<PAGE>
UNITED STATES
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
Date of Report (Date of earliest event reported) May 2, 1997
MATTHEWS STUDIO EQUIPMENT GROUP
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(Exact name of registrant as specified in its charter)
CALIFORNIA
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(State or other jurisdiction of incorporation)
0-18102 95-1447751
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(Commission file number) (I.R.S. Employer
Identification No.)
3111 NORTH KENWOOD STREET, BURBANK, CA 91505
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(Address of principal executive offices) (Zip Code)
(818) 525-5200
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(Registrant's telephone number, including area code)
2405 EMPIRE AVENUE, BURBANK, CA 91504-3399
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(Former name, former address and former fiscal year, if changed since
last report)
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Item 2. Acquisition or Disposition of Assets
On May 2, 1997, Matthews Studio Equipment Group ("the Company") acquired Duke
City Video, Inc., ("Duke City"), pursuant to stock exchange agreements dated as
of May 2, 1997, among the shareholders of Duke City and Duke City Holdings,
Inc., a wholly-owned subsidiary of the Company. Pursuant to the stock exchange
agreements the Duke City shareholders received 285,715 restricted shares of the
Company's common stock in a transaction exempt from registration under the
Securities Act of 1933, and the Company assumed all of the liabilities of Duke
City at the acquisition date. The amount of consideration paid to the Duke City
shareholders was reached through arms-length negotiations.
Prior to the acquisition, the ownership in Duke City was held by Harold Jay
Lefkovitz, Louise Lefkovitz, Patricia Brusati, Steve Ward and John Hensch. Duke
City has operations in Albuquerque, New Mexico, Burbank, California and Dallas,
Texas. Duke City provides rental services of audio, video, film and
professional grip equipment, as well as various levels of production expertise,
crews and expendable supplies to the film and television production industry.
Duke City will continue its business and operations as a wholly owned subsidiary
of the Company.
Information provided by Duke City's management shows Duke City's annual revenues
for the year ended December 31, 1996 were approximately $9 million. In addition
to the 285,715 restricted and unregistered shares of the Company's common stock
given in consideration for 100% of the common stock of Duke City, the Company
assumed all of the liabilities of Duke City as of the date of acquisition.
Information provided by Duke City's management shows Duke City's total
liabilities as of December 31, 1996 were approximately $12.2 million.
Item 7. Financial Statements and Exhibits
As of the date of this report the financial statements and pro forma data
required by this item are not available. It is the Company's intention that
such financial statements and pro forma data will be filed within 60 days of the
due date of this report, as required under applicable regulations of the
Securities and Exchange Commission.
(2) (C) Exhibits
EXHIBIT INDEX
Exhibit Document Description
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1. Stock Exchange Agreement and Plan of Reorganization dated as of
May 2, 1997, among Patricia M. Brusati, Harold Jay Lefkovitz,
Louise K. Lefkovitz, Stephen F. Ward, Duke City Video, Inc. and
Duke City Holdings, Inc., without the schedules and exhibits
thereto, other than as listed below:
i. Employment Agreement dated as of May 2, 1997, between
Patricia M. Brusati and Duke City Video, Inc.;
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ii. Employment Agreement dated as of May 2, 1997, between
Harold Jay Lefkovitz and Duke City Video, Inc.;
iii. Employment Agreement dated as of May 2, 1997, between
Stephen F. Ward and Duke City Video, Inc.;
iv. Non-Competition Agreement dated as of May 2, 1997, among
Patricia M. Brusati, Duke City Video, Inc. and Duke City
Holdings, Inc.;
v. Non-Competition Agreement dated as of May 2, 1997, among
Harold Jay Lefkovitz, Duke City Video, Inc. and Duke City
Holdings, Inc.;
vi. Non-Competition Agreement dated as of May 2, 1997, among
Louise K. Lefkovitz, Duke City Video, Inc. and Duke City
Holdings, Inc.;
vii. Non-Competition Agreement dated as of May 2, 1997, among
Stephen F. Ward, Duke City Video, Inc. and Duke City
Holdings, Inc.;
viii. Promissory Note dated as of May 2, 1997 made by
Duke City Video, Inc. in favor of Harold Jay Lefkovitz;
ix. Promissory Note dated as of May 2, 1997 made by Duke
City Video, Inc. in favor of Patricia M. Brusati.
2. Subordination Agreement made by Harold Jay Lefkovitz in favor of
Chase Manhattan Bank, as agent, but without the exhibit
referenced therein.
3. Stock Exchange Agreement dated as of May 2, 1997, between Duke
City Holdings, Inc. and John E. Hensch
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K, to be signed on its behalf
by the undersigned hereunto duly authorized.
MATTHEWS STUDIO EQUIPMENT GROUP
(Registrant)
Date: May 12, 1997 By: /s/ Gary Borman
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Gary Borman
Vice President & Corporate Controller
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[EXHIBIT 1]
STOCK EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
This STOCK EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION ("Agreement")
is made and entered into as of this 2nd day of May, 1997, by and among (i) DUKE
CITY VIDEO, INC., a New Mexico corporation doing business as Duke City Studio
("Duke City"); (ii) PATRICIA M. BRUSATI, an individual residing in California
("Brusati"); (iii) HAROLD JAY LEFKOVITZ, an individual residing in New Mexico
("J. Lefkovitz"); (iv) LOUISE K. LEFKOVITZ, an individual residing in New Mexico
("L. Lefkovitz"); (v) STEPHEN F. WARD, an individual residing in New Mexico
("Ward"); and (vi) DUKE CITY HOLDINGS, INC., a California corporation (the
"Acquirer"). Duke City, Brusati, J. Lefkovitz, L. Lefkovitz and Ward shall from
time to time be referred to collectively as the "Duke City Parties". Brusati,
J. Lefkovitz, L. Lefkovitz and Ward shall from time to time be referred to
collectively as the "Duke City Shareholders."
RECITALS
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WHEREAS, Duke City has one hundred seventeen and eight-tenths (117.8)
shares of stock which are authorized, issued and outstanding (the "Total
Shares");
WHEREAS, the Duke City Shareholders are the holders and owners of one
hundred six (106) shares of the Total Shares (the "Duke City Stock") in the
amounts set forth in Exhibit A attached hereto; and
WHEREAS, the Duke City Shareholders and the Acquirer deem it advisable
for their mutual benefit that the Acquirer purchase
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all right, title to and interest in the Duke City Stock pursuant to the terms
set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
ARTICLE I
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DEFINITIONS
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When used in this Agreement, each of the terms set forth below has the
meaning indicated.
1.1 "Affiliate" shall mean with respect to any person, any other
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person controlling, controlled by or under common control with such person or an
immediate family member of such person (including such person's spouse, children
and grandchildren).
1.2 "Aggrieved" shall have the meaning ascribed thereto at Section
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13.3(a) hereof.
1.3 "Benefit Plan" shall have the meaning ascribed thereto at Section
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3.20(a) hereof.
1.4 "Brusati Note" shall mean the promissory note in the principal
------------
amount of Fifty Thousand Dollars ($50,000) to be executed and delivered by Duke
City to Brusati, in the form attached hereto as Exhibit E, which represents a
restatement of the loans previously made by Brusati to Duke City that remain
outstanding as of the date of this Agreement and as of the Closing.
1.5 "CERCLA" shall mean the Comprehensive Environmental Response,
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Compensation and Liability Act, as amended.
1.6 "Claim" shall have the meaning ascribed thereto at Section
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13.3(a) hereof.
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1.7 "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
-----
Act of 1985.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
1.9 "Closing" shall have the meaning ascribed thereto at Section
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11.1 hereof.
1.10 "Closing Date" shall have the meaning ascribed thereto at
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Section 11.1 hereof.
1.11 "Employment Agreement" shall have the meaning ascribed thereto
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at Section 11.2(b) hereof.
1.12 "ERISA" shall have the meaning ascribed thereto at Section
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3.20(a) hereof.
1.13 "Financial Statements" shall have the meaning ascribed thereto
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at Section 3.7 hereof.
1.14 "Hazardous Materials" shall mean and include any oil, petroleum
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based products, solvents, lead, radon, cyanide, DDT, medical waste, printing
inks, acids, pesticides, ammonia compounds, asbestos, PCBs, flammable
explosives, radioactive materials, low-level nuclear materials, or hazardous,
toxic or dangerous waste, substance or related material, including, but not
limited to, substances subject to regulation under CERCLA, 42 U.S.C. (S) 9601 et
--
seq., the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq.,
- --- -- ---
the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the
-- ---
Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., the Water Pollution
-- ---
Control Act, 33 U.S.C. (S) 1251 et seq., the Clean Air Act, 42 U.S.C. (S) 7401,
-- ---
et seq., the Federal Insecti cide, Fungicide and Rodenticide Act ("FIFRA"), 7
- -- ---
U.S.C. (S) 136, et seq., the United States Department of Transportation Table
-- ---
(49
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C.F.R. (S) 172.101), the Environmental Protection Agency List of Hazardous
Substances and Reportable Quantities (40 C.F.R. (S) 302.4), California Hazardous
Waste Control Law (Cal. Health & Safety Code Section 25100 et seq.), the
-- ---
Carpenter-Presley-Tanner Substance Account Act (Cal. Health & Safety Code
Section 25300 et seq.), the Safe Drinking Water and Toxic Enforcement Act 1986
-- ---
(Cal. Health & Safety Code Section 25249.5 et seq.), California Health & Safety
-- ---
Code Sections 25280-25299.7, the Toxic Pits Cleanup Act of 1984 (Cal. Health &
Safety Code 25208-25208.21), the Porter-Cologne Water Quality Act 1970 (Cal.
Water Code Section 13000 et seq.), any so-called "Superfund" or "Superlien" law,
-- ---
or under any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards of conduct concerning the generation, use, storage, discharge and
disposal of any hazardous, toxic or dangerous waste, substance or material, as
now or any time hereafter in effect.
1.15 "Hazardous Materials Claims" shall mean (a) any and all
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enforcement, clean-up, removal or other governmental or regulatory actions
pursuant to any Hazardous Materials Law (as hereinafter defined) which
heretofore has been instituted, completed or threatened against Duke City's
business or property at any time, (b) any and all violations or non-compliance
with Hazardous Materials Laws which are occurring or have occurred with respect
to Duke City's business or property or (c) any and all claims by any third party
against the business or property of Duke City, or against Duke City with respect
to its business or property, relating to damage, contribution, cost recovery,
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compensation, loss or injury resulting from any Hazardous Materials.
1.16 "Hazardous Material Laws" shall mean all federal, state or
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local laws, ordinances or regulations relating to any Hazardous Material.
1.17 "Hensch Agreement" shall mean the Stock Exchange Agreement
----------------
dated May 2, 1997 between the Acquirer and John E. Hensch, pursuant to which
eleven and eight-tenths (11.8) shares of common stock of Duke City are to be
purchased by the Acquirer from John E. Hensch.
1.18 "Indemnitor" shall have the meaning ascribed thereto at Section
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13.3(a) hereof.
1.19 "Intellectual Properties" shall mean all patents, trademarks,
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trade names, service marks, know-how, copyrights, all applications for the
registration of any thereof, licenses, logos, existing promotional materials and
other proprietary rights used or acquired for use in the operation of Duke
City's business.
1.20 "IRS" shall mean the Internal Revenue Service.
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1.21 "Knowledge," "Know," or "Known," as used in this Agreement,
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shall mean the knowledge which the representing party has, or should have after
due inquiry, of the matters referred to as of the date referred to, or, in the
case of Duke City, the knowledge which the Chairman, President, any Vice
President, the Secretary, the Treasurer and any General Manager of a branch
office has or should have after due inquiry.
1.22 "Lefkovitz Note" shall mean the promissory note in the original
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principal amount of Five Hundred Eighty-Five Thousand Five Hundred Sixty-One
Dollars and 15/100 ($585,561.15) to be
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executed and delivered by Duke City to J. Lefkovitz in the form attached hereto
as Exhibit D, which represents a consolidation of all loans and financial
accommodations previously made by J. Lefkovitz to Duke City and that remain
outstanding as of the date of this Agreement and as of the Closing.
1.23 "Losses" shall have the meaning ascribed thereto at Section
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13.1 hereof.
1.24 "Material Adverse Effect" shall mean an effect which would,
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individually or in the aggregate, (a) be materially adverse to the business,
operations, properties, financial condition, assets (including the value or
usefulness thereof), liabilities, sales or operations of or in connection with,
Duke City, or (b) represent or result in an obligation of Duke City in the
amount of Fifteen Thousand Dollars or more.
1.25 "Matthews" shall mean Matthews Studio Equipment Group, a
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California corporation.
1.26 "Matthews Shares" shall have the meaning ascribed thereto at
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Section 2.2 hereof.
1.27 "Non-Competition Agreement" shall have the meaning ascribed
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thereto at Section 11.2(c) hereof.
1.28 "Nondisclosure Agreement" shall have the meaning ascribed
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thereto at Section 15.6 hereof.
1.29 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
1.30 "Pension Plan" shall have the meaning ascribed thereto at
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Section 3.21(b) hereof.
1.31 "Purchase Consideration" shall have the meaning ascribed
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thereto at Section 2.2 hereof.
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1.32 "Real Property" shall mean the property located at 4121 Cutler,
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North East, Albuquerque, New Mexico.
1.33 "Rules" shall have the meaning ascribed thereto at Section 14.1
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hereof.
1.34 "Securities Act" shall have the meaning ascribed thereto at
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Section 3.29 hereof.
1.35 "Shareholders' Agreement" shall have the meaning ascribed
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thereto at Section 3.3 hereof.
1.36 "Short Period" shall have the meaning ascribed thereto at
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Section 3.17(b) hereof.
ARTICLE II
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TRANSFER OF SHARES
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2.1 Sale and Purchase of the Duke City Stock. Subject to the terms
----------------------------------------
and conditions set forth in this Agreement, at the Closing, the Duke City
Shareholders shall assign and deliver to the Acquirer the Duke City Stock, and
the Acquirer shall purchase and take assignment and delivery of the Duke City
Stock.
2.2 Delivery and Purchase Price.
---------------------------
(a) The aggregate consideration for the Duke City Stock (the "Purchase
Consideration") shall be Two Hundred Fifty-Seven Thousand One Hundred Forty-
Three (257,143) shares of unregistered, restricted shares of Common Stock of
Matthews ("Matthews Shares"), which shall be delivered to the Duke City
Shareholders in the respective proportions set forth in Exhibit A.
(b) The Duke City Shareholders shall deliver to the Acquirer stock
certificates representing all the Duke City
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<PAGE>
Stock, accompanied by appropriate instruments of transfer satisfactory in form
and substance to counsel for the Acquirer.
(c) In consideration for the transfer of the Duke City Stock, the
Acquirer shall deliver to the Duke City Share holders at the Closing stock
certificates representing the number of Matthews Shares receivable by the
individual Duke City Shareholder in accordance with Exhibit A, issued in the
name of the individual Duke City Shareholders.
ARTICLE III
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REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE DUKE CITY PARTIES
---------------------
Each of the Duke City Parties hereby represents and warrants to the
Acquirer the matters set forth in this Article III.
3.1 Organization and Qualification. Duke City has received a
------------------------------
Certificate of Good Standing from the New Mexico State Corporation Commission
indicating that it is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Mexico. Duke City has all requisite
authority to own or lease its properties and carry on its business as now being
conducted. Duke City is qualified or licensed as a foreign corporation in the
States of California and Texas and, to the Duke City Parties' Knowledge, in each
other jurisdiction in the United States where the failure to so qualify would
have a Material Adverse Effect. Specifically, Duke City's business activities
have not required it to be qualified or licensed as a foreign corporation in the
State of Arizona.
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3.2 Capitalization. The authorized capital stock of Duke City
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consists entirely of Five Hundred (500) shares of voting common stock, of which
One Hundred Seventeen and Eight-Tenths (117.8) shares of voting common stock are
issued and outstanding. There are no outstanding options, warrants, scrips,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of any capital
stock of Duke City, or contracts, commitments, understandings or arrangements by
which Duke City is or may become bound to issue additional shares of its capital
stock or options, warrants or rights to purchase or acquire any shares of its
capital stock.
3.3 Status of Securities. The Total Shares, which are all of the
--------------------
issued and outstanding shares of Duke City, have been legally and validly issued
and are fully paid and non-assessable. All of the Duke City Stock is owned
legally and beneficially by the Duke City Shareholders as set forth in Exhibit
A, with no liability attaching to the ownership thereof, free and clear of all
mortgages, claims, liens, security interests, charges and encumbrances, or
restrictions on transfer or voting, and there are no proxies outstanding with
respect to any such shares, except pursuant to that Shareholders' Agreement
among the Duke City Parties and that certain Shareholders' Agreement among J.
Lefkovitz, L. Lefkovitz and John E. Hensch ("collectively Shareholders'
Agreement"), which shall be terminated and canceled by the Duke City Parties
participating in the Closing. (Further, each of the Duke City Shareholders
specifically represents and warrants that, as of the Closing, the shares of Duke
City Stock
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<PAGE>
listed on Exhibit A opposite his or her name are owned by him or her as his or
her separate (and not community) property, and no person shall have any
community or marital interest in such stock.) Upon delivery of the certificates
representing the Duke City Stock to the Acquirer at the Closing, the Acquirer
shall acquire valid title to all such stock free and clear of all mortgages,
claims, liabilities, liens, security interests, charges and encumbrances or
restrictions on transfer or voting.
3.4 Hensch Stock. John E. Hensch is the only party, other than the
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Duke City Shareholders, who holds an ownership interest (whether beneficially or
of record) in Duke City. Hensch holds and owns Eleven and Eight-Tenths (11.8)
shares of voting common stock of Duke City and does not have any right, interest
or claim in or to the income, profits, assets or liabilities of Duke City, other
than his obligations for income tax payments arising out of the business of Duke
City and the election of Duke City to be treated as a "Subchapter S" corporation
under the Code.
3.5 Sellers' Authority Relative to this Agreement. Each of the
---------------------------------------------
Duke City Parties has all requisite power and authority, corporate and other, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and no other actions or proceedings on the part of any of
the Duke City Parties are necessary to authorize the execution and delivery of
this Agreement. This Agreement constitutes a valid and binding obligation of
the Duke City Parties enforceable in accordance with its terms.
3.6 Corporate Records and Authorizations. All books and records of
------------------------------------
Duke City, including, but not limited to, the
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charter documents (including amendments thereto), all minutes of the proceedings
of the board of directors and of the shareholders of Duke City, all accounting
records, all tax returns, all current insurance policies and all permits, orders
and authorizations issued by any regulatory authority to Duke City are in the
possession of Duke City, and are complete and correct and have been or will be
made available to the Acquirer for inspection and copying, pursuant to the terms
of Section 8.1 hereof.
3.7 Financial Statements. The balance sheet and the related
--------------------
statement of income of Duke City for the fiscal year ended December 31, 1996
have been prepared in accordance with generally accepted accounting principles,
applied consistently with prior periods. Such financial statement shall be
referred to as the "Financial Statements" and is attached hereto as Schedule
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3.7.
- ----
3.8 Absence of Undisclosed Liabilities. Except for liabilities and
----------------------------------
obligations which do not result in or constitute a Material Adverse Effect, Duke
City has no liabilities or obligations, whether absolute, accrued or contingent,
which were not specifically reserved against or reflected as a liability in the
Financial Statements, whether or not such liability or obligation was required
to be so reflected or reserved in accordance with generally accepted accounting
principles.
3.9 Consents and Approvals of Governmental Authorities and Other
------------------------------------------------------------
Persons. To the Knowledge of the Duke City Parties, Duke City is not in
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possession of any technical data or information, inventions or know-how that are
subject to any export licensing requirements under the Export Administration Act
or the Arms Export Control Act, and Duke City in the past has not exported any
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technical data or information, inventions, know-how, or products subject to such
licensing requirements without the necessary export licenses. No employee of
Duke City possesses or is obligated to obtain any security clearance with any
governmental agency. Except as set forth in Schedule 3.9, Duke City does not
------------
have and has not had in the past any contracts with any governmental agency,
whether of a procurement nature or otherwise. Duke City does not engage and has
not engaged in the past in any business affecting national security, and the
services rendered by Duke City to those parties listed on Schedule 3.9 are
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unclassified services. No characteristic of Duke City or its business or
operations requires any consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
3.10 No Violation. Except as set forth in Schedule 3.10, none of
------------ -------------
the Duke City Parties are subject to or obligated under any provision of (a)
Duke City's charter documents, (b) any contract or other agreement, (c) any
license, franchise order or permit, or (d) any law, regulation, order, judgment
or decree, which would be breached or violated or in respect of which a right of
termination or acceleration or any encumbrance on any of their assets would be
created by their execution and performance of this Agreement. Schedule 3.10
-------------
includes a description of Duke City's non-material breaches of the terms of
certain financing agreements.
3.11 Absence of Changes. Except as set forth in Schedule 3.11
------------------ -------------
attached hereto, since December 31, 1996 (the close
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of Duke City's last preceding fiscal year) and prior to the Closing, there have
been and will be (a) no changes in the business, operations, assets or
financial condition of Duke City which have or will have a Material Adverse
Effect, (b) no change in the capital structure of Duke City, (c) no increase or
decrease in the number of authorized shares of capital stock of Duke City, (d)
no changes to the charter documents of Duke City, (e) no damage, destruction or
loss, whether or not covered by insurance, which have or will have a Material
Adverse Effect, (f) no direct or indirect redemption, purchase or other
acquisition of any shares of Duke City's capital stock, (g) no declaration or
payment of a dividend, distribution or other payment to any of Duke City's
shareholders, officers, or employees, whether in cash, stock or other property,
which has or will result in Duke City being unable to satisfy, as of the
Closing, all of the debts and liabilities of Duke City which have accrued as of
the Closing.
3.12 Litigation. Except as set forth on Schedule 3.12 hereof, there
---------- -------------
is no action, suit, claim, investigation or proceeding pending or, to the
Knowledge of the Duke City Parties, threatened against or involving any Duke
City Party or any of their respective properties or assets before any court,
arbitrator or governmental body, department, commission, board, bureau, agency
or instrumentality.
3.13 Compliance with Law. The Duke City Parties are not in default
-------------------
in any material respect with any judgment, order, writ, injunction, decree or
award. Duke City is in compliance with applicable federal, state, local and
foreign governmental laws and regulations, including, without limitation, laws
and regulations
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relating to environmental requirements (such as requirements in respect of air,
water and noise pollution) and to employment practices (such as practices in
respect of discrimination, health and safety) to the extent necessary to avoid
any Material Adverse Effect. Duke City holds all governmental licenses, permits
and other authorizations necessary for their conduct of business, except where
the failure to hold such governmental licenses, permits and other authorizations
does not and would not have a Material Adverse Effect. The Duke City Parties
have no Knowledge of any threatened suspension, cancellation or invalidation of
any such license, permit or other authorization which, if suspended, canceled or
invalidated, could reasonably be expected to have a Material Adverse Effect.
3.14 Assets in General.
-----------------
(a) Duke City has good and merchantable or marketable, and insurable,
title to all the properties and assets used in connection with Duke City'S
business, free and clear of any lien or encumbrance other than (i) as set forth
on Schedule 3.14, or (ii) liens and encumbrances which do not and will not,
-------------
singly or in the aggregate, have a Material Adverse Effect.
(b) All leases pursuant to which Duke City leases to or from third
parties real property, or material amounts of personal property, are valid,
binding and enforceable in accordance with their terms, and are in full force
and effect. Other than as described in Schedule 3.10, there are no existing
-------------
defaults by Duke City under such leases. Those defaults described in Schedule
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3.10 are not material defaults, and accordingly no event of default has occurred
- ----
which (whether with or without notice, lapse of time or
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occurrence of any other event) would constitute a default thereunder that would
entitle the other party thereto to terminate any such lease on an accelerated
basis.
(c) None of the Duke City Parties Know of any potential action by any
party, governmental or other, or proceedings with respect thereto that have been
instituted that would have a Material Adverse Effect.
3.15 Condition of Plant, Equipment, Products, etc. The plant and
--------------------------------------------
equipment owned, operated or leased by Duke City are in good operating
condition, ordinary wear and tear excepted, have been maintained in accordance
with the recommendations of the manufacturer and otherwise in accordance with
commercially reasonable practice and are sufficient to continue the operation of
the business of Duke City, as presently conducted. The plant and equipment
owned, operated or leased by Duke City are suitable for the operation of the
business of Duke City, except for obsolete items, the book value of which has
been written down as described in Section 3.16 hereof. The plant and equipment
are in conformity with applicable (including building, zoning and environmental)
laws, ordinances, regulations, orders and other requirements relating thereto
currently in effect. All products manufactured by Duke City (if any) have been
manufactured in accordance with applicable laws, in a good and workmanlike
manner, and conform to all express or implied warranties of Duke City.
3.16 Inventories. The inventories reflected on the Financial
-----------
Statements or which after the date thereof or on or prior to the Closing Date
have been acquired by Duke City consist of items of a quality and quantity
usable, rentable and/or salable in
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the normal course of business of Duke City, except for obsolete or below-
standard items, the book value of which has been written down to realizable
market value on the Financial Statements or for which adequate reserves have
been provided on the Financial Statements.
3.17 Taxes and Returns.
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(a) All taxes and governmental assessments of whatever nature,
including (i) federal income taxes, (ii) state and local taxes, (iii) personal
property tax due to counties, and (iv) taxes (if any) due to Arizona state
and/or local agencies, assessed to or payable by the Duke City Parties which
have become due and payable, have either been paid in full or adequate provision
therefor (in the form of cash reserves) has been made.
(b) The Duke City Parties have duly prepared and filed all returns,
reports and declarations regarding taxes required to be filed, including,
without limitation, returns with respect to federal, state and local income,
profits, real and personal property, capital stock, employment, sales and use
and franchise taxes, and except as set forth in Schedule 3.17(b), have duly paid
----------------
or made adequate provision (in the form of cash reserves) for all taxes and
other charges payable in respect of tax periods ending on or prior to the
Closing Date and any Short Period (as defined below). Each of the aforesaid tax
returns and reports filed is correct in all material respects. "Short Period"
means with respect to any tax period of Duke City which begins before the
Closing Date and ends thereafter, the portion thereof beginning with the first
day of such fiscal year and ending on the Closing Date.
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<PAGE>
(c) There are no material tax liens upon any property or assets of the
Duke City Parties, except liens for current taxes not yet due or delinquent or
the validity of which is being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside.
(d) Except as disclosed in Schedule 3.17(d), the federal income tax
----------------
returns of the Duke City Parties have not been examined by the IRS and no
deficiencies have been asserted by the IRS. Except for the examination
conducted in calendar year 1997, which is described in Schedule 3.17(d), the New
----------------
Mexico gross receipts and compensating tax returns and the sales and use tax
returns filed in respect of other States of Duke City have not been examined by
the applicable state authorities and, except for those deficiencies identified
pursuant to the previously mentioned examination, no deficiencies have been
asserted by the applicable state authorities with respect to the New Mexico
gross receipts and compensating tax returns or the sales and use tax returns
filed in respect of other States.
(e) Except as disclosed in Schedule 3.17(e), there are no outstanding
----------------
agreements or waivers extending the statutory period of limitation applicable to
any tax return of any of the Duke City Parties for any period.
3.18 Patents, Trademarks, and Other Intellectual Property.
----------------------------------------------------
(a) Duke City owns or is licensed to use all of the Intellectual
Properties listed on Schedule 3.18;
-------------
(b) Duke City owns or is licensed to use all Intellectual Property
currently used by Duke City in the business
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<PAGE>
of Duke City and the consummation of the transactions contemplated hereby will
not alter or impair any such ownership or licenses;
(c) Except as disclosed on Schedule 3.18, no claims have been asserted
-------------
by any person challenging such ownership or licenses;
(d) Except as disclosed on Schedule 3.18, none of the Intellectual
-------------
Property described in the preceding clauses (a) and (b) infringes or otherwise
violates the rights of others or is being infringed by others and, to the
Knowledge of the Duke City Parties, there are no potential or threatened
infringements thereof; and
(e) No license, sublicense or agreement pertain ing to any of
such Intellectual Property has been granted by Duke City.
3.19 Material Contracts.
------------------
(a) Set forth on Schedule 3.19 attached hereto is a complete and
-------------
accurate listing as of the date hereof with respect to Duke City of (i) any
contract for the lease of real or personal property by Duke City from a third-
party which represents an obligation of more than Ten Thousand Dollars
($10,000.00) and which has a term extending beyond the Closing Date; (ii) any
contract which involves more than Ten Thousand Dollars ($10,000.00) for the
purchase by Duke City from a third-party of materials, commodities, supplies or
other personal property, the licensing by Duke City from a third-party of
Intellectual Property, the receipt of services by Duke City from a third-party
or the sale of products by Duke City from a third-party which will not be fully
performed as of the Closing Date; and (iii) any agreement or instrument under
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<PAGE>
which Duke City is indebted for borrowed money which will not be fully satisfied
as of the Closing Date.
(b) All purchase orders or purchase commitments and all sales orders
and commitments of Duke City have been entered into in the ordinary course of
business.
(c) Except as set forth in Schedule 3.10, there does not exist under
-------------
or with respect to any contract or obligation by which Duke City is bound any
event which (with or without notice, lapse of time, or both) would constitute a
default thereunder on the part of Duke City or any of the other parties thereto
having a Material Adverse Effect. Neither the Duke City Shareholders nor the
managers or officers of Duke City have received written or oral notice of any
default or claim under any contract or agreement binding upon Duke City by any
person.
(d) Duke City is not a guarantor or otherwise liable for any
indebtedness of any person other than Duke City.
3.20 Labor Matters.
-------------
(a) Except as set forth in Schedule 3.20(a), Duke City does not have
----------------
any employment contracts with any of its employees. There is no pending
termination of employment of any Duke City employee which would have a Material
Adverse Effect. Except for the Employment Agreements and those other employment
agreements listed in Schedule 3.20(a), there are no employment agreements,
----------------
pending negotiations, arrangements or understandings with employees of Duke City
having a fixed term and no collective bargaining agreements to which Duke City
is a party.
(b) There are no labor disputes pending or threatened against Duke
City. Duke City has not experienced any
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<PAGE>
labor dispute, strike, picketing, handbilling, work slowdown, work stoppage or
other concerted labor difficulty.
(c) No charge or complaint of employment discrimination against Duke
City is pending or, to the Knowledge of the Duke City Parties, threatened before
the Equal Employment Opportunity Commission or any other federal, state or local
agency, court or tribunal.
(d) No charge or complaint against Duke City is pending or, to the
Knowledge of the Duke City Parties, threatened for payment of wages or other
benefits under the Fair Labor Standards Act, as amended, or under any similar
state or local employment standards law.
(e) No charge or complaint against Duke City is pending or, to the
Knowledge of the Duke City Parties, threatened before the Occupational Safety
and Health Administration or any similar state or local agency.
(f) No complaint or action against Duke City by any current or former
employee of Duke City, including, but not limited to, a complaint or action
alleging breach of an employment contract, wrongful discharge or breach of a
duty of good faith and fair dealing in the employment relationship, is pending
or, to the Knowledge of the Duke City Parties, threatened.
(g) There are no pending or threatened claims against Duke City for
workers' compensation, unemployment insurance or disability benefits under any
federal, state or local law.
(h) Duke City has withheld all amounts required by law or by agreement
to be withheld from the wages, salaries and other payments to employees.
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<PAGE>
(i) Also set forth at Schedule 3.20(a) is a list of the employees of
----------------
Duke City, together with their salary or hourly rate, severance pay, and
commission rate (if any). No employee of Duke City is entitled to any
commission rate or severance pay different from the information specified at
Schedule 3.20(a).
- ----------------
(j) Duke City is not in default under any of the employment agreements
listed at Schedule 3.20(a). All amounts reimbursable or due to Duke City's
----------------
employees for automobile expenses under the employment agreements listed at
Schedule 3.20(a) have been paid in full or are reflected in the Financial
- ----------------
Statements.
(k) All vacation, sick pay and bonuses accrued through the Closing on
behalf of employees of Duke City shall be adequately provided for on or before
the Closing Date.
3.21 Employee Benefit Plans.
----------------------
(a) Schedule 3.21(a) attached hereto contains a true and complete list
----------------
of all funded or unfunded, written or oral, employee benefit plans, contracts,
agreements, incentives, salary, wages or other compensation plans or
arrangements, including but not limited to all pension and profit sharing plans,
savings plans, bonus, deferred compensation, incentive compensation, stock
purchase, supplemental retirement, severance or termination pay, stock option,
hospitalization, medical, life insurance, dental, disability, salary
continuation, vacation, supplemental unemployment benefit, union contract,
employment contracts, consulting agreements, retiree benefits and agreements,
severance agreements and each other employee benefit program, plan, policy or
arrangement (each a "Benefit Plan"), maintained, contributed to, or
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<PAGE>
required to be contributed to by Duke City for the benefit of its employees,
former employees, directors, agents or consultants, or for which Duke City may
be responsible or with respect to which it may have any liability, whether or
not subject to the Employee Retirement Income Security Act of 1974 ("ERISA") and
whether legally binding or not. For purposes of this definition, any reference
to the term "Duke City" shall be deemed to also refer to any entity which is
under common control or affiliated with Duke City within the meaning of Section
4001 of ERISA, and the rules and regulations promulgated thereunder and/or
Sections 414(b), (c), (m) or (o) of the Code and the rules and regulations
promulgated thereunder.
(b) Duke City has delivered to the Acquirer true and complete copies
of all documents embodying or relating to the Benefit Plans. Except as set
forth in Schedule 3.21(b), each of the Benefit Plans listed in Schedule 3.21(b)
---------------- ----------------
hereto is and has at all times been in compliance in all respects with all
applicable provisions of ERISA, the Code and other laws. No event has occurred,
is threatened or about to occur which would constitute a reportable event (for
which the notice requirement has not been waived) within the meaning of Section
4043(b) of ERISA with respect to any "employee pension benefit plan" as defined
in Section 3(2) of ERISA (each a "Pension Plan").
(c) Each of the Pension Plans which are intended to meet the
requirements of Section 401(a) of the Code now meet, and since their inception
have met, the requirements for qualification under Section 401(a) of the Code
and nothing has occurred which would adversely affect the qualified status of
any
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<PAGE>
such Pension Plan. Except as set forth in Schedule 3.21(c), the IRS has issued
----------------
a favorable determination letter with respect to the qualification under the
Code of each Pension Plan and the IRS has not taken any action to revoke any
such letter.
(d) Each fiduciary and every plan official of each Benefit Plan is
bonded to the extent required by Section 412 of ERISA. No steps have been taken
to terminate any Benefit Plan which is subject to Title IV of ERISA and no
liability under such Title has been incurred by Duke City that has not been
satisfied in full, no condition exists that could reasonably be expected to
result in Duke City incurring a liability under such Title, and no proceeding
has been initiated by the PBGC to terminate or to appoint a trustee to
administer any Pension Plan. Duke City has not withdrawn from any Pension Plan
as a "substantial employer" so as to become subject to the provisions of Section
4063 of ERISA, or ceased operations at any facility so as to become subject to
the provisions of Section 4062(e) of ERISA. Those sections of all annual
reports heretofore filed with the IRS, the Department of Labor and the PBGC by
or on behalf of every Benefit Plan which were required to be certified were only
certified without qualification by the accountants or actuaries of such Benefit
Plan. Each of the Benefit Plans can be amended, terminated or otherwise
discontinued after the Closing Date without liability to Duke City or Acquirer
or any Affiliate of either of them.
(e) Except as specifically set forth in Schedule 3.21(e), the
----------------
execution and performance of the transactions contemplated by this Agreement
will not (either alone or upon the occurrence of any additional or subsequent
event) constitute an
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<PAGE>
event under any Benefit Plan or individual agreement that will or may result in
any payment (whether of severance pay or otherwise), acceleration, vesting or
increase in benefits with respect to any employee, former employee, consultant,
agent or director of Duke City or any of its Affiliates. No payment which will
be or may be made by Duke City to any employee, former employee, director,
consultant or agent thereof will or could be characterized as an "excess
parachute payment" within the meaning of Section 280G(b)(1) of the Code.
(f) At no time has Duke City or any of its Affiliates contributed to,
been required to contribute to, or incurred any withdrawal liability (within the
meaning of Section 4201 of ERISA) to any Benefit Plan which is a multiemployer
plan as defined in Section 3(37) of ERISA.
(g) Duke City does not maintain any Benefit Plan which is funded by an
association described in Section 501(c)(9) of the Code.
(h) Each "group health plan" (within the meaning of Section 4980B of
the Code) maintained by Duke City or any of its Affiliates has been administered
in compliance with the coverage continuation requirements contained in COBRA and
as provided under Section 4980B of the Code and any regulations promulgated or
proposed under the Code.
(i) With respect to all Benefit Plans which are funded, or are
required by applicable law to be funded, the present value of all accrued
benefits (vested and nonvested) of each such Benefit Plan as of the Closing Date
will not exceed the fair market
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<PAGE>
value of the assets of each such Benefit Plan as of the Closing Date.
(j) None of the Pension Plans listed in Schedule 3.21(a) nor any of
----------------
the trusts thereunder have incurred an "accumulated funding deficiency" as such
term is defined in Section 302(a) of ERISA (whether or not waived), since the
effective date of ERISA, and no such Pension Plan has incurred any liability to
the PBGC. Duke City has made all contributions required to be made to each
Benefit Plan under the terms of the plan and applicable law. No prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) has
occurred with respect to any Benefit Plan listed, which could subject any
Benefit Plan or any related trust, Duke City, any Affiliate, Acquirer or any
director or employee of any of them to any tax or penalty imposed under Section
4975 of the Code or Section 502(i) or 502(1) of ERISA, either directly or
indirectly, and whether by way of indemnity or otherwise.
(k) Duke City does not maintain, sponsor or contribute to any plan or
program providing retiree medical or life insurance benefits.
3.22 Insurance. Schedule 3.22 attached hereto sets forth a complete
--------- -------------
and accurate list of all insurance policies (including their respective
expiration dates) which are presently in effect covering prior and current
periods with respect to Duke City. True copies of all such policies have
heretofore been made available to the Acquirer. All premiums due for such
policies have been paid, no notice of termination has been received and such
policies, together with policies (including applicable deductibles)
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<PAGE>
for prior periods, provide insurance coverage for the properties, assets and
operations of Duke City in amounts and against such losses and risks as are
generally maintained for comparable businesses and properties. Duke City has
not experienced difficulty in obtaining insurance coverage for the equipment
rental business conducted by Duke City. Such policies of insurance will be
outstanding and fully in force at the Closing.
3.23 Competitors and Unfair Competition. Except as set forth on
----------------------------------
Schedule 3.23, no officer, director or principal employee of Duke City owns,
- -------------
directly or indirectly, an interest in any partnership, association, entity or
corporation (other than as the holder of less than one percent (1%) of the
issued and outstanding stock of a publicly held corporation) which is conducting
a business similar to that conducted by Duke City as a competitor or a potential
competitor of Duke City. Except as set forth on Schedule 3.23, no officer,
-------------
director, principal employee or Affiliate of the Duke City Parties is presently
engaged, or contemplates engaging, directly or indirectly, in any activity which
would compete with the present business of Duke City.
3.24 Disclosure. There are no facts which have a Material Adverse
----------
Effect, or in the future may have a Material Adverse Effect, which have not been
set forth herein. Each of the Duke City Parties covenants that, prior to the
Closing, he, she or it will give to the Acquirer immediate written notice of any
event or transaction transpiring or occurring which has or in the future may
have a Material Adverse Effect.
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<PAGE>
3.25 Subsidiary. Duke City does not have any subsidiaries nor owns
----------
any interest in any partnership or joint venture.
3.26 Environmental Matters.
---------------------
(a) Duke City is in compliance in all material respects with all
applicable Hazardous Materials Laws. Duke City has not filed any notice under
any Hazardous Materials Laws indicating past or present generation, treatment,
storage or disposal of a Hazardous Material or reporting a spill or release of a
Hazardous Material or other substance into the environment. No Hazardous
Material Claim has been made or threatened, or existed or currently exists. To
the Knowledge of the Duke City Parties, no occurrence or condition on any real
property adjoining or in the vicinity of the Real Property exists which could
cause such property or any part thereof to be otherwise subject to any
restrictions on the ownership, occupancy, transferability or use of such
property under any Hazardous Materials Laws.
(b) To the Knowledge of the Duke City Parties, all permits,
certificates, licenses, registrations and other consents and approvals, if any,
required by any Hazardous Materials Laws or any other applicable laws relating
to pollution or the protection of the environment (including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air, surface
water, ground water or land, or otherwise, relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials) in connection with Duke City, and any
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<PAGE>
operations conducted by Duke City, have been obtained and are current and valid.
Duke City is in compliance with all terms and conditions of such permits,
certificates, licenses, registrations and other consents and approvals.
(c) No Hazardous Material has been released on any part of any real
property which has been owned or leased by Duke City, while such property was
owned or leased by Duke City.
(d) To the Knowledge of the Duke City Parties, no soil, air, surface,
water or ground water contamination exists on any real property which has been
owned or leased by Duke City or on property adjacent to property which has been
owned or leased by Duke City.
(e) To the Knowledge of the Duke City Parties, there are, and have
been, no underground or aboveground storage tanks on any real property which has
been owned or leased by Duke City.
(f) No real property which has been owned or leased by Duke City is or
has been included on the United States Environmental Protection Agency's
National Priorities List issued pursuant to CERCLA or any other list maintained
by any federal, state or local governmental agency concerning sites on or from
which there is or has been a release or threatened release of any Hazardous
Material.
(g) No part of any real property owned or leased by Duke City has ever
been used by Duke City or, to the Knowledge of the Duke City Parties, by any
previous owners and/or operators of such real property, for (i) generating,
manufacturing, refining, producing, storing, handling, transferring, processing
or
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<PAGE>
transporting any Hazardous Materials, (ii) as a landfill, dump or other disposal
or storage facility for Hazardous Materials, (iii) as a facility for industrial,
military or manufacturing purposes, or (iv) as a gasoline service station or
facility for handling in any manner petroleum or petroleum products.
(h) To the Knowledge of the Duke City Parties, no Hazardous Materials
Law requires any work, cleanup, testing, repairs, construction or expenditures
with respect to any part of any real property which has been owned or leased by
Duke City.
(i) Duke City is in compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable law or contained in any regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder relating to environmental matters.
(j) None of the Duke City Parties is aware of, or has received notice
of, any past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or prevent
continued compliance, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, suit, proceeding,
hearing or investigation, based on or related to Duke City's manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release, by Duke
City into the environment of any Hazardous Material.
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<PAGE>
3.27 Absence of Liabilities at Closing. All liabilities of Duke City
---------------------------------
which have accrued or will accrue as of December 31, 1996 (and from that date to
the Closing Date) shall have been paid or otherwise adequately provided for.
3.28 Ownership of Real Property. No party other than Duke City and
--------------------------
the parties listed on Schedule 3.28 has any option or right to lease the Real
-------------
Property, or any portion thereof. The parties listed on Schedule 3.28 only have
-------------
such limited right to occupy those portions of the Real Property as are
described in Schedule 3.28.
-------------
3.29 Investment Representations. Each of the Duke City Shareholders
--------------------------
is acquiring the portion of the Matthews Shares receivable by him or her on
Closing for his or her own account as principal, with no view to any resale or
distribution of any such Matthews Shares, or any beneficial interest therein.
Each of the Duke City Shareholders understands that the Matthews Shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or applicable state securities laws, and therefore each Duke City
Shareholder agrees that he or she will not sell or otherwise transfer the
portion of the Matthews Shares receivable by him or her on Closing unless such
Matthews Shares are registered under the Securities Act and qualified under
applicable state securities laws, or unless an exemption from such registration
or qualification is available.
3.30 Value of Matthews Shares. The Duke City Shareholders represent
------------------------
and warrant that they have made their own determination as to the value of the
Matthews Shares receivable by them on the Closing, they have not relied on any
information
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<PAGE>
provided to them by the Acquirer or Matthews in respect of the business
prospects or future of Matthews or any of its subsidiaries, and that in the
transactions covered by this Agreement and the agreements to be delivered on
Closing, they have been represented by legal and financial advisors selected by
them.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
J. LEFKOVITZ
------------
J. Lefkovitz hereby represents and warrants to the Acquirer the
matters set forth in this Article IV.
4.1 Loans to Duke City. Conditioned upon receipt of the Lefkovitz
------------------
Note, J. Lefkovitz hereby acknowledges and agrees that such note represents the
total obligation of Duke City to J. Lefkovitz as of the Closing in respect of
all loans and financial accommodations made by J. Lefkovitz to Duke City (but
not employment compensation due to J. Lefkovitz from Duke City) at any time
prior to the Closing. J. Lefkovitz further agrees that delivery of the
Lefkovitz Note automatically effects a cancellation and full discharge of all
promissory notes and other evidence of indebtedness previously made or delivered
by Duke City to J. Lefkovitz, and that Duke City and the Acquirer as of the
Closing shall be authorized to cancel and destroy any and all prior promissory
notes and other evidence of indebtedness that may come into Duke City's or the
Acquirer's possession. J. Lefkovitz shall deliver to Duke City all such prior
promissory notes and other evidence of indebtedness that are in J. Lefkovitz's
possession on
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<PAGE>
the Closing Date or that may come into J. Lefkovitz's possession subsequent to
the Closing Date.
4.2 No Assignment. J. Lefkovitz represents and warrants to the
-------------
Acquirer that he remains the owner and holder of the indebtedness represented by
the Lefkovitz Note, and he has not assigned any of such indebtedness to any
other party nor has he negotiated or assigned any promissory notes or other
evidence of such indebtedness to any party, except for the delivery of a
promissory note representing the principal amount of $605,000 to Bank Leumi Le-
Israel, B.M. pursuant to a subordination agreement made by J. Lefkovitz in favor
of such bank, which note remains in such bank's possession and has not been
negotiated.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
BRUSATI
-------
Brusati hereby represents and warrants to the Acquirer the matters set
forth in this Article V.
5.1 Loans to Duke City. Conditioned upon receipt of the Brusati
------------------
Note, Brusati hereby acknowledges and agrees that the Brusati Note represents
the total obligation of Duke City to Brusati as of the Closing in respect of all
loans and financial accommodations made by Brusati to Duke City (but not
employment compensation due to Brusati from Duke City) at any time prior to the
Closing. Brusati further agrees that delivery of the Brusati Note automatically
effects a cancellation and full discharge of all promissory notes and other
evidence of indebtedness previously made or delivered by Duke City to Brusati,
and that Duke City and the
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<PAGE>
Acquirer as of the Closing shall be authorized to cancel and destroy any and all
such prior promissory notes and other evidence of indebtedness that may come
into Duke City's or the Acquirer's possession. Brusati shall deliver to Duke
City all such prior promissory notes and other evidence of indebtedness that are
in Brusati's possession on the Closing Date or that may come into Brusati's
possession subsequent to the Closing Date.
5.2 No Assignment. Brusati represents and warrants to the Acquirer
-------------
that she remains the owner and holder of the indebtedness represented by the
Brusati Note, and she has not assigned any of such indebtedness to any other
party nor has she negotiated or assigned any promissory notes or other evidence
of such indebtedness to any party.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE ACQUIRER
------------
The Acquirer hereby represents and warrants to the Duke City Parties
as follows:
6.1 Organization and Qualification. The Acquirer is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of
California and has all requisite power, corporate and otherwise, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
6.2 Execution and Delivery. The execution and delivery of this
----------------------
Agreement by the Acquirer and the consummation by the Acquirer of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action. This Agreement has
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<PAGE>
been duly executed and delivered by the Acquirer and constitutes a valid and
binding obligation of the Acquirer, enforceable in accordance with its terms.
6.3 Consents and Approvals of Governmental Authorities and Other
------------------------------------------------------------
Persons. No characteristic of the Acquirer or of its business or operations
- -------
requires any consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority or other person in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. In making this
representation, the Acquirer is relying, in part, on the representations and
warranties of the Duke City Parties set forth in Section 3.29.
6.4 Investment Representations. The Acquirer is acquiring the Duke
--------------------------
City Stock for its own account as principal, with no view to any resale or
distribution of the Duke City Stock, or any beneficial interest therein. The
Acquirer understands that the Duke City Stock has not been registered under the
Securities Act, or applicable state securities laws, and therefore the Acquirer
agrees that it will not sell or otherwise transfer the Duke City Stock unless it
is registered under the Securities Act and qualified under applicable state
securities laws, or unless an exemption from such registration or qualification
is available.
ARTICLE VII
-----------
CONDUCT OF BUSINESS PRIOR TO CLOSING
------------------------------------
Each of the Duke City Parties covenant and agree that, except as
otherwise consented to by the Acquirer, between the close
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<PAGE>
of Duke City's last fiscal year and the Closing, the provisions of this Article
VII shall be observed.
7.1 Conduct of Business in Ordinary Course. Duke City shall
--------------------------------------
conduct its business in the ordinary course and in accordance with past customs
and practice and in compliance with applicable law, and shall advise the
Acquirer promptly in writing of any change which has or reasonably may be
expected to have a Material Adverse Effect. From the close of Duke City's last
fiscal year to the Closing, no shareholder of Duke City shall remove any assets
from Duke City by way of dividend, distribution, withdrawal or otherwise, except
in accordance with past customs and practice.
7.2 Restricted Activities. Duke City shall not, without the prior
---------------------
written consent of the Acquirer:
(a) except for the issuance of additional One and Eight-Tenths (1.8)
shares of the common stock of Duke City to John E. Hensch, issue, sell, pledge
or dispose of, or agree to issue, sell, pledge or dispose of, any shares of its
capital stock, grant or issue, or agree to grant or issue, any options,
warrants, or other rights (including stock dividends) calling for the issue
thereof;
(b) create any rights to acquire its capital stock, or subsequently
acquire, directly or indirectly, such capital stock, or alter its capital
structure through a stock split, reverse stock split, reorganization or similar
transaction;
(c) except in the ordinary course of business and consistent with past
practice, sell, dispose of or encumber any of its assets;
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<PAGE>
(d) enter into any contract or commitment except in the ordinary
course of business and in accordance with past customs and practice, make or
permit to be made any material amendment to or termination of any material
contract or agreement to which it is a party, or surrender or forfeit any
license, permit or other qualification to conduct its business;
(e) adopt or amend any employment agreement, profit sharing,
compensation, bonus, deferred compensation, pension, retirement or other
employee benefit plan, agreement, fund, trust or arrangement for the benefit or
welfare of any employee;
(f) make any amendments to or changes in the charter documents of
Duke City;
(g) settle any material litigation, legal, administrative, arbitration
or other proceeding or claim or any tax audit; or
(h) change any accounting or material operating policies or
procedures except as may be required by law.
ARTICLE VIII
------------
OBLIGATIONS PRIOR TO THE CLOSING
--------------------------------
8.1 Access to Information. Prior to the Closing, the Duke City
---------------------
Parties shall afford the officers, employees and agents of the Acquirer complete
access, at all reasonable times pursuant to prior notice to Duke City, to each
of Duke City's officers, employees, independent accountants, agents, properties,
plants, facilities, books and records, and shall furnish the Acquirer all
financial, operating and other data and information as the
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<PAGE>
Acquirer, through its officers, employees or agents, may reasonably request. No
such examination, however, shall constitute a waiver or relinquishment on the
part of the Acquirer of its right to rely upon the covenants, representation
and warranties made by the Duke City Parties hereunder.
8.2 Insurance and Other Liability Matters. Until the Closing, the
-------------------------------------
Duke City Parties will cause Duke City to maintain, and Duke City shall
maintain, in full force and effect all of Duke City's presently existing
insurance coverage as set forth on Schedule 3.22, or insurance comparable to
-------------
such existing coverage.
8.3 Exclusivity. Prior to the Closing Date, the Duke City Parties
-----------
(whether individually or collectively) shall not enter into or solicit any
discussion, negotiation or agreement with any party other than the Acquirer with
respect to the transfer or exchange of the Duke City Stock, the sale of all or
substantially all of the assets of Duke City, or the mortgage, lease or sale of
all or a portion of the Real Property (other than to the parties listed on
Schedule 3.28).
- -------------
8.4 Additional Disclosure. From time to time prior to the Closing,
---------------------
Duke City shall deliver or cause to be delivered to the Acquirer supplemental
information concerning events subsequent to the date hereof which would render
any statement, representation or warranty made in this Agreement or any
information contained in a Schedule required by this Agreement inaccurate or
incomplete in any material respect. No supplement or amendment of any Schedule
made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless the Acquirer
specifically agrees thereto in writing.
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<PAGE>
8.5 Approvals and Requirements. The Duke City Parties shall obtain,
--------------------------
or shall cooperate with Acquirer in obtaining, all necessary governmental, board
of directors, shareholders and third-party approvals which are applicable to
them and which are necessary to effect the various agreements set forth herein.
8.6 Liabilities of Duke City. Without limiting the generality of
------------------------
the provisions of Section 7.2, the Duke City Parties shall notify the Acquirer
immediately if the liabilities (including, without limitation, taxes due or
deferred and accounts payable) of Duke City which have accrued as of December
31, 1996 shall exceed Thirteen Million Five Hundred Thousand Dollars
($13,500,000.00) or if any liabilities incurred between December 31, 1996 and
the Closing Date were not incurred in the ordinary course of business and in
accordance with past customs and practice.
ARTICLE IX
----------
CONDITIONS TO OBLIGATIONS OF THE Acquirer
-----------------------------------------
Each and every obligation of the Acquirer under this Agreement to be
performed at or before the Closing shall be subject to the satisfaction, at or
before the Closing, of the following conditions:
9.1 Representations and Warranties True. The representations and
-----------------------------------
warranties contained in Article III, Article IV and Article V hereof shall be
true and accurate in all material respects as of the date when made and on and
as of the Closing Date as if made on and as of the Closing Date.
-38-
<PAGE>
9.2 Performance of Covenants. The Duke City Parties shall have
------------------------
performed and complied in all material respects with each and every covenant,
agreement and condition required by this Agreement to be performed or complied
with by each of them prior to or at the Closing.
9.3 No Proceeding or Litigation. There shall be no investigation,
---------------------------
notice, suit, order, action, inquiry, arbitration or proceeding pending or
threatened which restrains or prohibits the consummation of this Agreement or
the transactions contemplated hereby or which questions the validity or legality
of the transactions contemplated hereby, or seeks to impose any liability on the
Acquirer as a result of the transactions contemplated hereby.
9.4 Approvals and Consents. All approvals, or the absence of
----------------------
disapprovals within applicable time periods, of public authorities, federal,
state or local (or exemptions from the requirements therefor), and all approvals
of any private persons, the granting or absence of which is necessary for the
consummation of the transactions contemplated by this Agreement (including, but
not limited to, those parties under contracts listed in Schedule 3.19), shall
-------------
have been obtained (or in the case of such disapprovals, shall be absent).
Notwithstanding the foregoing, the consent of the parties in respect of the
contracts listed on Schedule 9.4 shall not be required as a condition precedent
------------
to the Closing.
9.5 Certificates, Documents, Appraisals, and other Agreements. The
---------------------------------------------------------
Duke City Parties shall have furnished the Acquirer with such certificates,
documents, appraisals, and other
-39-
<PAGE>
agreements to evidence compliance with the conditions set forth in this Article
IX, and such other documents as may be reasonably requested by the Acquirer.
9.6 Due Diligence. The Acquirer, through its representatives and
-------------
agents, shall have completed, to its satisfaction, its business, legal,
environmental and accounting review of Duke City in accordance with the terms of
this Agreement, including a "Phase I" environmental investigation of the Real
Property.
9.7 Material Adverse Change. Prior to and at the time of the
-----------------------
Closing, there shall be no change in the financial condition or assets of Duke
City which has or in the future may have a Material Adverse Effect.
9.8 Hensch Closing. All conditions to the consummation of the
--------------
transactions contemplated under the Hensch Agreement shall have been satisfied,
to the Acquirer's sole discretion, and the closing of such transactions shall
occur contemporaneously with the Closing under this Agreement.
9.9 Satisfaction of Conditions in Collateral Agreements. Prior to
---------------------------------------------------
the Closing, all conditions to the execution, delivery and closing of the Non-
Competition Agreements and the Employment Agreements shall have been completed
to the satisfaction of the Acquirer.
ARTICLE X
---------
CONDITIONS TO OBLIGATIONS OF DUKE CITY PARTIES
----------------------------------------------
Each and every obligation of the Duke City Parties under this
Agreement to be performed at or before the Closing shall be
-40-
<PAGE>
subject to the satisfaction, at or before the Closing, of the following
conditions:
10.1 Representations and Warranties True. The representations and
-----------------------------------
warranties contained in Article IV hereof shall be true and accurate in all
material respects as of the date when made and on and as of the Closing Date as
if made on and as of the Closing Date.
10.2 Performance of Covenants. The Acquirer shall have performed
------------------------
and complied in all material respects with each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by it
prior to or at the Closing.
10.3 No Proceeding or Litigation. There shall be no investigation,
---------------------------
notice, suit, order, action, inquiry, arbitration or proceeding pending or
threatened which restrains or prohibits the consummation of this Agreement or
the transactions contemplated hereby or which questions the validity or legality
of the transactions contemplated hereby, or seeks to impose any liability on any
of the Duke City Parties as a result of the transactions contemplated hereby.
10.4 Approvals and Consents. All approvals, or the absence of
----------------------
disapprovals within applicable time periods, of public authorities, federal,
state or local (or exemptions from the requirements therefor), and all approvals
of any private persons, the granting or absence of which is necessary for the
consummation of the transactions contemplated by this Agreement, shall have been
obtained (or in the case of such disapprovals, shall be absent).
Notwithstanding the foregoing, the consent of the parties in
-41-
<PAGE>
respect of the contracts listed in Schedule 9.4 shall not be a condition
------------
precedent to the Closing.
10.5 Certificates, Documents, Appraisals, and other Agreements. The
---------------------------------------------------------
Acquirer shall have furnished the Duke City Parties with such certificates,
documents, appraisals, and other agreements to evidence compliance with the
conditions set forth in this Article X and such other documents as may be
reasonably requested by the Duke City Parties.
10.6 Satisfaction of Conditions in Collateral Agreements. Prior to
---------------------------------------------------
the Closing, all conditions to the execution, delivery and closing of the Non-
Competition Agreements and the Employment Agreements shall have been completed
to the satisfaction of the Duke City Parties.
ARTICLE XI
----------
CLOSING; CLOSING DATE
---------------------
11.1 Time and Place. Unless this Agreement shall have been
--------------
terminated and the transactions herein contemplated shall have been abandoned
pursuant to a provision of Article XII hereof, a closing (the "Closing") will be
held on May 2, 1997 (the "Closing Date"). The Closing shall be held at 10:00
a.m. at the offices of Whitman Breed Abbott & Morgan, 633 West Fifth Street,
Suite 2100, Los Angeles, California 90071 (or at such other place or time as
shall be agreed upon by the parties hereto).
11.2 Transactions at Closing. At the Closing:
-----------------------
(a) Each Duke City Shareholder shall duly deliver to the Acquirer the
stock certificates endorsed by him or her in
-42-
<PAGE>
blank representing his or her respective ownership of the Duke City Stock as
provided in Exhibit A hereto.
(b) Each of Brusati, Lefkovitz and Ward shall enter into an employment
agreement (individually, an "Employment Agreement") with Duke City, in the form
attached hereto as Exhibit B-1, Exhibit B-2 and Exhibit B-3, respectively.
(c) Each of the Duke City Shareholders shall execute and deliver to
Duke City and the Acquirer a Non-Competition Agreement in substantially the form
attached hereto as Exhibit C (the "Non-Competition Agreement").
(d) The Acquirer shall deliver to the Duke City Shareholders their
proportions of the Matthews Shares, as provided in Section 2.2 hereof.
(e) Duke City shall execute and deliver to the Duke City Shareholders
the Employment Agreements, the Non-Competition Agreements and the Acquirer shall
execute and deliver to the Duke City Shareholders the Non-Competition
Agreements.
(f) The Acquirer shall have received evidence reasonably satisfactory
to it of the accuracy of the representations and warranties made in Section 3.4
above.
(g) Duke City shall execute and deliver to J. Lefkovitz the
Lefkovitz Note.
(h) J. Lefkovitz shall execute and deliver to Chase Manhattan Bank, as
agent, a subordination agreement in such form as may be reasonably required by
such bank, to the effect that Duke City's obligations under the Lefkovitz Note
shall be fully subordinated to Duke City's obligations to such bank.
-43-
<PAGE>
(i) Duke City shall execute and deliver to Brusati the Brusati Note.
(j) Counsel for Duke City, J. Lefkovitz and L. Lefkovitz shall duly
deliver to the Acquirer opinion(s) of such counsel in form and substance
reasonably satisfactory to the Acquirer regarding the transactions contemplated
hereunder.
(k) Counsel for the Acquirer shall duly deliver to Duke City, J.
Lefkovitz and L. Lefkovitz opinion(s) of such counsel in form and substance
reasonably satisfactory to the Duke City Parties as to the transactions
contemplated hereunder.
11.3 Post Closing Obligations. As soon as practicable after the
------------------------
Closing, the Duke City Shareholders shall deliver to the Acquirer evidence
reasonably satisfactory to the Acquirer that the information set forth in
Schedule 3.20(a) relating to employee benefits and compensation is accurate.
- ----------------
ARTICLE XII
-----------
TERMINATION AND ABANDONMENT
---------------------------
12.1 Methods of Termination. Anything herein to the contrary
----------------------
notwithstanding, this Agreement may be terminated and the transactions herein
contemplated may be abandoned at any time:
(a) by mutual consent of all of the parties hereto;
(b) by any of the parties hereto if the Closing has not occurred on or
before May 2, 1997, unless the absence of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform each of its
obligations under
-44-
<PAGE>
this Agreement required to be performed by it at or prior to the Closing
pursuant to the terms hereof; or
(c) by the Acquirer at any time the Acquirer shall have determined
that the condition set forth in Section 9.6 will not be satisfied, provided that
the Acquirer shall give reasonable detail therefor.
12.2 Requirements and Effect of Termination. In the event of
--------------------------------------
termination and abandonment by any of the parties hereto pursuant to Section
12.1 hereof, written notice thereof shall forthwith be given to the other
parties hereto; provided, however, that the provisions of Sections 15.4 and 15.6
shall continue in full force and effect notwithstanding a waiver of any cause of
action which any party hereto might have against any other party hereto for
breach of any provision hereof.
ARTICLE XIII
------------
INDEMNIFICATION
---------------
13.1 Duke City's Indemnity. The Duke City Shareholders jointly and
---------------------
severally agree to indemnify and hold the Acquirer and its subsidiaries and
Affiliates and its and their shareholders, directors and officers harmless from
and with respect to any and all liabilities, losses, damages (including special
and punitive damages), costs and expenses, including, without limitation, the
fees and disbursements of counsel (collectively, "Losses"), related to or
arising directly or indirectly out of any of the following:
(a) Any inaccuracy or defect in any representa tion or warranty made
by any Duke City Shareholder in this Agreement or a Non-Competition Agreement or
Employment Agreement
-45-
<PAGE>
entered into by a Duke City Shareholder, which would have a Material Adverse
Effect (in respect of Duke City) or would represent or result in Losses of
Fifteen Thousand Dollars or more; or
(b) Any breach by any Duke City Shareholder of any covenant (including
covenants involving indemnification), obligation or undertaking made by any Duke
City Shareholder in this Agreement or a Non-Competition Agreement or Employment
Agreement entered into by a Duke City Shareholder which would have a Material
Adverse Effect (in respect of Duke City) or would represent or result in Losses
of Fifteen Thousand Dollars or more.
13.2 Acquirer's Indemnity. The Acquirer agrees to indemnify and
--------------------
hold the Duke City Shareholders harmless from and with respect to any and all
Losses related to or arising directly or indirectly out of any of the following:
(a) Any inaccuracy or defect in any representa tion or warranty made
by the Acquirer in Article VII of this Agree ment which would represent or
result in Losses of Fifteen Thousand Dollars or more; or
(b) Any breach by the Acquirer of any covenant (including covenants
involving indemnification), obligation or undertaking made by the Acquirer which
would result in Losses of Fifteen Thousand Dollars of more.
13.3 Claims.
------
(a) Any party (the "Aggrieved") may assert a right of indemnification
against any other party (the "Indemnitor") in connection with any action, suit,
proceeding, demand or claim at any time instituted against or made upon the
Aggrieved which may
-46-
<PAGE>
result in Losses to the Aggrieved (a "Claim"). In such event, the Aggrieved
shall notify the Indemnitor of such Claim and of the Aggrieved's claim of
indemnification with respect thereto, provided that failure of the Aggrieved to
give such notice shall not relieve the Indemnitor of its obligations under this
Article XIII, except to the extent, if at all, that the Indemnitor shall have
been materially prejudiced by such failure to give notice. Upon receipt of such
notice from the Aggrieved, the Indemnitor shall be entitled to participate in
the defense of such Claim.
(b) If and only if the Indemnitor confirms in writing that it shall
indemnify the Aggrieved with respect to such Claim and posts a bond, insurance
policy or other adequate security for the amount of such Claim, the Indemnitor
may assume the defense of such Claim, and in the case of such an assumption the
Indemnitor shall have the authority to negotiate, compromise and settle such
Claim for the Aggrieved; provided, however, that the Indemnitor may not assume
the defense of any Claim which demands equitable relief in whole or in part
without the express written consent of the Aggrieved.
(c) The Aggrieved shall retain the right to employ its own counsel and
to participate in the defense of any Claim, the defense of which has been
assumed by the Indemnitor pursuant to Section 13.3(b) hereof, but the Aggrieved
shall bear and shall be solely responsible for its own costs and expenses in
connection with such participation; provided, however, that the Aggrieved shall
cooperate in all respects in the defense of the Claim, including refraining from
taking any position adverse to the
-47-
<PAGE>
Indemnitor, whether or not the Aggrieved shall participate in the defense.
(d) With respect to liquidated Claims, if within thirty (30) days the
Indemnitor has not contested such Claim in writing, the Indemnitor shall pay the
full amount thereof within ten (10) days after the expiration of such period.
13.4 Right of Offset. Anything herein to the contrary
---------------
notwithstanding, and without limiting any other remedies available to the
Aggrieved hereunder or under applicable law, the Aggrieved shall have the right
of offset with respect to any Losses the Aggrieved has incurred or will incur
hereunder against any and all amounts then owed by it to an Indemnitor pursuant
to this Agreement, any Employment Agreement, any Non-Competition Agreement, the
Lefkovitz Note, the Brusati Note, or any other agreement between the Aggrieved
and the Indemnitor. Further, during the pendency of any Claim for which
adequate security as set forth in Section 13.3(b) has not been provided, the
Aggrieved shall not be required to pay any amount due the Indemnitor under the
above-referenced agreements until a final settlement of the Claim, through
judicial proceedings or otherwise, by the Indemnitor or the Aggrieved and the
payment to the Aggrieved of any Losses it may have incurred as a result of the
Claim.
13.5 Surviving Obligations. The rights and duties of the parties
---------------------
under this Article XIII shall survive termination of this Agreement for any
reason.
-48-
<PAGE>
ARTICLE XIV
-----------
ARBITRATION
-----------
14.1 Parties' Consent to Arbitration. Except as provided in this
-------------------------------
Agreement, any dispute, controversy or claim arising out of or relating to this
Agreement or breach thereof shall be settled by binding arbitration heard by one
arbitrator, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association Rules (the "Rules"). The parties hereto agree that the
venue of such arbitration shall be Los Angeles, California. The party intending
to arbitrate shall serve a written notice of intention to commence arbitration
on the other party. The arbitrator shall be appointed in accordance with the
Rules.
14.2 Powers. The arbitrator shall be bound by the terms and
------
conditions of this Agreement and shall have no power, in rendering the award, to
alter or depart from any express provision of this Agreement, and his/her
failure to observe this limitation shall constitute grounds for vacating the
award. Any award of the arbitrator shall be final and binding upon the parties
and judgment may be entered in any court of competent jurisdiction, including,
without limitation, the courts of the State of California or any federal court
in California or any court of competent jurisdiction in the United States. The
award and judgment thereon shall include interest at the legal rate from the
date that the sum awarded to the prevailing party was originally due and
payable.
14.3 Provisional Remedies. All provisional remedies shall be
--------------------
the exclusive jurisdiction of the courts. The parties may seek and obtain
provisional remedies prior to or contemporaneously with arbitration.
-49-
<PAGE>
14.4 Entitlement to Costs. If any legal action or dispute arises
--------------------
under this Agreement, arises by reason of any asserted breach of it, or arises
between the parties and is related in any way to the subject matter of the
Agreement, the prevailing party shall be entitled to recover all costs and
expenses, including reasonable attorneys' fees, arbitration costs, investigative
costs, reasonable accounting fees and charges for experts. Attorneys' fees and
expenses incurred in enforcing any judgment are recoverable as a separate item
and shall be severable from other provisions of this Agreement, shall survive
any judgment and shall not be merged into such judgment.
14.5 Jurisdiction and Venue. Except as otherwise provided in this
----------------------
Agreement, each of the parties consents and submits to the exclusive
jurisdiction and venue of the State of California for the adjudication of any
dispute between the parties pertaining to this Agreement or the alleged breach
of any provision hereof.
ARTICLE XV
----------
MISCELLANEOUS PROVISIONS
------------------------
15.1 Taxes. The Duke City Shareholders shall pay all sales, use,
-----
stamp, transfer and like taxes, if any, required to be paid in connection with
the transfer of the Duke City Stock when and if it is purchased pursuant to the
terms hereof. Further, each of the Duke City Shareholders expressly agrees that
all taxes, and penalties and interest thereon (if any such taxes are due), of
any nature, payable to any governmental authority relating to the transfer of
the Duke City Stock by the Duke City Shareholders are the responsibility of the
Duke City Shareholders, and the Acquirer
-50-
<PAGE>
and Matthews shall in no event be responsible for any such taxes. The Duke City
Shareholders shall not look to the Acquirer or Matthews for reimbursement or
contribution toward any such amounts.
15.2 Amendment and Modification. This Agreement may be amended,
--------------------------
modified and supplemented by mutual consent of the parties hereto, with respect
to any of the terms contained herein, only in such manner as may be agreed upon
in writing by the parties.
15.3 Waiver of Compliance. Any failure of any of the Duke City
--------------------
Parties on the one hand, or the Acquirer, on the other, to comply with any
obligation, covenant, agreement or condition herein may be respectively waived,
in writing, by the Duke City Parties or by the Acquirer. Such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
15.4 Expenses. All costs and expenses incurred in connection with
--------
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses. The Duke City Parties jointly and severally
represent to the Acquirer with respect to the Duke City Parties and the Acquirer
represents to the Duke City Parties with respect to the Acquirer, that they, or
any of them, have not dealt with any broker with respect to this transaction and
shall indemnify the other party or parties against any claim by any other third
person for any commission, brokerage, finder's fee or other payment based on any
alleged agreement or understanding between them or it and such third person.
-51-
<PAGE>
15.5 Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given as follows:
(a) if to the Duke City Shareholders, immediately when delivered by
hand or by confirmed facsimile transmission, or three (3) days after being
mailed, certified mail with postage prepaid, to:
Harold Jay Lefkovitz
c/o Duke City Video, Inc.
4121 Cutler, N.E.
Albuquerque, New Mexico 87110
Facsimile: (505) 884-1008
Louise K. Lefkovitz
c/o Duke City Video, Inc.
4121 Cutler, N.E.
Albuquerque, New Mexico 87110
Facsimile: (505) 884-1008
Patricia M. Brusati
c/o Duke City Video, Inc.
3088 Clybourn Avenue
Burbank, California 91505
Facsimile: (818) 841-5210
Stephen F. Ward
c/o Duke City Video, Inc.
4121 Cutler, N.E.
Albuquerque, New Mexico 87110
Facsimile: (505) 884-1008
with a copy to:
Jeffrey Loubet, Esq.
Rodey, Dickason, Sloan, Akin & Robb, P.A.
Albuquerque Plaza
201 Third Street NW, Suite 2200
Albuquerque, New Mexico 87103
Facsimile: (505) 768-7395
or to such other person or persons as the Duke City Shareholders shall designate
in writing, delivered to the Acquirer in the manner provided in this Section
15.5.
-52-
<PAGE>
(b) if to the Acquirer, immediately when delivered by hand or by
confirmed facsimile transmission, or three (3) days after being mailed,
certified mail with postage prepaid, to:
Duke City Holdings, Inc.
3111 North Kenwood Street
Burbank, California 91505
Attention: Mr. Carlos D. DeMattos
Facsimile: (818) 525-5243
with a copy to:
Tasha D. Nguyen, Esq.
Whitman, Breed, Abbott & Morgan
633 West Fifth Street
Twenty First Floor
Los Angeles, California 90071
Facsimile: (213) 896-2450
or to such other person or persons as the Acquirer shall designate in writing,
delivered to the Duke City Shareholders in the manner provided in this Section
15.5.
15.6 Public Statements. The parties' obligations regarding the
-----------------
confidential treatment of this Agreement is provided for in separate agreements
attached hereto as Exhibit G (each, a "Nondisclosure Agreement"), made by Duke
City in favor of Matthews and made by Matthews in favor of Duke City. Except
for filings with governmental authorities or other announcements required by
applicable law, prior to the Closing, no party hereto shall make any public
statement or announcement regarding the transactions contemplated hereby other
than (i) in accordance with the Nondisclosure Agreements and (ii) with advance
notice, together with a copy of the text thereof, to the other parties hereto.
As of the Closing, the terms of this Section 15.6 shall control in the event of
a conflict between this Section 15.6 and the Nondisclosure
-53-
<PAGE>
Agreements. As of the Closing, no public statement or announcement, except for
filings with governmental authorities or other announcements required by
applicable law, shall be made without the prior approval of the Acquirer. The
rights and duties of the parties under this Section 15.6 shall survive
termination of this Agreement for any reason.
15.7 Assignment. This Agreement and all the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties; provided,
however, that the Acquirer may assign this Agreement and the rights, interests
and obligations hereunder to an Affiliate of the Acquirer.
15.8 Governing Law. This Agreement and the legal relations between
-------------
the parties hereto shall be governed by and construed in accordance with the
laws of the State of California except insofar as federal law or the internal
law of any other political entity or jurisdiction shall specifically and
mandatorily apply to any of the transactions contemplated hereby.
15.9 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Duke City Parties and the Acquirer
contained in this Agreement and in any document delivered or to be delivered
pursuant to this Agreement shall survive the Closing Date until the expiration
of the statute of limitations with respect to claims related thereto.
-54-
<PAGE>
15.10 Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15.11 Headings and Schedules. The headings of the Sections and
----------------------
Articles of this Agreement are inserted for convenience only and shall not
constitute a part hereof.
15.12 Entire Agreement. This Agreement, including the other
----------------
agreements and documents expressly referred to herein which form a part hereof,
contains the entire understanding of the parties hereto in respect of the
subject matter hereof. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings amongst the parties with respect to such subject matter.
-55-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
DUKE CITY HOLDINGS, INC.
("Acquirer")
By: /s/ Carlos D. DeMattos
----------------------
Name: Carlos D. DeMattos
Title: President
DUKE CITY VIDEO, INC.
By: /s/ Harold Jay Lefkovitz
--------------------------
Harold Jay Lefkovitz
President
/s/ Patricia M. Brusati
-------------------------------
PATRICIA M. BRUSATI
/s/ Louise K. Lefkovitz
-------------------------------
LOUISE K. LEFKOVITZ
/s/ Harold Jay Lefkovitz
-------------------------------
HAROLD JAY LEFKOVITZ
/s/ Stephen F. Ward
-------------------------------
STEPHEN F. WARD
-56-
<PAGE>
LIST OF EXHIBITS
----------------
EXHIBIT TITLE
- ------- -----
A OWNERSHIP AND ALLOCATION OF MATTHEWS SHARES FOR DUKE CITY STOCK
B EMPLOYMENT AGREEMENT
B-1 BRUSATI
B-2 LEFKOVITZ
B-3 WARD
C NON-COMPETITION AGREEMENT
D LEFKOVITZ NOTE
E BRUSATI NOTE
F NONDISCLOSURE AGREEMENTS
-57-
<PAGE>
EXHIBIT B-1
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into this 2nd day of
May, 1997, by and between DUKE CITY VIDEO, INC., a New Mexico corporation doing
business as DUKE CITY STUDIO (the "Company"), and PATRICIA M. BRUSATI, an
individual ("Executive").
RECITALS
--------
A. The Company desires to be assured of the association and services of
Executive for the Company's operations.
B. Executive is willing and desires to be employed by the Company, and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as the Vice
----------
President, Administration, of the Company, subject to the supervision and
direction of the Company's President and Board of Directors.
2. Location and Travel. Executive shall perform her duties for
-------------------
the Company from the Company's facilities located in Burbank, California.
Executive shall travel as is required or appropriate to carry out her duties,
including travelling to the Company's facilities located in Burbank, California
and Albuquerque, New Mexico.
3. Term. The term of this Agreement shall be three (3) years
----
commencing on the date hereof, unless terminated earlier pursuant to Section 8
below; provided, however, that Executive's obligations in Section 7 below shall
continue in effect after such termination.
4. Compensation.
------------
(a) For all services rendered by Executive under this Agreement, the
Company shall pay Executive a base salary of One Hundred Ten Thousand Dollars
($110,000.00) per annum, payable weekly in equal installments. The base salary
may be increased from time to time pursuant to the discretion of the Company's
Board of Directors, provided that such increase shall not in any event exceed
ten percent (10%) for any twelve-month period;
(b) In addition to such salary, Executive shall be paid such bonuses
as are described in Section 5 below;
- 1 -
<PAGE>
(c) Executive will be reimbursed for all reasonable "out-of-pocket"
business expenses for business travel (other than travel related expenses
covered by the car allowance described below) and business entertainment
incurred in connection with the performance of her duties under this Agreement.
Such reimbursement shall be upon monthly presentation to the Company of valid
receipts and other appropriate documentation and upon approval by the Company of
receipts and documents; provided, however, any individual expense greater than
One Thousand Dollars ($1,000) shall not be incurred without prior approval of
the Company; and
(d) Executive shall be entitled to a car allowance of Three Hundred
Dollars ($300.00) per month (which includes automobile leasing, insurance and
mileage expenses); and
(e) Executive shall also be entitled to such other employee benefits
(such as vacation, and medical, disability and life insurance coverage) as are
available pursuant to the Company's general employment practices.
5. Performance Bonus.
-----------------
(a) In addition to Executive's base salary, the Company shall pay
Executive a bonus which shall be determined according to the formula set forth
in this Section 5:
(i) For the six-month period ending September 30, 1997, the bonus
shall be an amount equal to thirty percent (30%) of Executive's
base salary if EBITDA (as hereinafter defined) for such period
exceeds Three Million Dollars ($3,000,000.00);
(ii) For the fiscal year (i.e., twelve-month period) ending
September 30, 1998, the bonus shall be an amount equal to
thirty percent (30%) of Executive's base salary if EBITDA for
such fiscal year exceeds Six Million Dollars ($6,000,000.00);
(iii) For the fiscal year ending September 30, 1999, the bonus shall
be an amount equal to thirty percent (30%) of Executive's base
salary if EBITDA for such fiscal year exceeds Seven Million Two
Hundred Fifty Thousand Dollars ($7,250,000.00).
(b) For the period commencing from October 1, 1999 and ending on May
1, 2000, the expiration date of this Agreement, the bonus shall be an amount to
be determined by the Company's Board of Directors.
(c) Notwithstanding anything contained herein to the contrary,
Executive shall only be entitled to receive a bonus if she remains employed by
the Company, and continues to render
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<PAGE>
services on a full time basis to the Company, through January 1 of the calendar
year following the fiscal year in which the bonus is earned. Payment of any
bonus earned by Executive shall be made by no later than March 31 of the
calendar year following the fiscal year in which the bonus is earned. The
foregoing requirement shall also apply to the bonus payable for the period
commencing from October 1, 1999 and ending on May 1, 2000. No bonus shall be
payable to Executive in respect of any fiscal period unless the EBITDA level
specified above shall have been reached for that fiscal period.
(d) The term EBITDA as used above shall mean, for the relevant fiscal
period, the (1) net income, plus (2) to the extent deducted from net income (A)
depreciation and amortization for such fiscal year, plus (B) without
duplication, other non-cash charges, plus (C) tax expense, plus (D) the total
interest expense paid or accrued with respect to all outstanding indebtedness,
plus (E) non-cash expenses relating to Financial Accounting Standards Board
Statements Nos. 106 and 109, plus (F) the aggregate amount of non-capitalized
transaction costs incurred in connection with financings and acquisitions, all
as determined in accordance with generally accepted accounting principles
("GAAP"), of the Company. The net income and other amounts listed above of
Matthews Studio Equipment Group (the "Parent") and its subsidiaries other than
the Company will not be included in the calculation of EBITDA. The Parent and
its subsidiaries shall be referred to herein from time to time as the "Group".
(e) In determining the Company's EBITDA for the relevant fiscal
period, the Company's net income shall be calculated in accordance with GAAP.
6. Scope of Duties.
---------------
(a) Executive shall have responsibility for all day to day operations
of the Company's Burbank, California facility, including, but not limited to,
(1) marketing and rental of video equipment, marketing and rental of grip and
lighting equipment, and sales and distribution of "expendable supplies" used in
connection with grip, lighting and other equipment rented by the Company's
Burbank, California facility, (2) achieving other business goals of the Company,
(3) achievement of profit plan and goals for the Company, and (4) staffing,
organization, accounting and such other operational matters relating to the
operations of the Company. Such duties shall be exercised subject to the
control and supervision of the President and the Board of Directors of the
Company. Executive and the Company acknowledge that it is currently planned
that the Company's grip and lighting equipment operations will be transferred
out of the Company by September 30, 1997;
- 3 -
<PAGE>
(b) Executive shall have such other duties as may be assigned to her
from time to time by the Company's President and Board of Directors commensurate
with her experience and responsibilities in the position for which she is
employed pursuant to Section 1 above. Such duties shall be exercised subject to
the control and supervision of the President and the Board of Directors of the
Company;
(c) Executive hereby agrees to devote her full time, abilities and
energy to the faithful performance of duties assigned to her and to the
promotion and forwarding of the business affairs of the Company. Executive also
agrees not to divert any business opportunities from the Company, or any other
entity part of the Group, to himself or to any other person or business entity;
(d) Executive shall not, during the term of this Agreement, be engaged
in any other business activity without the prior consent of the President and
the Board of Directors of the Company; provided, however, that this restriction
shall not be construed as preventing Executive from investing her personal
assets in passive investments in business entities which are not in competition
with the Company or any other entity part of the Group; and
(e) Executive hereby agrees to promote and develop all business
opportunities that come to her attention relating to current or anticipated
future business of the Company or the Group in general, in a manner consistent
with the best interests of the Company or the Group, as applicable, and with her
duties under this Agreement.
7. Intellectual Property.
---------------------
(a) Other than in the performance of her duties hereunder, Executive
hereby agrees not to disclose, divulge or otherwise disseminate either during
the term of her employment by the Company or at any time thereafter, to any
person, firm or corporation, any information concerning the business affairs,
the trade secrets, the customer lists or similar proprietary information of the
Company or of any other entity part of the Group. Any technique, method,
process or technology used by the Company or the Group in the manufacture, sale
or distribution of any product or in the providing of any service shall be
considered a "trade secret" for purposes of this Agreement; and
(b) Executive hereby agrees that all patents, patent applications,
know-how, documents, reports, plans, proposals, marketing and sales plans,
client lists, client files and materials made by him, the Company, or any other
entity part of the Group are the property of the Company or such other entity
and shall not be used by her in any way adverse to the Company's or the Group's
interests either during the term of her employment
- 4 -
<PAGE>
by the Company or at any time thereafter. Executive shall not deliver,
reproduce or in any way allow such documents or things to be delivered or used
by any third party without the prior written direction or consent of the
Company's Board of Directors. Upon termination of this Agreement, Executive
shall surrender to the Company all items in her possession which are the
property of the Company. Executive hereby assigns to the Company any rights
which she may have in any such trade secret or proprietary information.
8. Term and Termination.
--------------------
(a) This Agreement shall automatically terminate on the death of
Executive;
(b) The Company shall have the right to terminate Executive's
employment "with cause" AT ANY TIME without prior notice, if any of the
following, which shall be deemed "cause" by the Company, shall occur:
(1) Any willful breach of duty or habitual neglect of duty;
(2) Subject to applicable law, including, but not limited to,
the Family and Medical Leave Act of 1933, the continued incapacity of
Executive for a period of more than sixty (60) consecutive days;
(3) Any material breach of Executive's obligations to the
Company under this Agreement and, to the extent such breach can be cured,
the failure of Executive to cure such breach within ten (10) days following
receipt of written notice from the Company, if such breach can be cured by
the payment of money, or a period of thirty (30) days following receipt of
written notice from the Company, if such breach can be cured by other than
the payment of money;
(4) Any material acts or events which inhibit Executive from
fully performing her responsibilities to the Company in good faith, such as
(i) drug or alcohol abuse, or (ii) acts of dishonesty, gross carelessness
or gross misconduct;
(5) Executive shall be convicted of a felony criminal offense or
any other criminal offense involving Executive's lack of honesty or
Executive's moral turpitude; or
(6) A breach on the part of Executive under the Non-
Competition Agreement dated as of May 2, 1997, among Executive, the Company
and Duke City Holdings, Inc. (the "Non-Competition Agreement") and, to the
extent such breach can be cured, such breach remains uncured for a period
of
- 5 -
<PAGE>
ten (10) days following receipt by Executive of written notice thereof
from the Company, if such breach can be cured by the payment of money, or a
period of thirty (30) days following receipt by Executive of written notice
thereof from the Company, if such breach can be cured by other than the
payment of money;
(c) Executive may terminate this Agreement if there shall be a breach
by the Company of a material obligation hereunder and, to the extent such breach
can be cured, such breach remains uncured for a period of ten (10) days
following receipt by the Company's Board of Directors of written notice thereof
from Executive, if such breach can be cured by the payment of money, or a period
of thirty (30) days following receipt by the Company's Board of Directors of
written notice thereof from Executive, if such breach can be cured by other than
the payment of money; and
(d) In the event of termination pursuant to this Section 8, Executive
shall be entitled to no further compensation or employee benefits, except for
those salary amounts and employee benefits accrued and unpaid as of the date of
termination and except for the bonus due under Section 5 above.
9. Right of Offset. Anything herein to the contrary
---------------
notwithstanding, and without limiting any other remedies available to the
Company hereunder or under applicable law, the Company shall have the right to
offset, against amounts payable to Executive under this Agreement and against
amounts payable to Executive under that certain Promissory Note dated May 2,
1997 in the original principal amount of Fifty Thousand Dollars ($50,000.00) due
to Executive from the Company (the "Executive Note"), any loss, liability,
damage, cost or expense, including, without limitation, the fees and
disbursements of counsel, incurred or suffered by the Company or any other
entity part of the Group by reason of a breach by Executive of a material term
of the Stock Exchange Agreement and Plan of Reorganization dated May 2, 1997
among Executive, Harold Jay Lefkovitz, Louise K. Lefkovitz, the Company and Duke
City Holdings, Inc. (the "Exchange Agreement") or the Non-Competition Agreement.
10. Insurance. Executive hereby acknowledges and agrees that the
---------
Company shall have the right to procure insurance, to insure against the risk of
death or disability of Executive during the term of this Agreement. If the
Company so elects to purchase such additional insurance, such additional
insurance shall name the Company, or Parent, as the beneficiary in the event of
Executive's death or disability. Executive hereby agrees to cooperate with the
Company in connection with the procurement and maintenance of such insurance.
- 6 -
<PAGE>
11. Injunctive Relief. The Company and Executive hereby
-----------------
acknowledge and agree that any default under Section 7 above will cause
irreparable damage to the Company in an amount difficult to ascertain.
Accordingly, in addition to any other relief to which the Company may be
entitled, the Company shall be entitled to such injunctive relief as may be
ordered by any court of competent jurisdiction including, but not limited to, an
injunction restraining any violation of Section 7 above and without the proof of
actual damages.
12. Arbitration.
-----------
(a) Except as provided in this Agreement, any dispute, controversy or
claim arising out of or relating to this Agreement or breach thereof shall be
settled by binding arbitration heard by one arbitrator, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association Rules (the
"Rules"). The parties hereto agree that the venue of such arbitration shall be
Los Angeles, California. The party intending to arbitrate shall serve a written
notice of intention to commence arbitration on the other party. The arbitrator
shall be appointed in accordance with the Rules.
(b) The arbitrator shall be bound by the terms and conditions of this
Agreement and shall have no power, in rendering the award, to alter or depart
from any express provision of this Agreement, and his/her failure to observe
this limitation shall constitute grounds for vacating the award. Any award of
the arbitrator shall be final and binding upon the parties and judgment may be
entered in any court of competent jurisdiction, including, without limitation,
the courts of the State of California or any federal court in California or any
court of competent jurisdiction in the United States. The award and judgment
thereon shall include interest at the legal rate from the date that the sum
awarded to the prevailing party was originally due and payable.
(c) All provisional remedies shall be the exclusive jurisdiction of
the courts. The parties may seek and obtain provisional remedies prior to or
contemporaneously with arbitration.
(d) If any legal action or dispute arises under this Agreement, arises
by reason of any asserted breach of it, or arises between the parties and is
related in any way to the subject matter of the Agreement, the prevailing party
shall be entitled to recover all costs and expenses, including reasonable
attorneys' fees, arbitration costs, investigative costs, reasonable accounting
fees and charges for experts. Attorneys' fees and expenses incurred in
enforcing any judgment are recoverable as a separate item and shall be severable
from other provisions of this Agreement, shall survive any judgment and shall
not be merged into such judgment.
- 7 -
<PAGE>
(e) Except as otherwise provided in this Agreement, each of the
parties consents and submits to the exclusive jurisdiction and venue of the
State of California for the adjudication of any dispute between the parties
pertaining to this Agreement or the alleged breach of any provision hereof.
13. Transfer and Assignment. This Agreement is personal as to
-----------------------
Executive and shall not be assigned or transferred by Executive without the
prior written consent of the Company. This Agreement shall be binding upon and
inure to the benefit of all of the parties hereto and their respective permitted
heirs, personal representatives, successors and assigns.
14. Severability. Nothing contained herein shall be construed to
------------
require the commission of any act contrary to law. Should there be any conflict
between any provisions hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.
15. Governing Law. This Agreement is made under and shall be
-------------
construed pursuant to the laws of the State of California.
16. Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
17. Entire Agreement. This Agreement (together with the Exchange
----------------
Agreement, the Non-Competition Agreement and the Executive Note) constitutes the
entire agreement and understanding of the parties with respect to the subject
matter hereof and supersedes all prior oral or written agreements, arrangements,
and understandings with respect thereto. No representation, promise,
inducement, statement or intention has been made by any party hereto that is not
embodied herein, and no party shall be bound by or liable for any alleged
representation, promise, inducement, or statement not so set forth herein.
18. Modification. This Agreement may be modified, amended,
------------
superseded, or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the parties hereto.
- 8 -
<PAGE>
19. Waiver. The waiver by either of the parties, express or
------
implied, of any right under this Agreement or any failure to perform under this
Agreement by the other party, shall not constitute or be deemed as a waiver of
any other right under this Agreement or of any other failure to perform under
this Agreement by the other party, whether of a similar or dissimilar nature.
20. Cumulative Remedies. Each and all of the several rights and
-------------------
remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one or such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.
21. Headings. The section and other headings contained in this
--------
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
22. Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given immediately when delivered by hand or by confirmed
facsimile transmission, or three (3) days after being mailed, certified mail
with postage prepaid, to
(a) if to Executive:
Patricia M. Brusati
c/o Duke City Video, Inc.
3088 Clybourn Avenue
Burbank, California 91505
Facsimile: (818) 841-5210
with a copy to:
Jeffrey W. Loubet, Esq.
Rodey, Dickason, Sloan, Akin & Robb, P.A.
Albuquerque Plaza
201 Third Street NW, Suite 2200
Albuquerque, New Mexico 87103
Facsimile: (505) 768-7395
(b) if to the Company:
Duke City Video, Inc.
3111 North Kenwood Street
Burbank, California 91505
Attention: Each Member of the Board of
Directors
Facsimile: (818) 525-5243
- 9 -
<PAGE>
with a copy to:
Carlos D. DeMattos
Matthews Studio Equipment Group
3111 Kenwood Street
Burbank, California 91505
Facsimile: (818) 525-5243
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first set forth above.
"Executive"
/s/ Patricia M. Brusati
-----------------------
PATRICIA M. BRUSATI
"Company" DUKE CITY VIDEO, INC.
By:/s/ Harold Jay Lefkovitz
------------------------
Name: Harold Jay Lefkovitz
Title: President
- 10 -
<PAGE>
EXHIBIT B-2
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into this 2nd day of
May, 1997, by and between DUKE CITY VIDEO, INC., a New Mexico corporation doing
business as DUKE CITY STUDIO (the "Company"), and HAROLD JAY LEFKOVITZ, an
individual ("Executive").
RECITALS
--------
A. The Company desires to be assured of the association and services of
Executive for the Company's operations.
B. Executive is willing and desires to be employed by the Company, and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as the
----------
President of the Company, subject to the supervision and direction of the
Company's Board of Directors.
2. Location and Travel. Executive shall perform his duties for
-------------------
the Company from the Company's facilities located in Albuquerque, New Mexico.
Executive shall travel as is required or appropriate to carry out his duties,
including the Company's facilities located in Burbank, California and Dallas,
Texas. Executive shall relocate to Burbank, California at such time as the
Company's Board of Directors shall elect to move the Company's headquarters to
Burbank, which move is estimated to occur within the three months following the
date of this Agreement.
3. Term. The term of this Agreement shall be three (3) years
----
commencing on the date hereof, unless terminated earlier pursuant to Section 8
below; provided, however, that Executive's obligations in Section 7 below shall
continue in effect after such termination.
4. Compensation.
------------
(a) For all services rendered by Executive under this Agreement, the
Company shall pay Executive a base salary of One Hundred Fifty Thousand Dollars
($150,000.00) per annum, payable weekly in equal installments. The base salary
may be increased from time to time pursuant to the discretion of the Company's
Board of Directors, provided that such increase shall not in any event exceed
ten percent (10%) for any twelve-month period;
- 1 -
<PAGE>
(b) In addition to such salary, Executive shall be paid such bonuses
as are described in Section 5 below;
(c) Executive will be reimbursed for all reasonable "out-of-pocket"
business expenses for business travel (other than travel related expenses
covered by the car allowance described below) and business entertainment
incurred in connection with the performance of his duties under this Agreement.
Such reimbursement shall be upon monthly presentation to the Company of valid
receipts and other appropriate documentation and upon approval by the Company of
receipts and documents; provided, however, any individual expense greater than
One Thousand Dollars ($1,000) shall not be incurred without prior approval of
the Company; and
(d) Executive shall be entitled to a car allowance of Five Hundred
Dollars ($500.00) per month (which includes automobile leasing, insurance and
mileage expenses); and
(e) Executive shall also be entitled to such other employee benefits
(such as vacation, and medical, disability and life insurance coverage) as are
available pursuant to the Company's general employment practices.
5. Performance Bonus.
-----------------
(a) In addition to Executive's base salary, the Company shall pay
Executive a bonus which shall be determined according to the formula set forth
in this Section 5:
(i) For the six-month period ending September 30, 1997, the bonus
shall be an amount equal to thirty percent (30%) of Executive's
base salary if EBITDA (as hereinafter defined) for such period
exceeds Three Million Dollars ($3,000,000.00);
(ii) For the fiscal year (i.e., twelve-month period) ending
September 30, 1998, the bonus shall be an amount equal to
thirty percent (30%) of Executive's base salary if EBITDA for
such fiscal year exceeds Six Million Dollars ($6,000,000.00);
(iii) For the fiscal year ending September 30, 1999, the bonus shall
be an amount equal to thirty percent (30%) of Executive's base
salary if EBITDA for such fiscal year exceeds Seven Million Two
Hundred Fifty Thousand Dollars ($7,250,000.00).
(b) For the period commencing from October 1, 1999 and ending on May
1, 2000, the expiration date of this Agreement, the bonus shall be an amount to
be determined by the Company's Board of Directors.
(c) Notwithstanding anything contained herein to the contrary,
Executive shall only be entitled to receive a bonus if
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<PAGE>
he remains employed by the Company, and continues to render services on a full
time basis to the Company, through January 1 of the calendar year following the
fiscal year in which the bonus is earned. Payment of any bonus earned by
Executive shall be made by no later than March 31 of the calendar year following
the fiscal year in which the bonus is earned. The foregoing requirement shall
also apply to the bonus payable for the period commencing from October 1, 1999
and ending on May 1, 2000. No bonus shall be payable to Executive in respect of
any fiscal period unless the EBITDA level specified above shall have been
reached for that fiscal period.
(d) The term EBITDA as used above shall mean, for the relevant fiscal
period, the (1) net income, plus (2) to the extent deducted from net income (A)
depreciation and amortization for such fiscal year, plus (B) without
duplication, other non-cash charges, plus (C) tax expense, plus (D) the total
interest expense paid or accrued with respect to all outstanding indebtedness,
plus (E) non-cash expenses relating to Financial Accounting Standards Board
Statements Nos. 106 and 109, plus (F) the aggregate amount of non-capitalized
transaction costs incurred in connection with financings and acquisitions, all
as determined in accordance with generally accepted accounting principles
("GAAP"), of the Company. The net income and other amounts listed above of
Matthews Studio Equipment Group (the "Parent") and its subsidiaries other than
the Company will not be included in the calculation of EBITDA. The Parent and
its subsidiaries shall be referred to herein from time to time as the "Group".
(e) In determining the Company's EBITDA for the relevant fiscal
period, the Company's net income shall be calculated in accordance with GAAP.
6. Scope of Duties.
---------------
(a) Executive shall have primary responsibility for all day to day
operations of the Company, including, but not limited to, (1) marketing and
rental of video equipment and film camera equipment, marketing and rental of
grip and lighting equipment, rental of the Company's sound stage, videotape
duplication services, and sales and distribution of "expendable supplies" used
in connection with grip, lighting and other equipment rented by the Company, (2)
achieving other business goals of the Company, (3) achievement of profit plan
and goals for the Company, and (4) staffing, organization, supervision of
accounting and such other operational matters relating to the operations of the
Company. In addition, Executive shall have primary responsibility for
coordinating the operations of the Company's facilities in Albuquerque, New
Mexico, Burbank, California and Dallas, Texas. Such duties shall be exercised
subject to the control and supervision of the Board of Directors of the Company.
Executive and the Company acknowledge that it is planned that the Company's grip
and lighting operations will be transferred out of the Company by September 30,
1997;
- 3 -
<PAGE>
(b) Executive shall have such other duties as may be assigned to him
from time to time by the Company's Board of Directors commensurate with his
experience and responsibilities in the position for which he is employed
pursuant to Section 1 above. Such duties shall be exercised subject to the
control and supervision of the Board of Directors of the Company;
(c) Executive hereby agrees to devote his full time, abilities and
energy to the faithful performance of duties assigned to him and to the
promotion and forwarding of the business affairs of the Company. Executive also
agrees not to divert any business opportunities from the Company, or any other
entity part of the Group, to himself or to any other person or business entity;
(d) Executive shall not, during the term of this Agreement, be engaged
in any other business activity without the prior consent of the Board of
Directors of the Company; provided, however, that this restriction shall not be
construed as preventing Executive from investing his personal assets in passive
investments in business entities which are not in competition with the Company
or any other entity part of the Group; and
(e) Executive hereby agrees to promote and develop all business
opportunities that come to his attention relating to current or anticipated
future business of the Company or the Group in general, in a manner consistent
with the best interests of the Company or the Group, as applicable, and with his
duties under this Agreement.
7. Intellectual Property.
---------------------
(a) Other than in the performance of his duties hereunder, Executive
hereby agrees not to disclose, divulge or otherwise disseminate either during
the term of his employment by the Company or at any time thereafter, to any
person, firm or corporation, any information concerning the business affairs,
the trade secrets, the customer lists or similar proprietary information of the
Company or of any other entity part of the Group. Any technique, method,
process or technology used by the Company or the Group in the manufacture, sale
or distribution of any product or in the providing of any service shall be
considered a "trade secret" for purposes of this Agreement; and
(b) Executive hereby agrees that all patents, patent applications,
know-how, documents, reports, plans, proposals, marketing and sales plans,
client lists, client files and materials made by him, the Company, or any other
entity part of the Group are the property of the Company or such other entity
and shall not be used by him in any way adverse to the Company's or the Group's
interests either during the term of his employment by the Company or at any time
thereafter. Executive shall not deliver, reproduce or in any way allow such
documents or things to be delivered or used by any third party without the prior
- 4 -
<PAGE>
written direction or consent of the Company's Board of Directors. Upon
termination of this Agreement, Executive shall surrender to the Company all
items in his possession which are the property of the Company. Executive hereby
assigns to the Company any rights which he may have in any such trade secret or
proprietary information.
8. Term and Termination.
--------------------
(a) This Agreement shall automatically terminate on the death of
Executive;
(b) The Company shall have the right to terminate Executive's
employment "with cause" AT ANY TIME without prior notice, if any of the
following, which shall be deemed "cause" by the Company, shall occur:
(1) Any willful breach of duty or habitual neglect of duty;
(2) Subject to applicable law, including, but not limited to,
the Family Leave and Medical Act of 1933, the continued incapacity of
Executive for a period of more than sixty (60) consecutive days;
(3) Any material breach of Executive's obligations to the
Company under this Agreement and, to the extent such breach can be cured,
the failure of Executive to cure such breach within ten (10) days following
receipt of written notice from the Company, if such breach can be cured by
the payment of money, or a period of thirty (30) days following receipt of
written notice from the Company, if such breach can be cured by other than
the payment of money;
(4) Any material acts or events which inhibit Executive from
fully performing his responsibilities to the Company in good faith, such as
(i) drug or alcohol abuse, or (ii) acts of dishonesty, gross carelessness
or gross misconduct;
(5) Executive shall be convicted of a felony criminal offense or
any other criminal offense involving Executive's lack of honesty or
Executive's moral turpitude; or
(6) A breach on the part of Executive under the Non-
Competition Agreement dated as of May 2, 1997, among Executive, the Company
and Duke City Holdings, Inc. (the "Non-Competition Agreement") and, to the
extent such breach can be cured, such breach remains uncured for a period
of ten (10) days following receipt by Executive of written notice thereof
from the Company, if such breach can be cured by the payment of money, or a
period of thirty (30) days following receipt by Executive of written notice
thereof
- 5 -
<PAGE>
from the Company, if such breach can be cured by other than the payment of
money;
(c) Executive may terminate this Agreement if there shall be a breach
by the Company of a material obligation hereunder and, to the extent such breach
can be cured, such breach remains uncured for a period of ten (10) days
following receipt by the Company's Board of Directors of written notice thereof
from Executive, if such breach can be cured by the payment of money, or a period
of thirty (30) days following receipt by the Company's Board of Directors of
written notice thereof from Executive, if such breach can be cured by other than
the payment of money; and
(d) In the event of termination pursuant to this Section 8, Executive
shall be entitled to no further compensation or employee benefits, except for
those salary amounts and employee benefits accrued and unpaid as of the date of
termination and except for the bonus due under Section 5 above.
9. Right of Offset. Anything herein to the contrary
---------------
notwithstanding, and without limiting any other remedies available to the
Company hereunder or under applicable law, the Company shall have the right to
offset, against amounts payable to Executive under this Agreement and against
amounts payable to Executive under that certain Promissory Note dated May 2,
1997 in the original principal amount of Five Hundred Eighty-Five Thousand Five
Hundred Sixty-One Dollars and 15/100 ($585,561.15) due to Executive from the
Company (the "Executive Note"), any loss, liability, damage, cost or expense,
including, without limitation, the fees and disbursements of counsel, incurred
or suffered by the Company or any other entity part of the Group by reason of a
breach by Executive of a material term of the Stock Exchange Agreement and Plan
of Reorganization dated May 2, 1997, among Executive, Louise K. Lefkovitz,
Patricia M. Brusati, Stephen F. Ward, the Company and Duke City Holdings, Inc.
(the "Exchange Agreement") or the Non-Competition Agreement.
10. Insurance. Executive hereby acknowledges and agrees that the
---------
Company shall have the right to procure insurance, to insure against the risk of
death or disability of Executive during the term of this Agreement. If the
Company so elects to purchase such additional insurance, such additional
insurance shall name the Company, or Parent, as the beneficiary in the event of
Executive's death or disability. Executive hereby agrees to cooperate with the
Company in connection with the procurement and maintenance of such insurance.
11. Injunctive Relief. The Company and Executive hereby
-----------------
acknowledge and agree that any default under Section 7
above will cause irreparable damage to the Company in an amount difficult to
ascertain. Accordingly, in addition to any other relief to which the Company
may be entitled, the Company shall be entitled to such injunctive relief as may
be ordered by any court of competent jurisdiction including, but not limited to,
an
- 6 -
<PAGE>
injunction restraining any violation of Section 7 above and without the proof of
actual damages.
12. Arbitration.
-----------
(a) Except as provided in this Agreement, any dispute, controversy or
claim arising out of or relating to this Agreement or breach thereof shall be
settled by binding arbitration heard by one arbitrator, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association Rules (the
"Rules"). The parties hereto agree that the venue of such arbitration shall be
Los Angeles, California. The party intending to arbitrate shall serve a written
notice of intention to commence arbitration on the other party. The arbitrator
shall be appointed in accordance with the Rules.
(b) The arbitrator shall be bound by the terms and conditions of this
Agreement and shall have no power, in rendering the award, to alter or depart
from any express provision of this Agreement, and his/her failure to observe
this limitation shall constitute grounds for vacating the award. Any award of
the arbitrator shall be final and binding upon the parties and judgment may be
entered in any court of competent jurisdiction, including, without limitation,
the courts of the State of California or any federal court in California or any
court of competent jurisdiction in the United States. The award and judgment
thereon shall include interest at the legal rate from the date that the sum
awarded to the prevailing party was originally due and payable.
(c) All provisional remedies shall be the exclusive jurisdiction of
the courts. The parties may seek and obtain provisional remedies prior to or
contemporaneously with arbitration.
(d) If any legal action or dispute arises under this Agreement, arises
by reason of any asserted breach of it, or arises between the parties and is
related in any way to the subject matter of the Agreement, the prevailing party
shall be entitled to recover all costs and expenses, including reasonable
attorneys' fees, arbitration costs, investigative costs, reasonable accounting
fees and charges for experts. Attorneys' fees and expenses incurred in
enforcing any judgment are recoverable as a separate item and shall be severable
from other provisions of this Agreement, shall survive any judgment and shall
not be merged into such judgment.
(e) Except as otherwise provided in this Agreement, each of the
parties consents and submits to the exclusive jurisdiction and venue of the
State of California for the adjudication of any dispute between the parties
pertaining to this Agreement or the alleged breach of any provision hereof.
- 7 -
<PAGE>
13. Transfer and Assignment. This Agreement is personal as to
-----------------------
Executive and shall not be assigned or transferred by Executive without the
prior written consent of the Company. This Agreement shall be binding upon and
inure to the benefit of all of the parties hereto and their respective permitted
heirs, personal representatives, successors and assigns.
14. Severability. Nothing contained herein shall be construed to
------------
require the commission of any act contrary to law. Should there be any conflict
between any provisions hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.
15. Governing Law. This Agreement is made under and shall be
-------------
construed pursuant to the laws of the State of California.
16. Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
17. Entire Agreement. This Agreement (together with the Exchange
----------------
Agreement and the Non-Competition Agreement and the Executive Note) constitutes
the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersedes all prior oral or written agreements,
arrangements, and understandings with respect thereto. No representation,
promise, inducement, statement or intention has been made by any party hereto
that is not embodied herein, and no party shall be bound by or liable for any
alleged representation, promise, inducement, or statement not so set forth
herein.
18. Modification. This Agreement may be modified, amended,
------------
superseded, or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the parties hereto.
19. Waiver. The waiver by either of the parties, express or
------
implied, of any right under this Agreement or any failure to perform under this
Agreement by the other party, shall not constitute or be deemed as a waiver of
any other right under this Agreement or of any other failure to perform under
this Agreement by the other party, whether of a similar or dissimilar nature.
- 8 -
<PAGE>
20. Cumulative Remedies. Each and all of the several rights and
-------------------
remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one or such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.
21. Headings. The section and other headings contained in this
--------
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
22. Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given immediately when delivered by hand or by confirmed
facsimile transmission, or three (3) days after being mailed, certified mail
with postage prepaid, to
(a) if to Executive:
Harold J. Lefkovitz
c/o Duke City Video, Inc.
4121 Cutler, N.E.
Albuquerque, New Mexico 87110
Facsimile: (505) 884-1008
with a copy to:
Jeffrey W. Loubet, Esq.
Rodey, Dickason, Sloan, Akin & Robb, P.A.
Albuquerque Plaza
201 Third Street NW, Suite 2200
Albuquerque, New Mexico 87103
Facsimile: (505) 768-7395
(b) if to the Company:
Duke City Video, Inc.
3111 North Kenwood Street
Burbank, California 91505
Attention: Each Member of the Board of
Directors
Facsimile: (818) 525-5243
with a copy to:
Carlos D. DeMattos
Matthews Studio Equipment Group
3111 Kenwood Street
Burbank, California 91505
Facsimile: (818) 525-5243
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first set forth above.
"Executive"
/s/ Harold Jay Lefkovitz
------------------------
HAROLD JAY LEFKOVITZ
"Company" DUKE CITY VIDEO, INC.
By:/s/ Stephen W. Ward
-------------------
Name: Stephen F. Ward
Title: Executive Vice-President
- 10 -
<PAGE>
EXHIBIT B-3
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into this 2nd day of
May, 1997, by and between DUKE CITY VIDEO, INC., a New Mexico corporation doing
business as DUKE CITY STUDIO (the "Company"), and STEPHEN F. WARD, an individual
("Executive").
RECITALS
--------
A. The Company desires to be assured of the association and services of
Executive for the Company's operations.
B. Executive is willing and desires to be employed by the Company, and
the Company is willing to employ Executive, upon the terms, covenants and
conditions hereinafter set forth.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs Executive as the
----------
Executive Vice President of the Company, subject to the supervision and
direction of the Company's President and Board of Directors.
2. Location and Travel. Executive shall perform his duties for
-------------------
the Company from the Company's facilities located in Albuquerque, New Mexico.
Executive shall travel as is required or appropriate to carry out his duties,
including travelling to the Company's facilities located in Burbank, California
and Dallas, Texas. Executive shall relocate to Burbank, California at such time
as the Company's Board of Directors shall elect to move the Company's
headquarters to Burbank, which move is estimated to occur within the three (3)
months following the date of this Agreement.
3. Term. The term of this Agreement shall be three (3) years
----
commencing on the date hereof, unless terminated earlier pursuant to Section 8
below; provided, however, that Executive's obligations in Section 7 below shall
continue in effect after such termination.
4. Compensation.
------------
(a) For all services rendered by Executive under this Agreement, the
Company shall pay Executive a base salary of One Hundred Twenty-Five Thousand
Dollars ($125,000.00) per annum, payable weekly in equal installments. The base
salary may be increased from time, to time pursuant to the discretion of the
- 1 -
<PAGE>
Company's Board of Directors, provided that such increase shall not in any event
exceed ten percent (10%) for any twelve-month period;
(b) In addition to such salary, Executive shall be paid such bonuses
as are described in Section 5 below;
(c) Executive will be reimbursed for all reasonable "out-of-pocket"
business expenses for business travel (other than travel related expenses
covered by the car allowance described below) and business entertainment
incurred in connection with the performance of his duties under this Agreement.
Such reimbursement shall be upon monthly presentation to the Company of valid
receipts and other appropriate documentation and upon approval by the Company of
receipts and documents; provided, however, any individual expense greater than
One Thousand Dollars ($1,000) shall not be incurred without prior approval of
the Company; and
(d) Executive shall be entitled to a car allowance of Four Hundred
Dollars ($400.00) per month (which includes automobile leasing, insurance and
mileage expenses); and
(e) Executive shall also be entitled to such other employee benefits
(such as vacation, and medical, disability and life insurance coverage) as are
available pursuant to the Company's general employment practices.
5. Performance Bonus.
-----------------
(a) In addition to Executive's base salary, the Company shall pay
Executive a bonus which shall be determined according to the formula set forth
in this Section 5:
(i) For the six-month period ending September 30, 1997, the bonus
shall be an amount equal to thirty percent (30%) of Executive's
base salary if EBITDA (as hereinafter defined) for such period
exceeds Three Million Dollars ($3,000,000.00);
(ii) For the fiscal year (i.e., twelve-month period) ending
September 30, 1998, the bonus shall be an amount equal to
thirty percent (30%) of Executive's base salary if EBITDA for
such fiscal year exceeds Six Million Dollars ($6,000,000.00);
(iii) For the fiscal year ending September 30, 1999, the bonus shall
be an amount equal to thirty percent (30%) of Executive's base
salary if EBITDA for such fiscal year exceeds Seven Million Two
Hundred Fifty Thousand Dollars ($7,250,000.00).
- 2 -
<PAGE>
(b) For the period commencing from October 1, 1999 and ending on May
1, 2000, the expiration date of this Agreement, the bonus shall be an amount to
be determined by the Company's Board of Directors.
(c) Notwithstanding anything contained herein to the contrary,
Executive shall only be entitled to receive a bonus if she remains employed by
the Company, and continues to render services on a full time basis to the
Company, through January 1 of the calendar year following the fiscal year in
which the bonus is earned. Payment of any bonus earned by Executive shall be
made by no later than March 31 of the calendar year following the fiscal year in
which the bonus is earned. The foregoing requirement shall also apply to the
bonus payable for the period commencing from October 1, 1999 and ending on May
1, 2000. No bonus shall be payable to Executive in respect of any fiscal period
unless the EBITDA level specified above shall have been reached for that fiscal
period.
(d) The term EBITDA as used above shall mean, for the relevant fiscal
period, the (1) net income, plus (2) to the extent deducted from net income (A)
depreciation and amortization for such fiscal year, plus (B) without
duplication, other non-cash charges, plus (C) tax expense, plus (D) the total
interest expense paid or accrued with respect to all outstanding indebtedness,
plus (E) non-cash expenses relating to Financial Accounting Standards Board
Statements Nos. 106 and 109, plus (F) the aggregate amount of non-capitalized
transaction costs incurred in connection with financings and acquisitions, all
as determined in accordance with generally accepted accounting principles
("GAAP"), of the Company. The net income and other amounts listed above of
Matthews Studio Equipment Group (the "Parent") and its subsidiaries other than
the Company will not be included in the calculation of EBITDA. The Parent and
its subsidiaries shall be referred to herein from time to time as the "Group".
(e) In determining the Company's EBITDA for the relevant fiscal
period, the Company's net income shall be calculated in accordance with GAAP.
6. Scope of Duties.
---------------
(a) Executive shall have responsibility for all day to day operations
of the Company's business, including, but not limited to, (1) marketing and
rental of video equipment and of film camera equipment, marketing and rental of
grip and lighting equipment, rental of the Company's sound stage, videotape
duplication services, and sales and distribution of "expendable supplies" used
in connection with grip, lighting and other equipment rented by the Company, (2)
achieving other business goals of the Company, (3) achievement of profit plan
and goals for the Company, and (4) staffing, organization, accounting and
- 3 -
<PAGE>
such other operational matters relating to the operations of the Company. Such
duties shall be exercised subject to the control and supervision of the
President and the Board of Directors of the Company. Executive and the Company
acknowledge that it is planned that the Company's grip and lighting operations
will be transferred out of the Company by September 30, 1997;
(b) Executive shall have such other duties as may be assigned to him
from time to time by the Company's President and Board of Directors commensurate
with his experience and responsibilities in the position for which he is
employed pursuant to Section 1 above. Such duties shall be exercised subject to
the control and supervision of the President and the Board of Directors of the
Company;
(c) Executive hereby agrees to devote his full time, abilities and
energy to the faithful performance of duties assigned to him and to the
promotion and forwarding of the business affairs of the Company. Executive also
agrees not to divert any business opportunities from the Company, or any other
entity part of the Group, to himself or to any other person or business entity;
(d) Executive shall not, during the term of this Agreement, be engaged
in any other business activity without the prior consent of the President and
Board of Directors of the Company; provided, however, that this restriction
shall not be construed as preventing Executive from investing his personal
assets in passive investments in business entities which are not in competition
with the Company or any other entity part of the Group; and
(e) Executive hereby agrees to promote and develop all business
opportunities that come to his attention relating to current or anticipated
future business of the Company or the Group in general, in a manner consistent
with the best interests of the Company or the Group, as applicable, and with his
duties under this Agreement.
7. Intellectual Property.
---------------------
(a) Other than in the performance of his duties hereunder, Executive
hereby agrees not to disclose, divulge or otherwise disseminate either during
the term of his employment by the Company or at any time thereafter, to any
person, firm or corporation, any information concerning the business affairs,
the trade secrets, the customer lists or similar proprietary information of the
Company or of any other entity part of the Group. Any technique, method,
process or technology used by the Company or the Group in the manufacture, sale
or distribution of any product or in the providing of any service shall be
considered a "trade secret" for purposes of this Agreement; and
- 4 -
<PAGE>
(b) Executive hereby agrees that all patents, patent applications,
know-how, documents, reports, plans, proposals, marketing and sales plans,
client lists, client files and materials made by him, the Company, or any other
entity part of the Group are the property of the Company or such other entity
and shall not be used by him in any way adverse to the Company's or the Group's
interests either during the term of his employment by the Company or at any time
thereafter. Executive shall not deliver, reproduce or in any way allow such
documents or things to be delivered or used by any third party without the prior
written direction or consent of the Company's Board of Directors. Upon
termination of this Agreement, Executive shall surrender to the Company all
items in his possession which are the property of the Company. Executive hereby
assigns to the Company any rights which he may have in any such trade secret or
proprietary information.
8. Term and Termination.
--------------------
(a) This Agreement shall automatically terminate on the death of
Executive;
(b) The Company shall have the right to terminate Executive's
employment "with cause" AT ANY TIME without prior notice, if any of the
following, which shall be deemed "cause" by the Company, shall occur:
(1) Any willful breach of duty or habitual neglect of duty;
(2) Subject to applicable law, including, but not limited to,
the Family and Medical Leave Act of 1933, the continued incapacity of
Executive for a period of more than sixty (60) consecutive days;
(3) Any material breach of Executive's obligations to the
Company under this Agreement and, to the extent such breach can be cured,
the failure of Executive to cure such breach within ten (10) days following
receipt of written notice from the Company, if such breach can be cured by
the payment of money, or a period of thirty (30) days following receipt of
written notice from the Company, if such breach can be cured by other than
the payment of money;
(4) Any material acts or events which inhibit Executive from
fully performing his responsibilities to the Company in good faith, such as
(i) drug or alcohol abuse, or (ii) acts of dishonesty, gross carelessness
or gross misconduct;
- 5 -
<PAGE>
(5) Executive shall be convicted of a felony criminal offense or
any other criminal offense involving Executive's lack of honesty or
Executive's moral turpitude; or
(6) A breach on the part of Executive under the Non-Competition
Agreement dated as of May 2, 1997, among Executive, the Company and Duke
City Holdings, Inc. (the "Non-Competition Agreement") and, to the extent
such breach can be cured, such breach remains uncured for a period of ten
(10) days following receipt by Executive of written notice thereof from the
Company, if such breach can be cured by the payment of money, or a period
of thirty (30) days following receipt by Executive of written notice
thereof from the Company, if such breach can be cured by other than the
payment of money;
(c) Executive may terminate this Agreement if there shall be a breach
by the Company of a material obligation hereunder and, to the extent such breach
can be cured, such breach remains uncured for a period of ten (10) days
following receipt by the Company's Board of Directors of written notice thereof
from Executive, if such breach can be cured by the payment of money, or a period
of thirty (30) days following receipt by the Company's Board of Directors of
written notice thereof from Executive, if such breach can be cured by other than
the payment of money; and
(d) In the event of termination pursuant to this Section 8, Executive
shall be entitled to no further compensation or employee benefits, except for
those salary amounts and employee benefits accrued and unpaid as of the date of
termination and except for the bonus due under Section 5 above.
9. Right of Offset. Anything herein to the contrary
---------------
notwithstanding, and without limiting any other remedies available to the
Company hereunder or under applicable law, the Company shall have the right to
offset, against amounts payable to Executive under this Agreement, any loss,
liability, damage, cost or expense, including, without limitation, the fees and
disbursements of counsel, incurred or suffered by the Company or any other
entity part of the Group by reason of a breach by Executive of a material term
of the Stock Exchange Agreement and Plan of Reorganization dated May 2, 1997
among Executive, Harold Jay Lefkovitz, Louise K. Lefkovitz, Patricia M. Brusati,
the Company and Duke City Holdings, Inc. (the "Exchange Agreement") or the Non-
Competition Agreement.
10. Insurance. Executive hereby acknowledges and agrees that the
---------
Company shall have the right to procure insurance, to insure against the risk of
death or disability of Executive during the term of this Agreement. If the
Company so elects to purchase such additional insurance, such additional
- 6 -
<PAGE>
insurance shall name the Company, or Parent, as the beneficiary in the event of
Executive's death or disability. Executive hereby agrees to cooperate with the
Company in connection with the procurement and maintenance of such insurance.
11. Injunctive Relief. The Company and Executive hereby
-----------------
acknowledge and agree that any default under Section 7 above will cause
irreparable damage to the Company in an amount difficult to ascertain.
Accordingly, in addition to any other relief to which the Company may be
entitled, the Company shall be entitled to such injunctive relief as may be
ordered by any court of competent jurisdiction including, but not limited to, an
injunction restraining any violation of Section 7 above and without the proof of
actual damages.
12. Arbitration.
-----------
(a) Except as provided in this Agreement, any dispute, controversy or
claim arising out of or relating to this Agreement or breach thereof shall be
settled by binding arbitration heard by one arbitrator, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association Rules (the
"Rules"). The parties hereto agree that the venue of such arbitration shall be
Los Angeles, California. The party intending to arbitrate shall serve a written
notice of intention to commence arbitration on the other party. The arbitrator
shall be appointed in accordance with the Rules.
(b) The arbitrator shall be bound by the terms and conditions of this
Agreement and shall have no power, in rendering the award, to alter or depart
from any express provision of this Agreement, and his/her failure to observe
this limitation shall constitute grounds for vacating the award. Any award of
the arbitrator shall be final and binding upon the parties and judgment may be
entered in any court of competent jurisdiction, including, without limitation,
the courts of the State of California or any federal court in California or any
court of competent jurisdiction in the United States. The award and judgment
thereon shall include interest at the legal rate from the date that the sum
awarded to the prevailing party was originally due and payable.
(c) All provisional remedies shall be the exclusive jurisdiction of
the courts. The parties may seek and obtain provisional remedies prior to or
contemporaneously with arbitration.
(d) If any legal action or dispute arises under this Agreement, arises
by reason of any asserted breach of it, or arises between the parties and is
related in any way to the subject matter of the Agreement, the prevailing party
shall be entitled to recover all costs and expenses, including reasonable
attorneys' fees, arbitration costs, investigative costs,
- 7 -
<PAGE>
reasonable accounting fees and charges for experts. Attorneys' fees and
expenses incurred in enforcing any judgment are recoverable as a separate item
and shall be severable from other provisions of this Agreement, shall survive
any judgment and shall not be merged into such judgment.
(e) Except as otherwise provided in this Agreement, each of the
parties consents and submits to the exclusive jurisdiction and venue of the
State of California for the adjudication of any dispute between the parties
pertaining to this Agreement or the alleged breach of any provision hereof.
13. Transfer and Assignment. This Agreement is personal as to
-----------------------
Executive and shall not be assigned or transferred by Executive without the
prior written consent of the Company. This Agreement shall be binding upon and
inure to the benefit of all of the parties hereto and their respective permitted
heirs, personal representatives, successors and assigns.
14. Severability. Nothing contained herein shall be construed to
------------
require the commission of any act contrary to law. Should there be any conflict
between any provisions hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.
15. Governing Law. This Agreement is made under and shall be
-------------
construed pursuant to the laws of the State of California.
16. Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
17. Entire Agreement. This Agreement (together with the Exchange
----------------
Agreement and the Non-Competition Agreement) constitutes the entire agreement
and understanding of the parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement, or statement not so set forth herein.
- 8 -
<PAGE>
18. Modification. This Agreement may be modified, amended,
------------
superseded, or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the parties hereto.
19. Waiver. The waiver by either of the parties, express or
------
implied, of any right under this Agreement or any failure to perform under this
Agreement by the other party, shall not constitute or be deemed as a waiver of
any other right under this Agreement or of any other failure to perform under
this Agreement by the other party, whether of a similar or dissimilar nature.
20. Cumulative Remedies. Each and all of the several rights and
-------------------
remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one or such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.
21. Headings. The section and other headings contained in this
--------
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
22. Notices. All notices, requests, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given immediately when delivered by hand or by confirmed
facsimile transmission, or three (3) days after being mailed, certified mail
with postage prepaid, to
(a) if to Executive:
Stephen F. Ward
c/o Duke City Video, Inc.
4121 Cutler, N.E.
Albuquerque, New Mexico 87110
Facsimile: (505) 884-1008
with a copy to:
Jeffrey W. Loubet, Esq.
Rodey, Dickason, Sloan, Akin & Robb, P.A.
Albuquerque Plaza
201 Third Street NW, Suite 2200
Albuquerque, New Mexico 87103
Facsimile: (505) 768-7395
- 9 -
<PAGE>
(b) if to the Company:
Duke City Video, Inc.
3111 Kenwood Street
Burbank, California 91505
Attention: Each Member of the Board of
Directors
Facsimile: (818) 523-5243
with a copy to:
Carlos D. DeMattos
Matthews Studio Equipment Group
3111 North Kenwood Street
Burbank, California 91505
Facsimile: (818) 525-5243
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first set forth above.
"Executive"
/s/ Stephen F. Ward
-------------------
STEPHEN F. WARD
"Company" DUKE CITY VIDEO, INC.
By:/s/ Harold Jay Lefkovitz
------------------------
Name: Harold Jay Lefkovitz
Title: President
- 10 -
<PAGE>
EXHIBIT C
NON-COMPETITION AGREEMENT
This Non-Competition Agreement ("Agreement") is made and entered into as of
the 2nd day of May, 1997, by and between (i) DUKE CITY HOLDINGS, INC., a
California corporation ("Acquirer"), (ii) PATRICIA M. BRUSATI, an individual
("Shareholder"), and (iii) DUKE CITY VIDEO, INC., a New Mexico corporation
("Company").
RECITALS
--------
A. The Company, Shareholder and Acquirer as of the date hereof have
entered into that certain Stock Exchange Agreement and Plan of Reorganization
(the "Exchange Agreement"), pursuant to which Acquirer is acquiring from
Shareholder, Harold Jay Lefkovitz, Louise K. Lefkovitz and Stephen F. Ward all
of the issued and outstanding shares of capital stock in the Company held by
Shareholder and such other parties. Acquirer is also acquiring all other shares
of capital stock in the Company pursuant to a Stock Exchange Agreement between
Acquirer and John E. Hensch dated May 2, 1997.
B. In fulfillment of a condition to the Exchange Agreement and for the
consideration set forth therein, Shareholder is willing to provide to Acquirer
certain non-competition agreements and covenants for the benefit of Acquirer,
the Company and its affiliates upon the terms, covenants and conditions
hereinafter set forth.
C. All capitalized terms used herein and not otherwise defined shall have
the meaning given to them in the Exchange Agreement.
In consideration of the foregoing premises and the mutual covenants
and conditions contained herein, the parties hereto agree as follows:
1. Noncompetition.
--------------
1.1 Competition. During the pendency of Shareholder's employment
-----------
with, and for a period of three (3) years from the date Shareholder ceases to be
employed by, the Company, Matthews Studio Equipment Group (the "Parent"), or any
of the Parent's other subsidiaries, whether under the Employment Agreement
between Shareholder and the Company dated May 2, 1997 (the "Employment
Agreement") or otherwise, Shareholder hereby covenants and agrees that
Shareholder shall not at any time directly or indirectly anywhere in the States
of California, New Mexico, Texas and Georgia (the "Territory") own, manage,
operate, control, or be connected in any manner, directly or indirectly, with
the ownership, management, operation or control of (including, without
limitation, through (i) serving as an
- 1 -
<PAGE>
employee, consultant, partner, officer, independent contractor of, (ii) having
any substantial investment in or (iii) directly or indirectly contributing
services or information to) any person or entity that is engaged in a business
competitive with, or similar to, any line of business currently conducted by the
Company. The Parent and all subsidiaries of the Parent other than the Company
and Acquirer shall be referred to herein as the "Acquirer's Affiliates".
1.2 Solicitation. During the pendency of Shareholder's employment
------------
with, and for a period of three (3) years from the date Shareholder ceases to be
employed by, the Company, Acquirer or any of Acquirer's Affiliates, whether
under the Employment Agreement or otherwise, Shareholder shall not at any time
directly or indirectly solicit any of the customers of the Company, Acquirer or
Acquirer's Affiliates with the purpose of obtaining them as customers for a
business competitive with, or similar to, the Company's business as a whole or
any of the Company's lines of business.
1.3 Use of Information. Shareholder shall not communicate,
------------------
divulge, use to the detriment of the Company, Acquirer or any of the Acquirer's
Affiliates, or use for her own benefit or for the benefit of any person other
than Acquirer and Acquirer's Affiliates, or misuse in any way, any confidential
or proprietary information or trade secrets of (i) the Company, (ii) Acquirer,
or (iii) any Acquirer's Affiliates, including, but not limited to, any client
lists, supplier lists, cost and manner of operations, marketing practices,
manufacturing specifications or methods, technical information, business
development plans, and any and all financial aspects of the Company, Acquirer,
any Acquirer's Affiliates (all such information and trade secrets collectively
referred to as "Trade Secrets"). Shareholder acknowledges and agrees that any
Trade Secrets she has acquired in the past or may acquire in the future have
been and will be received in confidence and as a fiduciary of the Company and
Acquirer.
1.4 Injunctive Relief. Shareholder hereby acknowledges and agrees
-----------------
that any default hereunder will cause damage to the Company, Acquirer and
Acquirer's Affiliates in an amount that is difficult to ascertain. Accordingly,
in addition to any other relief to which the Company, Acquirer and Acquirer's
Affiliates may be entitled, Acquirer and Acquirer's Affiliates shall be entitled
to injunctive relief as may be ordered by any court of competent jurisdiction
without the proof of actual damages, including, but not limited to, an
injunction restraining any violation of Sections 1.1, 1.2 or 1.3 above.
1.5 Description of Business. Shareholder agrees and represents and
-----------------------
warrants to Acquirer that immediately prior to the date hereof, the Company was
conducting business from offices located in the States of California, New Mexico
and Texas, the
- 2 -
<PAGE>
customers of the Company were located throughout the Territory, equipment rented
by the Company was sent throughout the Territory to its customers, and the
Company had developed a favorable reputation and goodwill throughout the
Territory. Shareholder agrees that the non-compete covenants set forth above
covering the Territory are a fair reflection of such reputation and goodwill.
1.6 Severability. Based in part on the statements and agreements
------------
contained in Section 1.5 above, the parties hereto intend that the covenants
contained in Sections 1.1, 1.2 and 1.3 above shall be construed as a series of
separate covenants, one for each of the counties of each state in the United
States included in the Territory. Except for such geographical coverage, each
such separate covenant shall be identical in its terms. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants not to
compete as set forth herein, then the unenforceable covenants shall be deemed
eliminated from the provisions of this Agreement for the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants
to be enforced.
2. Arbitration.
-----------
2.1 Parties' Consent to Arbitration. Except as provided in this
-------------------------------
Agreement, any dispute, controversy or claim arising out of or relating to this
Agreement or breach thereof shall be settled by binding arbitration heard by one
arbitrator, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association Rules (the "Rules"). The parties hereto agree that the
venue of such arbitration shall be Los Angeles, California. The party intending
to arbitrate shall serve a written notice of intention to commence arbitration
on the other party. The arbitrator shall be appointed in accordance with the
Rules.
2.2 Powers. The arbitrator shall be bound by the terms and
------
conditions of this Agreement and shall have no power, in rendering the award, to
alter or depart from any express provision of this Agreement, and his/her
failure to observe this limitation shall constitute grounds for vacating the
award. Any award of the arbitrator shall be final and binding upon the parties
and judgment may be entered in any court of competent jurisdiction, including,
without limitation, the courts of the State of California or any federal court
in California or any court of competent jurisdiction in the United States. The
award and judgment thereon shall include interest at the legal rate from the
date that the sum awarded to the prevailing party was originally due and
payable.
2.3 Provisional Remedies. All provisional remedies shall be the
--------------------
exclusive jurisdiction of the courts. The parties
- 3 -
<PAGE>
may seek and obtain provisional remedies prior to or contemporaneously with
arbitration.
2.4 Entitlement to Costs. If any legal action or dispute arises
--------------------
under this Agreement, arises by reason of any asserted breach of it, or arises
between the parties and is related in any way to the subject matter of the
Agreement, the prevailing party shall be entitled to recover all costs and
expenses, including reasonable attorneys' fees, arbitration costs, investigative
costs, reasonable accounting fees and charges for experts. Attorneys' fees and
expenses incurred in enforcing any judgment are recoverable as a separate item
and shall be severable from other provisions of this Agreement, shall survive
any judgment and shall not be merged into such judgment.
2.5 Jurisdiction and Venue. Except as otherwise provided in this
----------------------
Agreement, each of the parties consents and submits to the exclusive
jurisdiction and venue of the State of California for the adjudication of any
dispute between the parties pertaining to this Agreement or the alleged breach
of any provision hereof.
3. Miscellaneous.
-------------
3.1 Cumulative Remedies. This Agreement is in addition to the
-------------------
Exchange Agreement and the Employment Agreement, and the Company's, Acquirer's
and Acquirer's Affiliates' rights and remedies under this Agreement and under
the Exchange Agreement and Employment Agreement shall be independent, separate
and distinct, and at the option of the Company, Acquirer and Acquirer's
Affiliates, cumulative.
3.2 Successors and Assigns. This Agreement shall be binding upon,
----------------------
and inure to the benefit of all of the parties hereto and their respective
heirs, personal representatives, successors and assigns. The Company's and
Acquirer's successors and assigns shall have the right to enforce each and every
right of Acquirer under this Agreement, the Exchange Agreement and the
Employment Agreement, to the extent such rights have been assigned or
transferred to such parties.
3.3 Governing Law. Nothing contained herein shall be construed to
-------------
require the commission of any act contrary to law. Should there be any conflict
between any provision hereof and any present or future statute, law, ordinance,
or regulation, the latter shall prevail, but the provision of this Agreement
affected thereby shall be curtailed and limited only to the extent necessary to
bring it within the requirements of the law, and the remaining provisions of
this Agreement shall remain in full force and effect. This Agreement is made
under and shall be construed pursuant to the laws of the State of California.
- 4 -
<PAGE>
3.4 Entire Agreement. This Agreement (together with the Exchange
----------------
Agreement and the Employment Agreement) constitute the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings with respect
thereto. No representation, promise, inducement or statement of intention has
been made by any party hereto that is not embodied herein, and no party shall be
bound by or liable for any alleged representation, promise, inducement or
statement not so set forth herein.
3.5 Modification. This Agreement may be modified, amended,
------------
superseded or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by all parties hereto.
3.6 Indemnification. Shareholder shall indemnify and hold the
---------------
Company, Acquirer and such other parties designated in Section 13.1 of the
Exchange Agreement harmless for any and all breaches of this Agreement in
accordance with the provisions of the Exchange Agreement.
3.7 Waiver. Each and all of the several rights and remedies
------
provided in this Agreement, or by law or in equity, shall be cumulative, and no
one of them shall be exclusive of any other right or remedy, and the exercise of
any one of such rights or remedies shall not be deemed a waiver of, or an
election to exercise, any other such right or remedy. No waiver of any term or
condition of this Agreement shall be construed as a waiver of any other term or
condition; nor shall any waiver of any default hereunder be construed as a
waiver of any other default hereunder.
3.8 Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
3.9 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been given
when delivery is made in accordance with the provisions of the Exchange
Agreement.
- 5 -
<PAGE>
The parties hereto have executed this Agreement as of the date first
set forth above.
/s/ Patricia M. Brusati
----------------------------------------
PATRICIA M. BRUSATI
DUKE CITY VIDEO, INC.
By: /s/ Harold Jay Lefkovitz
--------------------------
Name: Harold Jay Lefkovitz
Title: President
DUKE CITY HOLDINGS, INC.
By: /s/ Carlos D. DeMattos
--------------------------
Name: Carlos D. DeMattos
Title: President
- 6 -
<PAGE>
NON-COMPETITION AGREEMENT
This Non-Competition Agreement ("Agreement") is made and entered into as of
the 2nd day of May, 1997, by and between (i) DUKE CITY HOLDINGS, INC., a
California corporation ("Acquirer"), (ii) HAROLD JAY LEFKOVITZ, an individual
("Shareholder"), and (iii) DUKE CITY VIDEO, INC., a New Mexico corporation
("Company").
RECITALS
--------
A. The Company, Shareholder and Acquirer as of the date hereof have
entered into that certain Stock Exchange Agreement and Plan of Reorganization
(the "Exchange Agreement"), pursuant to which Acquirer is acquiring from
Shareholder, Louise K. Lefkovitz, Stephen F. Ward and Patricia M. Brusati all of
the issued and outstanding shares of capital stock in the Company held by
Shareholder and such other parties. Acquirer is also acquiring all other shares
of capital stock in the Company pursuant to a Stock Exchange Agreement dated May
2, 1997 between Acquirer and John E. Hensch.
B. In fulfillment of a condition to the Exchange Agreement and in
consideration for the payments set forth therein, Shareholder is willing to
provide to Acquirer certain non-competition agreements and covenants for the
benefit of Acquirer, the Company and its affiliates upon the terms, covenants
and conditions hereinafter set forth.
C. All capitalized terms used herein and not otherwise defined shall have
the meaning given to them in the Exchange Agreement.
In consideration of the foregoing premises and the mutual covenants
and conditions contained herein, the parties hereto agree as follows:
1. Noncompetition.
--------------
1.1 Competition. During the pendency of Shareholder's employment
-----------
with, and for a period of three (3) years from the date Shareholder ceases to be
employed by, the Company, Matthews Studio Equipment Group (the "Parent"), or any
of the Parent's other subsidiaries, whether under the Employment Agreement
between Shareholder and the Company dated May 2, 1997 (the "Employment
Agreement") or otherwise, Shareholder hereby covenants and agrees that
Shareholder shall not at any time directly or indirectly anywhere in the States
of California, New Mexico, Texas and Georgia (the "Territory") own, manage,
operate, control, or be connected in any manner, directly or indirectly, with
the ownership, management, operation or control of
- 1 -
<PAGE>
(including, without limitation, through (i) serving as an employee, consultant,
partner, officer, independent contractor of, (ii) having any substantial
investment in or (iii) directly or indirectly contributing services or
information to) any person or entity that is engaged in a business competitive
with, or similar to, any line of business currently conducted by the Company.
The Parent and all subsidiaries of the Parent other than the Company and
Acquirer shall be referred to herein as the "Acquirer's Affiliates".
1.2 Solicitation. During the pendency of Shareholder's employment
------------
with, and for a period of three (3) years from the date Shareholder ceases to be
employed by, the Company, Acquirer or any of Acquirer's Affiliates, whether
under the Employment Agreement or otherwise, Shareholder shall not at any time
directly or indirectly solicit any of the customers of the Company, Acquirer or
Acquirer's Affiliates with the purpose of obtaining them as customers for a
business competitive with, or similar to, the Company's business as a whole or
any of the Company's lines of business.
1.3 Use of Information. Shareholder shall not communicate,
------------------
divulge, use to the detriment of the Company, Acquirer or any of the Acquirer's
Affiliates, or use for his own benefit or for the benefit of any person other
than Acquirer and Acquirer's Affiliates, or misuse in any way, any confidential
or proprietary information or trade secrets of (i) the Company, (ii) Acquirer,
or (iii) any Acquirer's Affiliates, including, but not limited to, any client
lists, supplier lists, cost and manner of operations, marketing practices,
manufacturing specifications or methods, technical information, business
development plans, and any and all financial aspects of the Company, Acquirer,
any Acquirer's Affiliates (all such information and trade secrets collectively
referred to as "Trade Secrets"). Shareholder acknowledges and agrees that any
Trade Secrets he has acquired in the past or may acquire in the future have been
and will be received in confidence and as a fiduciary of the Company and
Acquirer.
1.4 Injunctive Relief. Shareholder hereby acknowledges and agrees
-----------------
that any default hereunder will cause damage to the Company, Acquirer and
Acquirer's Affiliates in an amount that is difficult to ascertain. Accordingly,
in addition to any other relief to which the Company, Acquirer and Acquirer's
Affiliates may be entitled, Acquirer and Acquirer's Affiliates shall be entitled
to injunctive relief as may be ordered by any court of competent jurisdiction
without the proof of actual damages, including, but not limited to, an
injunction restraining any violation of Sections 1.1, 1.2 or 1.3 above.
- 2 -
<PAGE>
1.5 Description of Business. Shareholder agrees and represents and
-----------------------
warrants to Acquirer that immediately prior to the date hereof, the Company was
conducting business from offices located in the States of California, New Mexico
and Texas, the customers of the Company were located throughout the Territory,
equipment rented by the Company was sent throughout the Territory to its
customers, and the Company had developed a favorable reputation and goodwill
throughout the Territory. Shareholder agrees that the non-compete covenants set
forth above covering the Territory are a fair reflection of such reputation and
goodwill.
1.6 Severability. Based in part on the statements and agreements
------------
contained in Section 1.5 above, the parties hereto intend that the covenants
contained in Sections 1.1, 1.2 and 1.3 above shall be construed as a series of
separate covenants, one for each of the counties of each state in the United
States included in the Territory. Except for such geographical coverage, each
such separate covenant shall be identical in its terms. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants not to
compete as set forth herein, then the unenforceable covenants shall be deemed
eliminated from the provisions of this Agreement for the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants
to be enforced.
2. Arbitration.
-----------
2.1 Parties' Consent to Arbitration. Except as provided in this
-------------------------------
Agreement, any dispute, controversy or claim arising out of or relating to this
Agreement or breach thereof shall be settled by binding arbitration heard by one
arbitrator, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association Rules (the "Rules"). The parties hereto agree that the
venue of such arbitration shall be Los Angeles, California. The party intending
to arbitrate shall serve a written notice of intention to commence arbitration
on the other party. The arbitrator shall be appointed in accordance with the
Rules.
2.2 Powers. The arbitrator shall be bound by the terms and
------
conditions of this Agreement and shall have no power, in rendering the award, to
alter or depart from any express provision of this Agreement, and his/her
failure to observe this limitation shall constitute grounds for vacating the
award. Any award of the arbitrator shall be final and binding upon the parties
and judgment may be entered in any court of competent jurisdiction, including,
without limitation, the courts of the State of California or any federal court
in California or any court of competent jurisdiction in the United States. The
award and judgment thereon shall include interest at the legal rate from the
date that the sum awarded to the prevailing party was originally due and
payable.
- 3 -
<PAGE>
2.3 Provisional Remedies. All provisional remedies shall be the
--------------------
exclusive jurisdiction of the courts. The parties may seek and obtain
provisional remedies prior to or contemporaneously with arbitration.
2.4 Entitlement to Costs. If any legal action or dispute arises
--------------------
under this Agreement, arises by reason of any asserted breach of it, or arises
between the parties and is related in any way to the subject matter of the
Agreement, the prevailing party shall be entitled to recover all costs and
expenses, including reasonable attorneys' fees, arbitration costs, investigative
costs, reasonable accounting fees and charges for experts. Attorneys' fees and
expenses incurred in enforcing any judgment are recoverable as a separate item
and shall be severable from other provisions of this Agreement, shall survive
any judgment and shall not be merged into such judgment.
2.5 Jurisdiction and Venue. Except as otherwise provided in this
----------------------
Agreement, each of the parties consents and submits to the exclusive
jurisdiction and venue of the State of California for the adjudication of any
dispute between the parties pertaining to this Agreement or the alleged breach
of any provision hereof.
3. Miscellaneous.
-------------
3.1 Cumulative Remedies. This Agreement is in addition to the
-------------------
Exchange Agreement and the Employment Agreement, and the Company's, Acquirer's
and Acquirer's Affiliates' rights and remedies under this Agreement and under
the Exchange Agreement and Employment Agreement shall be independent, separate
and distinct, and at the option of the Company, Acquirer and Acquirer's
Affiliates, cumulative.
3.2 Successors and Assigns. This Agreement shall be binding upon,
----------------------
and inure to the benefit of all of the parties hereto and their respective
heirs, personal representatives, successors and assigns. The Company's and
Acquirer's successors and assigns shall have the right to enforce each and every
right of Acquirer under this Agreement, the Exchange Agreement and the
Employment Agreement, to the extent such rights have been assigned or
transferred to such parties.
3.3 Governing Law. Nothing contained herein shall be construed to
-------------
require the commission of any act contrary to law. Should there be any conflict
between any provision hereof and any present or future statute, law, ordinance,
or regulation, the latter shall prevail, but the provision of this Agreement
affected thereby shall be curtailed and limited only to the extent necessary to
bring it within the requirements of the law, and the remaining provisions of
this Agreement shall remain in full force and effect. This Agreement is made
under and shall be construed pursuant to the laws of the State of California.
- 4 -
<PAGE>
3.4 Entire Agreement. This Agreement (together with the Exchange
----------------
Agreement and the Employment Agreement) constitute the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings with respect
thereto. No representation, promise, inducement or statement of intention has
been made by any party hereto that is not embodied herein, and no party shall be
bound by or liable for any alleged representation, promise, inducement or
statement not so set forth herein.
3.5 Modification. This Agreement may be modified, amended,
------------
superseded or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by all parties hereto.
3.6 Indemnification. Shareholder shall indemnify and hold the
---------------
Company, Acquirer and such other parties designated in Section 13.1 of the
Exchange Agreement harmless for any and all breaches of this Agreement in
accordance with the provisions of the Exchange Agreement.
3.7 Waiver. Each and all of the several rights and remedies
------
provided in this Agreement, or by law or in equity, shall be cumulative, and no
one of them shall be exclusive of any other right or remedy, and the exercise of
any one of such rights or remedies shall not be deemed a waiver of, or an
election to exercise, any other such right or remedy. No waiver of any term or
condition of this Agreement shall be construed as a waiver of any other term or
condition; nor shall any waiver of any default hereunder be construed as a
waiver of any other default hereunder.
3.8 Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
3.9 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been given
when delivery is made in accordance with the provisions of the Exchange
Agreement.
- 5 -
<PAGE>
The parties hereto have executed this Agreement as of the date first
set forth above.
/s/ Harold Jay Lefkovitz
----------------------------------------
HAROLD JAY LEFKOVITZ
DUKE CITY VIDEO, INC.
By: /s/ Stephen F. Ward
---------------------------
Name: Stephen F. Ward
Title: Executive Vice-President
DUKE CITY HOLDINGS, INC.
By: /s/ Carlos D. DeMattos
--------------------------
Name: Carlos D. DeMattos
Title: President
- 6 -
<PAGE>
NON-COMPETITION AGREEMENT
This Non-Competition Agreement ("Agreement") is made and entered into as of
the 2nd day of May, 1997, by and between (i) DUKE CITY HOLDINGS, INC., a
California corporation ("Acquirer"), (ii) LOUISE K. LEFKOVITZ, an individual
("Shareholder"), and (iii) DUKE CITY VIDEO, INC., a New Mexico corporation
("Company").
RECITALS
--------
A. The Company, Shareholder and Acquirer as of the date hereof have
entered into that certain Stock Exchange Agreement and Plan of Reorganization
(the "Exchange Agreement"), pursuant to which Acquirer is acquiring from
Shareholder, Harold Jay Lefkovitz, Stephen F. Ward and Patricia M. Brusati all
of the shares of capital stock in the Company held by Shareholder and such other
parties. Acquirer is also acquiring all other shares of capital stock in the
Company pursuant to a Stock Exchange Agreement dated May 2, 1997 between
Acquirer and John E. Hensch.
B. In fulfillment of a condition to the Exchange Agreement and for the
consideration set forth therein, Shareholder is willing to provide to Acquirer
certain non-competition agreements and covenants for the benefit of Acquirer,
the Company and its affiliates upon the terms, covenants and conditions
hereinafter set forth.
C. All capitalized terms used herein and not otherwise defined shall have
the meaning given to them in the Exchange Agreement.
In consideration of the foregoing premises and the mutual covenants
and conditions contained herein, the parties hereto agree as follows:
1. Noncompetition.
--------------
1.1 Competition. For a period of three (3) years after the date of
-----------
this Agreement, Shareholder hereby covenants and agrees that Shareholder shall
not at any time directly or indirectly anywhere in the States of California, New
Mexico, Texas and Georgia (the "Territory") own, manage, operate, control, or be
connected in any manner, directly or indirectly, with the ownership, management,
operation or control of (including, without limitation, through (i) serving as
an employee, consultant, partner, officer, independent contractor of, (ii)
having any substantial investment in or (iii) directly or indirectly
contributing services or information to) any person or entity that is engaged in
a business competitive with, or similar to, any line of business currently
conducted by the
- 1 -
<PAGE>
Company. The Parent and all subsidiaries of the Parent other than the Company
and Acquirer shall be referred to herein as the "Acquirer's Affiliates".
1.2 Solicitation. For a period of three (3) years after the date
------------
of this Agreement, Shareholder shall not at any time directly or indirectly
solicit any of the customers of the Company, Acquirer or Acquirer's Affiliates
with the purpose of obtaining them as customers for a business competitive with,
or similar to, the Company's business as a whole or any of the Company's lines
of business.
1.3 Use of Information. Shareholder shall not communicate,
------------------
divulge, use to the detriment of the Company, Acquirer or any of the Acquirer's
Affiliates, or use for his own benefit or for the benefit of any person other
than Acquirer and Acquirer's Affiliates, or misuse in any way, any confidential
or proprietary information or trade secrets of (i) the Company, (ii) Acquirer,
or (iii) any Acquirer's Affiliates, including, but not limited to, any client
lists, supplier lists, cost and manner of operations, marketing practices,
manufacturing specifications or methods, technical information, business
development plans, and any and all financial aspects of the Company, Acquirer,
any Acquirer's Affiliates (all such information and trade secrets collectively
referred to as "Trade Secrets"). Shareholder acknowledges and agrees that any
Trade Secrets she has acquired in the past or may acquire in the future have
been and will be received in confidence and as a fiduciary of the Company and
Acquirer.
1.4 Injunctive Relief. Shareholder hereby acknowledges and agrees
-----------------
that any default hereunder will cause damage to the Company, Acquirer and
Acquirer's Affiliates in an amount that is difficult to ascertain. Accordingly,
in addition to any other relief to which the Company, Acquirer and Acquirer's
Affiliates may be entitled, Acquirer and Acquirer's Affiliates shall be entitled
to injunctive relief as may be ordered by any court of competent jurisdiction
without the proof of actual damages, including, but not limited to, an
injunction restraining any violation of Sections 1.1, 1.2 or 1.3 above.
1.5 Description of Business. Shareholder agrees and represents and
-----------------------
warrants to Acquirer that immediately prior to the date hereof, the Company was
conducting business from offices located in the States of California, New Mexico
and Texas, the customers of the Company were located throughout the Territory,
equipment rented by the Company was sent throughout the Territory to its
customers, and the Company had developed a favorable reputation and goodwill
throughout the Territory. Shareholder agrees that the non-compete covenants set
forth above covering the Territory are a fair reflection of such reputation and
goodwill.
- 2 -
<PAGE>
1.6 Severability. Based in part on the statements and agreements
------------
contained in Section 1.5 above, the parties hereto intend that the covenants
contained in Sections 1.1, 1.2 and 1.3 above shall be construed as a series of
separate covenants, one for each of the counties of each state in the United
States included in the Territory. Except for such geographical coverage, each
such separate covenant shall be identical in its terms. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants not to
compete as set forth herein, then the unenforceable covenants shall be deemed
eliminated from the provisions of this Agreement for the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants
to be enforced.
2. Arbitration.
-----------
2.1 Parties' Consent to Arbitration. Except as provided in this
-------------------------------
Agreement, any dispute, controversy or claim arising out of or relating to this
Agreement or breach thereof shall be settled by binding arbitration heard by one
arbitrator, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association Rules (the "Rules"). The parties hereto agree that the
venue of such arbitration shall be Los Angeles, California. The party intending
to arbitrate shall serve a written notice of intention to commence arbitration
on the other party. The arbitrator shall be appointed in accordance with the
Rules.
2.2 Powers. The arbitrator shall be bound by the terms and
------
conditions of this Agreement and shall have no power, in rendering the award, to
alter or depart from any express provision of this Agreement, and his/her
failure to observe this limitation shall constitute grounds for vacating the
award. Any award of the arbitrator shall be final and binding upon the parties
and judgment may be entered in any court of competent jurisdiction, including,
without limitation, the courts of the State of California or any federal court
in California or any court of competent jurisdiction in the United States. The
award and judgment thereon shall include interest at the legal rate from the
date that the sum awarded to the prevailing party was originally due and
payable.
2.3 Provisional Remedies. All provisional remedies shall be the
--------------------
exclusive jurisdiction of the courts. The parties may seek and obtain
provisional remedies prior to or contemporaneously with arbitration.
2.4 Entitlement to Costs. If any legal action or dispute arises
--------------------
under this Agreement, arises by reason of any asserted breach of it, or arises
between the parties and is related in any way to the subject matter of the
Agreement, the prevailing party shall be entitled to recover all costs and
expenses, including reasonable attorneys' fees, arbitration
- 3 -
<PAGE>
costs, investigative costs, reasonable accounting fees and charges for experts.
Attorneys' fees and expenses incurred in enforcing any judgment are recoverable
as a separate item and shall be severable from other provisions of this
Agreement, shall survive any judgment and shall not be merged into such
judgment.
2.5 Exclusive Jurisdiction. Except as otherwise provided in this
----------------------
Agreement, each of the parties consents and submits to the exclusive
jurisdiction and venue of the State of California for the adjudication of any
dispute between the parties pertaining to this Agreement or the alleged breach
of any provision hereof.
2.6 Jurisdiction and Venue. Except as otherwise provided in this
----------------------
Agreement, each of the parties consents and submits to the exclusive
jurisdiction and venue of the State of California for the adjudication of any
dispute between the parties pertaining to this Agreement or the alleged breach
of any provision hereof.
3. Miscellaneous.
-------------
3.1 Cumulative Remedies. This Agreement is in addition to the
-------------------
Exchange Agreement and the Company's, Acquirer's and Acquirer's Affiliates'
rights and remedies under this Agreement and under the Exchange Agreement shall
be independent, separate and distinct, and at the option of the Company,
Acquirer and Acquirer's Affiliates, cumulative.
3.2 Successors and Assigns. This Agreement shall be binding upon,
----------------------
and inure to the benefit of all of the parties hereto and their respective
heirs, personal representatives, successors and assigns. The Company's and
Acquirer's successors and assigns shall have the right to enforce each and every
right of Acquirer under this Agreement and the Exchange Agreement to the extent
such rights have been assigned or transferred to such parties.
3.3 Governing Law. Nothing contained herein shall be construed to
-------------
require the commission of any act contrary to law. Should there be any conflict
between any provision hereof and any present or future statute, law, ordinance,
or regulation, the latter shall prevail, but the provision of this Agreement
affected thereby shall be curtailed and limited only to the extent necessary to
bring it within the requirements of the law, and the remaining provisions of
this Agreement shall remain in full force and effect. This Agreement is made
under and shall be construed pursuant to the laws of the State of New Mexico.
3.4 Entire Agreement. This Agreement (together with the Exchange
----------------
Agreement) constitute the entire agreement and understanding of the parties with
respect to the subject matter hereof, and supersedes all prior agreements,
arrangements and
- 4 -
<PAGE>
understandings with respect thereto. No representation, promise, inducement or
statement of intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement or statement not so set forth herein.
3.5 Modification. This Agreement may be modified, amended,
------------
superseded or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by all parties hereto.
3.6 Indemnification. Shareholder shall indemnify and hold the
---------------
Company, Acquirer and such other parties designated in Section 13.1 of the
Exchange Agreement harmless for any and all breaches of this Agreement in
accordance with the provisions of the Exchange Agreement.
3.7 Waiver. Each and all of the several rights and remedies
------
provided in this Agreement, or by law or in equity, shall be cumulative, and no
one of them shall be exclusive of any other right or remedy, and the exercise of
any one of such rights or remedies shall not be deemed a waiver of, or an
election to exercise, any other such right or remedy. No waiver of any term or
condition of this Agreement shall be construed as a waiver of any other term or
condition; nor shall any waiver of any default hereunder be construed as a
waiver of any other default hereunder.
3.8 Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
3.9 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been given
when delivery is made in accordance with the provisions of the Exchange
Agreement.
- 5 -
<PAGE>
The parties hereto have executed this Agreement as of the date first
set forth above.
/s/ Louise K. Lefkovitz
----------------------------------------
LOUISE K. LEFKOVITZ
DUKE CITY VIDEO, INC.
By: /s/ Harold Jay Lefkovitz
--------------------------
Name: Harold Jay Lefkovitz
Title: President
DUKE CITY HOLDINGS, INC.
By: /s/ Carlos D. DeMattos
--------------------------
Name: Carlos D. DeMattos
Title: President
- 6 -
<PAGE>
NON-COMPETITION AGREEMENT
This Non-Competition Agreement ("Agreement") is made and entered into as of
the 2nd day of May, 1997, by and between (i) DUKE CITY HOLDINGS, INC., a
California corporation ("Acquirer"), (ii) STEPHEN F. WARD, an individual
("Shareholder"), and (iii) DUKE CITY VIDEO, INC., a New Mexico corporation
("Company").
RECITALS
--------
A. The Company, Shareholder and Acquirer as of the date hereof have
entered into that certain Stock Exchange Agreement and Plan of Reorganization
(the "Exchange Agreement"), pursuant to which Acquirer is acquiring from
Shareholder, Harold Jay Lefkovitz, Louise K. Lefkovitz and Patricia M. Brusati
all of the shares of capital stock in the Company owned by Shareholder and such
other parties. Acquirer is also acquiring all other shares of capital stock in
the Company pursuant to a Stock Exchange Agreement dated May 2, 1997 between
Acquirer and John E. Hensch.
B. In fulfillment of a condition to the Exchange Agreement and for the
consideration set forth therein, Shareholder is willing to provide to Acquirer
certain non-competition agreements and covenants for the benefit of Acquirer,
the Company and its affiliates upon the terms, covenants and conditions
hereinafter set forth.
C. All capitalized terms used herein and not otherwise defined shall have
the meaning given to them in the Exchange Agreement.
In consideration of the foregoing premises and the mutual covenants
and conditions contained herein, the parties hereto agree as follows:
1. Noncompetition.
--------------
1.1 Competition. During the pendency of Shareholder's employment
-----------
with, and for a period of three (3) years from the date Shareholder ceases to be
employed by, the Company, Matthews Studio Equipment Group (the "Parent"), or any
of the Parent's other subsidiaries, whether under the Employment Agreement
between Shareholder and the Company dated May 2, 1997 (the "Employment
Agreement") or otherwise, Shareholder hereby covenants and agrees that
Shareholder shall not at any time directly or indirectly anywhere in the States
of California, New Mexico, Texas and Georgia (the "Territory") own, manage,
operate, control, or be connected in any manner, directly or indirectly, with
the ownership, management, operation or control of (including, without
limitation, through (i) serving as an employee, consultant, partner, officer,
independent contractor of, (ii) having any substantial investment in or (iii)
directly
- 1 -
<PAGE>
or indirectly contributing services or information to) any person or entity that
is engaged in a business competitive with, or similar to, any line of business
currently conducted by the Company. The Parent and all subsidiaries of the
Parent other than the Company and Acquirer shall be referred to herein as the
"Acquirer's Affiliates".
1.2 Solicitation. During the pendency of Shareholder's employment
------------
with, and for a period of three (3) years from the date Shareholder ceases to be
employed by, the Company, Acquirer or any of Acquirer's Affiliates, whether
under the Employment Agreement or otherwise, Shareholder shall not at any time
directly or indirectly solicit any of the customers of the Company, Acquirer or
Acquirer's Affiliates with the purpose of obtaining them as customers for a
business competitive with, or similar to, the Company's business as a whole or
any of the Company's lines of business.
1.3 Use of Information. Shareholder shall not communicate,
------------------
divulge, use to the detriment of the Company, Acquirer or any of the Acquirer's
Affiliates, or use for his own benefit or for the benefit of any person other
than Acquirer and Acquirer's Affiliates, or misuse in any way, any confidential
or proprietary information or trade secrets of (i) the Company, (ii) Acquirer,
or (iii) any Acquirer's Affiliates, including, but not limited to, any client
lists, supplier lists, cost and manner of operations, marketing practices,
manufacturing specifications or methods, technical information, business
development plans, and any and all financial aspects of the Company, Acquirer,
any Acquirer's Affiliates (all such information and trade secrets collectively
referred to as "Trade Secrets"). Shareholder acknowledges and agrees that any
Trade Secrets he has acquired in the past or may acquire in the future have been
and will be received in confidence and as a fiduciary of the Company and
Acquirer.
1.4 Injunctive Relief. Shareholder hereby acknowledges and agrees
-----------------
that any default hereunder will cause damage to the Company, Acquirer and
Acquirer's Affiliates in an amount that is difficult to ascertain. Accordingly,
in addition to any other relief to which the Company, Acquirer and Acquirer's
Affiliates may be entitled, Acquirer and Acquirer's Affiliates shall be entitled
to injunctive relief as may be ordered by any court of competent jurisdiction
without the proof of actual damages, including, but not limited to, an
injunction restraining any violation of Sections 1.1, 1.2 or 1.3 above.
1.5 Description of Business. Shareholder agrees and represents and
-----------------------
warrants to Acquirer that immediately prior to the date hereof, the Company was
conducting business from offices located in the States of California, New Mexico
and Texas, the customers of the Company were located throughout the Territory,
equipment rented by the Company was sent throughout the Territory
- 2 -
<PAGE>
to its customers, and the Company had developed a favorable reputation and
goodwill throughout the Territory. Shareholder agrees that the non-compete
covenants set forth above covering the Territory are a fair reflection of such
reputation and goodwill.
1.6 Severability. Based in part on the statements and agreements
------------
contained in Section 1.5 above, the parties hereto intend that the covenants
contained in Sections 1.1, 1.2 and 1.3 above shall be construed as a series of
separate covenants, one for each of the counties of each state in the United
States included in the Territory. Except for such geographical coverage, each
such separate covenant shall be identical in its terms. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants not to
compete as set forth herein, then the unenforceable covenants shall be deemed
eliminated from the provisions of this Agreement for the purpose of those
proceedings to the extent necessary to permit the remaining separate covenants
to be enforced.
2. Arbitration.
-----------
2.1 Parties' Consent to Arbitration. Except as provided in this
-------------------------------
Agreement, any dispute, controversy or claim arising out of or relating to this
Agreement or breach thereof shall be settled by binding arbitration heard by one
arbitrator, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association Rules (the "Rules"). The parties hereto agree that the
venue of such arbitration shall be Los Angeles, California. The party intending
to arbitrate shall serve a written notice of intention to commence arbitration
on the other party. The arbitrator shall be appointed in accordance with the
Rules.
2.2 Powers. The arbitrator shall be bound by the terms and
------
conditions of this Agreement and shall have no power, in rendering the award, to
alter or depart from any express provision of this Agreement, and his/her
failure to observe this limitation shall constitute grounds for vacating the
award. Any award of the arbitrator shall be final and binding upon the parties
and judgment may be entered in any court of competent jurisdiction, including,
without limitation, the courts of the State of California or any federal court
in California or any court of competent jurisdiction in the United States. The
award and judgment thereon shall include interest at the legal rate from the
date that the sum awarded to the prevailing party was originally due and
payable.
2.3 Provisional Remedies. All provisional remedies shall be the
--------------------
exclusive jurisdiction of the courts. The parties may seek and obtain
provisional remedies prior to or contemporaneously with arbitration.
- 3 -
<PAGE>
2.4 Entitlement to Costs. If any legal action or dispute arises
--------------------
under this Agreement, arises by reason of any asserted breach of it, or arises
between the parties and is related in any way to the subject matter of the
Agreement, the prevailing party shall be entitled to recover all costs and
expenses, including reasonable attorneys' fees, arbitration costs, investigative
costs, reasonable accounting fees and charges for experts. Attorneys' fees and
expenses incurred in enforcing any judgment are recoverable as a separate item
and shall be severable from other provisions of this Agreement, shall survive
any judgment and shall not be merged into such judgment.
2.5 Jurisdiction and Venue. Except as otherwise provided in this
----------------------
Agreement, each of the parties consents and submits to the exclusive
jurisdiction and venue of the State of California for the adjudication of any
dispute between the parties pertaining to this Agreement or the alleged breach
of any provision hereof.
3. Miscellaneous.
-------------
3.1 Cumulative Remedies. This Agreement is in addition to the
-------------------
Exchange Agreement and the Employment Agreement, and the Company's, Acquirer's
and Acquirer's Affiliates' rights and remedies under this Agreement and under
the Exchange Agreement and Employment Agreement shall be independent, separate
and distinct, and at the option of the Company, Acquirer and Acquirer's
Affiliates, cumulative.
3.2 Successors and Assigns. This Agreement shall be binding upon,
----------------------
and inure to the benefit of all of the parties hereto and their respective
heirs, personal representatives, successors and assigns. The Company's and
Acquirer's successors and assigns shall have the right to enforce each and every
right of Acquirer under this Agreement, the Exchange Agreement and the
Employment Agreement, to the extent such rights have been assigned or
transferred to such parties.
3.3 Governing Law. Nothing contained herein shall be construed to
-------------
require the commission of any act contrary to law. Should there be any conflict
between any provision hereof and any present or future statute, law, ordinance,
or regulation, the latter shall prevail, but the provision of this Agreement
affected thereby shall be curtailed and limited only to the extent necessary to
bring it within the requirements of the law, and the remaining provisions of
this Agreement shall remain in full force and effect. This Agreement is made
under and shall be construed pursuant to the laws of the State of California.
3.4 Entire Agreement. This Agreement (together with the Exchange
----------------
Agreement and the Employment Agreement) constitute the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior
- 4 -
<PAGE>
agreements, arrangements and understandings with respect thereto. No
representation, promise, inducement or statement of intention has been made by
any party hereto that is not embodied herein, and no party shall be bound by or
liable for any alleged representation, promise, inducement or statement not so
set forth herein.
3.5 Modification. This Agreement may be modified, amended,
------------
superseded or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by all parties hereto.
3.6 Indemnification. Shareholder shall indemnify and hold the
---------------
Company, Acquirer and such other parties designated in Section 13.1 of the
Exchange Agreement harmless for any and all breaches of this Agreement in
accordance with the provisions of the Exchange Agreement.
3.7 Waiver. Each and all of the several rights and remedies
------
provided in this Agreement, or by law or in equity, shall be cumulative, and no
one of them shall be exclusive of any other right or remedy, and the exercise of
any one of such rights or remedies shall not be deemed a waiver of, or an
election to exercise, any other such right or remedy. No waiver of any term or
condition of this Agreement shall be construed as a waiver of any other term or
condition; nor shall any waiver of any default hereunder be construed as a
waiver of any other default hereunder.
3.8 Counterparts. This Agreement may be executed in several
------------
counterparts and all documents so executed shall constitute one agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
did not sign the original or the same counterparts.
3.9 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been given
when delivery is made in accordance with the provisions of the Exchange
Agreement.
- 5 -
<PAGE>
The parties hereto have executed this Agreement as of the date first
set forth above.
/s/ Stephen F. Ward
----------------------------------------
STEPHEN F. WARD
DUKE CITY VIDEO, INC.
By: /s/ Harold Jay Lefkovitz
-------------------------
Name: Harold Jay Lefkovitz
Title: President
DUKE CITY HOLDINGS, INC.
By: /s/ Carlos D. DeMattos
--------------------------
Name: Carlos D. DeMattos
Title: President
- 6 -
<PAGE>
EXHIBIT D
PROMISSORY NOTE
Principal Sum: $585,561.15 May 2, 1997
1. Promise to Pay. For value received, DUKE CITY VIDEO, INC., a New
--------------
Mexico corporation doing business as DUKE CITY STUDIO ("Maker"), promises to pay
to HAROLD J. LEFKOVITZ, an individual ("Payee"), at the address of Payee at 4121
Cutler, N.E., Albuquerque, New Mexico 87110, the principal sum of FIVE HUNDRED
EIGHT-FIVE THOUSAND FIVE HUNDRED SIXTY-ONE DOLLARS AND 15/100 ($585,561.15),
with interest on the unpaid balance accruing at the rate of eight and three-
fourths percent (8.75%) per annum.
2. Terms of Payment. Interest on this Promissory Note ("Note") shall be
----------------
due and payable on each January 1, April 1, July 1 and October 1, and the
principal outstanding under this Note and accrued and unpaid interest thereon
shall be due and payable in full on the maturity date hereof, which shall be May
1, 2000.
3. Prepayment. Maker may prepay this Note in whole or in part on any
----------
date without premium or penalty. Any partial prepayment shall be credited first
to accrued interest and then to principal. No partial prepayment shall extend
or postpone the maturity date.
4. Security, Guaranty and Subordination. The obligations of Maker under
------------------------------------
this Note are neither secured by any property, real or personal, nor guaranteed
by any third-party. The rights of Payee under this Note, and the indebtedness
represented hereby, are subordinated to the rights of Maker's principal lender,
in accordance with subordination agreements delivered by Maker to such lender
from time to time.
5. Successors and Assigns. This Note shall be binding upon and inure to
----------------------
the benefit of the parties, their respective successors and permitted assigns,
provided that neither Maker nor Payee shall assign this Note or any interest
herein or obligation hereunder without the consent of the other party.
6. Governing Law. All questions with respect to this Note and the rights
-------------
and liabilities of the parties shall be governed by the laws of California
(without giving effect to provisions in California law related to conflict of
laws).
- 1 -
<PAGE>
7. Extension Not a Waiver. No delay or omission in the exercise of any
----------------------
power, remedy or right herein provided or otherwise available to any party shall
impair or affect the right of such party thereafter to exercise the same. Any
extension of time or other indulgence granted to a party hereunder shall not
otherwise alter or affect any power, remedy or right of any other party, or the
obligations of the party to whom such extension or indulgence is granted except
as specifically waived.
8. Absolute Obligations. Maker waives presentment, notice of nonpayment
--------------------
or dishonor, protest, notice of protest, and all other notices in connection
with the delivery, acceptance, performance, default, or enforcement of this
Note. Notwithstanding the foregoing, offset rights in respect of this Note are
as set forth in that certain Stock Exchange Agreement and Plan of Reorganization
dated as of May 2, 1997, among Maker, Payee, Louise K. Lefkovitz, Patricia M.
Brusati, Stephen F. Ward, and Duke City Holdings, Inc. ("Exchange Agreement").
9. Arbitration. Any disputes or other controversies relating to the
-----------
offset rights described in Section 8 above shall be resolved by arbitration in
accordance with the provisions of the Exchange Agreement.
10. Usury Law. Notwithstanding any other provision contained in this
---------
Note, the rate of interest payable under this Note shall not at any time exceed
a rate which, when combined with any and all other charges provided for in this
Note or any other document executed in connection with this Note (to the extent
such other charges would constitute interest for the purpose of any applicable
law limiting interest which may be charged hereunder), exceeds the maximum
interest rate permitted by law with respect to the transactions contemplated
hereby.
11. Forum Selection. Disputes with respect to this Note shall be heard in
---------------
a California State court or Federal court sitting in Los Angeles, California.
To the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in such forum shall not be raised
by either Maker or Payee.
IN WITNESS WHEREOF, Maker has executed this Note as of the day and year set
forth above.
DUKE CITY VIDEO, INC.
By: /s/ Stephen F. Ward
---------------------------
Name: Stephen F. Ward
Title: Executive Vice-President
- 2 -
<PAGE>
EXHIBIT E
PROMISSORY NOTE
Principal Sum: $50,000.00 May 2, 1997
1. Promise to Pay. For value received, DUKE CITY VIDEO, INC., a New
--------------
Mexico corporation doing business as DUKE CITY STUDIO ("Maker"), promises to pay
to PATRICIA M. BRUSATI, an individual ("Payee"), at the address of Payee at 3088
Clybourn Avenue, Burbank California 91505, the principal sum of FIFTY THOUSAND
DOLLARS ($50,000.00), with interest on the unpaid balance accruing at the rate
of eight and three-fourths percent (8.75%) per annum.
2. Terms of Payment. The principal outstanding under this Promissory
----------------
Note ("Note") and accrued interest thereon shall be due and payable in full on
the maturity date hereof, which shall be May 1, 1998.
3. Prepayment. Maker may prepay this Note in whole or in part on any
----------
date without premium or penalty. Any partial prepayment shall be credited first
to accrued interest and then to principal. No partial prepayment shall extend
or postpone the maturity date.
4. Security and Guaranty. The obligations of Maker under this Note are
---------------------
neither secured by any property, real or personal, nor guaranteed by any third-
party.
5. Acceleration. In the event Maker fails to make payment under this
------------
Note, Payee may, at his sole option, and without notice to Maker (which notice
is hereby expressly waived) declare immediately due and payable the entire
unpaid principal balance of this Note, together with all accrued and unpaid
interest thereon.
6. Successors and Assigns. This Note shall be binding upon and inure to
----------------------
the benefit of the parties, their respective successors and permitted assigns,
provided that neither Maker nor Payee shall assign this Note or any interest
herein or obligation hereunder without the consent of the other party.
7. Governing Law. All questions with respect to this Note and the rights
-------------
and liabilities of the parties shall be governed by the laws of California
(without giving effect to provisions in California law related to conflict of
laws).
8. Extension Not a Waiver. No delay or omission in the exercise of any
----------------------
power, remedy or right herein provided or otherwise available to any party shall
impair or affect
- 1 -
<PAGE>
the right of such party thereafter to exercise the same. Any extension of time
or other indulgence granted to a party hereunder shall not otherwise alter or
affect any power, remedy or right of any other party, or the obligations of the
party to whom such extension or indulgence is granted except as specifically
waived.
9. Consent to Arbitration. Except as provided in this Note, any dispute,
----------------------
controversy or claim arising out of or relating to this Note or breach thereof
shall be settled by binding arbitration heard by one arbitrator, in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
Rules (the "Rules"). Maker agrees that the venue of such arbitration shall be
Los Angeles, California. In the event either Maker or Payee intend to commence
arbitration, they may serve a written notice of intention to commence
arbitration on the other party. The arbitrator shall be appointed in accordance
with the Rules.
10. Powers. The arbitrator shall be bound by the terms and conditions of
------
this Note and shall have no power, in rendering the award, to alter or depart
from any express provision of this Note, and his/her failure to observe this
limitation shall constitute grounds for vacating the award. Any award of the
arbitrator shall be final and binding upon Maker and Payee and judgment may be
entered in any court of competent jurisdiction, including, without limitation,
the courts of the State of California or any federal court in California or any
court of competent jurisdiction in the United States. The award and judgment
thereon shall include interest at the legal rate from the date that the sum
awarded to the prevailing party was originally due and payable.
11. Provisional Remedies. All provisional remedies shall be the exclusive
--------------------
jurisdiction of the courts. Maker and Payee may seek and obtain provisional
remedies prior to or contemporaneously with arbitration.
12. Entitlement to Costs. If any legal action or dispute arises under
--------------------
this Note, arises by reason of any asserted breach of it, or arises between
Maker and Payee and is related in any way to the subject matter of the Note, the
prevailing party shall be entitled to recover all costs and expenses, including
reasonable attorneys' fees, arbitration costs, investigative costs, reasonable
accounting fees and charges for experts. Attorneys' fees and expenses incurred
in enforcing any judgment are recoverable as a separate item and shall be
severable from other provisions of this Note, shall survive any judgment and
shall not be merged into such judgment.
- 2 -
<PAGE>
13. Jurisdiction and Venue. Except as otherwise provided in this Note,
----------------------
Maker consents and submits to the exclusive jurisdiction and venue of the State
of California for the adjudication of any dispute between Maker and Payee
pertaining to this Note or the alleged breach of any provision hereof.
14. Absolute Obligations. Maker waives presentment, notice of nonpayment
--------------------
or dishonor, protest, notice of protest, and all other notices in connection
with the delivery, acceptance, performance, default, or enforcement of this
Note. Notwithstanding the foregoing, offset rights in respect of this Note are
as set forth in that certain Stock Exchange Agreement and Plan of Reorganization
dated as of May 2, 1997, among Maker, Payee, Harold Jay Lefkovitz, Louise K.
Lefkovitz, Stephen F. Ward, and Duke City Holdings, Inc.
15. Usury Law. Notwithstanding any other provision contained in this
---------
Note, the rate of interest payable under this Note shall not at any time exceed
a rate which, when combined with any and all other charges provided for in this
Note or any other document executed in connection with this Note (to the extent
such other charges would constitute interest for the purpose of any applicable
law limiting interest which may be charged hereunder), exceeds the maximum
interest rate permitted by law with respect to the transactions contemplated
hereby.
16. Forum Selection. Disputes with respect to this Note shall be heard in
---------------
a California State court or Federal court sitting in Los Angeles, California.
To the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in such forum shall not be raised
by either Maker or Payee.
IN WITNESS WHEREOF, Maker has executed this Note as of the day and year set
forth above.
DUKE CITY VIDEO, INC.
By: /s/ Harold Jay Lefkovitz
------------------------
Name: Harold Jay Lefkovitz
Title: President
- 3 -
<PAGE>
[EXHIBIT 2]
SUBORDINATION AGREEMENT
This Subordination Agreement ("Agreement") is made as of May 2, 1997,
by the undersigned, HAROLD JAY LEFKOVITZ, an individual ("Creditor"), in favor
of CHASE MANHATTAN BANK, as agent ("Bank"). Creditor is a creditor of DUKE CITY
VIDEO, INC., a New Mexico corporation ("Debtor") and Creditor understands that
Debtor is or shall become indebted to Bank in respect of that certain Credit
Agreement dated as of July 27, 1995, by and among (i) Matthews Studio Equipment
Group, Matthews Studio Equipment, Inc., Hollywood Rental Co., Inc., Matthews
Studio Electronics, Inc., Matthews Acceptance Corporation, (ii) the guarantors
named therein, (iii) the lenders named therein, and (iv) Chemical Bank (as
predecessor in interest to Bank), as agent for the lenders named therein. Such
Credit Agreement, as amended, renewed, restated, substituted and modified from
time to time, shall be referred to herein as the Credit Agreement.
At the request of Debtor, and in order to induce Bank to, at any time
or from time to time at Bank's option, make loans or extend credit or other
accommodation or benefit to or for the account of Debtor, with or without
security, or to grant such renewals or extensions of any thereof as Bank may
deem advisable, it is agreed as follows:
1. The following terms used in this Agreement shall have the
following meaning:
(a) "Indebtedness" shall mean all present and future indebtedness of
Debtor which from time to time may be incurred, whether directly or indirectly,
by Debtor, including, but not limited to, any negotiable instruments evidencing
the same, all debts, demands, indebtedness, liabilities and obligations owed or
to become owing, including interest, principal, costs, and other charges, and
all claims, rights, causes of action, judgments, decrees, remedies, security
interests, and other obligations of any kind whatsoever and howsoever arising,
whether voluntary, involuntary, absolute, contingent, or by operation of law.
(b) "Default" shall mean any default under or pursuant to the terms of
any agreement with, or Indebtedness owing by Debtor to, Bank, including, but not
limited to, obligations and indebtedness of Debtor to Bank under or with respect
to the Credit Agreement.
2. Creditor represents and warrants to Bank that:
(a) At the date hereof, the Indebtedness owing by Debtor to Creditor
consists of Five Hundred Eighty-Five Thousand Five Hundred Sixty-One Dollars and
15/100 in principal, which is
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<PAGE>
evidenced by the Promissory Note dated May 2, 1997, a copy of which is attached
hereto as Exhibit A (the "Note").
(b) The Note bears a legend stating that it is subject to this
Agreement.
(c) There is no default under the Note or Indebtedness owed by Debtor
to Creditor.
(d) The Indebtedness of Debtor to Creditor is not secured by any
property of Debtor or other collateral, nor is such Indebtedness guaranteed by
any party.
3. Creditor agrees with Bank that:
(a) Except as set forth in Paragraph 10 hereof, the Indebtedness from
Debtor to Creditor, including all liens of any kind, all security interests,
deeds of trust, mortgages or other security instruments of Creditor against
Debtor, or any rights and remedies of Creditor, whether legal or equitable,
whether now existing or hereafter acquired, shall be and hereby are subordinated
to, and the payment of such Indebtedness is deferred until the full and final
payment in cash or its equivalent of, any and all Indebtedness (including all
interest accruing after the date of the filing of a petition by or against
Debtor under the U.S. Bankruptcy Code) now due to Bank from Debtor or which may
hereafter be incurred and become due to Bank from Debtor, and the performance of
all other covenants, agreements, warranties and obligations of any nature
whatsoever owed by Debtor to Bank. This subordination shall be effective
regardless of the time or order of perfection, attachment, priority, or filing
of any such liens, security interests or other rights and remedies.
(b) Creditor will not, without Bank's prior written consent, take any
action to enforce the Indebtedness owed by Debtor to Creditor or any part
thereof, nor shall Creditor take any action to dispose of, foreclose, realize
upon or release any collateral securing the Indebtedness owed by Debtor to
Creditor or enforce any liens, security interests, deeds of trust, mortgages,
security instruments, or other encumbrances securing the Indebtedness owed by
Debtor to Creditor, or any other rights and remedies.
(c) If Bank so requests, Creditor shall take all steps necessary to
collect and enforce the Indebtedness owing to Creditor. Following the
occurrence and during the continuation of a Default, Creditor will hold in trust
and immediately pay to Bank any amount Debtor pays to Creditor on account of the
Indebtedness owing to Creditor, in the same form of payment received, for
application upon the Indebtedness now or hereafter owing to Bank by Debtor.
- 2 -
<PAGE>
(d) Creditor will, upon Bank's request, assign, deliver or cause to be
delivered to Bank any collateral which Creditor may receive in the future as
security for the Indebtedness owed by Debtor to Creditor.
(e) Creditor agrees that he will not, without Bank's prior written
consent, commence, prosecute or participate in any administrative, legal, or
equitable action against Debtor or in any administrative, legal or equitable
action that might adversely affect Debtor or its interest, and shall not join in
any petition for bankruptcy or assignment for the benefit of creditors.
(f) If Creditor, in violation of this Agreement, shall commence,
prosecute or participate in any suit, action, petition or proceeding against
Debtor, Debtor may assert as a defense this Agreement and Bank may also assert
such defense in Bank's name or in the name of Debtor. If Creditor shall attempt
to enforce any liens, security interests, deeds of trust, mortgages or any other
security instruments, or any rights and remedies, Bank or Debtor may by virtue
of this Agreement restrain the enforcement thereof in Bank's name or in the name
of Debtor. If Creditor obtains any assets of Debtor as a result of any
administrative, legal, or equitable action, or otherwise, such assets shall be
received in trust for Bank, and Creditor agrees to promptly pay, deliver, and
assign to Bank any such assets for application upon the Indebtedness now or
hereafter owing to Bank by Debtor.
(g) Debtor agrees with Bank that it will not (except as permitted
pursuant to Paragraph 10 hereof) without Bank's prior written consent, pay
Creditor any sum on account of the Indebtedness owing Creditor, or execute or
deliver any negotiable instruments (whether in replacement of the Note or
otherwise) as evidence of the Indebtedness of Debtor to Creditor, or any portion
thereof.
(i) Creditor agrees that Bank shall have absolute power and
discretion, without notice to Creditor to deal in any manner with the
Indebtedness owing to Bank, including interest, costs and expenses payable by
Debtor to Bank, and any security and guarantees therefor including, but not by
way of limitation, any and all release, surrender, extension, renewal,
modification, acceleration, compromise, or substitution thereof. Creditor
hereby waives and agrees not to assert against Bank any rights which a guarantor
or surety could exercise; provided that nothing in this Agreement shall
constitute Creditor a guarantor or surety. Creditor hereby waives the right, if
any, to require that Bank marshal or otherwise require Bank to proceed to
dispose of or foreclose upon any collateral for any Indebtedness in any manner
or order.
- 3 -
<PAGE>
4. If, at any time hereafter, Bank shall, in Bank's own judgment
determine to discontinue the extension of credit to Debtor, Bank may do so.
Except as permitted under Paragraph 10 below, this Agreement and the obligations
of Debtor and Creditor and Bank's rights and privileges hereunder shall continue
until payment in full of all Indebtedness owing to Bank by Debtor,
notwithstanding any action or non-action by Bank with respect thereto or any
collateral therefor or any guarantees thereof. All rights, powers and remedies
hereunder shall apply to all present and future Indebtedness of Debtor to Bank,
including under successive transactions which may continue, renew, increase,
decrease or from time to time create new Indebtedness to Bank.
5. If Debtor or Creditor violates any of the provisions of this
Agreement, or if Debtor's Indebtedness to Creditor is accelerated, Bank may
elect by notice in writing delivered to Debtor and Creditor to cause all
Indebtedness of Debtor to Bank to become immediately due and payable. In the
event that any party to this Agreement shall retain an attorney as a result of
any dispute over or to enforce any provision of this Agreement, the prevailing
party in any litigation, arbitration, or other formal or informal resolution of
any such dispute over or enforcement of this Agreement shall be entitled to all
of its expenses, costs (whether legally recoverable or actual out-of-pocket
costs) and attorneys' fees incurred as a result of such dispute or enforcement.
The right to recover such expenses, costs and attorneys' fees shall survive the
rendering of any judgment on this Agreement and shall not be deemed merged into
such judgment.
6. In the event any portion of this Agreement is found invalid,
that portion may be severed from this Agreement, and shall not affect the
validity of the remainder of such Agreement.
7. The obligations of Debtor and Creditor hereunder shall continue
irrespective of, and Debtor and Creditor hereby waive, to the fullest extent
legally permitted, any existing or any future statute of limitations applicable
thereto.
8. This Agreement shall be binding upon the heirs, administrators,
personal representatives, successors and assigns of Creditor and Debtor, and
shall inure to the benefit of Bank's successors and assigns.
9. This Agreement and the obligations which it secures and all
rights and liabilities of the parties shall be governed as to validity,
interpretations, enforcement and effect by the laws of the State of California.
- 4 -
<PAGE>
10. Notwithstanding anything herein contained to the contrary, and
provided no Default has occurred and be continuing, Creditor may accept and
Debtor may make the payments of interest due quarterly under the terms of the
Note, and the payment of principal and interest called for on the maturity date
of the Note, which is May 1, 2000, without prior written notice to or approval
by Bank.
11. Bank shall give Creditor notice of the occurrence and
continuation of a Default, but Bank's failure to so notify Creditor will not,
however, affect or impair in any way the subordination made in this Agreement or
the terms and provisions of this Agreement.
IN WITNESS WHEREOF, Creditor has duly executed this Agreement as of
May 2, 1997.
/s/ Harold Jay Lefkovitz
-------------------------
HAROLD JAY LEFKOVITZ
- 5 -
<PAGE>
[EXHIBIT 3]
STOCK EXCHANGE AGREEMENT
------------------------
This STOCK EXCHANGE AGREEMENT ("Agreement") is made and entered into
as of this 2nd day of May, 1997, by and between (i) JOHN E. HENSCH, an
individual ("Hensch") and (ii) DUKE CITY HOLDINGS, INC., a California
corporation (the "Purchaser").
RECITALS
--------
WHEREAS, DUKE CITY VIDEO, INC., a New Mexico corporation doing
business as DUKE CITY STUDIO ("Duke City") has one hundred seventeen and eight-
tenths (117.8) shares of stock which are authorized, issued and outstanding (the
"Total Shares");
WHEREAS, Hensch is the holder and owner of eleven and eight-tenths
(11.8) shares of the Total Shares (the "Hensch Shares"); and
WHEREAS, Hensch and the Purchaser deem it advisable for their mutual
benefit that the Purchaser purchase all right, title to and interest in the
Hensch Shares pursuant to the terms set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
- 1 -
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
When used in this Agreement, each of the terms set forth below has the
meaning indicated.
1.1 "Affiliate" shall mean with respect to any person, any other
---------
person controlling, controlled by or under common control with such person or an
immediate family member of such person (including such person's spouse, children
and grandchildren).
1.2 "Aggrieved" shall have the meaning ascribed thereto at Section
---------
10.3 hereof.
1.3 "Claim" shall have the meaning ascribed thereto at Section 10.3
-----
hereof.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
1.5 "Closing" shall have the meaning ascribed thereto at Section
-------
8.1 hereof.
1.6 "Closing Date" shall have the meaning ascribed thereto at
------------
Section 8.1 hereof.
1.7 "Indemnitor" shall have the meaning ascribed thereto at Section
----------
10.3 hereof.
1.8 "IRS" shall mean the Internal Revenue Service.
---
1.9 "Knowledge," "Know," or "Known," as used in this Agreement,
--------- ---- -----
shall mean the knowledge which the representing party has, or should have after
due inquiry, of the matters referred to as of the date referred to.
- 2 -
<PAGE>
1.10 "Losses" shall have the meaning ascribed thereto at Section
--------
10.1 hereof.
1.11 "Matthews" shall mean Matthews Studio Equipment Group, a
--------
California corporation.
1.12 "Matthews Shares" shall have the meaning ascribed thereto at
---------------
Section 2.2 hereof.
1.13 "Other Purchase Agreement" shall mean that certain Stock
------------------------
Exchange Agreement and Plan of Reorganization dated May 2, 1997, among Duke
City, the Other Shareholders, and the Purchaser, pursuant to which the Purchaser
is to acquire all other shares of capital stock of Duke City which, together
with the Hensch Shares, constitute the Total Shares.
1.14 "Other Shareholders" shall mean Harold Jay Lefkovitz, Louise K.
------------------
Lefkovitz, Stephen F. Ward and Patricia M. Brusati.
1.15 "Rules" shall have the meaning ascribed thereto in Section 14.1
-----
hereof.
1.16 "Securities Act" shall have the meaning ascribed thereto at
--------------
Section 3.4 hereof.
1.17 "Shareholders' Agreement" shall have the meaning ascribed
-----------------------
thereto at Section 3.1 hereof.
ARTICLE II
----------
TRANSFER OF SHARES
------------------
2.1 Sale and Purchase of Hensch Shares. Subject to the terms and
----------------------------------
conditions set forth in this Agreement, at the
- 3 -
<PAGE>
Closing, Hensch shall assign and deliver to the Purchaser the Hensch Shares, and
the Purchaser shall purchase and take assignment and delivery of the Hensch
Shares.
2.2 Delivery and Consideration.
--------------------------
(a) The aggregate consideration for the Hensch Shares shall be
Twenty-Eight Thousand Five Hundred Seventy-Two (28,572) shares of unregistered,
restricted shares of Common Stock of Matthews ("Matthews Shares").
(b) At the Closing Hensch shall deliver to the Purchaser stock
certificates representing all of the Hensch Shares, accompanied by appropriate
instruments of transfer satisfactory in form and substance to counsel for the
Purchaser.
(c) In consideration for the transfer of the Hensch Shares, the
Purchaser shall deliver to Hensch at the Closing stock certificates representing
the Matthews Shares, issued in Hensch's name.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
HENSCH
------
Hensch hereby represents and warrants to the Purchaser the matters set
forth in this Article III.
3.1 Status of Securities. Each of the Hensch Shares have been
--------------------
legally and validly issued and are fully paid and non-assessable. All of the
Hensch Shares are owned legally and beneficially by Hensch, with no liability
attaching to the
- 4 -
<PAGE>
ownership thereof, free and clear of all mortgages, claims, liens, security
interests, charges and encumbrances, or restrictions on transfer or voting, and
there are no proxies outstanding with respect to any such shares, except
pursuant to that certain Shareholders' Agreement dated as of January 1, 1992,
among Duke City, Hensch, Harold Jay Lefkovitz and Louise K. Lefkovitz
("Shareholders' Agreement"). Further, Hensch specifically represents and
warrants that, as of the Closing, the Hensch Shares are owned by him as his
separate property, he is not married and no person has or as of the Closing
shall have any community or marital interest in such stock. Upon delivery of
the certificates representing the Hensch Shares to the Purchaser at the Closing,
the Purchaser shall acquire valid title to all such stock free and clear of all
mortgages, claims, liabilities, liens, security interests, charges and
encumbrances or restrictions on transfer or voting.
3.2 No Violation. Hensch is not subject to any contract or other
------------
agreement, any license, order or permit, or any law, regulation, order, judgment
or decree, which would be breached or violated or in respect of which a right of
termination or acceleration or any encumbrance on any of his assets would be
created by his execution and performance of this Agreement.
3.3 Seller's Authority Relative to this Agreement. Hensch has all
---------------------------------------------
requisite power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby and no other actions or
proceedings on Hensch's part are
- 5 -
<PAGE>
necessary to authorize the execution and delivery of this Agreement. This
Agreement constitutes a valid and binding obligation of Hensch enforceable in
accordance with its terms. No characteristic of Hensch or of his business
activities requires any consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority or other
person in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
3.4 Investment Representations. Hensch is acquiring the Matthews
--------------------------
Shares for his own account as principal, with no view to any resale or
distribution of any such Matthews Shares, or any beneficial interest therein.
Hensch understands that the Matthews Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or applicable state
securities laws, and therefore Hensch agrees that he will not sell or otherwise
transfer the Matthews Shares unless such Matthews Shares are registered under
the Securities Act and qualified under applicable state securities laws, or
unless an exemption from such registration or qualification is available.
3.5 Value of Matthews Shares. Hensch has made his own
------------------------
determination as to the value of the Matthews Shares, he has not relied on any
information provided to him by the Purchaser or Matthews in respect of the
business prospects or future of Matthews or any of its subsidiaries, and that in
the transactions covered by
- 6 -
<PAGE>
this Agreement, he has been represented by legal and financial advisors selected
by him.
3.6 Claims Against Duke City. Except for amounts not in excess of
------------------------
Fifteen Thousand Dollars ($15,000.00) due to Hensch for video engineering
services rendered by Hensch to Duke City and except for a Cannon Hi-8 video
camera with lens, accessories and a shipping case on consignment from Hensch to
Duke City (collectively, "Hensch's Rights to Payment") Hensch does not own or
hold, against Duke City or any of the Other Shareholders, any claims, causes of
action, unpaid debts or other rights to payment that arise out of or relate to
the ownership interest in Duke City held by Hensch or the Hensch Shares. If
claims, causes of action, unpaid debts or other rights to payment described in
the preceding sentence, other than the Hensch's Rights to Payment, existed at
one time, Hensch did not transfer, assign or convey to any party any such
claims, causes of action, unpaid debts or other rights to payment.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE PURCHASER
-------------
The Purchaser hereby represents and warrants to Hensch as follows:
4.1 Organization and Qualification. The Purchaser is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of
California and has all requisite power, corporate
- 7 -
<PAGE>
and otherwise, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
4.2 Execution and Delivery. The execution and delivery of this
----------------------
Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by the
Purchaser and constitutes a valid and binding obligation of the Purchaser,
enforceable in accordance with its terms.
4.3 Investment Representations. The Purchaser is acquiring the
--------------------------
Hensch Shares for its own account as principal, with no view to any resale or
distribution of the Hensch Shares, or any beneficial interest therein. The
Purchaser understands that the Hensch Shares have not been registered under the
Securities Act, or applicable state securities laws, and therefore the Purchaser
agrees that it will not sell or otherwise transfer the Hensch Shares unless it
is registered under the Securities Act and qualified under applicable state
securities laws, or unless an exemption from such registration or qualification
is available.
4.4 Consents and Approvals of Governmental Authorities and Other
------------------------------------------------------------
Persons. No characteristic of the Purchaser or of its business or operations
- -------
requires any consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority or other person in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. In making
- 8 -
<PAGE>
this representation, the Purchaser is relying, in part, on the representations
and warranties of Hensch set forth in Section 3.4.
ARTICLE V
---------
OBLIGATIONS PRIOR TO THE CLOSING
--------------------------------
5.1 Access to Information. Prior to the Closing, Hensch shall
---------------------
furnish the Purchaser all documentation and information as the Purchaser,
through its officers, employees or agents, may reasonably request in connection
with the Purchaser's due diligence review of Hensch's ownership of the Hensch
Shares and the transactions contemplated hereby. No such examination, however,
shall constitute a waiver or relinquishment on the part of the Purchaser of its
right to rely upon the covenants, representa tions and warranties made by Hensch
hereunder.
5.2 Exclusivity. Prior to the Closing Date, Hensch shall not enter
-----------
into or solicit any discussion, negotiation or agreement with any party other
than the Purchaser with respect to the transfer or exchange of the Hensch
Shares.
5.3 Additional Disclosure. From time to time prior to the Closing,
---------------------
Hensch shall deliver or cause to be delivered to the Purchaser supplemental
information concerning events subsequent to the date hereof which would render
any statement, representation or warranty made in this Agreement inaccurate or
incomplete in any material respect.
- 9 -
<PAGE>
ARTICLE VI
----------
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
------------------------------------------
Each and every obligation of the Purchaser under this Agreement to be
performed at or before the Closing shall be subject to the satisfaction, at or
before the Closing, of the following conditions:
6.1 Representations and Warranties True. The representations and
-----------------------------------
warranties contained in Article III hereof shall be true and accurate in all
material respects as of the date when made and on and as of the Closing Date as
if made on and as of the Closing Date.
6.2 Performance of Covenants. Hensch shall have performed and
------------------------
complied in all material respects with each and every covenant, agreement and
condition required by this Agreement to be performed or complied with by him
prior to or at the Closing.
6.3 No Proceeding or Litigation. There shall be no investigation,
---------------------------
notice, suit, order, action, inquiry, arbitration or proceeding pending or
threatened which restrains or prohibits the consummation of this Agreement or
the transactions contemplated hereby or which questions the validity or legality
of the transactions contemplated hereby, or seeks to impose any liability on the
Purchaser as a result of the transactions contemplated hereby.
6.4 Approvals and Consents. All approvals, or the absence of
----------------------
disapprovals within applicable time periods, of public authorities, federal,
state or local (or exemptions from the
- 10 -
<PAGE>
requirements therefor), and all approvals of any private persons, the granting
or absence of which is necessary for the consummation of the transactions
contemplated by this Agreement, shall have been obtained (or in the case of such
disapprovals, shall be absent).
6.5 Certificates, Documents, and other Agreements. Hensch shall
---------------------------------------------
have furnished the Purchaser with such certificates, documents, and other
agreements to evidence compliance with the conditions set forth in this Article
VI, and such other documents as may be reasonably requested by the Purchaser.
6.6 Due Diligence. The Purchaser, through its representatives and
-------------
agents, shall have completed, to its satisfaction, its due diligence review of
the Hensch Shares and Hensch's ownership interest in Duke City in accordance
with the terms of this Agreement.
6.7 Other Closing. All conditions to the consummation of the
-------------
transactions contemplated under the Other Purchase Agreement shall have been
satisfied, to the Purchaser's sole discretion, and the closing of such
transactions shall occur contemporaneously with the Closing under this
Agreement.
ARTICLE VII
-----------
CONDITIONS TO OBLIGATIONS OF HENSCH
-----------------------------------
Each and every obligation of the Hensch under this Agreement to be
performed at or before the Closing shall be subject to the satisfaction, at or
before the Closing, of the following conditions:
- 11 -
<PAGE>
7.1 Representations and Warranties True. The representations and
-----------------------------------
warranties contained in Article IV hereof shall be true and accurate in all
material respects as of the date when made and on and as of the Closing Date as
if made on and as of the Closing Date.
7.2 Performance of Covenants. The Purchaser shall have performed
------------------------
and complied in all material respects with each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by it
prior to or at the Closing.
7.3 No Proceeding or Litigation. There shall be no investigation,
---------------------------
notice, suit, order, action, inquiry, arbitration or proceeding pending or
threatened which restrains or prohibits the consummation of this Agreement or
the transactions contemplated hereby or which questions the validity or legality
of the transactions contemplated hereby, or seeks to impose any liability on
Hensch as a result of the transactions contemplated hereby.
7.4 Approvals and Consents. All approvals, or the absence of
----------------------
disapprovals within applicable time periods, of public authorities, federal,
state or local (or exemptions from the requirements therefor), and all approvals
of any private persons, the granting or absence of which is necessary for the
consummation of the transactions contemplated by this Agreement, shall have been
obtained (or in the case of such disapprovals, shall be absent).
7.5 Certificates, Documents, Appraisals, and other Agreements. The
---------------------------------------------------------
Purchaser shall have furnished Hensch with such certificates, documents,
appraisals, and other agreements to
- 12 -
<PAGE>
evidence compliance with the conditions set forth in this Article IX and such
other documents as may be reasonably requested by Hensch.
ARTICLE VIII
------------
CLOSING; CLOSING DATE
---------------------
8.1 Time and Place. Unless this Agreement shall have been
--------------
terminated and the transactions herein contemplated shall have been abandoned
pursuant to a provision of Article IX hereof, a closing (the "Closing") will be
held on May 2, 1997 (the "Closing Date"). The Closing shall be held at 10:00
a.m. at the offices of Whitman Breed Abbott & Morgan, 633 West Fifth Street,
Suite 2100, Los Angeles, California 90071 (or at such other place or time as
shall be agreed upon by the parties hereto).
8.2 Transactions at Closing. At the Closing:
-----------------------
(a) Hensch shall duly deliver to the Purchaser the stock certificates
endorsed by him in blank representing his ownership of the Hensch Shares.
(b) The Purchaser shall deliver to Hensch the Matthews Shares.
ARTICLE IX
----------
TERMINATION AND ABANDONMENT
---------------------------
9.1 Methods of Termination. Anything herein to the contrary
----------------------
notwithstanding, this Agreement may be terminated and the transactions herein
contemplated may be abandoned at any time:
- 13 -
<PAGE>
(a) by mutual consent of all of the parties hereto;
(b) by any of the parties hereto if the Closing has not occurred on or
before May 2, 1997, unless the absence of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform each of its
obligations under this Agreement required to be performed by it at or prior to
the Closing pursuant to the terms hereof; or
(c) by the Purchaser at any time the Purchaser shall have determined
that the condition set forth in Section 6.6 will not be satisfied.
9.2 Requirements and Effect of Termination. In the event of
--------------------------------------
termination and abandonment by any of the parties hereto pursuant to Section 9.1
hereof, written notice thereof shall forthwith be given to the other parties
hereto; provided, however, that the provisions of Sections 12.4 and 12.6 shall
continue in full force and effect notwithstanding a waiver of any cause of
action which any party hereto might have against any other party hereto for
breach of any provision hereof.
ARTICLE X
---------
INDEMNIFICATION
---------------
10.1 Hensch's Indemnity. Hensch agrees to indemnify and hold the
------------------
Purchaser and its subsidiaries and Affiliates and its and their shareholders,
directors and officers harmless from and with respect to any and all
liabilities, losses, damages (including
<PAGE>
special and punitive damages), costs and expenses, including, without
limitation, the fees and disbursements of counsel (collectively, "Losses"),
related to or arising directly or indirectly out of any of the following:
(a) Any inaccuracy or defect in any representation or warranty
made by Hensch in this Agreement; or
(b) Any breach by Hensch of any covenant (including covenants
involving indemnification), obligation or undertaking made by Hensch.
10.2 Purchaser's Indemnity. The Purchaser agrees to indemnify and
---------------------
hold Hensch harmless from and with respect to any and all Losses related to or
arising directly or indirectly out of any of the following:
(a) Any inaccuracy or defect in any representation or warranty
made by the Purchaser in this Agreement; or
(b) Any breach by the Purchaser of any covenant (including covenants
involving indemnification), obligation or undertaking made by the Purchaser.
10.3 Claims.
------
(a) Any party (the "Aggrieved") may assert a right of indemnification
against any other party (the "Indemnitor") in connection with any action, suit,
proceeding, demand or claim at any time instituted against or made upon the
Aggrieved which may result in Losses to the Aggrieved (a "Claim"). In such
event, the Aggrieved shall notify the Indemnitor of such Claim and of the
Aggrieved's claim of indemnification with respect thereto, provided
- 15 -
<PAGE>
that failure of the Aggrieved to give such notice shall not relieve the
Indemnitor of its obligations under this Article X, except to the extent, if at
all, that the Indemnitor shall have been materially prejudiced by such failure
to give notice. Upon receipt of such notice from the Aggrieved, the Indemnitor
shall be entitled to participate in the defense of such Claim.
(b) If and only if the Indemnitor confirms in writing that it shall
indemnify the Aggrieved with respect to such Claim and posts a bond, insurance
policy or other adequate security for the amount of such Claim, the Indemnitor
may assume the defense of such Claim, and in the case of such an assumption the
Indemnitor shall have the authority to negotiate, compromise and settle such
Claim for the Aggrieved; provided, however, that the Indemnitor may not assume
the defense of any Claim which demands equitable relief in whole or in part
without the express written consent of the Aggrieved.
(c) The Aggrieved shall retain the right to employ its own counsel and
to participate in the defense of any Claim, the defense of which has been
assumed by the Indemnitor pursuant to Section 10.3 hereof, but the Aggrieved
shall bear and shall be solely responsible for its own costs and expenses in
connection with such participation; provided, however, that the Aggrieved shall
cooperate in all respects in the defense of the Claim, including refraining from
taking any position adverse to the Indemnitor, whether or not the Aggrieved
shall participate in the defense.
- 16 -
<PAGE>
(d) With respect to liquidated Claims, if within thirty (30) days the
Indemnitor has not contested such Claim in writing, the Indemnitor shall pay the
full amount thereof within ten (10) days after the expiration of such period.
10.4 Surviving Obligations. The rights and duties of the parties
---------------------
under this Article X shall survive termination of this Agreement for any reason.
ARTICLE XI
----------
11.1 Arbitration.
-----------
(a) Except as provided in this Agreement, any dispute, controversy or
claim arising out of or relating to this Agreement or breach thereof shall be
settled by binding arbitration heard by one arbitrator, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association Rules (the
"Rules"). The parties hereto agree that the venue of such arbitration shall be
Los Angeles, California. The party intending to arbitrate shall serve a written
notice of intention to commence arbitration on the other party. The arbitrator
shall be appointed in accordance with the Rules.
(b) The arbitrator shall be bound by the terms and conditions of this
Agreement and shall have no power, in rendering the award, to alter or depart
from any express provision of this Agreement, and his/her failure to observe
this limitation shall constitute grounds for vacating the award. Any award of
the arbitrator shall be final and binding upon the parties and judgment
- 17 -
<PAGE>
may be entered in any court of competent jurisdiction, including, without
limitation, the courts of the State of California or any federal court in
California or any court of competent jurisdiction in the United States. The
award and judgement thereon shall include interest at the legal rate from the
date that the sum awarded to the prevailing party was originally due and
payable.
(c) All provisional remedies shall be the exclusive jurisdiction of
the courts. The parties may seek and obtain provisional remedies prior to or
contemporaneously with arbitration.
(d) If any legal action or dispute arises under this Agreement, arises
by reason of any asserted breach of it, or arises between the parties and is
related in any way to the subject matter of the Agreement, the prevailing party
shall be entitled to recover all costs and expenses, including reasonable
attorneys' fees, arbitration costs, investigative costs, reasonable accounting
fees and charges for experts. Attorneys' fees and expenses incurred in
enforcing any judgment are recoverable as a separate item and shall be severable
from other provisions of this Agreement, shall survive any judgment and shall
not be merged into such judgment.
(e) Except as otherwise provided in this Agreement, each of the
parties consents and submits to the exclusive jurisdiction and venue of the
State of California for the adjudication of any dispute between the parties
pertaining to this Agreement or the alleged breach of any provision hereof.
- 18 -
<PAGE>
ARTICLE XII
-----------
MISCELLANEOUS PROVISIONS
------------------------
12.1 Taxes. Hensch shall pay all sales, use, stamp, transfer and
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like taxes, if any, required to be paid in connection with the transfer of the
Hensch Shares when and if they are purchased pursuant to the terms hereof.
Further, Hensch expressly agrees that all taxes, and penalties and interest
thereon (if any such taxes are due), of any nature, payable to any governmental
authority relating to the transfer of the Hensch Shares are the responsibility
of Hensch, and the Purchaser and Matthews shall in no event be responsible for
any such taxes. Hensch shall not look to the Purchaser or Matthews for
reimbursement or contribution toward any such amounts.
12.2 Amendment and Modification. This Agreement may be amended,
--------------------------
modified and supplemented by mutual consent of the parties hereto, with respect
to any of the terms contained herein, only in such manner as may be agreed upon
in writing by the parties.
12.3 Waiver of Compliance. Any failure of Hensch or the Purchaser
--------------------
to comply with any obligation, covenant, agreement or condition herein may be
respectively waived, in writing, by Hensch or by the Purchaser. Such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
12.4 Expenses. All costs and expenses incurred in connection with
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this Agreement and the transactions contemplated
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<PAGE>
hereby shall be paid by the party incurring such expenses. Hensch represents to
the Purchaser and the Purchaser represents to Hensch that such party has not
dealt with any broker with respect to this transaction and shall indemnify the
other party against any claim by any other third person for any commission,
brokerage, finder's fee or other payment based on any alleged agreement or
understanding between them or it and such third person.
12.5 Notices. All notices, requests, demands and other
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communications required or permitted hereunder shall be in writing and shall be
deemed to have been given as follows:
(a) if to Hensch immediately when delivered by hand or by confirmed
facsimile transmission, or three (3) days after being mailed, certified mail
with postage prepaid, to:
John E. Hensch
4813 Hilton Avenue Northeast
Albuquerque, New Mexico 87110-1144
Facsimile: (505) 884-9504
with a copy to:
David Cowan, CPA
David Cowan & Associates
920 Laguayra Drive, N.E.
Albuquerque, New Mexico 87108
Facsimile: (505) 266-4059
with a copy to:
Tom Watrous, Esq.
Watrous & Reardon
3733 Eubank Boulevard Northeast
Albuquerque, New Mexico 87110
Facsimile: (505) 293-0831
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<PAGE>
or to such other person or persons as Hensch shall designate in writing,
delivered to the Purchaser in the manner provided in this Section 12.5.
(b) if to the Purchaser, immediately when delivered by hand or by
confirmed facsimile transmission, or three (3) days after being mailed,
certified mail with postage prepaid, to:
Duke City Holdings, Inc.
3111 North Kenwood Street
Burbank, California 91505
Attention: Mr. Carlos D. DeMattos
Facsimile: (818) 525-5243
with a copy to:
Tasha D. Nguyen, Esq.
Whitman, Breed, Abbott & Morgan
633 West Fifth Street
Twenty First Floor
Los Angeles, California 90071
Facsimile: (213) 896-2450
or to such other person or persons as the Purchaser shall designate in writing,
delivered to Hensch in the manner provided in this Section 12.5.
12.6 Public Statements. Except for filings with governmental
-----------------
authorities or other announcements required by applicable law, prior to the
Closing, no party hereto shall make any public statement or announcement
regarding the transactions contemplated hereby other than with advance notice,
together with a copy of the text thereof, to the other parties hereto. As of
the Closing, no public statement or announcement, except for filings with
governmental authorities or other announcements required by
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<PAGE>
applicable law, shall be made without the prior approval of the Purchaser. The
rights and duties of the parties under this Section 12.6 shall survive
termination of this Agreement for any reason.
12.7 Assignment. This Agreement and all the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other party; provided, however,
that the Purchaser may assign this Agreement and the rights, interests and
obligations hereunder to an Affiliate of the Purchaser.
12.8 Governing Law. This Agreement and the legal relations between
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the parties hereto shall be governed by and construed in accordance with the
laws of the State of California except insofar as federal law or the internal
law of any other political entity or jurisdiction shall specifically and
mandatorily apply to any of the transactions contemplated hereby.
12.9 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of Hensch and the Purchaser contained in this
Agreement shall survive the Closing Date until the expiration of the statute of
limitations with respect to claims related thereto.
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<PAGE>
12.10 Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
12.11 Headings and Schedules. The headings of the Sections and
----------------------
Articles of this Agreement are inserted for convenience only and shall not
constitute a part hereof.
12.12 Entire Agreement. This Agreement, including the other
----------------
agreements and documents expressly referred to herein which form a part hereof,
contains the entire understanding of the parties hereto in respect of the
subject matter hereof. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings amongst the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
DUKE CITY HOLDINGS, INC.
("Purchaser")
By:/s/ Carlos D. DeMattos
----------------------------
Name: Carlos D. DeMattos
Title: President
/s/ John E. Hensch
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JOHN E. HENSCH
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