Exhibit 2.7
FIFTH AMENDMENT TO
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
This Fifth Amendment to Agreement and Plan of Merger and Reorganization
("Amendment") is made effective as of December 31, 1996, between NETTER DIGITAL
ENTERTAINMENT, INC., a Delaware corporation ("NDEI"), NETTER ACQUISITION, INC.,
a California corporation ("NAC") and VIDESSENCE, INC., a California corporation
("Videssence"), with reference to the following facts:
A. NDEI, NAC and Videssence entered into an Agreement and Plan of
Merger and Reorganization dated April 26, 1996 (the "Merger
Agreement") pursuant to which NAC would merge into Videssence,
making Videssence the wholly-owned subsidiary of NDEI.
B. NDEI, NAC and Videssence entered into the First Amendment to
Merger Agreement, dated July 3, 1996 (the "First Amendment")
and a Second Amendment to Merger Agreement, dated August 31,
1996 (the "Second Amendment"), and a Third Amendment to Merger
Agreement, dated October 30, 1996 (the "Third Amendment"), and
a Fourth Amendment to Merger Agreement, dated December 13,
1996 (the "Fourth Amendment") whereby the parties amended and
modified the Merger Agreement.
C. NDEI, NAC and Videssence wish to amend further the Merger
Agreement.
D. Terms with initial capital letters used in this Amendment and
not otherwise defined herein shall have the same meanings set
forth in the Merger Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. Modification to Merger Agreement: The Merger Agreement is hereby further
modified and amended as follows:
1.1. The second sentence of Section 3.6.3 of the Fourth Amendment shall be
amended and restated as follows:
On March 31, 1997, the Escrow Agent shall release from Escrow to the
Principal Shareholders (on a pro rata basis) 66,667 Indemnification Escrow
Shares less that number of Netter Shares equal to the quotient of (i) the paid
claims and the outstanding claims filed by Netter with the Escrow Agent; and
(ii) the average of the average of the Wall Street Journal's reported closing
bid and ask prices of the Netter Shares on the Nasdaq SmallCap Market (or the
Netter Shares primary trading market, if different) over the ten trading days
ending on the trading day prior to March 31, 1997.
1.2 Section 3.6.4 to the Merger Agreement shall be amended and restated as
follows:
Representative. Until the termination of the Escrow Agreement as provided
under its terms, Xxxx X. Xxxxx ("Representative") shall act with full power of
substitution as the Representative of the Videssence Shareholders and the
Principal Shareholders, to give and receive all notices and to take or omit to
take all such other actions as e may deem necessary or appropriate and to act,
all as provided under the Escrow Agreement.
1.3 Section 3.6.8 to the Merger Agreement shall be amended and restated as
follows:
Escrow Release Date. The Escrow Release Date shall be the date (i)
following satisfactory review or audit by Netter's outside accountants of the
Surviving Corporation's financial statements for the period ended July 31, 1997,
or such other time as is mutually agreeable to the parties, and in any event no
later than October 31, 1997, plus (ii) such number of days as is required to
resolve any objection as provided for in Sections 3.6.7 and 3.8; provided,
however, that if any such objections are outstanding on the date specified in
clause (i) (the "Review Date"), then the Escrow Release Rate with respect to the
undisputed portion of the 1996 Videssence Operating Profit shall be the Review
Date.
1.4 Section 3.7.1 of the Merger Agreement shall be amended and restated as
follows:
Calculation of Earn-Out. Xxxx Xxxxx and such other parties as determined in
the sole discretion of the Representative shall be entitled to earn additional
Netter Shares based on Surviving Corporation's EBIT (as defined below) from the
period commencing July 1, 1996 and ending June 30, 2001 (the "Earn-Out Period").
During the Earn-Out Period, upon Surviving Corporation achieving EBIT of at
least $1.25 Million on the nest succeeding Earn-Out Payment Date (as defined
below), Netter shall deliver to the Representative, for every $45,000 in EBIT
that exceeds $1.25 Million, such number of Netter Shares calculated as the
greater of (i) 5,000 Netter Shares or (ii) the product of (a) 5,000 Netter
Shares and (b) the quotient of (x) $9.00 and (y) the average of the closing bid
and closing ask price on June 30 of the year for which EBIT is being calculated
(the "Earn-Out Shares") . Thereafter, during the Earn-Out Period on each next
succeeding Earn-Out Payment Date, Netter shall deliver to the Representative,
for every additional $45,000 in EBIT, such number of Netter Shares as determined
by the calculation in the preceding sentence.
1.5 Section 3.7.5 of the Merger Agreement shall be amended and restated as
follows:
Payment. Netter shall issue and deliver to the Representative the EarnOut
Shares, if any, to be issued and delivered for each Fiscal Year within 5 days
after the calculation for such Fiscal Year shall have become final and binding
on the parties (the "Earn-Out Payment Date"). The Representative shall
distribute the Escrow Shares to such parties and in such amounts as determined
by him in his sole and absolute discretion.
1.6 Section 3.7.6 of the Merger Agreement shall be amended and restated as
follows:
Termination of Earn-Out. Immediately upon the earlier date of (i) Xxxx
Xxxxx being terminated by Surviving Corporation "For Cause" as defined in his
employment agreement to be entered into upon the Closing; (ii) Xxxx Xxxxx'x
voluntary termination of employment for other than "Good Reason" as defined in
his employment agreement to be entered into upon the Closing; (iii) or Xxxx
Xxxxx'x material breach of his NonCompetition Agreement (the "Costa Termination
Date"), the number of Earn-Out Shares to be earned for every $45,000 in EBIT
that exceeds $1.25 Million shall be reduced to equal the product of (x) 5,000
Netter Shares or such greater number as is determined pursuant to Section 3.7.1
(ii); and (y) the quotient of (xx) the number of shares of Videssence common
stock owned by Xxxx Xxxxx immediately preceding the Closing divided by (yy) the
total number of shares of Videssence common stock owned by the Xxxx Xxxxx, Xxxxx
Xxxxxxxxx, Xxxxxx Xxxxxxx and Xxx Xxxxxxx (the "Principal Shareholders")
immediately preceding the Closing. In that event, the remaining Principal
Shareholders, in their sole discretion, may replace Costa with another person as
the Representative for purposes of the Earn-Out. In that event, Netter shall
deliver to Costa on the next succeeding Earn-Out Payment Date, any additional
Earn-Out Shares earned by Costa prior to the Costa Termination Date. At any time
during the Earn-Out Period, if the cumulative EBIT represents a loss of in
excess of $1,000,000, the Earn-Out shall immediately terminate and this Section
3.7 shall be of no further force and effect.
1.7 The last sentence of Section 4.28 to the Merger Agreement shall be
amended and restated as follows:
There is no fact known to Videssence or any of the Shareholders which
materially and adversely affects the business or financial condition of
Videssence, its properties or assets, which has not been disclosed and set forth
in this Agreement.
2. Waivers. (a) Netter and Merger Corp. hereby waive the following as conditions
to their obligation to consummate the Merger and the other transactions
described in the Merger Agreement on the Closing Date: (i) the requirements of
Section 7.2(d), solely with respect to the State Pennsylvania; (ii) the
requirements of Section 7.8, solely with respect to any indebtedness of
Videssence to Bank of America; (iii) the requirements of Section 7.12, solely
with respect to Xxxxx Xxxxxxxxx; (iv) the requirements of Section 7.15, solely
with respect to the execution by all Shareholders of the Management Protocol;
and (v) the requirements of Section 7.17 in their entirety.
(b) Videssence hereby waives the following as conditions to its obligations
to consummate the Merger and the other transactions described in the Merger
Agreement in the Closing Date: (i) the requirements of Sections 8.6, solely with
respect to agreements with Xxxxx Xxxxxxxxx; and (ii) the requirements of Section
7.15, solely with respect to the execution by all Shareholder of the Management
Protocol.
3. Other Provisions Unmodified. Except as expressly modified hereby, the rights,
obligations and terms of the Merger Agreement shall remain unmodified and in
full force and effect. In the event of a conflict between the Amendment and the
Merger Agreement, the Amendment shall be controlling.
4. Counterparts. This Amendment may be executed in several counterparts, and all
so executed shall constitute an agreement, binding on all the parties hereto,
notwithstanding that all of the parties are not signatory to the original or the
same counterpart.
IN WITNESS WHEREOF, this Amendment is effective as of the date first
set forth above.
NETTER DIGITAL ENTERTAINMENT, INC., a Delaware corporation
By_/S/Xxxxxxx Netter______________
Xxxxxxx Xxxxxx, President
VIDESSENCE, Inc., a California corporation
By__/S/Xxxx Costa_________________
Xxxx Xxxxx, President
NETTER ACQUISITION, INC., a California corporation
By_/S/Xxxxxxx Netter______________
Xxxxxxx Xxxxxx, President
By execution hereof, the undersigned, Principal Shareholders, acknowledge,
consent and agree to the modification to the Merger Agreement set forth in
Sections 1.2, 1.4, 1.5, 1.6 and 2 of this Amendment.
/S/Xxxx Costa___________ /s/Xxxxx Michelson_______
Xxxx Xxxxx Xxxxx Xxxxxxxxx
/s/Xxxxxx Francis_______ /s/Xxx Cercone___________
Xxxxxx Xxxxxxx Xxx Xxxxxxx
