Document:

Exhibit 10.14

 

GOVERNANCE RIGHTS AGREEMENT

 

by and among

 

Starwood Capital Group Global, L.P.,

 

Waypoint Real Estate Group Holdco, LLC and

 

Starwood Waypoint Residential Trust

 

Dated as of               , 2014

 

 

GOVERNANCE RIGHTS AGREEMENT

 

This GOVERNANCE RIGHTS AGREEMENT, dated as of             , 2014, is entered into by and among Waypoint Real Estate Group Holdco, LLC (“Waypoint Holdco”), Starwood Waypoint Residential Trust (“SRP”) and Starwood Capital Group Global, L.P. (“SCG”).

 

RECITALS

 

WHEREAS, SCG, SWAY Management LLC (“SRP Manager”) and Waypoint Holdco have entered into a transaction whereby SRP Manager acquired the operating company platform previously operated by Waypoint Holdco and its Affiliates concurrently with the completion of the Spin-Off (as defined below); and

 

WHEREAS, the Parties desire to memorialize their respective governance rights and certain obligations with respect to SRP.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and agreements hereinafter set forth, the Parties hereto hereby agree as follows:

 

ARTICLE 1.

 

Definitions

 

Section 1.1                                    The following terms used in this Agreement shall have the following meanings.

 

“Affiliate” means (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person, (ii) any executive officer or general partner of such other Person, (iii) any member of the board of directors, board of trustees or board of managers (or bodies performing similar functions) of such Person, and (iv) any legal entity for which such Person acts as an executive officer or general partner.

 

“Agreement” means this Governance Rights Agreement, as amended, supplemented or otherwise modified from time to time.

 

“Distribution Date” means the distribution date of the Spin-Off.

 

“Governing Instruments” means, with regard to any entity, the articles of incorporation or certificate of incorporation and bylaws in the case of a corporation, the partnership agreement in the case of a general or limited partnership, the certificate of formation and operating agreement in the case of a limited liability company, the trust instrument in the case of a trust, or similar governing documents in each case as amended.

 

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“Independent Trustee” means a member of the SRP Board who is “independent” in accordance with the rules of the NYSE or such other securities exchange on which the common shares of SRP are listed.

 

“NYSE” means The New York Stock Exchange.

 

“Parties” means, collectively, Waypoint Holdco, SRP and SCG.

 

“Person” means any natural person, corporation, partnership, association, limited liability company, estate, trust, joint venture, any federal, state, county or municipal government or any bureau, department or agency thereof or any other legal entity and any fiduciary acting in such capacity on behalf of the foregoing.

 

“Spin-Off” means the distribution of common shares of SRP by Starwood Property Trust, Inc. to the holders of its outstanding shares of common stock pursuant to SRP’s Registration Statement on Form 10 (No.              ).

 

“SRP Board” means the board of trustees of SRP.

 

Section 1.2                                    Interpretation.

 

As used herein, “calendar quarters” shall mean the period from January 1 to March 31, April 1 to June 30, July 1 to September 30 and October 1 to December 31 of the applicable year.  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to this Agreement unless otherwise specified.  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.  The words include, includes and including shall be deemed to be followed by the phrase “without limitation.”  Any definition of or reference to any agreement, instrument, document, statute or regulation herein shall be construed as referring to such agreement, instrument, document, statute or regulation as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein).  This Agreement is among financially sophisticated and knowledgeable parties and is entered into by the Parties in reliance upon the economic and legal bargains contained herein and shall be interpreted and construed in a fair and impartial manner without regard to such factors as the Party who prepared, or cause the preparation of, this Agreement or the relative bargaining power of the Parties.

 

ARTICLE 2.

 

Board of Trustees of SRP

 

Section 2.1                                    Size of SRP Board.  From and after the date of this Agreement and until the termination hereof, each of SCG and Waypoint Holdco shall vote all of the voting securities of SRP over which such party has voting control and shall take all other reasonably necessary or desirable actions within its control (whether in its capacity as a shareholder, trustee, member of a committee of the SRP Board or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written

 

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consents in lieu of meetings), and SRP shall take all reasonably necessary or desirable actions within its control (including, without limitation, calling special SRP Board and shareholder meetings), so that the number of trustees on the SRP Board shall be established at, and shall remain during the term of this Agreement fixed at, nine (9) trustees.

 

Section 2.2                                    Composition of the SRP Board.  Each of SCG and Waypoint Holdco shall vote all of the voting securities of SRP over which such party has voting control and shall take all other reasonably necessary or desirable actions within its control (whether in its capacity as a shareholder, trustee, member of a committee of the SRP Board or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and SRP shall take all reasonably necessary or desirable actions within its control (including, without limitation, calling special SRP Board and shareholder meetings), so that from and after the date of this Agreement and until the termination hereof, the following nine (9) persons shall constitute the SRP Board:

 

(a)                                 two individuals designated by SCG, who may be affiliates of Starwood Property Trust, Inc. or SCG at the time of any such nomination;

 

(b)                                 two individuals designated by Waypoint Holdco, who may be affiliates of Waypoint Holdco’s equity holders at the time of any such nomination;

 

(c)                                  four individuals designated by SCG, each of whom shall qualify as Independent Trustees; and

 

(d)                                 one individual designated by Waypoint Holdco, who shall qualify as an Independent Trustee.

 

Section 2.3                                    Chairman of the SRP Board.  SCG shall have the right to designate one member of the SRP Board as the Chairman of the SRP Board.  SCG and Waypoint Holdco hereto agree to instruct their respective designees on the SRP Board to take all reasonably necessary or desirable actions within his or her control to elect the Chairman of the SRP Board as designated by SCG.

 

Section 2.4                                    Resignation; Removal of Trustees.

 

(a)                                 In the event that any trustee ceases to serve as a member of the SRP Board during his or her term of office, whether due to such member’s death, disability, resignation or removal, then (i) the Person or Persons entitled to designate the trustee who caused the vacancy shall have the exclusive right (vis-à-vis the SRP Board, any committee of the SRP Board, or any other party hereto) to nominate an alternate candidate for the vacated seat; or (ii) if no Person was entitled to designate such trustee, the resulting vacancy shall be filled by the shareholders of SRP in accordance with the Governing Instruments of SRP.

 

(b)                                 Unless required by applicable law, SCG and Waypoint Holdco shall not take any action for the purpose of removing a trustee from the SRP Board without the written consent of the Person entitled to designate such trustee.

 

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Section 2.5                                    Fiduciary Duties.  Notwithstanding anything contained in this Agreement to the contrary, if the trustees of the SRP Board hereto determine in good faith, after consultation with outside legal counsel, that any action or restriction on any action required by this Article 2 could reasonably constitute a violation of the trustees’ fiduciary duties or other obligations under applicable laws, rules or regulations, then, such action or restriction on such action shall not be required pursuant to this Agreement until such time, if any, as such action or restriction on such action could no longer reasonably constitute a violation of such duties or obligations.

 

ARTICLE 3.

 

Officers

 

Section 3.1                                    Officers.  The initial officers of SRP immediately following the Distribution Date are set forth on Schedule 1 hereto.  The officers of SRP shall hold their respective offices until their respective successors have been elected or appointed or until their earlier death, resignation or removal by the SRP Board.

 

ARTICLE 4.

 

Term; Termination

 

Section 4.1                                    Term.  This Agreement shall become effective on the Distribution Date and shall continue in operation, unless terminated in accordance with the terms hereof.

 

Section 4.2                                    Termination.

 

(a)                                 This Agreement shall remain in full force and effect in perpetuity unless terminated in accordance with its terms.

 

(b)                                 This Agreement may only be terminated: (i) upon the mutual written agreement of each of the Parties; (ii) by SCG in the event Waypoint Holdco materially breaches the terms of this Agreement and fails to cure such breach within thirty (30) days after receiving written notice thereof; (iii) by Waypoint Holdco in the event SCG materially breaches the terms of this Agreement and fails to cure such breach within thirty (30) days after receiving written notice thereof; or (iv) by SCG or SRP if at any time after the date hereof two or more of Gary Beasley, Doug Brien and Colin Wiel cease to serve as officers and employees of either SRP or SRP Manager. The termination rights set forth in this Agreement are in addition to any rights available at law or equity (other than rights to terminate or rescind this Agreement).

 

ARTICLE 5.

 

Equitable Adjustment

 

Section 5.1                                    Equitable Adjustments.  The Parties acknowledge and agree that this Agreement sets forth general principles and intent with respect to the Parties’ respective rights and obligations relating to the governance of SRP, and may not anticipate or appropriately contemplate all facts and circumstances that may arise after the date hereof.  Accordingly, the

 

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Parties acknowledge and agree that if SRP determines, in its reasonable judgment, that performance of any of the obligations set forth in this Agreement would violate any applicable law or any rule of any securities exchange on which the securities of SRP are traded, the Parties shall negotiate in good faith to amend or waive the applicable provisions of this Agreement in a manner that preserves as closely as possible the principles and intent set forth in this Agreement without violating such  law or rule.

 

ARTICLE 6.

 

Miscellaneous

 

Section 6.1                                    Notices.  All notices, requests and demands to or upon the respective Parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered against receipt or upon actual receipt of (i) personal delivery, (ii) delivery by reputable overnight courier, (iii) delivery by facsimile transmission with telephonic confirmation or (iv) delivery by registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below (or to such other address as may be hereafter notified by the respective Parties hereto in accordance with this Section 6.1):

 

SCG:                                                                                                                   Starwood Capital Group
 591 West Putnam Avenue
 Greenwich, Connecticut 06830
 Attention:  General Counsel
 Fax:  (203) 422-7899

 

with a copy to:                                                               Sidley Austin LLP
 One South Dearborn Street
 Chicago, Illinois 60603
 Attention:  Michael A. Gordon, Esq.

Jonathan C. Babb, Esq.
 Fax:  (312) 853-7036

 

Waypoint Holdco:                                           Waypoint Real Estate Group Holdco, LLC
 1999 Harrison Street

Oakland, California 94612

Attention:  Tamra Browne, CLO
 Fax:  (510) 550-2828

 

with a copy to:                                                               Latham & Watkins LLP

650 Town Center Drive, 20th Floor

Costa Mesa, California 92626
 Attention:  William Cernius, Esq.
 Fax:  (714) 755-8290

 

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SRP:                                                                                                                     Starwood Waypoint Residential Trust
                           
 Attention:                    
 Fax:                      

 

with a copy to:                                                                                         
 Attention:                    
 Fax:                      

 

Section 6.2                                    Binding Nature of Agreement; Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, personal representatives, successors and assigns as provided herein.

 

Section 6.3                                    Integration.  This Agreement contains the entire agreement and understanding among the Parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof.  The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.

 

Section 6.4                                    Amendments.  This Agreement, nor any terms hereof, may not be amended, supplemented or modified except in an instrument in writing executed by the Parties hereto.

 

Section 6.5                                    GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MARYLAND, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT THAT MATTERS RELATING TO THE FIDUCIARY DUTIES OF THE GOVERNING BODIES OF EACH PARTY AND INTERNAL CORPORATE AFFAIRS OF EACH PARTY SHALL BE GOVERNED BY THE LAWS OF THE APPLICABLE STATE OF ORGANIZATION OF SUCH PARTY.  SUBJECT TO SECTION 6.12, EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF MARYLAND AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND FOR THE PURPOSE OF ANY ACTION OR JUDGMENT RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND TO THE LAYING OF VENUE IN SUCH COURT.

 

Section 6.6                                    WAIVER OF JURY TRIAL.  EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER

 

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OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

Section 6.7                                    No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of a Party hereto, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

 

Section 6.8                                    Costs and Expenses.  Each Party hereto shall bear its own costs and expenses (including the fees and disbursements of counsel and accountants) incurred in connection with the negotiations and preparation of and the closing under this Agreement, and all matter incident thereto.

 

Section 6.9                                    Section Headings.  The section and subsection headings in this Agreement are for convenience in reference only and shall not be deemed to alter or affect the interpretation of any provisions hereof.

 

Section 6.10                             Counterparts.  This Agreement may be executed by the Parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

 

Section 6.11                             Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 6.12                             Dispute Resolution.

 

(a)                                 All disputes, controversies, and disagreements arising out of or relating to this Agreement, interpretation or construction of this Agreement, any breach of or default under this Agreement, or the relationship between and among the Parties by virtue of this Agreement (referred to collectively as a “Dispute”) shall be resolved in accordance with this Section 6.12; provided, however, that the following shall not be subject to the provisions of this Section 6.12 and nothing herein shall be construed so as to prevent any Party from pursuing:

 

(1)                                 any action, claim or cause of action that the Parties may have against each other that arises from or is related to any claim or cause of action asserted or made by a person who is not a party to this Agreement (including, without limitation, any cross claims, counterclaims, or claims for indemnification or contribution), in which case the Parties reserve all rights that they may have against each other;

 

(2)                                 any action or claim for injunctive relief, whether by way of temporary restraining order, preliminary injunction, and/or permanent injunction, 

 

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or other equitable remedies in which case the Parties shall have the right to proceed by way of litigation through judicial proceedings;

 

(3)                                 any action to enforce the provisions of this Section 6.12.

 

(b)                                 All Disputes shall be resolved by final and binding arbitration  in accordance with the United States Arbitration Act (9 U.S.C. 1 et seq.) and the then existing rules (“Rules”) of practice and procedure of the Judicial Arbitration & Mediation Services (“JAMS”), except to the extent such JAMS Rules are inconsistent with the provisions of this Agreement.  The arbitration process shall be as follows:

 

(1)                                 Any Party may commence an arbitration proceeding in accordance with this Section 6.12(b), and shall simultaneously notify the other Parties in writing of such commencement.  The arbitration shall be conducted by one (1) neutral arbitrator, to be mutually selected by the Parties within five (5) business days after notice from one party to the other. If the Parties are unable to mutually select such arbitrator within such five (5) business day period, then either Party may request that JAMS appoint an arbitrator. In connection with any such request, a party may propose one or more persons to act as the arbitrator, provided that the arbitrator shall be independent and shall be a licensed attorney with at least ten (10) years’ experience in connection with voting agreements and similar instruments.  After the appointment of the arbitrator, the parties shall not have the right to take depositions and to obtain discovery by other means regarding the subject matter of the arbitration unless the arbitrator determines, for good cause shown, that discovery beyond the exchange of documents is necessary in the proceeding, at which point the arbitrator shall establish the number and extent of depositions and the extent of any other requested discovery.  The arbitrator shall have the power to decide all other procedural issues, including the following: the date, time and place of any hearing; the form, timing and subject matter of any pre-hearing documents to be submitted by the parties; and any evidentiary or procedural issues that may arise at or in connection with any arbitration hearing.  The arbitrator shall follow the law in reaching a reasoned decision and shall deliver a written opinion setting forth findings of fact, conclusions of law and the rationale for the decision.

 

(2)                                 The arbitration proceeding shall be held in New York, New York.  Each Party shall bear its own expenses (including the fees and expenses of its attorneys, consultants and witnesses) in connection with the arbitration proceeding, and each Party shall, on an ongoing basis, pay one-half (1⁄2) the fees and expenses of JAMS and the arbitrator.

 

(3)                                 The final decision of the arbitrator shall be the sole and exclusive remedy of the Parties, shall be final and shall be fully and irrevocably accepted by the Parties.  The prevailing Party may enforce such decision against the other Party in a court having jurisdiction in accordance with Sections 6.5 and 6.6.  In any arbitration hereunder, the arbitrator will not have the right to modify the terms and conditions of this Agreement.  As a result, the rights and obligations of the 

 

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Parties will be determined in accordance with the terms and conditions of this Agreement, and any decision will be only in accordance with the terms and conditions of this Agreement.  The Parties will exert best efforts to have the decision rendered within ninety (90) days after a Party commences the arbitration proceeding.

 

(c)                                  Except as necessary in court proceedings to enforce the arbitration provisions in this Section 6.12 or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration hereunder, including all evidence taken, without the prior written consent of the Parties.

 

(d)                                 In the event of any litigation arising under Section 6.12(a)(1) — (3), the prevailing Party shall be entitled to recover their costs and expenses, including, without limitation, reasonable attorneys’ fees.

 

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IN WITNESS WHEREOF, each of the Parties hereto has executed this Management Agreement as of the date first written above.

 

	
 
    	
Starwood   Capital Group Global, L.P.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
Waypoint   Real Estate Group Holdco, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
Starwood   Waypoint Residential Trust
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

10

 

Schedule 1

 

Officers of SRPExhibit 10.1

 

TRANSITION SERVICES AGREEMENT

 

dated as of

 

[ · ], 2014

 

between

 

THE NEW ONLINE COMPANY

 

And

 

DIGITAL GENERATION, INC.

 

 

TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (together with the Schedules attached hereto, this “Agreement”) is entered into as of              (this “Agreement”), by and among The New Online Company, a Delaware corporation (“SpinCo”) and Digital Generation, Inc., a Delaware corporation (the “DG”).

 

RECITALS

 

WHEREAS, DG and SpinCo have entered enter into that certain Separation and Redemption Agreement dated as of [·], 2014 (the “Separation Agreement”) providing for, among other things, the contribution by DG to SpinCo of all of the assets and liabilities of its Online Business, all of its cash and all of its working capital, as more fully set forth therein; and

 

WHEREAS, the Separation Agreement contemplates that the parties hereto will, at the Closing (as defined in the Agreement and Plan of Merger dated as of August 12, 2013 (the “Merger Agreement”) by and among DG, Extreme Reach, Inc. and Dawn Blackhawk Acquisition Corp.), enter into this Agreement for the provision of certain services by DG for SpinCo and certain services by SpinCo for DG, on the terms and conditions set forth herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, for themselves, their successors and permitted assigns, hereby agree as follows:

 

ARTICLE 1
  DEFINITIONS

 

Section 1.01.  Definitions.  (a)  Any capitalized term that is used herein but not defined herein shall have the meaning assigned to such term in the Separation Agreement.

 

(b)                       As used in this Agreement, the following terms shall have the following meanings, applicable both to the singular and the plural forms of the terms described:

 

“DG Systems” means any computer software program or routine or part thereof owned, licensed or provided by DG, its Affiliates or its suppliers on DG’s or any of its Affiliates’ behalf, each as modified, maintained or enhanced from time to time by DG, SpinCo, any of their respective Affiliates or any third party.

 

“Insolvency Event” means with respect to either party, as applicable, (i) the making by such party of any assignment for the benefit of creditors of all or substantially all of its assets or the admission by such party in writing of its inability to pay all or substantially all of its debts as they become due; (ii) the adjudication of such party as bankrupt or insolvent or the filing by such party of a petition or application to any tribunal for the appointment of a trustee or receiver for such party or any substantial part of the assets of such party; or (iii) the commencement of any voluntary or involuntary bankruptcy proceedings (and, with respect to involuntary bankruptcy proceedings, the failure of such proceedings to be discharged within 60 days), reorganization

 

 

proceedings or similar proceeding with respect to such party or the entry of an order appointing a trustee or receiver or approving a petition in any such proceeding.

 

“SpinCo Systems” means any computer software program or routine or part thereof owned, licensed or provided by SpinCo, its Affiliates or its suppliers on SpinCo’s or any of its Affiliates’ behalf, each as modified, maintained or enhanced from time to time by SpinCo, DG, any of their respective Affiliates or any third party.

 

“Schedule” means a Schedule attached hereto forming part of this Agreement.

 

“Service Costs” means costs for the services as provided on Schedule A-1 or A-2.

 

“Service Provider” means SpinCo in the case of SpinCo Provided Services and DG in the case of DG Provided Services.

 

“Service Provider Indemnitees” means Service Provider, its Affiliates or any of its or their respective directors, officers, agents, consultants, representatives and/or employees.

 

“Service Recipient” means, DG or its Affiliates, as the case may be, in the case of SpinCo Provided Services, and SpinCo or its Affiliates, as the case may be, in the case of DG Provided Services.

 

“Service Recipient Indemnitees” means Service Recipient, its Affiliates or any of its or their respective directors, officers, agents, consultants, representatives and/or employees.

 

“Systems” means the DG Systems or the SpinCo Systems, individually, or the DG Systems and the SpinCo Systems, collectively, as the context may indicate or require.

 

(c)                        Each of the following terms is defined in the Section set forth opposite such term:

 

	
Term
    	
 
    	
Section
    
	
Agreement
    	
 
    	
Preamble
    
	
Baseline   Period
    	
 
    	
4.01
    
	
DG
    	
 
    	
Preamble
    
	
DG   Provided Services
    	
 
    	
2.01
    
	
Confidential   Information
    	
 
    	
7.01(a)
    
	
force   majeure
    	
 
    	
9.03
    
	
Invoice   Date
    	
 
    	
3.03(a)
    
	
Liaison
    	
 
    	
4.04
    
	
SpinCo
    	
 
    	
Preamble
    
	
SpinCo   Provided Services
    	
 
    	
2.01
    
	
Separation   Agreement
    	
 
    	
Recitals
    
	
Services
    	
 
    	
2.01
    

 

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ARTICLE 2
  SERVICES

 

Section 2.01.  Provision of Services.

 

(a)                       On the terms and subject to the conditions of this Agreement and in consideration of the charges described in Section 3.01 below, SpinCo agrees to provide to DG, or procure the provision to DG of the transition services set forth on Schedule A-1 (the “SpinCo Provided Services”).  On the terms and subject to the conditions of this Agreement and in consideration of the charges described in Section 3.01 below, DG agrees to provide to SpinCo, or procure the provision to SpinCo of the transition services set forth on Schedule A-2 (the “DG Provided Services” and, together with the SpinCo Provided Services, the “Services”).

 

(b)                       It is understood that (i) the Services to be provided under this Agreement shall only be provided for the purpose of conducting the Service Recipient’s business substantially as it was conducted prior to the Closing Date, and (ii) the Service Provider may satisfy its obligations to provide or procure Services hereunder by causing one or more of its Affiliates to provide or procure such Services, which Affiliates it may change at its discretion from time to time.

 

(c)                        Except for the Services expressly contemplated to be provided in accordance with this Section 2.01, neither party shall have any obligation under this Agreement to provide any services to the other party.

 

(d)                                 If a party requires services from the other party for the purpose of conducting its business as it was conducted prior to the Closing that are not otherwise required to be provided hereunder, the parties will negotiate in good faith the terms under which such services will be provided under this Agreement as “Services”, including appropriate Service Costs therefor.

 

Section 2.02.  Third Party Licenses and Consents.  The parties shall use commercially reasonable efforts to obtain, and to keep and maintain in effect, all governmental or third party licenses and consents required for the provision of any Service in accordance with the terms of this Agreement; provided that if the Service Provider is unable to obtain any such license or consent, the Service Provider shall promptly notify the Service Recipient in writing and shall, and shall cause its Affiliates to, use commercially reasonable efforts to implement an appropriate alternative arrangement.  The reasonable costs relating to obtaining any such licenses or consents shall be deemed to be Service Costs.  If any such license, consent or alternative arrangement is not available despite the commercially reasonable efforts of the Parties, Service Provider shall not be required to provide the affected Services.

 

Section 2.03.  Third Party Providers.  If Service Provider receives written notice from any third party service provider that such Person intends to terminate a service pursuant to which the Service Provider provides a Service to the Service Recipient, then the Service Provider shall provide a copy of such written notice to the Service Recipient and shall use commercially reasonable efforts to secure the continued provision of that Service from such third party or an alternative service provider, the reasonable costs of which shall be deemed to be Service Costs.  If the Service Provider is unable to secure the continued provision of that Service from such third party or an alternative service provider, Service Provider shall not be required to provide the affected Service.

 

Section 2.04.  Cooperation.  The parties agree to cooperate in good faith in providing for an orderly transition of Services to the Service Recipient or a successor service provider designated by Service Recipient.

 

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ARTICLE 3
  SERVICE COSTS; OTHER CHARGES

 

Section 3.01.  Service Costs Generally.  The charges for the Services to be provided by a party hereunder shall be such party’s Service Costs.

 

Section 3.02.  Taxes.  Service Recipient shall pay all applicable sales or use taxes incurred with respect to provision of such Services.  Such taxes shall be incremental to other payments or charges identified in this Agreement.  All sums payable under this Agreement shall be paid free and clear of all deductions or withholdings unless the deduction or withholding is required by Law, in which event the amount of the payment due from the party required to make such payment (other than amounts of interest) shall be increased to an amount which after any withholding or deduction leaves an amount equal to the payment which would have been due if no such deduction or withholding had been required.

 

Section 3.03.  Invoicing and Settlement.

 

(a)                       Unless any Schedule hereto indicates otherwise or the parties agree in writing to a different arrangement following the Closing, Service Provider shall invoice Service Recipient on a monthly basis in arrears for the Service Costs (the date of delivery of such invoice, the “Invoice Date”).

 

(b)                       Service Recipient shall pay each invoice within 15 days after the Invoice Date by wire transfer of immediately available funds payable to the order of Service Provider to such account(s) designated by Service Provider.  Late payments shall be subject to an interest charge equal to the lesser of (i) an annual rate of eighteen percent (18%) or (ii) the highest rate of interest allowable by applicable law.

 

ARTICLE 4
  THE SERVICES

 

Section 4.01.  Standards of Service.  (a) Unless any Schedule hereto indicates otherwise or the parties agree in writing to a different arrangement following the Closing, the level or volume of any specific Service required to be provided hereunder shall be at a level or volume consistent in all material respects with the level or volume, as the case may be, of such specific Service as utilized by the Service Recipient during the twelve-month period prior to the date hereof (the “Baseline Period”).

 

(b)                       The manner, nature, quality and standard of care applicable to the delivery by Service Provider of the Services hereunder shall be substantially the same as that of similar services provided by or to the Service Recipient during the Baseline Period.

 

(c)                        Service Provider shall have no obligation to provide any Services hereunder in respect of any business, assets or properties not forming part of the Service Recipient as of the date hereof.

 

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Section 4.02.  Changes to Services.  It is understood and agreed that Service Provider may from time to time modify or change the manner, nature, quality and/or standard of care of any Service provided to Service Recipient to the extent Service Provider is making a similar change in the performance of such services for the Service Provider and its Affiliates and provided that any such modification, change or enhancement will not reasonably be expected to materially affect such Service or the business of the Service Recipient.  Service Provider shall furnish to Service Recipient substantially the same notice (in content and timing), if any, as Service Provider furnishes to its own organization with respect to such modifications or changes.

 

Section 4.03.  Management of Services By Service Provider.  Except as may otherwise be expressly provided in this Agreement, the management of and control over the provision of the Services by Service Provider shall reside solely with Service Provider.  Service Provider shall have the right in its sole discretion to choose the personnel, methodology, systems, applications and third party providers it utilizes in the provision of such Services.  The provision, use of and access to the Services shall be subject to (i) Service Provider’s business, operational and technical environment, standards, policies and procedures as in effect from time to time, (ii) applicable Law and (iii) the terms of this Agreement.

 

Section 4.04.  Liaisons.  Each party shall designate one representative to act as such party’s primary contact person in connection with the Services (each, a “Liaison”).  The Liaisons will oversee the implementation and ongoing operation of this Agreement and shall attempt in good faith to resolve disputes between the parties.  The parties have designated their respective initial Liaisons and provided contact information therefor on Schedule B.  The parties shall ensure that their respective Liaisons shall meet in person or telephonically at such times as are reasonably requested by DG or SpinCo to review and discuss the status of, and any issues arising in connection with, the Services or this Agreement.  Each party may re-designate its Liaison(s) from time to time upon notice to the other party.

 

ARTICLE 5
  DISCLAIMER, LIABILITY AND INDEMNIFICATION

 

Section 5.01.  EXCLUSION OF WARRANTIES.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SERVICES ARE PROVIDED “AS-IS” WITH NO WARRANTIES, AND EACH SERVICE PROVIDER EXPRESSLY EXCLUDES AND DISCLAIMS ANY WARRANTIES UNDER OR ARISING AS A RESULT OF THIS AGREEMENT, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, NON-INFRINGEMENT AND ANY OTHER WARRANTY WHATSOEVER.

 

Section 5.02.  Limitation of Liability.

 

(a)                       Except for the indemnity obligations set forth in Sections 5.03 and 5.04, neither DG nor SpinCo shall have any liability, whether direct or indirect, in contract or tort or otherwise, for or in connection with the Services rendered or to be rendered by or on behalf of any Service Provider pursuant to this Agreement, the transactions contemplated hereby or any actions or inactions by or on behalf of Service Provider in connection with any such Services or the

 

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transactions contemplated hereby, except to the extent any damages have resulted from Service Provider’s gross negligence or willful misconduct or Service Provider’s failure to comply with Laws applicable to it or them in the conduct of their business in the ordinary course.

 

(b)                       Notwithstanding the provisions of Section 5.02(a), neither DG nor SpinCo shall be liable for any special, indirect, incidental, consequential or punitive damages of any kind whatsoever in any way due to, resulting from or arising in connection with any of the Services or the performance of or failure to perform any obligations under this Agreement.  This disclaimer applies without limitation (i) to claims arising from the provision of the Services or any failure or delay in connection therewith, (ii) to claims for lost profits or opportunities, (iii) regardless of the form of action, whether in contract, tort (including negligence), strict liability, or otherwise, and (iv) regardless of whether such damages are foreseeable or whether DG or SpinCo, as applicable, or any of its Affiliates has been advised of the possibility of such damages.

 

Section 5.03.  Indemnification of Service Provider.  Service Recipient shall indemnify, defend and hold harmless the Service Provider Indemnitees from and against any and all Liabilities and related losses of the Service Provider Indemnitees relating to, arising out of or resulting from the Services rendered or to be rendered by or on behalf of any of the Service Provider Indemnitees pursuant to this Agreement, the transactions contemplated hereby or any actions or inactions by or on behalf of any of the Service Provider Indemnitees in connection with any such Services or transactions; provided that Service Recipient shall not be responsible for any Liabilities resulting from a Service Provider’s gross negligence or willful misconduct or Service Provider’s failure to comply with Laws applicable to it in the conduct of its business in the ordinary course.

 

Section 5.04.  Indemnification of Service Recipient.  Service Provider agrees to indemnify and hold harmless the each Service Recipient Indemnitees from and against any Liabilities incurred in investigating, preparing, or defending any Action, in each case solely to the extent such Liabilities have arisen out of the Service Provider’s gross negligence or willful misconduct or Service Provider’s failure to comply with Laws applicable to it in the conduct of its business in the ordinary course.

 

Section 5.05.  Indemnification as Exclusive Remedy; Limit on Indemnification.  The indemnification provisions of this Article 5 set forth the exclusive remedy for money damages for breach of this Agreement and any matters relating to this Agreement.  In no case shall the liability under Section 5.03 or 5.04 of a Service Recipient or Service Provider, as the case may be, exceed the amount of Service Costs paid by a Service Recipient, in the case of indemnification under Section 5.04, or Service Costs received by a Service Provider, in the case of indemnification under Section 5.05.

 

ARTICLE 6
  TERM AND TERMINATION

 

Section 6.01.  Term.  Unless terminated earlier or except as expressly set forth in Schedule A-1 or Schedule A-2, the term of this Agreement with respect to each of the Services shall commence on the Closing Date and shall cease on 270 days after the Closing Date.  This Agreement shall terminate in its entirety upon the expiration of the terms (as determined

 

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pursuant to the preceding sentence) of all Services; provided that the provisions of Articles 5, 6, 7 and 9 shall survive any such termination indefinitely.

 

Section 6.02.  Termination.

 

(a)                       Except as otherwise provided in any Schedule hereto, Service Recipient may from time to time terminate this Agreement with respect to one or more of the Services it receives, in whole or in part, upon giving at least 30 days’ prior notice to Service Provider.

 

(b)                       Either party may terminate this Agreement or any Service if (i) the other party shall have failed to perform any of its material obligations with respect to such Service under this Agreement, (ii) the terminating party has notified the other party in writing of such failure and (iii) such failure (A) shall have continued uncured for a period of 15 days after receipt of written notice of such failure or (B) is incapable of remedy.

 

(c)                        Either party may terminate this Agreement at any time with immediate effect upon serving written notice upon the other party if the other party suffers an Insolvency Event.

 

Section 6.03.  Effect of Termination.  (a) Other than as required by Law, upon termination of any Service pursuant to Section 6.02, Service Provider shall have no further obligation to provide the terminated Service.  Notwithstanding any termination, Service Recipient shall remain liable to Service Provider for (i) Service Costs and other fees owed and payable in respect of Services provided to Service Recipient prior to the effective date of the termination and (ii) in the case of a termination under Section 6.02(a) or (b), any costs incurred by Service Provider between the time of such termination and the time the provision of the relevant Service(s) would have terminated absent such early termination to the extent such Service Provider cannot avoid the incurrence of such costs using commercially reasonable efforts.

 

(b)                       Termination of this Agreement as provided for herein shall not prejudice or affect any rights or remedies which shall have accrued to either party, or any Service Provider Indemnitee or Service Recipient Indemnitee of either party.

 

ARTICLE 7
  ADDITIONAL AGREEMENTS

 

Section 7.01.  Confidential Information

 

(a)                       The parties hereby covenant and agree to keep confidential all Confidential Information relating to the other party or any of such other party’s Affiliates.  Without limiting the generality of the foregoing, each party shall cause its employees and agents to exercise the same level of care with respect to Confidential Information relating to the other party or any of its Affiliates as it would with respect to proprietary information, materials and processes relating to itself or any of its Affiliates.  “Confidential Information” shall mean all information, materials and processes relating to a party or any Affiliate of such party obtained by the other party or any Affiliate of such other party at any time (whether prior to or after the date hereof) in any format whatsoever (whether orally, visually, in writing, electronically or in any other form) arising out of the rendering or receipt of Services hereunder (or preparations for the same or for the

 

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termination thereof) and shall include, but not be limited to, economic and business information or data, business plans, computer software and information relating to employees, vendors, customers, products, financial performance and projections, processes, strategies and systems but shall not include (i) information which is or becomes generally available to the public other than by release in violation of the provisions of this Section 7.01(a), (ii) information which is or becomes available on a non-confidential basis to a party from a source other than the other party to this Agreement, provided the party in question reasonably believes that such source is not or was not bound by a legal or contractual obligation to the other party or one of its Affiliates to hold such information confidential and (iii) information acquired or developed independently by a party without use or reference to otherwise Confidential Information of the other party.  Except with the prior written consent of the other party, each party will use the other party’s Confidential Information only in connection with the performance of its obligations hereunder and each party shall use commercially reasonable efforts to restrict access to the other party’s Confidential Information to those employees of such party requiring access for the purpose of providing or receiving Services hereunder.  Notwithstanding any provision of this Section 7.01(a) to the contrary, a party may disclose such portion of the Confidential Information relating to the other party to the extent, but only to the extent, the disclosing party reasonably believes that such disclosure is required under Law or the rules of a Governmental Authority; provided that if permissible under Law and practicable, the disclosing party shall first notify the other party hereto of such requirement and allow such party a reasonable opportunity to seek a protective order or other appropriate remedy to prevent such disclosure.  The parties acknowledge that money damages would not be a sufficient remedy for any breach of the provisions of this Section 7.01(a) and that the non-breaching party shall be entitled to equitable relief in a court of law in the event of, or to prevent, a breach of this Section 7.01(a).

 

Section 7.02.  Ownership of Assets.

 

(a)                       DG Systems and any and all enhancements thereof or improvements thereto are and shall remain the sole exclusive property of DG or its Affiliates and/or their suppliers as applicable.

 

(b)                       SpinCo Systems and any and all enhancements thereof or improvements thereto are and shall remain the sole exclusive property of SpinCo or its Affiliates and/or their suppliers as applicable.

 

Section 7.03.  Security.  Each party, its Affiliates and their respective employees, authorized agents and subcontractors shall only use or access such other party’s Systems, premises or data to the extent such Person is authorized by the other party or pursuant to the terms hereof.  Each party, its Affiliates and their employees, authorized agents and subcontractors shall comply with the other party’s policies and procedures in relation to the use and access of the other party’s Systems, provided that they do not conflict with the terms of this Agreement and further provided that to the extent such policies and procedures of Service Recipient make the provision of a given Service impracticable, Service Provider will be relieved of the obligation to provide such Service.

 

Section 7.04.  Compliance with Law.  Each party shall at all times fully comply with all Law to which such party and its Affiliates (to the extent such Affiliates are engaged in the receipt

 

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or provision of Services) is subject in connection with the receipt or provision of Services hereunder, as applicable.

 

Section 7.05.  Labor Matters.  All labor matters relating to employees of Service Provider and its Affiliates (including, without limitation, employees involved in the provision of Services to Service Recipient or any of its Affiliates) shall be within the exclusive control of Service Provider, and Service Recipient shall not take any action affecting such matters.  Nothing in this Agreement is intended to transfer the employment of employees engaged in the provision of any Service from one party to the other.  All employees and representatives of a party and any of its Affiliates will be deemed for all compensation, employee benefits, tax and social security contribution purposes to be employees or representatives of such party or its Affiliates (or their subcontractors) and not employees or representatives of the other party or any of its Affiliates (or their subcontractors).  In providing the Services, such employees and representatives of Service Provider and its Affiliates (or their subcontractors) will be under the direction, control and supervision of Service Provider or its Affiliates (or their subcontractors) and not of Service Recipient or its Affiliates.

 

Section 7.06.  Record Retention.  Each party shall take reasonable steps to preserve and maintain complete and accurate accounts, books, and records of and supporting documentation relating to the Services provided hereunder, which records shall be retained by such party and/or its Affiliates for the period of time specified in such party’s record retention policies and procedures (which are governed by applicable Law and good industry practices).

 

ARTICLE 8
  REPRESENTATIONS AND WARRANTIES

 

Section 8.01.  Representations and Warranties of DG.  DG represents and warrants to SpinCo as of the date hereof that:

 

(a)                       The execution, delivery and performance by DG of this Agreement are within DG’s corporate powers and have been duly authorized by all necessary corporate action on the part of DG.  This Agreement constitutes a valid and binding agreement of DG enforceable against DG in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).

 

(b)                       The execution, delivery and performance by DG of this Agreement require no action by or in respect of, or filing with, any Governmental Authority other than any such action or filing that has already been taken or made or as to which the failure to make or obtain would not reasonably be expected to materially impede or delay the performance by DG of its obligations hereunder.

 

(c)                        The execution, delivery and performance by DG of this Agreement do not and will not (i) violate the certificate of incorporation or bylaws of DG, (ii) violate any Law or (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation under any provision of any agreement or other instrument binding upon

 

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DG, with such exceptions, in the case of clauses (ii) and (iii), as would not reasonably be expected to materially impede or delay the performance by DG of its obligations hereunder.

 

Section 8.02.  Representations and Warranties of SpinCo.  SpinCo represents and warrants to DG as of the date hereof that:

 

(a)                       The execution, delivery and performance by SpinCo of this Agreement are within SpinCo’s corporate or other applicable powers and have been duly authorized by all necessary corporate or other applicable action on the part of SpinCo.  This Agreement constitutes a valid and binding agreement of SpinCo enforceable against SpinCo in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).

 

(b)                       The execution, delivery and performance by SpinCo of this Agreement require no action by or in respect of, or filing with, any Governmental Authority other than any such action or filing that has already been taken or made or as to which the failure to make or obtain would not reasonably be expected to materially impede or delay the performance by SpinCo of its obligations hereunder.

 

(c)                        The execution, delivery and performance by SpinCo of this Agreement do not and will not (i) violate the certificate of incorporation or bylaws or other equivalent organizational documents of SpinCo, (ii) violate any Law or (iii) constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation under any provision of any agreement or other instrument binding upon SpinCo, with such exceptions, in the case of each of clauses (ii) and (iii), as would not reasonably be expected to materially impede or delay the performance by SpinCo of its obligations hereunder.

 

ARTICLE 9

MISCELLANEOUS

 

Section 9.01.  No Agency; Independent Contractor Status.  Nothing in this Agreement shall constitute or be deemed to constitute a partnership or joint venture between the parties hereto or constitute or be deemed to constitute any party the agent or employee of the other party for any purpose whatsoever and neither party shall have authority or power to bind the other or to contract in the name of, or create a liability against, the other in any way or for any purpose.  Each party hereto acknowledges and agrees that the other party is an independent contractor in the performance of each and every part of this Agreement and nothing herein shall be construed to be inconsistent with this status.  Subject to the terms and conditions of this Agreement, each party shall have the authority to select the means, methods and manner by which any Service is performed by it.

 

Section 9.02.  Subcontractors.  Each party may hire or engage one or more subcontractors to perform all or any of its obligations under this Agreement; provided that, (i) such party shall use the same degree of care in selecting any subcontractors as it would if such subcontractor was being retained to provide similar services to it and (ii) such party shall in all cases shall remain responsible for ensuring that obligations with respect to the standards of services set forth in this

 

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Agreement are satisfied with respect to any Service provided by a subcontractor hired or engaged by it.

 

Section 9.03.  Force Majeure.

 

(a)                       For purposes of this Section 9.03, “force majeure” means an event beyond the reasonable control of either party, which by its nature was not foreseen by such party, or, if it was foreseen, was not reasonably avoidable, and includes without limitation, acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, threat, declaration, continuation, escalation or acts of war (declared or undeclared) or acts of terrorism, failure or shortage of energy sources, raw materials or components, strike, walkout, lockout or other labor trouble or shortage, delays by unaffiliated suppliers or carriers, and acts, omissions or delays in acting by any Governmental Authority or the other party.

 

(b)                       Without limiting the generality of Section 5.02(a), neither party shall be under any liability for failure to fulfill any obligation under this Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered, or delayed as a consequence of circumstances of force majeure; provided that (i) such party shall have used commercially reasonable efforts to minimize to the extent practicable the effect of force majeure on its obligations hereunder and (ii) nothing in this Section 9.03 shall be construed to require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the reasonable judgment of the affected party, are contrary to its interests.  It is understood that the settlement of a strike, walkout, lockout or other labor dispute will be entirely within the discretion of the affected party.  The party affected by the force majeure event shall notify the other party of that fact as soon as practicable.

 

Section 9.04.  Entire Agreement.  This Agreement, together with the Merger Agreements and the other Spin-off Agreements (as defined in the Merger Agreement including all schedules and exhibits hereto and thereto), constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof.  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and permitted assigns.

 

Section 9.05.  Notices.  Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission (provided that any notice received by facsimile transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m.  (addressee’s local time) shall be deemed to have been received at 9:00 a.m. (addressee’s local time) on the next Business Day), by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.05):

 

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if to DG:

 

c/o Extreme Reach, Inc.
 75 2nd Avenue

Needham, MA 02494
 Attention: John Roland, President and CEO
 Facsimile: (877) 484-8836

 

with copies to (which shall not constitute notice):

 

Pierce Atwood LLP

100 Summer Street, Suite 2250

Boston, MA 02110
 Attention: Timothy C. Maguire, Esq.
 Facsimile:  (617) 824-2020

 

if to SpinCo:

 

The New Online Company
 750 West John Carpenter Freeway, Suite 700
 Irving, TX 75039
 Attention: Craig Holmes, Chief Financial Officer
 Facsimile: (972) 581-2100

 

with copies to:

 

Sean N. Markowitz
 General Counsel and Secretary
 SpinCo, Inc.
 750 West John Carpenter Freeway, Suite 700
 Irving, TX 75039
 Facsimile: (972) 581-2100

 

and to:

 

Latham & Watkins LLP
 555 Eleventh Street, N.W., Suite 1000
 Washington, D.C. 20004-1304
 Attention: William P. O’Neill
 Facsimile: (202) 637-2201
 E-mail: william.o’neill@lw.com

 

Copies delivered solely to counsel shall not constitute notice.

 

Section 9.06.  Interpretation; Certain Definitions.  When a reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement, unless otherwise indicated.  The table of contents and headings for this Agreement are for reference purposes only and shall not affect in any way the meaning

 

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or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any statute defined or referred to herein or in any agreement or instrument that is referred to herein means such statute as from time to time amended, modified or supplemented, including (in the case of statutes) by succession of comparable successor statutes.  References to a Person are also to its permitted successors and assigns.

 

Section 9.07.  Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Separation is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Separation be consummated as originally contemplated to the fullest extent possible.

 

Section 9.08   Assignment.  Neither this Agreement nor any rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties hereto, except that either party upon written notice to the other, may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to any direct or indirect wholly- owned subsidiary or affiliate of the assigning party, but no such assignment shall relieve the assigning party of any of its obligations hereunder.

 

Section 9.09.  Entire Agreement; No Third-Party Beneficiaries.  Except for the Subsidiaries and Affiliates of a Service Recipient or Service Provider with respect to such Services this Agreement (including the Schedules) is not intended to and shall not confer upon any person other than the parties hereto any rights or remedies hereunder.

 

Section 9.10   Governing Law.  This Agreement shall be governed by, and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.

 

Section 9.11   Consent to Jurisdiction.  The Parties hereby irrevocably submit to the personal jurisdiction of the Court of Chancery of the State of Delaware, or to the extent such Court does not have subject matter jurisdiction, the Superior Court of the State of Delaware (the “Chosen Courts”) solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions

 

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contemplated hereby and thereby, or the negotiation, execution or performance hereof, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in the Chosen Courts or that the Chosen Courts are an inconvenient forum or that the venue thereof may not be appropriate, or that this Agreement or any such documentation may not be enforced in or by such Chosen Courts, and the parties hereto irrevocably agree that all claims, actions, suits and proceedings or their causes of action (whether at Law, in contract, in tort or otherwise) that may be based upon, arising out of or relating to this Agreement or any of the transactions contemplated b this Agreement, or the negotiation, execution or performance hereof shall be heard and determined exclusively in the Chosen Courts.  The Parties hereby consent to and grant any such Chosen Courts jurisdiction over the person of such parties and, to the extent permitted by law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action, suit or proceeding in the manner provided in Section 9.9 or in such other manner as may be permitted by law shall be valid, effective and sufficient service thereof.

 

(b)                                 Each of SpinCo and DG irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself or its property, by personal delivery of copies of such process to such party.  Nothing in this Section 9.11 shall affect the right of any party to serve legal process in any other manner permitted by Law.

 

Section 9.12   Counterparts.  This Agreement may be executed and delivered (including by facsimile transmission) in two (2) or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

 

Section 9.13   No Strict Construction.  The parties hereto acknowledge that this Agreement has been prepared jointly by them and shall not be strictly construed against any party hereto.

 

Section 9.14   WAIVER OF JURY TRIAL.  EACH OF BUYER AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF BUYER OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.

 

Section 9.15   Amendments.  This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, SpinCo and DG have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

	
 
    	
THE   NEW ONLINE COMPANY
    
	
 
    	
 
    
	
 
    	
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DIGITAL   GENERATION, INC.
    
	
 
    	
 
    
	
 
    	
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[Signature Page to Transition Services Agreement]

 

 

Schedule A-1

 

SpinCo Provided Services

 

From and after the Effective Date, SpinCo shall provide the Services expressly assigned to it in this Schedule A-1.

 

1.              IT.  SpinCo shall be responsible for monitoring, managing, maintaining and making accessible to DG the server equipment, server-based software, ERP and accounting software and data storage and other IT assets that were transferred from DG to SpinCo in the Separation to the extent such equipment, software, storage and assets were used by DG prior to Closing, but only to the extent of such usage, and shall provide data transfer and processing services with respect to such assets and data generated or used by the TV Business as requested by DG..

 

2.              SEC matters.  Each of SpinCo and DG shall cooperate and provide access to such data and other financial information as is reasonably required to prepare their respective financial statements in a timely manner for filings with the U.S. Securities and Exchange Commission.

 

 

Schedule A-2

 

DG Provided Services

 

1.              Accounts Receivable.

 

a.              As soon as reasonably practicable following the Closing, and in any event within 30 days thereafter, SpinCo shall prepare with DG’s assistance an accounting in reasonable detail of all accounts receivables, unbilled accounts receivable and Tax receivables relating to periods prior to the Closing Date (such accounts receivables and Tax receivables, the “Pre-Closing Receivables”).

 

b.              Following the Closing and for a period of 180 days thereafter (the “Receivables Collections Period”), all Pre-Closing Receivables shall be collected by DG on behalf of SpinCo.  Following the expiration of the Receivables Collections Period, DG and SpinCo may mutually agree to extend the Receivables Collections Period in sixty (60) day increments (the “Extension Periods”).  During any Extension Periods, DG shall make commercially reasonable efforts to collect the Pre-Closing Receivables.  Every two weeks during the Receivable Collections Period and any subsequent Extension Periods, and on the fifth (5th) Business Day following the end of the Receivable Collections Period and any subsequent Extension Periods, DG shall deliver to SpinCo by wire transfer any Pre-Closing Receivables that have been collected by DG.  At the end of the Receivables Collection Period and any subsequent Extension Periods, DG shall transfer the right to collect Pre-Closing Receivables to SpinCo and shall make available to SpinCo all records relating thereto.  If at any time following the expiration of the Receivables Collections Period and any subsequent Extension Periods an amount is remitted to the DG as payment for any Pre-Closing Receivables, DG shall deliver such amount to SpinCo by wire transfer within five (5) Business Days of the end of the month during which such amount is received.

 

c.               Each of SpinCo and DG shall cooperate and provide access to such data and other financial information as is reasonably required to prepare their respective financial statements in a timely manner for filings with the U.S. Securities and Exchange Commission.

 

2.              Accounts Payable.

 

a.              As soon as reasonably practicable following the Closing, and in any event within 30 days thereafter, SpinCo shall prepare with DG’s assistance an accounting in reasonable detail of all accounts payable, unbilled accounts

 

 

payable and Tax payables relating to periods prior to the Closing Date (such accounts payable and Tax payables, the “Pre-Closing Payables”).

 

b.              Following the Closing and for a period of 180 days thereafter (the “Payables Period”), all Pre-Closing Payables shall be, at DG’s option, (i) paid by DG or (ii) delivered to SpinCo for payment.  Following the expiration of the Payables Period, DG and SpinCo may mutually agree to extend the Payables Period in sixty (60) day increments (the “Extension Periods”).  During the Payables Period and any Extension Period, DG shall, as applicable, (i) deliver to SpinCo for payment any Pre-Closing Payables weekly within five Business Days all such payables received during the prior week, or (ii) deliver to SpinCo copies of relevant invoices and records of payment by DG of such invoices.  Every week during the Payables Period and any subsequent Extension Periods, and on the fifth (5th) Business Day following the end of the Payables Period and any subsequent Extension Periods, SpinCo shall deliver to DG by wire transfer any Pre-Closing Payables that have been paid by DG.  At the end of the Payables Period and any subsequent Extension Periods, DG shall deliver all Pre-Closing Payables to SpinCo and shall make available to SpinCo all records relating thereto.  If at any time following the expiration of the Payables Period and any subsequent Extension Periods an amount is paid by DG as payment for any Pre-Closing Payables, SpinCo shall deliver such amount to DG by wire transfer within five (5) Business Days of the end of the month during which such amount is paid.

 

3.              Real Estate.  DG hereby grants a License to SpinCo and its Affiliates and agents to use the Premises and Facilities described below for 180 days:

 

	
# of People
    	
 
    	
Address
   (“Premises”)
    	
 
    	
Description of Facilities
    	
 
    	
License Fee
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

DG hereby grants SpinCo a limited and non-exclusive license for reasonable use and access to the space located upon each of the respective Premises set forth above as used by employees of the SpinCo, its Affiliates, and its agents (“SpinCo Employees”) as of the date of this Agreement at DG’s Premises as described herein.  SpinCo’s use of the Premises shall include the right to use the furnishings, equipment, trade fixtures, furniture and other goods located within the Premises consistent with such use as of the date of this Agreement.  The use of Premises and the provision of the Licensor Services (as defined below) shall be deemed Services under this Agreement.

 

1.              Use and Occupancy.  So long as SpinCo has paid the applicable fees required hereunder with respect to a Premises, SpinCo shall have access to and may use such Premises (and the furnishings, equipment, trade fixtures, furniture or other goods and effects contained therein) and have access to common areas (including, but not limited to, access to cafeterias (if any), fitness center (if

 

 

any), restrooms, and workspaces) and parking in the same amount and manner, on the same basis and for the same uses as the SpinCo Employees had on the date of this Agreement and enjoy such common areas and parking as of the date of this Agreement.  The Premises may be occupied only by the SpinCo and SpinCo Employees.  SpinCo and SpinCo Employees will be provided substantially the same access to the Premises as DG provides its own employees and DG shall have the right to enter any portion of the Premises at all reasonable times in order to comply with the terms and conditions of any lease covering the Premises or to otherwise maintain and repair the Premises or DG’s space.  SpinCo will not assign SpinCo’s rights or delegate SpinCo’s duties under this license (whether by operation of law, transfer of interest in SpinCo or otherwise) or permit the Premises or any part thereof to be occupied or used by any other person or entity or create any other possessory rights in and to the Premises, including sub-licenses or leasehold estates.

 

2.              License Fees.  SpinCo shall pay to DG the license fee set forth above for each Premises which includes a fee for the provision of Services in accordance with this Schedule B.

 

3.              Services.  DG shall continue to provide to SpinCo space and occupancy and services related to the office use of the Premises (e.g., mail and copy services, employee badging, heating, ventilation and air conditioning, access to conference rooms, access to cafeteria (if any), safety procedures/fire drills, utilities) (“Licensor Services”) consistent with the provision of such services as of the date of this Agreement.

 

4.              “As-is” Condition.  SpinCo accepts each Premises in its “as-is” condition on the date hereof;  and (b) DG shall not be required to perform any alterations to the Premises prior to occupancy by SpinCo.  SpinCo shall maintain each Premises in good order and condition, subject to reasonable wear and tear occurring in the ordinary course consistent with past usage.

 

5.              Repairs.  DG shall maintain and repair the Premises consistent with such maintenance and repair practices as of the date of this Agreement but in any event in accordance with and otherwise as required to maintain compliance with Law.

 

6.              Alterations.  SpinCo will not make or cause to be made any alterations, installations, improvements, additions or other physical changes in or about the Premises without DG’s prior written consent, which shall not be unreasonably withheld.

 

7.              Compliance with Laws.  SpinCo and DG will comply with all present and future laws, rules, orders, ordinances, regulations, statutes, requirements, codes and executive orders, extraordinary as well as ordinary, of all governmental authorities now existing or hereafter created, and of any and all of their departments and bureaus, and of any applicable fire rating bureau, or

 

 

other body exercising similar functions applicable to the use and/or occupancy of the Premises.

 

8.              Compliance with Lease or Sublease.  SpinCo and DG both shall at all times comply with the terms and conditions of any lease or sublease governing the Premises; provided that in the case of SpinCo, DG has delivered copies of the applicable lease to SpinCo.  The licenses granted hereunder are subject and subordinate to all mortgages, ground or underlying leases which may now or hereafter affect such leases, subleases or the real property of which a Premises is a part and to all renewals, modifications, consolidations, replacements and extensions of such leases, subleases and mortgages.

 

9.              Insurance.  Each party agrees, during the term of this license, to carry and maintain commercial general liability insurance in an amount and with companies reasonably satisfactory to the other party, against liability with respect to accidents occurring on, in or about the Premises or arising out of the use and occupancy of the Premises by SpinCo, or SpinCo’s visitors, contractors, agents and representatives.  Each party acknowledges that the other party shall have no responsibility to insure or actively care for the other party’s personal property located in the Premises.  Each party shall provide the other party with evidence of such required insurance.  To the extent permitted by existing property insurance, each party releases the other from any liability they may have on account of loss, cost, damage or expense to the extent the same is covered by such party’s property insurance policy with respect to such loss, cost, damage or expense.  Each party agrees to provide in each such policy of property insurance commercially reasonable waivers of subrogation.

 

10.       Surrender.  Upon the expiration or termination of each of the licenses herein granted, SpinCo shall, at SpinCo’s sole cost and expense, (i) remove from such Premises SpinCo’s personal property and repair any damage to such Premises resulting from such removal, and (ii) otherwise quit and deliver up such Premises (including the furnishings, equipment, trade fixtures, furniture or other goods and effects contained therein as of the date of this Agreement) peaceably and quietly and in as good order and condition as the same were in on the date of this Agreement, reasonable wear and tear, damage by fire or other casualty, and DG’s obligations excepted.  If SpinCo fails to repair and otherwise deliver the Premises as set forth above and such failure continues for five (5) days, DG shall have the right to make said reasonable repairs, charge SpinCo the reasonable costs of such repairs, and SpinCo shall reimburse DG within fifteen (15) days of receipt of invoice.  Any personal property left in the Premises after the expiration or termination of the license herein granted shall be deemed to have been abandoned and the property of DG to dispose of as DG deems expedient and at SpinCo’s sole cost and expense.  SpinCo shall not remove any furnishings, equipment, trade fixtures,

 

 

furniture or other goods and effects from the Premises located in the Premises at the date of this Agreement at any time.

 

11.       License Rights.  The rights granted herein in favor of SpinCo are in the nature of a license and shall not create any leasehold or other estate or possessory rights in SpinCo, and if the license herein granted expires or is terminated pursuant to the terms of this Agreement or this Schedule B, SpinCo shall vacate the Premises, and any occupancy or activity of SpinCo in the Premises shall be considered a trespass.

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