<PAGE>
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)
December 31, 1996
(Date of Report (Date of Earliest Event Reported))
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
(Exact name of registrant as specified in its charter)
DELAWARE 2741 95-4578632
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification
Code Number) Number)
5548 Lindbergh Lane
Bell, California 90201-6410
(213) 980-4300
(Address, including ZIP code, and telephone number, including area code,
of registrant's principal executive offices)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 31, 1996, Global One Distribution & Merchandising Inc. (the
"REGISTRANT") consummated the sale of its 51%-owned subsidiary, Stanley
DeSantis, Inc. ("SDI"), pursuant to a redemption of all of the SDI stock held
by the Registrant's wholly owned subsidiary, OSP Publishing, Inc. (the "SDI
STOCK"). Following the redemption, Stanley DeSantis, SDI's President and the
owner of the remaining 49%, was the sole stockholder of SDI.
In consideration of the SDI Stock and repayment of amounts due from SDI,
the Registrant will receive an aggregate of $1.575 million, $417,000 of
which was paid upon the redemption and $1,158,000 of which is payable on or
before February 28, 1997 pursuant to a promissory note. The promissory note
is secured by the SDI Stock. The consideration for the SDI Stock was based
upon a formula relating to SDI's prior four years of operating income
established pursuant to the agreement under which the Registrant acquired SDI.
SDI designs and markets T-shirts, sweatshirts, mugs, hats and other
apparel to department and specialty stores and other retail outlets,
including mass merchants, based on both licensed and non-licensed designs.
2
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. Page No.
--------
(a) Financial Statements of Businesses Acquired.
Audited Financial Statements for OSP Publishing, Inc.
and Kelly Russell Studios, Inc. at December 31, 1995 and
for the three years then ended are incorporated herein by
reference from Registrant's Registration Statement on
Form S-4 (333-4655).
(b) Pro Forma Financial Statements.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
at September 30, 1996. . . . . . . . . . . . . . . . . . . . . . . . 6
Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the nine months ended September 30, 1996 and
the year ended December 31, 1995 . . . . . . . . . . . . . . . . . . 8
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .10
(c) Exhibits
Exhibit No. Description Page No.
----------- ----------- --------
2.1 Agreement for Purchase and Sale
of Stock of Stanley DeSantis, Inc.,
dated December 31, 1996
2.2 Promissory Note,
dated December 31, 1996
by Stanley DeSantis, Inc. in favor
of OSP Publishing, Inc.
2.3 Limited Continuing Guaranty,
dated December 31, 1996 by
Stanley DeSantis in favor of
OSP Publishing, Inc.
2.4 Security Pledge Agreement,
dated December 31, 1996
3
<PAGE>
2.5 Management Consulting Agreement,
dated December 31, 1996 between
OSP Publishing, Inc. and
Stanley DeSantis, Inc.
4
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
information gives effect to the acquisition of Kelly Russell Studios, Inc.
("KRSI") and the disposition of Stanley DeSantis, Inc. ("SDI") (collectively,
"the Transactions"). The acquisition of Kelly Russell Studios, Inc. was
completed on August 28,1996, and therefore the historical financial statements
of Global One Distribution & Merchandising Inc. (the "Company") reflect the
operating results subsequent to that date. The unaudited pro forma financial
statements give effect to the Transactions as if they had occurred as of January
1, 1995 for the unaudited pro forma condensed consolidated statement of
operations and other financial data and as of September 30, 1996 for purposes of
the unaudited pro forma condensed consolidated balance sheet.
The Unaudited Pro Forma Condensed Consolidated Financial Statements do
not purport to present the actual financial position or results of operations of
the Registrant had the transactions and events assumed therein in fact occurred
on the dates specified, nor are they necessarily indicative of the results of
operations that may be achieved in the future. The following Unaudited Pro Forma
Condensed Consolidated Statements of Operations do not reflect cost savings that
may result from the transactions. The Unaudited Pro Forma Condensed
Consolidated Financial Statements are based on certain assumptions and
adjustments described in the notes to the Unaudited Pro Forma Condensed
Consolidated Financial Statements and should be read in conjunction therewith.
5
<PAGE>
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet sets
forth the historical balance sheet information for the Company which
includes the acquisition of KRSI which occurred August 28, 1996 and the
sale of the 49% ownership interest in the stock of Stanley DeSantis, Inc.
which was disposed of on December 31, 1996.
<TABLE>
<CAPTION>
ASSETS
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
COMPANY SDI ADJUSTMENTS ADJUSTED
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents
Accounts receivable - trade, net of allowance
for doubtful accounts and returns $ 3,746 $ 430 $ (56) (6) $ 3,260
Inventories (Note 2) 5,132 2,467 2,665
Prepaid royalty advances 917 152 765
Prepaid expenses and other current assets 776 2 1,560 (6) 2,334
Deferred income tax asset 1,123 34 1,089
--------- -------- ---------- ----------
Total current assets 11,694 3,085 1,504 10,113
PROPERTY AND EQUIPMENT, Net 1,262 55 1,207
GOODWILL, Net 4,481 (5) 4,481
DEPOSITS 261 13 248
--------- -------- ---------- ----------
TOTAL $ 17,698 $ 3,153 $ 1,504 $ 16,049
--------- -------- ---------- ----------
--------- -------- ---------- ----------
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
6
<PAGE>
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
COMPANY SDI ADJUSTMENTS ADJUSTED
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,520 $ 1,233 $ (60) (6) $ 3,227
Accrued expenses 1,585 633 952
Royalties payable 1,695 5 1,690
Intercompany payable 239 239 (6) 0
Due to customers 294 0 294
Income taxes payable 86 7 450 (6) 529
Current maturities of:
Capitalized lease obligations 84 84
Subordinated long-term debt 675 675
--------- -------- ---------- ----------
Total current liabilities 8,939 2,117 629 7,451
REVOLVING LINE OF CREDIT 3,430 3,430
CAPITALIZED LEASE OBLIGATIONS 88 88
SHAREHOLDER LOAN 1,100 1,100
SUBORDINATED LONG-TERM DEBT 1,732 1,732
MINORITY INTEREST 508 (508) (6) 0
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 130 50 80
Additional paid-in capital 9,484 300 9,184
Accumulated deficit (7,713) 686 1,383 (6) (7,016)
--------- -------- ---------- ----------
Total stockholders' equity 1,901 1,036 1,383 2,248
--------- -------- ---------- ----------
TOTAL $ 17,698 $ 3,153 $ 1,504 $ 16,049
--------- -------- ---------- ----------
--------- -------- ---------- ----------
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
7
<PAGE>
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL PRO FORMA PRO FORMA
COMPANY KRSI SDI ADJUSTMENTS ADJUSTED
---------- ----------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Net sales $ 29,328 $ 1,828 $ 13,312 $ 17,844
Cost of sales 19,517 1,242 9,715 11,044
---------- ----------- ------------ ------------- ----------
Gross profit 9,811 586 3,597 0 6,800
Operating expenses:
Warehouse and selling 7,896 0 1,373 0 6,523
General and administrative 4,889 2,280 2,731 326 (1) 4,764
---------- ----------- ------------ ------------- ----------
Total operating expenses 12,785 2,280 4,104 326 11,287
---------- ----------- ------------ ------------- ----------
Operating loss (2,974) (1,694) (507) (326) (4,487)
Interest expense 994 41 201 - 834
---------- ----------- ------------ ------------- ----------
Loss before income taxes and minority interest (3,968) (1,735) (708) (326) (5,321)
Income tax benefit (1,186) - (283) - (903)
---------- ----------- ------------ ------------- ----------
Loss before minority interest (2,782) (1,735) (425) (326) (4,418)
Minority interest in loss of subsidiary 209 - - (209) (2) 0
---------- ----------- ------------ ------------- ----------
Net loss $ (2,573) $ (1,735) $ (425) $ (535) $ (4,418)
---------- ----------- ------------ ------------- ----------
---------- ----------- ------------ ------------- ----------
Pro forma net income (loss) data:
Loss before income taxes, as reported $ (3,968) $ (1,735) $ (708) $ (326) $ (5,321)
Pro forma benefit for income taxes (794) (3) - - (794) (3)
Minority interest in loss of subsidiary 209 - - (209) -
---------- ----------- ------------ ------------- ----------
Pro forma net loss $ (2,965) $ (1,735) $ (708) $ (535) $ (4,528)
---------- ----------- ------------ ------------- ----------
---------- ----------- ------------ ------------- ----------
Pro forma income (loss) per share:
Loss from operations $ (0.35) $ (0.19) $ (0.08) $ (0.04) $ (0.35)
Minority interest in loss of subsidiary 0.02 - - (0.02) -
---------- ----------- ------------ ------------- ----------
Pro forma net loss $ (0.33) $ (0.19) $ (0.08) $ (0.06) $ (0.35)
---------- ----------- ------------ ------------- ----------
---------- ----------- ------------ ------------- ----------
Weighted average shares outstanding 8,944 8,944 8,944 8,944 13,011 (4)
---------- ----------- ------------ ------------- ----------
---------- ----------- ------------ ------------- ----------
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
8
<PAGE>
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL PRO FORMA PRO FORMA
COMPANY KRSI SDI ADJUSTMENTS ADJUSTED
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 38,228 $ 2,814 $ 10,140 $ 30,902
Cost of sales 21,647 2,553 6,802 17,398
----------- ----------- ----------- ------------ -----------
Gross profit 16,581 261 3,338 0 13,504
----------- ----------- ----------- ------------ -----------
Operating expenses:
Warehouse and selling 10,201 0 1,219 0 8,982
General and administrative 4,971 2,094 1,185 435 (1) 6,315
----------- ----------- ----------- ------------ -----------
Total operating expenses 15,172 2,094 2,404 435 15,297
----------- ----------- ----------- ------------ -----------
Operating income (loss) 1,409 (1,833) 934 (435) (1,793)
Interest expense 841 7 165 - 683
----------- ----------- ----------- ------------ -----------
Income (loss) before income taxes and min. int.
and extraordinary item 568 (1,840) 769 (435) (2,476)
Income tax (benefit) provision (77) - 213 - (290)
----------- ----------- ----------- ------------ -----------
Income (loss) before minority interest and
extraordinary item 645 (1,840) 556 (435) (2,186)
Minority interest in (income) of subsidiary (243) - - 243 (2) 0
----------- ----------- ----------- ------------ -----------
Net income (loss) before extraordinary item $ 402 $ (1,840) $ 556 $ (192) $ (2,186)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Pro forma net income (loss) data:
Income (loss) before income taxes $ 568 $ (1,840) $ 769 $ (435) $ (2,476)
Pro forma provision for income taxes 114 (3) - - - 114 (3)
Minority interest in (income) of subsidiary (243) - - 243 -
----------- ----------- ----------- ------------ -----------
Pro forma net income (loss) before
extraordinary item $ 211 $ (1,840) $ 769 $ (192) $ (2,590)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Pro forma income (loss) per share:
Income (loss) from operations $ 0.03 $ (0.14) $ 0.06 $ (0.03) $ (0.20)
Minority interest in (income) of subsidiary 0.02 - - 0.02 -
----------- ----------- ----------- ------------ -----------
Pro forma net income (loss) before
extraordinary item $ 0.01 $ (0.14) $ 0.06 $ (0.01) $ (0.20)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
Weighted average shares outstanding 13,011 13,011 13,011 13,011 13,011 (4)
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
</TABLE>
See notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
9
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(1) Represents amortization of the excess of purchase price of KRSI over the
net assets acquired assuming a ten year life.
(2) Represents the adjustment to eliminate the allocation of SDI's profit
(loss) to the minority shareholder.
(3) Assumes pro forma treatment of income taxes for OSP being treated as a C
Corporation.
(4) Assumes for all periods presented the issuance of 2,041,189 shares of
Global One Common Stock to effect the KRSI merger, as well as 4,328,238
shares sold in the private placement which was completed August 28, 1996
with gross proceeds of $6.7 million.
(5) The acquisition of Kelly Russell Studios, Inc. was accounted for as a
purchase, applying the provisions of Accounting Principles Board Opinion
No. 16. The total purchase cost was allocated to KRSI's assets and
liabilities based on their relative fair values as of August 28, 1996. The
purchase cost plus the net liabilities assumed has been allocated to
goodwill.
Purchase cost of equity $ 3,062
Plus OSP's portion of costs associated with the merger 551
Plus net liabilities acquired at August 28, 1996, including
KRSI's portion of costs of the Merger totaling $528 741
---------
Cost in excess of net liabilities acquired $ 4,354
---------
---------
The costs associated with the merger of KRSI and private placement offering
consisted principally of legal and accounting fees for KRSI and OSP,
printing costs and investment banking costs. These costs have been
allocated between the cost of new equity, acquistion of KRSI and KRSI's
costs of selling its business which were expensed by KRSI.
(6) Represents the sale of the 51%-owned subsidiary, SDI. The sale was
completed on December 31, 1996, for total consideration of $1.575 million,
which includes repayment of amounts due from SDI. The first payment of
$417 was received on December 31, 1996 and was held in a trust account
of the attorney and the second payment of $1.158 million, evidenced by a
secured promissory note, is to be paid on or before February 28, 1997.
The total consideration was allocated as follows:
Intercompany receivable from SDI $ 239
Accounts receivable from SDI 56
Payment of attorney fees 15
Accounts payable to SDI (60)
Elimination of minority interest (508)
Income taxes payable 450
Gain on sale of stock 1,383
-----------
Total $ 1,575
-----------
-----------
10
<PAGE>
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, Global One
Distribution & Merchandising Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: January 15, 1997
GLOBAL ONE DISTRIBUTION
& MERCHANDISING INC.
By: /s/ WALTER M. LACHER
---------------------
Walter M. Lacher
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
----------- ----------- --------
2.1 Agreement for Purchase and Sale
of Stock of Stanley DeSantis, Inc.,
dated December 31, 1996
2.2 Promissory Note,
dated December 31, 1996
by Stanley DeSantis, Inc. in favor
of OSP Publishing, Inc.
2.3 Limited Continuing Guaranty,
dated December 31, 1996 by
Stanley DeSantis in favor of
OSP Publishing, Inc.
2.4 Security Pledge Agreement,
dated December 31, 1996
2.5 Management Consulting Agreement,
dated December 31, 1996 between
OSP Publishing, Inc. and
Stanley DeSantis, Inc.
12
<PAGE>
EXHIBIT 2.1
AGREEMENT FOR PURCHASE AND SALE
OF STOCK OF
STANLEY DESANTIS, INC.
A CALIFORNIA CORPORATION
THIS AGREEMENT FOR PURCHASE AND SALE OF STOCK ("AGREEMENT") is entered
into this 31st day of December, 1996, by and between STANLEY DESANTIS, INC.,
a California corporation ("COMPANY"), and OSP Publishing, Inc., a Delaware
corporation ("SELLER") with reference to the following facts:
A. Seller owns fifty-one percent (51%) (five hundred and ten shares) of
the outstanding common stock (the "STOCK") of Company.
B. Seller now desires to sell and Company desires to redeem and
purchase from Seller all of the Seller's Stock for the Purchase Price (as
herein defined), and in accordance with the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
1. PRIOR AGREEMENT.
Upon the payment in full of all obligations by Company to Seller
pursuant to this Agreement, any and all prior agreements between Company and
Seller, and any of Seller's agents, subsidiaries, employees, directors or
agents, are hereby terminated.
2. PURCHASE AND SALE OF STOCK.
2.1 Subject to the terms and conditions set forth herein, Seller
hereby sells, transfers and assigns to Company and Company hereby acquires,
accepts, purchases and redeems from Seller, all of Seller's right, title and
interest in and to the
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<PAGE>
Stock and for other inter-company payables between Seller and Company for
the total sum of One Million Five Hundred Seventy-Five Thousand Dollars
($1,575,000.00) (the "PURCHASE PRICE").
2.2 Concurrent with the Closing (as that term is defined herein),
of the transaction contemplated by this Agreement, Company shall deliver a
cashier's check or wire transfer to Seller's counsel Samaha, Grogin &
Stulberg Attorney-Client Trust Account in the amount of Four Hundred
Seventeen Thousand Dollars ($417,000.00) and a One Million One Hundred
Fifty-Eight Thousand Dollar ($1,158,000.00) Promissory Note in the form of
Exhibit "2.2" hereto ("Promissory Note").
2.3 The Purchase Price set forth in paragraph 2.1 above shall be
allocated by the parties as provided for on the Schedule of Allocation
set forth on Schedule 2.3
3. CANCELLATION OF THE NOTE.
Concurrent with the payment in full of the Promissory Note provided
for in paragraph 2.2 of this Agreement, Seller shall deliver to the Company
the Promissory Note with a written notation, "This Promissory Note has been
paid in full," affixed to the face of the Promissory Note and signed by an
officer authorized by Seller.
4. RESIGNATION.
Effective with the payment of the Promissory Note, Seller shall
cause the resignation of Michael Malm and Joseph Angard as directors of
Company. Upon the execution of this Agreement, Michael Malm and Joseph
Angard shall execute and deliver their written resignations, as set forth on
Schedule "4," which shall be held in trust by Seller's counsel and shall be
delivered to Company's counsel at such time as said Promissory Note is
paid in full.
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<PAGE>
5. PROMISSORY NOTE.
5.1 The Promissory Note referred to herein shall provide for the
payment of One Million One Hundred Fifty-Eight Thousand Dollars
($1,158,000.00) on or before February 28, 1997.
6. THE STOCK.
Concurrently with the Closing, Seller shall tender Five Hundred Ten
shares (510) shares of the Common Stock of Company represented by Stock
Certificate Numbers 7, 9 and 10, endorsed in blank, or a lost stock
certificate affidavit in a form reasonably satisfactory to Company evidencing
its entire ownership interest in and to all of the Stock and shall execute
and deliver such other documents as may be reasonably necessary under
applicable laws to consummate a transfer and redemption of the Stock.
7. CLOSING DATE.
The Closing shall occur on or before 4:30 p.m. on December 31, 1996,
at the Law Offices of Katz, Hoyt, Seigel & Kapor, 11111 Santa Monica
Boulevard, Suite 820, Los Angeles, California 90025 (the "CLOSING").
8. RELEASES.
Except for the specific obligations, representations and warranties
of the parties pursuant to this Agreement, or any other document or
instrument to be delivered in connection with this Agreement, and except as
otherwise provided herein, Company, on the one hand, and Seller on the other
hand, for itself and for its agents, servants, employees, shareholders,
subsidiaries, officers, directors, attorneys, accountants, agents,
successors, and assigns, forever release and discharge each and all of the
other parties hereto, and their respective agents, servants, employees,
shareholders, subsidiaries, officers, directors, attorneys, accountants,
agents, successors, and assigns, from any and all claims, demands, debts,
liabilities, accounts, obligations, costs, damages, losses, expenses, liens,
actions or causes of action, rights of indemnity (legal or equitable), rights
to subrogation,
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<PAGE>
rights to contributions and remedies of any nature whatsoever (collectively
the "CAUSES OF ACTION"), know or unknown which each of the parties had, now
has or has acquired at any time prior to the date of the execution of this
Agreement, including specifically but not exclusively and without limiting
the generality of the foregoing, any and all claims, damages, demands and
causes of action, known or unknown, suspected or unsuspected, by each of
them, including specifically but not exclusively and without limiting the
generality of the foregoing: (i) outstanding receivables and payables
between Company and Seller; (ii) the Company's past, present and future
profits; or (iii) arising out of or in any way connected with any loss,
damage or injury whatsoever, known or unknown, suspected or unsuspected,
relating to any act or omission by or on the part of any party committed or
omitted prior to the date hereof.
9. WAIVER OF CIVIL CODE Section 1542.
The parties acknowledge that a risk exists that subsequent to the
execution of this Agreement, each party may incur or suffer losses, damages
or injuries which are in some way caused by circumstances or events referred
to above, but which were unknown or unanticipated at the time this Agreement
was executed. Each party does hereby assume the foregoing risks and agrees
that this Agreement shall apply to all unknown or unanticipated results of
the transactions and occurrences described above, as well as those known and
anticipated, and on the advice of counsel, each party does knowingly waive
any and all rights and protections under California Civil Code Section 1542,
which section has been duly explained and reads as follows:
A general release does not extend to the claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor.
10. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller makes the following representations and warranties (which
representations and warranties shall survive the execution
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<PAGE>
of this Agreement), each of which (i) is material and is being relied upon by
Company; (ii) is true in all material respects as of the date hereof; and
(iii) shall be true as of the date of the Closing Date:
10.1 Seller is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Delaware.
10.2 Seller is the sole owner of the Stock, free and clear of all
liens, encumbrances, claims, rights, demands, agreements and covenants.
10.3 Seller has entered into no commitments or agreements with any
governmental or nongovernmental person or entity affecting the Stock.
10.4 Neither this Agreement, nor any document or instrument to be
delivered hereunder, including but not limited to the transfer, assignment
and sale of the Stock violates or shall violate any oral or written contract
or agreement to which Seller is a party.
10.5 Seller has all requisite power and authority to enter into,
execute and deliver this Agreement and all other documents and instruments
to be executed by Seller in connection herewith and to transfer, convey and
sell to Company and the Stock.
10.6 Seller is the sole owner of, and has not previously assigned
or transferred any of its Causes of Action against the Company.
10.7 Seller and its officer, directors, shareholders, employees,
agents, assigns, and anyone acting in concert therewith shall not interfere
in any way with the operation and management of the Company.
10.8 Seller is not relying upon any representation or warranties,
oral, written or otherwise, with respect to the transaction which is
contemplated herein except as may be expressly set forth herein.
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<PAGE>
10.9 Between the execution of this Agreement and the payment of the
Promissory Note, Seller will not take any action which intentionally and
directly lessens the monetary value of the Stock.
10.10 Seller has entered into no contract arrangement or
understanding with any broker, finder or similar agent with respect to the
transaction contemplated by this Agreement.
11. REPRESENTATIONS AND WARRANTIES OF COMPANY.
Company makes the following representations and warranties (which
representations and warranties shall survive the execution of this
Agreement), each of which (i) is material and is being relied upon by Seller;
(ii) is true in all material respects as of the date hereof; and (iii) shall
be true as of the date of the Closing.
11.1 Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California.
11.2 Company has all requisite power and authority to enter into,
execute and deliver this Agreement and all of the documents and instruments
to be executed in connection herewith and to perform fully their obligations
hereunder and thereunder.
11.3 Neither this Agreement, nor any document or instrument to be
delivered hereunder, including but not limited to the transfer, assignment
and sale of the Stock to Company, violates or shall violate any oral or
written contract or agreement to which Company is a party.
11.4 Company is the sole owner of, and has not previously assigned
or transferred any of its Causes of Action against Seller.
11.5 Company has not entered into any contract, arrangement or
understanding with any broker, finder or similar agreement with respect to
the transaction contemplated by this Agreement.
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<PAGE>
11.6 Company shall not and will not incur, except contemporaneously
with the payment of the Promissory Note, any obligations outside of the
ordinary and regular course of its operations consistent with its past
business practices.
12. SELLER'S INDEMNIFICATION.
Seller shall indemnify, defend and hold the Company, its
shareholders, directors, officers, employees, agents, attorneys, accountants,
successors and assigns, harmless from and against any and all claims, suits,
damages, losses, expenses, costs, obligations, liabilities, recoveries and
deficiencies, including without limitation, interest, penalties and
attorneys' fees and disbursements of all foreseeable and unforeseeable
consequential damages that they, or any of them, shall incur or suffer, and
that arise or result directly or indirectly from any breach of this Agreement
or any document or instrument executed in connection herewith.
13. BUYER'S INDEMNIFICATION.
The Company shall indemnify, defend, and hold Seller, its
shareholders, directors, officer, employees, agents, attorneys, accountants,
successors and assigns, harmless from and against any and all claims, suits,
damages, losses, expenses, costs, obligations, liabilities, recoveries and
deficiencies, including without limitation, interest, penalties and
attorneys' fees and disbursements, of all foreseeable and unforeseeable
consequential damages that they, or any of them, shall incur or suffer, and
that arise or result directly or indirectly from any breach of this Agreement
or any document or instrument executed in connection herewith.
14. BOARD OF DIRECTORS MEETING.
If the Four Hundred Seventeen Thousand Dollar ($417,000.00) payment
set forth in paragraph 2.2 above is not made on or before 4:30 p.m. on
December 31, 1996, there shall be a Company Board of Directors meeting on
December 31, 1996, at 5:00 p.m. at Duff & Phelps, located at 2029 Century
Park East, Suite
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820, Los Angeles, California 90067. If the Promissory Note (Exhibit 2.2) is
not paid on or before 4:30 p.m. on February 28, 1997, there shall be a
Company Board of Directors meeting on February 28, 1997, at 5:00 p.m. at Duff
& Phelps.
15. NOTICES.
All notices, requests and other communication hereunder shall be in
writing and shall be delivered by courier or other means of personal service
or sent by overnight mail or registered or certified mail, return receipt
requested, addressed to:
If to Company: Stanley DeSantis, Inc.
Attn: Stanley DeSantis
and Richard Hart
10615 Vanowen Street
Burbank, CA 91505
With copy to: Jeffrey H. Kapor, Esq.
Katz, Hoyt, Seigel & Kapor LLP
11111 Santa Monica Boulevard
Suite 820
Los Angeles, CA 90025-3342
If to Seller: OSP Publishing, Inc.
Attn: Michael Malm
and Joseph Angard
5548 Lindbergh Lane
Bell, CA 90201
With copy to: Jeffrey P. Grogin, Esquire
Samaha, Grogin & Stulberg LLP
911 East Colorado Blvd.
Third Floor
Pasadena, CA 91106-1700
All notices, requests and other communication shall be deemed given
on the date of delivery if given by personal service (with confirmation
notice) or if sent by overnight mail or registered mail, return receipt
requested, upon delivery to the
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address set forth above. Any party may change their address for notices,
requests and other communication by giving notice in the manner specified
above.
16. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
17. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties and their
respective successors, assigns and legal representatives.
18. GOVERNING LAW.
This Agreement is to be governed by and construed in accordance with
the laws of the State of California. Any suit brought herein shall be
brought in any State or Federal Court located in Los Angeles, California, and
all parties hereto waive any claim or defense that such forum is not
convenient or proper.
19. ATTORNEYS' FEES.
In the event suit is commenced to enforce this Agreement or
otherwise related to this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees and costs incurred in connection therewith.
20. INTERPRETATION.
The parties each agree that each of them and their respective
counsel have reviewed carefully this Agreement and participated in its
negotiation and preparation. Accordingly, the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.
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21. CAPTIONS.
The captions and headings used in this Agreement are for convenience
of reference only and shall not be deemed to alter or affect any provision
hereof.
22. FINAL AGREEMENT.
This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter contained herein and therein, and supersedes
all prior agreements, representations and understandings of the parties.
23. NO MODIFICATION.
No modification or amendment hereof shall be of any force or effect
unless in writing and executed by all the parties hereto.
24. FURTHER ASSURANCES.
The parties shall take such action and execute and deliver such
further documents as may be reasonably necessary or appropriate to effectuate
the intentions of this Agreement.
25. EXPENSES.
Each party shall bear all of its own costs and expenses incurred in
connection with the transaction contemplated herein.
26. GUARANTY.
Company shall cause its President and sole shareholder to execute a
Non Recourse Continuing Personal Guaranty in the form of Schedule 26.
27. TELECOPY TRANSMISSION.
A signature required under this Agreement and any of the related
agreements contemplated by the parties to be executed in conjunction with
this Agreement may be executed by facsimile with
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the originals to be delivered within five (5) business days of the Closing.
The facsimile signature can be relied upon and used with the same force and
effect as though it were an original.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
"SELLER"
OSP Publishing, Inc.
By: /s/ MICHAEL MALM
----------------
Michael Malm, President
"COMPANY"
STANLEY DESANTIS, INC.
/s/ STANLEY DESANTIS
--------------------
Stanley DeSantis, President
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EXHIBIT 2.2
PROMISSORY NOTE
Los Angeles, California
$1,158,000.00 December 31, 1996
FOR VALUE RECEIVED, the undersigned ("MAKER") promises to pay to the
order of OSP Publishing, Inc. ("PAYEE"), at 5548 Lindbergh Lane, Bell,
California 90201, or at such other address as the holder of this Promissory
Note shall direct, the sum of One Million One Hundred Fifty-Eight Thousand
Dollars ($1,158,000.00) on or before February 28, 1997 (the "DUE DATE").
This Promissory Note shall not bear interest except if payment is not
made on the Due Date. If said payment is not made on the Due Date as
provided herein, the entire unpaid amount shall bear interest at the rate of
ten percent (10%) per annum until paid in full at the option of the holder.
In the event of a default of payment by Maker on the Due Date, Payee may,
at its option, elect to foreclose upon its security and, in such event, this
Note shall be considered non-recourse and there shall be no further
obligation of Maker hereunder.
Payment on this Promissory Note shall be payable in lawful money of the
United States of America.
Maker agrees to pay all costs and expenses (including without limitation
attorneys' fees) incurred by Payee in connection with or related to this
Promissory Note, or its enforcement.
In the event any one or more of the provisions of this Promissory Note
shall for any reason be held to be invalid, illegal or unenforceable, the
same shall not affect any other provision of this Promissory Note and the
remaining provisions of this Promissory Note shall remain in full force and
effect.
No waiver or modification of any of the terms or provisions of this
Promissory Note shall be valid or binding unless set forth in a writing
signed by a duly authorized officer of Payee, and then only to the extent
therein specifically set forth.
This Promissory Note is personally guaranteed by Stanley DeSantis, an
individual, who has pledged fifty-one percent (51%) of his common stock in
Maker to secure said Personal Guaranty.
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This Promissory Note is payable in, and shall be governed by the laws of,
the State of California.
STANLEY DESANTIS, INC.
a California corporation
By /s/ Stanley DeSantis
------------------------------
Stanley DeSantis, President
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EXHIBIT 2.3
LIMITED CONTINUING GUARANTY
(Non-Recourse)
THIS LIMITED CONTINUING GUARANTY (the "GUARANTY") is entered into as of
December 31, 1996 (the "EFFECTIVE DATE") by STANLEY DESANTIS ("GUARANTOR") in
favor of OSP PUBLISHING, INC., a Delaware corporation ("OSP"). THE LIABILITY
OF GUARANTOR UNDER THIS GUARANTY IS LIMITED PURSUANT TO SECTION 3 BELOW.
Guarantor, in order to induce OSP to consider financial accommodations
granted to Stanley DeSantis, Inc. ("COMPANY") pursuant to that certain
Promissory Note dated December 31, 1996, and for the benefit of OSP, agrees
as set forth below.
1. RECITALS. This Guaranty is executed and delivered to OSP in connection
with the Promissory Note between Company and OSP dated December 31, 1996.
2. GUARANTY. Guarantor unconditionally guaranties to OSP the timely
(whether as scheduled or upon acceleration) payment and performance by
Company of any obligations under the Promissory Note, together with all costs
and expenses (including reasonable attorney fees and disbursements) incurred
with the enforcement of OSP's rights under this Guaranty. The Guarantor
agrees that the Promissory Note may be extended, amended, modified,
supplemented or renewed, in whole or in part, without notice or further
assent from Guarantor, and that the Guarantor will remain bound by this
Guaranty notwithstanding any extension, renewal or other alteration of the
Promissory Note. Notwithstanding anything to the contrary in this Guaranty,
the parties specifically agree that this Guaranty shall not cover the Pledge,
as defined below, and in the event of a default by Guarantor pursuant to the
Pledge Agreement OSP shall have recourse against Guarantor without the
limitations set forth in this Guaranty.
3. RECOURSE LIMITED TO PLEDGED STOCK AS REFERRED TO IN THE SECURITY PLEDGE
AGREEMENT OF EVEN DATE HEREWITH, EXECUTED BY GUARANTOR, IN FAVOR OF OSP
("PLEDGE"). OSP SHALL ONLY BE ENTITLED TO RESORT TO THE PLEDGED STOCK IN THE
EVENT OSP IS ENTITLED TO ENFORCE ITS RIGHTS AGAINST GUARANTOR UNDER THIS
GUARANTY. OSP'S ONLY SOURCE OF RECOVERY SHALL BE AGAINST THE PLEDGED STOCK
AND GUARANTOR SHALL NOT OTHERWISE BE LIABLE FOR ANY PAYMENTS UNDER THIS
GUARANTY.
4. OSP'S DIRECT RIGHTS.
4.1 GUARANTY OF PAYMENT. This is a guaranty of payment and performance
and is not a guaranty of collection. This Guaranty is irrevocable
and continuing in nature and relates to any obligations pursuant to
the Promissory Note now existing or hereafter arising.
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4.2 DIRECT RIGHTS AGAINST GUARANTOR. In the event that Company fails
timely to pay or perform any of the obligations under the
Promissory Note, OSP may enforce its rights under this Guaranty
without first seeking to obtain payment or performance from Company.
4.3 CLIENT'S BANKRUPTCY. In the event Company becomes subject to a
voluntary or involuntary case under the Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, or makes
an assignment for the benefit of creditors, or enters into a formal
or informal moratorium, composition or extension generally with
Company's creditors, OSP may immediately pursue its rights under
this Guaranty, even though OSP may be stayed from accelerating or
collecting the Promissory Note from Company.
4.4 WAIVER OF PRIORITY OF COLLECTION. Guarantor waives any rights
Guarantor may have to require OSP to proceed against the Company
or to pursue any other remedy in OSP's power. In addition,
Guarantor waives Guarantor's right to benefit from every security
which now or hereafter exists for the performance of the Promissory
Note, including any right the Guarantor has to require OSP to
proceed against or exhaust such security. If OSP decides to
proceed first to exercise any other remedy or right, OSP retains
all of OSP's rights under this Guaranty.
4.5 WAIVER OF RELEASE. The Guarantor shall not be discharged, released
or exonerated, in any way, from its absolute, unconditional and
independent liabilities hereunder, even though any rights or
defenses which the Guarantor may have against Company, OSP or
others may be destroyed, diminished or otherwise affected, by:
4.5.1 any declaration by OSP of a default in respect of the
Promissory Note;
4.5.2 the exercise by OSP of any rights or remedies against
Company or any other person;
4.5.3 the failure of OSP to exercise any rights or remedies
against Company or any other person, including without
limitation the failure to perfect security interests
granted by Company or the failure to file a bankruptcy
claim in any bankruptcy case of Company; or
4.5.4 the sale or enforcement of, or realization upon (through
judicial foreclosure, power of sale or any other means)
any security for any of the Promissory Note, even though
recourse may not thereafter be had against Company for any
deficiency, or OSP fails to pursue any such recourse which
might otherwise be available, whether by way of deficiency
judgment following judicial foreclosure, or otherwise.
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4.6 PAYMENT OF PROMISSORY NOTE. Until the Promissory Note has been
performed in full, the Guarantor shall not have any right to
subrogation against Company or OSP, and the Guarantor waives:
4.6.1 any right to enforce any remedy which OSP now has or may
hereafter have against Company, and
4.6.2 any benefit of, and any right to participate in, any
security now or hereafter held by OSP.
4.7 STATUTE OF LIMITATIONS. The Guarantor waives any right to plead or
assert any election of remedies and the defense of the statute of
limitations in any action to enforce this Guaranty.
4.8 INDEPENDENT LIABILITY. The Guarantor shall not be discharged,
released or exonerated, in any way, from its absolute,
unconditional, and independent liabilities hereunder, by the
voluntary or involuntary participation by Company in any settlement
or composition for the benefit of Company's creditors either in
liquidation, readjustment, receivership, bankruptcy or otherwise.
4.9 WAIVER. The Guarantor hereby expressly waives any and all benefits
under California Civil Code Section 2809, 2810, 2819, 2845, 2847,
2848, 2849, 2850, 2899 and 3433.
5. NO NOTICE REQUIRED. Guarantor fully waives all requirements, if any, of
demand, presentment, diligence, protest and notice or dishonor and all other
notices of every kind or nature in respect of the Promissory Note. Guarantor
will not be released or exonerated from Guarantor's obligations under this
Guaranty if Guarantor is not notified by OSP of Company's failure to pay timely
any amount owed under the Promissory Note.
6. GUARANTOR'S ADDITIONAL WAIVERS. Guarantor waives any right Guarantor may
have to require any of the following acts: demand; presentment; diligence;
protest; notice of dishonor; and any other notice to which Guarantor may be
entitled.
7. NO RELEASE OF GUARANTOR. OSP may do or suffer any of the following, by
action or inaction, without releasing or exonerating Guarantor from any of
Guarantor's obligations under this Guaranty and without notifying Guarantor of
any of the following: (i) renew, extend, rearrange, alter, impair, suspend or
otherwise modify the Promissory Note; (ii) sell, release, subordinate, impair,
suspend, waive or otherwise fail to obtain, perfect or realize upon (or continue
the perfection of) a security interest in any collateral for this Guaranty; or
(iii) exercise OSP's rights in any collateral.
8. WAIVER OF SUBROGATION, REIMBURSEMENT, PERFORMANCE AND INDEMNIFICATION.
Guarantor permanently waives and shall not seek to exercise any of the following
rights that Guarantor may have against OSP for any for any amounts paid by
Guarantor, or acts performed by Guarantor under this Guaranty: (i) all rights
that Guarantor may have, upon satisfying the Promissory Note or any portion
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thereof, to enforce any remedies which OSP then has against Company in
connection with this Guaranty (including, without limitation, any right of
subrogation (whether contractual, under Section 509 of the Bankruptcy Code,
other similar insolvency laws or arrangements, or otherwise); (ii) all rights
that Guarantor may have to the benefit of any security for the performance under
the Promissory Note; (iii) all rights of reimbursement from Company for the
amounts paid by Guarantor in connection with the Promissory Note (including
costs and expenses); or (iv) all rights of indemnification from Company or any
other third party. Guarantor irrevocably waives and releases OSP from all
"claims" (as defined in Section 101(4) of the Bankruptcy Code) to which
Guarantor is or would be entitled by virtue of this Guaranty.
9. [Intentionally omitted]
10. MISCELLANEOUS.
10.1 REVIVAL OF DEBT. Notwithstanding any revocation of this Guaranty,
Guarantor's obligations under this Guaranty shall include and shall
be increased by the amount returned by OSP which was previously
paid by Company prior to the effectiveness of such revocation
because of the application of the Bankruptcy Code, any fraudulent
transfer law, or any law respecting preferences.
10.2 EFFECT OF COMPLIANCE. Guarantor's compliance with any of the
provisions of this Guaranty will not reduce or affect in any manner
the liability of Guarantor under any of the other provisions of
this Guaranty.
10.3 NO MARSHALING. OSP has no obligation to marshal any assets in
favor of Guarantor.
10.4 FEES AND COSTS. Guarantor will pay all of OSP's fees and costs
incurred in enforcing this Guaranty, including OSP's reasonable
attorneys' fees (including without limitation any attorneys
fees' incurred by OSP in connection with any probate claim,
bankruptcy claim, third-party claim, secured creditor claim,
reclamation complaint, and complaint for relief from any stay
under the U.S. Bankruptcy Code or otherwise).
10.5 ASSIGNMENT. Guarantor may not assign Guarantor's obligations or
liabilities under this Guaranty. This Guaranty may be assigned or
transferred in whole or in part by OSP, and the benefit of this
Guaranty shall automatically pass with a transfer or assignment
of the Promissory Note (or any portion thereof) to any subsequent
owner or holder. All references to OSP herein shall be deemed to
include any successors or assignees or any subsequent owners or
holders of the Promissory Note (or any portion thereof) or any of
them. This Guaranty is also made for the benefit of any person
claiming by, through or under OSP and any purchaser of any
security or any portion thereof at foreclosure or otherwise as a
result of the exercise of any right or remedy. Subject to
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the preceding sentence, this Guaranty shall be binding upon the
parties hereto and their respective heirs, executors, successors,
representatives and assigns and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
10.6 APPLICABLE LAW. The laws of the State of California will apply to
the interpretation and enforcement of this Guaranty, without regard
to California's internal laws regarding conflicts of law.
10.7 INTEGRATION. This Guaranty is the entire agreement of Guarantor
with respect to the subject matter of this Guaranty.
10.8 RIGHTS CUMULATIVE. All of OSP's rights under this Guaranty are
cumulative. The exercise of any one right does not exclude the
exercise of any other right given in this Guaranty or any other
right of OSP not set forth in this Guaranty.
10.9 RULES OF CONSTRUCTION. The following rules shall apply in
interpreting the meaning of this Guaranty: (i) "Includes" and
"including" are not limiting; (ii) "Or" is not exclusive; and
(iii) "All" includes "any" and "any" includes "all."
10.10 SEVERABILITY. If any provision of this Guaranty is unenforceable,
or otherwise invalid, the remaining provisions of this Guaranty
shall be enforced to the fullest possible extent.
10.11 NOTICES. Any notice given in connection with this Guaranty shall
be in writing addressed to the respective party at its address set
forth below its signature on the last page of this Guaranty and may
be personally served, telecopied or sent by overnight courier
service or United States certified mail, postage prepaid; provided,
however, that any notice of revocation of this Guaranty may only be
sent by United States certified mail, postage prepaid. Notices
shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of
transmission if confirmed and if transmitted on a business day
before 4:00 p.m. or, if not, on the next succeeding business day;
(c) if delivered by overnight courier, two days after delivery to
such courier properly addressed; or (d) if by United States
certified mail, five business days after depositing in the United
States mail, with postage prepaid and properly addressed. The
address for notices may be changes by delivering written notice of
such change in accordance with this Section.
10.12 HEADINGS; NUMBER; GENDER. Section headings used in this Guaranty
are for convenience only. They are not a part of this Guaranty and
shall not be used in construing this Guaranty. Wherever
appropriate in this Guaranty, the singular shall be deemed to also
refer to the plural, and the plural to the singular.
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10.13 COUNTERPARTS. This Guaranty may be executed in counterparts, or by
facsimile, each of which shall be deemed an original, but all of
which, when taken together, shall be deemed one and the same
agreement. A facsimile signature may be used to enforce the terms
of this Guaranty.
10.14 SUBORDINATION OF THE GUARANTOR'S CLAIMS. Any indebtedness of
company now or hereafter held by the Guarantor is hereby
subordinated to the Promissory Note; and such indebtedness of
Company to the Guarantor, if OSP so requests, shall be collected,
enforced and received by the Guarantor as trustee for OSP and be
paid over to OSP on account of the Promissory Note but without
reducing or affecting in any manner the absolute, unconditional
and independent liability of the Guarantor under this Guaranty.
10.15 ORDER OF REFERENCE. The parties waive the right to a jury trial
and agree to submit all actions, claims or controversies to a
trial on Order of Reference conducted by a retired judge or
justice from the panel of Judicial Arbitration & Mediation
Services, Inc. ("JAMS") appointed pursuant to Cal. Code Civ.
Proc. Section 638(1). The parties intend this general reference
to be specifically enforceable. If the parties are unable to
agree upon a member of the JAMS panel to act as referee, one
shall be appointed by the Presiding Judge of the Los Angeles
County Superior Court.
11. ACKNOWLEDGMENT OF WAIVERS AND LOSS OF DEFENSES.
11.1 Guarantor acknowledges that certain provisions of this Guaranty
operate as waivers of rights that Guarantor would otherwise have
under applicable law. Other provisions permit OSP to take actions
that OSP would otherwise not have a right to take, to fail to take
actions that OSP would otherwise have an obligation to take, or to
take actions that may prejudice Guarantor's rights and obligations
under this Guaranty and against Company. In the absence of these
provisions Guarantor might have defenses against Guarantor's
obligations under this Guaranty. These defenses might permit
Guarantor to avoid some or all of Guarantor's obligations under
this Guaranty.
11.2 Guarantor intends by the waivers and other provisions of this
Guaranty, including the acknowledgement set forth in this section,
to be liable to the greatest extent permitted by law for all of
Company's obligations to OSP under the Promissory Note.
11.3 Guarantor acknowledges that (i) Guarantor understands the
seriousness of the provisions of this Guaranty; (ii) Guarantor
has had a full opportunity to consult with counsel of Guarantor's
choice; and (iii) Guarantor has consulted with counsel of
Guarantor's choice or has decided not to consult with counsel.
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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first above written.
STANLEY DESANTIS, an individual
By: /s/ STANLEY DeSANTIS
__________________________
Stanley DeSantis
Address: 10615 Vanowen Street
Burbank, CA 91505
Fax: (818) 755-0212
OSP PUBLISHING, INC., hereby accepts this Guaranty and agrees to the
provisions contained herein.
OSP PUBLISHING, INC.
By: /s/ MICHAEL A. MALM
______________________________
Michael A. Malm, President
Address: 5545 Lindbergh Lane
Bell, CA 90301
Fax: (213) 263-9238
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EXHIBIT 2.4
SECURITY PLEDGE AGREEMENT
This Security Pledge Agreement ("SECURITY PLEDGE AGREEMENT") is entered
into between OSP Publishing, Inc. ("SELLER") on the one hand and Stanley
DeSantis, an individual ("DESANTIS"), on the other, and Jeffrey P. Grogin
("GROGIN") and Jeffrey H. Kapor ("KAPOR") jointly as joint pledgeholder
(collectively "PLEDGEHOLDER"), on this 31st day of December, 1996.
RECITALS
A. Concurrently herewith, Stanley DeSantis, Inc. ("COMPANY") has entered
into an Agreement for Purchase and Sale of Stock (the "AGREEMENT") with
Seller pursuant to which Seller has agreed, among other things, to sell all
of its outstanding shares of common stock in Company upon the terms and
conditions as set forth in said Agreement.
B. Said Agreement provides in part for a payment by Company to Seller in
the amount of One Million Five Hundred Seventy-Five Thousand Dollars
($1,575,000.00), composed of a cash payment in the amount of Four Hundred
Seventeen Thousand Dollars ($417,000.00) and the delivery of a Promissory
Note in the amount of One Million One Hundred Fifty-Eight Thousand Dollars
($1,158,000.00) ("PROMISSORY NOTE").
C. Upon the Closing of the transaction, as that term is defined in the
Agreement, DeSantis shall own one hundred percent (100%) of the outstanding
common stock of the Company.
D. As security for the performance by Company of its obligations under
the Promissory Note, DeSantis hereby agrees to personally guaranty the
obligations of Company under the terms of the Promissory Note and to grant a
security interest to Seller in fifty one percent (51%) of the outstanding
shares of Company's common stock owned by him to secure said personal
guaranty upon the terms, covenants and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and conditions contained herein and with the intent of being
legally bound hereby, the parties hereto agree as
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follows:
1. RECITALS.
The foregoing recitals are incorporated herein by reference.
2. PERSONAL GUARANTY.
DeSantis shall execute a Limited Continuing Guaranty (Non-Recourse)
(the "GUARANTY") in the form of Schedule 2.
3. SECURITY.
DeSantis hereby grants to Seller a security interest in two hundred
forty-nine and nine-tenths (249.90) shares representing fifty-one percent
(51%) of the outstanding shares of Company's common stock owned by DeSantis
("PLEDGED SHARES" or "STOCK"), to secure his full performance under the terms
of said Guaranty.
4. ENDORSEMENT.
The parties hereby agree that the Pledged Shares shall be endorsed by
DeSantis to the pledgeholder named herein, who shall hold said Pledged Shares
during the terms of this Security Pledge Agreement, together with stock
assignments executed in blank by DeSantis.
5. TERMS AND CONDITIONS.
Seller shall retain a security interest in the Pledged Shares on the
following terms and conditions:
5.1 Certificates evidencing the foregoing Pledged Shares shall be
held by Grogin and Kapor, (the "PLEDGEHOLDER") pursuant to the terms of this
Agreement and as agent for Seller pursuant to California Commercial Code
Section 9305. Such Certificates shall be endorsed in blank.
5.2 In the event there shall occur a default by DeSantis in the
performance of his obligations called for under the said Guaranty, Seller
shall have all the rights and remedies of a secured party with respect to the
Pledged Shares as provided in the
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California Uniform Commercial Code.
5.3 Seller's security interest in the Pledged Shares shall terminate
upon complete discharge by Company of its payment obligation under the
aforementioned Promissory Note; in such event, all such Pledged Shares shall
be delivered by the Pledgeholder to DeSantis.
6. REPRESENTATIONS AND WARRANTIES OF DESANTIS.
DeSantis makes the following representations and warranties (which
representations and warranties shall survive the execution of this
Agreement), each of which (i) is material and is being relied upon by Seller;
(ii) is true in all material respects as of the date hereof; and (iii) shall
be true as of the date of the Closing Date:
6.1 DeSantis is the sole owner of the Stock, free and clear of all
liens, encumbrances, claims, rights, demands, agreements and covenants.
6.2 DeSantis has entered into no commitments or agreements with any
governmental or nongovernmental person or entity affecting the Stock.
6.3 Neither this Agreement, nor any document or instrument to be
delivered hereunder, including but not limited to the transfer, assignment
and sale of the Stock violates or shall violate any oral or written contract
or agreement to which DeSantis is a party.
6.4 DeSantis is the sole owner of and has not previously assigned
or transferred any of his Causes of Action (as defined herein) against Seller.
6.5 The Stock is, and will be, on deposit hereunder, duly and
validly pledged in accordance with the law, and that the pledge of the Stock
pursuant to this Agreement creates a valid and perfected first priority
security interest therein, securing the obligations of DeSantis under this
Agreement. DeSantis agrees to defend the Seller's right, title, lien and
security interest in and to the Stock against all claims and demands of all
persons whomsoever. DeSantis also represents and warrants to the Seller
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that the Seller has, and will have on deposit hereunder, good title to all of
the Stock, free and clear of all claims, mortgages, pledges, liens,
encumbrances and security interests of every nature whatsoever (other than
the lien created hereunder), and that no consent or approval of any
governmental or regulatory authority is necessary to the validity of this
pledge.
6.6 DeSantis shall not sell or transfer any other shares of capital
stock of the Company, now owned or hereafter acquired, including, without
limitation, any rights to receive common, preferred or convertible shares.
6.7 (i) the authorized capital stock of the Company is comprised
solely of 1,000 shares of common stock, Four Hundred Ninety (490) of which
are issued and outstanding; (ii) DeSantis owns a total of 490 shares of stock
in the Company (including the Stock); (iii) there are no outstanding options,
warrants, convertible instruments or other rights to acquire common stock or
any other capital stock of the Company ("STOCK RIGHTS"); and (iv) the issued
and outstanding shares of the Company have been validly and duly issued and
are not subject to any preemptive rights, voting trust agreements or other
contracts, agreements or arrangements restricting voting or dividend rights
or transferability.
7. DEFAULT.
The occurrence of any of the following events shall constitute
default under this Security Pledge Agreement which default shall be effective
upon five (5) business days notice except for a payment obligation where no
notice need be given (an "EVENT OF DEFAULT"):
7.1 Representation and Warranty Untrue. Any repre- sentation or
warranty made by DeSantis in this Security Pledge Agreement or the Guaranty
(collectively, the "CLOSING DOCUMENTS") shall have been false or misleading
as of the time when made.
7.2 Failure to Perform. DeSantis fails to perform or observe any
term, condition, covenant, obligation or agreement to be performed or
observed by him under the Closing Documents.
7.3 Corporate Existence. The Company ceases to preserve
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and maintain its corporate existence, rights and franchises; its good
standing in the State of California; and its qualification as a foreign
corporation in each jurisdiction in which such qualification is required, or
where the failure to qualify would have a material adverse effect upon the
Company.
7.4 Amendment of Articles or Bylaws. Without the prior written
consent of Seller thereto, the Company amends, modifies or repeals its
Articles of Incorporation or its Bylaws.
7.5 Compensation. The Company pays more than a reasonable salary or
gives any emolument not commensurate with value of services performed, to any
director, officer, employee, consultant or agent of the Company or its
subsidiaries, if any. Payments made by Company consistent with past business
practices shall be considered reasonable.
7.6 Issuance of Shares. The Company issues, repurchases or redeems
any shares of the Company's stock or other capital stock of the Company
(other than as set forth in the Agreement of this even date), or any option
or warrant or security convertible into capital stock of the Company.
7.7 Affiliate Transactions. DeSantis and his Affiliates enter into
any transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or asset; or loan, advance, guaranty or assumption
of any kind) with the Company or any Company Affiliate. "Affiliate" is
defined as any family member, no matter how remote the family tie, or any
individual, corporation, partnership, trust, organization or other entity
controlled by or under common control with, directly or indirectly, DeSantis
or the Company, as the case may be.
7.8 Material Disposition. The Company disposes by sale, lease or
otherwise all or any substantial portion of its property or assets.
7.9 Merger. The Company, without Seller's prior written consent,
acquires all or substantially all of the assets of another business, or
consolidates or merges into or with any other corporation or business entity,
enters into a binding agreement for such acquisition, consolidation or merger.
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7.10 Bankruptcy.
i. A petition is filed against the Company or DeSantis under any
state or federal bankruptcy, reorganization, insolvency or receivership law
of any jurisdiction and is not dismissed within sixty (60) days after such
filing;
ii. The Company or DeSantis takes affirmative steps to prepare to
file, or files, a petition in bankruptcy or seeking relief under any
reorganization, insolvency or receivership law of any jurisdiction.
iii. The Company or DeSantis makes an assignment for the benefit of
its creditors, is unable to pay its debts generally as they become due, or
consents to the appointment of a receiver, trustee or liquidator of any of
its property.
7.11 At any time after an Event of Default, the Seller may, by notice
to the Pledgeholder and DeSantis of an uncured Event of Default, cause all or
any of the Pledged Stock to be transferred to or registered in its name or
the name of its nominee or nominees. The Pledgeholder shall have the
authority to transfer the Pledged Stock to Seller on the Company's books and
records and shall deliver the Pledged Stock to the Seller upon the
Pledgeholder's receipt of such notice from the Seller.
7.12 So long as there shall exist a condition, event or act which,
with notice and lapse of time, would constitute a breach, default or an event
of default under any of the obligations under the Guaranty (the
"OBLIGATIONS"), the Seller shall be entitled to exercise all voting power
with respect to the Stock and to receive and retain, as additional Stock
hereunder, any and all dividends and interest at any time and from time to
time declared or paid upon any of the Stock.
7.13 Any cash received and retained by the Pledgeholder hereunder
pursuant to the foregoing provisions may at any time and from time to time be
applied (in whole or in part) by the Seller, at its option, to any payments
due under the Obligations as follows:
FIRST, to the payment of late charges, if any, and interest accrued
on the Obligations;
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SECOND, to the payment of all Obligations then due and payable other
than those specified in clause First above (the allocation of such payment to
be made by the Seller in its sole discretion); and
THIRD, to pay the remainder, if any, to DeSantis or such other person
as Seller and/or Pledgeholder reasonably determine may be lawfully entitled
to receive the same or as a court of competent jurisdiction may direct.
7.14 Notwithstanding any other provision of this Security Pledge
Agreement, upon receipt by the Pledgeholder of written instructions signed by
or on behalf of DeSantis and the Seller, the Pledgeholder shall make any
other payment or delivery of the Stock then held hereunder as may be
specified in such instructions.
7.15 If there is an uncured Event of Default, DeSantis hereby
appoints the Seller as DeSantis's attorney-in-fact for the purpose of
carrying out the provisions of this Security Pledge Agreement and taking any
action and executing any instrument which either DeSantis or Seller may deem
necessary or advisable to accomplish the purposes hereof. Without limiting
the generality of the foregoing, the Seller shall have the right and power to
receive, endorse and collect all checks and other orders for the payment of
money made payable to DeSantis representing any interest or dividend or other
distribution payable in respect of the Stock or any part thereof and to give
full discharge for the same.
7.16 DeSantis shall not, without the prior written consent of
Seller, vote in favor of or allow any of the following actions of the Company
or enter into any agreement to : (i) amend the Company's Articles of
Incorporation or bylaws; (ii) sell any capital asset, or group of assets, of
the Company with a value of more than twenty-five thousand dollars
($25,000.00), in a single transaction or a series of transactions outside the
ordinary and regular course of business consistent with past business
practices; (iii) undertake any Reorganization or Short-Form Merger (as those
terms are defined in California Corporations Code Sections 181 and 187,
respectively); or (iv) undertake any other corporate action for which
shareholder approval is required by the California General Corporate Law.
7.17 In case, upon the dissolution or liquidation (in
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whole or in part) of the Company, any sum shall be paid as a liquidation
dividend or otherwise upon or with respect to any of the Stock, and in case
any sum shall be paid on account of the principal of any of the Stock which
shall be an obligation, such sum shall be paid over to the Pledgeholder, to
be held by the Pledgeholder as additional Stock hereunder. In case any stock
dividend shall be declared on any of the Stock, or any shares of stock or
fractions thereof shall be issued pursuant to any stock split involving any
of the Stock, or any distribution of capital shall be made on any of the
Stock, or any shares, obligations or other property shall be distributed upon
or with respect to the Stock pursuant to a recapitalization or
reclassification of the capital, or pursuant to the dissolution, liquidation
(in whole or in part), bankruptcy or reorganization, or to the merger or
consolidation with or into another corporation, of the Company, the shares,
obligations or other property so distributed shall be delivered to the
Pledgeholder, to be held by it as additional Stock hereunder, and all of the
same shall constitute Stock for all purposes hereof.
7.18 Upon payment in full of the Promissory Note and any other
amounts due and payable in connection with the Obligations, DeSantis shall be
entitled to the return of the Stock. This Agreement and the obligations
hereunder shall terminate at the time when all of the Stock held hereunder
has been delivered by the Pledgeholder as provided in this Security Pledge
Agreement.
8. COVENANTS OF DESANTIS.
8.1 Dilution. DeSantis shall not, without the prior written consent
of Seller, cause the Company to take, or vote in favor of, any action or
enter into any agreement to (i) issue, sell, or otherwise dispose of any
shares of capital stock in the Company; (ii) acquire any of the shares of
capital stock in the Company; or (iii) grant or accept any Stock Rights.
8.2 Continuous Security Interest. DeSantis hereby agrees that,
until performance in full of all of the Obligations (as defined herein), and
the covenants, conditions and agreements of DeSantis hereunder, all rights,
powers and remedies granted to Seller hereunder shall continue to exist and
may be exercised by Seller at any time and from time to time.
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8.3 Waiver of Notice. DeSantis hereby agrees that Seller shall be
under no duty or obligation whatsoever to make or give any presentments,
demands for performance, notice of nonperformance, protests, notice of
protest or notices of dishonor hereunder or in connection with the Stock or
any obligations, evidences of indebtedness at any time constituting any part
of the Stock, or in connection with the Guaranty, the Obligations or other
obligations secured hereby except as herein provided.
8.4 Waiver of Marshaling Rights. DeSantis hereby waives any right
to require Seller to proceed against any person, proceed against or exhaust
any Stock or pursue any other remedy in Seller's power, or to pursue any of
such rights, if any, in any particular order or manner, and waives any
defenses arising by reason of any disability or other defense of any other
person.
8.5 Other Waivers. DeSantis hereby waives all pro- visions of the
California Uniform Commercial Code pertaining to pledges and sales to the
extent contrary hereto (excepting those provisions incorporated herein).
8.6 No Transfer, Further Encumbrance, Etc. DeSantis hereby agrees
not to directly or indirectly assign, transfer or convey or further encumber
the Stock or any part thereof or interest therein without the prior written
consent of Seller.
8.7 Further Assurances. Upon demand, DeSantis will execute and
deliver to Seller such instruments and documents as Seller may deem
reasonably necessary or advisable to confirm or perfect the rights of Seller
under this Agreement and Seller's interest in the Stock. DeSantis will take
all necessary action to preserve and protect the security interest created
hereby as a first lien and encumbrance upon the Stock.
8.8 Protection of Security; Notice of Levy. DeSantis shall, at his
own cost and expense take any and all actions necessary to defend title to
the Stock and to defend Seller's interest in the Stock and the priority
thereof, against all claims and demands. DeSantis will promptly notify
Seller of any attachment or other legal process levied against any of the
Stock.
8.9 Taxes, Claims and Liens. DeSantis shall pay when due all taxes,
assessments or charges upon the Stock.
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<PAGE>
8.10 Notice of Default. DeSantis will promptly notify Seller in
writing of the occurrence of any event of default hereunder, no later than
three (3) business days after said occurrence.
8.11 No Dissolution. DeSantis shall not voluntarily liquidate,
dissolve or otherwise wind up the Company's affairs without first satisfying
in full all the Obligations.
9. RELEASES.
Except for the specific obligations, representations and warranties
of the parties pursuant to this Security Pledge Agreement, or any other
document or instrument to be delivered in connection with the Agreement, and
except as otherwise provided herein, Seller on the one hand, and DeSantis on
the other hand, for itself and himself and for its and his agents, servants,
employees, shareholders, subsidiaries, officers, directors, attorneys,
accountants, agents, successors, and assigns, forever release and discharge
each and all of the other parties hereto, and their respective agents,
servants, employees, shareholders, subsidiaries, officers, directors,
attorneys, accountants, agents, successors, and assigns, from any and all
claims, demands, debts, liabilities, accounts, obligations, costs, damages,
losses, expenses, liens, actions or causes of action, rights of indemnity
(legal or equitable), rights to subrogation, rights to contributions and
remedies of any nature whatsoever (collectively the "CAUSES OF ACTION"),
known or unknown which each of the parties had, now has or has acquired at
any time prior to the date of the execution of this Security Pledge
Agreement, including specifically but not exclusively and without limiting
the generality of the foregoing, any and all claims, damages, demands and
causes of action, known or unknown, suspected or unsuspected, by each of
them, including specifically but not exclusively and without limiting the
generality of the foregoing: (i) any agreements between Seller and DeSantis;
(ii) the Company's past, present and future profits; or (iii) arising out of
or in any way connected with any loss, damage or injury whatsoever, known or
unknown, suspected or unsuspected, relating to any act or omission by or on
the part of any party committed or omitted prior to the date hereof.
10. WAIVER OF CIVIL CODE Section 1542.
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The parties acknowledge that a risk exists that subsequent to the
execution of this Security Pledge Agreement, each party may incur or suffer
losses, damages or injuries which are in some way caused by circumstances or
events referred to above, but which were unknown or unanticipated at the time
this Security Pledge Agreement was executed. Each party does hereby assume
the foregoing risks and agrees that this Security Pledge Agreement shall
apply to all unknown or unanticipated results of the transactions and
occurrences described above, as well as those known and anticipated, and on
the advice of counsel, each party does knowingly waive any and all rights and
protections under California Civil Code Section 1542, which section has been
duly explained and reads as follows:
A general release does not extend to the claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor.
11. GOVERNING LAW.
This Security Pledge Agreement is to be governed by and construed in
accordance with the laws of the State of California. Any suit brought herein
shall be brought in any State or Federal Court located in Los Angeles,
California, and all parties hereto waive any claim or defense that such forum
is not convenient or proper.
12. NOTICES.
All notices, requests and other communication hereunder shall
be in writing and shall be delivered by courier or other means of personal
service or sent by overnight mail or registered or certified mail, return
receipt requested, addressed to:
If to DeSantis: Stanley DeSantis
10615 Vanowen Street
Burbank, CA 91505
With copy to: Jeffrey H. Kapor, Esquire
Katz, Hoyt, Seigel & Kapor LLP
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11111 Santa Monica Boulevard
Suite 820
Los Angeles, CA 90025-3342
If to Seller: OSP Publishing, Inc.
Attn: Michael Malm
and Joseph Angard
5548 Lindbergh Lane
Bell, CA 90201
With copy to: Jeffrey P. Grogin, Esquire
Samaha, Grogin & Stulberg LLP
911 East Colorado Blvd.
Third Floor
Pasadena, CA 91106-1700
If to Pledgeholder: Jeffrey H. Kapor, Esquire
Katz, Hoyt, Seigel & Kapor LLP
11111 Santa Monica Boulevard
Suite 820
Los Angeles, CA 90025-3342 AND
Jeffrey P. Grogin, Esquire
Samaha, Grogin & Stulberg LLP
911 East Colorado Blvd.
Third Floor
Pasadena, CA 91106-1700
All notices, requests and other communication shall be deemed given
on the date of delivery if given by personal service (with confirmation
notice) or if sent by overnight mail or registered mail, return receipt
requested, upon delivery to the address set forth above. Any party may
change their address for notices, requests and other communication by giving
notice in the manner specified above.
13. PLEDGEHOLDER LIABILITY.
13.1 The Pledgeholder shall not be responsible for the genuineness
of any certificate or signature, and may rely conclusively upon, and shall be
protected when acting upon, any notice, affidavit, request, consent,
instruction, check, or other
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instruments believed by the Pledgeholder, in good faith, to be genuine, or to
be signed or presented by the proper person, or duly authorized, or properly
made. The Pledgeholder shall have no responsibility except for the
performance of his express duties hereunder, and no additional duties shall
be inferred or implied thereby. The Pledgeholder shall not be responsible or
liable for any act or omission on their part in performance of their duties
as Pledgeholder under this Agreement, unless such act or omission constitutes
bad faith, gross negligence, or fraud. Pledgeholder shall not be required to
institute or defend any actions involving any matters referred to herein, or
which affects their duties or liabilities hereunder unless or until requested
to do so by any party to this Security Pledge Agreement, and then only upon
receiving full indemnity, in character satisfactory to the Pledgeholder,
against any and all claims, liabilities and expenses in relation thereto.
13.2 The acceptance by the Pledgeholder of their duties under this
Agreement is subject to the following terms and conditions, which shall
govern and control with respect to its rights, duties, liabilities and
immunities:
(a) The duties of the Pledgeholder are only such as are herein
specifically provided, being purely ministerial in nature and no additional
duties shall be inferred here from or implied hereby. The Pledgeholder shall
incur no liability whatsoever to the Seller, DeSantis or otherwise, except
for its own willful misconduct or gross negligence.
(b) The Pledgeholder shall be under no responsibility in
respect of any of the items deposited with them other than to follow the
provisions of this Agreement. The Pledgeholder may consult with counsel and
shall be fully protected in any action taken or omitted in good faith, in
accordance with advice of such counsel except for willful misconduct or gross
negligence.
(c) The Pledgeholder shall not be required to defend any legal
proceedings which may be instituted against them in respect of the subject
matter of this Security Pledge Agreement unless requested to do so by the
Seller or DeSantis and shall be fully indemnified by the requesting party or
parties to their
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satisfaction against the cost and expense of such defense. The Pledgeholder
shall not be required to institute legal proceedings of any kind.
(d) The Pledgeholder shall have no responsibility for the
genuineness, validity or value of any certificate, document or other item
deposited with or delivered to them, and the Pledgeholder shall be fully
protected in acting in accordance therewith except for willful misconduct or
gross negligence.
(e) In the event that the Pledgeholder shall be uncertain as
to its duties or rights hereunder, or shall receive instructions from the
Seller or DeSantis with respect to the Stock that, in their opinion, are in
conflict with any of the provisions of this Security Pledge Agreement, the
Pledgeholder shall be entitled to refrain from taking any action until it
shall be directed otherwise in writing by both the Seller and DeSantis or by
a final order of a court of competent jurisdiction.
(f) Notwithstanding any provision to the contrary contained in
any other agreement (excluding any amendment to this Security Pledge
Agreement) between any of the parties hereto, the Pledgeholder shall have no
interest in the Stock except as provided in this Security Pledge Agreement.
(g) In the event that any of the terms and provisions
(excluding any amendment to this Security Pledge Agreement) between any of
the parties hereto conflict or are inconsistent with any of the terms and
provisions of this Security Pledge Agreement, the terms and provisions of
this Agreement in respect of the rights and duties of the Pledgeholder shall
govern and control in all respects.
(h) Nothing in this Security Pledge Agreement shall be deemed
to prohibit the Pledgeholder from providing legal services or representation
to one or all of the parties to this Agreement in connection with any matter
whatsoever.
(i) The Pledgeholder may at any time by written notice given to
all parties to this Security Pledge Agreement resign their position under this
Security Pledge Agreement, whereupon the other parties to this Security Pledge
Agreement shall
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designate one or more persons to act as a successor. If such parties shall
fail to designate such a successor, such parties agree to apply to the
American Arbitration Association for the designation of a successor.
(j) The Pledgeholder shall not receive any compensation for
their services hereunder, except that DeSantis agrees to reimburse the
Pledgeholder on demand for all necessary and ordinary expenses (including
reasonable attorneys' fees, whether for its own services as counsel or for
the services of other counsel which shall apply solely in the event of a
default) incurred by the Pledgeholder in the performance of their duties
hereunder.
14. ATTORNEYS' FEES.
In the event suit is commenced to enforce this Security Pledge
Agreement or otherwise related to this Security Pledge Agreement, the
prevailing party shall be entitled to reasonable attorneys' fees and costs
incurred in connection therewith.
15. COUNTERPARTS.
This Security Pledge Agreement may be executed in any number of
counterparts, or by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. A
facsimile signature shall have the same force and effect as though it were an
original signature.
16. CAPTIONS.
The Captions and headings used in this Security Pledge Agreement are
for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.
17. FURTHER ASSURANCES.
The parties shall take action and execute and deliver such further
documents as may be reasonably necessary or appropriate to effectuate the
intentions of this Stock Pledge Agreement.
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18. SUCCESSORS AND ASSIGNS.
This Security Pledge Agreement shall be binding upon the parties and
their respective successors, assigns and legal representatives.
19. INTERPRETATION.
The parties each agree that each of them and their respective
counsel have reviewed this Security Pledge Agreement and participated in its
negotiation and preparation. Accordingly, the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.
20. FINAL AGREEMENT.
This Security Pledge Agreement constitutes the entire agreement
among the parties pertaining to the subject matter contained herein and
therein, and supersedes all prior agreements, representations and
understandings of the parties.
21. NO MODIFICATION. No modification or amendment hereof shall be of
any force or effect unless in writing and executed by all the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Security Pledge
Agreement as of the date first set forth above.
"SELLER"
OSP Publishing, Inc.
By:/s/ MICHAEL A. MALM
---------------------------
Michael A. Malm, President
"DESANTIS"
/s/ STANLEY DESANTIS
---------------------------
Stanley DeSantis
(Signatures continued next page)
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"PLEDGEHOLDER"
/s/ JEFFREY P. GROGIN
---------------------------
Jeffrey P. Grogin
/s/ JEFFREY H. KAPOR
---------------------------
Jeffrey H. Kapor
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EXHIBIT 2.5
MANAGEMENT CONSULTING AGREEMENT
THIS MANAGEMENT CONSULTING AGREEMENT ("AGREEMENT") is executed as of
December 31, 1996, by and between OSP Publishing, Inc., a Delaware
corporation ("OSP") and Stanley DeSantis, Inc., a California corporation
("COMPANY").
1. GENERAL. The Company has heretofore retained the services of OSP
and OSP has provided and will continue to provide services to the Company
upon the terms and conditions hereinafter set forth. This Agreement
memorializes the terms heretofore agreed upon between OSP and Company and
confirms the existing relationship of the parties.
2. CONSULTING SERVICES. OSP has made, and will continue to make, at
its sole and absolute discretion, its services available to Company in a
manner consistent with its past business practices including but not limited
to advise to Company regarding all aspects of Company's business including
merchandising, sales, financial and general business administration matters,
marketing and customer relations. The Company hereby acknowledges that the
services heretofore performed by OSP have been adequate and performed to the
satisfaction of Company. The services rendered by OSP shall be at times and
places agreeable to OSP in its sole and absolute discretion.
3. FEES. The Company shall pay upon execution a fee to OSP for all of
the consulting services to be rendered by OSP for the benefit of Company in
the amount of Seven Hundred Seventy-Five Thousand Dollars ($775,000.00).
4. TERM. This Agreement shall terminate on December 31, 1997, and may
not be terminated by any of the parties prior thereto. The parties
acknowledge that there would be
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substantial damages should there be an attempt to earlier terminate this
Agreement and agree not to do so.
5. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof. This
Agreement shall not be modified except in writing.
6. SEVERABILITY. If, at any time, any provision of this Agreement
shall be held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force or effect, but the
illegality or unenforceability of such provision shall have no effect and
shall not impair the enforceability of any other provision of this Agreement.
7. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California.
8. PAROL EVIDENCE. The parties agree that parol evidence is admissible
should there be any dispute with respect to their rights hereunder.
"OSP"
OSP PUBLISHING, INC., a
Delaware Corporation
By: /s/ MICHAEL S. MALM
--------------------
Michael A. Malm, President
"COMPANY"
STANLEY DeSANTIS, INC., a California
Corporation
By: /s/ STANLEY DESANTIS
--------------------
Stanley DeSantis, President
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