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ASSET PURCHASE
AGREEMENT
between
CENTERSTAGING MUSICAL
PRODUCTIONS, INC.
DEBTOR AND DEBTOR IN
POSSESSION
and
POINT.360
DATED AS OF SEPTEMBER 29,
2008
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ASSET PURCHASE
AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the “
Agreement ”) is made and entered into as of September
__, 2008 (the “ Execution Date ”) by and between
CENTERSTAGING MUSICAL PRODUCTIONS, INC., a California corporation,
as debtor and debtor in possession (“ Seller ”)
under Case No.2:08-bk-13019-VZ (the “ Bankruptcy Case
”) in the United States Bankruptcy Court for the Central
District of California (the “ Bankruptcy Court
”), and POINT.360, a California corporation or its assignee
(“ Purchaser ”). Capitalized terms used herein
but not otherwise defined shall have the meanings set forth in
Section 15.15 of this Agreement.
R E C I T A L
S
WHEREAS, on March 10, 2008 (the “
Petition Date ”), Seller commenced the Bankruptcy Case
by filing a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code with the Bankruptcy Court; and
WHEREAS, Seller is primarily engaged in the
business of (i) providing production and support services for live
musical performances for major television programs; (ii) renting
its studio and soundstage facilities, and (iii) renting musical
instruments and related equipment for use at its studios and other
venues (such businesses as presently conducted by Seller,
collectively, the “ Business ”) as debtor and
debtor in possession pursuant to Sections 1107(a) and 1108 of the
Bankruptcy Code; and
WHEREAS, Seller wishes to sell, transfer,
convey, assign and deliver to Purchaser, in accordance with
Sections 363 and 365 and the other applicable provisions of the
Bankruptcy Code, all of the Purchased Assets, together with the
Assumed Liabilities of Seller upon the terms and subject to the
conditions set forth in this Agreement (hereinafter collectively
referred to as the “ Transaction ”);
WHEREAS, Purchaser wishes to purchase and take
delivery of such Purchased Assets and Assumed Liabilities upon such
terms and subject to such conditions;
WHEREAS, the Purchased Assets will be sold
pursuant to a Sale Order of the Bankruptcy Court approving such
sale under Section 363 of the Bankruptcy Code and such Sale Order
will include the assumption and assignment of certain executory
contracts, unexpired leases and liabilities thereunder under
Section 365 of the Bankruptcy Code and the terms and conditions of
this Agreement; and
WHEREAS, all of the obligations of the parties
under this Agreement are conditioned upon the approval of the
Bankruptcy Court in accordance with Article 3 hereof.
NOW, THEREFORE, in consideration of the premises
and mutual covenants and agreements herein set forth and for other
good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE
1
PURCHASE AND
SALE
Except as otherwise provided and subject to the
terms and conditions set forth in this Agreement and subject to
Bankruptcy Court approval, Seller agrees to sell, convey, assign,
transfer and deliver to Purchaser, and Purchaser agrees to purchase
from Seller at the Closing, all of Seller’s right, title and
interest in and to the Purchased Assets, free and clear of all
Liens, claims or interests of any type or nature, whether known or
unknown, of Seller or any other party, other than the Assumed
Liabilities.
ARTICLE
2
DESCRIPTION OF PURCHASED
ASSETS; EXCLUDED ASSETS; ASSUMPTION OF
LIABILITIES
Section 2.1. Purchased Assets. Upon the terms and subject to the conditions
set forth in this Agreement, at the Closing, Seller shall sell,
convey, transfer, assign and deliver to Purchaser, and Purchaser
shall purchase, acquire and take assignment and delivery from
Seller, all of Seller’s right and title to and interest in
and to Seller’s business assets, properties, rights
(contractual or otherwise) and its affirmative claims, but
excluding the Excluded Assets (the assets so included, the
“Purchased Assets”). The Purchased Assets shall
include, without limitation, all of Seller’s right, title and
interest in and to the following:
(a) All equipment, machinery or other tangible
personal property owned by Seller including, without limitation,
the equipment, machinery and personal property listed on
Schedule 2.1(a) hereto;
(b) All of Seller’s rights, titles and
interests in and to the any and all intellectual property owned or
utilized by the Seller, including, without limitation, patents,
patent rights, patent applications, inventions, trade secrets,
processes, formulas, customer lists, proprietary rights,
proprietary knowledge, computer software, websites, URLs, domain
names, trademarks, names, service marks, brand marks, brand names,
trade names, source or object code, copyrights, trade secrets
relating to or arising from any proprietary process, symbols and
logos related to the Business and all applications therefor,
registrations thereof and licenses and sublicenses or agreements in
respect thereof, which Seller owns or has the right to use or to
which Seller is a party and all filings, registrations or issuances
of any of the foregoing with or by any federal, state, local or
foreign regulatory, administrative or governmental office, as
listed on Schedule 2.1(b) (excluding the Retained
Intellectual Property, collectively, the “ Transferred
Intellectual Property ”);
(c) All leases of equipment, machinery or other
tangible personal property to which Seller is a party, as listed on
Schedule 2.1(c) hereto (the “ Personal Property
Leases ”);
(d) All contracts, agreements, contract rights,
license agreements, customer contracts, distribution agreements,
franchise rights and agreements, purchase and sales orders (if
any), quotations and executory commitments, instruments, royalty
agreements, third party guaranties, indemnifications, arrangements
and understandings, whether oral or written, to which Seller is a
party (whether or not legally bound thereby), as listed on
Schedule 2.1(d) hereto (the “ Assumed Contracts
”);
(e) All franchises, licenses, permits, consents,
authorizations, approvals and certificates of any regulatory,
administrative or other Governmental Authority, as listed on
Schedule 2.1(e) hereto (the “ Permits
”);
(f) All of Seller’s rights under leases of
real property set forth on Schedule 2.1(f) hereto, together
with all buildings, structures, installations, fixtures and all
other leasehold improvements, appurtenant thereto or situated
thereon and all other rights, interests and appurtenances of Seller
pertaining thereto; provided, however, that such leases shall be
subject to further negotiation and agreement by and between
Purchaser and any lessor following execution of this Agreement (the
“ Assumed Leases ”);
(g) Seller’s marketing and sales materials
relating to the Business;
(h) Seller’s backlog ( i.e ., lease
and sales (if any) orders, and orders for production and support
services that have not been processed);
(i) All of Seller’s customer or client lists,
files, documentation, records and related documentation related to
the Business, including, without limitation, those listed on
Schedule 2.1(i) hereto, relating to the Purchased
Assets;
(j) All of Seller’s security deposits,
prepaid expenses and other miscellaneous assets, as listed on
Schedule 2.1(j) hereto;
(k) All of Seller’s other tangible and
intangible assets, other than the Excluded Assets.
Section 2.2. Excluded Assets . Notwithstanding the provisions of Section 2.1,
the Purchased Assets shall not include any of the following assets,
properties and/or rights of Seller, (collectively, the “
Excluded Assets ”) and liens, claims or encumbrances
against such Excluded Assets shall not be altered by virtue of this
Agreement:
(a) Any Contracts that are not Assumed Contracts
(the “ Excluded Contracts ”);
(b) Any items excluded pursuant to the provisions
of Section 2.1 above;
(c) All cash, bank accounts, certificates of
deposit, commercial paper, annuities, treasury notes and bills and
other marketable securities;
(d) All accounts receivable;
(e) All claims for refunds and/or credits by the
Seller of any kind, including for Taxes; and
(f) all Employee Plans, including, without
limitation, all of Seller’s severance, pension, retirement
and other employee benefit plans; and
(g) All of Seller’s insurance policies
relating to the Business or the Purchased Assets, subject to any
claims of co-insureds, including, without limitation, all credits,
cash or surrender value, all rights to any refunds, all rights to
receive proceeds of insurance policies, any outstanding claims
thereunder and all rights of offset, counterclaims and insurance
coverage thereunder (collectively, the “ Insurance
Policies ”), which such Insurance Policies are as set
forth in Schedule 2.1(k) hereto (showing as to each policy
or binder the carrier, policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums and a general
description of the type of coverage provided).
(h) All of Seller’s right, title and
interests in and to high definition and other content, stored on
digital video cassettes or other electronic mediums, available for
multi-platform distribution (the “ Content Library
”) and all copyrights, contract rights, content licenses or
other general intangibles associated with the Content Library (the
“ Retained Intellectual Property ”); provided
however, it is contemplated and understood that Purchaser will be
entering into a management contract with respect to the Content
Library upon Closing, which contract will be subject to further
negotiations by the Parties and which contract shall not preclude
the sale of the Content Library at any time. It is understood that
Seller has the right to refuse to enter into any management
contract proposed by Purchaser.
(i) Any and all tax refunds due to Seller prior to
the effective date of the sale, and any and all NOLs in favor or
Seller.
(j) All known and unknown, liquidated or
unliquidated, contingent or fixed, claims, rights or causes of
action which Seller may have against any third party for avoidance
and recovery of any preferential or fraudulent transfer.
(k) All of Seller’s corporate minute books
and organizational documents
(l) Any interest of the Seller in any
affiliate.
Section 2.3. Assumed Liabilities; Non-Assumed
Liabilities .
(a) At the Closing, Purchaser shall assume and
agree to perform and discharge the following Liabilities of Seller
to the extent not previously performed or discharged, and no
others: (i) all Liabilities of Seller under the Personal Property
Leases in an aggregate amount not to exceed $1,300,000, (ii) all
Liabilities of Seller which first accrue and are to be performed
from and after the Closing under the Assumed Contracts, the Assumed
Leases and the Personal Property Leases, which relate to periods of
time on or after the Closing Date, and (iii) liabilities and
obligations relating to and arising from Purchaser’s
operation of the Purchased Assets after the Closing (items (i),
(ii) and (iii) are collectively referred to herein as the “
Assumed Liabilities ”).
(b) Other than the Assumed Liabilities, Purchaser
shall not assume or be bound by or be obligated or responsible for
any duties, responsibilities, commitments, expenses, obligations or
liabilities of Seller or relating to the Purchased Assets or the
Business (or which may be asserted against or imposed upon
Purchaser as a successor or transferee of Seller as an acquirer of
the Purchased Assets or the Business or otherwise as a matter of
law) of any kind or nature, fixed or contingent, known or unknown,
including, without limitation, the following (collectively, the
“ Non-Assumed Liabilities ”):
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(i)
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any Liability
of Seller in respect of any Taxes arising or accruing prior to the
Closing Date;
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(ii)
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any Liability
of Seller under any contract or lease that is not an Assumed
Contract, Assumed Lease or Personal Property Lease;
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(iii)
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any Liability
of Seller arising out of or resulting from its compliance or
noncompliance with any Law;
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(iv)
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any Liability
of Seller arising out of or related to any Legal Proceeding against
it or any Legal Proceeding which has an adverse effect on the
Purchased Assets or the Business and which was or could have been
asserted on or prior to the Closing Date or to the extent the basis
of which arose or accrued on or prior to the Closing
Date
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(v)
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any Liability
of Seller for any indemnification obligations pursuant to any claim
or notice received or required to be received prior to the Closing
Date with respect to any Transferred Intellectual
Property;
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(vi)
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any Liabilities
arising under or in connection with any Employee Plans of, or
maintained or required to be maintained by, Seller;
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(vii)
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any Liability
pursuant to any personal guaranty or indemnity provided by any
officer, director, principal, owner or other party related to
Seller; and
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(viii)
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any Liability
that is not an Assumed Liability.
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ARTICLE
3
BANKRUPTCY COURT
APPROVAL
Section 3.1. Entry of Sale Procedures Order
. No later than October 1, 2008 or
two (2) business days after execution of this Agreement, whichever
is earlier by the parties hereto, Seller shall file a motion in
form and substance reasonably satisfactory to Purchaser (the
“ Sales Procedures Motion ”) with the Bankruptcy
Court seeking entry of an order in form and substance satisfactory
to Purchaser which shall include all of the following provisions
(the “ Sale Procedures Order ”):
(a) Competing offers to acquire the Purchased
Assets shall:
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(i)
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be submitted in
writing to Seller and its counsel on or before 4:00 p.m. (Pacific
Time) on the business day that is no later than five days prior to
the Sale Hearing (as defined below);
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(ii)
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provide for
total cash consideration that exceeds the Cash Payment and Tax
Escrow Funds as defined herein by at least Three Hundred Thousand
Dollars ($300,000.00);
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(iii)
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be accompanied
by a signed asset purchase agreement in form and substance
substantially identical to this Agreement, except with respect to
the payment on account of tax claims as set forth in Section 5.2
below and with respect to the Key Employment agreements set forth
in Section 9.10 below, together with a redlined, marked copy
showing all changes to this Agreement (the “ Competing
Agreement ”);
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(iv)
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must not be
subject to due diligence contingencies or other conditions beyond
those imposed by Purchaser; any bidder other than Purchaser shall
have an opportunity to review the books and records of the Seller,
provided that such bidder shall execute a non-disclosure agreement
in form and substance acceptable to Seller in Seller’s sole
discretion (notwithstanding the foregoing, all due diligence must
be completed by all qualified bidders prior to Auction (as defined
below);
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(v)
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remain open
until the conclusion of the Sale Hearing (as defined
below);
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(vi)
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contain terms
and conditions no less favorable to Seller than the terms and
conditions of this Agreement;
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(vii)
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be accompanied
by admissible evidence in the form of affidavits or declarations
establishing the bidder’s good faith, within the meaning of
Section 363(m) of the Bankruptcy Code;
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(viii)
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be accompanied
by admissible evidence in the form of affidavits or declarations
establishing that the bidder is capable and qualified, financially,
legally, and otherwise, of unconditionally performing all
obligations under the Competing Agreement;
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(ix)
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for no less
than substantially all of the Purchased Assets;
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(x)
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contain a
proposed closing date that is not later than the Closing Date
hereunder; and
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(xi)
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contain a
condition to closing which requires the payment of the total
indebtedness, including principal, interests, fees, costs and other
allowable charges, of Pacific Western Bank (formerly the secured
debt of Community National Bank) through or prior to Closing either
directly by a proposed Overbidder or through a refinance of such
indebtedness .
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(b) If any bidders have submitted a qualifying
competing bid in accordance with Section 3.1(a) hereof (each such
bid, a “ Qualified Bid ”), then a public auction
of the Purchased Assets (the “ Auction ”) shall
be held at the Sale Hearing at the United States Bankruptcy Court
for the Central District of California . The Auction shall be
governed by the following procedures:
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(i)
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All bidders
shall be deemed to have consented to the core jurisdiction of the
Bankruptcy Court and to have waived any right to jury trial in
connection with any disputes relating to the Auction or the sale of
the Purchased Assets;
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(ii)
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Bidding will
commence at the amount of the highest Qualified Bid;
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(iii)
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Each subsequent
bid shall be in increments of no less than $100,000; and
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(iv)
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For the
Purchaser, the Breakup Fee shall be taken into account in the
bidding process, such that if the bid is $8,000,000 the Purchaser
may bid such amount in cash plus the value of the Breakup Fee to
match the $8,000,000 bid.
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(c) A hearing to approve the successful bid at the
Auction, or, if no auction is held, to approve this Agreement,
shall be scheduled for no later than November 15, 2008 (the “
Sale Hearing Date ”);
(d) The Breakup Fee in the amount of reasonable
costs and fees incurred by Buyer not to exceed $200,000 is approved
and shall be paid to Purchaser in the event that the Bankruptcy
Court enters an order approving an offer to purchase the Purchased
Assets submitted by a party other than Purchaser or enters an order
confirming a plan of reorganization of Seller (other than a plan
under which Purchaser acquires the Purchased Assets) no later than
the closing of the sale of the Purchased Assets to a third
party;
(e) No other bidder for the Purchased Assets shall
be entitled to payment of any breakup fee;
(f) Any entity that fails to submit a timely,
conforming Qualified Bid, as set forth above, shall be disqualified
from bidding for the Purchased Assets at the Auction or the Sale
Hearing; and
(g) If no timely, conforming Qualified Bid is
submitted, Seller shall request at the Sale Hearing that the Court
approve the proposed sale of the Purchased Assets to Purchaser
under this Agreement.
Section 3.2. Entry of Order Approving Sale
. Seller shall use its best efforts
to obtain entry of on order of the Bankruptcy Court approving the
terms of this Agreement (the “ Sale Order ”) as
soon as practicable following the mutual execution and delivery of
this Agreement and approval of the Sale Procedures, but no later
than November 15, 2008 (“ Sale Order Date ”).
The Sale Order shall be in accordance with the terms of this
Agreement, shall be in a form reasonably satisfactory to Purchaser
and Seller, and shall:
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(i)
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approve and
direct the sale and assignment of the Purchased Assets to Purchaser
and approve and direct the assumption and assignment of the Assumed
Leases and Assumed Contracts to Purchaser free and clear of all
Liens, claims or interests except those expressly assumed in this
Agreement, based on appropriate findings and rulings pursuant to,
inter alia , Sections 363(b), (f) and (m) and 365 of the
Bankruptcy Code, including but not limited to Sections 365(h), (i),
(l) and (n) and the release of Purchaser to any rights otherwise
associated with and which may otherwise be to the benefit of any
third parties; provided that notwithstanding anything to the
contrary in this Agreement, Purchaser shall not be entitled to
disapprove the Sale Order by reason of, and Purchaser’s (or a
successful overbidder’s) obligation to consummate the
transactions provided for herein shall not be conditioned upon the
assumption and assignment of, any Assumed Leases with respect to
which the Bankruptcy Court determines that Purchaser (or a
successful overbidder) has failed to provided adequate assurance of
future performance pursuant to Section 365 of the Bankruptcy
Code;
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include a
direction that Seller allocate in any Chapter 11 plan of
reorganization, including a plan of liquidation, the Consideration
in the manner established by Section 5.3(a);
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(ii)
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include a
direction that Seller and Purchaser consummate the transactions
contemplated hereby in accordance with the terms hereof, including
all payments required hereunder, on or before the Outside
Date;
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(iii)
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include a
finding that Purchaser is a good faith purchaser pursuant to
Section 363(m) of the Bankruptcy Code;
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(iv)
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include a
finding that Purchaser is not deemed to be a successor to Seller,
to have, de facto or otherwise, merged with or into Seller
or to be a mere continuation of Seller;
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(v)
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include a
finding that the Consideration is a fair and reasonable price for
the Purchased Assets;
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(vi)
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include a
finding confirming the adequacy of notice to all creditors and
parties in interest and parties to any executory contract,
unexpired lease or right of entry;
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(vii)
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include a
finding that the Cure Costs are final and binding upon the
applicable counterparty and Seller is authorized and directed to
pay such Cure Costs directly from the sale proceeds;
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(viii)
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include a
direction that Purchaser shall be provided with the Qualified Bid
and supporting documentation and evidence that such Qualified Bid
satisfies the requirements of the Sale Order; and
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(ix)
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include
provisions for the retention of jurisdiction in the Bankruptcy
Court over matters relating to the transactions contemplated in
this Agreement including matters relating to title to the Purchased
Assets and claims against the Purchased Assets which arose or were
based on facts or occurrences prior to the Closing. Furthermore,
the Sale Order shall not have been reversed, stayed, modified or
amended.
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(b) Seller shall provide notice of any hearing on
the motion to approve the Sale Order or any other matter before the
Bankruptcy Court relating to this Agreement or the Transaction
Documents, in each case as required by the Bankruptcy Code, the
Federal Rules of Bankruptcy Procedure and the Local Bankruptcy
Rules for the Central District of California or as otherwise
ordered by the Bankruptcy Court.
(c) Notwithstanding anything to the contrary in
this Section 3.1 or any other provision of this Agreement, in the
event that a Qualified Bid of a third party (an “
Alternative Buyer ,” and the underlying agreement
between the Alternative Buyer and Seller, the “
Alternative APA ”) is approved by the Bankruptcy Court
at the hearing on the Sale Motion, this Agreement, shall become an
approved “back-up bid” which may, if exercised by
written election by Purchaser and delivered to Seller with twenty
four (24) hours of the completion of the Sale hearing, remain open
for acceptance by Seller for a period of thirty (30) days following
the date upon which such hearing is concluded, but subject and
subordinate in all respects to the rights of the Alternative Buyer
under the Alternative APA.
Section 3.3. Certain Bankruptcy Undertakings by
Seller .
(a) Seller shall, in good faith, using its
commercially reasonable efforts, seek entry of the Sale Order no
later than November 15, 2008 (the “Outside Date”) and
take such actions following the Execution Date as are necessary to
consummate the Transactions contemplated by this Agreement in
accordance with Sale Order.
(b) Recognizing that the transaction contemplated
herein is subject to overbid, from and after the date hereof,
except as ordered by the Bankruptcy Court and as is reasonably
necessary to adequately market the Assets for overbid, Seller shall
neither take any action, nor fail to take any action, which action
or failure to act would reasonably be expected to (i) prevent or
impede the consummation of the transactions contemplated by this
Agreement in accordance with the terms of this Agreement; or (ii)
result in (A) the reversal, avoidance, revocation, vacating or
modification (in any manner that would reasonably be expected to
materially and adversely affect Purchaser’s rights
hereunder), or (B) the entry of a stay pending appeal.
(c) Seller shall, in good faith, using its
commercially reasonable efforts and with the cooperative efforts of
Purchaser, attempt to obtain in the Sale Order an exemption from
Transfer Taxes pursuant to Section 1146(c) of the Bankruptcy
Code.
(d) If the Sale Procedures Order, the Sale Order or
any other order of the Bankruptcy Court relating to this Agreement
shall be appealed by any Person (or a petition for
certiorari or motion for rehearing or reargument shall be
filed with respect thereto), Seller, with the cooperation and
support of Purchaser, shall take all steps as may be reasonable and
appropriate to defend against such appeal, petition or motion, and
shall endeavor to obtain an expedited resolution of such
appeal.
ARTICLE
4
INSTRUMENTS OF TRANSFER AND
ASSUMPTION
Section 4.1. Transfer Documents . At the Closing, Seller will deliver to
Purchaser (a) one or more Bills of Sale in substantially the form
attached hereto as Exhibit B (the “ Bill of
Sale ”), and (b) all such other good and sufficient
instruments of sale, transfer and conveyance consistent with the
terms and provisions of this Agreement, including, without
limitation, assignments of leases and the Transferred Intellectual
Property, and any other assignments as shall be reasonably
necessary to vest in Purchaser all of Seller’s right and
title to, and interest in, the Purchased Assets.
Section 4.2. Assignment and Assumption Documents
. At the Closing, Purchaser and
Seller will execute and deliver an Assignment and Assumption
Agreement in substantially the form attached hereto as Exhibit
C (the “ Assumption Agreement ”) in order to
effect the assignment and assumption of the Assumed
Liabilities.
ARTICLE
5
CONSIDERATION;
ALLOCATION
Section 5.1. Consideration . In exchange for the sale, assignment,
transfer, conveyance and delivery from Seller of the Purchased
Assets, at Closing Purchaser shall:
(a) assume the Assumed Liabilities pursuant to this
Agreement;
(b) pay by wire transfer to an account designated
by Seller (which account shall be designated at least three (3)
business days prior to the Closing) the amount of Two Million
Dollars ($2,000,000) (the “ Cash Payment ”);
and
(c) pay no less than $1,000,000 into escrow which
shall be set aside and used to pay payroll taxes due and owing by
Seller as set forth in section 5.2 below (the “Tax Escrow
Funds”).
(d) Items (a) through (c) of this Section 5.1 are
referred to collectively as the “ Consideration
.”
(e) The Cash Payment and Tax Escrow Funds shall be
paid to Seller at the Closing in immediately available, good funds
of the United States of America (“ Good Funds
”).
Section 5.2. Allocation of Consideration
.
(a) The Seller agrees that the Tax Escrow Funds
shall be applied to the payment of that portion of the pre-petition
priority Tax obligations of Seller which may be personally asserted
against Jan Parent and/or Johnny Caswell (the “Personal Tax
Obligation”), or such lesser amount as necessary to satisfy
such Personal Tax Obligation in full and shall be held in a
segregated interest bearing account pending final determination of
such Personal Tax Obligation. To the extent all of the Tax Escrow
Funds are not necessary to satisfy the Personal Tax Obligation,
then any remaining portion o f the Tax Escrow Funds shall be paid
to secured creditors and/or the Seller’s bankruptcy estate to
be distributed in accordance with their priorities.
(b) Prior to Closing, Purchaser shall deliver to
Seller Purchaser’s proposed allocation (the “
Allocation Statement ”) of the Consideration
(including, without limitation, the Assumed Liabilities) among the
Purchased Assets. The Allocation Statement shall allocate the
Consideration and any item required to be treated as an adjustment
to the Consideration among the various assets comprising the
Purchased Assets in accordance with Treasury Regulation 1.1060-1
(or any comparable provisions of state or local tax law) or any
successor provision. If Seller agrees with the Allocation Statement
and the allocation among the Purchased Assets set forth therein,
Purchaser and Seller shall report and file all tax returns
(including any amended tax returns and claims for refund)
consistent with such mutually agreed Consideration allocation, and
shall take no position contrary thereto or inconsistent therewith
(including in any audits or examinations by any taxing authority or
any other proceedings). Purchaser and Seller shall file or cause to
be filed any and all forms (including U.S. Internal Revenue Service
Form 8594), statements and schedules with respect to such
allocation, including any required amendments to such forms. If, on
the other hand, Seller objects to, or otherwise disagrees with the
Allocation Statement, Purchaser and Seller shall use their
commercially reasonable efforts to agree upon the allocation of the
Consideration among the Purchased Assets. In any event, Seller
agrees to take no position in its tax returns, which are
inconsistent with the Purchaser’s allocations of the
Consideration for tax purposes. Seller shall be responsible for all
fees associated with the preparation of tax returns.
Notwithstanding any other provisions of this Agreement,
Purchaser’s and Seller’s obligations under this Section
5.2 shall survive Closing.
Section 5.3. Prorations . The following prorations relating to the
Business and the Purchased Assets will be made as of the Closing
Date, with Seller liable to the extent that such items can be
determined relate to any time period up to and including the
Closing Date and Purchaser liable to the extent that such items can
be determined relate to periods subsequent to the Closing Date;
provided , however , that for periods of time which
straddle the Closing Date and for which the amounts attributable to
any item cannot be readily allocable to a particular date, the
obligations and liabilities shall be prorated between the Purchaser
and the Seller based upon the total amount of days in any allocable
period and the amount of days which precede the Closing (allocable
to the Seller) and the amount of days during such period which are
on or are on or after the Closing (allocable to the
Purchaser):
(a) Real, sales, ad valorem, personal property and
all similar taxes and assessments relating to the Property and the
Business;
(b) Water, sewer and other similar types of taxes,
and installments on special benefit assessments;
(c) Electric, gas, telephone and utility
charges;
(d) Charges under maintenance and service contracts
and fees under licenses transferred to or assumed by
Purchaser;
(e) Any and all payments due under Assumed
Contracts, Assumed Leases or Personal Property Leases; subject to
any payment restructurings with Bankruptcy Court approvals,
and
(f) Prepaid expenses of Seller to the extent that
the benefit thereof will be available to Purchaser after the
Closing Date.
Seller shall be responsible for all sales,
transfer and documentary Taxes and recording fees and Taxes
applicable to the transactions contemplated hereby or imposed by
reason of the transfers of the Purchased Assets provided under this
Agreement and any deficiency, interest or penalty asserted with
respect thereto (collectively, the “ Transfer Taxes
”). Purchaser shall pay the fees and costs of recording or
filing all applicable conveyance instruments contemplated
hereunder. Purchaser shall pay all costs of applying for new
Permits and obtaining the transfer of existing Permits which may be
lawfully transferred.
ARTICLE
6
CLOSING
Section 6.1. Closing Date . Subject to the terms and conditions hereof,
the closing of the transactions contemplated by this Agreement (the
“ Closing ”) shall take place at the offices of
Point.360 or such other location as may be mutually agreed upon
between the Parties on the date which is the third (3rd) business
day following the date on which all conditions to Closing set forth
in Articles 10 and 11 hereof have been satisfied or waived (the
“ Closing Date ”). The Closing
shall be effective as of 2:00 a.m. Pacific Time on the day after
the Closing Date.
ARTICLE
7
SELLER’S
REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Purchaser that
the statements contained in this Article 7 are, to Seller’s
Knowledge, true, correct and complete as of the date of this
Agreement and will, to Seller’s Knowledge, be correct and
complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement
throughout this Article 7).
Section 7.1. Organization, Qualification and Corporate
Power . Seller is a
corporation duly organized, validly existing and in good standing
under the Laws of the state of California and has all necessary
power and authority to own and operate its properties and to carry
on its business as it is now being conducted and is in good
standing under the Laws of each jurisdiction where such
qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect and, subject
to obtaining Bankruptcy Court approval of this Agreement as
contemplated herein, to carry out the transactions contemplated by
this Agreement and the other Transaction Documents. Seller has the
power and authority to execute and deliver and, subject to entry of
the Sale Order, perform its obligations under this Agreement and
the other Transaction Documents, and to undertake the transactions
contemplated hereby and thereby. As used herein, the term “
Transaction Documents ” means this Agreement and all
other agreements, documents and instruments executed in connection
herewith or required to be executed and/or delivered by the parties
or any one or more of them in accordance with the provisions of
this Agreement.
Section 7.2. Authorization, Execution and Delivery of
Agreement and Transaction Documents . The execution, delivery and performance of
this Agreement and the other Transaction Documents by Seller and
the transfer or assignment of the Purchased Assets to Purchaser
have been duly and validly authorized and approved by all necessary
corporate action. Subject to obtaining the Sale Order and pursuant
thereto, Seller will have full power, right and authority to sell
and convey to Purchaser the Purchased Assets owned by Seller. The
Sale Order to be entered by the Bankruptcy Court shall provide that
this Agreement is, and each of the other Transaction Documents when
so executed and delivered will be, a valid and binding obligation
of Seller, enforceable against such Seller in accordance with its
terms.
Section 7.3. Title to and Condition of Assets
. Except as set forth in Schedule
7.3 hereto, Seller has good and marketable title to, or a valid
leasehold interest in, all of the properties and assets included in
the Purchased Assets, and upon the consummation of the transactions
contemplated hereby and by the Transaction Documents, Purchaser
will acquire good and marketable title to all of the Purchased
Assets, free and clear of all Liens other than the Assumed
Liabilities. The Purchased Assets include, without limitation, all
assets, tangible or intangible, of any nature whatsoever, necessary
for the conduct of the Business and are sufficient for the
continued conduct of the Business after the Closing in
substantially the same manner as conducted prior to the
Closing.
Section 7.4. Liabilities . Other than the
Non-Assumed Liabilities, and except as set forth in Schedule
7.4 hereto, Seller has no Liabilities relating to the Purchased
Assets or the Business due or to become due except the Assumed
Liabilities.
Section 7.5. Corporate Records . Seller has maintained the Corporate Records,
which, in reasonable detail, accurately and fairly reflect the
activities of Seller pertaining to the Business. Seller has not, in
any manner that pertains to, or could affect, the Business or the
Purchased Assets, engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank
accounts and funds which have been and are reflected in the
normally maintained Corporate Records.
Section 7.6. Legal Proceedings . Except as set forth on Schedule 7.6
hereto, there is no Legal Proceeding (a) pending or, to the
Knowledge of Seller, threatened or anticipated against or affecting
Seller, the Business or the Purchased Assets (or to the Knowledge
of Seller, pending or threatened, against any of the officers,
directors or employees of Seller with respect to their business
activities related to or affecting the Business); (b) that
challenges or that may have the effect of preventing, making
illegal, delaying or otherwise interfering with any of the
transactions contemplated by this Agreement; or (c) related to the
Business or the Purchased Assets to which Seller is otherwise a
party. To the Knowledge of Seller, there is no reasonable basis for
any such Legal Proceeding.
Section 7.7. Real Property . Except as set forth in Schedule 7.7
hereto, Seller does not own any or leased real
property.
Section 7.8. No Violation of Laws or Agreements
. The Sale Order shall contain
findings by the Bankruptcy Court that the execution and delivery by
Seller of this Agreement and the Transaction Documents contemplated
hereby, the performance by Seller of its obligations hereunder and
thereunder and the consummation by Seller of the transactions
contemplated herein and therein will not violate in any material
respect, (i) any statute or Law or any judgment, decree, order,
regulation or rule of any court or Governmental Authority to which
Seller is subject; (ii) result in any breach of, or constitute a
default (or event which with the giving of notice or lapse of time,
or both, would become a default) under, or give to any Person any
rights of termination, amendment, acceleration or cancellation of,
or result in the creation of any Lien on any of the Purchased
Assets, any note, bond, mortgage, indenture, contract, agreement,
lease, license, Permit, franchise or other instrument to which
Seller is a party or by which any of the Purchased Assets are
bound; and (iii) contravene, conflict with or result in a violation
of any provision of any organizational documents of
Seller.
Section 7.9. Employee Benefits; ERISA Matters
.
(a) Schedule 7.9 hereto contains a complete list of all Employee
Plans (i) covering employees, directors or consultants or former
employees, directors or consultants in, or related to, the Business
and/or (ii) with respect to which Purchaser may incur any Liability
(“ Business Employee Plans ”). Seller has made
available to Purchaser true and complete copies of all Employee
Plans, including written interpretations thereof and written
descriptions thereof which have been distributed to Seller’s
employees and for which Seller has copies, all annuity contracts or
other funding instruments relating thereto, and a complete
description of all Employee Plans which are not in
writing.
(b) Neither Seller nor any ERISA Affiliate
sponsors, maintains, contributes to or has an obligation to
contribute to, or has sponsored, maintained, contributed to or had
an obligation to contribute to, any Pension Plan subject to Title
IV of ERISA, any Multiemployer Plan.
(c) Each Welfare Plan which covers or has covered
employees or former employees of Seller or of its Affiliates in the
Business and which is a “group health plan,” as defined
in Section 607(1) of ERISA, has been operated in compliance with
provisions of Part 6 of Title I, Subtitle B of ERISA and Section
4980B of the Code at all times.
(d) There is no Legal Proceeding outstanding,
relating to or seeking benefits under any Business Employee Plan
that is pending, threatened or anticipated against Seller, any
ERISA Affiliate or any Employee Plan.
(e) Neither Seller nor any ERISA Affiliate has any
liability for unpaid contributions under Section 515 of ERISA with
respect to any Welfare Plan (i) covering employees, directors or
consultants or former employees, directors or consultants in, or
related to, the Business and (ii) with respect to which Purchaser
may incur any Liability.
(f) There are no liens arising under the Code or
ERISA with respect to the operation, termination, restoration or
funding of any Business Employee Plan or arising in connection with
any excise tax or penalty tax with respect to any Business Employee
Plan.
(g) Each Business Employee Plan has at all times
been maintained in all material respects, by its terms and in
operation, in accordance with all applicable laws, including,
without limitation, ERISA and the Code.
(h) Seller and its ERISA Affiliates have made full
and timely payment of all amounts required to be contributed under
the terms of each Business Employee Plan and applicable Law or
required to be paid as expenses or as Taxes under applicable Laws,
under such Employee Plan, and Seller and its ERISA Affiliates shall
continue to do so through the Closing Date.
(i) Seller has no Business Employee Plan intended
to qualify under Section 401 of the Code.
(j) Neither the execution and delivery of this
Agreement or other related agreements by Seller nor the
consummation of the transactions contemplated hereby or thereby
will result in the acceleration or creation of any rights of any
person to benefits under any Employee Plan (including, without
limitation, the acceleration of the vesting or exercisability of
any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any
benefits under any Pension Plan or the acceleration or creation of
any rights under any severance, parachute or change in control
agreement).
(k) Neither Seller nor any ERISA Affiliate has
incurred any liability with respect to any Employee Plan, which may
create, or result in any liability to Purchaser.
(l) No amounts payable under the Business Employee
Plans will fail to be deductible for federal income tax purposes by
virtue of Section 280G of the Code.
Section 7.10. Labor Matters .
(a) Except as set forth on Schedule 7.10
hereto, there are no employment, consulting, severance or
indemnification contracts between the Seller and any of its
employees. Seller is not a party to any union contract or
collective bargaining agreement.
(b) Except as set forth on Schedule 7.10
hereto, (i) Seller is not party to or bound by any collective
bargaining or similar agreement with any labor organization; (ii)
no employees of Seller are represented by any labor organization;
(iii) Seller has no Knowledge of any union organizing activities
among the employees of the Seller; and (iv) during the past year,
there has been no actual or, to the Knowledge of Seller, threatened
strikes, slowdowns, work stoppages or lockouts affecting the
Seller.
(c) Except as set forth on Schedule 7.10
hereto, Seller is and has been in compliance with all notice and
other requirements under the WARN Act.
(d) Except as set forth on Schedule 7.10
hereto, to Seller’s Knowledge (i)
there are no material claims (i.e., claims not covered by
insurance) by any or on behalf of any of the employees of the
Business pending with respect to their employment or benefits
incident thereto with respect to sexual harassment and
discrimination claims and claims arising under workers’
compensation laws which are not ordinary course of business claims
for a business such as the Business (collectively, “
Employee Claims ”), and (ii) there have been no
organizational efforts known to Seller during the past five years
involving any of such employees to organize into a collective
bargaining unit.
Section 7.11. Transferred Intellectual Property
. Seller is the sole owner of the
Transferred Intellectual Property. Except as set forth on
Schedule 7.11 hereto, no claims have been asserted or
threatened nor has any Seller received notice of any such claim
that (i) the operations of Seller infringe upon or misappropriate
the rights of any other person in respect of any Transferred
Intellectual Property, or (ii) any Transferred Intellectual
Property or the use by Seller of such Transferred Intellectual
Property is invalid or unenforceable. To the Knowledge of Seller,
(i) no third party is engaging in any activity that infringes or
misappropriates the Transferred Intellectual Property and (ii)
Seller has not granted any material license or other right to any
third party with respect to the Transferred Intellectual
Property.
Section 7.12. Defaults . Seller filed for Chapter 11 on March 10, 2008,
and had numerous leases, contracts and agreements in default as set
forth on Schedule 7.12 hereto.
Section 7.13. Environmental Matters . Except as set forth on Schedule 7.13
hereto, (A) Seller is in compliance with all applicable
Environmental Laws, except where failure to be in compliance would
not have a Material Adverse Effect; (B) there is no Environmental
Claim pending against Seller; (C) Seller has obtained all material
permits, approvals, identification numbers, licenses or other
authorizations required under any applicable Environmental Laws
(the “ Environmental Permits ”) and is and has
been in compliance with their requirements; (D) to the Knowledge of
the Seller there are no underground or aboveground stora
