CONTRIBUTION
AGREEMENT
This CONTRIBUTION AGREEMENT (this “
Agreement ”), dated as of April 16, 2007, is by and
among Point.360, a California corporation (“ Point.360
”), New 360, a California corporation and wholly owned
subsidiary of Point.360 (“ New 360 ”), and DG
FastChannel, Inc., a Delaware corporation (“ DG
”). All capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Merger
Agreement (as defined below).
WHEREAS, Point.360, New 360, and DG are parties
to an Agreement and Plan of Merger and Reorganization, dated as of
the date hereof (the “ Merger Agreement ”),
pursuant to which, among other things, DG will acquire the ADS
Business of Point.360;
WHEREAS, pursuant to the Merger Agreement, DG
has agreed to commence an exchange offer (the “ Exchange
Offer ”) to acquire all of the issued and outstanding
shares (the “ Point.360 Shares ”) of the common
stock, no par value per share, of Point.360, in which Exchange
Offer each Point.360 Share validly tendered and not properly
withdrawn will be exchanged for a certain number of shares of
common stock, par value $0.001 per share, of DG (the “ DG
Common Stock ”) as provided in the Merger Agreement (such
amount of shares of DG Common Stock paid per Point.360 Share
pursuant to the Exchange Offer, the “ Exchange Offer
Consideration ”);
WHEREAS, the Merger Agreement provides that,
following the date (the “ Acceptance Date ”) on
which DG accepts for exchange, and exchanges the Exchange Offer
Consideration for, all Point.360 Shares validly tendered and not
withdrawn pursuant to the Exchange Offer, Point.360 will be merged
with and into DG, with DG continuing as the surviving
corporation;
WHEREAS, the Merger Agreement contemplates that,
on the Acceptance Date immediately prior to the consummation of the
Exchange Offer: (i) Point.360 will contribute to New 360 all of the
Excluded Assets in exchange for shares of New 360 common stock;
(ii) New 360 will assume all of the Assumed Liabilities; and (iii)
immediately thereafter, Point.360 will distribute to its
shareholders (other than DG), on a pro rata basis, without
consideration being paid by such shareholders, all then-outstanding
shares of New 360 common stock (the “ Spin-Off
”);
WHEREAS, it is the intention of the parties to
this Agreement that the contribution by Point.360 of the Excluded
Assets to New 360 and the assumption of the Assumed Liabilities by
New 360, together with the Spin-Off, will qualify as a
reorganization within the meaning of Sections 368(a)(1)(D) and 355
of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the mutual
covenants and promises contained in this Agreement and in the
Merger Agreement and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties
to this Agreement hereby agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following
terms shall have the respective meanings set forth
below:
(a) “ Acceptance Date ” has the
meaning set forth in the recitals to this Agreement.
(b) “ Agreement ” has the
meaning set forth in the first paragraph of this
Agreement.
(c) “ Assumption of Assumed
Liabilities ” has the meaning set forth in Section
2(b) .
(d) “ Books and Records ” means
all books of account, ledgers, general, financial, legal,
regulatory, Tax, accounting, personnel and employment records,
files, customer lists, sales and promotional literature,
correspondence, manuals, data, papers and other information,
whether in hard copy or computer or other format, of Point.360
and/or IVC.
(e) “ Cash ” as of any specified
date means cash and cash equivalents calculated net of issued but
uncleared checks and drafts.
(f) “ CBS Agreement ” has the
meaning set forth in Section 2(f) of this
Agreement.
(g) “ Contribution ” has the
meaning set forth in Section 2(b) .
(h) “ DG ” has the meaning set
forth in the first paragraph of this Agreement.
(i) “ DG Common Stock ” has the
meaning set forth in the recitals to this Agreement.
(j) “ DG Confidentiality Agreement
” has the meaning set forth in Section 3(b)(ii)
.
(k) “ Exchange Offer ” has the
meaning set forth in the recitals to this Agreement.
(l) “ Exchange Offer Consideration
” has the meaning set forth in the recitals to this
Agreement.
(m) “ Indemnification Agreement
” has the meaning set forth in Section 6 .
(n) “ IVC ” means International
Video Conversions, Inc., a California corporation and wholly owned
subsidiary of Point.360.
(o) “ Licensed IP ” has the
meaning set forth in Section 4(a) .
(p) “ Merger Agreement ” has the
meaning set forth in the recitals to this Agreement.
(q) “ Merger Effective Time ”
means the time at which the merger of Point.360 with and into DG
that is contemplated by the Merger Agreement becomes effective in
accordance with the Delaware General Corporation Law and the
California General Corporation Law.
(r) “ New 360 ” has the meaning
set forth in the first paragraph of this Agreement.
(s) “ Non-ADS Real Property Leases
” means the six (6) leases or sub-leases by Point.360 of real
property that are described in Schedule A to this
Agreement.
(t) “ Point.360 ” has the
meaning set forth in the first paragraph of this
Agreement.
(u) “ Point.360 Shares ” has the
meaning set forth in the recitals to this Agreement.
(v) “ Spin-Off ” has the meaning
set forth in the recitals to this Agreement.
(w) “ Tax Attribute ” means a
net operating loss, net capital loss, investment credit, foreign
Tax credit, excess charitable contribution, general business credit
or any other item of loss, deduction or credit that could reduce a
Tax liability.
(x) “ Tax Item ” means any item
of income, gain, loss, deduction, credit, recapture of credit or
any other item (including the basis or adjusted basis of property)
which increases or decreases Income Taxes paid or payable in any
taxable period.
(y) “ Tentative Tax Item Allocation
” has the meaning set forth in Section 7 .
(z) “ Tentative Tax Item Allocation
Date ” has the meaning set forth in Section 7
.
(aa) “ Transfer ” or “
Transfers ” means the contribution, assignment,
conveyance and transfer.
(bb) “ Transfer of Excluded Assets
” has the meaning set forth in Section 2(a)
.
SECTION 2. CONTRIBUTION AND
SPIN-OFF
(a) Transfer of Excluded Assets by Point.360 to New
360 . Effective as of
immediately prior to DG’s consummation of the Exchange Offer
on the Acceptance Date, Point.360 hereby Transfers to New 360 (the
“ Transfer of Excluded Assets ”), in exchange
for the concurrent issuance by New 360 to Point.360 of a number of
shares of New 360 common stock equal to the number of Point.360
Shares outstanding on the Acceptance Date (other than Point.360
Shares owned by DG), all of the right, title and interest of
Point.360 and/or IVC in and to all of the Excluded Assets.
Point.360 shall retain all of its right, title and interest in and
to all of the Acquired Assets.
(b) Assumption of Assumed Liabilities by New
360 . Effective as of
immediately prior to DG’s consummation of the Exchange Offer
on the Acceptance Date, Point.360 hereby delegates to New 360, and
New 360 hereby assumes from Point.360, and agrees to pay, perform,
discharge and fulfill, all of the Assumed Liabilities (the “
Assumption of Assumed Liabilities ” and, together with
the Transfer of Excluded Assets, the “ Contribution
”).
(c) Spin-Off of New 360 Common Stock
. On the Acceptance Date immediately
following the Contribution but immediately prior to DG’s
consummation of the Exchange Offer, Point.360 shall distribute to
its shareholders (other than DG), on a pro rata basis,
without consideration being paid by such shareholders, all of the
outstanding shares of New 360 common stock. Subject to any
limitations imposed by applicable law, Point.360 shall be entitled
to select the record date to be used in determining the
shareholders entitled to receive the distribution of shares of New
360 common stock in the Spin-Off; provided that such record
date must be prior to the Acceptance Date.
(d) Further Assurances . This Agreement is intended by the parties to
fully evidence and carry out (without the need for additional
documents) the Acceptance Date Transfer of the Excluded Assets by
Point.360 to New 360 pursuant to Section 2(a) and the
Acceptance Date assumption by New 360 of the Assumed Liabilities
pursuant to Section 2(b) ; provided , however
, from and after the Acceptance Date, (i) if requested by New 360,
Point.360 shall execute and deliver to New 360 a bill of sale or
similar instrument that further evidences the Transfer of the
Excluded Assets to New 360 and/or stock powers with respect to the
Transfer of the capital stock of IVC to New 360, and (ii) if
requested by Point.360 or DG, New 360 shall execute and deliver to
Point.360 an assumption agreement or similar instrument that
further evidences New 360’s assumption of the Assumed
Liabilities. Each such instrument must be in form and substance
reasonably satisfactory to Point.360, New 360 and DG. Without
limiting the generality of the foregoing, from and after the
Acceptance Date, each of Point.360, New 360 and DG shall cooperate
with the other parties in executing and delivering any other
instruments necessary to effectuate the Contribution as may be
reasonably requested by any other party from time to time, in each
case consistent with the terms of this Agreement.
(e) Conditions to Point.360’s
Obligations . Point.360
shall not be obligated to Transfer the Excluded Assets to New 360,
and New 360 shall not be obligated to assume the Assumed
Liabilities, unless and until (i) the Form 10 to be filed by New
360 with the SEC has been declared effective under the Exchange
Act, and no stop order with respect thereto is in effect and (ii)
DG has given Point.360 at least one (1) business day’s prior
written notice of the Acceptance Date.
(f) CBS Agreement . Point.360 and CBS Worldwide Distribution, CBS
Broadcasting, Inc. are parties to an Agreement, dated January 31,
2006 (the “ CBS Agreement ”), that constitutes
an Excluded Asset. New 360 hereby agrees that: (i) it shall comply
with the terms of the CBS Agreement from and after the Acceptance
Date; (ii) it shall not use any products or services under the CBS
Agreement from and after the Acceptance Date; and (iii) it shall
not allow any renewal, extension or further assignment of the CBS
Agreement.
(g) No Representations or Warranties
. This Agreement shall not be
construed as containing, expressly or by implication, any
representations or warranties by Point.360, New 360 or DG regarding
(i) the nature, condition, amount or value of any Acquired Assets,
Assumed Liabilities, Excluded Assets or Retained Liabilities, (ii)
any consents, waivers or approvals from Governmental Entities and
other third parties that are required to be obtained in connection
with the transactions contemplated by this Agreement or (iii) the
absence of security interests, liens, claims and other encumbrances
with respect to any Acquired Assets or Excluded Assets. All
Acquired Assets and Excluded Assets are being transferred or
retained, as applicable, on an “as is,” “where
is” basis.
SECTION 3. RETENTION BY POINT.360 OF THE
ACQUIRED ASSETS AND RETAINED LIABILITIES
(a) For the avoidance of doubt, from and after the
Contribution: (i) Point.360 shall retain all of its right, title
and interest in and to the Acquired Assets to the same extent that
such right, title, and interest existed immediately prior to the
Contribution; (ii) Point.360 shall retain the obligation to pay,
perform, discharge and fulfill all of the Retained Liabilities;
(iii) New 360 shall have no right, title or interest in or to any
of the Acquired Assets; and (iv) New 360 shall have no obligation
to pay, perform, discharge or fulfill any of the Retained
Liabilities.
(b) Books and Records .
(i) For a period of at least five years after the
Acceptance Date (or the later of the applicable statute of
limitations for Books and Records relating to Taxes), New 360 shall
retain the Books and Records that constitute Excluded Assets. For a
period of at least five years after the Acceptance Date (or the
later of the applicable statute of limitations for Books and
Records relating to Taxes), Point.360 and DG shall retain the
minute books and share record books relating to Point.360 and the
Books and Records that constitute Acquired Assets.
(ii) During the five-year period after the
Acceptance Date (or the later period described in Section
3(b)(i) for Books and Records relating to Taxes), each of New
360, on the one hand, and DG and Point.360, on the other hand,
shall provide to the other party and its authorized accountants,
counsel and other designated representatives, promptly after
receipt of a written request from the requesting party and with any
related out-of-pocket expenses to be paid by the requesting party,
reasonable access during normal business hours to the Books and
Records that such providing party is required to retain pursuant to
the terms of Section 3(b)(i) , subject to appropriate
restrictions for classified, privileged or confidential
information; provided , however , a request for
access that is made by New 360, DG or Point.360, as applicable,
must specify in reasonable detail the Books and Records to which
such requesting party desires access, and such request must specify
a legitimate business purpose for such access; provided ,
further , however , (i) in the case of a request by
DG or Point.360, such request must relate solely to Books and
Records relating to the Acquired Assets, the Retained Liabilities
or the ADS Business and (ii) in the case of a request by New 360,
such request must relate solely to Books and Records relating to
the Excluded Assets, the Assumed Liabilities or Point.360’s
business prior to the Merger Effective Time. The confidentiality
provisions contained in Section 1 of the Noncompetition Agreement
to be entered into by and between DG and New 360 shall govern the
use and disclosure of any ADS Confidential Information (as defined
in said agreement) that is obtained by New 360 pursuant to this
Section 3(b)(ii) . The Confidentiality Agreement, dated
August 16, 2006, by and between DG and Point.360, as amended on
April 16, 2007 to add New 360 as a party thereto (the “ DG
Confidentiality Agreement ”), shall govern the
obligations owed to New 360 regarding the use and disclosure of any
Confidential Information (as defined in said agreement) that is
obtained by DG or Point.360 pursuant to this Section
3(b)(ii) .
(iii) Nothing in this Section 3(b) shall
require any party to violate any agreement with any third party
regarding the confidentiality of confidential and proprietary
information relating to that third party or its business;
provided , however , that in the event that a party
is otherwise required to disclose any such information pursuant to
this Section 3(b) , such party shall use commercially
reasonable efforts to seek to obtain a consent from such third
party to the disclosure of such information.
(iv) After the Acceptance Date, each of New 360,
Point.360 and DG may receive from third parties mail, packages and
other communications properly belonging to another party. The
receiving party shall promptly deliver such mail, packages or other
communications at its expense to the proper party.
(v) New 360 shall promptly deliver any Books and
Records which are in electronic format or otherwise and which
constitute Acquired Assets to DG upon written request;
provided that such Books and Records are identified with
reasonable specificity in such request. Notwithstanding anything in
this Agreement to the contrary, New 360 shall not be obligated to
deliver any Books and Records which are in electronic format (other
than those Books and Record specifically identified in Schedule
C ) unless and until a request for such Books and Records is
received in accordance with the immediately preceding
sentence.
(c) Point.360 Lockbox . From and after the Acceptance Date, New 360
shall remit to DG on a weekly basis any payments received by New
360 in respect of accounts receivable constituting Acquired Assets
(regardless of the manner in which such payments are received by
New 360).
SECTION 4. INTELLECTUAL PROPERTY
LICENSES
(a) Effective upon the consummation of the
Contribution, New 360 hereby grants to Point.360 and DG a
non-exclusive, non-transferable, royalty-free license for a term of
five (5) years after the Acceptance Date to use, solely in
connection with the operation of the ADS Business, all Intellectual
Property constituting Excluded Assets that is currently used in the
conduct of the ADS Business (the “ Licensed IP
”); provided that New 360 shall not further license
the Licensed IP to any third party engaged in a business equivalent
to the ADS Business. Neither Point.360 nor New 360 makes any
representation or warranty, expressed or implied, regarding any of
the Licensed IP. Neither Point.360 nor DG shall have the right to
use any of the Licensed IP after the expiration of the five-year
term described in this Section 4(a) . DG hereby agrees to
pay any license fees or other fees owed by New 360 to third party
licens
