AGREEMENT AND PLAN OF MERGER
by and among
AVENUE ENTERTAINMENT GROUP, INC.,
a Delaware corporation,
LCA ACQUISITION SUBSIDIARY, INC.,
a California corporation,
LCA PRODUCTIONS, INC.,
a Nevada corporation ,
and
DOUBLE BAY ENTERTAINMENT, INC.,
a Nevada corporation
November 21, 2000
i
TABLE OF CONTENTS
Page
Section 1. Definitions 1
Section 2 The Merger Transactions 2
2.1 The Merger 2
2.2 Use of Name; Articles of Incorporation and Bylaws 2
2.3 Conversion and Exchange of Shares 2
2.4 Closing 3
2.5 Further Assurances 3
Section 3 Representations and Warranties of LCA and DBE 3
3.1 Shareholders 3
3.2 Corporate Organization and Good Standing 4
3.3 Capitalization 4
3.4 Subsidiaries 4
3.5 Financial Statements 4
3.6 Absence of Undisclosed Liabilities 4
3.7 Absence of Certain Changes 4
3.8 Litigation 4
3.9 Contracts 5
3.10 Title and Leases 5
3.11 Condition of Tangible Assets 5
3.12 Tax Returns and Corporate Status 5
3.13 No Violation 5
3.14 Consents and Approvals 5
3.15 Authority 5
3.16 Hazardous Waste and Materials 6
3.17 Employee and Employee Benefit Matters 6
3.18 Proprietary Rights 6
3.19 Insurance 6
3.20 Reliance 6
3.21 Merger Consideration 7
3.22 Restrictive Legend 7
3.23 Full Disclosure 7
3.24 Legal and Tax Advice 7
Section 4 Representations and Warranties of Parent 8
4.1 Corporate Organization, Good Standing, and Capitalization 8
4.2 Authority 8
4.3 Consents and Approvals 8
4.4 Shares to Be Issued 8
4.5 No Material Adverse Change 8
Section 5 Representations and Warranties of Subsidiary 8
5.1 Corporate Organization, Good Standing, and Capitalization 8
5.2 Authority 9
5.3 Consents and Approvals 9
5.4 Liabilities 9
5.5 Continued Activity 9
Section 6 Additional Shares 9
6.2 Issuance of Additional Shares 9
6.2 Further Rights of DBE to Receive Additional Shares 9
6.3 Expiration of Rights to Receive Additional Shares 10
Section 7 Conduct of LCA and DBE Pending the Closing 10
7.1 Certificate of Incorporation and Bylaws 10
7.2 Capitalization 10
7.3 Additional Actions 10
7.4 Conduct of Business 10
7.5 No Solicitation 10
7.6 Notification of Certain Matters 11
7.7 Information 11
7.8 Announcement 11
Section 8 Covenants of Parent and Subsidiary Pending the Closing 11
8.1 Written Consent of Subsidiary's Sole Stockholder 11
8.2 Information 11
8.3 Contribution to Subsidiary 11
Section 9 Conditions to Obligations of Parent and Subsidiary 11
9.1 Representations and Warranties True 12
9.2 Absence of Litigation 12
9.3 Requisite Approvals and Consents 12
9.4 Governmental Permits 12
9.5 Due Diligence 12
9.6 Deliveries 12
Section 10 Conditions to Obligations of LCA 12
10.1 Representations and Warranties True 12
10.2 Absence of Litigation 12
10.3 Requisite Approvals and Consents 12
10.4 Governmental Permits 12
10.5 Deliveries 13
Section 11 Termination 13
11.1 Circumstances of Termination 13
11.2 Effect of Termination 13
Section 12 Certain Post-Closing Matters 13
12.1 Limitations on Sales of Parent Stock 13
12.2 Restrictive Legends 13
12.3 Board of Directors of Subsidiary 13
Section 13 Indemnification 13
13.1 Indemnifications 13
Section 14 General Provisions 15
14.1 Acknowledgment 15
14.2 Alterations and Waivers 15
14.3 Attorneys' Fees 16
14.4 Post Judgment Fees 16
14.5 Authority to Execute 16
14.6 Choice of Laws 16
14.7 Confidentiality 16
14.8 Counterparts 16
14.9 Cumulative Rights 16
14.10 Enforceability and Severability 16
14.11 Entire Agreement 16
14.12 Exhibits 17
14.13 Fictitious Business Name 17
14.14 Further Acts 17
14.15 Recitals 17
14.16 Arbitration 17
14.17 Survival 17
14.18 Headings 17
14.19 Assignability 17
14.20 Notices 17
14.21 Parties 17
14.22 Time of Essence 18
14.23 Costs of Transaction 18
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
November 21, 2000 (the "Execution Date"), is entered into by and among AVENUE
ENTERTAINMENT GROUP, a Delaware corporation (the "Parent"), LCA ACQUISITION
SUBSIDIARY, INC., a California corporation (the "Subsidiary"), LCA PRODUCTIONS,
INC., a Nevada corporation ("LCA"), and DOUBLE BAY ENTERTAINMENT, INC., a Nevada
corporation and the holder of all of the issued and outstanding shares of stock
of LCA ("DBE").
WHEREAS, the Boards of Directors of Parent, Subsidiary, LCA and DBE
deem the merger of LCA into Subsidiary on the terms herein set forth to be
desirable and in the best interests of their stockholders and have approved this
Agreement, and the boards of directors (or other governing body) of Subsidiary,
LCA and DBE have directed that the Agreement be submitted to their respective
stockholders for approval.
NOW, THEREFORE, Subsidiary and LCA agree that LCA shall be merged into
Subsidiary, which shall be the surviving corporation, and that the plan, terms
and conditions of such merger shall be as follows:
Section 1 Definitions
This Section 1 sets forth certain defined terms used from time to time
in this Agreement. Additional terms are defined in the text of the Agreement.
"Affiliate" shall mean: (a) any corporation, association, partnership,
joint venture, limited liability company, other organization or entity (i) for
which a party, directly or indirectly, owns 10% or more of the voting stock of
such entity or otherwise owns 10% or more of the equity interests in such
entity, or (ii) for which a party has the capacity to cause the direction and
management of the policies or operations of such entity, whether through
ownership of voting securities, partnership interests or other debt or equity
securities, employment contracts or relationships, or other means.
"Best Knowledge" shall mean the actual knowledge of the officers of a
party, plus such additional knowledge as might be obtained through discussions
with the officers and employees of such party and a review of the business
records of such party (in each case tailored, as reasonably appropriate, in
order to assess all material information with respect to the subject topic).
"Closing Date" shall mean November 22, 2000 or such later date as may
be selected by Parent, with the approval of LCA (which approval shall not be
unreasonably withheld); provided, however, that the Closing Date shall take
place no later than November 30, 2000.
"Constituent Corporations" shall mean Subsidiary and LCA.
"Merger" shall mean the merger of LCA into Subsidiary as contemplated
by Section 2.2 hereof.
"Parent Stock" shall mean the common stock, par value $.001 per share,
of Parent.
"Transaction Documents" means this Agreement and any additional
agreement or instrument required to be executed and delivered by a party
pursuant to the terms of any of the foregoing.
Section 2 The Merger Transactions
2.1 The Merger. On the Closing Date, LCA shall be merged into
Subsidiary (Subsidiary being the surviving corporation), the separate existence
of LCA shall cease and Subsidiary as the surviving corporation shall continue
its corporate existence under the laws of the State of Delaware under the name
of LCA Acquisition Sub, Inc., or such other name as may thereafter be determined
by its Board of Directors. Subsidiary shall possess (i) all the rights,
privileges, powers and franchises of a public as well as private nature and be
subject to all of the restrictions and duties of LCA; (ii) all rights,
privileges, powers, and franchises of LCA and all property, real, personal,
tangible and intangible belonging to LCA shall be vested in Subsidiary; and
(iii) all property, rights, privileges, powers, and franchises and every other
interest shall be the property of Subsidiary as they were of LCA, and the title
to any real estate vested by deed or otherwise in LCA shall not revert or be in
any way impaired by reason of this Merger, provided that all rights of
creditors, and all liens upon any property of LCA, shall be preserved unimpaired
and all debts, liabilities and duties of LCA shall thenceforth attach to
Subsidiary and may be enforced against Subsidiary to the same extent as if said
debts, liabilities and duties had been incurred or contracted by Subsidiary. The
parties intend for the Merger to qualify as a tax free reorganization or
tax-free exchange under the Internal Revenue Code of 1986, as amended (the
"Code").
Without limiting the generality of the foregoing, the parties
understand and agree that DBE has developed and owns all right, title and
interest in and to a series of proposed theatrical quality, feature length
motion picture projects known as "The Adventures Of . . ." (the "Film Series"),
including all ancillary rights therein and thereto, all as more particularly
described in Appendix A attached hereto and incorporated herein ("Appendix A").
In connection with the Film Series, DBE has engaged LCA to manage and supervise,
on DBE's behalf, the production of the first four (4) films in the Film Series,
tentatively entitled "The Adventures of a Boy Named ▇▇▇▇▇▇," "The Adventures of
a Girl Named Guinevere," "The Adventures of a Boy Named Parsifal," and "The
Adventures of a Boy Named Lancelot," and also to produce additional films in the
Film Series, pursuant to a that certain Production Services License Agreement
between DBE and LCA dated as of October 15, 2000, a copy of which is attached
hereto and incorporated herein, as the same may be hereafter modified or amended
by the mutual agreement of Subsidiary and DBE (the "Production Agreement").
Following the Closing, Subsidiary shall be entitled to all of the benefits and
rights, including, but not limited to, the right to receive any and all
compensation, payments, fees, reimbursements and profit participation rights
under the Production Agreement, and shall perform all of the services and
obligations of LCA under the Production Agreement. Without limiting the
foregoing, the rights to which LCA shall be entitled under and pursuant to the
Production Agreement shall include, without limitation, the right to provide
production services in connection with any sequels, remakes, spinoffs,
additional films in the Film Series and television rights.
2.2 Use of Name; Certificate of Incorporation and Bylaws. The parties
agree to take whatever actions Subsidiary deems necessary or appropriate to
ensure that the "LCA Productions, Inc." name is available to Subsidiary for its
use from and after the Closing. By way of example only, within the discretion of
Subsidiary, (a) the certificate of incorporation of Subsidiary may be amended,
by changing Article I thereof so as to read in its entirety as follows: "The
name of the corporation is LCA Productions, Inc." or (b) Subsidiary may use such
name as a d.b.a. The certificate of incorporation and bylaws of Subsidiary in
effect immediately prior to the Closing otherwise shall continue to be the
certificate of incorporation and bylaws of Subsidiary, as the surviving
corporation, from and after the Merger (subject to the rights under applicable
law of the stockholders and the board of directors of Subsidiary to effect
changes thereto in their sole discretion).
2.3 Conversion and Exchange of Shares. The manner of converting or
exchanging the shares of stock of each of the Constituent Corporations in
connection with the Merger shall be as follows:
(a) The Merger shall effect no change in any of the shares of
Subsidiary stock, and none of its shares shall be converted or issued as a
result of the Merger.
(b) As a result of the Merger, the capital stock of LCA
outstanding immediately prior to the Merger will be converted in the aggregate
into the right to receive 800,000 of shares of Parent Stock (subject to any
adjustment required pursuant to Section 6 below).
(c) DBE acknowledges and agrees that, as of the Closing Date,
the Parent Stock to be provided pursuant to this Agreement shall not have been
registered or qualified in accordance with applicable federal or state
securities laws as of the date of issuance. Notwithstanding this provision,
however, Parent agrees that, prior to December 31, 2000, Parent will cause to be
filed a registration statement.
2.4 Closing. The Closing shall be held at the principal offices of
Parent, unless another place is agreed upon in writing by the parties; it being
understood that deliveries of the documents contemplated by this Section 2.4 may
be effected by U.S. mail, overnight courier or facsimile (to be followed by mail
or overnight courier). In connection with the Closing, the parties shall cause
the following steps to be taken:
(a) Subsidiary and LCA shall file an Agreement of Merger
substantially in the form of Exhibit "A" attached hereto (the "Agreement of
Merger"). The Agreement of Merger shall be executed and filed in the office of
the Secretary of State for the State of California.
(b) Subsidiary shall deliver to DBE 400,000 shares of Parent
Stock described in Section 2.3(b) hereof. The remaining 400,000 shares of Parent
Stock (the "Additional Shares") will be held by Parent in accordance with the
provisions of Section 6 of this Agreement.
(c) DBE shall surrender to Subsidiary for cancellation the
certificates or other evidence of ownership representing all of the issued and
outstanding shares of stock in LCA. Until so presented and surrendered, each
certificate (or other evidence of ownership) which represents shares of stock in
LCA shall be deemed for all purposes to evidence ownership of the Parent Stock
into which such shares have been converted pursuant to the Merger. However,
until surrender of the certificates or other evidence of ownership in LCA, DBE
shall not be entitled to vote any shares of Parent Stock acquired hereunder at
any meeting of Parent's stockholders.
2.5 Further Assurances. From time to time as and when requested by
Parent, Subsidiary or their respective successors or assigns, DBE and the
officers of LCA last in office shall execute and deliver such deeds and other
instruments and shall take or cause to be taken such other actions as shall be
necessary to vest or perfect in or to confirm or record or otherwise,
Subsidiary's title to, and possession of, all the property, interests, assets,
rights, privileges, powers, franchises, and authority of LCA, and otherwise to
carry out the purposes of this Agreement.
Section 3 Representations and Warranties of LCA and DBE
LCA and DBE each represent and warrant to Parent and Subsidiary that
the following are and shall be true and correct as of the date hereof, and will
be true and correct as of the Closing Date:
3.1 Shareholders. DBE is the only shareholder of LCA. DBE further
represents and warrants that as of the Execution Date, it owns all of the issued
and outstanding shares of LCA free and clear of all liens, encumbrances and any
liabilities.
3.2 Corporate Organization and Good Standing. LCA and DBE are each a
corporation duly formed, validly existing and in good standing under the laws of
the State of Nevada, with full corporate power and authority to conduct its
business as it presently is being conducted and to own and lease its properties
and assets. LCA is qualified to do business as a foreign corporation in each
jurisdiction, if any, in which its property or business requires such
qualification. Copies of the Articles of Incorporation and Bylaws of LCA, and
all amendments thereto, heretofore delivered to Parent are accurate and
complete.
3.3 Capitalization. As of the Execution Date, 1,000 shares in LCA were
issued and outstanding, and all such shares were validly issued, fully paid and
non-assessable. As of the Closing Date, 1,000 shares in LCA will be issued and
outstanding, all of which will be issued to DBE, and all of such shares will be
fully paid and nonassessable and will be free and clear of any and all liens,
encumbrances and liabilities. There are no options, warrants or rights
outstanding of any kind to purchase or acquire shares or any other equity
interest in LCA, and there will be none as of the Closing Date.
3.4 Subsidiaries. LCA has no subsidiaries and LCA has no direct or
indirect stock or other equity or ownership interest (whether controlling or
not) in any corporation, association, partnership, joint venture or other
entity, and will have none as of the Closing Date.
3.5 Financial Statements. LCA's balance sheet as of October 31, 2000, a
copy of which has previously been delivered to Parent and Subsidiary
(collectively, the "Balance Sheet"), fairly presents in all material respects
the financial condition of LCA as of said dates and the results of its
operations for the periods then ended, on an accrual basis and in conformity
with generally accepted accounting principles consistently applied for the
periods covered. The accounts receivable set forth on the Balance Sheet, if any,
represent bona fide claims of LCA against debtors for sales, services performed
or other charges arising on or before the date hereof, and all the goods
delivered and services performed which gave rise to said accounts were delivered
or performed in accordance with the applicable orders, Contracts (as defined
below) or customer requirements. Such accounts receivable are subject to no
defenses, counterclaims or rights of setoff and are fully collectible in the
ordinary course of business without cost in collection efforts therefor.
3.6 Absence of Undisclosed Liabilities. Except to the extent reflected
or reserved against in LCA's Balance Sheet, as of the Closing Date LCA will not
have any liabilities or obligations (secured, unsecured, contingent or
otherwise). LCA does not have any liabilities, obligations or indebtedness to
any Shareholder or any other person, other than any obligations under or
pursuant to the Production Agreement.
3.7 Absence of Certain Changes. (a) LCA has not incurred, since the
date of the Balance Sheet, any additional liabilities or accrued payables, and
(b) there have been no material adverse changes in the business, properties, or
financial condition of LCA since October 30, 2000. Specifically, since October
30, 2000, there have been (i) no sales, assignments or transfers of any of the
assets of LCA; (ii) no failure to repay any material obligation of LCA; (iii) no
changes in accounting methods or practices by LCA affecting its assets,
liabilities or business; and (iv) no issuance by LCA of, or commitment of LCA to
issue, any shares or other equity securities. DBE acknowledges that it has no
claims of any nature against LCA, Parent or Subsidiary arising out of the
business of LCA, any indebtedness of LCA to it or the relationship between LCA
and it, including, but not limited to, any claim for breach of contract, unpaid
monies, or recovery of possession of personal property. DBE further acknowledges
that it has not heretofore assigned, transferred or purported to transfer to any
person or entity any obligation, liability, claim, demand, action or cause of
action against LCA, Parent or Subsidiary.
3.8 Litigation. There is no litigation, proceeding, or investigation
pending or, to the Best Knowledge of DBE or LCA, threatened against LCA. In
addition, LCA and DBE have no knowledge of any facts or circumstances that could
lead to any such litigation or arbitration against LCA (including, without
limitation, litigation or arbitration that might be brought by past or present
employees of LCA), which, if decided adversely, could have a material adverse
effect on LCA.
3.9 Contracts. LCA is not a party to any contract other than the
Production Agreement. LCA and DBE have each duly performed all of its respective
obligations under the Production Agreement to the extent those obligations to
perform have accrued, and no material violation of, or material default or
breach under the Production Agreement by LCA or DBE has occurred.
3.10 Title and Leases. LCA has good and valid title to all property
included in the Balance Sheet, and will have good and marketable title thereto
as of the Closing Date. LCA is not a party to any lease, mortgage, encumbrance,
or lien of any kind.
3.11 Condition of Tangible Assets. Any tangible assets of LCA are in
good operating condition and repair (except for ordinary wear and tear and any
defect the cost of repairing which would not be material), are sufficient for
the operation of LCA's business as presently conducted and are in conformity in
all material respects with all applicable laws, ordinances, orders, regulations
and other requirements (including applicable zoning, environmental, motor
vehicle safety or standards, occupational safety and health laws and
regulations) relating thereto currently in effect, except where the failure to
conform would not have a material adverse effect on the business or financial
condition of LCA.
3.12 Tax Returns and S Corporation Status. Any federal income tax
returns of LCA that are required to have been filed by LCA, if any, have been
filed with the Internal Revenue Service, and LCA has provided Parent with
accurate and complete copies of any such federal and state income tax returns
filed for LCA. LCA has reserved adequate amounts to cover any federal and state
taxes that may be assessed against LCA in respect of its business and its
operations during the periods prior to the Closing Date.
3.13 No Violation. Neither the execution, delivery or performance of
this Agreement nor the consummation of the Merger will constitute or result in a
breach or default under any provision of any charter, bylaw, indenture,
mortgage, lease, or agreement, or any order, judgment, decree, law, or
regulation to which any property of LCA is subject or by which LCA is bound,
except for breaches or defaults which in the aggregate would not have a material
adverse effect on LCA's properties, business operations or financial condition.
LCA has complied with and is not in violation of any applicable federal, state
or local laws and regulations affecting the operation of its business, except
(i) for any such noncompliance which in the aggregate would not have a material
adverse effect on LCA's properties, business operations or financial condition
and (ii) the provisions of this Section 3.13 shall not apply to environmental
laws, which are the subject of Section 3.16 hereof.
3.14 Consents and Approvals. Except as specifically contemplated by
this Agreement, no consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority, or any other
person or entity, is required to be made or obtained by DBE or LCA in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
3.15 Authority. DBE has all requisite power and authority, and has
taken all action necessary, to execute and deliver this Agreement, to consummate
the transactions contemplated hereby and to perform his or her obligations
hereunder. LCA has all requisite power and authority, and has taken all action
necessary, to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform its obligations hereunder. The execution and
delivery of this Agreement by LCA and DBE, and the consummation by LCA and DBE
of the transactions contemplated hereby have been duly approved by the
respective Boards of Directors of LCA and DBE. No other proceedings, on the part
of DBE or LCA are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by DBE
and LCA and is a legal, valid and binding obligation of DBE and LCA enforceable
against each of them in accordance with its terms.
3.16 Hazardous Waste and Materials. LCA has been in compliance with all
environmental laws including, but not limited to, those spelled out in the
Comprehensive Environmental Resource Compensation and Liability Act, 42 U.S.C.
ss.9600 et seq., Resources Conservation and Recovery Act, 42 U.S.C., ss.6900 et
seq., Clean Water Act, 33 U.S.C. ss.1251 et seq., as well as other federal,
state and local laws which relate to the creation, storage and disposal of
hazardous materials (except to the extent that noncompliance therewith would not
have a material adverse effect upon the properties, business operations or
financial condition of LCA). There are no claims pending or, to the Best
Knowledge of DBE or LCA, threatened, by any person or agency, against LCA or any
property owned or leased by LCA under any environmental laws (and no
circumstances have occurred which could form the basis for any such claims). LCA
has not created, utilized, stored nor disposed of, or suffered the existence of,
any material or substance which may be hazardous on any property or land owned
or leased by LCA, except in accordance with all applicable laws and in the
ordinary course of its business.
3.17 Employee and Employee Benefit Matters. As of the date of this
Agreement, LCA has no employees and is not a party to any employee benefit plans
including, but not limited to, pension, stock bonus, 401(k), employee stock
ownership, money purchase, stock option, cafeteria, medical expense
reimbursement or phantom stock plans.
3.18 Proprietary Rights. LCA does not own any domestic or foreign
federal, state and foreign registrations of trademarks, patents or copyrights or
other marks, trade names or other trade rights, or any pending applications for
any such registrations, patents and copyrights (collectively, "Proprietary
Rights"). LCA does not have any obligation to compensate any person for the use
of any Proprietary Rights, nor has LCA granted to any person any license, option
or other rights to use in any manner any Proprietary Rights, whether requiring
the payment of royalties or not.
3.19 Insurance. LCA has maintained all necessary policies of fire,
liability, title, worker's compensation and product liability which relate to
its business, the assets of the business and its employees. Such insurance
provides, and during such period provided, coverage to the extent and in the
manner as may be required by law and by any and all Contracts to which LCA is a
party. LCA is not in default under any of such policies or binders, and LCA has
not failed to give any notice or to present any claim under any such policy or
binder in a due and timely fashion. There are no existing facts or circumstances
upon which an insurer might be justified in reducing coverage or increasing
premiums on existing policies or binders. No insurer has advised LCA that it
intends to reduce coverage, increase premiums or fail to renew any existing
policy or binder. There are no outstanding unresolved claims under any such
policies or binders. All policies and binders provide sufficient coverage for
the risks insured against, are in full force and effect on the date hereof and
shall be kept in full force and effect through the Closing Date.
3.22 Reliance. DBE, either alone or with a purchaser representative (as
such term is defined in Rule 501(h) under the Securities Act), has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in the Parent Stock it will
receive pursuant hereto. LCA and DBE, and their respective advisors, have been
given access to public information to permit them to fairly and adequately
analyze the respective businesses, properties, assets and liabilities of Parent
and Subsidiary, and to make an informed assessment as to the appropriateness and
commercial reasonableness of the transactions contemplated hereby. Based upon
their independent review of such information, LCA and DBE have determined to
proceed with the transactions contemplated hereby without reliance upon any
representations or warranties of Parent and Subsidiary except as specifically
set forth herein and in the public records and securities filings of Parent.
3.23 Merger Consideration. The Parent Stock to be delivered at the
Closing, and any of the Parent Stock delivered thereafter as provided herein, is
being acquired for DBE's own account, with no intention of assigning any
participation or interest therein, and without a view to the distribution of any
portion thereof, except in accordance with the Securities Act of 1933, as
amended (the "Securities Act"), and all applicable state securities laws. The
headquarters of Parent and Subsidiary are located in California. All material
negotiations relating to this Agreement and the transactions contemplated hereby
occurred in the State of California. DBE and LCA each understand that, except as
may be expressly provided in the Registration Rights Agreement, the Parent Stock
to be delivered at the Closing and any Parent Stock that may be delivered to DBE
following the Closing is not registered under the Securities Act or any state
securities law and must be held unless and until such time as it is subsequently
registered thereunder or an exemption from such registration is available. DBE
further understands that, except as otherwise provided in this Agreement, (i)
the Parent Stock to be delivered at the Closing and thereafter is not being
registered under the Securities Act or any state securities law in part on the
grounds that the issuance thereof is exempt under Section 4(2) of the Securities
Act, and Regulation D promulgated thereunder, as a transaction by an issuer not
involving any public offering; and (ii) that Parent's reliance on such exemption
is predicated in part on the foregoing representations and warranties of DBE and
that in the view of the Securities and Exchange Commission, the statutory basis
for the exemption claimed would not be present if, notwithstanding such
representation and warranty, DBE contemplates acquiring any of the Parent Stock
for sale upon the occurrence or non-occurrence of some predetermined event. DBE
understands and acknowledges that the sale of the Parent Stock may be restricted
or limited by the qualification or listing requirements of any securities
exchange upon which the common stock of Parent may subsequent to Closing become
designated or listed for trading.
3.24 Restrictive Legend. DBE understands that the certificates
representing the Parent Stock shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), BUT HAVE BEEN ISSUED
PURSUANT TO AN EXEMPTION THEREUNDER. THE REGISTERED HOLDER OF SUCH SHARES HAS
AGREED NOT TO EFFECT A DISPOSITION OF SUCH SHARES UNTIL EITHER: (1) THE HOLDER
HAS RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION
UNDER THE ACT IS NOT REQUIRED OR (2) A REGISTRATION STATEMENT UNDER THE ACT
COVERING SUCH SHARES AND DISPOSITION HAS BECOME EFFECTIVE UNDER THE ACT."
3.26 Full Disclosure. None of the representations and warranties made
by LCA and DBE contain or will contain any untrue statement of a material fact
or omit any material fact, the omission of which would be misleading. To the
Best Knowledge of DBE and LCA, none of the representations and warranties made
by the other contain or will contain any untrue statement of a material fact or
omit any material fact, the omission of which would be misleading.
3.27 Legal and Tax Advice. LCA and DBE have had an opportunity to
discuss this Agreement with counsel of their respective choosing, and to have
the legal consequences of the Transaction Agreements and the transactions
contemplated thereby explained by such counsel. DBE has also had an opportunity
to seek and obtain the advice of competent tax professionals with respect to the
tax consequences of the Transaction Agreements and the transactions contemplated
hereby. Neither LCA nor DBE is relying upon Parent, Subsidiary or any of their
respective stockholders, directors, officers, employees, attorneys, accountants,
agents or representatives for purposes of interpreting the provisions of the
Transaction Agreements or assessing the consequences hereof.
Section 4 Representations and Warranties of Parent
Parent represents and warrants to LCA and DBE that the following are
and shall be true and correct as of the date hereof and the Closing Date:
4.1 Corporate Organization, Good Standing, and Capitalization. Parent
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware, with full corporate power to own its
properties and to carry on its business as now being conducted. As of the
Effective Date, (a) Parent's authorized capital stock consisted of Fifteen
Million (15,000,000) shares of common stock, $.01 par value per share, of which
4,591,030 fully paid and nonassessable shares were issued and outstanding, and
(b) warrants, options, rights or conversion privileges permitting the holders to
acquire an additional One Million Three Hundred Fifty-two Thousand (1,352,000)
shares of common stock were outstanding.
4.2 Authority. This Agreement has been approved of by all necessary
corporate action of Parent. Neither the execution and delivery of this
Agreement, nor performance hereunder, will conflict with, or result in a breach
of the terms, conditions, or provisions of, or constitute a default under, the
Certificate of Incorporation or Bylaws of Parent or any agreement or instrument
to which Parent is a party or by which it is bound.
4.3 Consents and Approvals. Except as specifically contemplated by this
Agreement and except for consents already obtained, no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any other person or entity, is required to be made
or obtained by Parent in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby.
Notwithstanding the foregoing, it is expressly understood by the parties that
the consent of the American Stock Exchange to the transactions contemplated in
this Agreement will be required prior to the Closing.
4.4 Shares to Be Issued. The shares of Parent Stock to be issued and
delivered pursuant to this Agreement will be duly and validly issued, fully
paid, and nonassessable. Such shares, however, will not be registered under the
Securities Act of 1933, as amended.
4.5 No Material Adverse Change. Since the date of its last filing
pursuant to the Securities Exchange Act of 1934, as amended, there has not been
any change in the business, assets, operations, or financial condition of Parent
nor its consolidated subsidiaries, if any, that materially adversely affects the
business of Parent and its consolidated subsidiaries, if any, as a whole.
Section 5 Representations and Warranties of Subsidiary
Subsidiary represents and warrants to LCA and DBE that the following
are and shall be true and correct as of the Execution Date and the Closing Date:
5.1 Corporate Organization, Good Standing, and Capitalization. On the
Closing Date, Subsidiary shall be a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, with
authorized capital stock of 100,000 shares of common stock, par value $.01,
10,000 of which shall be issued, outstanding, and owned by Parent (with no other
shares issued or outstanding).
5.2 Authority. This Agreement has been approved of by the Board of
Directors of Subsidiary. Neither the execution and delivery of this Agreement,
nor performance hereunder, will conflict with, or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, the
Certificate of Incorporation or Bylaws of Subsidiary or any agreement or
instrument to which Subsidiary is a party or by which it is bound.
5.3 Consents and Approvals. Except as specifically contemplated by this
Agreement, and other than the consent of the American Stock Exchange which will
be required prior to the Closing, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
Subsidiary in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
5.4 Liabilities. Subsidiary has no liabilities except liabilities for
organizational expenses and expenses in connection with the Merger contemplated
by this Agreement.
5.5 Continued Activity. Following the Merger, Subsidiary will continue
the active conduct of the business to be acquired from LCA, specifically
including, but not limited to, continuation of all of the obligations and
services under and pursuant to the Production Agreement, and has no plan or
intention to liquidate or sell its assets other than in the ordinary course of
business.
Section 6 Additional Shares
6.1 Issuance of Additional Shares. In addition to the 400,000 shares of
Parent Stock to be issued and delivered to DBE at the Closing, within three (3)
business days following the "first draw down" by Subsidiary of the Production
Financing for the Film Series, as defined and described in Attachment A, Parent
shall cause to be issued and deliver to DBE a certificate representing all of
the 400,000 Additional Shares, less any of the Additional Shares previously
issued and delivered to DBE pursuant to Section 6.2, below.
6.2 Further Rights of DBE to Receive Additional Shares. Notwithstanding
the foregoing, however: (a) if the closing price of Parent's common stock on the
American Stock Exchange or any other national exchange on which Parent's stock
is then trading ("Closing Price") on the date that is thirty (30) days following
the Closing Date does not exceed $0.50 per share, then within three (3) business
days thereafter, Parent shall cause to be issued and deliver to DBE a
certificate representing 330,000 of the Additional Shares; and (b) if the
Closing Price of Parent's common stock on the American Stock Exchange on the
date that is sixty (60) days following the Closing Date is greater than $0.50
per share, but does not exceed $0.75 per share, and provided that DBE did not
receive the 330,000 Additional Shares pursuant to Section 6.2(a), above, then
Parent shall cause to be issued and deliver to DBE a certificate representing
247,500 of the Additional Shares, and all of the remaining Additional Shares
will continue to be held in accordance with the provisions of this Agreement;
and (c) if the Closing Price of Parent's common stock on the American Stock
Exchange on the date that is ninety (90) days following the Closing Date is
greater than $0.75 per share, but does not exceed $1.00 per share, and if DBE
did not previously receive at least 165,000 of the Additional Shares pursuant to
Section 6.2(a) and 6.2(b), above, then Parent shall cause to be issued and
deliver to DBE a certificate representing an amount equal to 165,000 of the
Additional Shares, less any of the Additional Shares that were issued to DBE
pursuant to Section 6.2(a) or 6.2(b), above, with the remainder of all of the
Additional Shares continuing to be held in accordance with the provisions of
this Agreement. Notwithstanding anything to the contrary contained in this
Agreement, the parties understand and agree that a minimum of 70,000 of the
Additional Shares, together with any of the Additional Shares not delivered to
DBE in accordance with this Section 6.2, shall continue to be held by Parent
until the "first draw down" by Subsidiary of the Production Financing for the
Film Series, and in no event shall the number of Additional Shares to be issued
and delivered to DBE pursuant to this Section 6.2 exceed 330,000 Additional
Shares.
6.3 Expiration of Rights to Receive Additional Shares. In the event
that DBE has not vested the right to receive all 400,000 of the Additional
Shares as provided in Section 6.1 and 6.2 above by October 31, 2005 (the
"Additional Share Reversion Date"), then DBE's right to receive any such
remaining Additional Shares shall thereupon immediately terminate, expire and be
of no further force or effect and any such remaining Additional Shares shall, as
of the Additional Share Reversion Date, automatically revert to Parent and
remain as authorized but unissued shares, and may thereafter be disposed of as
determined by the Parent in its discretion, subject to applicable laws, rules
and regulations.
Section 7 Conduct of LCA and DBE Pending the Closing
LCA and DBE agree that between the date of this Agreement and the
Closing:
7.1 Certificate of Incorporation and Bylaws. No change will be made in
LCA's certificate of formation or operating agreement.
7.2 Capitalization. LCA will not make any change in its authorized or
issued shares in LCA, declare or pay any dividend or other distribution, or
issue, encumber, purchase, or otherwise acquire any of its issued shares.
7.3 Additional Actions. DBE and LCA each agree to take all steps
reasonably appropriate (by unanimous written consent or otherwise) to approve
the transactions contemplated hereby and to cause the other to consummate the
transactions contemplated hereby.
7.4 Conduct of Business. LCA and DBE will each maintain and preserve
the business organization, employee relationships, and goodwill of LCA intact,
and will not, without the written consent of Parent and Subsidiary, enter into
any contracts or other commitments, amend any existing contracts, including, but
not limited to any employment contract or other commitment, borrow money, make
loans, or sell any of LCA's assets. LCA and DBE further agree that any expenses
to be borne by LCA in connection with the transactions contemplated hereby shall
be paid prior to the Closing.
7.5 No Solicitation. From the date hereof through the Closing or the
earlier termination of this Agreement, DBE and LCA shall not, and shall cause
each of its representatives (including without limitation investment bankers,
attorneys and accountants), not to, directly or indirectly, enter into, solicit,
initiate or continue any discussions or negotiations with, or encourage or
respond to any inquiries or proposals by, or participate in any negotiations
with, or provide any information to, or otherwise cooperate in any other way
with, any corporation, partnership, person or other entity or group, other than
Parent and its representatives, concerning any sale of all or a portion of the
assets or the business of LCA, or of any units representing shares in LCA, or
any merger, consolidation, liquidation, dissolution or similar transaction
involving LCA (each such transaction being referred to herein as a "Proposed
Acquisition Transaction"). DBE and LCA shall not, directly or indirectly,
through any officer, director, employee, representative, agent or otherwise,
solicit, initiate or encourage the submission of any proposal or offer from any
person (including, without limitation, a "person" as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended) or entity relating to any
Proposed Acquisition Transaction or participate in any negotiations regarding,
or furnish to any other person any information with respect to LCA or any of its
subsidiaries for the purposes of, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt by any
other person to seek or effect a Proposed Acquisition Transaction. DBE and LCA
hereby represent that they are not now engaged in discussions or negotiations
with any party other than Parent with respect to any of the foregoing. DBE and
LCA shall notify Parent promptly (orally and in writing) if any such written
offer, or any inquiry or contact with any person with respect thereto, is made
and shall provide Parent with a copy of such offer and shall keep Parent
informed on the status of any negotiations regarding such offer. DBE and LCA
each agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which LCA is a party. DBE and LCA
will promptly notify Parent if any discussions or negotiations are sought to be
initiated, any inquiry or proposal is made, or any information is requested with
respect to any Proposed Acquisition Transaction and notify Parent of the terms
of any proposal which it may receive in respect of any such Proposed Acquisition
Transaction, including, without limitation, the identity of the prospective
purchaser or soliciting party.
7.6 Notification of Certain Matters. From the date hereof through the
Closing, DBE and LCA shall give prompt notice to Parent of (a) the occurrence,
or failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement or in any
exhibit or schedule hereto to be untrue or inaccurate in any material respect
and (b) any material failure of DBE, LCA or any of their respective affiliates,
or of any of their respective stockholders or representatives, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement or any exhibit or schedule hereto; provided, however,
that such disclosure shall not be deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any condition.
7.7 Information. LCA and DBE will furnish Parent and Subsidiary, or
their representatives, with all information reasonably requested by Parent or
Subsidiary prior to the Closing concerning LCA or DBE in connection with the
transactions contemplated by this Agreement.
7.8 Announcement. Prior to the Closing, neither LCA nor DBE will make
any announcement or other statement to the public without the prior approval of
Parent, and LCA will promptly forward to Parent a copy of any general
announcement or statement to its employees, customers, or suppliers concerning
the transactions covered by this Agreement; provided, however, that any party
may make such statements or announcements as required by law so long as such
party takes commercially reasonable efforts to provide the other parties with an
opportunity to review and comment upon such required statements or
announcements.
Section 8 Covenants of Parent and Subsidiary Pending the Closing
Parent and Subsidiary agree that between the date hereof and the
Closing:
8.1 Written Consent of Subsidiary's Sole Stockholder. Parent will vote
all the outstanding shares of common stock of Subsidiary in favor of the Merger
by written consent dated as of a date prior to the Closing Date.
8.2 Information. Parent will furnish LCA and DBE with all
non-confidential information reasonably requested by LCA or DBE prior to the
Closing concerning Parent or Subsidiary in connection with the transactions
contemplated by this Agreement.
8.3 Contribution to Subsidiary. Parent will contribute to Subsidiary
such Parent Stock as may be required in order for Subsidiary to make the
payments contemplated to be made on the Closing Date by Section 2.3 hereof, and
will take all necessary action to authorize and, if applicable, issue and
deliver to DBE the Additional Shares pursuant to Section 6 hereof.
Section 9 Conditions to Obligations of Parent and Subsidiary
The obligations of Parent and Subsidiary to effect the Merger are, at
the option of Parent or Subsidiary, subject to the following conditions:
9.1 Representations and Warranties True. The representations and
warranties of DBE and LCA contained herein shall be true at and as of the date
hereof and the Closing Date with the same effect as though made at and as of
such dates. DBE and LCA shall have performed all obligations and complied with
all covenants required by this Agreement to be performed or complied with by
them prior to the Closing and LCA and DBE shall have delivered to Parent and
Subsidiary certificates dated as of the Closing Date and signed by their
respective president, to both such effects.
9.2 Absence of Litigation. There shall be no actual or threatened
litigation against LCA and no actual or threatened litigation against DBE to
restrain or invalidate the Merger or any other transaction contemplated in this
Agreement.
9.3 Requisite Approvals and Consents. The consent of any other party to
the transfer to Subsidiary of all the rights of LCA in, to, and under any
contract, agreement, lease, or other instrument and any property or asset,
tangible or intangible, pursuant to the Merger contemplated by this Agreement,
including, but not limited to all rights under and pursuant to the Production
Agreement, shall have been obtained or waived.
9.4 Governmental Permits. All governmental and other regulatory body
authorizations and permits necessary for the consummation of the Merger shall
have been secured.
9.5 Due Diligence. In the reasonable discretion of Parent, Parent shall
be satisfied with the results of a good faith diligence review of LCA's books
and records, financial statements, and other records and accounts of LCA's
business.
9.6 Deliveries. Parent shall have received from DBE and LCA the
documents and instruments contemplated by Section 2.4 hereof.
Section 10 Conditions to Obligations of LCA and DBE
The obligations of LCA and DBE to effect the Merger as provided herein
are, at the option of LCA and DBE, subject to the conditions that:
10.1 Representations and Warranties True. The representations and
warranties of Parent and Subsidiary contained herein shall be true at and as of
the date hereof and the Closing Date with the same effect as though made at and
as of such dates. Parent and Subsidiary shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by them prior to the Closing and Parent and Subsidiary shall have
delivered to LCA and DBE a certificate, dated the Closing Date and signed by the
president and secretary of Parent and Subsidiary, to both such effects.
10.2 Absence of Litigation. There shall be no actual or threatened
litigation to restrain or invalidate the Merger or any other transaction
contemplated in this Agreement.
10.3 Requisite Approvals and Consents. The consent of any other party,
including but not limited to the consent of the American Stock Exchange,
necessary for the transfer to Subsidiary of all the rights of LCA in, to and
under any contract, agreement, lease, or other instrument and any property or
asset, tangible or intangible, pursuant to the Merger contemplated by this
Agreement, including but not limited to all rights under or pursuant to the
Production Agreement, shall have been obtained or waived.
10.4 Governmental Permits. All governmental and other regulatory
bodies' authorizations and permits necessary for the consummation of the Merger
shall have been secured.
10.5 Deliveries. DBE and LCA shall have received from Parent and
Subsidiary the documents and instruments contemplated by Section 2.4 hereof.
Section 11 Termination
11.1 Circumstances of Termination. This Agreement may be terminated
prior to Closing:
(a) By the mutual consent in writing of the Board of
Directors (or other governing body) of LCA and Parent.
(b) By the Board of Directors (or other governing body) of LCA
if any condition provided in Section 10 hereof has not been satisfied or waived
on or before the Closing.
(c) By the Board of Directors of Parent if any condition
provided in Section 9 hereof has not been satisfied or waived on or before the
Closing.
11.2 Effect of Termination. In the event of a termination of this
Agreement pursuant to Section 11.1 hereof, each party shall pay the costs and
expenses incurred by it in connection with this Agreement and no party (or any
of its officers, directors, stockholders and Shareholders) shall be liable to
any other party for any costs, expenses, damage, or loss of anticipated profits
hereunder.
Section 12 Certain Post-Closing Matters
12.1 Limitations on Sales of Parent Stock. DBE agrees it they will not
sell, convey an interest in or otherwise encumber the shares of Parent Stock
issued to it in except in accordance with applicable federal and state
securities laws, rules and regulations.
12.2 Restrictive Legends. Parent agrees that it will instruct its
transfer agent to permit transfers of the shares of Parent Stock issued pursuant
hereto and pursuant to the Transaction Documents to the extent required under
the Securities Act or other applicable federal and state securities laws, rules
and regulations.
12.3 Board of Directors of Subsidiary. Following the Closing, the Board
of Directors of Subsidiary shall consist of five (5) members. DBE shall have the
right to designate two (2) of such members of the Board and Parent shall have
the right to designate the remaining three (3) members of the Board.
Section 13 Indemnification
13.1 Indemnifications.
(a) By DBE. DBE shall indemnify, protect, defend, save and
hold harmless Parent, Subsidiary and each of their respective affiliates and
subsidiaries, and its and their respective representatives, from and against any
and all costs, losses (including, without limitation, diminution in value),
taxes, liabilities, obligations, damages, lawsuits, deficiencies, claims,
demands and expenses (whether or not arising out of third-party claims),
including, without limitation, interest, penalties, costs of mitigation, losses
in connection with any environmental law (including, without limitation, any
clean-up or remedial action), lost profits and other losses resulting from any
shutdown or curtailment of operations, damages to the environment, attorneys'
fees and all amounts paid in investigation, defense or settlement of any of the
foregoing (herein, "Damages"), incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty
or the inaccuracy of any representation made by LCA or DBE in or pursuant to
this Agreement or (ii) any breach of any covenant or agreement made by LCA or
DBE in or pursuant to this Agreement provided, however, that said indemnity
shall not apply to any Damages to the extent that they arise out of the
negligence, gross negligence or willful misconduct of Parent or Subsidiary.
The term "Damages" as used in this Section 13.1 is not limited
to matters asserted by third parties against LCA, Subsidiary or Parent, but
includes Damages incurred or sustained by LCA, Subsidiary or Parent in the
absence of third party claims. Payments to third parties by Parent, Subsidiary
or LCA of amounts for which Parent, Subsidiary or LCA are indemnified hereunder,
shall not be a condition precedent to recovery. DBE's obligation to indemnify
Parent, Subsidiary or LCA, and Parent's obligation to indemnify DBE, shall not
limit any other rights, including, without limitation, rights of contribution
that either party may have under statute or common law.
(b) By Parent. Parent shall indemnify, protect, defend and
save and hold harmless DBE from and against any and all Damages incurred in
connection with, arising out of, resulting from or incident to (i) any breach of
any representation or warranty or the inaccuracy of any representation made by
Parent in or pursuant to this Agreement; (ii) any breach of any covenant or
agreement made by Parent in or pursuant to this Agreement or (iii) operation of
the business by Parent or Subsidiary from and after the Closing Date; provided,
however, that said indemnity shall not apply to any Damages to the extent that
they arise out of the negligence, gross negligence or willful misconduct of DBE.
The term "Damages" as used in this Section 13.1 is not limited
to matters asserted by third parties against DBE, but includes Damages incurred
or sustained by DBE in the absence of third party claims. Payments to third
parties by DBE of amounts for which DBE is indemnified hereunder, shall not be a
condition precedent to recovery. Parent's obligation to indemnify DBE, and DBE's
obligation to indemnify Parent and Subsidiary, shall not limit any other rights,
including, without limitation, rights of contribution that either party may have
under statute or common law.
(c) Defense of Claims. If a request for defense and/or
indemnity is to be made against the indemnifying party, the party asserting a
right to such defense and indemnity shall give written notice ("Notice") to the
indemnifying party as soon as practicable after becoming aware that a
third-party suit alleging claims which would constitute Damages under Section
13.1 or 13.2 has been initiated (and in any event within fifteen (15) calendar
days after receiving service of the operative documents initiating suit). The
failure to give timely Notice shall not affect the rights and obligations to
defense and indemnity hereunder, except, and only to the extent that the
indemnifying party is able to demonstrate actual prejudice caused by such
failure to provide Notice. After receiving such Notice, if the indemnifying
party provides written notification to the party to be indemnified that it will
timely defend and indemnify the party to be indemnified in full for all
reasonable defense costs (including investigative costs and expenses) and
Damages incurred in connection with such suit, and evidence or assurances
reasonably satisfactory to the indemnified party as to the indemnifying party's
capacity to perform such obligations in full, then the indemnifying party shall
be entitled, if it so elects in writing, (i) to assume control of the defense of
such suit, (ii) to appoint counsel of its own choosing to defend the suit,
provided that the party to be indemnified consents to such appointment (such
consent not to be unreasonably withheld) and (iii) to settle such suit with the
written consent of the indemnified party (such consent not to be unreasonably
withheld). If the indemnifying party fails to agree to defend and indemnify the
party to be indemnified in full within fifteen (15) calendar days after receipt
of the Notice and to provide such reasonable evidence or assurance as to the
indemnifying party's capacity to perform such obligations, then the party
requesting defense and indemnity will (upon delivering Notice to such effect to
the indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the defense and settlement of such suit on behalf of and for
the account and risk of the indemnifying party; provided, however, that such
suit shall not be settled without the written consent of the indemnifying party
(such consent not to be unreasonably withheld). In the event the party to be
indemnified assumes the defense of the suit, the party to be indemnified will
keep the indemnifying party reasonably informed regarding the status of the
suit. The indemnifying party shall reimburse the party to be indemnified (1) for
all reasonable defense costs, including investigative costs, and to pay such
defense costs and expenses in a timely manner within thirty (30) days of
receiving invoices from the party to be indemnified and (2) for all Damages
incurred by the party to be indemnified. To the extent that the indemnifying
party and the party to be indemnified dispute that a third-party suit alleges
wrongdoing that potentially falls within the scope of this section, the
indemnifying party may reserve a right to seek recoupment of defense costs paid
pursuant to this section in the event that a court subsequently determines that
no coverage existed based upon the third-party suit's allegations and/or facts.
Likewise, to the extent that the indemnifying party and the party to be
indemnified dispute the indemnifying party's duty to indemnify, the indemnifying
party may reserve a right to seek recoupment of monies paid to resolve or
satisfy the third-party suit. Notwithstanding the above, the indemnifying party
shall have a duty to defend, without right of recoupment, any suit alleging
wrongdoing that potentially falls within the scope of this section even if such
suit is groundless, false or fraudulent.
(d) Cooperation. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of any suit or action and any appeal arising
therefrom for which the indemnifying party is providing defense in accordance
with Section 13.1(c); provided, however, that the indemnified party may, at its
own cost, participate in the investigation, trial and defense of such lawsuit or
action and any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
(e) Brokers and Finders. Pursuant to the provisions of this
Section 13, each of DBE and Parent shall indemnify, hold harmless and defend the
other party from the payment of any and all broker's and finder's expenses,
commissions, fees or other forms of compensation which may be due or payable
from or by the indemnifying party, or may have been earned by any third party
acting on behalf of the indemnifying party in connection with the negotiation
and execution hereof and the consummation of the transactions contemplated
hereby. The indemnity provided by Parent hereunder shall include indemnification
for any such items payable by, or arising out of the conduct of, Subsidiary, and
the indemnity provided by DBE hereunder shall include any such items payable by,
or arising out of the conduct of, LCA.
(f) Limitation. No party shall be liable for any Damages under
this Section 13 (other than costs incurred in performance of defense obligations
in accordance with Section 13.1(c) hereof) until such Damages exceed Ten
Thousand Dollars ($10,000) in the aggregate, in which case such indemnifying
party will be liable to the indemnified party for all Damages in excess of Ten
Thousand Dollars ($10,000).
Section 14 General Provisions
14.1 Acknowledgment. The parties acknowledge that they have read this
Agreement in its entirety, understand its contents, and sign it freely and
voluntarily. The parties affirm that neither party, nor their representatives,
have made any representations concerning the terms or effects of this Agreement
other than those contained herein. The parties further acknowledge that they
have negotiated with each other over the terms and language of this Agreement
and the other Transaction Agreements and have had the opportunity to consult
with an attorney or attorneys of their own choosing prior to executing this
Agreement. The rule of construction and interpretation that provides that any
ambiguity or drafting error is to be construed against the drafting party and in
favor of the interpretation advocated by the non-drafting party is waived and it
is deemed that all parties hereto co-equally drafted this Agreement.
14.2 Alterations and Waivers. No alteration or modification of any of
the provisions of this Agreement shall be binding unless in writing and signed
by the parties hereto. Further, the failure of either party at any time to
enforce any of the provisions of this Agreement, or any rights it may have in
respect thereto, or to exercise any right herein provided, shall in no way be
considered to be a waiver of such provisions or rights or in any way affect the
validity of this Agreement.
14.3 Attorneys' Fees. In the event any attorney is employed by either
party to this Agreement with regard to any legal actions, arbitration or other
proceeding brought by either party for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, then the party
prevailing in such proceeding, whether at trial or upon appeal, shall be
entitled to recover reasonable attorneys' fees and other costs and expenses
incurred (the amount of which shall be set by the arbitrator or judge and not by
a jury), in addition to any other relief to which it may be entitled.
14.4 Post Judgment Fees. In the event a party obtains a judgment in a
proceeding brought to enforce this Agreement, that party shall also be entitled
to recover attorneys' fees and costs incurred in enforcing said judgment. This
provision is intended to be severable from the other provisions of this
Agreement, shall not be deemed merged into but shall survive any such judgment.
14.5 Authority to Execute. Each party hereto hereby warrants and
represents to each other party that it has the legal authority and capacity to
enter into this Agreement and that all resolutions or other actions have been
taken so as to enable it to enter into and perform this Agreement.
14.6 Choice of Laws. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California, without regard
to the conflicts of law provisions thereof.
14.7 Confidentiality. The parties acknowledge and agree that the
confidentiality agreement currently in place between the parties shall remain in
full effect from the date hereof through the Closing Date; provided that if for
any reason this Agreement is terminated prior to Closing, the confidentiality
agreement shall survive such termination for a period of two years.
14.8 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
14.9 Cumulative Rights. The various rights, options, elections, powers
and remedies of a party or parties to this Agreement shall be construed as
cumulative and no one of them exclusive of any other, or of any other legal or
equitable remedy which said party or parties might otherwise have in the event
of breach or default of the terms hereof. The exercise of one right or remedy by
a party or parties shall not in any way impair his rights to any other right or
remedy and to all obligations imposed on a party or parties to have been fully
performed.
14.10 Enforceability and Severability. If any provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable by reason of any rule of law or public policy, all other
provisions of this Agreement shall nevertheless remain in effect. No provision
of this Agreement shall be deemed dependent on any other provision unless so
expressed herein.
14.11 Entire Agreement. This Agreement supersedes any and all other
Agreements, either oral or in writing, between the parties hereto with respect
to the subject matter hereof, and no other agreement, statement or promise
relating to the subject matter of this Agreement which is not contained herein
or in any other documents to be delivered as contemplated hereby shall be valid
or binding.
14.12 Exhibits. All exhibits to which reference is made are deemed
incorporated in this Agreement, whether or not actually attached.
14.13 Fictitious Business Name. The parties hereto covenant and
represent that if any or all of them are doing business under a fictitious name,
they, and each of them, have fully and completely complied with California law
in relation to doing business under such fictitious name.
14.14 Further Acts. The parties hereto agree to execute, acknowledge
and deliver any and all additional papers, documents and other assurances and
shall perform any and all acts and things reasonably necessary in connection
with the performance of the obligations hereunder to carry out the intent of the
parties hereto.
14.15 Recitals. The above recitals are incorporated herein as if set
forth in full.
14.16 Arbitration. Any controversy between any of the parties hereto
regarding the construction or application of any of the terms, provisions, or
conditions of this Agreement, or the scope of this arbitration provision, shall
upon the written request of either party served on the other be submitted to
binding arbitration in Los Angeles, California in accordance with the provisions
of the Commercial Arbitration Rules of the American Arbitration Association. The
arbitration proceedings shall be conducted in accordance with California
Evidence Code Section 1152.5. The arbitrator shall have the authority to grant
provisional remedies. Judgment on any award rendered by the arbitrator pursuant
to any such arbitration may be entered in any court having jurisdiction over the
dispute in question.
14.18 Survival. All statements contained in any of the instruments,
certificates, opinions or other writings delivered pursuant hereto shall be
deemed to be representations and warranties of the party delivering the same
under this Agreement. All such representations and warranties and the covenants
and agreements to be performed or complied with by the respective parties for or
upon the Closing Date, shall survive the Closing. Nothing in this paragraph
shall affect the obligations of the parties with respect to covenants and
agreements contained in this Agreement or any of the other Transaction
Agreements that are permitted to be performed, in whole or in part, after the
Closing Date.
14.19 Headings. The paragraphs headings used in this Agreement are for
reference and convenience only and shall not in any way limit or amplify the
terms and provisions hereof, nor affect the interpretation of this Agreement.
14.19 Assignability. This Agreement and the rights of the parties
hereunder is personal in nature and are not assignable by either party without
the prior written consent of the non-assigning party (which consent shall not be
unreasonably withheld). Any purported assignment or delegation without such
consent shall be null and void and of no force and effect. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit to the
parties and their respective heirs, legatees, legal representatives, successors
and assigns.
14.21 Notices. Notices given under this Agreement shall be in writing
and shall be either served personally or delivered by first-class U.S. mail,
postage prepaid. Notice shall be deemed received at the earlier of actual
receipt or three (3) days following deposit in the U.S. mail, postage prepaid.
Notices shall be directed to the addresses shown on the signature pages hereto,
provided that a party may change his address for notice by giving written notice
to all other parties in accordance with this paragraph.
14.22 Parties. Nothing in this Agreement, whether express or implied,
is intended to confer any rights or remedies under or by reason of this
Agreement on any person other than the parties to it and their permitted
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or actions over or against any party to this Agreement.
14.23 Time of Essence. Time is of the essence of this Agreement.
14.24 Costs of Transaction. Each party will pay their respective
expenses in connection with the transaction contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
have made it effective as of the date first above written.
PARENT: ADDRESS:
AVENUE ENTERTAINMENT GROUP, INC., 11111 Santa ▇▇▇▇▇▇ Boulevard
a Delaware corporation ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
SUBSIDIARY: ADDRESS:
LCA ACQUISITION SUBSIDIARY, INC., 11111 Santa ▇▇▇▇▇▇ Boulevard
a Delaware corporation ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer
LCA: ADDRESS:
LCA PRODUCTIONS, INC., c/o The Law Offices of
a Nevada corporation A. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Jr
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, its President and CEO ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DBE: ADDRESS:
DOUBLE BAY ENTERTAINMENT, INC., c/o The Law Offices of
a Nevada corporation A. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Jr.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
By: ▇▇▇ ▇▇▇▇▇▇▇, its President and CEO ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇