SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is made as of the 3rd day of December,
1997, by and between American Interactive Media, Inc., a Nevada corporation (the
"Company"), and ▇▇▇▇▇▇▇▇▇ Digital, Inc., a Delaware corporation, or a designated
affiliate ("Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Securities.
1.1 Initial Sale and Issuance of Securities. Subject to the terms and
conditions of this Agreement, the Company agrees to issue to Purchaser: (a)
(i) a floating rate convertible secured debenture (the "First Convertible
Debenture"), a copy of which is attached hereto as Exhibit A-1, (ii) a
floating rate convertible secured debenture (the "Second Convertible
Debenture" and together with the First Convertible Debenture, the
"Convertible Debenture"), a copy of which is attached hereto as Exhibit
A-2, (b) a common stock purchase option (the "Option"), a copy of which is
attached hereto as Exhibit B and (c) a warrant (the "Warrant"), a copy of
which is attached hereto as Exhibit C. The Convertible Debenture, the
Option and the Warrant are referred to collectively as the "Securities."
1.2 First Closing. The first closing for the purchase and sale of the
First Convertible Debenture, the Option and the Warrant shall take place at
the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇▇, Colt & Mosle, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ on December 4, 1997, provided that the conditions set forth
in Section 4.1 below shall have been satisfied as of such date, or at such
other time and place as the Company and Purchaser mutually agree upon
orally or in writing (which time and place are designated as the "First
Closing"). At the First Closing, the Company shall deliver to Purchaser the
First Convertible Debenture, the Option and the Warrant.
1.3 Second Closing. The second closing for the purchase and sale of
the Second Convertible Debenture shall take place at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇▇▇, Colt & Mosle, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ on
February 3, 1998, provided that the conditions set forth in Section 4.1
below shall have been satisfied as of such date, or at such other time and
place as the Company and Purchaser mutually agree upon orally or in writing
(which time and place are designated as the "Second Closing"). At the
Second Closing, the Company shall deliver to Purchaser the Second
Convertible Debenture.
1.4 Legend. The certificate or certificates issued pursuant to
conversion or exercise of the Convertible Debenture, the Option or the
Warrant evidencing shares of Common Stock of the Company, par value $0.001
("Company Common Stock") shall be subject to a legend restricting transfer
under the Securities Act of 1933, as amended (the "Securities Act"), such
legend to be substantially as follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended.
Such shares may not be sold or transferred in the absence of such
registration or an opinion of counsel reasonably satisfactory to
American Interactive Media, Inc., as to the availability of an
exemption from registration."
2. Representations and Warranties of the Company. Except as specifically
disclosed by the Company in the Exhibits attached hereto, the Company hereby
represents and warrants to Purchaser that:
2.1 Organization, Good Standing and Qualification. The Company and its
subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of their respective states of incorporation and
have all requisite corporate power and authority to carry on their
businesses as now conducted and as proposed to be conducted. The Company
and its subsidiaries are duly qualified to transact business and are in
good standing in each jurisdiction in which the failure so to qualify would
have a material adverse effect on their businesses or properties.
2.2 Authorization. The Company has all corporate right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The transactions contemplated hereby shall include,
but not be limited to, the execution and delivery of the Securities. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action, and stockholder
action if required, on behalf of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity and public policy
principles. The Company has obtained or shall obtain prior to the Closing
all required consents, authorizations and approvals, and shall have made
all filings with all governmental authorities required to be made prior to
the Closing and shall make in a timely manner all filings required to be
made subsequent to the Closing in connection with the consummation of the
transactions contemplated hereby.
2.3 Compliance. The Company has complied with, and is not in default
under or in violation of its Amended Articles of Incorporation, By-laws or
any and all laws, ordinances and regulations or other governmental
restrictions, orders, judgments or decrees, applicable to the Company's
business as now conducted and as proposed to be conducted, where any such
default or violation would have a material adverse effect on the business,
operations or financial condition of the Company. The Company has not
received notice of any possible or actual violation of any applicable law,
ordinance, regulation, or order, the result of which violation would have a
material adverse effect on the business, operations, or financial condition
of the Company. The Company is not a party to any agreement, instrument,
mortgage, indenture, loan, lease or license, or subject to any charter or
other corporate restriction, or any judgment, order, decree, law,
ordinance, regulation or other governmental restriction which would prevent
or impede, or be breached or violated by, or would result in the creation
of any lien or
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encumbrance upon any assets of the Company as a result of, the transactions
contemplated by this Agreement.
2.4 Capitalization. The authorized capital stock of the Company
consists of fifty million one hundred thousand (50,100,000) shares of which
fifty million (50,000,000) shares are Common Stock, par value $0.001 and
one hundred thousand (100,000) shares are Preferred Stock, par value $1.00.
As of the close of business on December 3, 1997, there were issued and
outstanding 13,017,435 shares of Common Stock and no shares of Preferred
Stock. All such issued and outstanding shares have been duly authorized and
validly issued, and are fully paid and nonassessable. As of the close of
business on December 1, 1997 the Company has granted options, warrants and
other convertible securities for 7,055,250 shares of Company Common Stock.
Attached as Exhibit 2.4 is an accurate list of the holders of record of the
Company's outstanding securities (including without limitation all options,
warrants and other convertible securities) as of December 1, 1997. As of
December 3, 1997, the Company is not aware of any 5% or greater Shareholder
of record intending to dispose of its shares of Company Common Stock.
2.5 Valid Issuance of Shares. The shares issued pursuant to exercise
or conversion of the Securities, when issued, sold and delivered in
accordance with the terms of the Securities for the consideration expressed
in the Securities, will be duly and validly issued, fully paid and
nonassessable, subject only in the case of shares issued upon exercise of
the Option to payment of the consideration with payments in kind as
provided for in the Option. Based in part upon representations of Purchaser
in this Agreement, the shares issued upon exercise or conversion of the
Securities will be issued in compliance with all applicable federal and
state securities laws and shall not be subject to restrictions on transfer
arising through the Company other than under applicable federal and state
securities laws.
2.6 Financial Statements. The audited financial statements of the
Company for the period from January 1, 1995 to and including December 31,
1995, January 1, 1996 to and including December 31, 1996 (the "Audited
Financials") and the interim financial statements of the Company for the
period from January 1, 1997 through September 30, 1997 (such interim
financial statements and the Audited Financials are hereinafter
collectively referred to at times as the "Company Financial Statements"),
copies of which have been previously provided by the Company to the
Purchaser, are true, complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
("GAAP"), and except for such changes as may be disclosed in the notes to
the Company Financial Statements, consistently followed for three (3) years
by the Company; the balance sheets in the Company Financial Statements
fairly present the financial position of the Company as of their respective
dates and set forth in full and reflect all liabilities, including taxes,
of the Company as of such dates required to be reflected thereon in
accordance with GAAP; the income statements fairly present in all material
respects the results of the operations of the Company for the periods
indicated and covered thereby; and the Shareholders' Equity of the Company
as of such dates was as set forth in the Company Financial Statements,
after full provision and reserves for all taxes and other liabilities for
all periods up to the
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dates thereof. Except for liabilities incurred after September 30, 1997, in
the ordinary course of business and included on the books and records of
the Company, the Company does not know and has no reason to know of any
liability or any basis for the assertion against the Company of any
liability not reflected or reserved against in the balance sheets required
to be included thereon in accordance with GAAP.
2.7 Intellectual Property. To the Company's best knowledge, the
Company holds valid and enforceable licenses for the use of all patents
necessary to conduct the business of the Company. Except as disclosed in
Exhibit 2.7 to the Company's best knowledge, the Company has valid,
unrestricted, exclusive and enforceable rights in copyrights, trademarks,
trademark registrations and trade names necessary to conduct the business
of the Company. To the Company's best knowledge, the Company has valid,
unrestricted and enforceable rights in trade secrets, know-how and other
intellectual property necessary to conduct the business of the Company.
Except as disclosed in Exhibit 2.7 to the best of the Company's knowledge,
the Company is not infringing on the intellectual property rights of any
third party, nor is any third party infringing on the Company's
intellectual property rights. There are no restrictions in any agreements,
licenses, franchises, or other instruments that are necessary for the
conduct of the Company's business as presently conducted or as planned to
be conducted in the future that materially interfere with the conduct of
such business. Each current and former employee and consultant of the
Company with access to confidential or proprietary information of material
value to the Company has executed a proprietary information agreement with
the Company. Each consultant of the Company who has developed intellectual
property of material value to the Company on behalf of the Company has
executed a work for hire agreement with the Company.
2.8 Use of Funds; Activities in Support of Strategic Relationship. The
Company hereby represents, warrants and agrees to use the funds from the
transactions contemplated hereby for the support and expansion of its
marketing activities, research and development, working capital needs and
general corporate purposes consistent with the full commercialization of
the webPASSPORT network, the development and commercialization of the
Virtual Cable and ComedyNet products and the creation of any other products
or services that are in keeping with the mission and goals of the Company
as presently defined by current activities. Purchaser acknowledges,
however, that the Company's plans and intentions must of necessity be
subject to change based on numerous factors, including the degree of market
acceptance of the Company's current and future products, technological
developments, competitive conditions and other factors which require the
Company to keep the interests of all of its stockholders in mind.
2.9 Disclosure. The Company Financial Statements are true, complete
and correct at the respective dates thereof, in all material respects.
Without limiting the foregoing, there are no material liabilities,
contingent or actual, that are not disclosed in the Company Financial
Statements. The Company has paid all taxes which are due, except for taxes
which it reasonably disputes. There is no material claim, litigation, or
administrative proceeding pending, or to the best of the Company's
knowledge, threatened against the Company, except as disclosed in the
Company Financial Statements. No representation or warranty made in this
Agreement or in any exhibit or
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schedule hereto and no statement, certificate, memorandum or instrument
furnished or to be furnished by the Company pursuant hereto or in
connection with the transactions hereby (excluding, however, the Business
Plan annexed to the Convertible Debenture) contains or will contain any
untrue statement of a material fact or omits or will omit any material
fact.
2.10 Contractual Obligations. Exhibit 2.10 contains a correct and complete
list of all material contracts, agreements, leases, licenses or other
commitments of any kind, made directly or indirectly by the Company
("Contracts"), including, without limitation, all of the following, true and
complete copies of which have been furnished to Purchaser:
(a) All collective bargaining agreements, employment and bonus
agreements, consulting agreements (which have directly produced
confidential or proprietary information or intellectual property
of material value to the Company), and pension, profit sharing,
deferred compensation, stock option, stock purchase, welfare or
incentive plans or agreements;
(b) All Contracts under which the Company is restricted from carrying
on any business, venture or other activities anywhere in the
world;
(c) All Contracts to sell or lease (as lessor) any of the assets or
properties of the Company, except in the ordinary course of
business, or to purchase or lease any real property;
(d) All Contracts pursuant to which the Company guarantees any
liability of any person;
(e) All Contracts pursuant to which the Company provides goods or
services involving payments in excess of $50,000;
(f) All Contracts with any affiliate of the Company;
(g) All Contracts pursuant to which any person has the ability to
cause the Company to register any shares of Company Common Stock
under the Securities Act, or to cause the Company to commence
filing reports under the Securities Exchange Act of 1934;
(h) All Contracts pursuant to which the Company licenses any patent,
trademark, trade name, technology or other intellectual property
right (whether as licensor or licensee) and any other Contract
which provides for the payment or receipt of royalties or other
fees related to the use of any intellectual property rights; and
(i) All Contracts relating to the borrowing of money or the
mortgaging or pledging of, or otherwise placing a lien on, any
asset of the Company.
All of the Contracts are enforceable against the Company and, to its
knowledge, the other parties thereto in accordance with their terms, except
as stated in Exhibit 2.10. The Company is not now in material default under
nor, to the Company's knowledge, are
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there any material liabilities arising from any breach or default by
Company prior to the date of this Agreement, under any of the Contracts.
2.11 Title to Assets. The Company has good and marketable title to all
of its properties and assets, in each case subject to no mortgage, pledge,
lien, lease, encumbrance or charge, other than (i) the lien granted
pursuant to the Pledge and Security Agreement in favor of Purchaser, (ii)
liens for current taxes not yet due and payable and (iii) possible minor
liens and encumbrances which do not in any case materially detract from the
value of the property subject thereto or materially impair the operations
of the Company, and which have not arisen otherwise than in the ordinary
course of business.
2.12 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against the Company or its properties that
might result in a material adverse effect on the Company or its business,
taken as a whole. The Company is not charged with or, to the knowledge of
the Company, threatened with a charge or violation, nor is it under
investigation with respect to any actual, alleged, possible or potential
violation of any provision, of any federal, state or local law or
administrative ruling or regulation relating to any aspect of the business
being carried on by the Company.
2.13 Taxes. The Company has filed all tax and information returns
which are required to be filed by it and has paid, or made adequate
provision for the payment of, all taxes which have or may become due. The
Company has no knowledge of any additional assessments or any basis
therefor. The Company has withheld or collected from each payment made to
its employees the amount of all taxes required to be withheld or collected
therefrom, and has paid over such amounts to the appropriate taxing
authorities.
2.14 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental, Health and Safety Laws" shall mean all
federal, state or local laws, ordinances, codes, regulations, rules,
policies and orders regarding the protection of the environment,
requiring pollution control equipment, or that classify, regulate,
call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or
toxic substances, materials, wastes, pollutants or contaminants, or
regarding the safety of employees or workers.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without
limitation, petroleum products and those substances, materials and
wastes defined in or regulated under any Environmental, Health and
Safety Law.
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(iii) "Property" shall mean all real property leased or owned by
the Company either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements on
the Property of the Company.
(b) The Company represents and warrants as follows with respect to the
operations of the Company: (i) to the best of the Company's knowledge, no
friable asbestos is contained in the Facilities; (ii) all Hazardous
Materials have been disposed of in accordance with all Environmental,
Health and Safety Laws; (iii) the Company has received no notice (verbal or
written) of any noncompliance of the Facilities or its past or present
operations with Environmental, Health and Safety Laws; (iv) no notices,
administrative actions or suits are pending or, to the best of the
Company's knowledge, threatened relating to a violation of any
Environmental, Health and Safety Law; (v) to the best of the Company's
knowledge, the Company is not a potentially responsible party under the
Federal Comprehensive Environmental Response, Compensation and Liability
Act, or any state analog statute, arising out of events occurring prior to
the Closing Date which would have a material adverse effect on the Company;
(vi) to the best of the Company's knowledge, there have not been in the
past, and are not now, any Hazardous Materials under or migrating to or
from the Facilities or Property; (vii) to the best of the Company's
knowledge, there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under the Property
including without limitation, treatment or storage tanks, sumps, or water,
gas or oil ▇▇▇▇▇; (viii) the Company has not deposited, stored, or disposed
of polychlorinated biphenyls (PCBs) on the Property or Facilities or any
equipment on the Property containing PCBs at levels in excess of 50 parts
per million; (ix) to the best of the Company's knowledge, the Facilities
and the Company's uses and activities therein have at all times complied
with all Environmental, Health and Safety Laws; (x) the Company has all the
permits and licenses required to be issued and is in full compliance with
the terms and conditions of those permits.
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2.15 Employee Benefit Plans.
Except for the plans listed on Exhibit 2.15, the Company does not
maintain any pension, profit sharing, retirement, fringe benefit, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, hospitalization, medical insurance, life insurance
or any other type of employee benefit plan, program or arrangement within
the meaning of Section 3(3) Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including, without limitation, any defined
benefit plan within the meaning of Section 3(34) of ERISA or any defined
contribution or multi-employer plan within the meaning of Section 3(37) of
ERISA on behalf of any current or former officers or employees of the
Company or their beneficiaries or dependents (whether on an active or
frozen basis).
3. Representations and Warranties of the Purchaser. Purchaser hereby
represents and warrants to Company that:
3.1 Organization, Good Standing and Qualification. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted.
3.2 Authorization. Purchaser has all corporate right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
Purchaser and the consummation by Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on behalf of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with
its respective terms, subject to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general equity and public policy principles. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with or result in any
violation of any obligation under any provision of the Certificate of
Incorporation or By-laws (or corresponding instruments) of Purchaser or any
mortgage, indenture, lease or other agreement or instrument, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Purchaser, its properties or assets, the effect of which
would materially impair or restrict its power to perform its obligations as
contemplated hereby.
3.3 Government Consents, etc.. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on
the part of Purchaser is required in connection with the valid execution
and delivery of this Agreement, or the purchase of the Securities, or the
consummation of any other transaction contemplated hereby.
3.4 Investment. Purchaser will acquire the Securities and any shares
acquired pursuant to the exercise or conversion of the Securities for
investment for its
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own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof. Purchaser understands
that the Securities and any shares acquired pursuant to the exercise or
conversion of the Securities have not been, and will not be, registered
under the Securities Act for sale to Purchaser by reason of a specific
exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of Purchaser's
investment intent and the accuracy of Purchaser's representations as
expressed herein. Should Purchaser in the future decide to offer to dispose
of any of the Securities or shares acquired pursuant to the exercise or
conversion of any of the Securities, or any interest therein, it agrees to
do so only in compliance with the Securities Act and this Agreement.
3.5 Purchaser's Independent Investigation. Purchaser, in offering to
purchase the Securities hereunder, has relied solely upon an independent
investigation made by it and its representatives, if any, and upon the
representations made by Company in this Agreement and the other documents
listed in the Exhibits hereto and has, prior to the date hereof, been given
access to and the opportunity to examine all books and records of the
Company, and all material contracts and documents of the Company. In making
its investment decision to purchase the Securities, the Purchaser is not
relying on any oral or written representations or assurances from the
Company or any other person other than as set forth in this Agreement and
the Exhibits hereto, or on any information other than that contained or
incorporated by reference in the Company Financial Statements. Purchaser
has such experience in business and financial matters that it is capable of
evaluating the risk of its investment and determining the suitability of
its investment. Purchaser is an accredited investor as defined in Rule 501
of Regulation D of the Securities Act.
4. Conditions to the Closings.
4.1 Conditions to Obligations of Purchaser. Purchaser's obligation to
purchase the First Convertible Debenture, the Option and the Warrant at the
First Closing and the Second Convertible debenture at the Second Closing is
at the option of Purchaser which may waive any such conditions to the
extent permitted by law, subject to the fulfillment on or prior to the
respective closing of the following conditions:
(a) Representations and Warranties Correct. The representations
and warranties made by the Company in Section 2 hereof shall be true
and correct in all material respects when made, and shall be true and
correct in all material respects on the respective Closing with the
same force and effect as if they had been made on and as of said date.
(b) Performance. All covenants and agreements contained in this
Agreement to be performed by the Company on or prior to the respective
Closing shall have been performed or complied with in all respects.
(c) No Order Pending. There shall not then be in effect any order
enjoining or restraining, or any pending proceeding seeking to enjoin
or restrain,
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the transactions contemplated by this Agreement or the effect of which
could reasonably be anticipated to have an adverse effect on the
prospects of the Company.
(d) No Law Prohibiting or Restricting Such Sale. There shall not
be in effect any law, rule or regulation prohibiting or restricting
such sale or requiring any consent or approval of any person which
shall not have been obtained to issue any of the Securities.
(e) Compliance Certificate. The Company shall have delivered to
the Purchaser a certificate, executed on behalf of the Company by the
President of the Company, dated the respective Closing date, and
certifying to the fulfillment of the conditions specified in Section
4.1(a), Section 4.1(b) and Section 4.1(c). .
(f) Bankruptcy. The Company shall not (i) have filed a voluntary
petition in bankruptcy, (ii) been declared insolvent or bankrupt, or
have made a general assignment for the benefit of creditors, or
similar arrangement for the benefit of its creditors, (iii) been the
subject of proceedings in bankruptcy or insolvency, which have not
been dismissed within 60 days thereafter, or (iv) have had a receiver
appointed by a court for the Company or a substantial portion of its
assets, which receiver has not been discharged within 60 days.
(g) Voting Agreement. The Voting and Standstill Agreement shall
have been executed and delivered by Company, Purchaser and the other
parties thereto in the form attached hereto as Exhibit 4.1(g).
(h) Opinion. Purchaser shall have received from ▇▇▇▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇▇▇, Colt & Mosle, counsel to the Company, an opinion
addressed to Purchaser, dated the Closing Date, substantially in the
form attached hereto as Exhibit 4.1(h).
4.2 Conditions to Obligations of the Company. The Company's obligation
to sell and issue the First Convertible Debenture, the Option and the
Warrant at the First Closing and the Second Convertible Debenture at the
Second Closing is at the option of the Company which may waive any such
conditions to the extent permitted by law, subject to the fulfillment on or
prior to the respective closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties made by Purchaser in Section 3 hereof shall be true and
correct in all material respects when made, and shall be true and
correct in all material respects on the respective Closing date with
the same force and effect as if they had been made on and as of said
date.
(b) No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this
Agreement.
(c) No Law Prohibiting or Restricting Such Sale. There shall not
be in effect any law, rule or regulation prohibiting or restricting
such sale or requiring any
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consent or approval of any person which shall not have been obtained
to issue any of the Securities.
(d) Compliance Certificate. Purchaser shall have delivered to the
Company a certificate, executed on behalf of Purchaser by an officer
of Purchaser, dated the respective Closing, and certifying to the
fulfillment of the conditions specified in Section 4.2(a) amd Section
4.2(b).
(e) The Company and Purchaser shall have entered into the Voting
and Standstill Agreement.
5. Additional Agreements.
5.1 Director Nominee and Voting Agreement. As soon as practicable
following the Closing, the Company shall use its reasonable efforts to
cause an individual designated (the "Purchaser Designee") by Purchaser to
be elected to the Company's Board of Directors. The initial Purchaser
Designee is ▇▇▇▇▇▇▇ ▇▇▇▇▇, and the Company agrees that ▇▇. ▇▇▇▇▇ may send a
non-voting representative of Purchaser to, or be accompanied by an
additional observer for Purchaser at, meetings of the Company's Board of
Director. The Company also shall be obligated to take all action necessary
to implement the voting agreements contained in the Voting and Standstill
Agreement.
5.2 (a) Rights of First Refusal. At any time following the First
Closing, if the Company offers, issues or sells additional Company Common
Stock or securities exchangeable or convertible into Company Common Stock
or if the Company enters into any agreements or commitments pursuant to
which the Company may become obligated to issue any shares of capital
stock, warrants, options, rights or securities convertible into or
exchangeable into Company Common Stock, the Company shall offer to sell to
Purchaser on the same terms and conditions the Purchaser's pro rata share
of such proposed sale based on the number of shares of Company Common Stock
held by the Purchaser or subject to issuance upon exercise or conversion of
the Securities at the time of and immediately prior to such sale relative
to the total outstanding shares of Company Common Stock on a fully diluted
basis immediately prior to such sale. The offer shall be effected by
delivery of written notice thereof by the Company to the Purchaser, and
such offer shall remain open for a period of thirty (30) calendar days from
receipt thereof. This Section 5.2(a) shall not apply to (i) shares issued
upon the exercise of the Option or Warrant or the conversion of the
Convertible Debenture or shares issued pursuant to the exercise of options,
warrants or other securities outstanding on the Closing Date, (ii) shares
of Company Common Stock issued pursuant to compensatory plans or
arrangements which are approved by the Company's Board of Directors and are
for the Company's employees, officers, directors or consultants or any
shares of Company Common Stock issued pursuant to the exercise of warrants,
options, rights or securities convertible into or exchangeable for capital
stock of the Company issued to such persons or the issuance of such
Warrants, options, rights or securities, (iii) any shares of Company Common
Stock or warrants, options, rights or securities convertible into or
exchangeable for capital stock of the Company in connection with any stock
split, stock dividend or equivalent event affecting the Company Common
Stock or (iv) any
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offering of capital stock of the Company which is registered under the
Securities Act. For the purpose of this Section 5.2 the term "pro rata"
shall mean the fraction for which the numerator shall be the number of
shares of Company Common Stock owned by Purchaser or subject to issuance
upon exercise or conversion of the Securities and the denominator for which
shall be the number of shares of Company Common Stock on a fully diluted
basis immediately prior to the transaction. The provisions of this Section
5.2(a) shall not apply to a private placement of shares or convertible
securities of up to $6,000,000 provided that the Company shall consult with
Purchaser with respect to such issuance. For private placements of shares
or convertible securities over the $6,000,000 amount, the Company must
receive approval of such transaction from Purchaser.
(b) In addition, without ▇▇▇▇▇▇▇▇▇'▇ approval, from and after the
First Closing until 90 days following the conversion of the Convertible
Debenture, the Company may not issue or sell additional Company Common
Stock or securities exchangeable for or convertible into Company Common
Stock, provided that this Section 5.2(b) shall not apply to (i) shares
issued upon the exercise of the Option or Warrant or the conversion of the
Convertible Debenture or shares issued pursuant to the exercise of options,
warrants or other securities outstanding on the Closing Date, (ii) shares
of Company Common Stock issued pursuant to compensatory plans or
arrangements which are approved by the Company's Board of Directors and are
for the Company's employees, officers, directors or consultants or any
shares of Company Common Stock issued pursuant to the exercise of warrants,
options, rights or securities convertible into or exchangeable for capital
stock of the Company issued to such persons or the issuance of such
warrants, options, rights or securities, (iii) any shares of Company Common
Stock or warrants, options, rights or securities convertible into or
exchangeable for capital stock of the Company in connection with any stock
split, stock dividend or similar event affecting the Company Common Stock
or (iv) any offering of capital stock of the Company which is registered
under the Securities Act. The provisions of this Section 5.2(b) shall not
apply to a private placement of shares or convertible securities of up to
$6,000,000 provided that the Company shall consult with Purchaser with
respect to such issuance. For private placements of shares or convertible
securities over the $6,000,000 amount, the Company must receive approval of
such transaction from Purchaser.
5.3 [intentionally omitted]
5.4 Change in Control. If the Company receives a bona fide proposal
from a third party which could result in a change in control of the
Company, the Company shall provide Purchaser with notice of such proposal
and give Purchaser 30 days during which Purchaser shall have the exclusive
right to negotiate with the Company with respect to a mutually-agreeable
counter proposal by the Purchaser. During such 30 day period the Company
shall not discuss or negotiate any third party proposal with the third
party proposing the transactions. A "Change of Control" shall mean for the
purposes of this Agreement:
(a) a merger or consolidation with any other Person in which all
voting securities of the Company outstanding immediately prior thereto
represent (either by remaining outstanding or being converted into
-12-
voting securities of the surviving corporation) less than 50% of the
actual voting power of such corporation or the surviving entity
outstanding immediately after such merger or consolidation; or
(b) the sale or disposition by the Company (in one transaction or
a series of transactions) of all or substantially all the Company's
assets; or
(c) any person (other than a person owned directly or indirectly
by the Company's stockholders in substantially the same proportions as
their ownership of stock of the Company) becoming the beneficial
owner, directly or indirectly, of voting securities of the Company
representing greater than 40% of the actual voting power of the
Company, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise.
Notwithstanding the foregoing, Purchaser's rights under this
Section 5.4 shall terminate if either (i) the Option is not exercised
in full prior to expiration, (ii) the Warrant is not exercised in full
prior to expiration or (iii) Purchaser disposes of any amount of the
Convertible Debenture or any of the shares issued upon conversion
thereof. In addition, notwithstanding the foregoing, the Company shall
not be required to negotiate with Purchaser on an exclusive basis if
to do so would violate the Board of Directors' fiduciary duty to its
stockholders.
5.5 Piggyback Registration; Demand Registration; Exchange Act
Registration.
(a) If at any time the Company proposes to make a registered
public offering of Company Common Stock, or Securities convertible
therefor (whether for its own account or for the account of others)
under the Securities Act, other than an offering registered on Form
▇-▇, ▇▇▇▇ ▇-▇, or other Securities and Exchange Commission ("SEC")
registration form which does not permit inclusion of shares of selling
stockholders for offer to the public, the Company shall promptly give
written notice of the proposed registration to Purchaser reasonably
prior to the proposed filing date of the registration statement, and
at the written request of the Purchaser, delivered to the Company
within 30 days after the receipt of such notice, the Company shall
include in such registration and offering all of the Purchaser's
Company Common Stock that have been designated for registration in the
Purchaser's request (a "Piggyback Registration"), provided, however,
that (i) the Company will not be required to effect a Piggyback
Registration with respect to Company Common Stock which have already
been registered for sale on another registration statement; and (ii)
the Company may withdraw any proposed registration statement or
offering of securities that gave rise to the Piggyback Registration at
any time without liability to Purchaser. If, however, after one (1)
year or more after Closing, Purchaser demands that the Company
register an offering of the Company Common Stock which have not
already been registered for sale on another registration statement
held by Purchaser, the Company shall register an
-13-
offering of such Company Common Stock (a "Demand Registration", and
such Demand Registration or Piggyback Registration referred to as a
"Registration"). Purchaser shall be entitled to two Demand
Registrations per year.
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the lead underwriter
advises the Company in writing that in its opinion the number of
securities requested to be included in such registration exceeds the
number that can be sold in such offering without adversely affecting
the marketability of the offering, the Company shall include in such
offering first, the securities of the Company proposed to be sold by
the Company, second, the Company Common Stock requested to be included
in such registration by Purchaser and third, other securities proposed
to be included in such registration. If a Piggyback Registration is an
underwritten secondary registration on behalf of selling stockholders,
and the lead underwriter advises the Company in writing that in its
opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering
without adversely affecting the marketability of the offering, then
the Company shall include in such offering first, the securities of
the Company proposed to be sold by the stockholders requiring or
demanding pursuant to a contractual right that the Company effect such
registration, second, the Company Common Stock requested to be
included in such registration by Purchaser and third, other securities
(if any) proposed to be included in such registration. If a Piggyback
Registration is with respect to an underwritten primary registration
on behalf of the Company and if Purchaser exercises its Piggyback
rights, Purchaser agrees to sell its Company Common Stock, if the
Company so requests, on the same basis as the other securities
included in such registration are being sold, and the underwriter or
underwriters for such registration shall be selected by the Company.
(c) The Company shall have no obligation to include Company
Common Stock owned by Purchaser in a registration statement for a
Registration, unless and until Purchaser has furnished to the Company
all information and statements about or pertaining to Purchaser in
such reasonable detail and on such timely basis as is reasonably
deemed by the Company to be necessary or appropriate for the
preparation of the registration statement.
(d) Whenever a request for a Registration is properly made in
accordance with Section 5.5(a), the Company shall, as expeditiously as
reasonably possible:
(i) prepare and file with the SEC a registration statement
with respect to such Company Common Stock and use its best
efforts (subject to Section 5.5(a)) to cause such registration
statement to become effective as soon as practicable thereafter
and Purchaser shall have the opportunity to object to any
information pertaining solely to Purchaser that is contained
therein and the Company will make the corrections reasonably
requested by Purchaser with respect to such information;
-14-
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and prospectus
contained therein as may be necessary to keep such registration
statement effective for a period of not less than six (6) months
and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration
statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
registration statement;
(iii) furnish to Purchaser the number of copies of such
registration statement, each amendment and supplement thereto,
the prospectus contained in such registration statement
(including each preliminary prospectus), and such other documents
as Purchaser may reasonably request in order to facilitate the
disposition of the Company Common Stock owned by Purchaser;
(iv) use its best efforts to register or qualify such shares
under the state blue sky or securities ("Blue Sky") laws of such
jurisdictions as Purchaser reasonably requests, and to do any and
all other acts and things that may be reasonably necessary or
advisable to enable Purchaser to consummate the disposition of
such shares in such jurisdictions; provided, however, that the
Company will not be required to do any of the following: (1)
qualify generally to do business in any jurisdiction where it
would not be required but for this Section 5.5(d), (2) subject
itself to taxation in any such jurisdiction or (3) file any
general consent to service of process in any such jurisdiction;
and
(v) notify Purchaser, at any time when a prospectus relating
to Company Common Stock is required to be delivered under the
Securities Act, of the occurrence of any event as a result of
which the prospectus included in any such registration statement
contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein in the light of the
circumstances under which they were made, not misleading, and
prepare a supplement or amendment to the prospectus so that, as
thereafter delivered to the purchasers of such shares, the
prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
(e) If, after a registration statement becomes effective, the
Company advises Purchaser that the Company considers it appropriate
for the registration statement to be amended, Purchaser shall suspend
any further sales of its registered shares until the Company advises
Purchaser that the registration statement has been amended. The six
(6) month time period referred to herein during which the registration
statement must be kept current after its effective date shall be
extended for an additional number of business days during which the
rights to sell shares was suspended pursuant to
-15-
the preceding sentence, but in no event will the Company be required
to update the registration statement after the first anniversary of
the date hereof.
(f) With respect to any Registration, Purchaser shall pay all
transfer taxes, if any, relating to the sale of its Company Common
Stock and its pro rata portion of any underwriting discounts or
commissions or the equivalent thereof.
(g) With respect to any Registration, except for the fees and
expenses specified in Section 5.5(f) hereof and except as provided
below in this Section 5.5(g), regardless of whether any registration
statement becomes effective, the Company shall pay all expenses
incident to a Registration, including, without limitation, all
registration and filing fees, fees and expenses of compliance with
Blue Sky laws, underwriting discounts, fees, and expenses (other than
Purchaser's pro rata portion of any underwriting discounts or
commissions or the equivalent thereof), printing expenses, messenger
and delivery expenses, and fees and expenses of counsel for the
Company and all independent certified public accountants and other
persons retained by the Company.
(h) The Company agrees to indemnify, to the extent permitted by
law, each holder of Company Common Stock, against all losses, claims,
damages, liabilities and expenses, joint or several (or actions in
respect thereof) ("Losses") arising out of or based upon any untrue or
alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or other document and any
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and any
violation by the Company of the Securities Act or any rule or
regulation promulgated thereunder, or of any Blue Sky or other state
securities laws or any rule or regulation promulgated thereunder,
except insofar as the same are caused by any untrue or alleged untrue
statement or any omission or alleged omission made in reliance upon
and in conformity with information furnished in writing to the Company
by such holder expressly for use therein or by such holder's failure
to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished such
holder with a sufficient number of copies of the same and except
insofar as the same are caused by or contained in any prospectus if
such holder failed to send or deliver a copy of any subsequent
prospectus or prospectus supplement which would have corrected such
untrue or alleged untrue statement of material fact or such omission
or alleged omission of a material fact with or prior to the delivery
of written confirmation of the sale by such holder after the Company
has furnished such holder with a sufficient number of copies of the
same.
(i) In connection with any registration statement in which the
holder of Company Common Stock is participating, such holder will
furnish to the Company in writing such information and affidavits as
the Company requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, severally
and not jointly, will indemnify the Company, each person, which may be
an individual, partnership, corporation, limited liability company,
association, joint stock company, trust, joint venture, unincorporated
organization or governmental entity
-16-
or any department, agency or political subdivision thereof ("Person"),
who controls the Company (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and their respective
officers, directors, partners, employees, agents and representatives
against any Losses arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in any registration
statement, prospectus, or form of prospectus, or any omission or
alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue
statement is contained in, or such omission or alleged omission is
required to be contained in and in conformity with, any information so
furnished in writing by such holder or its representatives to the
Company expressly for use in such registration statement or prospectus
and that such statement or omission was relied upon by the Company in
preparation of such registration statement, prospectus or form of
prospectus; provided, however, that such holder of Company Common
Stock shall not be liable in any such case to the extent that the
holder has furnished in writing to the Company prior to the filing of
any such registration statement or prospectus or amendment or
supplement thereto information expressly for use in such registration
statement or prospectus or any amendment or supplement thereto which
corrected or made not misleading, information previously furnished to
the Company, and the Company failed to include such information
therein. In no event shall the liability of the selling holder of
Company Common Stock hereunder be greater in amount than the dollar
amount of the proceeds (net of payment of all expenses) received by
such holder upon the sale of the Company Common Stock giving rise to
such indemnification obligation. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf
of such indemnified party.
(j) If any Person shall be entitled to indemnity hereunder, such
indemnified party shall give prompt notice to the party or parties
from which such indemnity is sought of the commencement of any action,
suit, proceeding or investigation or written threat thereof
("Proceeding"') with respect to which such indemnified party seeks
indemnification or contribution pursuant hereto; provided, however,
that the failure to so notify the indemnifying parties shall not
relieve the indemnifying parties from any obligation or liability
hereunder except to the extent that the indemnifying parties have been
prejudiced by such failure. The indemnifying parties shall have the
right, exercisable by giving written notice to an indemnified party
promptly after the receipt of written notice from such indemnified
party of such Proceeding, to assume, at the indemnifying parties'
expense, the defense of any such Proceeding, with counsel reasonably
satisfactory to such indemnified party; provided, however, that an
indemnified party or parties (if more than one such indemnified party
is named in any Proceeding) shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless there exists, in
the opinion of counsel for the indemnified parties, legal defenses
available to the indemnified parties which are different from or in
addition to those available to the indemnifying party, or a conflict
exists between one or more indemnifying parties and one or more
indemnified parties, in which case the indemnifying parties shall, in
connection with any one such Proceeding or separate but substantially
similar or related Proceedings in the same jurisdiction, arising
-17-
out of the same general allegations or circumstances, be liable for
the fees and expenses of not more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such
indemnified party or parties. If an indemnifying party assumes the
defense of such Proceeding, the indemnifying parties will not be
subject to any liability for any settlement made by the indemnified
party without its or their consent (such consent not to be
unreasonably withheld).
(k) If the indemnification provided for in Sections 5.5(h), (i)
and (j) is unavailable to an indemnified party or is insufficient to
hold such indemnified party harmless for any Losses in respect of
which Sections 5.5(h), (i) and (j) would otherwise apply by its terms,
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation to
contribute to the amount paid or payable by such indemnified party as
a result of such Losses, in such proportion as is appropriate to
reflect the relative fault of the indemnifying party, on the one hand,
and such indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
such indemnifying party, on the one hand, and indemnified party, on
the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or
omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the
extent such party would have been indemnified for such expenses under
Section 5.5(j) if the indemnification provided for in Section 5.5(h)
or 5.5(i) was available to such party. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this
Section 5.5(k) were determined by pro rata allocation or by any other
method of allocation that does not take account of the equitable
considerations referred to in this paragraph. Notwithstanding the
provision of this Section 5.5(k), an indemnifying party that is a
selling holder of Company Common Stock shall not be required to
contribute any amount in excess of the amount by which the net
proceeds received by such indemnifying party exceeds the amount of any
damages that such indemnifying party has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(l) Within nine (9) months of Closing, the Company shall cause a
registration statement registering the Company Common Stock to become
effective under the Securities Exchange Act of 1934, as amended.
The provisions of Sections 5.5(h), (i), (j) and (k) shall be in
addition to any other rights to indemnification or contribution which
an indemnified party may have pursuant to law, contract or otherwise
and shall remain in full force and effect
-18-
and shall survive the transfer of the shares issued pursuant to the
exercise or conversion of the Securities.
Notwithstanding anything to the contrary, the registration rights
granted under this Section 5.5 (i) shall terminate if there is a
change in control of the Company pursuant to a public tender offer or
merger or similar transaction and (ii) the registration rights granted
in this Section 5.5 shall be pari passu with all rights granted to the
shareholders listed on Exhibit 5.5
5.6 Financial Information. (a) For so long as Purchaser shall hold any
shares of Company Common Stock, as soon as practicable after the end of
each fiscal year of the Company, and in any event within 90 days
thereafter, the Company will furnish Purchaser a consolidated balance sheet
of the Company, as at the end of such fiscal year, and a consolidated
statement of income and a consolidated statement of cash flows of the
Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case
in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a
report and opinion thereon by independent public accountants selected by
the Company's Board of Directors.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and
in any event within 45 days thereafter, the Company will furnish Purchaser
a consolidated balance sheet of the Company as of the end of each such
quarterly period, and a consolidated statement of income and a consolidated
statement of cash flows of the Company for such period and for the current
fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied, with the exception that no
notes need be attached to such statements and year-end audit adjustments
may not have been made.
(c) As soon as practicable after the end of each calendar month, and
in any event within 30 days thereafter, the Company will furnish Purchaser
the financial reports as of the end of such month in the form customarily
prepared by management for internal use, together with a discussion and
analysis of the Company's financial condition and results of operations as
of and for such period.
(d) From time to time upon the request of Purchaser, Company will
furnish to Purchaser such information regarding the business, assets or
financial condition of Company as Purchaser may reasonably request.
Purchaser shall have the right during normal business hours upon reasonable
notice to examine the books and records of Company, to make copies and
notes therefrom, and at its expense to make an independent examination of
the books and records of Company.
(e) The covenants provided in this Section 5.6 shall terminate upon
the first date that the Company shall become subject to the reporting
requirements of the Exchange Act.
-19-
6. Miscellaneous.
6.1 Survival of Representations and Warranties. The Company's
representations and warranties contained in Section 2 hereof and
Purchaser's representations and warranties set forth in Section 3 hereof
shall survive each Closing for a period of three (3) years.
6.2 Assignment. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns. Purchaser may assign any or all of its rights hereunder and under
any of the Securities to be acquired pursuant to to this Agreement to any
entity affiliated with Purchaser and may assign or pledge any of the
Securities to institutional creditors of any such affiliate, except that
any such pledgee shall not have any rights under Sections 5.2(b) and 5.4 of
this Agreement. Except as otherwise provided in this Agreement, this
Agreement may not be transferred or assigned by operation of law or
otherwise without the prior written consent of the other party.
6.3 Notice. All notices, communications and demands required or
permitted to be given or made hereunder or pursuant hereto shall be in
writing and shall be effective when delivered in person or transmitted by
telegram or telecopier (confirmed by mail), addressed as follows:
If to Purchaser:
▇▇▇▇▇▇▇▇▇ Digital, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company:
American Interactive Media, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Secretary
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may change the address designated by notice given by such
party. The parties agree to acknowledge in writing the receipt of any such
notice delivered in person.
6.4 Governing Law. This Agreement is deemed to have been entered into
in the State of New York, and its interpretation, construction, and the
remedies for its enforcement or breach are to be applied pursuant to and in
accordance with the laws of the State of New York (without regard to the
conflict of laws principles thereof).
-20-
6.5 Validity of Agreement. If any provision of this Agreement is,
becomes, or is deemed invalid or unenforceable in any jurisdiction, such
provision shall be deemed amended to conform to applicable law so as to be
valid, legal and enforceable in such jurisdiction so deeming. The validity,
legality and enforceability of such provision shall not in any way be
affected or impaired thereby in any other jurisdiction. If such provision
cannot be so amended without materially altering the intention of the
parties, it shall be stricken in the jurisdiction so deeming, and the
remainder of this Agreement shall remain in full force and effect.
6.6 Waiver. No waiver of any right under this Agreement shall be
deemed effective unless contained in a writing signed by the party charged
with such waiver, and no waiver of any right arising from any breach or
failure to perform shall be deemed to be a waiver of any future such right
or of any other right arising under this Agreement.
6.7 Headings and References; Incorporation of Schedules. The headings
contained in this Agreement are inserted for convenience of reference only
and shall not be a part, control or affect the meaning hereof. All
references herein to Sections are to the Sections of this Agreement.
6.8 No Third Party Rights. Nothing in this Agreement shall create or
be deemed to create any rights in any person or entity not a party to this
Agreement.
6.9 Entire Agreement. This Agreement sets forth and constitutes the
entire agreement between the parties hereto with respect to the subject
matter hereof, and supersedes any and all prior agreements, understandings,
promises and representations made by either party to the other concerning
the subject matter hereof and the terms applicable hereto.
6.10 Other Business Interests. Purchaser and any affiliate of
Purchaser shall be entitled to hold interests in any other business,
investment or undertaking without regard to this Agreement, and Purchaser
and its affiliates shall have no obligation to offer any business
opportunity of any nature to the Company, and the Company shall have no
right to participate in, or have any claim with respect to or right to
block for any reason, any other business, investment or undertaking of any
nature in which Purchaser and its affiliates now participates or may in the
future participate in any way. The provisions of this Section 6.10 are
absolute and are intended to by agreement eliminate any right or claim of
the Company under any "business opportunity" or related doctrine. Purchaser
and its affiliates are to be completely and absolutely free to pursue
business and investment interests of all manners and kinds without the
Company having any right to participate in any way in any such businesses
or investments.
6.11 Dispute Resolution.
(a) Any claim, controversy or dispute, whether sounding in
contract, statute, tort, fraud, misrepresentation or other legal
theory, whenever brought and whether between the Parties to this
Agreement or between one of the Parties of this
-21-
Agreement and the employees, agents or affiliated businesses of the
other Party, shall be resolved by arbitration as prescribed in this
Section 6.11. The Federal Arbitration Act, 9 U.S.C. ss. 1-15, not
state law, shall govern the arbitrability of all claims.
(b) A single arbitrator engaged in the practice of law and
experienced in transactions of the sort contemplated hereby shall
conduct the arbitration under the then current rules of the American
Arbitration Association (AAA), unless otherwise provided herein. The
arbitrator shall be selected in accordance with AAA procedures from a
list of qualified people maintained by AAA. The arbitration shall be
conducted in the regional AAA office closest to the principal office
of the Company, and all expedited procedures prescribed by AAA rules
shall apply.
(c) Except as provided in Section 6.11(e), the arbitrator shall
only have authority to award compensatory damages and shall not have
authority to award punitive damages, other non-compensatory damages or
any other form of relief. Each party shall bear its own costs and
attorneys' fees and the Parties shall share equally the fees and
expenses of the arbitration; provided that the arbitrator may provide
for the reimbursement by one Party of the costs and attorneys' fees of
the other Party incurred in enforcing such Party's rights under this
Agreement. The arbitrator's decision and award shall be final and
binding, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
(d) If any Party files a judicial or administrative action
asserting claims subject to arbitration, as prescribed herein, and
another Party successfully stays such action and/or compels
arbitration of said claims, the Party filing said action shall pay the
other Party's costs and expenses incurred in seeking such stay and/or
compelling arbitration, including reasonable attorneys' fees.
(e) The Parties each acknowledge and agree that Purchaser will be
irreparably harmed as a result of a breach by Company of Sections 5.1,
5.2 or 5.4 of this Agreement and that it would be difficult, if not
impossible, to measure the damages resulting from such a breach.
Accordingly, in the event of any actual or threatened breach by the
Company of Section 5.1, the Purchaser shall, in addition to any other
legal remedies permitted hereunder or by applicable law, be entitled
to obtain equitable remedies from a court of competent jurisdiction,
without the need for any bond or security, including, without
limitation, specific performance, a temporary restraining order or a
permanent injunction to prevent or otherwise restrain a breach hereof
and to recover all costs and expenses, including, without limitation,
reasonable attorneys' fees, incurred in enforcing this Agreement. Such
relief shall be in addition to and not in substitution for any other
remedies available to Purchaser. Notwithstanding anything herein to
the contrary, the Parties agree that the Purchaser may seek a
temporary restraining order or a preliminary injunction or other
equitable relief from any court of competent jurisdiction in order to
prevent or restrain a breach hereof pending the selection of an
arbitrator to render a decision on the ultimate merits of any dispute,
controversy or claim.
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6.12 Publicity. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby, and neither party
shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed.
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement as to
be effective as of the date first written above.
▇▇▇▇▇▇▇▇▇ DIGITAL, INC. AMERICAN INTERACTIVE MEDIA, INC.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------- ---------------------------------
Name: Name:
Title: Title:
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