SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 10, 1997
(Date of Report)
NETTER DIGITAL ENTERTAINMENT, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Commission File No. 0-26884
Delaware 95-3392054
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation)
5200 Lankershim Boulevard, Suite 280
North Hollywood, California 91601
(Address of Principal Executive Offices)
(818) 753-1990
(Registrant's Telephone No.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
Effective January 10, 1997, Netter Digital Entertainment, Incorporated
("NDEI") completed its previously announced acquisition of Videssence,
Incorporated ("Videssence") through the merger of Videssence into NDEI. This
transaction was completed pursuant to an Agreement and Plan of Merger (the
"Plan") dated April 26, 1996 between Videssence and NDEI which was approved by
NDEI's shareholders at a Special Meeting held on August 5, 1996. Under the Plan,
NDEI acquired all of the outstanding common stock of Videssence in exchange for
522,221 shares of NDEI's Common Stock, valued at $9.00 per share. The terms of
this transaction are set forth in the Plan which was attached as Exhibit 2.1 to
the Company's Form 10-KSB for the fiscal year ended June 30, 1996. As a result
of the merger, Videssence shareholders have become shareholders of NDEI and
Videssence is a wholly-owned subsidiary of NDEI.
Videssence's primary business is the design, manufacture and distribution
of media lighting products which incorporate the patented and trademarked SRGB
light technology for the illumination of studios, stages and other production
environments in the sound stage, media picture, theater and theme park
industries. NDEI intends to continue the business of Videssence.
Item 7. Financial Statements and Exhibits
(a) and (b) It is impractical for the Company to provide the required
financial statements of Videssence and the pro forma financial information at
this time because the necessary accounting work is still in process. Such
financial statements will be filed by Amendment to this Report on Form 8-K as
soon as practical and by no later than March 11, 1997, as required.
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(c) Exhibit 2.1 Form of Press Release (1)
Exhibit 2.2 Agreement and Plan of Merger dated April 26, 1996 between
registrant and Videssence, Incorporated (2)
Exhibit 2.3 Amendment No.1 to the Agreement of Merger and Reorganization (2)
Exhibit 2.4 Amendment No.2 to the Agreement of Merger and Reorganization (3)
Exhibit 2.5 Amendment No.3 to the Agreement of Merger and Reorganization (1)
Exhibit 2.6 Amendment No.4 to the Agreement of Merger and Reorganization (1)
Exhibit 2.7 Amendment No.5 to the Agreement of Merger and Reorganization (1)
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(1) Filed herewith.
(2) Incorporated by reference to the Company's Proxy Statement, dated June
26, 1996 for the approval/disapproval of the proposed merger between the Company
and Videssence.
(3) Incorporated by reference to the Company's Form 10-KSB for the year
ended June 30, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 10, 1997 NETTER DIGITAL ENTERTAINMENT, INC.
By: /s/ Thomas L. Jorgenson_______________
Thomas L. Jorgenson, Chief Operating Officer
<PAGE>
EXHIBIT INDEX
2.1 Form of Press Release (1)
2.2 Agreement and Plan of Merger dated April 26, 1996 between registrant
and Videssence, Incorporated (2)
2.3 Amendment No. 1 to the Agreement of Merger and Reorganization (2)
2.4 Amendment No. 2 to the Agreement of Merger and Reorganization (3)
2.5 Amendment No. 3 to the Agreement of Merger and Reorganization (1)
2.6 Amendment No. 4 to the Agreement of Merger and Reorganization (1)
2.7 Amendment No. 5 to the Agreement of Merger and Reorganization (1)
------------------------------
(1) Filed herewith.
(2) Incorporated by reference to the Company's Proxy Statement, dated June
26, 1996 for the approval/disapproval of the proposed merger between
the Company and Videssence.
(3) Incorporated by reference to the Company's Form 10-KSB for the year
ended June 30, 1996.
Exhibit 2.1
NETTER DIGITAL AND VIDESSENCE CLOSE MERGER DEAL
FIRST COLLABORATION RESULTS IN NEW
PRODUCTS FOR FILM PRODUCTION
VIDESSENCE ENTERS CHINA MARKET WITH INSTALLATIONS
IN CHINA CENTRAL TELEVISION MAIN NEWS STUDIOS
PRODUCT ACCEPTED AS NEW STANDARD IN BEIJING OPERATIONS
Los Angeles, CA and Burlingame, CA--January 9, 1997 --Netter Digital
Entertainment, Inc. (NASDAQ:NETT) and Videssence, Inc., with combined annualized
sales of $30 million, announced today that the merger of the Companies approved
by the stockholders of Netter Digital on August 5, 1996 was closed on December
31, 1996. Videssence, Inc., with annualized sales of $6 million, has become a
wholly-owned subsidiary of Netter Digital Entertainment, Inc.
In their first collaborative effort, Netter Digital Entertainment, Inc. and
Videssence, Inc. have focused on expanding uses of the Videssence SRGB(TM)
technology into significant new growth markets for Videssence by jointly
developing new lighting technologies and products for the film production
markets. The line of new Videssence SRGB motion picture lighting systems is
being developed and tested at Netter Digital's Babylon 5 Stage in North
Hollywood, California. Working with Kodak, Minolta and Rosco Laboratories,
Videssence has formulated new lamps and filtration materials which adjust color
contents of specific SRGB lamps to match the needs of specific film emulsions
used in film production. These new products are expected to provide significant
new sales opportunities.
The first European demonstration of these new products will take place at the
Pinewood Studios in London on January 22, 1997. Over 200 members of the lighting
profession in the United Kingdom are scheduled to attend premiere workshops
being hosted by the Videssence distributor in the United Kingdom, Michael
Samuelson Lighting.
Videssence products have been adopted by broadcasters in 23 countries. The newly
designed VIDESSENCE Studio 2000 and VID-LITE products have recently been
installed at the China Central Television (CCTV) main news studio in Beijing. In
July 1996, CCTV installed the digital dimming SRGB Studio 2000 Lighting Systems
in two of their studios. These two studios were used as a demonstration for the
management of Chinese Television. The Studio 2000 Television News Studio systems
reduced the electrical energy used to produce lighting in those studios by over
80%, eliminating the need for air conditioning, while enhancing the picture
quality of the Philips BTS studio cameras. Consequently, because the equipment
surpassed all performance requirements, VIDESSENCE SRGB 2000 products have been
accepted as the new standard in the Beijing CCTV news operations. The Company
anticipates wide market acceptance among the more than 1,000 studio operations
in China resulting from the adoption of the technology and the endorsement of
CCTV in Beijing.
Douglas Netter, Chairman, President and CEO of Netter Digital, said "With the
combination of Videssence and Netter Digital, we are positioned to aggressively
market our media technology products to the emerging digital entertainment
industry."
In a statement from Paul Costa, President of Videssence, he said "Videssence has
developed in its eight years of business significant core technologies that will
be greatly expanded in their marketing potential as a result of this merger with
Netter Digital. We are very excited about our prospects together, which have
already been demonstrated by the development of new products for the film
production markets."
<PAGE>
Videssence, Inc. located in Burlingame, California, with patented SRGB lighting
technologies and products, is the market leader for energy efficient studio
lighting in the television news industry. There are presently over five hundred
broadcasters who have adopted VIDESSENCE SRGB light as the standard for their
lighting and camera calibration platforms. These include CNN worldwide, ABC
World News with Peter Jennings and numerous network operations.
Netter Digital Entertainment, Inc. is a digital entertainment and production
company which utilizes high technology in creating television series, movies,
documentaries and multimedia productions. The Company specializes in creating
science fiction programming which combines live action with computer graphics
and is presently expanding its capabilities from being primarily a production
company into broader-based technology-driven entertainment company. The Company
currently produces the Hugo Award-winning science fiction television series
"Babylon 5" with creator and executive producer, J. Michael Straczynski.
# # #
Exhibit 2.5
THIRD AMENDMENT TO
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
This Third Amendment to Agreement and Plan of Merger and Reorganization
("Amendment") is made effective as of October 30, 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") whereby the parties amended and
modified the Merger Agreement.
C. NDEI, NAC and Videssence wish to amend the Second Amendment
and further amend the First Amendment and the Merger Agreement
to merge NAC into Videssence such that Videssence becomes the
wholly-owned subsidiary of NDEI on the terms and conditions
set forth in the Merger Agreement, the First Amendment and the
Second Amendment, both as modified in this Amendment.
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, the First Amendment or the
Second Amendment, as appropriate.
NOW, THEREFORE, the parties hereby agree as follows:
1. Modification to Second Amendment: The Second Amendment is hereby modified as
follows:
1.1. Section 1.2 of the Second Amendment shall be amended and restated as
follows:
by Netter if any of the conditions in Article VII have not been satisfied
as of December 20, 1996 or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Netter to comply with its
obligations under this Agreement) and Netter has not waived such condition on or
before December 20, 1996; or
1.2 Section 1.3 to the Second Amendment shall be amended and restated as
follows:
by Videssence, if any of the conditions in Article VIII not been satisfied
as of December 20, 1996 or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Videssence to comply with their
obligations under this Agreement) and Videssence has not waived such condition
on or before December 20, 1996;
<PAGE>
1.3 Section 1.4 to the Second Amendment shall be amended and restated as
follows:
by either Netter or Videssence if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before December 20, 1996,
or such later date as the parties may agree upon.
2. Other Provisions Unmodified. Except as expressly modified hereby, the
rights, obligations and terms of the Second Amendment, the First Amendment
and the Merger Agreement shall remain unmodified and in full force and
effect. In the event of a conflict between the Amendment and any or all of
the First Amendment, Second Amendment or Merger Agreement, the Amendment
shall be controlling.
3. 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/Douglas Netter______________
Douglas Netter, President
VIDESSENCE, Inc., a California corporation
By_/S/Paul Costa__________________
Paul Costa, President
NETTER ACQUISITION, INC., a California corporation
By_/S/Douglas Netter______________
Douglas Netter, President
Exhibit 2.6
FOURTH AMENDMENT TO
AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
This Fourth Amendment to Agreement and Plan of Merger and Reorganization
("Amendment") is made effective as of December 13, 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"),
whereby the parties amended and modified the Merger Agreement.
C. NDEI, NAC and Videssence wish to amend the Third Amendment and
further amend the Second Amendment, First Amendment and the
Merger Agreement to merge NAC into Videssence such that
Videssence becomes the wholly-owned subsidiary of NDEI on the
terms and conditions set forth in the Merger Agreement, the
First Amendment and the Second Amendment, both as modified in
this Amendment.
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, the First Amendment, the Second
Amendment or the Third Amendment, as appropriate.
NOW, THEREFORE, the parties hereby agree as follows:
1. Modification to Third Amendment: The Third Amendment is hereby modified as
follows:
1.1. Section 1.2 of the Third Amendment shall be amended and restated as
follows:
by Netter if any of the conditions in Article VII have not been satisfied
as of January 31, 1997 or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Netter to comply with its
obligations under this Agreement) and Netter has not waived such condition on or
before January 31, 1997; or
<PAGE>
1.2 Section 1.2 to the Third Amendment shall be amended and restated as
follows:
by Videssence, if any of the conditions in Article VIII have not been
satisfied as of January 31, 1997 or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Videssence to comply with
their obligations under this Agreement) and Videssence has not waived such
condition on or before January 31, 1997;
1.3 Section 1.3 to the Third Amendment shall be amended and restated as
follows:
by either Netter or Videssence if the Closing has not occurred (other than
through the failure of any party seeking to terminate this Agreement to comply
fully with its obligations under this Agreement) on or before January 31, 1997,
or such later date as the parties may agree upon.
2. Other Provisions Unmodified. Except as expressly modified hereby, the rights,
obligations and terms of the Third Amendment, the Second Amendment, the First
Amendment and the Merger Agreement shall remain unmodified and in full force and
effect. In the event of a conflict between the Amendment and any or all of the
First Amendment, Second Amendment, Third Amendment or Merger Agreement, the
Amendment shall be controlling.
3. 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/Douglas Netter_____________
Douglas Netter, President
VIDESSENCE, Inc., a California corporation
By_/S/Paul Costa___________________
Paul Costa, President
NETTER ACQUISITION, INC., a California corporation
By__/S/Douglas Netter______________
Douglas Netter, President
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.
<PAGE>
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, Paul D. Costa ("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. Paul Costa 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.
<PAGE>
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) Paul
Costa being terminated by Surviving Corporation "For Cause" as defined in his
employment agreement to be entered into upon the Closing; (ii) Paul Costa's
voluntary termination of employment for other than "Good Reason" as defined in
his employment agreement to be entered into upon the Closing; (iii) or Paul
Costa's 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 Paul Costa immediately preceding the Closing divided by (yy) the
total number of shares of Videssence common stock owned by the Paul Costa, Steve
Michelson, Delwin Francis and Sam Cercone (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 Steve Michelson; (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.
<PAGE>
(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 Steve Michelson; 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/Douglas Netter______________
Douglas Netter, President
VIDESSENCE, Inc., a California corporation
By__/S/Paul Costa_________________
Paul Costa, President
NETTER ACQUISITION, INC., a California corporation
By_/S/Douglas Netter______________
Douglas Netter, 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/Paul Costa___________ /s/Steve Michelson_______
Paul Costa Steve Michelson
/s/Delwin Francis_______ /s/Sam Cercone___________
Delwin Francis Sam Cercone
