ASSET PURCHASE AGREEMENT
BY AND AMONG
INSCAPE,
WARNER MUSIC GROUP INC.
AND
GRAPHIX ZONE, INC.
FEBRUARY 24, 1997
TABLE OF CONTENTS
PAGE
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1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Basic Transaction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Purchase and Sale of the Acquired Assets. . . . . . . . . . . . 3
(b) Assumption of Liabilities . . . . . . . . . . . . . . . . . . . 3
(c) Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . 3
(f) Allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties of the Seller. . . . . . . . . . . . . . . 3
(a) Organization of the Seller. . . . . . . . . . . . . . . . . . . 3
(b) Authorization of Transaction. . . . . . . . . . . . . . . . . . 4
(c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Title to the Acquired Assets. . . . . . . . . . . . . . . . . . 4
(e) Material Contracts. . . . . . . . . . . . . . . . . . . . . . . 4
(f) Intellectual Property . . . . . . . . . . . . . . . . . . . . . 5
(g) Patents and Patent Rights . . . . . . . . . . . . . . . . . . . 5
(h) Identification of Employees and Compensation. . . . . . . . . . 5
(i) Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 5
(j) Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(l) Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(m) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(n) ERISA and Employment Matters. . . . . . . . . . . . . . . . . . 6
(o) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 7
(p) Related Parties . . . . . . . . . . . . . . . . . . . . . . . . 8
(q) Underlying Documents. . . . . . . . . . . . . . . . . . . . . . 8
(r) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 8
(s) Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(t) Investment Representations. . . . . . . . . . . . . . . . . . . 8
4. Representations and Warranties of the Buyer . . . . . . . . . . . . . . .10
(a) Organization and Capitalization of the Buyer. . . . . . . . . .10
(b) Authorization of Transaction. . . . . . . . . . . . . . . . . .10
(c) Noncontravention. . . . . . . . . . . . . . . . . . . . . . . .10
(d) Concerning the Shares . . . . . . . . . . . . . . . . . . . . .11
(e) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . .11
(f) SEC Reporting Status and Filings. . . . . . . . . . . . . . . .11
(g) Information Provided. . . . . . . . . . . . . . . . . . . . . .11
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(h) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . .11
(i) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . .12
5. Post-Closing Covenants and Agreements . . . . . . . . . . . . . . . . . .12
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
(b) Certain Employees of the Seller's Business. . . . . . . . . . .12
(c) Certain Distribution Rights . . . . . . . . . . . . . . . . . .12
(d) Certain Agreements. . . . . . . . . . . . . . . . . . . . . . .12
(e) Reporting Status. . . . . . . . . . . . . . . . . . . . . . . .12
(f) Board Seat. . . . . . . . . . . . . . . . . . . . . . . . . . .12
(g) Condition to Transfer of Certain Contracts. . . . . . . . . . .13
6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
(a) Indemnification of Losses . . . . . . . . . . . . . . . . . . .13
(b) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
(c) Notice of Claims. . . . . . . . . . . . . . . . . . . . . . . .14
(d) Third Party Claims. . . . . . . . . . . . . . . . . . . . . . .14
(e) Disputed Claims . . . . . . . . . . . . . . . . . . . . . . . .14
(f) Surrender of Shares . . . . . . . . . . . . . . . . . . . . . .14
(g) Survival of Representations and Warranties. . . . . . . . . . .15
7. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
(a) Press Releases and Announcements. . . . . . . . . . . . . . . .15
(b) No Third Party Beneficiaries. . . . . . . . . . . . . . . . . .15
(c) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . .15
(d) Succession and Assignment . . . . . . . . . . . . . . . . . . .15
(e) Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .15
(f) Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .16
(i) Amendments and Waivers. . . . . . . . . . . . . . . . . . . . .16
(j) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
(k) Construction. . . . . . . . . . . . . . . . . . . . . . . . . .16
(l) Incorporation of Exhibits and Schedules . . . . . . . . . . . .17
(m) Bulk Transfer Laws. . . . . . . . . . . . . . . . . . . . . . .17
(n) Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . .17
(o) Confidentiality of Information. . . . . . . . . . . . . . . . .17
(p) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . .17
(q) Guarantee by WMG. . . . . . . . . . . . . . . . . . . . . . . .18
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Schedule 1 Seller's Products
Schedule 2 The Acquired Assets
Schedule 3 Seller's Disclosure Schedule
Schedule 4 Allocation of Purchase Price
Schedule 5 Excluded Assets
Schedule 6 Employees
Exhibit A Form of ▇▇▇▇ of Sale
Exhibit B Form of Agreement of Assumption of Liabilities
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Certificate of Designations of Series C Convertible
Preferred Stock
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ASSET PURCHASE AGREEMENT
Agreement entered into on February 24, 1997, by and among Graphix Zone,
Inc., a Delaware corporation (the "BUYER"), Inscape, a Delaware general
partnership among Home Box Office and corporations owned by Warner Music Group
Inc. ("WMG") and ▇▇▇▇ New Media, Inc., respectively (the "SELLER"), and WMG.
This Agreement contemplates a transaction in which the Buyer will purchase
certain assets (and assume certain liabilities) of the Seller's Business in
return for the consideration described herein.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACQUIRED ASSETS" means the following assets of the Seller pertaining
to the Seller's Business other than the Excluded Assets:
(a) All right, title and interest in and to the Seller's Products.
(b) All Intellectual Property associated with the Seller's Products
including the trademarks, copyrights, and trade secrets identified on SCHEDULE
2(a).
(c) All rights under all agreements with respect to the development
or design of the Seller's Products ("Title Agreements") identified in Section
(ix) of Schedule 2(c).
(d) All equipment and personal property used in the Seller's Business
identified on SCHEDULE 2(L).
(e) The leases and other agreements listed on SCHEDULE 2(c) which are
identified on SCHEDULE 2(e) to be assigned to the Buyer.
(f) All marketing plans.
(g) All right, title and interest in and to the "Inscape" name.
"ASSUMED CONTRACTS" means the Title Agreements and the contracts
identified in SCHEDULE 2(e) to be assigned to the Buyer.
"ASSUMED LIABILITIES" means only the following liabilities:
(a) Liabilities pertaining to the Seller's Business or to the
Acquired Assets arising on or after the Closing Date (but NOT any liabilities
that arise out of litigation or claims that are pending or threatened on the
Closing Date).
(b) Those liabilities with respect to employees of the Seller
accepting employment with the Buyer described in Section 5(b).
"CLOSING" and "CLOSING DATE" have the meanings set forth in
Section 2(d) below.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"EXCLUDED ASSETS" means those assets of the Seller identified on
SCHEDULE 5 hereto.
"INTELLECTUAL PROPERTY" means (a) patents, patent applications, patent
disclosures, and improvements thereto, (b) trademarks, service marks, trade
dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (c) copyrights and registrations and
applications for registration thereof, (d) mask works and registration and
applications for registration thereof, (e) trade secrets and confidential
business information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (f) other proprietary rights, and (g) copies
and tangible embodiments there (in whatever form or medium).
"KNOWLEDGE" means actual knowledge (i) of the senior executives of the
Seller, and (ii) of the senior managers of the Seller having responsibility for
the subject matter in question.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice.
"PARTIES" means the Buyer, the Seller and WMG.
"PURCHASE PRICE" has the meaning set forth in Section 2(c) below.
"SELLER'S BUSINESS" means the Seller's business of designing,
developing, and marketing interactive entertainment software products.
"SELLER'S PRODUCTS" means those products now offered for sale by the
Seller ("EXISTING TITLES") and those products now under or currently planned for
development by the Seller ("TITLES IN DEVELOPMENT") including those listed on
SCHEDULE 1 hereto. The Seller's Products also include those discontinued
products listed on SCHEDULE 1.
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2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF THE ACQUIRED ASSETS. On and subject to the
terms and conditions of this Agreement, the Buyer agrees to purchase from the
Seller, and the Seller agrees to sell, transfer, convey, and deliver to the
Buyer, all of the Acquired Assets at the Closing for the consideration specified
below in this Section 2.
(b) ASSUMPTION OF LIABILITIES. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. The Buyer will not assume or
have any responsibility, however, with respect to any other obligations or
liabilities of the Seller which are not Assumed Liabilities. Without limiting
the foregoing, the Buyer shall not assume or be responsible for any liabilities
accrued on the Seller's balance sheet as of the Closing Date.
(c) PURCHASE PRICE. At the Closing the Buyer shall deliver to the
Seller a certificate representing 948,148 shares (the "SHARES") of the Buyer's
Series C Preferred Stock (the "PURCHASE PRICE"). The Shares shall have the
rights, privileges, preferences and restrictions set forth in the form of
Certificate of Designations of Series C Convertible Preferred Stock attached
hereto as EXHIBIT D.
(d) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇
L.L.P., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 9:00 a.m.
local time on _____, or as soon thereafter as practicable (the "CLOSING DATE").
(e) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Buyer a ▇▇▇▇ of Sale for the Acquired Assets in the form attached
hereto as EXHIBIT A, (ii) the Buyer will deliver to the Seller the Shares and a
document of Assumption of the Assumed Liabilities in the form attached hereto as
EXHIBIT B, and (iii) each Party shall deliver to the other all such agreements,
documents and instruments contemplated by this Agreement or necessary for the
conveyance of the Acquired Assets to the Buyer and the assumption of the Assumed
Liabilities by the Buyer.
(f) ALLOCATION. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets for all purposes
(including financial accounting and tax purposes) in accordance with the
allocation of the Purchase Price set forth on SCHEDULE 4 attached hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller and WMG
represent and warrant to the Buyer that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date, except as set forth in the
schedules accompanying this Agreement and initialed by the Parties.
(a) ORGANIZATION OF THE SELLER. The Seller is a general partnership
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. The general partners
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of the Seller are Warner Music Multimedia Inc. (a wholly-owned subsidiary of
WMG), Home Box Office and ▇▇▇▇ New Media, Inc.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the Seller has
taken all actions required for the execution, delivery and performance of this
Agreement by the Seller and the sale of the Acquired Assets as provided herein.
This Agreement constitutes the valid and legally binding obligation of the
Seller, enforceable in accordance with its terms. The persons who have executed
this Agreement on behalf of the Seller have been duly authorized to do so by the
partners of the Seller.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Seller is subject or any provision of the partnership
agreement, as amended, of the Seller or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require a notice
under any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
security interest, or other arrangement to which the Seller is a party or by
which the Seller is bound or to which any of the Seller's assets is subject,
except where (A) disclosed in the Disclosure Schedule or (B) the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice would not have a material adverse effect on
the financial condition of the Seller's Business or the ability of the Parties
to consummate the transactions contemplated by this Agreement. The Seller need
not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement except
where (A) disclosed in the Disclosure Schedule or (B) the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a material adverse effect on the financial condition of the Seller's
Business or on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
(d) TITLE TO THE ACQUIRED ASSETS. Except as set forth in SCHEDULE
3(d), the Seller has good and marketable title, free and clear of all mortgages,
liens, pledges, claims, easements, rights of way, conditions, security
interests, or encumbrances, to all of the Acquired Assets, respectively, real
and personal, tangible and intangible, to be sold, conveyed, transferred and
delivered hereunder. At the Closing, the Buyer will obtain good and marketable
title to the Acquired Assets, free and clear of all liens, security interests,
charges or encumbrances.
(e) MATERIAL CONTRACTS. Set forth in SCHEDULE 2(c) is a list of all
material written agreements, leases, contracts, and commitments of the following
types relating and applicable to the Seller's Business to which the Seller is a
party as of the date of this Agreement: (i) employment and consulting
agreements; (ii) license agreements; (iii) manufacturing agreements;
(iv) secrecy agreements; (v) any contract or purchase order to which the Seller
is a party for the purchase of products, materials, or supplies requiring a
payment after the date hereof of $5,000 or more; (vi) any
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customer order or sale contract to which the Seller is a party for products
under which the customer is to make a payment after the date hereof of $5,000 or
more; (vii) distributor agreements; (viii) research agreements; (ix) development
agreements; (x) contracts with any government or government agency; (xi) leases;
(xii) contracts not within the Ordinary Course of Business; (xiii) output or
requirements agreements; (xiv) leases; and (xv) any other material agreement,
contract, or commitment relating to the Seller's Business or the Acquired
Assets. The Seller has, in all material respects, performed all obligations
required to be performed by it under the Assumed Contracts. To the Knowledge of
the Seller, each of the other parties to the Assumed Contracts has, in all
material respects, performed all the obligations required to be performed by
them to date thereunder. Each Assumed Contract (i) is valid, binding and
enforceable in accordance with its terms, (ii) is in full force and effect with
no default or dispute existing or, to the knowledge of the Seller, threatened
with respect thereto, and (iii) will not be terminated or otherwise affected by
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby. Except as set forth in SCHEDULE 3(j), no
consent of any third party is required for the assignment of any Assumed
Contract to the Buyer.
(f) INTELLECTUAL PROPERTY. SCHEDULE 2(a) to this Agreement contains a
true and complete list of all Intellectual Property which is applicable to and
used by the Seller in the operation of the Seller's Business. SCHEDULE 2(a)
includes the following information (to the extent applicable) for each such item
of Intellectual Property: date first used, whether or not registered, and
registration number. To the Knowledge of the Seller, none of the Seller's
Products or any Intellectual Property used by the Seller infringes the
Intellectual Property or other proprietary rights of any other party. All
Intellectual Property developed for the Seller was so developed under agreements
with employees, consultants or others which provide that the Intellectual
Property so developed is a "work made for hire" or otherwise providing for the
assignment of all rights thereto to the Seller.
(g) PATENTS AND PATENT RIGHTS. The Seller has no patents or
applications for patents. To the Knowledge of the Seller, the manufacture, use
or sale of the Seller's Products do not violate or infringe on any patent or any
proprietary or personal right of any person or firm.
(h) IDENTIFICATION OF EMPLOYEES AND COMPENSATION. SCHEDULE 3(h)
contains a true and complete list of the names of all employees of the Seller's
Business and all consultants material to the Seller's Business, their position
with Seller's Business, and their salary and other compensation from the Seller
as of the date hereof.
(i) COMPLIANCE WITH LAWS. The Seller's Business has been operated in
compliance with all federal, state, local and foreign laws, regulations and
orders, the violation of which would have a material adverse effect upon the
Acquired Assets. All reports and filings required to be made by the Seller with
respect to the Seller's Business under foreign, federal, state, and local
statutes, laws, regulations, rules, and ordinances relating to health, safety,
and protection of the environment have been filed in a timely manner, and no
such report or filings are currently required that have not been made.
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(j) CONSENTS. Except as set forth in SCHEDULE 3(j), no approvals or
consents of or assignments by any person (including, without limitation, any
federal, state or local governmental or administrative authorities) are
necessary in connection with the execution, delivery or performance of this
Agreement.
(k) TAX MATTERS. All taxes, including, without limitation, income,
excise, property, sales, transfer, use, franchise, payroll, employees' income
withholding and social security taxes imposed or assessed by the United States
or by any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or by any other
taxing authority, which are due or payable by the Seller with respect to the
Seller's Business, and all interest, penalties and additions thereon, whether
disputed or not, have been paid in full; all tax returns or other documents
required to be filed in connection therewith have been accurately prepared and
duly and timely filed. No issues have been raised (or are currently pending) by
the Internal Revenue Service or any other taxing authority in connection with
any of the returns and reports referred to above, and no waivers of statutes of
limitations have been given or requested with respect to the Seller in
connection therewith. The provisions for taxes in the Financial Statements are
sufficient for the payment of all accrued and unpaid federal, state, county and
local taxes of the Seller's Business
(l) PROPERTIES. SCHEDULE 2(L) contains a full and complete list of
all equipment and personal property used in the Seller's Business having an
original cost basis in excess of $2,000 as of the date hereof. The Seller has
good and marketable title to all equipment and personal property reflected in
SCHEDULE 2(L), free and clear of any imperfections of title, lien, claim,
encumbrance, restriction, charge, or equity of any nature whatsoever, except for
the lien of current taxes not yet due and payable. All of the equipment and
personal property used in the Seller's Business or necessary to the conduct of
the Seller's Business is in good operating condition and repair, normal wear and
tear excepted.
(m) LITIGATION. Except as set forth in SCHEDULE 3(m), there is no
claim, dispute, action, proceeding (including arbitration), suit or appeal, or
investigation, at law or in equity, pending (other than those, if any, with
respect to which service of process or similar notice has not yet been made and
which are not within the Knowledge of the Seller) or, to the Knowledge of the
Seller, threatened against the Seller or the Seller's Business or involving any
of the Acquired Assets before any court, agency, authority, arbitration panel or
other tribunal. The Seller is not subject to any order, writ, injunction or
decree of any court, agency, authority, arbitration panel or other tribunal, and
the Seller is not in default with respect to any notice, order, writ,
injunction, or decree.
(n) ERISA AND EMPLOYMENT MATTERS. Except as set for in SCHEDULE 3(n),
(i) The Seller does not presently maintain, contribute to
or have any plan or arrangement that (A) could subject the Seller or the Buyer
(under any successor liability theory) to any current or potential multi-
employer plan withdrawal liability under Title IV of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or (B) is an unfunded or
funded medical, health or life insurance plan or arrangement for present or
future retirees or present or future terminated employees which is an "employee
welfare benefit plan" as such term
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is defined in Section 3(1) of ERISA, except as required by section 4980B of the
Code or sections 601 through 609 of ERISA.
(ii) With respect to each of the employee benefit plans in which
any employee of the Seller's Business participates, the Seller has furnished to
the Buyer true and complete copies of (A) the plan documents (including any
related trust agreements), and (B) the most recent determination letter received
from the Internal Revenue Service, if applicable.
(iii) The Seller shall be responsible for satisfying the
requirements of Section 4980B of the Code and Sections 601 through 609 of ERISA
("COBRA requirements") with respect to any employee of the Business who had a
qualifying event prior to the Closing or for any employee of the Seller's
Business not otherwise employed by the Buyer after the Closing, to the extent
required under the COBRA requirements. The Buyer shall be responsible for
satisfying the COBRA requirements for any employee of the Seller's Business
employed by the Buyer after the Closing, to the extent required under the COBRA
requirements.
(iv) The Seller has not made any promises to or agreements
(implicit or explicit) with any of the employees listed on SCHEDULE 3(h) with
respect to severance and similar compensation other than as provided in the
Seller's employee handbook.
(o) REAL PROPERTY. SCHEDULE 3(o) contains a full and complete list of
all real property owned, leased, or under option to purchase by the Seller and a
list of all contracts and commitments relating to real property to which the
Seller is a party. All such leased property is held under valid, subsisting and
enforceable leases. In addition:
(i) As of the Closing, no Hazardous Material (as defined in
clause (iv) below), underground storage tanks, pipes, or sumps are present at
any sites where the Seller's Business is operated, and to the best of the
Seller's knowledge, no reasonable likelihood exists that any Hazardous Material
present on other property will come to be present at any sites where the
Seller's Business is operated. The Seller has conducted no Hazardous Materials
Activity in connection with the Seller's Business or at any sites where the
Seller's Business is operated.
(ii) The Seller has obtained no Environmental Permits (as
defined in clause (iv) below) in connection with the conduct of the Seller's
Business, and none are required.
(iii) The Seller has delivered to the Buyer all records
concerning activities of the Seller and all environmental audits and
environmental assessments conducted at the request of, or otherwise possessed
by, the Seller. The Seller has complied with all environmental disclosure
obligations imposed upon it with respect to the Business or the transactions
contemplated herein under any applicable law.
(iv) For purposes of this Section 3(o), the following capitalized
terms shall have the following meanings:
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(i) "Environmental Laws" shall mean all laws, rules,
regulations, orders, treaties, statutes and codes of any federal,
state, or local governmental authority relating to human health,
safety, or the environment.
(ii) "Environmental Permit" shall mean any approval,
permit, license, clearance or consent required to be obtained from any
private person or any governmental authority pursuant to any
Environmental Law.
(iii) "Hazardous Material" shall mean any material or
substance that is prohibited or regulated by any Environmental Law or
that has been designated by any governmental authority to be
radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment.
(iv) "Hazardous Materials Activity" shall mean the
transportation, transfer, recycling, storage, use, treatment,
manufacture, investigation, removal, remediation, release, exposure of
others to, sale, handling, or distribution of any Hazardous Material
or any product containing a Hazardous Material.
(p) RELATED PARTIES. Except as listed or described in SCHEDULE 3(p),
no officer, director or other affiliate of the Seller, directly or indirectly,
is party to any material arrangement affecting the design, development,
marketing, distribution or use of the Acquired Assets.
(q) UNDERLYING DOCUMENTS. Copies of all documents listed or described
in the Disclosure Schedule have been furnished or made available to the Buyer.
All such documents are true and complete copies, and there are no amendments or
modifications thereto, except as expressly noted in the Disclosure Schedule.
(r) BROKERS' FEES. The Seller has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(s) DISCLOSURE. Neither this Agreement nor any of the schedules or
exhibits hereto contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they were made, not misleading, and there is
no fact which has not been disclosed to the Buyer which materially affects
adversely or could reasonably be anticipated to materially affect adversely the
Acquired Assets.
(t) INVESTMENT REPRESENTATIONS. The Seller hereby represents and
warrants to the Buyer with respect to the acquisition of the Shares as follows:
(i) INVESTMENT EXPERIENCE. The Seller has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Buyer so that the Seller is capable of
evaluating the merits and risks of its investment in the Buyer and has the
capacity to protect its own interests.
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(ii) ACCREDITED INVESTOR. The Seller is either (i) an
"accredited investor" as that term is defined in Securities and Exchange
Commission Rule 501 of Regulation D, as presently in effect, or (ii) has a
preexisting personal or business relationship with the Buyer or any of its
officers, directors or controlling persons, or by reason of the Seller's
business or financial experience or the business or financial experience of the
Seller's professional advisors who are unaffiliated with and who are not
compensated by the Buyer or any affiliate or selling agent of the Buyer,
directly or indirectly, has the capacity to protect the Seller's own interests
in connection with the acquisition of the Shares.
(iii) INVESTMENT. The Seller is acquiring the Shares for
investment by the Seller and its affiliates, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof.
The Seller understands that the Shares have not been, and will not be,
registered under the Securities Act of 1933 ("Securities Act") by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Seller's representations as
expressed herein.
(iv) RULE 144. The Seller acknowledges that the Shares must
be held indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available. The Seller is aware of
the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Buyer, the resale occurring not less than two years after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three month period
not exceeding specified limitations.
(v) ACCESS TO DATA. The Seller has had an opportunity to
discuss the Buyer's business, management and financial affairs with its
management. The Seller also has had an opportunity to ask questions of officers
of the Buyer, which questions were answered to its satisfaction. The Seller
understands that such discussions, as well as any written information issued by
the Buyer, were intended to describe certain aspects of the Buyer's business and
prospects but were not a thorough or exhaustive description. The Seller's
decision to enter into the transactions contemplated hereby is based on its own
evaluation of the risks and merits of the purchase and the Buyer's proposed
business activities. Without limiting the generality of the foregoing, the
Seller has had the opportunity to obtain and to review the following documents
of the Buyer: (1) Registration Statement on Form S-4 (Registration
No. 333-02642) filed with the Securities and Exchange Commission (the "SEC") on
March 25, 1996, as amended, (2) Annual Report on Form 10-K for the fiscal year
ended June 30, 1996, (3) Quarterly Reports on Form 10-Q for the fiscal quarters
ended September 30, 1996, and December 31, 1996, (4) Current Report on Form 8-K,
dated July 15, 1996, and (5) definitive Proxy Statement for its 1996 Annual
Meeting of Stockholders, in each case as filed with the SEC. The Buyer
understands that its investment in the Securities involves a high degree of
risk.
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(vi) TAX LIABILITY. The Seller has reviewed with its own tax
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. With respect to
such tax consequences, the Seller relies solely on such advisors and not on any
statements or representations of the Buyer or any of its agents. The Seller
understands and agrees that it (and not the Buyer) shall be responsible for any
of its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Seller that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date.
(a) ORGANIZATION AND CAPITALIZATION OF THE BUYER. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. As of February 19, 1997, the authorized capital
stock of the Company consisted of (a) 100,000,000 shares of Common Stock, $.01
par value per share, of which 10,698,446 shares are validly issued and
outstanding, fully paid and non-assessable, and (b) 25,000,000 shares of
Preferred Stock, $.01 par value per share, of which 3,500 shares have been
designated "Series A Convertible Preferred Stock" and no shares are issued and
outstanding 3,500 shares have been designated "Series B Convertible Preferred
Stock" and 3,025 shares are issued and outstanding.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, the Buyer has taken
all actions required for the execution, delivery and performance of this
Agreement and the Registration Rights Agreement described in Section 5(d) by the
Buyer, the purchase of the Acquired Assets and the issuance of the Shares to the
Seller as provided herein. This Agreement constitutes the valid and legally
binding obligation of the Buyer, enforceable in accordance with its terms. The
persons who have executed this Agreement on behalf of the Buyer have been duly
authorized to do so by the Buyer.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the actions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government, governmental agency,
or court to which the Buyer is subject or any provision of its charter or bylaws
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, bent of indebtedness, security interest, or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its assets
is subject, except that the consent of the Buyer's primary lender is required to
consummate the transactions contemplated by this Agreement. Other than federal
and state securities law notices in connection with the issuance of the Shares,
the Buyer does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement.
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(d) CONCERNING THE SHARES. The Shares have been duly authorized and
when issued in accordance with this Agreement, and the Common Stock, when issued
upon conversion of the Shares, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive rights of any stockholder
of the Buyer, as such, to acquire any of the Shares. The Common Stock is listed
for trading on the Nasdaq SmallCap Market ("NASDAQ") and (1) the Buyer and the
Common Stock meet the criteria for continued listing and trading on Nasdaq; (2)
the Buyer has not been notified since January 1, 1994 by the National
Association of Securities Dealers, Inc. ("NASD") of any failure or potential
failure to meet the criteria for continued listing and trading on Nasdaq (except
for the notices dated February 22, 1995, March 16, 1995, April 13, 1995, and
October 24, 1996, and December 3, 1996, regarding matters which have been
rectified) and (3) no suspension of trading in the Common Stock is in effect.
(e) APPROVALS. No authorization, approval or consent of or filing
with any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Buyer is
required to be obtained by the Buyer for the issuance and sale of the Shares and
the Common Stock issuable upon conversion thereof other than (1) listing of the
Common Stock on Nasdaq and (2) the requirements of any applicable blue sky laws.
The Buyer has taken or will take all actions necessary for such listing and has
satisfied the requirements of all applicable blue sky laws.
(f) SEC REPORTING STATUS AND FILINGS. The Buyer has timely filed with
the SEC all reports and other information required to be filed under Sections
13(a), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the
"1934 ACT"), except that the Company did not timely file with the SEC either its
Annual Report on Form 10-K for the fiscal year ended June 30, 1996, or its Form
10-Q for the quarter ended September 30, 1996. Since June 30, 1996, the Company
has not filed any reports or other information with the SEC pursuant to Sections
13(a), 14 and 15(d) of the 1934 Act other than the reports and other information
identified in Section 3(t)(v).
(g) INFORMATION PROVIDED. The information provided by or on behalf of
the Buyer to the Seller and referred to in Section 4(f) of this Agreement does
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading.
(h) LITIGATION. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Buyer or any of its subsidiaries, threatened against or
affecting the Buyer or any of its subsidiaries, wherein an unfavorable decision,
ruling or finding would have a material adverse effect on the properties,
business, condition (financial or other), results of operations or prospects of
the Buyer and its subsidiaries taken as a whole or the transactions contemplated
by this Agreement or any of the documents contemplated hereby or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Buyer to perform its obligations under, this Agreement or any of such
other documents.
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(i) BROKERS' FEES. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
5. POST-CLOSING COVENANTS AND AGREEMENTS. The Parties agree as follows
with respect to the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as the other Party may reasonably
request, all at the sole cost and expense of the requesting Party.
(b) CERTAIN EMPLOYEES OF THE SELLER'S BUSINESS. The Buyer shall offer
employment to those employees of the Seller's Business listed on SCHEDULE 6,
effective upon the Closing. The Seller shall retain all liabilities with respect
to the termination of its employees not listed on SCHEDULE 6. With respect to
the employees listed on SCHEDULE 6, the Buyer shall assume all liabilities
arising with respect to those employees after the Closing Date and all
liabilities for severance and similar compensation of those employees with
respect to their employment with the Seller or its predecessors. If within six
months following the Closing, the Buyer employs any employee of the Seller not
hired by the Buyer at the Closing, the Buyer shall reimburse the Seller for any
severance costs paid by the Seller in connection with such employee.
(c) CERTAIN DISTRIBUTION RIGHTS. For a period of four months
following the Closing, WMG and its affiliates shall continue to have the
exclusive right to distribute the Existing Titles. To the extent that inventory
retained by the Seller is insufficient to meet sales made in such period, WMG
shall have the right, at its expense, to manufacture for sale the Existing
Titles. Within six months following the Closing, WMG shall account to the Buyer
for sales made after the Closing and shall remit to the Buyer a fee of 15% of
net sales after all discounts, price protection and a returns reserve of 15%. To
the extent sales by WEA result in royalties becoming payable to developers
(after recoupment of all recoupable amounts), the Buyer shall inform WMG of the
amounts of such royalties, and WMG shall promptly remit such amounts to the
Buyer. The Buyer shall account to and pay all royalties due to developers.
(d) CERTAIN AGREEMENTS. At the Closing the Buyer and the Seller shall
enter a Registration Rights Agreement in the form attached hereto as EXHIBIT C.
(e) REPORTING STATUS. So long as the Seller beneficially owns any of
the Shares or the Common Stock issuable upon conversion thereof, the Buyer shall
timely file all reports required to be filed with the SEC pursuant to Section 13
or 15(d) of the 1934 Act and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
(f) BOARD SEAT. Following the Closing, the Buyer will use its
reasonable best efforts to have a designee, if any, of WMG appointed or elected
to the Board of Directors of the Buyer to serve for so long as the Seller holds
at least one-half (1/2) of the Shares issued to it pursuant
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to Section 2(c). Any such designee shall be reimbursed by the Buyer for out-of-
pocket costs incurred in attending the Buyer's Board of Directors meetings.
(g) CONDITION TO TRANSFER OF CERTAIN CONTRACTS.
(i) The Seller agrees that it will use its best efforts to
obtain the necessary consents to the assignment of each Assumed Contract which
by its terms requires the consent of any of the other contracting parties
thereto to an assignment to the Buyer.
(ii) At the Closing the Buyer may elect to close the
transactions contemplated hereby notwithstanding the fact that the Seller may
have failed to obtain consents to the transfer of one or more Assumed Contracts
which by their terms require the consent of any other contracting party thereto
to the assignment thereof to the Buyer. The terms of this paragraph (ii) shall
govern the transfer of the benefits of each such Assumed Contract.
Notwithstanding anything herein to the contrary, the parties acknowledge and
agree that at the Closing the Seller will not assign to the Buyer any Assumed
Contract which by its terms requires the consent of any other contracting party
thereto unless each consent has been obtained prior to the Closing Date. With
respect to each such unassigned Assumed Contract, after the Closing Date the
Seller shall continue to deal with the other contracting party(ies) to that
Assumed Contract as the prime contracting party and shall use its best efforts
to obtain the consent of all required parties to the assignment of such Assumed
Contract, but the Buyer shall be entitled to the benefits of such Assumed
Contract accruing after the Closing Date to the extent that the Seller may
provide the Buyer with such benefits without violating the terms of such Assumed
Contract; and the Buyer agrees to perform at its sole expense all of the
obligations of the Seller to be performed under such Assumed Contract the
benefits of which the Buyer is receiving after the Closing Date.
6. INDEMNIFICATION.
(a) INDEMNIFICATION OF LOSSES. The Seller hereby indemnifies the
Buyer against Losses (as defined below), and the Buyer hereby indemnifies the
Seller against Losses, as set forth in this Section 6. If the Buyer shall have
suffered a Loss by reason of (i) the breach of any of the representations or
warranties or covenants made by the Seller herein, or (ii) any liability or
claim arising prior to the Closing with respect to the Seller's Business (except
the Assumed Liabilities but including the claims and litigation disclosed on
SCHEDULE 3(M)), the Buyer shall be indemnified for such Loss by the Seller as
set forth in this Section 6; if the Seller shall have suffered a Loss by reason
of (iii) the breach of any of the representations or warranties or covenants
made by the Buyer herein (iv) the manufacture or sale of the Seller's Products
by the Buyer after Closing, or (v) the Assumed Liabilities, the Seller shall be
indemnified for such Loss by the Buyer as set forth in Section 6. The party who
is requested to provide indemnity is herein referred to as "INDEMNITOR" and the
party requesting indemnity is herein referred to as "INDEMNITEE." "LOSS" shall
mean any losses, liabilities, claims, damages and expenses incurred including,
without limitation, penalties, fines, interest, amounts paid in settlement and
reasonable fees and disbursements of counsel, and reasonable expenses incurred
in connection with any investigation, action, suit or proceeding instituted
against Indemnitee.
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(b) PAYMENT. At such time as the indemnifiable amount of a Loss as
been determined in accordance with this Section 6 (a "LIQUIDATED CLAIM"), (A) if
resulting from a claim made by the Buyer, the Seller shall immediately pay the
Buyer the amount of the Liquidated Claim if the Liquidated Claim is described in
Section 6(a)(ii) or shall surrender a portion of the Shares as provided in
Section 6(f) if the Liquidated Claim is described in Section 6(a)(i), or (B) if
resulting from a claim made by the Seller, the Buyer shall immediately pay the
Seller the amount of the Liquidated Claim, as the case may be. No forbearance of
an Indemnitee in demanding payment from an Indemnitor shall act as a waiver of
any right of Indemnitee to receive payment from Indemnitor, nor shall it relieve
Indemnitor of any obligation to Indemnitee under this Agreement.
(c) NOTICE OF CLAIMS. If Indemnitee has any claim for a Loss (a
"CLAIM"), it will give prompt written notice thereof to Indemnitor, including in
such notice a brief description of the facts upon which Claim is based and the
amount thereof.
(d) THIRD PARTY CLAIMS. If Indemnitee becomes aware of a Third Party
Claim which it believes may result in a Claim (a "THIRD PARTY CLAIM"),
Indemnitee shall notify Indemnitor of such Third Party Claim, and Indemnitor
shall be entitled, at the expense of Indemnitor, to defend such Third Party
Claim.
(e) DISPUTED CLAIMS. If Indemnitor objects to any Claim or Third
Party Claim, it shall give written notice of such objection and brief statement
of the grounds of such objection to Indemnitee within twenty (20) business days
after notice is received. If no such notice is given, such claim shall be a
Liquidated Claim. If such objection is made, Indemnitor and Indemnitee shall
meet and use their best efforts to settle the dispute in writing which when
resolved shall be a Liquidated Claim. If no such settlement is reached, the
parties will submit their dispute to arbitration pursuant to Section 7(p)
hereof.
(f) SURRENDER OF SHARES
(i) If the Buyer suffers any Losses described in Section 6(a)(i)
hereof, the Buyer's sole and exclusive remedy for Losses shall be the surrender
by the Seller of Shares to the Buyer, provided that the Seller shall not be
required to surrender, in the aggregate, more than one third of the Shares
(subject to appropriate adjustment for stock splits, reverse splits and stock
dividends).
(ii) The Seller shall surrender Shares to the Buyer with respect
to Losses described in Section 6(a)(i) hereof at the rate of one Share for each
$3.375 of Liquidated Claim with respect thereto.
(iii) No surrender of Shares shall be made with respect to
Liquidated Claims described in Section 6(a)(i) until the aggregate amount
thereof exceeds $100,000, whereupon reduction shall be made for all such
Liquidated Claims.
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(g) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties set forth in this Agreement will continue for a
period of two (2) years from the date of Closing.
7. MISCELLANEOUS.
(a) PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party; PROVIDED, HOWEVER, that any Party
may make any public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party will advise the other Party prior
to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder in writing. Any notice, request, demand, claim, or
other communication hereunder shall be deemed duly given five business days
after mailing if sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below:
If to the Seller:
Inscape
c/o Warner Music Group Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
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Copy to:
Warner Music Group Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
If to the Buyer:
Graphix Zone, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it any is received by the person for whom
it is intended. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Party notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the State
of California.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller.
(j) EXPENSES. Each of the Buyer and the Seller will bear its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
(k) CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the Parties to express their mutual intent, and no
rule of strict construction shall be applied against any Party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
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(l) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(m) BULK TRANSFER LAWS. The Buyer acknowledges that the Seller will
not comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement. The Seller
shall indemnify the Buyer for any liability with respect to any such non-
compliance.
(n) TRANSFER TAXES. Any and all sales, use or other transfer taxes
arising from the transactions contemplated by this Agreement will be paid
equally by the Buyer and the Seller.
(o) CONFIDENTIALITY OF INFORMATION. All information given to a Party
by the other Party in connection with this Agreement and designated as
"confidential" by the disclosing Party ("CONFIDENTIAL INFORMATION") shall be
used only for purposes related to the consummation of the transactions
contemplated herein, and shall be disclosed to the receiving Party's employees
and representatives only on a "need to know" basis in connection with such
purposes. If the Closing does not occur for any reason, each Party shall
maintain in confidence all Confidential Information of the other Party, shall
return to the disclosing Party all tangible embodiments (and all copies) of such
Confidential Information and shall not use such Confidential Information for any
purpose; provided, that the forgoing restrictions shall not apply to: (a)
information which is or which becomes a matter of public knowledge through no
act or failure to act of the receiving Party, its representatives or employees,
(b) information which becomes available to the receiving Party from a source not
under an obligation of confidentiality to the disclosing Party, or
(c) information which was known to receiving Party prior to its disclosure to
the receiving Party by the disclosing Party. The Parties shall also treat as
confidential the terms of this Agreement, except as provided in Section 7(a).
(p) ARBITRATION. In the event of any dispute arising under this
Agreement, the Parties shall first attempt to resolve such dispute by
negotiation and mediation, if necessary. If such dispute is not resolved in
thirty (30) days, or such longer period as the Buyer and the Seller may agree,
the Buyer and the Seller will each select an arbitrator to serve on a three-
party arbitration panel and the selected arbitrators will select the third
arbitrator. Arbitration under this Agreement will be conducted in Orange County,
California pursuant to the rules of the American Arbitration Association. Each
side shall bear its own expenses in connection with such arbitration. The
decision of the arbitrators will be final and binding upon the Buyer and the
Seller, and shall be enforceable in any court of competent jurisdiction.
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(q) GUARANTEE BY WMG. WMG shall guarantee the performance of the
Seller's obligations under this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
GRAPHIX ZONE, INC.
By:
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Title:
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INSCAPE
By: Warner Music Multimedia Inc.
Title: General Partner
Warner Music Multimedia Inc.
By:
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Title:
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WARNER MUSIC GROUP INC.
By:
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Title:
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