202 W. Washington Blvd.
David Lean Bldg., Rm. 119
Culver City, CA 90232
Facsimile: (310) 244-6869
Any Party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the Party to whom it is sent. Any Party may change the
address to which notices, instructions and communications are to be delivered by
giving the other Parties notice thereof in the manner herein set forth in this
Section 9.6.
9.7 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the internal laws (and not the law
of conflicts) of the State of California. Legal proceedings relating to this
Agreement, the Ancillary Documents or the transactions contemplated hereby or
thereby may be commenced only in the state or federal courts in the State of
California. The Parties each consent to the exclusive jurisdiction of such
courts in any such action or proceeding and waive any objection to venue laid
therein.
9.8 AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Closing Time. No amendment
of any provision of this Agreement shall be valid unless the same shall be in
writing and signed by each of the Parties. No waiver by either Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.9 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
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provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
9.10 EXPENSES. Each Party shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
9.11 CONSTRUCTION. The language used in this Agreement shall be deemed
to be the language chosen by the Parties hereto to express their mutual intent,
and no rule of strict construction shall be applied against either Party. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. Except if otherwise provided, the word
"including," as used herein means including without limitation.
9.12 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Asset
Purchase Agreement as of the date first above written.
BUYER: SELLER:
CARY BROKAW PRODUCTIONS, INC. AVENUE PICTURES, INC.
a Delaware corporation a Delaware corporation
By: /S/ CARY BROKAW By: /S/ GENE FELDMAN
------------------------------- --------------------------------
CARY BROKAW, ITS PRESIDENT GENE FELDMAN, ITS PRESIDENT
AND CHIEF EXECUTIVE OFFICER
BROKAW: PARENT:
AVENUE ENTERTAINMENT GROUP, INC.
a Delaware corporation
By: /S/ CARY BROKAW By: /S/ GENE FELDMAN
------------------------------- --------------------------------
CARY BROKAW GENE FELDMAN, ITS CHAIRMAN OF
THE BOARD
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