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): March 31, 1998
--------------
INMARK ENTERPRISES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1340408
------------------------ ---------------
(State or other jurisdic- (I.R.S. Employer
tion of incorporation or Identification No.)
organization)
0-20394
----------------------
(Commission File Number)
One Plaza Road, Greenvale, New York 11548
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 625-3500
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets
On March 31, 1998, Optimum Group, Inc., formerly known as OG
Acquisition Corp. (the "Purchaser"), an indirect, wholly owned subsidiary of the
Registrant, completed the acquisition (the "Acquisition") of the assets of OG
Holding Corporation, formerly known as Optimum Group, Inc. (the "Seller"). The
Acquisition was consummated pursuant to the terms of that certain Asset Purchase
Agreement, dated as of December 8, 1997, by and among the Seller, James H.
Ferguson, Michael J. Halloran, Christina M. Heile, David E. Huddleston, Thomas
E. Lachenman, Roderick E. Taylor, Thomas L. Wessling, the Purchaser and the
Registrant (the "Purchase Agreement"), as amended by Amendment No. 1, dated as
of March 31, 1998 ("Amendment No. 1"). The Purchase Agreement and Amendment No.
1 are included as Exhibits 2.1 and 2.2, respectively, and are incorporated by
reference.
Upon consummation of the Acquisition, the Purchaser purchased
from the Seller all of the properties, assets and rights comprising or used in
the business of providing sales promotion and marketing services conducted by
the Seller and all other business conducted by the Seller at any time since
January 1, 1994. The purchased assets include cash and cash equivalents,
assigned contracts, intellectual property, name and goodwill, records, insurance
policies, tangible personal property and fixtures, safe deposit boxes and
off-site storage facilities, and inventories and supplies. (A detailed list of
assets purchased by the Purchaser is included in Section 2.1 of the Purchase
Agreement.) The Purchaser plans to use the assets purchased from the Seller,
including equipment and other physical property, in substantially the same
manner as used by the Seller.
Following the consummation of the Acquisition, all of the
employees of the Seller became employees of the Purchaser and certain officers
and shareholders of the Seller became directors of the Purchaser, the Registrant
and Inmark Services, Inc. ("Services"), a direct, wholly owned subsidiary of the
Registrant and the corporate parent of the Purchaser.
The purchase price for the Acquisition (the "Purchase Price")
was negotiated at arms length by the parties to the Purchase Agreement. The
Purchase Price consisted of (i) approximately $8,700,000 in cash, (ii) a
subordinated note of the Registrant in the principal amount of $2.5 million (the
"Subordinated Note"), (iii) 565,385 shares of newly and validly issued, fully
paid and nonassessable common stock of the Registrant, par value $.001 per share
(the "Inmark Shares"), and (iv) the payment or assumption by the Purchaser of
approximately $2.0 million of the Seller's liabilities and debt. The
Subordinated Note and the Inmark Shares are being held in escrow
2
<PAGE>
in accordance with the terms and provisions of the Escrow
Agreement attached as Exhibit 2.3.
Simultaneously with the closing of the Acquisition, the
Registrant, Services and the Purchaser entered into a loan agreement with PNC
Bank, National Association (the "Bank") pursuant to which the Bank provided the
Parent with a $5 million five-year term loan (the "Term Loan") and a $5 million
revolving loan credit facility (the "Revolving Credit Facility"). The cash
portion of the Purchase Price was financed with a combination of the proceeds of
the Term Loan, a $2 million draw on the Revolving Credit Facility and existing
working capital of the Registrant.
During the years ended December 31, 1997, December 31, 1996
and December 31, 1995, Procter & Gamble accounted for 31.1%, 23.1% and 19.0% of
the Seller's revenue, respectively. On a pro forma basis, giving effect to the
Acquisition, for the years ended December 31, 1997, December 31, 1996 and
December 31, 1995, the revenues from Procter & Gamble would have accounted for
9.6%, 8.9% and 7.4%, respectively, of the revenues of the Registrant on a
consolidated basis.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial Statements of Business Acquired.
Financial Statements for the Optimum business of the Seller
for the years ended December 31, 1997 and 1996 are filed as part of this report.
Financial Statements of the Registrant for the fiscal year ended March 31, 1998
will be filed as part of the Registrant's Annual Report on Form 10-K for the
fiscal year ended March 31, 1998.
3
<PAGE>
OPTIMUM GROUP, INC.
Financial Statements
December 31, 1997 and 1996
With Independent Auditors' Report Thereon
4
<PAGE>
Independent Auditors' Report
The Shareholders
Optimum Group, Inc.:
We have audited the accompanying balance sheets of Optimum Group, Inc. as of
December 31, 1997 and 1996, and the related statements of earnings,
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Optimum Group, Inc. as of
December 31, 1997 and 1996, and the results of their operations and their cash
flows for each of the years in the three-period ended December 31, 1997 in
conformity with generally accepted accounting principles.
January 12, 1998
5
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<TABLE>
OPTIMUM GROUP, INC.
Balance Sheets
December 31, 1997 and 1996
<S> <C> <C>
1997 1996
------------- -------------
Assets (note 4)
Current assets:
Cash and cash equivalents $ 857,011 1,552,433
------------- -------------
Accounts receivable:
Trade 1,893,344 1,588,167
Other 1,210 12,502
------------- -------------
1,894,554 1,600,669
------------- -------------
------------- -------------
Costs and estimated earnings in excess of billings
on uncompleted contracts 52,370 794,011
------------- -------------
Total current assets 2,803,935 3,947,113
------------- -------------
Property and equipment:
Leasehold improvements 284,316 264,596
Furniture and fixtures 191,791 191,791
Equipment 1,625,153 1,388,725
------------- -------------
2,101,260 1,845,112
Less accumulated depreciation 1,513,503 1,350,587
------------- -------------
Net property and equipment 587,757 494,525
------------- -------------
Other assets 9,648 10,093
============= =============
Total assets $ 3,401,340 4,451,731
============= =============
1997 1996
--------------- --------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 880,413 655,066
Accrued expenses 191,838 300,413
Billings in excess of costs and estimated earnings
on uncompleted contracts 142,340 245,870
Current portion of long-term debt (note 4) 296,946 275,721
--------------- --------------
Total current liabilities 1,511,537 1,477,070
--------------- --------------
Long-term debt, net of current portion (note 4) 887,039 1,168,476
--------------- --------------
Total liabilities 2,398,576 2,645,546
--------------- --------------
Shareholders' equity (note 5):
Common stock, without par value, 100,000 authorized
shares; 55,600 outstanding 274,539 274,539
Additional paid-in capital 624,834 -
Retained earnings 1,875,089 2,678,510
Treasury stock 21,200 common shares, at cost (1,146,864) (1,146,864)
Notes receivable from shareholders (624,834) -
--------------- --------------
Net shareholders' equity 1,002,764 1,806,185
Commitments (notes 3, 7 and 10)
--------------- --------------
Total liabilities and shareholders' equity $ 3,401,340 4,451,731
=============== ==============
See accompanying notes to financial statements.
</TABLE>
6
<PAGE>
<TABLE>
OPTIMUM GROUP, INC.
Statements of Earnings
Years ended December 31, 1997, 1996 and 1995
<S> <C> <C> <C>
1997 1996 1995
-------------- --------------- --------------
Net sales (note 9) $ 10,507,763 11,002,259 10,511,052
Direct expenses 6,896,884 6,433,227 6,585,037
-------------- --------------- --------------
Gross profit 3,610,879 4,569,032 3,926,015
Selling, general and administrative expenses (note 8) 2,060,736 2,059,955 2,195,608
-------------- --------------- --------------
Operating income 1,550,143 2,509,077 1,730,407
-------------- --------------- --------------
Other income (expense):
Interest expense (50,544) (43,196) (57,464)
Interest income 15,515 17,274 32,672
Other, net 3,164 (7,923) 13,280
-------------- --------------- --------------
Other income (expense), net (31,865) (33,845) (11,512)
-------------- --------------- --------------
Earnings before income taxes 1,518,278 2,475,232 1,718,895
Income taxes (note 6) 46,398 36,800 65,520
-------------- --------------- --------------
Net earnings $ 1,471,880 2,438,432 1,653,375
============== =============== ==============
See accompanying notes to financial statements.
</TABLE>
7
<PAGE>
<TABLE>
OPTIMUM GROUP, INC.
Statements of Shareholders' Equity
Years ended December 31, 1997, 1996 and 1995
<S> <C> <C> <C> <C> <C> <C>
Notes
Additional Receivable Total
Common paid-in Retained Treasury from Shareholders'
stock capital earnings stock Shareholders equity
--------- -------- ----------- ----------- ------------ --------------
--------- -------- ----------- ----------- ------------ --------------
Balances, December 31, 1994 $ 35,814 - 1,510,920 (36,464) - 1,510,270
Issuance of common stock 238,725 - - - - 238,725
Purchases of treasury stock - - - (2,210,400) - (2,210,400)
Sale of treasury stock - - - 1,100,000 - 1,100,000
Net earnings - - 1,653,375 - - 1,653,375
Distributions to shareholders (note 5) - - (1,483,279) - - (1,483,279)
--------- -------- ----------- ----------- ------------ --------------
Balances, December 31, 1995 274,539 - 1,681,016 (1,146,864) - 808,691
Net earnings - - 2,438,432 - - 2,438,432
Distributions to shareholders (note 5) - - (1,440,938) - - (1,440,938)
--------- -------- ----------- ----------- ------------ --------------
Balances, December 31, 1996 274,539 - 2,678,510 (1,146,864) - 1,806,185
Contributed capital (note 5) - 624,834 - - - 624,834
Notes receivable from shareholders - - - - (624,834) (624,834)
(note 5)
Net earnings - - 1,471,880 - - 1,471,880
Distributions to shareholders (note 5) - - (2,275,301) - - (2,275,301)
-------- -------- ----------- ----------- ------------ --------------
Balances, December 31, 1997 $ 274,539 624,834 1,875,089 (1,146,864) (624,834) 1,002,764
======== ======== =========== =========== ============ ==============
See accompanying notes to financial statements.
</TABLE>
8
<PAGE>
<TABLE>
OPTIMUM GROUP, INC.
Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
<S> <C> <C> <C>
1997 1996 1995
--------------- -------------- ---------------
Cash flows from operating activities:
Net earnings $ 1,471,880 2,438,432 1,653,375
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 172,888 187,343 208,850
Changes in assets and liabilities:
Accounts receivable (293,885) (527,141) (33,197)
Costs and estimated earnings in excess
of billings on uncompleted contracts 741,641 145,190 (65,429)
Prepaid expenses - 8,460 21,575
Other assets 445 1,375 (10,771)
Accounts payable 225,347 164,774 (497,348)
Accrued expenses (108,575) 101,964 (87,882)
Billings in excess of costs and estimated
earnings on uncompleted contracts (103,530) 25,038 (85,864)
--------------- -------------- ---------------
Net cash provided by operating activities 2,106,211 2,545,435 1,103,309
--------------- -------------- ---------------
Cash flows from investing activities - capital expenditures (266,120) (121,739) (153,317)
--------------- -------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 21,495 170,795 1,100,000
Principal payments on long-term debt (281,707) (334,832) (260,408)
Distributions to shareholders (2,275,301) (1,440,938) (1,483,279)
Purchase of treasury stock - - (2,210,400)
Proceeds from sale of treasury stock - - 1,100,000
--------------- -------------- ---------------
Net cash used by financing activities (2,535,513) (1,604,975) (1,754,087)
--------------- -------------- ---------------
Net increase (decrease) in cash (695,422) 818,721 (804,095)
Cash and cash equivalents, beginning of the year 1,552,433 733,712 1,537,807
--------------- -------------- ---------------
Cash and cash equivalents, end of the year $ 857,011 1,552,433 733,712
=============== ============== ===============
Supplemental disclosures of cash flow information Cash paid
during the year for:
Interest $ 50,544 43,196 57,464
=============== ============== ===============
Income taxes $ 75,993 14,905 52,820
=============== ============== ===============
See accompanying notes to financial statements.
</TABLE>
9
<PAGE>
OPTIMUM GROUP, INC.
Notes to Financial Statements
December 31, 1997, 1996 and 1995
(1) Organization and Nature of Business
Optimum Group (the Company) is a marketing and visual communication
solutions provider which designs, develops, and coordinates sales,
marketing and promotional programs primarily for consumer product
client companies. The Company assists its clients in realizing
product recognition and sales by providing promotional programs at
both national and local levels, which are created to address
identified trade, sales and consumer needs.
(2) Summary of Significant Accounting Policies
(a) Revenue Recognition
The Company accounts for contracts on the percentage-of-completion
method, and income is recognized as work on the contracts
progresses. Estimated losses on contracts in progress are
charged to operations immediately. Billings in excess of the
percentage complete are deferred and recognized when earned.
(b) Cash and Cash Equivalents
Cash equivalents consist of investments in money market funds.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation is
calculated using the 200% double declining balance method
over the following estimated useful lives:
Years
-------
Leasehold improvements 7 - 39
Furniture and fixtures 5 - 7
Equipment 3 - 7
(d) Income Taxes
The Company has elected to be an S Corporation under the related
provisions of the Internal Revenue Code. Accordingly, no
provision for Federal and state income taxes has been made
in the accompanying financial statements. The tax liability
for these jurisdictions is that of the shareholders and not
of the Company. However, the Company is taxed on its
earnings by certain local taxing authorities.
(Continued)
10
<PAGE>
OPTIMUM GROUP, INC.
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies, Continued
(e) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(3) Leases
The Company has several noncancelable operating leases, primarily for
property, that expire in the next thirteen years. Rental expense
for operating leases during 1997, 1996 and 1995 was $161,300,
$137,800, and $127,800, respectively.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
Operating
Year ending December 31, Leases
--------------
1998 $ 150,303
1999 148,103
2000 148,103
2001 146,961
2002 140,580
Thereafter 1,124,640
==============
$ 1,858,690
==============
(Continued)
11
<PAGE>
OPTIMUM GROUP, INC.
Notes to Financial Statements, Continued
(4) Long-term Debt
Long-term debt as of December 31 is summarized as follows::
<TABLE>
<S> <C> <C>
1997 1996
------------- -------------
Term note payable to financing institution in
monthly installments of $11,458, plus interest
at 2.70% plus the 30-day Commercial Paper
Rate (as defined in the loan agreement) on
the unpaid balance of the installment due
for that year; secured by all business assets $ 802,083 939,583
Note payable to bank in monthly installments of
$6,214, including interest at 8.90%; secured by
all business assets 104,341 166,576
Non-interest bearing, unsecured note payable to
former partner in weekly installments of $1,064
including imputed interest at 8.50% 128,453 166,179
Note payable to bank in monthly installments of
$4,203, including interest at 8.00%; secured by 132,645 170,795
equipment being financed
Note payable to bank in monthly installments of $976,
including interest at 8.5%; secured by equipment
being financed 16,463 -
Other - 1,064
------------- -------------
Total long-term debt 1,183,985 1,444,197
Less current installments 296,946 275,721
------------- -------------
$ 887,039 1,168,476
============= =============
</TABLE>
The term note with financing institution contains certain covenants
which, among other things, limits distributions to shareholders as
calculated by a formula incorporated into the loan agreement. In
1997, 1996, and 1995, the Company exceeded the shareholder
distribution limit but has obtained a waiver from the financial
institution of this covenant for all three years.
(Continued)
12
<PAGE>
OPTIMUM GROUP, INC.
Notes to Financial Statements, Continued
(4) Long-term Debt, Continued
Future principal payments required on long-term obligations as of
December 31, 1997 are:
1998 $ 296,947
1999 267,267
2000 230,188
2001 137,500
2002 137,500
Thereafter 114,583
=============
$ 1,183,985
=============
(5) Shareholders' Equity
As a result of the Company's S Corporation election, the Company has
agreed to distribute cash to its shareholder each year in an
amount at least equal to the tax for which the shareholder will be
liable. Pursuant to this agreement, the Company declared
distributions totaling $2,275,301, $1,440,938, and $1,483,279 in
1997, 1996 and 1995, respectively.
In 1997, certain notes receivable from shareholders of the Company
for the purchase of stock were assigned to the Company as
additional paid-in capital. Accordingly the total amount of the
notes, which are secured by the stock being purchased, was
recorded both as an increase to additional paid-in capital and a
reduction from shareholders' equity in the accompanying balance
sheet and statement of shareholders' equity.
(6) Income Taxes
As a result of the S Corporation election, the Company is not subject to
Federal and state income taxes. Local income tax expense of
$46,398, $36,800, and $65,520 has been recorded in 1997, 1996 and
1995, respectively.
(7) Savings Plan
The Company sponsors a 401(k) savings plan for its employees. All
employees are eligible to participate in the Plan upon completion
of one-half year of service and attainment of age 21 1/2. Under
provisions of the Plan, participants are permitted to contribute
any percentage of their compensation, subject to certain
limitations. The Company contributes a discretionary match up to
5% of the employee's compensation. During fiscal 1997, 1996 and
1995, the Company contributed $113,064 , $97,059, and $86,503,
respectively.
(Continued)
13
<PAGE>
OPTIMUM GROUP, INC.
Notes to Financial Statements, Continued
(8) Related Party Transaction
The Company leases its office building from an officer of the Company.
Total lease payments under this agreement were $140,580, $129,930
and $127,800 for 1997, 1996 and 1995, respectively.
(9) Significant Customers
During the years ended December 31, 1997 and 1996, revenues from two
customers represented 28% and 11%, and 23% and 11%, respectively,
of total revenues. In 1995, revenues from one customer
respected 18% of total revenues.
(10) Sale of Company
On December 8, 1997, the shareholders of the Company signed an
agreement to sell all of the Company's assets and the Optimum
Group, Inc. name to Inmark Enterprises, Inc. (Inmark) for
approximately $11,325,000 in cash and notes, 565,385 common shares
of Inmark and the assumption of substantially all outstanding
liabilities of the Company as of the closing date.
14
<PAGE>
(b) Pro Forma Financial Information.
Pro forma financial information relating to the Acquisition
will be filed on or before June 15, 1998 in an amendment to this Current Report
on Form 8-K.
15
<PAGE>
(c) Exhibits.
Exhibit
No. Description
2.1 Asset Purchase Agreement, dated as of December 8,
1998, by and among OG Holding Corporation (formerly
known as Optimum Group, Inc.), James H. Ferguson,
Michael J. Halloran, Christina M. Heile, David E.
Huddleston, Thomas E. Lachenman, Thomas L.
Wessling, Optimum Group, Inc. (formerly known as OG
Acquisition Corp.) and Inmark Enterprises, Inc.
2.2 Amendment No. 1 to Asset Purchase Agreement, dated
as of March 31, 1998.
2.3 Escrow Agreement, dated as of March 31, 1998 by and
among OG Holding Corporation, formerly known as
Optimum Group, Inc., Electing Small Business Trust
f/b/o James H. Ferguson, Electing Small Business
Trust f/b/o Michael J. Halloran, Electing Small
Business Trust f/b/o Christina M. Heile, Electing
Small Business Trust f/b/o David E. Huddleston,
Electing Small f/b/o Thomas E. Lachenman, Electing
Small Business Trust f/b/o Roderick S. Taylor,
Electing Small Business Trust f/b/o Thomas L.
Wessling, Steven Clements, Kimberly Longshore, Terry
Steding, Optimum Group, Inc., formerly known as OG
Acquisition Corp., Inmark Enterprises, Inc. and
Kronish, Lieb, Weiner & Hellman LLP.
99.1 Press Release, dated March 31, 1998.
99.2 Loan Agreement, dated as of March 31, 1998, by and
among PNC Bank, National Association, Inmark
Enterprises, Inc., Inmark Services, Inc., and
Optimum Group, Inc. (formerly OG Acquisition
Corp.).
99.3 Guaranty, dated as of March 31, 1998, by Inmark
Enterprises, Inc. in favor of PNC Bank, National
Association.
99.4 Pledge Agreement, dated as of March 31, 1998, by
Inmark Enterprises, Inc., Inmark Services, Inc. and
Optimum Group, Inc. (formerly OG Acquisition Corp.)
in favor of PNC Bank, National Association.
16
<PAGE>
99.5 Security Agreement, dated as of March 31, 1998, by
Inmark Enterprises, Inc., Inmark Services, Inc. and
Optimum Group, Inc. (formerly OG Acquisition Corp.)
in favor of PNC Bank, National Association.
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: April 13, 1998
INMARK ENTERPRISES, INC.
------------------------
(Registrant)
By: /s/ Donald A. Bernard
Donald A. Bernard,
Executive Vice President and
Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No. Description
- ------- -----------
2.1 Asset Purchase Agreement, dated as of December 8,
1998, by and among OG Holding Corporation (formerly
known as Optimum Group, Inc.), James H. Ferguson,
Michael J. Halloran, Christina M. Heile, David E.
Huddleston, Thomas E. Lachenman, Thomas L.
Wessling, Optimum Group, Inc. (formerly known as OG
Acquisition Corp.) and Inmark Enterprises, Inc.
2.2 Amendment No. 1 to Asset Purchase Agreement, dated
as of March 31, 1998.
2.3 Escrow Agreement, dated as of March 31, 1998 by and
among OG Holding Corporation, formerly known as
Optimum Group, Inc., Electing Small Business Trust
f/b/o James H. Ferguson, Electing Small Business
Trust f/b/o Michael J. Halloran, Electing Small
Business Trust f/b/o Christina M. Heile, Electing
Small Business Trust f/b/o David E. Huddleston,
Electing Small f/b/o Thomas E. Lachenman, Electing
Small Business Trust f/b/o Roderick S. Taylor,
Electing Small Business Trust f/b/o Thomas L.
Wessling, Steven Clements, Kimberly Longshore, Terry
Steding, Optimum Group, Inc., formerly known as OG
Acquisition Corp., Inmark Enterprises, Inc. and
Kronish, Lieb, Weiner & Hellman LLP.
99.1 Press Release, dated March 31, 1998.
99.2 Loan Agreement, dated as of March 31, 1998, by and
among PNC Bank, National Association, Inmark
Enterprises, Inc., Inmark Services, Inc., and
Optimum Group, Inc. (formerly OG Acquisition
Corp.).
99.3 Guaranty, dated as of March 31, 1998, by Inmark
Enterprises, Inc. in favor of PNC Bank, National
Association.
99.4 Pledge Agreement, dated as of March 31, 1998, by
Inmark Enterprises, Inc., Inmark Services, Inc. and
Optimum Group, Inc. (formerly OG Acquisition Corp.)
in favor of PNC Bank, National Association.
<PAGE>
99.5 Security Agreement, dated as of March 31, 1998, by
Inmark Enterprises, Inc., Inmark Services, Inc. and
Optimum Group, Inc. (formerly OG Acquisition Corp.)
in favor of PNC Bank, National Association.
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
--------------------------------------------------------------
By and Among
OPTIMUM GROUP, INC.,
JAMES H. FERGUSON, MICHAEL J.
HALLORAN, CHRISTINA M. HEILE,
DAVID E. HUDDLESTON, THOMAS E.
LACHENMAN, RODERICK S. TAYLOR,
THOMAS L. WESSLING,
OG ACQUISITION CORP. and
INMARK ENTERPRISES, INC.
Dated as of December 8, 1997
==============================================================
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
Page
1.1 Certain Defined Terms...............................................................................2
ARTICLE 2 PURCHASE AND SALE OF ASSETS...........................................................15
2.1 Purchase and Sale of Assets....................................................................15
(a) Cash..................................................................................15
(b) Assigned Contracts....................................................................15
(c) Intellectual Property.................................................................16
(d) Name and Goodwill.....................................................................16
(e) Records...............................................................................16
(f) Insurance Policies....................................................................16
(g) Tangible Personal Property and Fixtures...............................................16
(h) Safe Deposit Boxes and Off-Site Storage
Facilities............................................................................16
(i) Inventories and Supplies..............................................................16
2.2 Excluded Assets................................................................................17
(a) Corporate Documents...................................................................17
(b) This Agreement........................................................................17
(c) Shareholder Promissory Notes..........................................................17
2.3 Assumption of Liabilities......................................................................17
2.4 Purchase Price.................................................................................18
2.5 Allocation of Purchase Price...................................................................18
2.6 Closing........................................................................................19
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDERS........................................................20
3.1 Organization and Qualification of Seller...........................................................20
3.2 Authority; Due Execution; Binding Obligation.......................................................20
3.3 Capital Stock of Seller............................................................................21
3.4 Subsidiaries and Affiliates........................................................................21
3.5 Corporate Books and Records........................................................................22
3.6 No Conflict........................................................................................22
3.7 Governmental Consents and Approvals................................................................23
3.8 Financial Information, Books and Records and
Operating Data.................................................................................23
3.9 Title..............................................................................................24
3.10 Solvency and Payment of Liabilities................................................................25
3.11 Inventories........................................................................................25
3.12 Acquired Assets....................................................................................26
3.13 [INTENTIONALLY DELETED]............................................................................26
3.14 Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions.........................................................26
3.15 Litigation.........................................................................................30
3.16 Certain Interests..................................................................................31
3.17 Compliance with Laws...............................................................................32
i
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3.18 Permits and Licenses; Related Matters..............................................................32
3.19 Material Contracts.................................................................................33
3.20 Intellectual Property..............................................................................35
3.21 Real Property......................................................................................37
3.22 Tangible Personal Property.........................................................................39
3.23 Purchased Assets...................................................................................40
3.24 Customers..........................................................................................41
3.25 Suppliers..........................................................................................41
3.26 Employee Benefit Matters...........................................................................42
(a) Plans and Material Documents...............................................................42
(b) Americans With Disability Act..............................................................45
(c) WARN Act...................................................................................45
3.27 Labor Matters......................................................................................45
3.28 Employees..........................................................................................46
3.29 Taxes..............................................................................................47
3.30 Insurance..........................................................................................48
3.31 Brokers............................................................................................49
3.32 Full Disclosure....................................................................................50
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND INMARK...............................................................50
4.1 Organization of Purchaser and Inmark...............................................................50
4.2 Authority; Due Execution; Binding Obligation. .....................................................50
4.3 No Conflict........................................................................................51
4.4 Capital Stock of Inmark............................................................................52
4.5 SEC Reports........................................................................................53
4.6 Solvency and Payment of Liabilities................................................................54
4.7 Customers..........................................................................................54
4.8 Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions.........................................................54
4.9 Compliance with Laws...............................................................................54
4.10 Taxes..............................................................................................55
4.11 Governmental Consents and Approvals................................................................55
4.12 Litigation.........................................................................................55
4.13 Brokers............................................................................................56
4.14 Full Disclosure....................................................................................56
ARTICLE 5 COVENANTS PRIOR TO CLOSING............................................................57
5.1 Regulatory and Other Authorizations; Notices and
Consents.......................................................................................57
5.2 Notice of Developments.............................................................................57
5.3 Board of Directors.................................................................................58
5.4 Access to Information..........................................................................59
5.5 Creation of Audited Financial Statements...........................................................60
5.6 Further Action.....................................................................................60
5.7 Preservation of Business.......................................................................60
(a) Affirmative Covenants Regarding Operations............................................60
(b) Negative Covenants Regarding Operations...............................................61
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5.8 Maintenance of Insurance.......................................................................65
5.9 Failure to Obtain Consents and Approvals.......................................................66
5.10 Headquarters Lease.............................................................................66
5.11 No Shop............................................................................................66
5.12 Financing..........................................................................................67
5.13 Investment Representation Letter...................................................................68
5.14 Escrow Agreement...................................................................................68
ARTICLE 6 CONDITIONS TO CLOSING.................................................................68
6.1 Conditions to Obligations of Purchaser and Inmark..................................................68
(a) General...................................................................................68
(i) Representations, Warranties and
Covenants..................................................................69
(ii) Audited Financial Statements...............................................69
(iii) Consents.......................................................................69
(iv) No Material Adverse Effect to Seller.......................................69
(v) Deliveries.................................................................70
(vi) Encumbrances...............................................................70
(vii) No Proceeding or Litigation....................................................70
(viii) Insurance......................................................................70
(ix) Permits....................................................................71
(x) Filings....................................................................71
(xi) Employees..................................................................71
(b) Financing.............................................................................71
6.2 Conditions to Obligations of Seller and the
Shareholders...................................................................................71
(a) Representations, Warranties and Covenants.............................................72
(b) No Material Adverse Effect to Inmark..................................................72
(c) Repayment of Seller's Loans...........................................................72
(d) Deliveries............................................................................72
(e) No Proceeding or Litigation...........................................................72
(f) Filings...............................................................................73
(g) Employees. ...........................................................................73
ARTICLE 7 DELIVERIES............................................................................73
7.1 Seller's and Shareholders' Deliveries..............................................................73
(a) Bill of Sale and Assignment...........................................................73
(b) Assignment and Assumption Agreement...................................................74
(c) Assignment of Trademark...............................................................74
(d) Organizational Documents..................................................................74
(e) Corporate and Stockholder Authorization...............................................74
(f) Good Standing; Qualification to Do Business...............................................75
(g) Consents and Approvals................................................................75
(h) Bring-Down Certificate................................................................75
(i) Encumbrance Release...................................................................75
(j) Customers.............................................................................75
(k) Legal Opinion.........................................................................75
(l) Change of Name........................................................................76
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(m) Employment Agreements.................................................................76
(n) Headquarters Lease....................................................................76
(o) Investment Representation Letters.....................................................76
(p) Escrow Agreement......................................................................76
(q) Business Documents....................................................................76
(r) Miscellaneous.........................................................................76
7.2 Purchaser's Deliveries.........................................................................77
(a) Cash Payment..........................................................................77
(b) Inmark Common Stock...................................................................77
(c) Subordinated Notes....................................................................77
(d) Assignment and Assumption Agreement...................................................77
(e) Organizational Documents..............................................................77
(f) Corporate Authorization...............................................................78
(g) Good Standing Certificate.............................................................78
(h) Consents and Approvals................................................................78
(i) Bring-Down Certificate................................................................78
(j) Legal Opinion.........................................................................79
(k) Employment Agreements.................................................................79
(l) Headquarters Lease....................................................................79
(m) Escrow Agreement......................................................................79
(n) Miscellaneous.........................................................................79
7.3 Inmark's Deliveries............................................................................79
(a) Organizational Documents..............................................................79
(b) Corporate Authorization...............................................................80
(c) Good Standing Certificate.............................................................80
(d) Consents and Approvals................................................................80
(e) Bring-Down Certificate................................................................80
(f) Legal Opinion.........................................................................81
(g) Escrow Agreement......................................................................81
(h) Miscellaneous.........................................................................81
ARTICLE 8 TERMINATION AND WAIVER................................................................81
8.1 Termination........................................................................................81
8.2 Effect of Termination..............................................................................83
8.3 Waiver.............................................................................................83
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.......................................................................84
9.1 Survival of Representations, Warranties
and Agreements.................................................................................84
9.2 Indemnification by Seller and the Shareholders.....................................................85
9.3 Procedure for Certain Indemnification..........................................................86
9.4 Limitation on Liability............................................................................87
9.5 Offset.............................................................................................87
ARTICLE 10 COVENANTS SUBSEQUENT TO CLOSING.......................................................87
10.1 Further Assurances............................................................................87
10.2 Change of Name....................................................................................88
10.3 Records...........................................................................................88
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10.4 Tax Reporting.....................................................................................88
10.5 Employee Benefit Plans........................................................................89
(a) Continuation of Plans.................................................................89
(b) Continuation of Coverage..............................................................90
10.6 Non-Competition; Trade Secrets....................................................................91
10.7 Gains, Transfer and Sales Taxes...................................................................93
10.8 Benefit Plans and Severance Payments..............................................................93
10.9 Board Representation..............................................................................93
10.10 Vertical Network Systems, Inc.....................................................................94
10.11 Parking Lot Lease.................................................................................95
ARTICLE 11 INMARK COMMON STOCK...................................................................96
11.1 Representations and Warranties of Seller and
the Shareholders..............................................................................96
11.2 Registration under the Securities Act of 1933.....................................................97
(a) Registration Rights.......................................................................97
(b) Inmark's Obligations in Registration......................................................99
(c) Information From Seller and Seller's
Designees........................................................................... 100
(d) Indemnification by Purchaser and Inmark............................................. 100
(e) Indemnification by Seller and Seller's
Designees........................................................................... 101
11.3 Inmark Shares Lock-Up Agreement..................................................................102
ARTICLE 12 GENERAL PROVISIONS...................................................................103
12.1 Expenses.........................................................................................103
12.2 Notices..........................................................................................103
12.3 Public Announcements.............................................................................105
12.4 Headings.........................................................................................106
12.5 Severability.....................................................................................106
12.6 Entire Agreement.................................................................................106
12.7 Assignment.......................................................................................107
12.8 No Third Party Beneficiaries.....................................................................107
12.9 Amendment or Termination.........................................................................107
12.10 Remedies.........................................................................................107
12.11 Governing Law....................................................................................108
12.12 Counterparts.....................................................................................109
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EXHIBITS
A - Form of Subordinated Notes B - Form of Headquarters Lease C - Form of Bill
of Sale and Assignment
D - Form of Assignment and Assumption Agreement
E - Form of Assignment of Trademark
F - Form of Legal Opinion of Wood & Lamping
G - Form of Employment Agreements
H - Form of Investment Representation Letter
I - Form of Legal Opinion of Kronish, Lieb, Weiner & Hellman LLP
J - Form of Escrow Agreement
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ASSET PURCHASE AGREEMENT, dated as of December 8, 1997, by and among
OPTIMUM GROUP, INC., an Ohio corporation ("Seller"), JAMES H. FERGUSON, an
individual residing at 8725 Tiburon Drive, Cincinnati, Ohio 45249 (a
"Shareholder"), MICHAEL J. HALLORAN, an individual residing at 6867 Stonington
Road, Cincinnati, Ohio 45230 (a "Shareholder"), CHRISTINA M. HEILE, an
individual residing at 24105 St. Rt. 1 Guilford, Indiana 47022 (a
"Shareholder"), DAVID E. HUDDLESTON, an individual residing at 135 Garfield
Place #422, Cincinnati, Ohio 45202 (a "Shareholder"), THOMAS E. LACHENMAN, an
individual residing at 7788 White Road, Rising Sun, Indiana 47040 ("Lachenman"
or a "Shareholder"), RODERICK S. TAYLOR, an individual residing at 7711
Coldstream Woods Drive, Cincinnati, Ohio 45255 (a "Shareholder"), THOMAS L.
WESSLING, an individual residing at 1509 Charleston Lane, Loveland, Ohio 45140
(a "Shareholder"), OG ACQUISITION CORP., an Ohio corporation ("Purchaser"), and
INMARK ENTERPRISES, INC., a Delaware corporation ("Inmark").
W I T N E S S E T H :
WHEREAS, Seller owns and operates the sales promotion and marketing
services business described in Section 1.1 hereof (the "Business); and
WHEREAS, Seller desires to sell and transfer to Purchaser, and
Purchaser desires to purchase and acquire from Seller, all of Seller's right,
title and interest in and to all of the tangible and intangible assets of Seller
relating to the Business, or used or held for use in connection with the
Business, all as set forth more fully below; and
WHEREAS, the Shareholders are entering into this Agreement
to induce Purchaser to acquire the Business;
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NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Asset Purchase
Agreement, dated as of December 8, 1997, by and among Seller, the Shareholders,
Purchaser and Inmark (including the Exhibits and Schedules hereto) and all
amendments hereto made in accordance with the provisions of Section 12.9.
"Assigned Contracts" has the meaning set forth in
Section 2.1(b).
"Assumed Liabilities" has the meaning specified in
Section 2.3.
"Audited Financial Statements" has the meaning
specified in Section 5.5.
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"Business" means the business of providing sales promotion and
marketing services presently being conducted by Seller and all other business
which has been conducted by Seller at any time since January 1, 1994.
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
the City of New York.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended through the date hereof.
"Closing" has the meaning specified in Section 2.6.
"Closing Date" has the meaning specified in
Section 2.6.
"Code" means the Internal Revenue Code of 1986, as amended
through the date hereof.
"Control" (including the terms "controlled by" and "under
common control with"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Damages" has the meaning specified in Section 9.2.
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"Encumbrance" means any security interest, pledge, mortgage,
lien (including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"Environment" means surface waters, groundwaters, soil,
subsurface strata and ambient air.
"Environmental Law" means any Law, now or hereinafter in
effect and as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, relating to the Environment, health, safety or Hazardous Materials,
including without limitation, CERCLA; the Resource Conservation and Recovery
Act, 42 U.S.C. ss.ss. 6901 et seq.; the Hazardous Materials Transportation Act,
49 U.S.C. ss.ss. 6901 et seq.; the Clean Water Act, 33 U.S.C. ss.ss. 1251 et
seq.; the Toxic Substances Control Act, 15 U.S.C. ss.ss. 2601 et seq.; the Clean
Air Act, 42 U.S.C. ss.ss. 7401 et seq; the Safe Drinking Water Act, 42 U.S.C.
ss.ss. 300f et seq.; the Atomic Energy Act, 42 U.S.C. ss.ss. 2011 et seq.; the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss.ss. 136 et seq.;
and the Federal Food, Drug and Cosmetic Act, 21 U.S.C. ss.ss. 301 et seq.
"Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" means an organization which is a
member of a controlled group of organizations within the meaning
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of Sections 414(b), (c), (m) or (o) of the Code which includes
the Seller.
"Escrow Agent" means Kronish, Lieb, Weiner & Hellman LLP, as
escrow agent, under the Escrow Agreement.
"Escrow Agreement" means an escrow agreement, dated as of the
Closing Date, by and among Seller, the Shareholders, Purchaser, Inmark and the
Escrow Agent in the form attached hereto as Exhibit J.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Excluded Assets" has the meaning specified in
Section 2.2.
"Financial Statements" has the meaning specified in
Section 3.8(a).
"Governmental Authority" means any United States federal,
state or local or any foreign government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Authority.
"Group Plans" has the meaning specified in Section
3.26.
"Hazardous Materials" means (a) petroleum and petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, transformers or other equipment that
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<PAGE>
contains polychlorinated biphenyls, and radon gas, (b) any other chemicals,
materials or substances defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants" or "pollutants" or words of similar import, under any applicable
Environmental Law, and (c) any other chemical, material or substance exposure to
which is regulated by any Governmental Authority.
"Headquarters Lease" means that certain Lease Agreement, dated
as of January 1, 1991, by and between Lachenman and Chere Lachenman, as
landlord, succeeded to by Lachenman, and Seller, as tenant, for premises located
at 9745 Mangham Drive, Cincinnati, Ohio 45215-2350.
"Indebtedness" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed money, (b)
all obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with U.S. GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, (g) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, valued, in the case of redeemable
preferred stock, at the greater of its
6
<PAGE>
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (h) all Indebtedness of others referred to in clauses (a) through (g)
above guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an agreement (i)
to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (iii) to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether such property is received or such services
are rendered) or (iv) otherwise to assure a creditor against loss, and (i) all
Indebtedness referred to in clauses (a) through (h) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"Inmark" has the meaning specified in the preamble to
this Agreement.
"Inmark Common Stock" means the common stock of Inmark, par
value $.001 per share.
"Inmark Shares" means the shares of Inmark Common Stock to be
issued and delivered to Seller at Closing.
"Intellectual Property" means (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications, (b) ideas and
conceptions of
7
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potentially patentable subject matter, including, without limitation, any patent
disclosures, whether or not reduced to practice and whether or not yet made the
subject of a pending patent application or applications, (c) national (including
the United States) and multinational statutory invention registrations, patents,
patent registrations and patent applications (including all reissues, divisions,
continuations, continuations-in-part, extensions and reexaminations) and all
rights therein provided by international treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application, (d) trademarks, service marks, trade dress, logos, trade names and
corporate names, whether or not registered, including all common law rights, and
registrations and applications for registration thereof, including, but not
limited to, all marks registered in the United States Patent and Trademark
Office, the trademark offices of the states and territories of the United States
of America, and the trademark offices of other nations throughout the world, and
all rights therein provided by international treaties or conventions, (e)
copyrights (registered or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by international treaties
or conventions, (f) moral rights (including, without limitation, rights of
paternity and integrity), and waivers of such rights by others, (g) computer
software including, without limitation, source code, operating systems and
specifications, data, data bases, files, documentation and other materials
related thereto, data and documentation, (h) trade secrets and confidential,
technical and business information (including ideas, formulas, compositions,
inventions, and conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice), (i) whether or not confidential, technology
(including know-how and show- how), manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works,
8
<PAGE>
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (j) copies
and tangible embodiments of all the foregoing, in whatever form or medium, (k)
all rights to obtain and rights to apply for patents, and to register trademarks
and copyrights, and (l) all rights to sue or recover and retain damages and
costs and attorneys fees for present and past infringement of any of the
foregoing.
"Interim Financial Statements" has the meaning
specified in Section 3.8(a).
"Inventories" means all inventory, merchandise, finished
goods, and raw materials, packaging, supplies and other personal property
maintained, held or stored by or for Seller as of the Closing Date for sale in
the Business and any prepaid deposits for any of the same.
"IRS" means the Internal Revenue Service of the United
States.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all Indebtedness, debts,
liabilities, obligations, claims, expenses, Taxes, contracts, accounts payable
or commitments of any kind, character or description, whether accrued or fixed,
absolute or contingent, matured or unmatured or determined or determinable,
including, without limitation, those arising under any Law (including, without
limitation, any Environmental Law), Action or Governmental Order and those
arising under any contract, agreement, arrangement, commitment or undertaking.
9
<PAGE>
"Licensed Intellectual Property" means all Intellectual
Property licensed or sublicensed to Seller from a third party and used in
connection with the Business.
"Material Adverse Effect to Inmark" means any material adverse
effect on the prospects, results of operations or the condition (financial or
otherwise) of Inmark.
"Material Adverse Effect to Seller" means any circumstance,
change in, or effect on the Business or the Purchased Assets that, individually
or in the aggregate with any other circumstances, changes or effects on the
Business or the Purchased Assets, (a) is, or could reasonably foreseeably be,
materially adverse to Seller, the Business or the Purchased Assets or the
prospects, results of operations or the condition (financial or otherwise) of
Seller, the Business or the Purchased Assets or (b) adversely affects the
ability of Purchaser to operate or conduct the Business in the manner in which
it is currently operated or conducted by Seller; provided, however, that loss of
customers or decline of customers' orders shall not be deemed a Material Adverse
Effect to Seller except to the extent that the representations and warranties
contained in Section 3.24 hereof are breached and except for the rights of
Purchaser to terminate this Agreement pursuant to Section 8.1(c) hereof.
"Material Contracts" has the meaning specified in
Section 3.19(a).
"Owned Intellectual Property" means all Intellectual Property
in and to which Seller holds, or has a right to hold, right, title and interest
and used, or held for use, in connection with the Business.
10
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"Parking Lot Lease" shall mean that certain Lease with Option
to Purchase, dated on or about January 28, 1997, between Thomas and Jerlene
Gibson, as landlord, and Lachenman, as tenant, for three parcels located in
Sycamore Township, Hamilton County, Ohio.
"Permits" has the meaning specified in Section 3.18(a).
"Permitted Encumbrances" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) liens for taxes, assessments and governmental
charges or levies not yet due and payable which are not in excess of the amount
accrued therefor on the balance sheet included in the Interim Financial
Statements; (b) Encumbrances imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar liens arising in
the ordinary course of business securing obligations that (i) are not overdue
for a period of more than 30 days and (ii) are not in excess of $5,000 in the
case of a single property or $50,000 in the aggregate at any time; (c) pledges
or deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; and (d) minor survey
exceptions, reciprocal easement agreements and other customary encumbrances on
title to real property that (i) were not incurred in connection with any
Indebtedness, (ii) do not render title to the property encumbered thereby
unmarketable and (iii) do not, individually or in the aggregate, materially
adversely affect the value or use of such property for its current and
anticipated purposes.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be
11
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deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
"Purchase Price" has the meaning specified in
Section 2.4.
"Purchased Assets" has the meaning specified in
Section 2.1.
"Purchaser" has the meaning specified in the preamble
to this Agreement.
"Purchaser Indemnitee" has the meaning specified in
Section 9.2.
"Purchaser's Accountants" means KPMG Peat Marwick LLP.
"Real Property" means the real property leased by Seller as
tenant, and used in connection with the Business, together with, (i) to the
extent leased by Seller all buildings and other structures, facilities or
improvements currently or hereafter located thereon, (ii) all fixtures, systems,
equipment and items of personal property of Seller attached or appurtenant
thereto and used in connection with the Business, and (iii) all easements,
licenses, rights and appurtenances relating to the foregoing.
"Regulations" means the Treasury Regulations (including
proposed or Temporary Regulations) promulgated by the United States Department
of Treasury with respect to the Code or other federal tax statutes.
"Related Documents" means the agreements and other
instruments and documents to be executed by Seller, the
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Shareholders, Purchaser and/or Inmark in connection with or pursuant to this
Agreement.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like into or upon any land or water or air or otherwise entering into the
Environment.
"Securities Act" means the Securities Act of 1933, as
amended.
"Seller" has the meaning specified in the preamble to
this Agreement.
"Seller Plans" has the meaning specified in Section
3.26.
"Seller's Loans" means the outstanding balance, as set forth
on the Interim Financial Statements (as such amounts may decrease from time to
time after the date of the Interim Financial Statements in conformance with the
terms of agreements governing such Seller's Loans) under (a) that certain Term
WCMA Loan and Security Agreement No. 95093340201, dated September 18, 1995, by
and between Seller and Merrill Lynch Business Financial Services, Inc., in the
original principal amount of $1,100,000, (b) that certain Simple Interest Note
and Security Agreement, dated as of June 15, 1994, by Seller in favor of The
Fifth Third Bank ("Fifth Third") in the original principal amount of $300,048,
(c) that certain Term Note, dated as of December 5, 1996, by Seller in favor of
Fifth Third in the original principal amount of $170,795, and (d) that certain
Term Note, dated as of June 26, 1997, by and between Seller and Fifth Third in
the original principal amount of $21,495.
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"Shareholder" has the meaning specified in the preamble to
this Agreement and the term "Shareholders" means all seven Shareholders.
"Subordinated Notes" means 9% subordinated promissory notes
payable by Purchaser to Seller substantially in the form attached as Exhibit A.
"Tangible Personal Property" means machinery, equipment,
tools, supplies, furniture, fixtures, personalty, vehicles, rolling stock and
other tangible personal property used in the Business or owned or leased by
Seller for use in the Business.
"Tax" or "Taxes" means any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs duties, tariffs, and
similar charges.
"U.S. GAAP" means United States generally accepted
accounting principles and practices as in effect during the
relevant period and applied consistently throughout the periods
involved.
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ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. Subject to the terms and
conditions hereof, on the Closing Date, Seller shall (and the Shareholders shall
cause Seller to) assign, transfer, sell, convey and deliver to Purchaser, and
Purchaser shall acquire from Seller, free and clear of all Encumbrances except
those listed on Schedule 3.9 hereto, all of Seller's right, title and interest
in and to the properties, assets and rights comprising or used in the Business,
other than the Excluded Assets (collectively, the "Purchased Assets"),
including, without limitation:
(a) Cash. All investment securities, cash on
hand or in transit and in bank accounts, and cash equivalents of
Seller.
(b) Assigned Contracts. All leases for real and
personal property (other than the Headquarters Lease), employee contracts,
customer contracts, franchise agreements, technology, license and know-how
agreements, all subject to the rights of the other parties in and to such
leases, contracts and agreements and, to the extent permitted by applicable law
and the terms of the instruments involved, all rights under any written or oral
contract, agreement, lease, plan, instrument, registration, license, certificate
of occupancy, other permit or approval of any nature, or other document,
commitment, arrangement, practice or authorization relating to the Business
including, without limitation, those listed on Schedule 2.1(b) hereto (all of
which contracts, orders, agreements, permits and leases are hereinafter
collectively referred to as the "Assigned Contracts").
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(c) Intellectual Property. All Owned
Intellectual Property and all Licensed Intellectual Property, including, without
limitation, that listed on Schedule 2.1(c) hereto.
(d) Name and Goodwill. The name "Optimum Group,
Inc." and all goodwill associated therewith or with the Business.
(e) Records. All books, records and files or
other documentation relating to the Purchased Assets or the Business (other than
as set forth in Section 2.2(a)), including without limitation, all (i) sales
promotion materials, (ii) client lists and telephone numbers with respect to
past, present or prospective clients and customers of the Business and related
sales and credit records, (iii) inventory, maintenance and asset history
records, and (iv) employee lists and telephone numbers used in the Business.
(f) Insurance Policies. All insurance policies
relating to the Purchased Assets and the Business.
(g) Tangible Personal Property and Fixtures. All
Tangible Personal Property (including Seller's telephone system and number),
leasehold improvements and other fixed assets used in the Business, including,
without limitation, the assets listed and described on Schedule 2.1(g) hereto.
(h) Safe Deposit Boxes and Off-Site Storage
Facilities. All safe deposit boxes and off-site storage
facilities used in the Business, including, without limitation,
those listed on Schedule 2.1(h) hereto.
(i) Inventories and Supplies. All Inventories,
and all packaging, office and other supplies, and other personal
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property owned by Seller and used in the Business, wherever
located.
2.2 Excluded Assets. The Purchased Assets shall exclude, and
Seller shall retain all of its right, title and interest in and to all of, and
shall not transfer to Purchaser, only the following (the "Excluded Assets"):
(a) Corporate Documents. Any interest in and to
the capital stock of Seller and all minute books, stock books, income tax
records, and similar corporate records of Seller.
(b) This Agreement. All rights of Seller under
this Agreement or any Related Documents to which Seller is a
party.
(c) Shareholder Promissory Notes. All rights of
Seller to any promissory notes (i) which are payable to Lachenman and made by
any Shareholder, (ii) which Lachenman has already contributed or will contribute
to the capital of Seller prior to the Closing, and (iii) for which Seller has
not paid and will not pay any consideration to Lachenman prior to the Closing.
2.3 Assumption of Liabilities. At the Closing and upon and
subject to the terms, conditions, representations and warranties contained
herein, Purchaser shall assume and agree to pay, perform and discharge when due
only those Liabilities of Seller relating to the Business which are disclosed on
Schedule 2.3 hereto (the "Assumed Liabilities") and no other Liabilities of
Seller or any Shareholder. Without limiting the generality of the foregoing,
Purchaser shall not assume any liability of Seller or any Shareholder, now
existing or hereafter arising, for Taxes except to the extent set forth on
Schedule 2.3 hereto, and the term "Assumed Liabilities" shall not include any of
the same.
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2.4 Purchase Price. The purchase price for the Purchased
Assets (the "Purchase Price") shall be (i) $8,825,000 in cash, (ii) Subordinated
Notes in the principal amount of $2,500,000, (iii) 565,385 newly and validly
issued, fully paid and nonassessable Inmark Shares, (iv) Purchaser's assumption
of the Assumed Liabilities, and (v) Purchaser's repayment of Seller's Loans. The
Purchase Price and the amount of cash payable at the Closing pursuant to this
Section 2.4 shall be subject to reduction in an amount equal to the sum of
one-time bonuses paid to employees of Purchaser, other than the Shareholders,
between the date of this Agreement and the Closing Date, which shall not exceed
in the aggregate $250,000. The Subordinated Notes and the Inmark Shares (except
for 65,385 of the Inmark Shares) shall be held in escrow by the Escrow Agent in
accordance with the terms and provisions of the Escrow Agreement.
2.5 Allocation of Purchase Price. Purchaser and Seller agree
(i) the Purchase Price shall be allocated among the Purchased Assets in the
manner required by Treasury Regulation Section 1.1060-1T(d) on IRS Form 8594
(Asset Acquisition Statement Under Section 1060) based on the respective fair
market values as of the Closing Date of the assets set forth therein to be
included as Class I, II, III and IV assets; (ii) the fair market value of the
Purchased Assets set forth on IRS Form 8594, unless otherwise subjected to an
independent appraisal, (x) with respect to the Purchased Assets that are
reflected on the books of Seller (the "Book Assets"), shall be the net book
value of such assets as of the Closing Date as determined on application of U.S.
GAAP for presentation on Seller's balance sheet, (y) with respect to the
Purchased Assets that are not Book Assets (the "Non-Book Assets") shall, in the
aggregate, be the excess of the Purchase Price of all the Purchased Assets less
the portion of the Purchase Price allocated to the Book Assets, and (z) with
respect to the individual Non-Book Assets, shall be based on a reasonable
allocation of the portion of the Purchase Price that
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is allocated to Non-Book Assets; (iii) the allocation set forth on IRS Form 8594
shall be binding on Purchaser and Seller for all federal, state and local tax
purposes and Purchaser and Seller shall file consistent IRS Forms 8594 with
their respective federal income tax returns; (iv) Purchaser shall prepare its
IRS Form 8594 and provide Seller with a copy so as to enable Seller to prepare
its IRS Form 8594 on a basis consistent with that of Purchaser; and (v) Seller
will assist Purchaser and provide Purchaser with any information necessary for
the completion of IRS Form 8594.
2.6 Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions provided for herein (the "Closing")
shall take place at the offices of Kronish, Lieb, Weiner & Hellman LLP, 1114
Avenue of the Americas, New York, New York 10036-7798, at 10:00 A.M. local time
on the later to occur of (i) February 26, 1998 or (ii) the third business day
following the satisfaction or waiver of all of the conditions specified in
Section 6.1, or on such later date and other time and place as may be mutually
agreed upon by the parties hereto (the "Closing Date"), to be effective as of
12:01 A.M. local time on the Closing Date.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDERS
Seller and the Shareholders jointly and severally
represent and warrant to Purchaser and Inmark as follows:
3.1 Organization and Qualification of Seller. Seller is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Ohio. Seller has all necessary power and authority to own,
operate or lease the properties and assets now owned, operated or leased by it
and to carry on the Business as it has been and is currently conducted. Seller
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
the Business makes such licensing or qualification necessary, except
jurisdictions where such failure to qualify will either result in a penalty of
less than $1,000, can be cured at a cost of less than $1,000 or will result in
no liability to Purchaser. Each jurisdiction in which Seller is qualified to do
business as a foreign corporation is listed on Schedule 3.1 hereto. True and
correct copies of the Articles of Incorporation and Code of Regulations of
Seller, each as in effect on the date hereof, have been delivered by Seller to
Purchaser.
3.2 Authority; Due Execution; Binding Obligation. (a) Seller
has all necessary power and authority to execute and deliver this Agreement and
the Related Documents to which it is a party, to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Related
Documents by Seller, the performance by Seller of its obligations hereunder and
thereunder and the consummation by Seller of the
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transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of Seller.
(b) Each Shareholder has full legal capacity to
execute and deliver this Agreement and the Related Documents to which it is a
party, to carry out its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby.
(c) This Agreement has been duly executed and
delivered by Seller and the Shareholders. Assuming due authorization, execution
and delivery by Purchaser and Inmark of this Agreement, this Agreement
constitutes a legal, valid and binding obligation of Seller and each Shareholder
enforceable against Seller and each Shareholder in accordance with its terms,
except as such enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
3.3 Capital Stock of Seller. All of the issued and outstanding
shares of capital stock of Seller are owned of record and beneficially by the
Shareholders as set forth on Schedule 3.3. None of the issued and outstanding
shares of capital stock of Seller was issued in violation of any preemptive
rights.
3.4 Subsidiaries and Affiliates. There are no corporations,
limited liability companies, partnerships, joint ventures, associations or other
entities in which Seller owns, of record or beneficially, any direct or indirect
equity or other interest or any right (contingent or otherwise) to acquire the
same. Except as set forth on Schedule 3.4 hereto and except for the
Shareholders' interests in Seller and Lachenman's interest as landlord under the
Headquarters Lease, neither Seller nor any
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Shareholder is a member or participant in or Affiliate of any corporation,
limited liability company, partnership, joint venture or similar arrangement
which is involved in the conduct of the Business.
3.5 Corporate Books and Records. The minute books of Seller
contain accurate records of all meetings and accurately reflect all proceedings
of the stockholders, Boards of Directors and all committees of the Boards of
Directors of Seller. Complete and accurate copies of all such minute books and
of the stock register of Seller have been provided by Seller to the Purchaser.
3.6 No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.7 have been obtained and
all filings and notifications listed on Schedule 3.7 have been made, except as
may result from any facts or circumstances relating solely to Purchaser or
Inmark, the execution, delivery and performance of this Agreement and the
Related Documents by Seller and the Shareholders do not and will not (a)
violate, conflict with or result in the breach of any provision of the Articles
of Incorporation or Code of Regulations (or similar organizational documents) of
Seller, (b) except as set forth on Schedule 3.6 hereto, conflict with or violate
(or cause an event which could have a Material Adverse Effect to Seller as a
result thereof) any Law or Governmental Order applicable to Seller or any
Shareholder or any of their respective assets, properties or businesses,
including, without limitation, the Business or (c) except as set forth on
Schedule 3.6 hereto conflict with, result in any breach of, constitute a default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under, require any consent under, or give to others any rights
of termination, amendment, acceleration, suspension, revocation or cancellation
of, or result in the creation of any Encumbrance on any of the assets or
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properties of Seller pursuant to, (i) any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which Seller is a party or by which any of such
assets or properties is bound or affected or (ii) any law or statute or any
judgment, decree, order, regulation or rule of any court or governmental or
regulatory authority relating to Seller, any Shareholder or the Business.
3.7 Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Related Documents by Seller
and the Shareholders do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to any
Governmental Authority, except as described on Schedule 3.7.
3.8 Financial Information, Books and Records and Operating
Data. (a) Seller has delivered to Purchaser true and complete copies of (i) the
unaudited balance sheet of the Business for each of the three fiscal years ended
as of December 31, 1994, December 31, 1995 and December 31, 1996, and the
related unaudited statements of income of the Business for the years then ended
(collectively referred to herein as the "Financial Statements"), and (ii) the
unaudited balance sheet of the Business as of September 30, 1997, and the
related statement of income of the Business for the nine-month period then ended
(collectively referred to herein as the "Interim Financial Statements"). The
Financial Statements and the Interim Financial Statements (i) were prepared in
accordance with the books of account and other financial records of the
Business, (ii) accurately reflect the values of the assets, Liabilities,
financial condition and results of operation of the Business as of the dates
thereof for the periods covered thereby, (iii) have been prepared on a basis
consistent with the past practices of the Business and (iv) include all
adjustments (consisting only of
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normal recurring accruals) that are necessary for a fair presentation of the
financial condition of the Business and the results of the operations of the
Business as of the dates thereof or for the periods covered thereby.
(b) Seller has delivered to Purchaser true and
complete copies of Seller's federal and state income tax returns for each of the
years ended December 31, 1994, December 31, 1995 and December 31, 1996.
(c) The books of account and other financial
records of the Business: (i) reflect all items of income and expense and all
assets and Liabilities required to be reflected therein on a basis consistent
with the past practices of the Business, (ii) are in all material respects
complete and correct, and do not contain or reflect any material inaccuracies or
discrepancies and (iii) have been maintained in accordance with good business
and accounting practices.
(d) There are no Liabilities of Seller, or
existing conditions which could reasonably be expected to result in Liabilities
of Seller, other than as (i) reflected or reserved against on the Interim
Financial Statements or (ii) disclosed on Schedule 3.8.
3.9 Title. Except as otherwise identified on Schedule 3.9,
Seller has, and pursuant to this Agreement will convey, sell, transfer, assign
and deliver to Purchaser, good, valid, marketable, legal and beneficial title to
all of the Purchased Assets, free and clear of all Encumbrances except for the
Encumbrances set forth on Schedule 3.9. Except as set forth on Schedule 3.9,
there are no outstanding options, warrants, commitments, agreements or any other
rights of any character, entitling any person or entity other than Purchaser to
acquire any interest in all, or any part of, the Purchased Assets. All
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Seller's leasehold or other executory interests in and to the Purchased Assets
are fully and freely assignable, except as set forth on Schedule 3.9.
3.10 Solvency and Payment of Liabilities. Seller is not on the
date hereof, nor will it be on the Closing Date, either as a result of the
transactions contemplated by this Agreement or otherwise, insolvent, as such
term is defined in the Title 11 Bankruptcy of the United States Code or any Ohio
statute relating to insolvency; the sum of its debts is not greater than all of
its property on the date hereof nor will it be on the Closing Date either as a
result of the transactions contemplated hereby or otherwise; and it is on the
date hereof, and will be after the Closing Date, able to pay its debts as they
mature.
3.11 Inventories. (a) Subject to amounts reserved therefor on
the balance sheet included in the Interim Financial Statements, the values at
which all Inventories are carried on the balance sheet included in the Interim
Financial Statements reflect the historical inventory valuation policy of the
Business of stating such Inventories at the lower of cost (determined on the
last-in, first-out method) or market value. Except as set forth on Schedule
3.11, Seller has good and marketable title to the Inventories free and clear of
all Encumbrances. The Inventories do not consist of, in any material amount,
items that are obsolete or damaged.
(b) The Inventories are in good and merchantable
condition in all material respects and are suitable and usable
for the purposes for which they are intended.
3.12 Acquired Assets. Except as disclosed on Schedule 3.12,
each asset of the Business (including, without limitation, the benefit of any
licenses, leases or other agreements or arrangements) acquired since the date of
the Interim Financial
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Statements has been acquired for consideration not less than the fair market
value of such asset at the date of such acquisition.
3.13 [INTENTIONALLY DELETED]
3.14 Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Except as disclosed on the Financial Statements,
the Interim Financial Statements or Schedule 3.14, the Business has been
conducted in the ordinary course and consistent with past practice during the
periods covered by such Financial Statements and Interim Financial Statements.
Except as disclosed Schedule 3.14, on or after October 1, 1997, Seller has not,
except in the ordinary course of business, in connection with the Business:
(i) permitted or allowed any of the assets or
properties (whether tangible or intangible) of the Business to
be subjected to any Encumbrance, which has not been released
prior to the date hereof, other than Permitted Encumbrances
and Encumbrances that will be released at or prior to the
Closing Date;
(ii) discharged or otherwise obtained the release of
any Encumbrance or paid or otherwise discharged any Liability
other than current liabilities reflected on the balance sheet
included in the Interim Financial Statements and current
liabilities incurred in the ordinary course of the Business
consistent with past practice since the date of the Interim
Financial Statements;
(iii) failed to pay any creditor any amount owed to
such creditor when due;
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(iv) made any material changes in the customary
methods of operations of the Business, including, without
limitation, practices and policies relating to marketing,
selling, pricing, purchasing, Inventories, manufacturing or
performance of any obligations Seller may have to clients or
customers;
(v) merged with, entered into a consolidation with or
acquired any interest in any Person or acquired any operating
assets or business of any Person or any division or line of
business thereof, or otherwise acquired any material assets
other than in the ordinary course of the Business consistent
with past practice;
(vi) made, in connection with the Business, any
capital expenditure or commitment for any capital expenditure
in excess of $25,000 individually or $50,000 in the aggregate;
(vii) issued, in connection with the Business, any
sales orders or otherwise agreed to make any purchases
involving exchanges in value in excess of $25,000 individually
or $50,000 in the aggregate;
(viii) sold, transferred, leased, subleased, licensed
or otherwise disposed of any properties or assets, real,
personal or mixed (including, without limitation, leasehold
interests and intangible assets), other than the sale of
Inventories in the ordinary course of the Business consistent
with past practice;
(ix) except for the transactions contemplated hereby,
entered into any agreement, arrangement or transaction with
any of its directors, officers, employees or shareholders (or
with any relative,
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beneficiary, spouse or Affiliate of such Person) in
connection with or relating to the Business;
(x) except as contemplated by Section 5.7(b)(xvii)
hereof, (A) granted any increase, or announced any increase,
in the wages, salaries, compensation, bonuses, incentives,
pension or other benefits payable by Seller to any of its
employees in connection with or relating to the Business,
including, without limitation, any increase or change pursuant
to any Plan or (B) established or increased or promised to
increase any benefits under any Plan, in either case except
(i) as required by Law or any collective bargaining agreement,
(ii) for the increases set forth on Schedule 3.14(x), which in
no event shall be effective prior to January 1, 1998, or (iii)
for employees other than those listed on Schedule 3.14(x), for
increases in wages or salaries in the ordinary course of
business, in a manner consistent with the past practices of
the Business and not in excess of 5% in the aggregate of the
aggregate annual wages and salaries of such employees;
(xi) amended, terminated, cancelled or compromised
any material claims of Seller relating to the Business;
(xii) made any change in any method of accounting
or accounting practice or policy used by Seller
relating to the Business, other than such changes
required by U.S. GAAP;
(xiii) failed to maintain the Purchased Assets in
accordance with good business practice and in good
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operating condition and repair, ordinary wear and tear
excepted;
(xiv) allowed any Permit or Environmental Permit that
was issued or relates to the Business to lapse or terminate or
failed to renew any such Permit or Environmental Permit or any
insurance policy issued or relating to the Business that is
scheduled to terminate or expire within 45 calendar days of
the Closing Date;
(xv) amended, modified or consented to the
termination of any Material Contract or Seller's rights
thereunder;
(xvi) failed to comply with the Workers Adjustment
and Retraining Notification Act or implemented any early
retirement, separation or program providing early retirement
window benefits within the meaning of Section
1.401(a)(4)-3(e)(4)(iii) of the Regulations or announced or
planned any such action or program for the future, in
connection with the Business;
(xvii) disclosed any secret or confidential
Intellectual Property relating to the Business (except by way
of issuance of a patent) or permitted to lapse or go abandoned
any Intellectual Property relating to the Business (or any
registration or grant thereof or any application relating
thereto) to which, or under which, Seller has any right,
title, interest or license;
(xviii) suffered any casualty loss or damage with
respect to any of the Purchased Assets which in the aggregate
have a replacement cost of more than
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$100,000, whether or not such loss or damage shall have
been covered by insurance;
(xix) suffered any Material Adverse Effect to Seller;
or
(xx) agreed, whether in writing or otherwise, to take
any of the actions specified in this Section 3.14 or granted
any options to purchase, rights of first refusal, rights of
first offer or any other similar rights or commitments with
respect to any of the actions specified in this Section 3.14,
except as expressly contemplated by this Agreement.
3.15 Litigation. Except as set forth on Schedule 3.15 (which,
with respect to each Action disclosed therein, sets forth the parties, nature of
the proceeding, date and method commenced, amount of damages or other relief
sought and, if applicable, paid or granted), there are no Actions by or against
Seller, or affecting any of the Purchased Assets or the Business, pending or, to
the best knowledge of Seller and the Shareholders after due inquiry, threatened.
Except as set forth on Schedule 3.15, there are no Actions against any
Shareholder relating to the Purchased Assets or the Business pending, or to the
best knowledge of Sellers and the Shareholders after due inquiry, threatened. To
the best knowledge of Seller and the Shareholders after due inquiry there are no
facts or circumstances that may give rise to any of the foregoing. None of the
matters disclosed on Schedule 3.15 will have or has had a Material Adverse
Effect to Seller or could affect the legality, validity or enforceability of
this Agreement or the Related Documents or the consummation of the transactions
contemplated hereby or thereby. Except as set forth on Schedule 3.15, none of
Seller, the Shareholders, the Business or any of the Purchased Assets is subject
to any Governmental Order (nor, to the best knowledge of
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Seller and the Shareholders after due inquiry, are there any such Governmental
Orders threatened to be imposed by any Governmental Authority) which has or has
had a Material Adverse Effect to Seller.
3.16 Certain Interests. (a) Except as disclosed on Schedule
3.16(a), no Shareholder or officer or director of Seller, no relative or spouse
(or relative of such spouse) who resides with, or is a dependent of, any such
Shareholder or officer or director, and no Affiliate of any such person:
(i) has any direct or indirect financial interest in
any competitor, supplier or customer of the Business;
provided, however, that the ownership of securities
representing no more than one percent of the outstanding
voting power of any competitor, supplier or customer and which
are listed on any national securities exchange or traded
actively in the over-the-counter market, shall not be deemed
to be a "financial interest" so long as the Person owning such
securities has no other connection or relationship with such
competitor, supplier or customer;
(ii) except for Lachenman's interest as landlord
under the Headquarters Lease, owns, directly or indirectly, in
whole or in part, or has any other interest in any tangible or
intangible property which Seller uses in the conduct of the
Business or otherwise; or
(iii) has outstanding any Indebtedness to Seller
relating to the Business.
(b) Except as disclosed on Schedule 3.16(b) and
except for obligations to make current salary and expense
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reimbursement payments, Seller has no Liability or other obligation of any
nature whatsoever relating to the Business to any Shareholder or to any officer,
director or employee of Seller or to any relative or spouse (or relative of such
spouse) who resides with, or is a dependent of, any Shareholder or any such
officer, director or employee.
3.17 Compliance with Laws. Except as set forth on Schedule
3.17, Seller and the Shareholders have conducted and continue to conduct the
Business in accordance with Seller's Articles of Incorporation and Code of
Regulations and with all Laws and Governmental Orders applicable to Seller, the
Shareholders, any of the Purchased Assets or the Business, and neither Seller
nor any of the Shareholders is in violation of any such Law or Governmental
Order.
3.18 Permits and Licenses; Related Matters. Schedule 3.18(a)
sets forth a true, complete and correct list of all the health and safety and
other permits, licenses, authorizations, certificates, exemptions and approvals
of Governmental Authorities (collectively, "Permits"), including, without
limitation, Environmental Permits, which, to the best knowledge of Seller and
the Shareholders, are necessary for the current use, occupancy and operation of
each Purchased Asset and the conduct of the Business. All such Permits are in
full force and effect. The Permits constitute all permits, licenses, franchises,
orders, certificates and approvals required for the lawful operation of the
Purchased Assets and the Business. To the best knowledge of Seller and the
Shareholders, there is no existing practice, action or activity of Seller and no
existing condition of the Purchased Assets or the Business which will give rise
to any civil or criminal Liability under, or violate or prevent compliance with,
any health or occupational safety or other applicable Law. Seller has not
received any notice from any Governmental Authority revoking, canceling,
rescinding,
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materially modifying or refusing to renew any Permit or providing written notice
of violations under any Law. Seller is in all respects in compliance with the
Permits and the requirements of the Permits. Schedule 3.18(b) identifies all
Permits that are nontransferable or which will require the consent of any
Governmental Authority in the event of the consummation of the transactions
contemplated by this Agreement.
3.19 Material Contracts. (a) Except for contracts listed on
Schedule 3.19(a), contracts with customers which are reasonably expected to be
profitable and contracts, the liability of Seller under which is set forth in
full on either the computer listing of all of Seller's unpaid trade payables to
its suppliers as of December 5, 1997 or the computer listing as of December 5,
1997 of all goods or services relating to the Business ordered by Seller for
which invoices had not been received as of December 5, 1997 (both of which have
been delivered by Seller to Purchaser), Seller is not a party to any contract or
other arrangement (written or oral) which (i) is not terminable upon not more
than 30 days notice by Seller without payment of any penalty or premium or (ii)
imposes or may impose on Seller a duty, liability or obligation involving more
than $25,000. Seller has, and the Shareholders have caused to be, delivered to
the Purchaser, correct and complete copies (or in the case of oral contracts or
informal arrangements, summaries thereof) of all of the contracts, and all
amendments thereto, listed on Schedule 3.19(a) (such contracts and amendments,
"Material Contracts").
(b) Except as disclosed on Schedule 3.19(b), (i)
each Material Contract is valid and binding on the respective parties, is in
full force and effect and represents the entire agreement between the parties
thereto with respect to the subject matter of the Material Contract and (ii)
upon consummation of the transactions contemplated by this Agreement, except to
the extent that any consents set forth on Schedule 3.7 are not obtained and
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except for the termination of the Headquarters Lease in accordance with Section
5.10 (which shall be terminated without penalty or adverse consequence to
Seller), each Material Contract shall continue in full force and effect without
penalty or other adverse consequence.
(c) Except as disclosed on Schedule 3.19(c), no
party to any Material Contract is in breach of, or in default under, any
Material Contract, nor will the consummation of the transactions contemplated by
this Agreement constitute a breach of or default under any Material Contract or
otherwise give any party a right to terminate such Material Contract. Seller has
not received any notice of termination or cancellation under any Material
Contract and no party to any Material Contract has any right of termination or
cancellation under such Material Contract except in connection with the default
of Seller thereunder.
(d) To the best knowledge of Seller, no event has
occurred that, with notice or lapse of time would constitute a breach or default
or permit termination, modification or acceleration under any Material Contract.
(e) Except as disclosed on Schedule 3.19(e),
there is no contract, agreement or other arrangement granting any Person any
rights, adverse or otherwise, under any Material Contract or any preferential
right to purchase any of the properties or assets of Seller.
3.20 Intellectual Property. (a) Schedule 3.20(a)(i) sets forth
a true and complete list and a brief description, including complete
identification of each patent and patent application and each registration or
application for registration thereof, of all Owned Intellectual Property and
Schedule 3.20(a)(ii) sets forth a true and complete list and a brief
description, including a description of any license or
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sublicense, of all Licensed Intellectual Property. The Owned Intellectual
Property and the Licensed Intellectual Property constitute all the Intellectual
Property necessary or desirable for the conduct of the Business as currently
conducted by Seller. In each case where a registration or patent or application
for registration or patent is held by Seller by assignment, the assignment has
been duly recorded with the State or national Trademark Office from which the
original registration issued or before which the application for registration is
pending. The rights of Seller in or to the Owned Intellectual Property and the
Licensed Intellectual Property do not conflict with or infringe on the rights of
any other Person, and Seller has not received any claim or written notice from
any Person, to such effect. The consummation of the transactions contemplated by
this Agreement will not result in the termination or impairment of any of the
Owned Intellectual Property or the Licensed Intellectual Property. After the
consummation of the transactions contemplated hereby, Purchaser shall own or
possess adequate licenses or other valid rights to use all the Owned
Intellectual Property and the Licensed Intellectual Property to the same extent,
and in the same manner, as Seller.
(b) Except as disclosed on Schedule 3.20(b): (i)
all the Owned Intellectual Property is owned by Seller free and clear of any
Encumbrance and (ii) no Actions have been made or asserted or are pending (nor,
to the best knowledge of Seller, has any such Action been threatened) against
Seller either (A) based upon or challenging or seeking to deny or restrict the
use by Seller of any of the Owned Intellectual Property or (B) alleging that any
services provided, or products manufactured or sold by Seller, are being
provided, manufactured or sold in violation of any patents or trademarks, or any
other rights of any Person. To the best knowledge of Seller, no Person is using
any patents, copyrights, trademarks, service marks, trade names, trade secrets
or similar property that are confusingly similar to
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the Owned Intellectual Property or that infringe upon the Owned Intellectual
Property or upon the rights of Seller therein. Except as disclosed in Schedule
3.20(b), Seller has not granted any license or other right to any other Person
with respect to the Owned Intellectual Property.
(c) With respect to each of such licenses and
sublicenses listed on Schedule 3.20(a)(ii):
(i) Seller has not granted to any other Person any
rights, adverse or otherwise, under such license or
sublicense;
(ii) no Actions have been made or asserted or are
pending (nor, to the best knowledge of Seller, has any such
Action been threatened) against Seller either (A) based upon
or challenging or seeking to deny or restrict the use by
Seller of any of the Licensed Intellectual Property or (B)
alleging that any Licensed Intellectual Property is being
licensed, sublicensed or used in violation of any patents or
trademarks, or any other rights of any Person; and
(iii) to the best knowledge of Seller, no Person is
using any patents, copyrights, trademarks, service marks,
trade names, trade secrets or similar property that are
confusingly similar to the Licensed Intellectual Property or
that infringe upon the Licensed Intellectual Property or upon
the rights of Seller therein.
3.21 Real Property. (a) Seller does not own any real
property or any buildings or other structures, facilities or
improvements located on any real property. Except as is set
forth on Schedule 3.21(a), Seller does not lease any real
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property or other structures, facilities or improvements located on any real
property. The Real Property constitutes all the real property, buildings,
structures, facilities, improvements, fixtures, systems, easements, licenses,
rights and appurtenances necessary for the conduct of the Business as currently
conducted by Seller. For purposes of this Section 3.21 and Sections 3.22 and
3.23, the term "lease" shall include any and all leases, subleases,
sale/leaseback agreements or similar arrangements.
(b) Except as described on Schedule 3.21(b) or
Schedule 3.17, there is no violation of any Law (including, without limitation,
any building, planning or zoning law) relating to any of the Real Property.
Seller is in peaceful and undisturbed possession of each parcel of Real Property
and there are no contractual or legal restrictions that preclude or restrict the
ability to use the premises in the manner in which they are currently being
used. The Real Property is currently maintained in accordance with good business
practice and in good operating condition and repair. There are no material
latent defects or material adverse physical conditions affecting the Real
Property or any of the facilities, buildings, structures, erections,
improvements, fixtures, fixed assets and personalty of a permanent nature
annexed, affixed or attached to, located on or forming part of the Real
Property. Seller is not leasing or subleasing any parcel or any portion of any
parcel of Real Property to any other Person, nor has Seller assigned its
interest under any lease or sublease for any Real Property to any third party.
(c) There are no condemnation proceedings or
eminent domain proceedings of any kind pending or, to the best knowledge of
Seller and the Shareholders after due inquiry, threatened against the Real
Property.
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(d) All the Real Property is occupied under a
valid and current certificate of occupancy or similar permit where such a
certificate of occupancy or similar permit is required. To the best knowledge of
Seller and the Shareholders after due inquiry, there are no facts that would
prevent the Real Property from being occupied by Purchaser after the Closing
Date in the same manner as occupied by Seller immediately prior to the Closing
Date.
(e) All improvements on the Real Property and all
the current uses and conditions thereof (i) comply with applicable deed
restrictions or other applicable covenants, restrictions, agreements, existing
site plan approvals, zoning or subdivision regulations or urban redevelopment
plans as modified by any duly issued variances or (ii) constitute legal
non-conforming uses of, or legal non-conforming improvements on, the Real
Property. No permits, licenses or certificates pertaining to the ownership or
operation of all improvements on the Real Property, other than those which are
transferable with the Real Property, are required by any Governmental Authority
having jurisdiction over the Real Property.
(f) All improvements on any Real Property are
wholly within the lot limits of such Real Property and do not encroach on any
adjoining premises, and there are no encroachments on any Real Property by any
improvements located on an adjoining premises.
(g) The rental set forth in each lease or
sublease of the Real Property is the actual rental being paid, and there are no
separate agreements or understandings with respect to the same.
(h) Seller has the full right to exercise any
renewal options contained in the leases and subleases pertaining
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to the Real Property on the terms and conditions contained therein and upon due
exercise would be entitled to enjoy the use of each Real Property for the full
term of such renewal options.
(i) Lachenman holds fee simple title to the
premises leased to Seller pursuant to the Headquarters Lease. So long as
Purchaser performs all of tenant's obligations under the lease for such premises
delivered pursuant to Section 7.1(n) hereof, Tenant shall peaceably and quietly
have, hold and enjoy such premises without hindrance, ejection or molestation,
subject to the terms and conditions of such lease.
3.22 Tangible Personal Property. (a) Except as is set forth on
Schedule 3.22(a), Seller does not own or lease any Tangible Personal Property.
The Tangible Personal Property constitutes all the machinery, equipment, tools,
supplies, furniture, fixtures, personalty, vehicles, rolling stock and other
personal property necessary for the conduct of the Business as currently
conducted by Seller.
(b) Seller has the full right to exercise any
renewal options contained in the leases and subleases pertaining to the Tangible
Personal Property on the terms and conditions contained therein and upon due
exercise would be entitled to enjoy the use of each item of leased Tangible
Personal Property for the full term of such renewal options.
3.23 Purchased Assets. (a) Except as disclosed on Schedule
3.23, Seller owns, leases or has the legal right to use all the Purchased
Assets, including, without limitation, the Owned Intellectual Property, the
Licensed Intellectual Property, the Real Property and the Tangible Personal
Property, and, with respect to contract rights, is a party to and enjoys the
right to the benefits of all contracts, agreements and other arrangements used
or intended to be used by Seller or in or relating to the
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conduct of the Business. Seller has good title to, or, in the case of leased or
subleased Purchased Assets, subsisting leasehold interests in, all the Purchased
Assets, free and clear of all Encumbrances, except (i) as disclosed on Schedule
3.23 and (ii) Permitted Encumbrances.
(b) The Purchased Assets constitute all the
properties, assets and rights forming a part of, used, held or intended to be
used in, and all such properties, assets and rights as are necessary for use in
the conduct of, the Business. At all times since the date of the Interim
Financial Statements, Seller has caused the Purchased Assets to be maintained in
accordance with good business practice, and all the Purchased Assets material to
the Business are in good operating condition and repair, ordinary wear and tear
excepted, and are suitable for the purposes for which they are used and
intended.
(c) Following the consummation of the
transactions contemplated by this Agreement, Purchaser will own, pursuant to
good and marketable title, or lease, under valid and subsisting leases, Seller's
interest in the Purchased Assets immediately preceding the Closing without
incurring any penalty or other adverse consequence, including, without
limitation, any increase in rentals, royalties, or licenses or other fees
imposed as a result of, or arising from, the consummation of the transactions
contemplated by this Agreement.
3.24 Customers. Schedule 3.24 lists each of the customers of
Seller relating to the Business to whom Seller rendered services since January
1, 1994 and the amounts invoiced during the years ended December 31, 1994, 1995
and 1996 and the period from January 1, 1997 through September 30, 1997 to each
such customer. The notes contained in the column entitled "status of
relationship" on Schedule 3.24 indicate, in the best judgment of Seller and the
Shareholders, the status of Seller's
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relationships with its customers relating to the Business for the remainder of
the year ending December 31, 1997 and neither Seller not the Shareholders have
actual knowledge of the intention of any customer to terminate its relationship
with Seller except as set forth in such Schedule. Notwithstanding any provision
of this Agreement to the contrary, neither Seller nor any Shareholder shall have
any liability, nor shall Inmark or Purchaser have any rights to indemnification
hereunder, arising out of the circumstance that any customer terminates its
relationship with Seller after the Closing except to the extent that such
termination reflects a breach of any representation or warranty contained in the
preceding sentence of this Section 3.24.
3.25 Suppliers. Seller has provided Purchaser with (a) a
computer listing of all payments Seller has made from January 1, 1997 through
December 5, 1997 to suppliers of goods or services relating to the Business
("Suppliers"), (b) a computer listing of all of Seller's unpaid trade payables
to Suppliers as of December 6, 1997, and (c) a computer listing as of December
5, 1997 of all goods and services relating to the Business ordered by Seller for
which invoices had not been received as of December 5, 1997. Such computer lists
are complete and accurate. Except as disclosed on Schedule 3.25, Seller has not
received any notice, that any supplier will not sell raw materials, supplies,
merchandise or other goods or services to Seller relating to the Business at any
time after the Closing Date on terms and conditions substantially similar to
those used in its current sales to Seller relating to the Business, subject only
to general and customary price increases.
3.26 Employee Benefit Matters. (a) Plans and Material
Documents. (i) Schedule 3.26(a)(i) contains a true and
complete list of all bonus, deferred compensation, pension,
profit-sharing, retirement, insurance, stock purchase, stock
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option, welfare, severance, hospitalization, insurance and other employee
benefit plans (as defined in section 3(3) of ERISA), whether formal or informal,
presently maintained by the Seller or maintained by it since 1992, or under
which the Seller has, or has had since 1992, any obligation to contribute
(collectively, the "Seller Plans").
(ii) For each of the Seller Plans, Seller
has delivered or made available to Purchaser true and complete
copies of (a) the plan document, (b) any related trust
agreements, insurance contracts and other funding agreements,
(c) the summary plan descriptions, (d) the most recent
Internal Revenue Service determination letter, if any, (e) the
most recently filed annual report (Form 5500 Series) and
accompanying schedules filed with the Department of Labor or
Internal Revenue Service, (f) the most recent financial
statements, if any, and (g) the most recent actuarial reports,
if any.
(iii) Except as set forth in Schedule
3.26(a)(iii), each such Seller Plan which is intended to be a
"qualified plan" under section 401(a) of the Code, has
received, within the last three years, a favorable
determination letter from the Internal Revenue Service (the
"IRS"). With respect to any Seller Plan which has received a
favorable determination letter from the IRS, nothing has
occurred since the date of such determination letter that
would adversely affect the qualification of the Seller Plan
under section 401(a) of the Code.
(iv) Seller has performed and complied with
all of its obligations under or with respect to the Seller
Plans, and the Seller Plans have operated in
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accordance with their respective terms. To the best knowledge
of Seller and the Shareholders, all Seller Plans have operated
in accordance with the applicable requirements of ERISA and
the Code and other applicable laws, rules and regulations, and
all reports required by any governmental agency with respect
to a Seller Plan have been timely filed.
(v) With respect to each Seller Plan that is
covered by Title IV of ERISA, the present value of benefit
liabilities (within the meaning of section 4001(a)(16) of
ERISA) valued on a termination basis as of the Closing Date
under regulations issued by the Pension Benefit Guaranty
Corporation does not exceed the value of the assets of such
Seller Plan.
(vi) To the best knowledge of Seller and the
Shareholders, no reportable event (as defined in section
4043(e) of ERISA), prohibited transaction (as defined in
section 406 of ERISA or section 4975 of the Code), accumulated
funding deficiency (as defined in section 302 of ERISA) or
plan termination (as defined in Title IV of ERISA or section
411(d) of the Code) has occurred with respect to any of the
Seller Plans or with respect to any employee benefit plan (as
defined in section 3(3) of ERISA) of an ERISA Affiliate (the
Seller Plans and the employee benefit plans of ERISA
Affiliates are collectively referred to as the "Group Plans").
(vii) None of the Group Plans is a
multiemployer plan (as defined in section 3(37) of ERISA) and
the Seller does not have any actual or potential liability
with respect to any multiemployer plan or a past or present
withdrawal therefrom.
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(viii) Each Seller Plan which constitutes a
welfare benefit plan within the meaning of section 3(1) of
ERISA has complied and continues to comply with the health
care continuation coverage requirements of section 4980B of
the Code and Part 6 of Subtitle B of Title I of ERISA. Other
than the coverage referred to in the immediately preceding
sentence, there are no benefits to be provided to current
retirees under any of the Seller Plans which constitutes a
welfare benefit plan.
(ix) To the best knowledge of Seller and the
Shareholders, no action, suit or proceeding, hearing, or
investigation with respect to the administration or investment
of the assets of any Group Plan is pending or threatened. None
of the Shareholders or directors or officers of the Seller has
any knowledge of any basis for any such action, suit,
proceeding, hearing or investigation.
(b) Americans With Disability Act. To the best
of Seller's knowledge, Seller is in compliance with the requirements of the
Americans With Disabilities Act.
(c) WARN Act. To the best of Seller's knowledge,
Seller is in compliance with the requirements of the Workers Adjustment and
Retraining Act and has no liabilities pursuant thereto.
3.27 Labor Matters. Except as set forth on Schedule 3.27, (a)
Seller is not a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by Seller in connection with the
Business and currently there are no organizational campaigns, petitions or other
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unionization activities seeking recognition of a collective bargaining unit
which could affect the Business; (b) there are no controversies, strikes,
slowdowns or work stoppages pending or, to the best knowledge of Seller after
due inquiry, threatened between Seller and any of its employees related to the
Business, and Seller has not experienced any such controversy, strike, slowdown
or work stoppage within the past three years in connection with the Business;
(c) Seller is currently in compliance with all applicable Laws relating to the
employment of labor in connection with the Business, including those related to
wages, hours, collective bargaining and the payment and withholding of taxes and
other sums as required by the appropriate Governmental Authority and has
withheld and paid to the appropriate Governmental Authority or is holding for
payment not yet due to such Governmental Authority all amounts required to be
withheld from employees of Seller in connection with the Business and is not
liable for any arrears of wages, taxes, penalties or other sums for failure to
comply with any of the foregoing; (d) in connection with the Business, Seller
has paid in full to all its employees or adequately accrued for in accordance
with U.S. GAAP all wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such employees; (e) there is no claim with
respect to payment of wages, salary or overtime pay that has been asserted or is
now pending or threatened before any Governmental Authority with respect to any
Persons currently or formerly employed by Seller in connection with the
Business; (f) Seller is not a party to, or otherwise bound by any consent decree
with, or citation by any Governmental Authority relating to employees or
employment practices in connection with the Business; (g) there is no charge or
proceeding with respect to a violation of any occupational safety or health
standards that has been asserted or is now pending or threatened with respect to
Seller in connection with the Business; and (h) there is no charge of
discrimination in employment or employment practices, for any reason, including,
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without limitation, age, gender, race, religion or other legally protected
category, which has been asserted or is now pending or threatened before the
United States Equal Employment Opportunity Commission, or any other Governmental
Authority in any jurisdiction in which Seller has employed or currently employs
any Person in connection with the Business.
3.28 Employees. (a) Schedule 3.28(a) lists the (i) name, (ii)
the current annual salary rates, bonuses, commissions, vacation entitlement, and
other like benefits paid or payable (in cash or otherwise) in 1996 and, to date,
in 1997, (iii) the date of employment and (iv) a description of position and job
function of each current employee, officer, director, consultant or agent of
Seller employed in connection with the Business. All such employees, officers,
directors, consultants and agents are employed at Seller's principal place of
business located at 9745 Mangham Drive, Cincinnati, Ohio 45215-2350. There is no
"golden parachute" or other like benefit and, except for the commissions set
forth on Schedule 3.28(a), there is no deferred or contingent compensation, paid
or payable to any such employee, officer, director, consultant or agent of
Seller.
(b) Schedule 3.28(b) lists all employment
agreements and severance agreements relating to Seller or the Business. Except
as set forth on Schedule 3.28(b), Seller is not a party to, and has no
obligation or responsibility under or with respect to, any oral or written
agreement with any employee of the Business. Seller has delivered to Purchaser
true and correct copies of all documents listed on Schedule 3.28(b) and of all
personnel policies, employee and/or supervisor handbooks, procedures and forms
of employment applications relating to employees of the Business.
(c) No amount paid or payable (or which may
become payable) pursuant to any plan, arrangement or agreement
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including, without limitation, any of those listed on Schedule 3.28(a) or
Schedule 3.28(b) and any Seller Plan to or for the benefit of any employee,
officer, director, consultant or agent of Seller, was or will constitute any
excess parachute payment (within the meaning of Section 280G of the Code) as a
consequence, direct or indirect, in whole or in part, of the consummation of the
transaction contemplated under this Agreement.
3.29 Taxes. All returns, reports, estimates, information
returns and statements of any nature regarding Taxes required to be filed by
Seller have been filed when due. All of the information provided on such
returns, reports, estimates, information returns and statements was true and
correct as of the date filed, and all of the Taxes shown to be due on such
returns, reports, estimates, information returns and statements have been paid
in full. Except as otherwise set forth on Schedule 3.29, there is no tax
deficiency outstanding, proposed or assessed against Seller. There are no Taxes
that are or could constitute an Encumbrance on the Purchased Assets or the
Business or that could have a Material Adverse Effect to Seller or, individually
or in the aggregate, a Material Adverse Effect to Inmark.
3.30 Insurance. (a) Schedule 3.30(a)(i) sets forth a list of
all insurance policies currently maintained by Seller with respect to the
Business together with a description of each policy (including the numbers, the
term, the name of the insurer, the coverage amounts, the nature of the coverage
and the amount of annual premiums). Schedule 3.30(a)(ii) sets forth a list of
claims made under any insurance policies during the five years prior to the date
hereof and the insurance policies under which those claims were made.
(b) To the best knowledge of Seller and the
Shareholders, with respect to each insurance policy held by
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Seller in connection with the Business: (i) the policy is legal, valid, binding
and enforceable in accordance with its terms and, except for policies that have
expired under their terms in the ordinary course, is in full force and effect;
(ii) Seller is not in breach or default (including any breach or default with
respect to the payment of premiums or the giving of notice), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination or modification, under the policy; (iii) no
party to the policy has repudiated, or given notice of a intent to repudiate,
any provision thereof; (iv) no insurer on the policy has been declared insolvent
or placed in receivership, conservatorship or liquidation; and (v) there is no
claim, pending under any policy as to which coverage has been questioned, denied
or disputed by the insurer.
(c) Schedule 3.30(c) sets forth all risks
relating to the Business against which Seller is self-insured or which are
covered under any risk retention program in which Seller participates, together
with details for the last five years of Seller's loss experience with respect to
such risks.
(d) Since January 1, 1997, no insurance carrier
has cancelled, failed to renew or materially reduced any insurance coverage for
Seller in connection with the Business or given any notice of its intention to
cancel, not renew or reduce any such coverage.
(e) At the Closing Date, all insurance policies
relating to the Business currently in effect will be outstanding
and duly in force.
(f) No insurance policy held by Seller in
connection with the Business will cease to be legal, valid,
binding, enforceable in accordance with its terms and in full
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force and effect on terms identical to those in effect as of the date hereof as
a result of the consummation of the transactions contemplated by this Agreement.
Seller makes no warranty or representation that such policies are assignable to
Purchaser or that Purchaser can claim coverage thereunder.
3.31 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Seller or the Shareholders.
3.32 Full Disclosure. No representation or warranty of Seller
or the Shareholders in this Agreement, nor any statement or certificate
furnished or to be furnished to the Purchaser or Inmark pursuant to this
Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND INMARK
Purchaser and Inmark jointly and severally
represent and warrant to Seller and the Shareholders as follows:
4.1 Organization of Purchaser and Inmark. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio. Inmark is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
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4.2 Authority; Due Execution; Binding Obligation. (a)
Purchaser has all necessary power and authority to execute and deliver this
Agreement and the Related Documents to which it is a party, to carry out its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Related Documents by Purchaser, the performance by Purchaser of its
obligations hereunder and thereunder and the consummation by Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of Purchaser.
(b) Inmark has all necessary power and authority
to execute and deliver this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Inmark, the performance by Inmark of its
obligations hereunder and the consummation by Inmark of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of Inmark.
(c) This Agreement has been duly executed and
delivered by Purchaser and Inmark. Assuming due authorization, execution and
delivery by Seller and the Shareholders, this Agreement constitutes a legal,
valid and binding obligation of Purchaser and Inmark enforceable against
Purchaser and Inmark in accordance with its terms except as such enforcement may
be subject to (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
4.3 No Conflict. Assuming the making and obtaining of
all filings, notifications, consents, approvals, authorizations
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and other actions referred to in Section 4.6, except as may result from any
facts or circumstances relating solely to Seller or the Shareholders, the
execution, delivery and performance of this Agreement by Purchaser and Inmark
does not and will not (a) violate, conflict with or result in the breach of any
provision of the Articles of Incorporation or Code of Regulations (or similar
organizational documents) of Purchaser or the Certificate of Incorporation or
by-laws (or similar organizational documents) of Inmark, (b) conflict with or
violate any Law or Governmental Order applicable to Purchaser or Inmark, or (c)
conflict with, or result in any breach of, constitute a default (or event which
with the giving of notice or lapse or time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation, or cancellation of, or result
in the creation of any Encumbrance on any of the assets or properties of
Purchaser or Inmark pursuant to, (i) any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which Purchaser or Inmark is a party or by which
any of such assets or properties are bound or affected which would have a
material adverse effect on the ability of Purchaser or Inmark to consummate the
transactions contemplated by this Agreement or (ii) any law or statute or any
judgment, decree, order, regulation or rule of any court or governmental or
regulatory authority relating to Purchaser or Inmark.
4.4 Capital Stock of Inmark. (a) The authorized capital stock
of Inmark consists of 25,000,000 shares of common stock, par value $.001 per
share, 650,000 shares of Class A convertible preferred stock, par value $.001
per share ("Class A Preferred Stock"), 700,000 shares of Class B convertible
preferred stock, par value $.001 per share ("Class B Preferred Stock"), and
3,650,000 shares of preferred stock, undesignated ("Undesignated Preferred
Stock"). As of the date hereof,
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2,839,876 shares of Inmark Common Stock are issued and outstanding, all of which
are validly issued, fully paid and nonassessable, and no shares of Class A
Preferred Stock, Class B Preferred Stock or Undesignated Preferred Stock are
issued and outstanding. None of the issued and outstanding shares of Inmark
Common Stock was issued in violation of any preemptive rights. Except for
options and warrants to purchase an aggregate of 1,375,491 shares of Inmark
Common Stock, the exercise prices of which are set forth on Schedule 4.4(a),
Inmark does not have outstanding any stock or securities convertible into or
exchangeable for any shares of its capital stock and is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock.
(b) Upon consummation of the transactions
contemplated by this Agreement, the Inmark Shares will be duly authorized,
validly issued, fully paid and non-assessable.
4.5 SEC Reports. Purchaser and Inmark have delivered to Seller
copies of Inmark's Annual Reports on Form 10-K for the years ended March 31,
1995, 1996 and 1997, any and all of Inmark's Quarterly Reports on Form 10-Q
filed during 1997, any and all of Inmark's Current Reports on Form 8-K filed
during 1997, and Inmark's most recent proxy statement, in each case as filed
with the Securities and Exchange Commission (the "Reports"). The Reports
substantially comply with the applicable requirements of the Securities Act and
the Exchange Act, and the rules and regulations thereunder, and do not, as of
their respective dates, contain a misstatement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. The unaudited balance sheets and related
unaudited statements of income and cash flows, together with all related notes
and schedules thereto appearing in the Reports (collectively, the "Inmark
Financial Statements") (i) were prepared in accordance
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with the books of account and other financial records of Inmark, (ii) accurately
reflect the values of the assets, liabilities, financial condition and results
of operation of Inmark as of the dates thereof and for the periods covered
thereby, (iii) have been prepared in accordance with U.S. GAAP applied on a
basis consistent with the past practices of Inmark, (iv) include all adjustments
(consisting only of normal recurring accruals) that are necessary for a fair
presentation of the financial condition of Inmark and the results of the
operations of Inmark as of the dates thereof or for the periods covered thereby.
4.6 Solvency and Payment of Liabilities. Inmark is not on the
date hereof, nor will it be on the Closing Date, either as a result of the
transactions contemplated by this Agreement or otherwise, insolvent, as such
term is defined in the Title 11 Bankruptcy of the United States Code or any New
York statute relating to insolvency; the sum of its debts is not greater than
all of its property on the date hereof nor will it be on the Closing Date either
as a result of the transactions contemplated hereby or otherwise; and it is on
the date hereof, and will be after the Closing Date, able to pay its debts as
they mature.
4.7 Customers. Schedule 4.7 lists each of the customers of
Inmark and its subsidiaries relating to the their businesses to whom Inmark or
its subsidiaries rendered services since April 1, 1994 and the amounts invoiced
during the years ended March 31, 1995, 1996 and 1997 and the period from April
1, 1997 through September 30, 1997 to each such customer.
4.8 Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Except as disclosed on the Inmark Financial
Statements or Schedule 4.8, the businesses of Inmark and its subsidiaries have
been conducted in the ordinary
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course and consistent with past practice during the periods covered by the
Inmark Financial Statements.
4.9 Compliance with Laws. Except as set forth on Schedule 4.9,
Inmark and its subsidiaries, to the best of Inmark's knowledge, have conducted
and continue to conduct their businesses in accordance with their respective
charters and by-laws (or similar organizational documents) and with all Laws and
Governmental Orders applicable to them or any of their assets or their
businesses, and to the best of Inmark's knowledge, neither Inmark nor any of its
subsidiaries is in violation of any such Law or Governmental Order.
4.10 Taxes. All returns, reports, estimates, information
returns and statements of any nature regarding Taxes required to be filed by
Inmark or any of its subsidiaries have been filed when due. All of the
information provided on such returns, reports, estimates, information returns
and statements was true and correct as of the date filed, and all of the Taxes
shown to be due on such returns, reports, estimates, information returns and
statements have been paid in full. Except as otherwise set forth on Schedule
4.10, there is no tax deficiency outstanding, proposed or assessed against
Inmark or any of its subsidiaries.
4.11 Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by Purchaser and Inmark do not and
will not require any consent, approval, authorization or other order of, action
by, filing with, or notification to, any Governmental Authority except for the
filing of a Current Report on Form 8-K with the Securities and Exchange
Commission.
4.12 Litigation. Except as set forth on Schedule 4.12 (which,
with respect to each Action disclosed therein, sets forth
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the parties, nature of the proceeding, date and method commenced, amount of
damages or other relief sought, and, if applicable, paid or granted), there are
no Actions by or against Inmark or any of its subsidiaries, or affecting any of
their assets or their businesses, pending or, to the best knowledge of Inmark,
threatened. To the best knowledge of Inmark, there are no facts or circumstances
that may give rise to any of the foregoing. None of the matters disclosed on
Schedule 4.12 will have or has had a Material Adverse Effect to Inmark or could
affect the legality, validity or enforceability of this Agreement or the Related
Documents or the consummation of the transactions contemplated hereby or
thereby. Except as set forth in Schedule 4.12, neither Inmark nor any of its
subsidiaries is subject to any Governmental Order (nor, to the best knowledge of
Inmark, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has or has had a Material Adverse Effect to
Inmark.
4.13 Brokers. Except for Janney Montgomery Scott Inc., no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Purchaser or Inmark.
4.14 Full Disclosure. No representation or warranty of
Purchaser or Inmark in this Agreement, nor any statement or certificate
furnished or to be furnished to Seller or the Shareholders pursuant to this
Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
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ARTICLE 5
COVENANTS PRIOR TO CLOSING
5.1 Regulatory and Other Authorizations; Notices and Consents.
(a) Seller, the Shareholders and Purchaser shall use all reasonable efforts to
obtain all authorizations, consents, orders and approvals of all Governmental
Authorities and officials that may be or become necessary for its execution and
delivery of, and the performance of its obligations pursuant to, this Agreement
and will cooperate fully with one another in promptly seeking to obtain all such
authorizations, consents, orders and approvals.
(b) Seller and the Shareholders, at Seller's sole
cost and expense, shall use all reasonable efforts to give such notices to third
parties and use all reasonable efforts to obtain such third party consents,
approvals or estoppel letters as Purchaser may deem necessary or desirable in
connection with the transactions contemplated by this Agreement.
(c) Purchaser shall cooperate and use all
reasonable efforts to assist Seller and the Shareholders in giving such notices
and obtaining such consents; provided, however, that Purchaser shall have no
obligation to give any consideration of any nature in connection with any such
notice and Purchaser shall not have any obligation to consent to any change in
the terms of any agreement or arrangement.
5.2 Notice of Developments. (a) Prior to the Closing Date,
Seller and the Shareholders shall promptly notify Purchaser in writing of (i)
all events, circumstances, facts and occurrences arising subsequent to the date
of this Agreement which could result in any breach of a representation or
warranty or covenant of Seller or the Shareholders in this Agreement or
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which could have the effect of making any representation or warranty of Seller
or the Shareholders in this Agreement untrue or incorrect in any respect as of
the respective dates of such events, circumstances, facts and occurrences and
(ii) all other material developments affecting the assets, liabilities or
obligations, business, capital improvements, financial condition, operations,
results of operations, customer or supplier relations, employee relations,
projections or prospects of Seller or the Business.
(b) Prior to the Closing Date, Inmark shall
promptly notify Seller in writing of (i) all events, circumstances, facts and
occurrences arising subsequent to the date of this Agreement which could result
in any breach of a representation or warranty or covenant of Inmark in this
Agreement or which could have the effect of making any representation or
warranty of Inmark in this Agreement untrue or incorrect in any respect as of
the respective dates of such events, circumstances, facts and occurrences and
(ii) all other material developments affecting the assets, liabilities or
obligations, business, capital improvements, financial condition, operations,
results of operations, customer or supplier relations, employee relations,
projections or prospects of Inmark or any of its subsidiaries.
5.3 Board of Directors. (a) Between the date of this Agreement
and the earlier of the (i) termination of this Agreement in accordance with the
provisions of Section 8.1 or (ii) Closing Date, Seller and the Shareholders
shall cause (A) copies of all reports and other documents given to the members
of the Board of Directors (or any committee thereof) of Seller relating to the
Business to be delivered to Purchaser at the same time and (B) copies of the
minutes of all meetings of, and actions taken without a meeting by, the Board of
Directors (or any committee thereof) of Seller relating to the Business to be
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prepared promptly and to be delivered to Purchaser promptly after the
preparation thereof. Between the date of this Agreement and the Closing Date,
Seller shall give Purchaser at least five Business Days' prior notice of any
meeting of, or action to be taken without a meeting by, the Board of Directors
(or any committee thereof) of Seller relating to the Business.
(b) Between the date of this Agreement and the
earlier of the (i) termination of this Agreement in accordance with the
provisions of Section 8.1 or (ii) Closing Date, Inmark shall cause (A) copies of
all reports and other documents given to the members of the Board of Directors
(or any committee thereof) of Inmark or to the members of the Board of Directors
of any of Inmark's subsidiaries relating to the business or businesses of its
subsidiaries to be delivered to Seller at the same time if such reports or other
documents are related to or will have an impact upon this Agreement or the
transactions contemplated hereby and (B) copies of the minutes of all meetings
of, and actions taken without a meeting by, the Board of Directors (or any
committee thereof) of Inmark or the Board of Directors of any of Inmark's
subsidiaries relating to the business of such corporation to be prepared
promptly and to be delivered to Purchaser promptly after the preparation thereof
if such matters or actions are related to or will have an impact upon this
Agreement or the transactions contemplated hereby.
5.4 Access to Information. Seller shall permit Purchaser, its
counsel, accountants and other representatives to have full access, upon
reasonable notice and during regular business hours, throughout the period prior
to Closing, to the Purchased Assets and the Business, specifically including,
without limitation, the books and records, equipment, properties and facilities
of Seller, and will cause to be furnished to Purchaser and its representatives
during such period all
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information concerning the foregoing as Purchaser or its
representatives may reasonably request.
5.5 Creation of Audited Financial Statements. Seller and the
Shareholders, at Seller's cost and expense, shall cause reputable certified
public accountants acceptable to Purchaser to prepare, and report upon, in
accordance with U.S. GAAP, historical balance sheets and related statements of
income, shareholders' equity and cash flows for the Business for each of the two
fiscal years ended as of December 31, 1995 and December 31, 1996 ("Audited
Financial Statements") that will comply with the requirements of Regulation S-X
under the Securities Act of 1933 and with the requirements of all regulations,
announcements and explanatory materials issued by the Securities and Exchange
Commission with respect thereto, including, without limitation, Staff
Accountancy Bulletins. Seller and Inmark shall each pay one-half of the expenses
and fees incurred in connection with preparing and reporting on the Audited
Financial Statements.
5.6 Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done, all things reasonably necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
5.7 Preservation of Business.
(a) Affirmative Covenants Regarding Operations. From
the date of this Agreement until the Closing Date, Seller shall (and the
Shareholders shall cause the Seller to) maintain and preserve the Business and
shall operate the Business in a reasonable and prudent manner, only in the
ordinary and usual course of business consistent with past practice, and shall:
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(i) preserve intact the present Articles of
Incorporation and Code of Regulations of Seller and the
business organization of Seller, as it relates to the Business
(except for the change of name contemplated by this
Agreement);
(ii) preserve the goodwill and advantageous
relationships of Seller with customers, suppliers, independent
contractors, employees and other persons material to the
operation of the Business or the Purchased Assets; and
(iii) maintain the books and records relating to the
Business in the usual and ordinary manner and in a manner that
fairly and correctly reflects the income, expenses, assets and
liabilities of the Business on a basis consistent with prior
years.
(b) Negative Covenants Regarding Operations.
Without limiting the generality of the obligation to preserve the Business,
prior to the Closing, Seller shall not (and the Shareholders shall not permit
Seller to), in connection with the Business, without the prior written consent
of Purchaser:
(i) except as set forth on Schedule
5.7(b)(i), make any payments;
(ii) incur any obligation or enter into any contract
which either (A) requires a payment by any party in excess of,
or a series of payments which in the aggregate exceed,
Twenty-Five Thousand Dollars ($25,000) or provides for the
delivery of goods or performance of services, or any
combination thereof, having a value in excess of Twenty-Five
Thousand Dollars ($25,000), or (B) has a term of, or requires
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the performance of any obligations by Seller over a
period in excess of, six (6) months;
(iii) take any action, or enter into or authorize any
contract or transaction in connection with the Business other
than in the ordinary course of business and consistent with
past practice;
(iv) sell, transfer, convey, assign or otherwise
dispose of any of the assets comprising the Business other
than in the ordinary course of business;
(v) merge with, enter into a consolidation agreement
with or acquire an interest in any person or entity, or
acquire a substantial portion of the assets or business of any
person or entity, or otherwise acquire any material assets;
(vi) waive, release or cancel any claims against
third parties or debts owing to it, relating to the Business,
or any rights relating to the Business that have any value;
(vii) make any changes in its accounting systems,
policies, principles or practices relating to the Business;
(viii) authorize for issuance, issue, sell, deliver
or agree or commit to issue, sell or deliver (whether through
the issuance or granting of options, warrants, convertible or
exchangeable securities, commitments, subscriptions, rights to
purchase or otherwise) any shares of its capital stock or any
other securities, or amend any of the terms of any such
securities;
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(ix) make any borrowings, incur any debt (other than
trade payables in the ordinary course of business), or assume,
guarantee, endorse or otherwise become liable (whether
directly, contingently or otherwise) for the obligations of
any other person, except for endorsements of negotiable
instruments in the ordinary course;
(x) make any loans, advances or capital
contributions to, or investments in, any other Person;
(xi) enter into, adopt, amend or terminate any bonus,
profit-sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit,
pension, retirement, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer or
employee, or increase in any manner the compensation or fringe
benefits of any director, officer or employee, or pay any
benefit not required by any existing plan and arrangement or
enter into any contract, agreement, commitment or arrangement
to do any of the foregoing;
(xii) except for capital expenditures contemplated by
(xiii) below, acquire, lease or encumber any assets outside
the ordinary course of business or any assets which are
material to Seller;
(xiii) except as set forth on Schedule 5.7(b)(xiii),
authorize or make any capital expenditures which individually
or in the aggregate are in excess of Twenty-Five Thousand
Dollars ($25,000);
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(xiv) make any Tax election or settle or compromise
any federal, state, local or foreign income Tax liability, or
waive or extend the statute of limitations in respect of any
such Taxes;
(xv) pay or agree to pay any amount in settlement or
compromise of any suits or claims of liability against Seller
its directors, officers, employees or agents or enter into or
adopt any employment or severance agreement with any employee
of Seller or in connection with the operations of the
Business;
(xvi) except as set forth on Schedule 5.7(b)(xvi),
enter into any agreement, arrangement or transaction with any
of its officers or directors or any Shareholder (or with any
relative, beneficiary, spouse or affiliate of such person);
(xvii) except as set forth on Schedule 5.7(b)(xvii),
terminate, modify, amend or otherwise alter or change any of
the terms or provisions of any employment contract or
arrangement, or breach the terms of any employment contract or
arrangement;
(xviii) terminate, modify, amend or otherwise alter
or change any of the terms or provisions of any material
contract or arrangement, or breach the terms of any material
contract or arrangement, or pay any amount not required by law
or by any contract;
(xix) except as set forth on Schedule 5.7(b)(xix),
declare, set aside or pay any dividend or other distribution
(whether in cash, stock, property or any combination thereof)
in respect of the shares of
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capital stock of Seller or redeem, repurchase or
otherwise acquire any equity securities issued by
Seller;
(xx) suffer any material damage, destruction or loss
to any of the assets or properties of the Business or Seller
whether or not covered by insurance;
(xxi) permit or allow any Encumbrance on any
properties or assets (whether tangible or intangible) of the
Business or Seller, including the Purchased Assets;
(xxii) enter into any agreement to take any actions
specified in this Section 5.7;
(xxiii) take any action, engage in any practice, fail
to take any action or enter into any transaction which could
cause any representation or warranty of Seller or the
Shareholders to be untrue or result in any breach of any
covenant or agreement made by Seller or the Shareholders in
this Agreement; or
(xxiv) take any other action that a reasonable
businessman would believe would have a Material Adverse Effect
to Seller.
5.8 Maintenance of Insurance. Seller shall continue, and the
Shareholders shall cause the Seller to continue, to carry all existing insurance
applicable to the Business and the Purchased Assets, and shall not allow any
breach, default, termination or cancellation of such insurance policies or
agreements to occur or exist prior to the Closing Date.
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5.9 Failure to Obtain Consents and Approvals. In the
event that any consent required with respect to any contract or
agreement to be assigned to Purchaser cannot be obtained prior to
the Closing Date, upon the request of Purchaser, Seller will
subcontract all of its obligations to perform under such contract
to Purchaser. The cost of performing each such subcontract shall
be borne by Purchaser and Seller will deliver to Purchaser all
revenues earned under each such contract. Upon the receipt of
the necessary third party consent, Seller shall assign the
relevant contract to Purchaser. No additional consideration
shall be paid for such assignment.
5.10 Headquarters Lease. Simultaneously with the Closing,
Seller shall cause the landlord under the Headquarters Lease to terminate the
Headquarters Lease without any cost or expense to Seller and shall cause such
landlord to enter into a new lease with Purchaser for the same premises
substantially in the form attached as Exhibit B.
5.11 No Shop. Until the Closing Date or the termination of
this Agreement in accordance with the provisions of Section 8.1, none of Seller,
any Shareholder or any of their respective Affiliates, officers, directors,
representatives or agents will directly or indirectly (a) solicit, initiate,
consider, encourage or accept any other proposals or offers from any person or
entity (i) relating to any acquisition or purchase of all or any portion of the
shares of capital stock or other equity interests or assets of Seller, (ii) to
enter into any business combination with Seller, or (iii) to enter into any
other extraordinary business transaction involving or otherwise relating to
Seller, or (b) participate in any discussions, conversations, negotiations and
other communications regarding, or furnish to any other person or entity any
information with respect to, or otherwise cooperate in any way, assist or
participate in, facilitate or encourage any effort or attempt by
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any other person or entity to seek to do any of the foregoing. Seller and the
Shareholders immediately shall cease and cause to be terminated all existing
discussions, conversations, negotiations and other communications with any
persons or entities conducted heretofore with respect to any of the foregoing.
Seller shall notify Purchaser promptly if any such proposal or offer, or any
inquiry or other contact with any person or entity with respect thereto, is made
and shall, in any such notice to Purchaser, indicate in reasonable detail the
identity of the person or entity making such proposal, offer, inquiry or contact
and the terms and conditions of such proposal, offer, inquiry or other contact.
Seller and the Shareholders covenant and agree not to release, without the prior
written consent of Purchaser, any person or entity from, or waive any provision
of, any confidentiality or standstill agreement relating to Seller or the
Business to which Seller, any Shareholder or any affiliate thereof is a party.
Without limiting any other remedies available to Purchaser for a breach of this
Section, Seller and the Shareholders agree that Purchaser shall be entitled to
injunctive relief (without establishing the likelihood of irreparable injury or
posting bond or other security) and monetary damages which shall in no event be
less than the expenses incurred by Purchaser in connection with the negotiation
of this Agreement, performance of due diligence activities, including the
reasonable fees and disbursements of Purchaser's counsel, accountants and
investment banker.
5.12 Financing. Seller and the Shareholders shall cooperate
with Purchaser in obtaining financing for the transactions contemplated by this
Agreement and in connection therewith shall furnish such documents and supply
such information to any potential lender or lenders as Purchaser may reasonably
require. Neither Seller nor any Shareholder shall be required under this Section
5.12 to pledge any of its, his or her
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assets or to make any payment to any Person except as may be set
forth in the Note.
5.13 Investment Representation Letter. Seller and the
Shareholders shall cause each of Steven Clements, Kimberly Longshore and Terry
Steding to execute and deliver to Inmark, prior to or simultaneously with the
execution and delivery of this Agreement, an investment representation letter in
the form attached as Exhibit H.
5.14 Escrow Agreement. Simultaneously with the Closing, Seller
and each of the Shareholders shall execute and deliver the Escrow Agreement to
Purchaser and Inmark. Simultaneously with the Closing, Purchaser and Inmark
shall, and shall cause the Escrow Agent to, execute and deliver the Escrow
Agreement to Seller and the Shareholders.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Purchaser and Inmark.
(a) General. The obligations of Purchaser and
Inmark to consummate the transactions contemplated by this Agreement are subject
to the fulfillment by Seller and, where applicable, the Shareholders (to the
satisfaction of Purchaser and Inmark), or waiver in writing by Purchaser and
Inmark, of the following conditions, each of which is individually hereby deemed
material, at or prior to Closing, and Seller and the Shareholders jointly and
severally agree to use their best efforts to fulfill such conditions:
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(i) Representations, Warranties and Covenants.
The representations and warranties of each of Seller and the Shareholders
contained in this Agreement shall be true and correct in all material respects
as of the Closing, with the same force and effect as if made as of the Closing,
other than such representations and warranties, if any, as are made as of
another date, which shall be true and correct in all material respects as of
such other date, and all the covenants contained in this Agreement to be
complied with by each of Seller and the Shareholders on or before the Closing
shall have been complied with in all material respects, and Purchaser and Inmark
shall have received a certificate of Seller and each Shareholder, where
applicable, to such effect, and, in the case of Seller, signed by a duly
authorized officer of Seller.
(ii) Audited Financial Statements. Seller shall
have delivered to Inmark Audited Financial Statements, which Audited Financial
Statements shall not differ in any material adverse respect from the Financial
Statements.
(iii) Consents. Purchaser and Seller shall have
received, each in form and substance satisfactory to Purchaser and Inmark, each
of the authorizations, consents, orders and approvals of Governmental
Authorities and officials and each of the third party consents set forth on
Schedule 3.7.
(iv) No Material Adverse Effect to Seller. No
event or events shall have occurred, or be reasonably likely to occur, which
individually or in the aggregate, have, or could reasonably be expected to have,
a Material Adverse Effect to Seller.
(v) Deliveries. Seller and the Shareholders
shall have delivered to Purchaser and Inmark each of the documents specified in
Section 7.1 hereof.
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(vi) Encumbrances. All Encumbrances, except
those listed on Schedule 3.9, if any, with respect to the Purchased Assets shall
have been released.
(vii) No Proceeding or Litigation. No Action
shall have been commenced or threatened by or before any Governmental Authority
against Seller, any Shareholder, Purchaser or Inmark seeking to restrain or
materially and adversely alter the transactions contemplated hereby which
Purchaser or Inmark believes, in its sole and absolute discretion, is likely to
render it impossible or unlawful to consummate the transactions contemplated by
this Agreement or which could have a Material Adverse Effect to Seller or
otherwise render inadvisable, in the reasonable, good faith determination of
Purchaser or Inmark, the consummation of the transactions contemplated by this
Agreement; provided, however, that the provisions of this Section 6.1(a)(vii)
shall not apply if Purchaser or Inmark has directly or indirectly solicited or
encouraged any such Action.
(viii) Insurance. Purchaser shall be satisfied
as to the availability and cost of adequate and reasonable insurance covering
the Business if Purchaser, in the exercise of reasonable business prudence,
determines, effective as of the Closing Date, to increase the levels of
insurance coverage currently maintained by Seller.
(ix) Permits. Purchaser shall have received, at
or before the Closing, all approvals, permits and licenses that Purchaser deems
reasonably necessary to own the Business and the Purchased Assets, operate the
Business and occupy the premises currently occupied by Seller in connection with
the Business, all in form reasonably satisfactory to Purchaser.
(x) Filings. Seller and the Shareholders shall
have made all registrations, qualifications, declarations, or
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filings with, or notices to, any federal, state or local Governmental Authority
or other third party required on the part of Seller or the Shareholders in
connection with the execution of this Agreement and the Related Documents or the
consummation of the transactions contemplated hereby and thereby.
(xi) Employees. The persons identified on
Schedule 6.1(a)(xi) shall have agreed to become employees of Purchaser.
(b) Financing. The obligations of Purchaser and
Inmark to consummate the transactions contemplated by this Agreement are subject
to Purchaser's obtaining financing for the transactions contemplated by this
Agreement from a lender and on terms satisfactory to Purchaser and Inmark.
6.2 Conditions to Obligations of Seller and the Shareholders.
The obligations of Seller and the Shareholders to consummate the transaction
contemplated by this Agreement are subject to the fulfillment by Purchaser and
Inmark (to the satisfaction of Seller and the Shareholders), or waiver in
writing by Seller and the Shareholders, of the following conditions, each of
which is individually hereby deemed material, at or prior to Closing:
(a) Representations, Warranties and Covenants.
The representations and warranties of Purchaser and Inmark contained in this
Agreement shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing, other than such
representations and warranties, if any, as are made as of another date, which
shall be true and correct in all material respects as of such other date, and
all the covenants contained in this Agreement to be complied with by Purchaser
on or before the Closing shall have been complied with in all material respects,
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and Seller shall have received a certificate of Purchaser and Inmark to such
effect signed by a duly authorized officer of each of Purchaser and Inmark.
(b) No Material Adverse Effect to Inmark. No
event or events shall have occurred, or be reasonably likely to occur, which
individually or in the aggregate, have, or could reasonably be expected to have,
a Material Adverse Effect to Inmark.
(c) Repayment of Seller's Loans. Purchaser shall
have repaid in full Seller's Loans.
(d) Deliveries. Purchaser and Inmark shall have
delivered to Seller each of the documents specified in Section
7.2 hereof.
(e) No Proceeding or Litigation. No Action shall
have been commenced by or before any Governmental Authority against Seller, any
Shareholder, Purchaser or Inmark seeking to restrain or materially and adversely
alter the transactions contemplated by this Agreement which, in, the reasonable,
good faith determination of Seller, is likely to render it impossible or
unlawful to consummate such transactions; provided, however, that the provisions
of this Section 6.2(e) shall not apply if Seller or any Shareholder has directly
or indirectly solicited or encouraged any such Action.
(f) Filings. Purchaser shall have made all
registrations, qualifications, declarations, or filings with, or notices to, any
federal, state or local Governmental Authority or other third party required on
the part of Purchaser or Inmark in connection with the execution of this
Agreement and the Related Documents or the consummation of the transactions
contemplated hereby and thereby.
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(g) Employees. Purchaser shall have offered
employment to the persons identified on Schedule 6.2(g) on terms comparable,
when taken as a whole, to their current employment arrangements.
ARTICLE 7
DELIVERIES
7.1 Seller's and Shareholders' Deliveries. At the Closing, in
addition to any other documents or agreements required under this Agreement,
Seller and the Shareholders shall deliver or cause to be delivered to Purchaser
and Inmark the following:
(a) Bill of Sale and Assignment. A bill of sale
and assignment, substantially in the form attached as Exhibit C, conveying to
Purchaser all of the Purchased Assets to be acquired hereunder, free and clear
of any and all Encumbrances, except those listed on Schedule 3.9.
(b) Assignment and Assumption Agreement. Written
instruments of the assignment by Seller to Purchaser of the Assigned Contracts
pursuant to an Assignment and Assumption Agreement, substantially in the form
attached as Exhibit D, together with originals of all Assigned Contracts.
(c) Assignment of Trademark. A written
instrument of the assignment by Seller to Purchaser of the registered trademark
listed on Schedule 3.20(a)(i) hereto, substantially in the form attached as
Exhibit E.
(d) Organizational Documents. A copy of (i) the
Articles of Incorporation, as amended (or similar organizational
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documents), of Seller certified by the secretary of state of Ohio as of a date
not earlier than twenty Business Days prior to the date hereof and accompanied
by a certificate of the Secretary or Assistant Secretary of Seller, dated as of
the Closing Date, stating that no amendments have been made to such Articles of
Incorporation (or similar organizational documents) since such date, and (ii)
the Code of Regulations (or similar organizational documents) of Seller
certified by the Secretary or Assistant Secretary of Seller.
(e) Corporate and Stockholder Authorization. A
certificate, dated the Closing Date, executed by the Secretary or Assistant
Secretary of Seller, certifying resolutions of the Board of Directors and of the
Shareholders, approving and authorizing the execution, delivery and performance
by Seller of this Agreement and each of the Related Documents to which Seller is
a party and the consummation of the transactions contemplated hereby and thereby
(together with an incumbency and signature certificate regarding the officer(s)
signing any document or instrument on behalf of Seller).
(f) Good Standing; Qualification to Do Business.
Good standing certificates for Seller from the secretary of state of each of the
jurisdictions listed on Schedule 3.1, in each case dated as of a date not
earlier than twenty Business Days prior to the Closing Date and accompanied by
bring-down telegrams, if customarily provided by the jurisdiction in question,
dated the Closing Date.
(g) Consents and Approvals. Copies of all
consents and approvals obtained pursuant to Section 3.7 hereof, and all
registrations, qualifications, declarations, filings and notices made by Seller
pursuant to Section 5.1 hereof.
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(h) Bring-Down Certificate. A certificate dated
as of the Closing Date, executed by Seller and the Shareholders, to the effect
that each representation and warranty made by Seller and the Shareholders in
this Agreement is true and correct on and as of the Closing Date, with the same
effect as though each such representation or warranty had been made or given on
and as of such date and that Seller and the Shareholders have performed and
complied with all of the terms, covenants and conditions set forth herein that
are to be performed or complied with by them before or as of the Closing Date.
(i) Encumbrance Release. Evidence reasonably
satisfactory to Purchaser that any Encumbrances of record on the date hereof
have been removed or released.
(j) Customers. A certificate dated as of the
Closing Date, executed by an executive officer of Seller, certifying as to the
matters relating to customers as set forth in Section 3.24 hereof.
(k) Legal Opinion. The legal opinion of Wood &
Lamping, Seller's counsel, addressed to Purchaser and Inmark and dated the
Closing Date, substantially in the form attached as Exhibit F.
(l) Change of Name. The documents contemplated
by Section 10.2 hereof, in form and substance sufficient to change Seller's name
as therein required and in the appropriate form for filing with the Governmental
Authority with whom such documents must be filed to become effective.
(m) Employment Agreements. An employment
agreement executed by each Shareholder in the form for such Shareholder attached
as Exhibit G.
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(n) Headquarters Lease. A written termination
of the Headquarters Lease executed by the landlord under such lease and Seller
and a new lease for such premises executed by such landlord substantially in the
form attached as Exhibit B.
(o) Investment Representation Letters. An
investment representation letter executed by each of Steven Clements, Kimberly
Longshore and Terry Steding in the form attached as Exhibit H.
(p) Escrow Agreement. The Escrow Agreement
executed by Seller and each of the Shareholders.
(q) Business Documents. All manuals, including
employee manuals, customer lists, books and other records and files, computer
programs, computer software and master disk of source codes relating to, or
associated with, the Business, the Purchased Assets or Seller.
(r) Miscellaneous. Such other documents and
certificates of officers as reasonably may be required by Purchaser or Inmark to
consummate this Agreement and the transactions contemplated hereby.
7.2 Purchaser's Deliveries. At the Closing, in addition to any
other documents or agreements required under this Agreement, Purchaser shall
deliver the following to Seller and, to the extent herein provided, to the
Shareholders (except for the items described in Sections 7.2(b) and (c), which
Purchaser shall deliver to the Escrow Agent to hold and disburse in accordance
with the Escrow Agreement):
(a) Cash Payment. A cash payment in the amount
of $8,825,000, as adjusted in accordance with Section 2.4, to be
made, at Purchaser's option, by a certified check payable to
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Seller or by wire transfer to an account designated by Seller at least 72 hours
prior to the Closing.
(b) Inmark Common Stock. Stock certificates
evidencing 565,385 Inmark Shares registered in Seller's name.
(c) Subordinated Notes. Subordinated Notes
payable to Seller in the aggregate principal amount of
$2,500,000.
(d) Assignment and Assumption Agreement. An
Assignment and Assumption Agreement executed by Purchaser, substantially in the
form attached as Exhibit D.
(e) Organizational Documents. A copy of (i) the
Articles of Incorporation, as amended (or similar organizational documents), of
Purchaser certified by the secretary of state of Ohio as of a date not earlier
than twenty Business Days prior to the date hereof and accompanied by a
certificate of the Secretary or Assistant Secretary of Purchaser, dated as of
the Closing Date, stating that no amendments have been made to such Articles of
Incorporation (or similar organizational documents) since such date, and (ii)
the Code of Regulations (or similar organizational documents) of Purchaser
certified by the Secretary or Assistant Secretary of Purchaser.
(f) Corporate Authorization. A certificate,
dated the Closing Date, executed by the Secretary or Assistant Secretary of
Purchaser, certifying resolutions of the Board of Directors of Purchaser
approving and authorizing the execution, delivery and performance by Purchaser
of this Agreement and each of the Related Documents to which Purchaser is a
party and the consummation of the transactions contemplated hereby and thereby
(together with an incumbency and signature certificate regarding
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the officer(s) signing any document or instrument on behalf of
Purchaser).
(g) Good Standing Certificate. A Certificate of
Good Standing for Purchaser from the State of Ohio, dated as of a date not
earlier than twenty Business Days prior to the Closing Date and accompanied by a
bring-down telegram, if customarily provided by the State of Ohio, dated the
Closing Date.
(h) Consents and Approvals. All necessary
consents and approvals of third parties or Governmental Authorities required to
be obtained by Purchaser to permit Purchaser to perform this Agreement or any
Related Document to which Purchaser is a party.
(i) Bring-Down Certificate. A certificate dated
as of the Closing Date, executed by Purchaser, to the effect that each
representation and warranty made by Purchaser in this Agreement is true and
correct on and as of the Closing Date, with the same effect as though each such
representation or warranty had been made or given on and as of such date and
that Purchaser has performed and complied with all of the terms, covenants and
conditions set forth herein that are to be performed or complied with by it
before or as of the Closing Date.
(j) Legal Opinion. The legal opinion of Kronish,
Lieb, Weiner & Hellman LLP, Purchaser's counsel, addressed to Seller and the
Shareholders and dated the Closing Date, substantially in the form attached as
Exhibit I.
(k) Employment Agreements. An employment
agreement executed by Purchaser for each Shareholder substantially in the form
for such Shareholder attached as Exhibit G.
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(l) Headquarters Lease. A new lease for the
premises previously covered by the Headquarters Lease executed by Purchaser
substantially in the form attached as Exhibit B.
(m) Escrow Agreement. The Escrow Agreement
executed by Purchaser and the Escrow Agent.
(n) Miscellaneous. Such other documents,
assignments, instruments of conveyance, and certificates of officers as
reasonably may be required by Seller and the Shareholders to consummate this
Agreement and the transactions contemplated hereby.
7.3 Inmark's Deliveries. At the Closing, in addition to any
other documents or agreements required under this Agreement, Inmark shall
deliver to Seller and the Shareholders the following:
(a) Organizational Documents. A copy of (i) the
Certificate of Incorporation, as amended (or similar organizational documents),
of Inmark certified by the secretary of state of Delaware as of a date not
earlier than twenty Business Days prior to the date hereof and accompanied by a
certificate of the Secretary or Assistant Secretary of Inmark, dated as of the
Closing Date, stating that no amendments have been made to such Certificate of
Incorporation (or similar organizational documents) since such date, and (ii)
the by-laws (or similar organizational documents) of Inmark certified by the
Secretary or Assistant Secretary of Inmark.
(b) Corporate Authorization. A certificate,
dated the Closing Date, executed by the Secretary or Assistant Secretary of
Inmark, certifying resolutions of the Board of Directors of Inmark approving and
authorizing the execution, delivery and performance by Inmark of this Agreement
and each of
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the Related Documents to which Inmark is a party and the consummation of the
transactions contemplated hereby and thereby (together with an incumbency and
signature certificate regarding the officer(s) signing any document or
instrument on behalf of Inmark).
(c) Good Standing Certificate. A Certificate of
Good Standing for Inmark from the State of Delaware, dated as of a date not
earlier than twenty Business Days prior to the Closing Date and accompanied by a
bring-down telegram, if customarily provided by the State of Delaware, dated the
Closing Date.
(d) Consents and Approvals. All necessary
consents and approvals of third parties or Governmental Authorities required to
be obtained by Inmark to permit Inmark to perform this Agreement.
(e) Bring-Down Certificate. A certificate dated
as of the Closing Date, executed by Inmark, to the effect that each
representation and warranty made by Inmark in this Agreement is true and correct
on and as of the Closing Date, with the same effect as though each such
representation or warranty had been made or given on and as of such date and
that Inmark has performed and complied with all of the terms, covenants and
conditions set forth herein that are to be performed or complied with by it
before or as of the Closing Date.
(f) Legal Opinion. The legal opinion of Kronish,
Lieb, Weiner & Hellman LLP, Inmark's counsel, addressed to Seller and the
Shareholders and dated the Closing Date, substantially in the form attached as
Exhibit I.
(g) Escrow Agreement. The Escrow Agreement
executed by Inmark and the Escrow Agent.
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(h) Miscellaneous. Such other documents,
assignments, instruments of conveyance, and certificates of officers as
reasonably may be required by Seller and the Shareholders to consummate this
Agreement and the transactions contemplated hereby.
ARTICLE 8
TERMINATION AND WAIVER
8.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by Seller or Purchaser if the Closing shall
not have occurred by March 31, 1998; provided, however, that the right to
terminate this Agreement under this Section 8.1(a) shall not be available to (i)
Seller if Seller's or any Shareholder's failure to fulfill any obligation or
condition under this Agreement to be fulfilled by Seller or the Shareholders
shall have been the cause of, or shall have resulted in, the failure of the
Closing to occur on or prior to such date, or (ii) Purchaser if Purchaser's or
Inmark's failure to fulfill any obligation under this Agreement to be fulfilled
by Purchaser or Inmark shall have been the cause of, or shall have resulted in,
the failure of the Closing to occur on or prior to such date; or
(b) by Seller or Purchaser in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken any
other Action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; or
(c) by Purchaser if, between the date hereof and
the time scheduled for the Closing: (i) an event or condition
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occurs that has resulted in or that may be expected to result in a Material
Adverse Effect to Seller, (ii) any representation or warranty of Seller or the
Shareholders contained in this Agreement shall not have been substantially true
and correct when made, (iii) Seller or any Shareholder shall not have complied
with any covenant or agreement to be complied with by any of them and contained
in this Agreement, (iv) any condition contained in Section 6.1 hereof shall not
have been fulfilled, or (v) Seller or any Shareholder makes a general assignment
for the benefit of creditors, or any proceeding shall be instituted by or
against any of Seller or any Shareholder seeking to adjudicate any of them a
bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any law relating to bankruptcy, insolvency or reorganization; or
(d) by Seller if, between the date hereof and the
time scheduled for the Closing: (i) any representation or warranty of Purchaser
or Inmark contained in this Agreement shall not have been substantially true and
correct when made, (ii) Purchaser or Inmark shall not have complied with any
covenant or agreement to be complied with by it and contained in this Agreement,
(iii) any condition contained in Section 6.2 hereof shall not have been
fulfilled, or (iv) Purchaser or Inmark makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against
Purchaser or Inmark or any of their subsidiaries seeking to adjudicate any of
them a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any law relating to bankruptcy, insolvency or reorganization; or
(e) by Seller if the average of the closing bid
and asked price per share of Inmark Common Stock, as reported by
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Nasdaq and as averaged over the thirty-day period ending two days before the
Closing Date, is less than $5.00; or
(f) by the mutual written consent of Seller and
Purchaser.
8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement (except for provisions
which by their terms survive any such termination) shall forthwith become void
and there shall be no liability on the part of any party hereto except that
nothing herein shall relieve any party from liability for any breach of this
Agreement.
8.3 Waiver. Seller may, on behalf of Seller and the
Shareholders, (a) extend the time for the performance of any of the obligations
or other acts of Purchaser or Inmark, (b) waive any inaccuracies in the
representations and warranties of Purchaser or Inmark contained herein or in any
document delivered by Purchaser or Inmark pursuant hereto or (c) waive
compliance with any of the agreements or conditions of Purchaser or Inmark
contained herein. Purchaser may, on behalf of Purchaser and Inmark, (x) extend
the time for the performance of any of the obligations or other acts of Seller
or the Shareholders, (y) waive any inaccuracies in the representations and
warranties of Seller or the Shareholders contained herein or in any document
delivered by Seller or the Shareholders pursuant hereto or (z) waive compliance
with any of the agreements or conditions of Seller or the Shareholders contained
herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby. Any waiver of any
term or condition shall not be construed as a waiver of any subsequent breach or
a subsequent waiver of the same term or condition, or a waiver of any other term
or condition, of this
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Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any of such rights.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements of Seller and the Shareholders in
this Agreement shall survive the Closing and any investigation at any time made
by or on behalf of Purchaser or Inmark. The representations, warranties and
agreements of Purchaser and Inmark in this Agreement shall survive the Closing
and any investigation at any time made by or on behalf of Seller or the
Shareholders for a period of two years after the Closing.
9.2 Indemnification by Seller and the Shareholders. Seller and
the Shareholders, jointly and severally, shall defend, indemnify and hold
harmless Purchaser and Inmark, and their respective Affiliates, officers,
directors, shareholders, controlling persons, employees, agents, successors and
assigns (each, a "Purchaser Indemnitee"), for any loss (including, without
limitation, any unfavorable net adjustment to the financial statements of Seller
resulting from a breach of representation), liability, claim, damage (including,
without limitation, diminution in value) or expense (including, without
limitation, the costs of investigation and defense and reasonable attorneys'
fees and disbursements) (collectively, "Damages") suffered or incurred by any
Purchaser Indemnitee arising from or in connection with (a) any breach of any of
the representations and warranties of Seller and the Shareholders contained in
Article 3 of this Agreement or in any certificate delivered by
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any of them pursuant to this Agreement or (b) any failure by Seller or the
Shareholders to perform or comply with any of their respective obligations
contained in this Agreement; provided, however, that for purposes of this
Section 9.2, no Shareholder shall be a Purchaser Indemnitee; and provided
further, that with respect to Damages arising out of a failure after the Closing
(i) by Seller to perform or comply with any of its obligations contained in this
Agreement, each Shareholder's liability shall be limited to such Shareholder's
pro rata share (based upon such Shareholders's percentage of stock ownership of
Seller immediately prior to the Closing) of the Escrow Fund (as defined in the
Escrow Agreement) as the same at such time may be constituted or (ii) by any
Shareholder to perform or comply with any of its obligations contained in this
Agreement, only such Shareholder shall be liable for Damages under this Section
9.2 and, in such event, such Shareholder's liability shall be limited to its pro
rata share (based upon its percentage of stock ownership of Seller immediately
prior to the Closing) of the Escrow Fund (as so defined) as the same at such
time may be constituted.
9.3 Procedure for Certain Indemnification. (a)
-------------------------------------
Promptly after receipt by a Purchaser Indemnitee under Section
9.2 of notice of the commencement of any action by a third party
as to which indemnification is or will be sought, such Purchaser
Indemnitee shall, if a claim in respect thereof is to be made
against an indemnifying party under such Section, give prompt
notice to the indemnifying party of the commencement thereof, but
the failure to so notify the indemnifying party shall not relieve
it of any liability that it may have to any Purchaser Indemnitee
except to the extent the indemnifying party demonstrates that the
defense of such action is materially prejudiced thereby. If any
such action shall be brought against a Purchaser Indemnitee, it
shall give notice to the indemnifying party of the commencement
thereof within five days of the receipt of such notice and the
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indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, to assume, at its expense, the defense thereof (utilizing
counsel satisfactory to the Purchaser Indemnitee), in which case the
indemnifying party shall not be liable to such Purchaser Indemnitee under such
Section for any fees of other counsel or any other expenses, in each case
subsequently incurred by such Purchaser Indemnitee in connection with the
defense thereof. If notice is given to an indemnifying party of the commencement
of any action and it does not, within five days after the Purchaser Indemnitee's
notice is given, give notice to the Purchaser Indemnitee of its election to
assume the defense thereof, the Purchaser Indemnitee shall be entitled to select
counsel of its own choice and the indemnifying party shall pay the reasonable
fees and expenses of one counsel in each relevant jurisdiction. An indemnifying
party shall not be responsible for any settlement or compromise of any action,
claim or proceeding effected without its consent (which consent shall not be
unreasonably withheld).
9.4 Limitation on Liability. The Purchaser Indemnitees shall
not be entitled to indemnification pursuant to this Article 9 for Damages
suffered or incurred by the Purchaser Indemnitees unless Damages aggregate at
least $50,000 (the "Basket Amount"). In the event that Damages exceed the Basket
Amount, Seller and the Shareholders shall be precluded from asserting that any
such Damages are immaterial or not adverse to the Purchaser Indemnitees. If
Damages aggregate more than the Basket Amount, Seller and the Shareholders shall
be liable for the entire amount of such Damages including the initial Basket
Amount; provided, however, that Seller and the Shareholders shall have no
personal liability for any Damages. Any liability for Damages hereunder shall be
limited to the amounts which Purchaser or Inmark may receive pursuant to the
Escrow Agreement.
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9.5 Offset. In addition to any other rights which Purchaser or
Inmark may have under this Agreement, Inmark shall be entitled to offset against
the Subordinated Notes, in the order of maturity of each installment, all
amounts due under this Article 9.
ARTICLE 10
COVENANTS SUBSEQUENT TO CLOSING
10.1 Further Assurances. Seller and the Shareholders jointly
and severally agree, without further consideration, to execute and deliver
following the Closing such other instruments of transfer and take such other
action as Purchaser may reasonably request in order to put Purchaser in
possession of, and to vest in Purchaser, good and valid title to the Purchased
Assets free and clear of any Encumbrances in accordance with this Agreement and
to consummate the transactions contemplated by this Agreement.
10.2 Change of Name. Simultaneously with the Closing, Seller
will take all actions necessary to change its name to a name unrelated and not
confusing with "Optimum Group, Inc." and shall provide thereafter to Purchaser
copies of duly executed documents effecting the change in such name. From and
after the Closing Date, and other than in connection with the preparation and
filing of tax returns and amendments, Seller shall discontinue all further use,
directly or indirectly, of the name "Optimum Group, Inc." or any variation
thereof, and of any trademark, trade name, service mark or name, or logo used by
Seller or any word or logo that is similar in sound or appearance.
10.3 Records. In order to facilitate the resolution of any
claims made by or against or incurred by Seller or for any other reasonable
purpose, for a period of six (6) years after the
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Closing, Purchaser (i) shall use its good faith efforts to retain the books and
records of Seller for periods prior to the Closing and which have been delivered
to Purchaser, unless specifically authorized by Seller to the contrary, and (ii)
upon reasonable notice, shall afford the officers, employees and authorized
agents and representatives of Seller reasonable access (including the right to
make, at Seller's expense, photocopies), during normal business hours, to such
books and records.
10.4 Tax Reporting. The parties hereby agree to adopt the
alternative procedure provided in Section 5 of Revenue Procedure 96-60 for
preparing and filing all payroll and employment tax returns for the employees of
Seller that are engaged by Purchaser, pursuant to which Purchaser will assume
Seller's obligation to furnish Forms W-2 to the employees of Seller who will
continue their employment in the Business with Purchaser. Seller and Purchaser
will each perform the duties imposed on them as predecessor and successor,
respectively, in such Section 5, and Seller will furnish all relevant
information with respect to such employees. The failure or refusal of Seller to
timely furnish complete and accurate information with respect to any such
employee shall be deemed an assumption by Seller to comply with the standard
procedure provided in Section 4 of Revenue Procedure 96-60 for preparing and
filing all payroll and employment tax returns for the employees of Seller.
10.5 Employee Benefit Plans.
(a) Continuation of Plans. On and after the
Closing Date, Seller shall continue to process and pay (or cause to be processed
and paid) in an expeditious manner and with respect to all current and former
employees of Seller performing, or having performed, services related to the
Business (the "Employees") (and, to the extent applicable, their spouses,
dependents and beneficiaries) the following obligations:
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(i) all claims under such "employee benefit plans"
(as defined under Section 3(3) of ERISA) maintained by Seller
that provide health and medical, or other welfare benefits
submitted for covered expenses with respect to occurrences
commencing on or prior to the Closing Date, including, but not
limited to, (A) covered hospital benefits for any confinements
that commenced on or before the Closing Date, including any
covered charges of health care professionals' relating to such
confinements, and (B) any other covered medical or health
expenses incurred on or before the Closing Date;
(ii) short-term and long-term disability benefits, if
any, for disabilities that commenced on or before the Closing
Date for the period that each of such affected individuals
remain disabled;
(iii) life and survivor income benefits, if
any, for deaths which occur on or prior to the Closing
Date;
(iv) workers' compensation benefits for disabilities
resulting from a work-related accident which occurred on or
prior to the Closing Date;
(v) all benefits that are being, or that may be, paid
to, or with respect to, any Employees who are on short or
long-term disability, or medical, personal or other leaves of
absence as of the Closing Date (or who go on short or
long-term disability, or medical, personal or other leave of
absence after the Closing Date as a result of any injury,
illness or other factor occurring on or prior to the Closing
Date) pursuant to the terms of such employee benefit plans as
in effect immediately prior to such date (including any
subsequent benefit increases);
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(vi) benefits under any "spending account," or
similar arrangement, under any "cafeteria plan" (as defined
under Section 125 of the Code), regardless of whether such
benefits accrue before, on or after the Closing Date; and
(vii) benefits under all other such employee benefit
plans which accrue on or before the Closing Date.
(b) Continuation of Coverage. Seller (or any
plan maintained by Seller) shall provide continued health and medical coverage
as required under Section 4980B of the Code, Part 6 of Title I of ERISA or any
other applicable federal, state or local law or ordinance to all employees (and
independent contractors) of Seller (and their spouses, dependents and
beneficiaries) with respect to whom a "qualifying event" (as such term is
defined under Sections 4980B(f)(3) of the Code or 603 of ERISA) or other
triggering event described under the applicable federal, state or local laws or
ordinances occurred on or before the Closing Date.
10.6 Non-Competition; Trade Secrets. Seller and the
Shareholders agree as follows effective on and after the Closing
Date:
(a) All research, advertising, sales,
manufacturers and other materials or articles or information, including, without
limitation, data processing reports, customer sales analyses, invoices, price
lists or information, samples, or any other materials or data of any kind
furnished to Seller or any Shareholder by Purchaser or Inmark or any of their
Affiliates are and shall remain the sole and confidential property of Purchaser,
Inmark and their Affiliates; provided, however, that the foregoing shall not
apply to any material in the public domain other than by reason of a breach of
this Section 10.6. If Purchaser or Inmark or any of their Affiliates requests
the
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return of such materials at any time, Seller and the Shareholders shall
immediately deliver the same to Purchaser or Inmark or their Affiliate, as the
case may be.
(b) For a period of five years after the Closing
Date, neither Seller nor any Shareholder shall, directly or indirectly, through
its respective agents, employees or otherwise, or as a principal, partner,
stockholder, agent, director, officer, employee, consultant or in any other
capacity, shall engage in (as a principal, partner, stockholder, agent,
director, officer, employee, consultant or otherwise) or be financially
interested in any business activities which are the same as, similar to or in
competition with, the business activities carried on by Purchaser or Inmark, or
any of their Affiliates, or being definitely planned by Purchaser or Inmark, or
any of their Affiliates, or at any time during such period induce or attempt to
influence any employee of Purchaser or Inmark, or any of their Affiliates, to
terminate his employment with Purchaser or Inmark, or any of their Affiliates.
(c) Neither Seller nor any Shareholder shall use
for its or his personal benefit, or disclose, communicate or divulge to, or use
for the direct or indirect benefit of any Person other than Purchaser, Inmark or
their Affiliates, any material referred to in Section 10.6(a) or any information
regarding the business methods, business policies, procedures, techniques,
research or development projects or results, trade secrets, or other knowledge
or processes of or developed by Purchaser, Inmark or any of their Affiliates, or
any names and addresses of customers or clients or any data on or relating to
past, present or prospective customers or clients or any other confidential
information relating to or dealing with the business operations or activities of
Purchaser, Inmark or any of their Affiliates, made known to Seller or any
Shareholder or learned or acquired by any Shareholder while in the employ of
Purchaser, Inmark or any of their Affiliates.
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(d) Seller and the Shareholders acknowledge that
the restrictions contained in this Section 10.6, in view of the nature of the
business in which Purchaser and Inmark are engaged, are reasonable and necessary
in order to protect the legitimate interests of Purchaser, Inmark and their
Affiliates, and that any violation thereof would result in irreparable injuries
to Purchaser and Inmark, and Seller and the Shareholders therefore acknowledge
that, in the event of their violation of any of these restrictions, Purchaser
and/or Inmark shall be entitled to obtain from any court of competent
jurisdiction preliminary and permanent injunctive relief (without establishing
the likelihood of irreparable injury or posting bond or other security). In the
event of such violation, Purchaser and/or Inmark shall also be entitled to
receive damages and an equitable accounting of all earnings, profits and other
benefits arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies to which Purchaser or Inmark may be
entitled.
(e) If the period of time or the scope of
activity restricted in Section 10.6(b) above should be adjudged unreasonable in
any proceeding, then the period of time shall be reduced by such number of
months and/or the scope of restricted activity shall be modified so that such
restrictions may be enforced as is adjudged to be reasonable. If Seller or any
Shareholder violates any of the restrictions contained in Section 10.6(b), the
restrictive period shall not run in favor of Seller and the Shareholders from
the time of the commencement of any such violation until such time as such
violation shall be cured by Seller and the Shareholders to the satisfaction of
Purchaser and Inmark.
10.7 Gains, Transfer and Sales Taxes. Seller and the
Shareholders shall pay all transfer, sales, gains and similar taxes and fees
payable in connection with the sale of the Purchased Assets and the assumption
of the Assumed Liabilities contemplated by this Agreement, and shall indemnify
and hold harmless Purchaser and Inmark from and against any liability with
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respect to such taxes (including any penalties, interest and professional fees).
Seller, the Shareholders, Purchaser and Inmark shall cooperate in the
preparation and filing of any required returns with respect to such taxes.
10.8 Benefit Plans and Severance Payments. Seller will
reimburse Purchaser for any costs associated with the termination of the Plans
as of the Closing Date.
10.9 Board Representation. (a) Immediately following the
Closing, Inmark's by-laws shall be amended to increase the size of the board of
directors by one board member and the Purchaser's existing board of directors
shall adopt a resolution filling such vacancy with Lachenman. In connection with
the election of directors at the first Annual Meeting of the Stockholders of
Inmark following the Closing, the existing board of directors of Inmark shall
nominate Lachenman as a nominee of management.
(b) Immediately following the Closing,
Purchaser's Code of Regulations shall be amended to increase the size of
Purchaser's board of directors by four board members and the Purchaser's
existing board of directors shall adopt a resolution filling such vacancies with
Lachenman, James H. Ferguson, Michael J. Halloran and Thomas S. Wessling.
(c) Immediately following the Closing, Inmark
shall cause the by-laws of Inmark Services, Inc., a wholly-owned subsidiary of
Inmark, to be amended to increase the size of ISI's board of directors by three
board members and shall cause ISI's existing board of directors to adopt a
resolution filling such vacancies with James H. Ferguson, Michael J. Halloran
and Thomas S. Wessling.
10.10 Vertical Network Systems, Inc. (a) Subject to
the rights of first refusal granted to Vertical Network Systems,
Inc., an Ohio corporation ("VNS"), Christopher A. Cartheuser
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("Cartheuser") and James H. Rombke ("Rombke") in that certain Share Restriction
Agreement, dated May 12, 1997, by and among VNS, Cartheuser, Rombke and
Lachenman, Purchaser and Inmark shall have the option, exercisable between the
Closing Date and the date that is six months after the Closing Date (the "Option
Period"), to purchase all of Lachenman's right, title and interest in VNS (the
"VNS Interest"). The purchase price for the VNS Interest shall be equal to the
amount Lachenman paid to acquire the VNS Interest, which Lachenman represents
and warrants to be $125,000. During the Option Period, Lachenman shall not sell,
assign, pledge, mortgage or otherwise transfer the VNS Interest to any party
other than Purchaser or Inmark.
(b) In the event Purchaser or Inmark wishes to
purchase the VNS Interest, Purchaser or Inmark, as the case may be, shall notify
Lachenman (the "Exercise Notice"). Upon receipt of the Exercise Notice,
Lachenman shall use his best efforts (i) to obtain promptly any third party
consents, in form reasonably satisfactory to Purchaser or Inmark, as the case
may be, required to permit Purchaser's or Inmark's, as the case may be, purchase
of the VNS Interest and (ii) to consummate as expeditiously as possible such
purchase and sale. In connection with such purchase and sale of the VNS
Interest, Lachenman shall execute such documentation as Purchaser or Inmark, as
the case may be, reasonably requests.
10.11 Parking Lot Lease. As long as Purchaser shall occupy the
premises located at 9745 Mangham Drive, Cincinnati, Ohio 45215-2350, (a)
Lachenman shall exercise all of Lachenman's rights with respect to use and
occupancy under the Parking Lot Lease as instructed by, and for the benefit of,
Purchaser, and (b) Lachenman shall not terminate, amend or otherwise modify the
Parking Lot Lease or surrender the premises leased by Lachenman pursuant to the
Parking Lot Lease, without Purchaser's prior written consent.
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ARTICLE 11
INMARK COMMON STOCK
11.1 Representations and Warranties of Seller and the
Shareholders.
(a) Seller and the Shareholders represent and
warrant to Purchaser and Inmark that Seller and the Shareholders understand that
the Inmark Shares have not been registered for sale under any federal or state
securities laws and that Inmark Common Stock is being or will be offered and
sold to Seller pursuant to the exemption from registration provided for under
Section 4(2) of the Securities Act, and Seller is acquiring the Inmark Shares
for Seller's own account for investment and without any view to any distribution
thereof; that the representations and warranties set forth in this Section
11.1(a) are given with the intention that Purchaser and Inmark rely on them for
purposes of claiming such exemption; and that Seller and the Shareholders
understand that Seller must bear the economic risk of Seller's investment in the
Inmark Shares for an indefinite period of time as the Inmark Shares cannot be
sold unless subsequently registered under such laws or unless an exemption from
such registration is available.
(b) Seller and the Shareholders agree that the
Inmark Shares will not be sold or otherwise transferred for value unless (i) a
registration statement with respect thereto has become effective under the
Securities Act, or (ii) there is presented to Inmark an opinion of counsel
satisfactory to Inmark that such registration is not required, and Seller and
the Shareholders consent that any transfer agent of Inmark may be instructed not
to transfer any Inmark Shares unless it receives satisfactory evidence of
compliance with the foregoing provisions, and that there may be endorsed upon
any certificate or instrument representing the Inmark Shares an appropriate
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legend calling attention to the foregoing restrictions on
transferability of such shares.
(c) Seller and the Shareholders represent and
warrant to Purchaser and Inmark that Seller is aware of Inmark's business
affairs and financial condition and has acquired sufficient information about
Inmark to reach an informed and knowledgeable decision to acquire the Inmark
Shares hereunder. Seller and the Shareholders further represent and warrant that
Seller and the Shareholders have discussed Inmark and its plans, operations and
financial condition with Inmark's officers, have received all such information
as it deems necessary and appropriate to enable it to evaluate the financial
risk inherent in making an investment in the Inmark Shares and has received
satisfactory and complete information concerning the business and financial
condition of Inmark in response to all inquiries in respect thereof.
11.2 Registration under the Securities Act of 1933.
(a) Registration Rights. Seller shall have the following
demand and piggyback registration rights (other than in connection with a merger
or acquisition registered on Form S-4, or similar special purpose form, or with
an employee benefit plan or similar plan registered on Form S-8, or similar
special purpose form, or any dividend reinvestment plan):
(i) Seller and Seller's designees shall have
the right on one occasion to demand that Inmark file expeditiously a
registration statement under the Securities Act covering not less than 50% of
the Inmark Shares provided that such Inmark Shares are then beneficially owned
by Seller and/or Seller's designees. Such demand may be made at any time after
the first anniversary of the Closing Date but in no event later than the third
anniversary of the Closing Date. If the registration is delayed by Inmark, the
period when such demand may be made shall be extended for a period of time equal
to the
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length of the delay in registering such securities. The registration shall be an
underwritten offering conducted by an underwriter reasonably satisfactory to
Seller and Inmark, provided that an investment banking firm designated by Inmark
shall be given a right of first refusal for thirty (30) days to be the
underwriter for such offering and shall be deemed to be satisfactory to both
Seller and Inmark. Inmark shall bear all expenses attendant to registering such
securities (other than the cost of counsel to selling stockholders and
underwriting discounts and commissions), except as prohibited by applicable
state securities laws.
(ii) If Inmark shall intend to file a
registration statement, then Seller and Seller's designees shall have the right
on no more than two occasions during the period from the first anniversary of
the Closing Date through the third anniversary of the Closing Date, to piggyback
the Inmark Shares in such registration statement, provided that after Inmark
delivers written notice by registered mail of its intention to file a
registration statement under the Securities Act, Seller and Seller's designees
must respond affirmatively within twenty (20) business days after delivery of
such notice. In connection with this piggyback registration right, Inmark shall
bear all expenses attendant to registering such securities (other than the cost
of counsel to selling stockholders and underwriting discounts and commissions),
except as prohibited by state securities laws. If, in the sole judgment of the
managing underwriter of any public offering by Inmark, the amount of securities
to be registered pursuant to the aforementioned piggyback rights shall be
determined to be, in the aggregate, an amount which would adversely affect the
success of Inmark's registration of its securities for its own account, then
securities of Seller and Seller's designees shall be excluded from the offering
to the extent recommended by the managing underwriter in its sole judgment.
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(b) Inmark's Obligations in Registration. If and whenever
Inmark is required by the provisions of this Section 11.2 to effect the
registration of the Inmark Shares under the Securities Act, Inmark shall:
(i) Prepare and file with the Commission a
registration statement with respect to all outstanding Inmark Shares to be
included in the registration statement and cause such registration statement to
become effective and file such amendments necessary to maintain the
effectiveness of the registration statement for a period of not less than one
(1) year, except that Inmark shall not be required to keep such registration
statement effective, or to prepare or file any amendments or supplements
thereto, after the period of distribution of the registered securities has been
completed;
(ii) Furnish to Seller and Seller's designees
such numbers of copies of the preliminary prospectus included in such
registration statement and the prospectus included in such registration
statement at the time it is ordered effective by the Commission as such holders
may reasonably request in order to facilitate the disposition of the registered
securities;
(iii) Use reasonable efforts to register or
qualify the Inmark Shares covered by such registration statement under such
other state securities laws of such jurisdictions as Seller and Seller's
designees shall reasonably request, provided, however, that Inmark will not be
required to: (A) qualify generally to do business in any jurisdiction where it
would not be required to do so but for this clause (iii); (B) subject itself to
taxation in such jurisdiction; (C) consent to general service of process; (D)
register in any state requiring, as a condition to registration, the escrow or
surrender of any Company securities held by any security holder; and (E) incur
expenses exceeding $10,000 in the aggregate, in connection with such
registration or qualification; and
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(iv) Notify Seller and Seller's designees, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such holder, prepare and furnish to Seller and Seller's designees a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statement therein not misleading in the
light of the circumstances then existing, provided that no such supplement or
amendment need be filed after distribution of the registered securities has been
completed.
(c) Information From Seller and Seller's Designees. Notices
and requests delivered by Seller and Seller's designees to Purchaser pursuant to
this Section 11.2 shall contain such information regarding the Inmark Shares and
the intended method of disposition of the Inmark Shares and such other
information regarding Seller and Seller's designees as shall reasonably be
required by counsel to Inmark in order to appropriately disclose matters
pertaining to Seller and Seller's designees in the registration statement.
(d) Indemnification by Purchaser and Inmark. In the event of
any registration under the Securities Act of any Inmark Shares pursuant to this
Section 11.2, Purchaser and Inmark hereby jointly and severally agree to
indemnify and hold harmless Seller and Seller's designees and each other person,
if any, who controls Seller within the meaning of the Securities Act and each
other person (including underwriters) who participates in the
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offering of the Inmark Shares, against any losses, claims, damages or
liabilities, joint or several, to which Seller, Seller's designees or such
controlling person or participating person may become subject under the
Securities Act or otherwise, in so far as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which such
Inmark Shares were registered under the Securities Act, in any preliminary
prospectus or final prospectus contained therein, or in any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
Seller, Seller's designees and each such controlling person or participating
person for any legal or any other expenses reasonably incurred by Seller,
Seller's designees or such controlling person or participating person in
connection with investigating or defending any such loss, damage, liability or
proceeding; provided, however, that neither Purchaser nor Inmark will be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, said
preliminary or final prospectus or said amendment or supplement in reliance upon
and in conformity with written information furnished to Purchaser or Inmark by
Seller, Seller's designees or such controlling or participating person, as the
case may be, specifically for use in the preparation thereof.
(e) Indemnification by Seller and Seller's
Designees. It shall be a condition of Purchaser's obligation under this Section
11.2 to cause Inmark to effect any registration under the Securities Act that
there shall have been delivered to Purchaser and Inmark an agreement or
agreements duly executed by Seller and Seller's designees and satisfactory to
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Inmark and Purchaser, whereby Seller and Seller's designees agree to indemnify
and hold harmless Purchaser, Inmark, each other person referred to in subparts
(1), (2), (3) and (5) of Section 11(a) of the Securities Act in respect of such
registration statement and each other person, if any, which controls Inmark
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which Purchaser or Inmark may become subject
under the Securities Act or otherwise, but only to the extent that such losses,
claims, damages or liabilities (or proceedings in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which such Inmark Shares were registered under the Securities
Act, in any preliminary prospectus or final prospectus contained therein or in
any amendment or supplement thereto or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
which, in each such statement, said preliminary or final prospectus or said
amendment or supplement in reliance upon, and in conformity with, written
information furnished to Purchaser or Inmark by Seller or Seller's designees for
use in the preparation thereof.
11.3 Inmark Shares Lock-Up Agreement. Notwithstanding anything
to the contrary contained herein, and subject to the provisions of the Escrow
Agreement, (a) no Shareholder shall transfer or sell any Inmark Shares until the
second anniversary of the Closing Date, (b) following the second anniversary of
the Closing Date, Thomas E. Lachenman may transfer or sell any or all of his
Inmark Shares, (c) no Shareholder other than Lachenman shall transfer or sell
more than a total of two-thirds of such Shareholder's Inmark Shares prior to the
third anniversary of the Closing Date, unless such sales or transfers are made
by will or the applicable laws of intestacy. For purposes of this Section 11.3,
the term "Inmark Shares" shall be deemed to include any
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shares of Inmark issued in stock splits of, or as stock dividends
on, the Inmark Shares.
ARTICLE 12
GENERAL PROVISIONS
12.1 Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid (i) by Seller with respect to all such costs and expenses incurred by
Seller and the Shareholders (except for the fees of the certified public
accountants for preparation of Audited Financial Statements in accordance with
Section 5.5, which shall be shared equally by Seller and Inmark) and by
Purchaser and Inmark with respect to all such costs and expenses incurred by
Purchaser and Inmark, if the Closing does not occur, and (ii) by Purchaser with
respect to all such costs incurred by Seller, the Shareholders, Purchaser and
Inmark if the Closing occurs.
12.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
12.2):
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(a) if to Seller:
Optimum Group, Inc.
9745 Mangham Drive
Cincinnati, Ohio 45215-2350
Telecopy: (513) 577-7081
Attention: Thomas F. Lachenman
with a copy to:
Wood & Lamping
2500 Cincinnati Commerce Center
600 Vine Street
Cincinnati, Ohio 45202
Telecopy: (513) 651-6087
Attention: James B. Harrison, Esq.
(b) if to any Shareholder, to the attention of such
Shareholder:
c/o Optimum Group, Inc.
9745 Mangham Drive
Cincinnati, Ohio 45215-2350
Telecopy: (513) 577-7081
with a copy to:
Wood & Lamping
2500 Cincinnati Commerce Center
600 Vine Street
Cincinnati, Ohio 45202
Telecopy: (513) 651-6087
Attention: James B. Harrison, Esq.
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(c) if to Purchaser:
OG Acquisition Corp.
c/o Inmark Enterprises, Inc.
One Plaza Road
Greenvale, New York 11548
Telecopy: (516) 625-3573
Attention: Donald A. Bernard
with a copy to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
Telecopy: (212) 479-6275
Attention: Joseph S. Hellman, Esq.
(d) if to Inmark:
Inmark Enterprises, Inc.
One Plaza Road
Greenvale, New York 11548
Telecopy: (516) 625-3573
Attention: John P. Benfield
with a copy to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
Telecopy: (212) 479-6275
Attention: Joseph S. Hellman, Esq.
12.3 Public Announcements. Except as required by law, no party
to this Agreement shall make, or cause to be made, any press release or public
announcement in respect of this Agreement or the transactions contemplated
hereby or otherwise communicate
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with any news media without the prior written consent of the other party. The
parties shall cooperate as to the timing and contents of any such press release
or public announcement.
12.4 Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
12.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
12.6 Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
thereof and supersedes all prior agreements and undertakings, both written and
oral, among Seller, the Shareholders, Purchaser and Inmark with respect to the
subject matter hereof and thereof except for that certain Joint Confidentiality
Agreement, dated as of March 17, 1997, by and between Seller and Purchaser,
which shall continue in full force and effect in accordance with its terms after
the Closing under this Agreement.
12.7 Assignment. Seller shall not assign this
Agreement by operation of law or otherwise without the express
written consent of Purchaser and Inmark. No Shareholder shall
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assign this Agreement without the express written consent of Purchaser and
Inmark except by operation of law. Any consent required by this Section 12.7 may
be granted or withheld in the sole discretion of Purchaser or Inmark.
12.8 No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
12.9 Amendment or Termination. No agreement shall be effective
to change, modify, waive, release, amend, terminate, discharge or effect an
abandonment of this Agreement, in whole or in part, unless such agreement is in
writing, refers expressly to this Agreement and is signed by the party against
whom enforcement of the change, modification, waiver, release, amendment,
termination, discharge or effectuation of the abandonment is sought.
12.10 Remedies. (a) Except as herein specifically provided,
any controversy, claim or dispute arising out of or relating to this Agreement
or any Related Document, or the breach, termination, enforceability or validity
hereof or thereof, including without limitation the determination of the scope
or applicability of this agreement to arbitrate, shall be determined by
arbitration before three arbitrators. The arbitration shall be governed by the
Federal Arbitration Act and administered by the American Arbitration Association
under its Commercial Arbitration Rules and its Supplementary Procedures for
Large, Complex Disputes, provided that persons eligible to be selected as
arbitrators shall be limited to attorneys-at-law who (i) are on the AAA's Large,
Complex Case Panel or the CPR Foundation Panel of Distinguished Neutrals, or who
have professional credentials similar to the attorneys listed on such AAA and
CPR panels, and (ii) who have practiced law for at least
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15 years as an attorney specializing in either general commercial litigation or
general corporate and commercial matters. Judgment upon the award rendered may
be entered in any court having jurisdiction.
(b) Notwithstanding the foregoing, the parties agree that due
to the unique subject matter of this transaction, monetary damages will be
insufficient to compensate the non- breaching party in the event of a breach of
any part of this Agreement. Accordingly, the parties agree that the non-
breaching party shall be entitled (without prejudice to any other right or
remedy to which it may be entitled) to an appropriate decree of specific
performance, or an injunction restraining any violation of this Agreement or
other equitable remedies to enforce this Agreement (without establishing the
likelihood of irreparable injury or posting bond or other security), and the
breaching party waives in any action or proceeding brought to enforce this
Agreement the defense that there exists an adequate remedy at law.
12.11 Governing Law. The validity and construction of this
Agreement and the Related Documents referred to herein shall be governed by the
internal laws (and not the principles of conflict of laws) of the state of New
York.
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12.12 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
OPTIMUM GROUP, INC.
By: /s/ Thomas E. Lachenman
Thomas E. Lachenman
President
/s/ James H. Ferguson
James H. Ferguson
/s/ Michael J. Halloran
Michael J. Halloran
/s/ Christina M. Heile
Christina M. Heile
/s/ David E. Huddleston
David E. Huddleston
/s/ Thomas E. Lachenman
Thomas E. Lachenman
/s/ Roderick S. Taylor
Roderick S. Taylor
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/s/ Thomas L. Wessling
Thomas L. Wessling
OG ACQUISITION CORP.
By: /s/ John P. Benfield
John P. Benfield
President
INMARK ENTERPRISES, INC.
By: /s/ John P. Benfield
John P. Benfield
President
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The following schedules to this Asset Purchase Agreement have been omitted and
will be furnish supplementally to the Commission upon request:
2.1(b) Assigned Contracts
2.1(c) Intellectual Property Owned by Optimum Group,
Inc. and Intellectual Property Held Under License
2.1(g) List of Assets
2.1(h) Safe Deposit Boxes and Off-Site Storage
Facilities
2.3 Liabilities to Be Assumed by OG Acquisition Corp.
3.1 List of Jurisdictions Where Optimum Group, Inc.
is Qualified to Do Business as a Foreign
Corporation
3.3 List of Shareholders of Optimum Group, Inc.
3.4 Subsidiaries and Affiliates of Optimum Group,
Inc.
3.6 Conflicts
3.7 Governmental Consents and Approvals
3.8 Liabilities of Optimum Group, Inc.
3.9 List of Encumbrances on Assets
3.11 Inventories
3.12 New Assets
3.14 Conduct Not in the Ordinary Course of Business
3.14(x) Salaries for 1998
3.15 Litigation
3.16(a) Certain Interests
3.16(b) Certain Interests
3.17 Noncompliance with Law
3.18(a) Permits and Licenses
3.18(b) Non-Transferable Permits
3.19(a) List of Material Contracts
3.19(b) Concerning Material Contracts
3.19(c) Concerning Material Contracts
3.19(e) Concerning Material Contracts
3.20(a)(i) Intellectual Property Owned by Optimum Group,
Inc.
3.20(a)(ii) Intellectual Property Held Under License
3.20(b) Encumbrances or Licenses in Owned Intellectual
Property
3.21(a) Real Property Leased by Optimum Group, Inc.
3.21(b) Violations of Law relating to Real Property
3.22(a) Tangible Personal Property
3.23 Exceptions to Seller's Ownership of, Rights to
Use and Title to Purchased Assets
3.24 Customers
3.25 Suppliers
3.26(a)(i) Employee Benefit Plans
3.26(a)(iii) Section 401(a) Qualified Plans
3.27 Collective Bargaining Agreements and Other Labor
Union Contracts
3.28(a) Employees
3.28(b) Employment Agreements and Severance Agreements
3.29 Tax Deficiencies
3.30(a)(i) Insurance
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3.30(a)(ii) List of Claims Made Under Insurance Policies in
Last Five Years
3.30(c) Self-Insured Risks
4.4(a) Granted Stock Options and Warrants to Purchase
Inmark Common Stock as at December 8, 1997
4.7 Inmark's Customers
4.8 Exceptions to Conduct of Business in the Ordinary
Course
4.9 Exceptions to Compliance with Laws
4.10 Tax Deficiencies
4.12 Litigation
5.7(b)(i) Permitted Payments
5.7(b)(xiii) Permitted Capital Expenditures
5.7(b)(xvi) Agreements, Arrangements or Transactions with
Officers or Directors
5.7(b)(xvii) Termination or Modification of Employment
Contracts or Arrangements
5.7(b)(xix) Permitted Dividends and Distributions Relating to
Shares of Capital Stock
6.1(a)(xi) Persons Agreeing to Become Purchaser's Employees
6.2(g) Required Offers of Employment
110
EXHIBIT 2.2
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
Amendment No. 1 dated as of March 31, 1998 to Asset Purchase Agreement
(the "APA") by and among Optimum Group, Inc. (the name of which is being changed
to OG Holding Corporation), James H. Ferguson, Michael J. Halloran, Christina M.
Heile, David E. Huddleston, Thomas E. Lachenman, Roderick S. Taylor, Thomas L.
Wessling, OG Acquisition Corp. (the name of which is being changed to Optimum
Group, Inc.), and Inmark Enterprises, Inc.
In consideration of the mutual agreements set forth herein and to
facilitate the consummation of the transactions contemplated by the APA, the
parties hereto agree as follows:
1. The parties have agreed that Inmark Services, Inc. ("Services") a
Delaware corporation and a direct subsidiary of Inmark, shall become
the sole shareholder of Purchaser prior to the Closing and, without
thereby acknowledging that any conforming changes in the APA are
necessary, any such changes are hereby deemed made.
2. Prior to the Closing, all of the Shareholders have transferred their
shares of Seller to individual electing small business trusts
("Trusts", as to each Trust for a particular Shareholder, a
"Shareholder Trust"). Each Shareholder and each Shareholder Trust
agrees that such Shareholder shall remain liable and his or her
Shareholder Trust shall be jointly and severally liable for all of such
Shareholder's obligations, respectively, to Inmark and Purchaser under
the APA, including without limitation the indemnification obligations
thereunder, to the extent that such Shareholder is liable for said
obligations under the APA and as limited by the indemnification
provisions of the APA. In consideration of the foregoing, Inmark and
Purchaser agree to such transfers.
3. The $8,825,000 cash portion of the Purchase Price payable to Seller
at the Closing shall be reduced to $8,700,000 and the aggregate
Purchase Price shall be reduced by $125,000 to reflect certain bonuses
paid by Seller to employees of Seller in December 1997 as contemplated
by the terms of the APA.
4. The Seller shall be permitted to retain a total of $100,000 of its
cash or cash equivalents at the Closing. All other cash and cash
equivalents of Seller shall be transferred by Seller to Purchaser at
the Closing.
5. All of the capitalized terms not otherwise defined herein shall have
the meanings given to them by the APA.
<PAGE>
6. This Agreement shall constitute an integral part of the APA which,
as modified hereby, is hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
as of the day and year first above written.
OPTIMUM GROUP, INC.
By: /s/ Thomas E. Lachenman
Thomas E. Lachenman, President
By: /s/ Thomas E. Lachenman
Thomas E. Lachenman, Individually
By: /s/ Thomas L. Wessling
Thomas L. Wessling as Trustee of
Electing Small Business Trust
U/A/W Thomas L. Lachenman
dated March 26, 1998 f/b/o Thomas
L. Lachenman
By: /s/ James H. Ferguson
James H. Ferguson, Individually and
as Trustee of Electing Small
Business Trust U/A dated March 26,
1998 f/b/o James H. Ferguson
By: /s/ Michael J. Halloran
Michael J. Halloran, Individually and
as Trustee of Electing Small
Business Trust U/A dated March
26, 1998 f/b/o Michael J. Halloran
By: /s/ Christina M. Heile
Christina M. Heile, Individually
<PAGE>
By: /s/ Thomas L. Wessling
Thomas L. Wessling as Trustee of
Electing Small Business Trust
U/A/W Christina M. Heile dated
March 26, 1998 f/b/o Christina M.
Heile
By: /s/ David E. Huddleston
David E. Huddleston, Individually
and as Trustee of Electing Small
Business Trust U/A dated March
26, 1998 f/b/o David E. Huddleston
By: /s/ Roderick S. Taylor
Roderick S. Taylor, Individually and
as Trustee of Electing Small
Business Trust U/A dated March
26, 1998 f/b/o Roderick S. Taylor
By: /s/ Thomas L. Wessling
Thomas L. Wessling, individually
and as Trustee of Electing Small
Business Trust U/A dated March
26, 1998 f/b/o Thomas L. Wessling
OG ACQUISITION CORP.
By: /s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President,
Chief Financial Officer &
Secretary
INMARK ENTERPRISES, INC.
By: /s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President,
Chief Financial Officer &
Secretary
<PAGE>
INMARK SERVICES, INC.
By: /s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President,
Chief Financial Officer &
Secretary
EXHIBIT 2.3
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of March 31, 1998 (this
"Agreement"), by and among OG HOLDING CORPORATION, formerly known as Optimum
Group, Inc., an Ohio corporation ("Seller"), ELECTING SMALL BUSINESS TRUST F/B/O
JAMES H. FERGUSON, an Ohio small business trust ("Ferguson" or a "Shareholder"),
ELECTING SMALL BUSINESS TRUST F/B/O MICHAEL J. HALLORAN, an Ohio small business
trust ("Halloran" or a "Shareholder"), ELECTING SMALL BUSINESS TRUST F/B/O
CHRISTINA M. HEILE, an Ohio small business trust ("Heile" or a "Shareholder"),
ELECTING SMALL BUSINESS TRUST F/B/O DAVID E. HUDDLESTON, an Ohio small business
trust ("Huddleston" or a "Shareholder"), ELECTING SMALL BUSINESS TRUST F/B/O
THOMAS E. LACHENMAN, an Ohio small business trust ("Lachenman" or a
"Shareholder"), ELECTING SMALL BUSINESS TRUST F/B/O RODERICK S. TAYLOR, an Ohio
small business trust ("Taylor" or a "Shareholder"), ELECTING SMALL BUSINESS
TRUST F/B/O THOMAS L. WESSLING, an Ohio small business trust ("Wessling" or a
"Shareholder"), STEVEN CLEMENTS, an individual residing at 643 Devonshire
Circle, Florence, Kentucky 41402 (a "Shareholder"), KIMBERLY LONGSHORE, an
individual residing at 127 Hunters Hill, Alexandria, Kentucky 41001 (a
"Shareholder"), TERRY STEDING, an individual residing at 3367 Citrus Lane,
Cincinnati, Ohio 45239 (a "Shareholder", and together with the other nine
Shareholders, the "Shareholders"), OPTIMUM GROUP, INC., formerly known as OG
Acquisition Corp., an Ohio corporation ("Purchaser"), INMARK ENTERPRISES, INC.,
a Delaware corporation ("Inmark"), and KRONISH, LIEB, WEINER & HELLMAN LLP, a
New York limited liability partnership (the "Escrow Agent").
R E C I T A L S :
Seller, Ferguson, Halloran, Heile, Huddleston,
Lachenman, Taylor, Wessling, Purchaser and Inmark have entered
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into an Asset Purchase Agreement, dated as of December 8, 1997, as amended by
Amendment No. 1, dated as of March 31, 1998 (as amended, the "Purchase
Agreement"), pursuant to which, among other things, (i) Seller agreed to sell to
Purchaser and Purchaser agreed to purchase from Seller, all of Seller's right,
title and interest in and to the Purchased Assets, and (ii) the parties agreed
to deposit into escrow, upon the closing under the Purchase Agreement, (a)
565,385 shares of Inmark Common Stock registered in the name of Seller and
represented by Certificate Number IE0083 (the "Escrow Stock"), (b) stock powers
relating to the Escrow Stock, in form and substance satisfactory to the Escrow
Agent and duly executed in blank by Seller with signature guaranteed (the "Stock
Powers"), (c) certified resolutions of each of Seller, Purchaser and Inmark
authorizing the Escrow Agent to act as escrow agent in accordance with the terms
and conditions of this Agreement (the "Resolutions"), and (d) the 9%
Subordinated Note Due March 31, 2003 in the principal amount of $2,500,000
payable by Inmark to Seller (the "Escrow Note"), each to be held and delivered
by the Escrow Agent in accordance with this Agreement. Except as otherwise
provided herein, capitalized terms used in this Agreement have the meanings
assigned to them in the Purchase Agreement. This is the Escrow Agreement
referred to in the Purchase Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Appointment and Deposit.
(a) Seller, the Shareholders, Purchaser and Inmark hereby
appoint the Escrow Agent to act as escrow agent, and the Escrow Agent hereby
accepts such appointment, all on the terms and subject to the conditions
contained in this Agreement.
(b) Concurrently with the execution and delivery of this
Agreement, Seller and the Shareholders are delivering to the
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<PAGE>
Escrow Agent (and hereby instruct the Purchaser and Inmark to deliver to the
Escrow Agent) the Escrow Stock (together with the Stock Powers) and the Escrow
Note, and each of Seller, Purchaser and Inmark have delivered to the Escrow
Agent certified Resolutions executed by such party. The Escrow Stock, together
with the Stock Powers and with any and all dividends and other distributions and
payments, payable in cash or in securities or other property, upon the Escrow
Stock and any and all cash proceeds realized upon the sale of any and all Escrow
Stock pursuant to Section 5 hereof (such dividends, distributions, payments and
proceeds collectively, the "Stock Proceeds"), and the Escrow Note, together with
any and all cash amounts paid into escrow pursuant to Section 3 hereof on
account of payments due and payable under the Escrow Note (the "Note Proceeds"),
are hereinafter collectively referred to as the "Escrow Fund".
(c) The Escrow Agent hereby acknowledges receipt of the Escrow
Stock, the Stock Powers, the Resolutions and the Escrow Note and agrees to act
as Escrow Agent and to receive, hold and deliver the Escrow Fund pursuant to the
terms and conditions hereof.
2. Delivery and Release of the Escrow Fund.
(a) If Seller delivers to the Escrow Agent (i) a copy of a
letter issued by the Division of Corporation Finance (the "Division") of the
Securities and Exchange Commission (the "Commission") stating that the Division
will not recommend enforcement action if Seller transfers to its former
employees shares of Inmark Common Stock that have not been registered under the
Securities Act of 1933, as amended (the "No-Action Letter"), (ii) a certificate
executed by an authorized officer of Seller specifying the number of shares of
Escrow Stock, not to exceed the lesser of 65,385 or such smaller number as shall
be permitted by the No-Action Letter, that Seller wishes to transfer to its
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<PAGE>
former employees, the names, addresses and social security numbers of the former
employees to whom Seller wishes to transfer Escrow Stock and the number of
shares of Escrow Stock to be transferred to each such former employee, and (iii)
stock powers relating to each such transfer of Escrow Stock, in form and
substance satisfactory to the Escrow Agent and duly executed by Seller with
signature guaranteed, then the Escrow Agent shall, within 20 days after receipt
of the No-Action Letter and certificate and in accordance with Section 7 hereof,
deliver certificates representing such number of shares of Escrow Stock, not to
exceed the lesser of 65,385 or such smaller number as shall be permitted by the
No-Action Letter, to Seller's former employees as specified in Seller's
certificate; provided, however, that such delivery of certificates shall be made
against receipt of (x) certificates representing the number of shares of Escrow
Stock reduced by the shares transferred pursuant to this Section 2(a) (the
"Remainder Certificates") and (y) stock powers relating to the Remainder
Certificates in form and substance satisfactory to the Escrow Agent and duly
executed in blank by Seller with signature guaranteed. Within 20 days after
delivery of certificates representing such shares of Escrow Stock to Seller's
former employees, the Escrow Agent shall send to each of Purchaser and Inmark a
copy of the No-Action Letter and shall send to each of Purchaser, Inmark and
Seller a notice specifying the parties to whom the certificates were delivered
and the number of shares of Escrow Stock transferred to each such party.
(b) If the Escrow Agent receives a written notice from
Purchaser and/or Inmark (an "Indemnification Notice"): (i) stating that they
and/or it is entitled to indemnification pursuant to the Purchase Agreement and
the reasons therefor (including references to the specific representations,
warranties or covenants which Purchaser and/or Inmark claims have been breached
by Seller and/or any of the Shareholders and stating the nature of the breach),
and (ii) setting forth the amount of any
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<PAGE>
Damages for which Purchaser and/or Inmark asserts a right to indemnification
under the Purchase Agreement (the "Indemnification Amount") and the method by
which the Indemnification Amount was calculated, then the Escrow Agent shall
promptly send a copy of the Indemnification Notice to Seller by overnight
courier service. If within thirty days after the Escrow Agent sends a copy of
the Indemnification Notice to Seller and the Shareholders, the Escrow Agent does
not actually receive a written notice from Seller or any Shareholder challenging
Purchaser's and/or Inmark's entitlement to the Indemnification Amount (a
"Counter Notice"), the Escrow Agent shall deliver to Purchaser and/or Inmark
such portion of the Escrow Fund as equals the Indemnification Amount.
(c) The amount delivered pursuant to Section 2(b) shall
consist of Stock Proceeds, Note Proceeds and Escrow Stock in the following
combinations and in the following order of priority: (i) first, such cash
portion of the Stock Proceeds as shall equal the Indemnification Amount; (ii)
second, if the Stock Proceeds delivered pursuant to clause (i) are less than the
Indemnification Amount, such portion of the Note Proceeds, which, together with
the Stock Proceeds delivered pursuant to clause (i), shall equal the
Indemnification Amount; (iii) third, if the total value of the Stock Proceeds
and the Note Proceeds delivered pursuant to clauses (i) and (ii) is less than
the Indemnification Amount, such number of shares of Escrow Stock, the value of
which, determined in accordance with the provisions hereof and added to the
Stock Proceeds and the Note Proceeds delivered pursuant to clauses (i) and (ii),
most closely equals the Indemnification Amount; and (iv) fourth, if the total
value of the Stock Proceeds, Note Proceeds and Escrow Stock delivered pursuant
to clauses (i), (ii) and (iii) is less than the Indemnification Amount, such
portion of the non-cash Stock Proceeds, the value of which, determined in
accordance with the provisions hereof and added to the Stock Proceeds, Note
Proceeds
5
<PAGE>
and Escrow Stock delivered pursuant to clauses (i), (ii) and (iii), most closely
equals the Indemnification Amount. If the total value of the Stock Proceeds,
Note Proceeds and Escrow Stock delivered pursuant to clauses (i), (ii), (iii)
and (iv) is less than the Indemnification Amount (such difference in value, the
"Indemnification Balance"), then, in addition to delivering the Stock Proceeds,
Note Proceeds and Escrow Stock, and provided that Inmark shall simultaneously
deliver to the Escrow Agent a substitute subordinated note payable to Seller, in
an original principal amount equal to $2,500,000 less the sum of the
Indemnification Balance and any principal payments previously made thereon and
in the same form as the Escrow Note (with the exception of the original
principal amount), the Escrow Agent shall deliver to Inmark the Escrow Note
marked "canceled". Upon delivery, such substitute subordinated note shall be the
"Escrow Note" for purposes of this Agreement.
(d) Anything herein to the contrary notwithstanding, the
Escrow Stock and the Stock Proceeds shall not be used to satisfy claims in
excess of (i) $3,675,003 less (ii) the sum of (A) $6.50 multiplied by the number
of shares delivered from escrow pursuant to Section 2(a) hereof and (B) the
value of the Escrow Stock and Stock Proceeds previously released from escrow in
satisfaction of Purchaser's and Inmark's claims for indemnification.
(e) In the event the Escrow Agent receives a Counter Notice,
the Escrow Agent shall continue to hold the Indemnification Amount or such
portion thereof that Seller has challenged in the Counter Notice (but in either
case only to the extent of the Escrow Fund then held by it) until the Escrow
Agent is otherwise directed by either (i) joint written instructions from
Seller, on the one hand, and Purchaser and/or Inmark, on the other hand, or (ii)
a final, non-appealable order of a court of competent jurisdiction which is
binding on Seller, Purchaser
6
<PAGE>
and/or Inmark and the Escrow Agent; provided, however, that the Escrow Agent
shall have the right at any time (whether before or after receipt of an
Indemnification Notice or a Counter Notice) to deposit the Indemnification
Amount or all of the Escrow Fund with any federal or state court of competent
jurisdiction. The Escrow Agent shall give written notice of any such deposit to
Seller, Purchaser and Inmark. Upon such deposit or other delivery in accordance
with the provisions of this Section 2(e), the Escrow Agent shall be relieved and
discharged of all further obligations with respect to the Indemnification Amount
or the Escrow Fund so deposited or delivered.
(f) In the event that (i) any Escrow Stock or Stock Proceeds
shall remain held by the Escrow Agent two years after the Closing Date, or (ii)
Purchaser and Inmark, collectively, shall have received the maximum amount with
respect thereto under Section 2(d) hereof, the Escrow Agent shall deliver to
Seller the portion, if any, of the Escrow Stock and Stock Proceeds then held by
the Escrow Agent to the extent in excess of the aggregate of claims under all
Indemnification Notices theretofore actually received by the Escrow Agent and
with respect to which such portion of the Escrow Fund in the amount of such
claims has not been released on or prior to such date or such claims have not
been otherwise fully satisfied or settled as reasonably evidenced to the Escrow
Agent by a writing signed by (i) Seller or all of the Shareholders, (ii)
Purchaser and (iii) Inmark. In the event that the Escrow Note or Note Proceeds
shall remain held by the Escrow Agent five years after the Closing Date, the
Escrow Agent shall deliver to Seller the portion, if any, of the Escrow Note and
Note Proceeds then held by the Escrow Agent to the extent in excess of the
aggregate of claims under all Indemnification Notices theretofore actually
received by the Escrow Agent and with respect to which such portion of the
Escrow Fund in the amount of such claims has not been released on or prior to
such date or such claims have not been otherwise fully satisfied or
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<PAGE>
settled as reasonably evidenced to the Escrow Agent by a writing signed by (x)
Seller or all of the Shareholders, (y) Purchaser and (z) Inmark.
(g) Upon joint written instructions from Seller, Purchaser and
Inmark to the Escrow Agent, the Escrow Agent shall deliver the Escrow Fund in
accordance with such instructions.
(h) In the event that the Escrow Agent shall deliver any
Escrow Stock to Purchaser and/or Inmark pursuant to Section 2(b) hereof or to
Seller pursuant to Section 2(f) hereof, the Escrow Stock delivered to Purchaser
and/or Inmark or the Escrow Stock retained by the Escrow Agent, as the case may
be, shall be valued at an amount equal to the average of the high and low trade
prices as reported by NASDAQ for shares of Inmark Common Stock for the three
trading days prior to the date of the delivery of such Escrow Stock to Purchaser
and/or Inmark or Seller, as the case may be.
3. Payments into Escrow of Amounts Due Under the Escrow Note.
Prior to Purchaser's or Inmark's delivery of an Indemnification Notice to the
Escrow Agent, Inmark shall pay all amounts due and payable under the Escrow Note
to Seller in accordance with and subject to the terms and conditions of the
Escrow Note but still subject to Inmark's right to set-off against such amounts
as set forth in the Escrow Note and in Section 9.5 of the Asset Purchase
Agreement which right shall be paramount to and unaffected by any of the
provisions of this Agreement. After delivery of an Indemnification Notice to the
Escrow Agent, subject to Inmark's right of set-off set forth in the Escrow Note
and in Section 9.5 of the Asset Purchase Agreement as aforesaid, Inmark shall
pay all amounts due and payable under the Escrow Note to the Escrow Agent, who
shall maintain such amounts as part of the Escrow Fund in accordance with the
terms and conditions of this Agreement.
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4. Dissolution of Seller.
(a) In the event that the Shareholders shall adopt a
resolution of dissolution for Seller in accordance with Ohio General Corporation
Law ss. 1701.86 (the "Dissolution Resolution"), Seller shall have the right to
transfer its rights under this Agreement and to the Escrow Fund (including,
without limitation, the Escrow Stock and the Escrow Note) to a Liquidating
Trustee, subject to the escrow provisions of this Agreement. In such event,
Seller shall deliver to the Escrow Agent: (i) a certificate executed by an
authorized officer of Seller stating that the Shareholders have adopted the
Dissolution Resolution in accordance with Ohio General Corporation Law ss.
1701.86 and specifying the date on which the Dissolution Resolution was adopted;
(ii) a copy of the Dissolution Resolution, certified as true and correct by an
authorized officer of Seller; (iii) a notice specifying (A) the name, address
and taxpayer identification number of the Liquidating Trustee, (B) stock powers
relating to such transfer of the Escrow Stock to the Liquidating Trustee and an
endorsement, without representation or recourse of the Escrow Note to the
Liquidating Trustee, in each case in form and substance satisfactory to the
Escrow Agent and duly executed by Seller with signature guaranteed.
(b) Within 20 days after receipt of the items listed in
Section 4(a) hereof, the Escrow Agent shall cause to be issued to the
Liquidating Trustee (as specified in Seller's notice) by delivering the same
into escrow hereunder (i) a certificate representing the shares of Escrow Stock
in the name of the Liquidating Trustee and (ii) a substitute subordinated note
payable to the Liquidating Trustee, in the same form as the Escrow Note;
provided, however, that issuance of a stock certificate to the Liquidating
Trustee shall be made against receipt of stock powers relating to such new
certificate in form and substance satisfactory to the Escrow Agent and duly
executed
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<PAGE>
in blank by the Liquidating Trustee, with signature guaranteed.
5. Right to Sell Escrow Stock and Substitute Stock
Proceeds.
(a) In the event that any Shareholder is permitted to transfer
his or her shares of Escrow Stock pursuant to Section 11.3 of the Purchase
Agreement, such Shareholder shall be permitted to sell such shares of Escrow
Stock hereunder provided that such shares are sold for no less than Fair Market
Value (as hereinafter defined), such Shareholder shall pay any fees incurred and
any taxes payable in connection with such sale from sources other than the
proceeds of such sale, and the entire proceeds of such sale are paid to the
Escrow Agent in substitution for such shares.
(b) In the event of any sale made in accordance with Section
5(a) hereof, certified as having been so made by the Liquidating Trustee, the
Escrow Agent shall deliver certificates evidencing such shares in accordance
with Section 7 hereof against receipt of certificates representing the number of
shares of Escrow Stock reduced by the shares so sold accompanied by stock powers
relating to such certificates in form and substance satisfactory to the Escrow
Agent and duly executed in blank by Seller with signature guaranteed. Upon
receipt of the proceeds of such sale, the Escrow Agent shall maintain such
proceeds as part of the Escrow Fund.
(c) For purposes of this Section 5, the term "Fair Market
Value" shall mean an amount equal to 95% of the average of the high and low
trade prices as reported by NASDAQ for shares of Inmark Common Stock for the
three trading days prior to the date of sale pursuant to this Section 5.
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6. Voting Rights; Dividends.
(a) Whichever of Seller or the Shareholders shall be the
registered owner of the Escrow Stock may (i) exercise any and all voting and
other consensual rights pertaining to any of the Escrow Stock and (ii) act, or
refrain from acting, in any manner which such registered owner may deem
necessary or advisable with respect to the Escrow Stock until such Escrow Stock
is transferred to Purchaser, Inmark or any other party; provided, however, that
in no event shall clause (i) or (ii) above authorize or permit Seller or the
Shareholders to act, or fail to act, in any manner which would violate or be
inconsistent with any of the terms of this Agreement or the Purchase Agreement.
(b) All dividends and distributions on the Escrow Stock,
payable in cash, securities or other property (including, without limitation,
pursuant to any stock split, reverse stock split, stock combination or
reclassification of Inmark Common Stock or any merger, consolidation or
combination of Inmark with any other entity or entities), shall become part of
the Escrow Fund and shall be held in escrow in accordance with the terms of this
Agreement; provided, however, that whichever of Seller and the Shareholders
shall be the registered owner of the Escrow Stock shall include such dividends
and distributions in its taxable income and shall pay all taxes arising
therefrom. Seller and the Shareholders agree that if they receive any such
dividends or distributions, they shall hold such dividends or distributions in
trust for Seller, Purchaser and Inmark under this Agreement, and shall forthwith
deliver the same to the Escrow Agent.
7. Transfer of Shares. Whenever the Escrow Agent shall be
required to (a) deliver shares of Escrow Stock from escrow to any party hereto,
to any party in connection with any transfer described in Section 2(a) hereof,
or to any party in
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connection with any sale permitted pursuant to Section 5 hereof, or (b) transfer
shares of Escrow Stock to the Shareholders upon dissolution but still subject to
escrow, the Escrow Agent shall deliver appropriate stock certificate(s),
together with the relevant Stock Powers and Resolutions, to Inmark's transfer
agent with instructions (i) to cancel such certificate(s) and issue new
certificate(s) evidencing the appropriate number of shares in the name of the
party to whom the shares of Escrow Stock shall be required to be delivered
(which may also include the Escrow Agent as specified in Section 10(c) hereof)
and (ii) in the event the shares of Escrow Stock evidenced by such certificate
shall no longer be held in escrow, to issue the new certificates without the
legend required by Section 8(a) hereof. Each of Seller, the Shareholders,
Purchaser and Inmark hereby irrevocably appoints the Escrow Agent as its
attorney-in-fact, with full power and authority to execute and deliver in such
party's name, any and all documentation reasonably necessary to transfer shares
of Escrow Stock of record. In addition, Inmark shall take all steps necessary to
cause its transfer agent to follow the directions of the Escrow Agent.
8. Legend on Escrow Stock Certificates and the Escrow
Note.
(a) All certificates evidencing shares of Escrow Stock shall
bear the following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE OFFERED,
SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISTRIBUTED
OR DISPOSED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THAT
CERTAIN ESCROW AGREEMENT, DATED AS OF MARCH 31, 1998, BY AND
AMONG OG HOLDING CORPORATION (FORMERLY KNOWN AS OPTIMUM GROUP,
INC.), THE SHAREHOLDERS NAMED THEREIN, OPTIMUM GROUP, INC.
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(FORMERLY KNOWN AS OG ACQUISITION CORP.), INMARK
ENTERPRISES, INC., AND KRONISH, LIEB, WEINER & HELLMAN
LLP.
(b) The Escrow Note shall bear the following legend:
THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED, EXCHANGED,
TRANSFERRED OR OTHERWISE DISTRIBUTED OR DISPOSED EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF THAT CERTAIN ESCROW
AGREEMENT, DATED AS OF MARCH 31, 1998, BY AND AMONG OG HOLDING
CORPORATION (FORMERLY KNOWN AS OPTIMUM GROUP, INC.), THE
SHAREHOLDERS NAMED THEREIN, OPTIMUM GROUP, INC. (FORMERLY
KNOWN AS OG ACQUISITION CORP.), INMARK ENTERPRISES, INC., AND
KRONISH, LIEB, WEINER & HELLMAN LLP.
(c) Notwithstanding the foregoing, the Escrow Agent shall not
be responsible for placing legends on certificates delivered to the Escrow Agent
or the Escrow Note or for changing the legends on the certificates delivered to
the Escrow Agent or the Escrow Note.
9. Reliance by Escrow Agent. The Escrow Agent may rely, and
shall be protected in acting or refraining from acting, upon any written notice,
instruction, consent or request furnished to it hereunder and believed by it to
be genuine and to have been signed or presented by the proper party or parties,
and the Escrow Agent may assume that the person signing the same holds the
office indicated and is duly authorized to act on behalf of the party for whom
he or she is acting. In performing its obligations hereunder, the Escrow Agent
may conclusively presume that any officer of any party hereto (as specified in
the incumbency certificate of such party delivered pursuant to Article 7 of the
Asset Purchase Agreement or otherwise) has full
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<PAGE>
power and authority to instruct the Escrow Agent on behalf of that party, unless
written notice to the contrary is delivered to the Escrow Agent prior to its
reliance on such presumption. The Escrow Agent may rely upon any order,
judgment, certification, demand or other writing delivered to it without being
required to determine the propriety or validity of the service thereof or the
jurisdiction of any court. In the event of any dispute or doubt as to the
genuineness of any document or signature, the Escrow Agent may, at its election,
continue to hold the Escrow Fund until otherwise directed by either (i) joint
written instructions from Seller, Purchaser and Inmark or (ii) a final,
non-appealable order of a court of competent jurisdiction which is binding on
Seller, Purchaser and/or Inmark and the Escrow Agent.
10. Escrow Agent's Role; Indemnification; Successor
Escrow Agent.
(a) The parties acknowledge that the Escrow Agent
is acting solely as a stakeholder at their request and convenience and that in
such capacity it shall not be deemed to be an agent of either of the parties.
The Escrow Agent shall have no duties or obligations hereunder except as
expressly set forth herein, shall be responsible only for the performance of
such duties and obligations, shall not be required to take any action otherwise
than in accordance with the terms hereof and shall not be in any manner liable
or responsible for any loss or damage arising by reason of any act or omission
to act by it hereunder or in connection with any of the transactions
contemplated hereby, including but not limited to any loss that may occur by
reason of forgery, any error in judgment or any mistake of fact or law or for
any other reason, except for its gross negligence or willful misconduct.
14
<PAGE>
(b) In the event of any controversy or dispute
arising hereunder or with respect to the construction hereof or any action to be
taken by the Escrow Agent hereunder, the Escrow Agent shall incur no liability
for any action or omission to act by it undertaken in good faith.
(c) Seller and the Shareholders, on the one hand,
and Purchaser and Inmark, on the other hand, shall jointly and severally
indemnify and hold the Escrow Agent harmless from and against all judgments,
costs, claims, losses, liability and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, incurred in connection with the
performance of the Escrow Agent's duties hereunder or resulting from any dispute
or litigation arising out of or concerning the Escrow Agent's services
hereunder, except for those resulting from the Escrow Agent's gross negligence
or willful misconduct. Without limiting the Escrow Agent's other rights and
remedies against any of the parties hereto, the Escrow Agent shall be entitled
to satisfy all or part of such indemnity obligations of the parties by releasing
to itself all or a portion of the Escrow Fund (and shall promptly notify the
parties in such event). This indemnity includes, without limitation,
disbursements and reasonable attorneys' fees either paid to retain attorneys or
representing the fair value of legal services rendered to the Escrow Agent by
the Escrow Agent itself.
(d) The Escrow Agent may act or refrain from
action in respect of any matter referred to herein in full reliance upon and
with the advice of counsel which may be selected by the Escrow Agent (including
any member of the Escrow Agent's firm) and shall be fully protected in so acting
or refraining from action upon the advice of such counsel.
15
<PAGE>
(e) The Escrow Agent may resign and be discharged
from its duties or obligations hereunder by giving notice in writing of such
resignation specifying a date upon which such resignation shall take effect. The
Escrow Agent may be removed and discharged from its duties or obligations
hereunder by an agreement (i) which is in writing and signed by Inmark and
Purchaser, (ii) which specifies a date upon which such removal shall take
effect, and (iii) a copy of which is delivered to the Escrow Agent. If the
Escrow Agent shall resign or be removed, a successor escrow agent (the
"Successor Escrow Agent"), which shall be a bank or trust company selected by
the Escrow Agent, Purchaser, Inmark or a court of competent jurisdiction and
having its principal executive offices in New York and assets in excess of $1
billion or which shall be appointed by Purchaser and Inmark (subject to the
approval of Seller, not to be unreasonably withheld or delayed) by written
instrument executed by Purchaser, Inmark and Seller and delivered to the Escrow
Agent and to the Successor Escrow Agent. Upon delivery of such notice, the
resignation or removal of the Escrow Agent shall become effective and the
Successor Escrow Agent, without any further act, deed or conveyance, shall
become vested with all right, title and interest to all cash and property held
hereunder of the Escrow Agent. The Escrow Agent shall, on the written request of
Purchaser, Inmark, Seller or the Successor Escrow Agent, deliver the Escrow Fund
to the Successor Escrow Agent and shall execute and deliver to the Successor
Escrow Agent any instrument reasonably satisfactory to Escrow Agent transferring
the rights of the Escrow Agent hereunder to the Successor Escrow Agent. If no
Successor Escrow Agent shall have been appointed within 20 days of a notice of
resignation by the Escrow Agent, the Escrow Agent's sole responsibility shall
thereafter be to hold the Escrow Fund until the earlier of receipt of
designation of the Successor Escrow Agent, a joint written instruction by
Purchaser,
16
<PAGE>
Inmark and Seller and termination of this Agreement in accordance with its
terms.
11. Conflicts. The parties acknowledge and consent that the
Escrow Agent has acted as counsel to Purchaser and Inmark in connection with
this Agreement, the Purchase Agreement and other matters, and that in the event
of any dispute with respect to this Agreement, the Escrow Agent shall be
entitled to continue to act as counsel to Purchaser and Inmark and their
subsidiaries and affiliates including, without limitation, with respect to any
dispute arising under or related to the Purchase Agreement or this Agreement or
any of the transactions contemplated thereby or hereby or under any of the
instruments or agreements executed or delivered in connection therewith or
herewith, regardless of any conflicts which this may present with respect to its
acting as the Escrow Agent.
12. Investment of the Escrow Fund. Until such time as all of
the Escrow Fund shall have been delivered by the Escrow Agent pursuant to this
Agreement, the Escrow Agent shall from time to time invest the cash portion of
the Escrow Fund, if any, held by the Escrow Agent in short-term U.S. Government
securities, securities issued or guaranteed by the U.S. Government, repurchase
agreements secured by such securities or certificates of deposit or time or
demand deposits or money market accounts in commercial banks having a net worth
of $50,000,000 or more (unless all amounts held in such banks are insured, in
which case a bank with a lower net worth may be used). No investment of cash
held in the Escrow Fund shall have a maturity date of greater than thirty days
without the prior written consent of Seller, Purchaser and Inmark. The Escrow
Agent shall present for redemption any obligation so purchased or sell any such
obligation, in every case upon the written direction of Purchaser and Inmark or
as may be necessary in order
17
<PAGE>
to fulfill the provisions of this Agreement. Any interest or other earnings on
Stock Proceeds shall be deemed a part of the Escrow Stock and any interest or
other earnings on Note Proceeds shall be deemed a part of the Escrow Note.
Seller shall include such earnings in its taxable income and shall pay all taxes
arising therefrom. Seller represents and warrants to the Escrow Agent that its
Internal Revenue Service Employer Identification Number is 31-0961840. The
Escrow Agent shall not have any liability to any party for any loss suffered as
the result of any investment made in accordance with this Section 12.
13. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
13):
(a) if to Seller:
OG Holding Corporation,
f/k/a Optimum Group, Inc.
9745 Mangham Drive
Cincinnati, Ohio 45215-2350
Telecopy: (513) 577-7081
Attention: Thomas E. Lachenman
18
<PAGE>
with a copy to:
Wood & Lamping
2500 Cincinnati Commerce Center
600 Vine Street
Cincinnati, Ohio 45202
Telecopy: (513) 651-6087
Attention: James B. Harrison, Esq.
(b) if to any Shareholder, to the attention of such
Shareholder:
c/o Optimum Group, Inc.
9745 Mangham Drive
Cincinnati, Ohio 45215-2350
Telecopy: (513) 577-7081
with a copy to:
Wood & Lamping
2500 Cincinnati Commerce Center
600 Vine Street
Cincinnati, Ohio 45202
Telecopy: (513) 651-6087
Attention: James B. Harrison, Esq.
19
<PAGE>
(c) if to Purchaser:
Optimum Group Inc.,
f/k/a OG Acquisition Corp.
c/o Inmark Enterprises, Inc.
One Plaza Road
Greenvale, New York 11548
Telecopy: (516) 625-3573
Attention: Donald A. Bernard
with a copy to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
Telecopy: (212) 479-6275
Attention: Joseph S. Hellman, Esq.
(d) if to Inmark:
Inmark Enterprises, Inc.
One Plaza Road
Greenvale, New York 11548
Telecopy: (516) 625-3573
Attention: John P. Benfield
with a copy to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
Telecopy: (212) 479-6275
Attention: Joseph S. Hellman, Esq.
20
<PAGE>
(e) if to the Escrow Agent, to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
Telecopier: (212) 479-6275
Attention: Joseph S. Hellman, Esq.
14. Termination. Upon the release from escrow of all
of the Escrow Fund, all duties of the Escrow Agent hereunder
shall be terminated.
15. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
16. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
Seller, the Shareholders, Purchaser, Inmark and Escrow Agent with respect to the
subject matter hereof except for the Purchase Agreement, which shall continue in
full force and effect in accordance with its terms.
17. No Third Party Beneficiaries. All provisions of this
Agreement shall be binding upon, and inure to the benefit of and be enforceable
by and against the respective heirs, executors, administrators, personal
representatives, successors and assigns of the parties. Nothing herein, express
or implied, is intended to or shall confer upon any other person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
21
<PAGE>
18. Amendment or Termination. No agreement shall be effective
to change, modify, waive, release, amend, terminate, discharge or effect an
abandonment of this Agreement, in whole or in part, unless such agreement is in
writing, refers expressly to this Agreement and is signed by all of the parties
hereto.
19. Governing Law. The validity and construction of this
Agreement shall be governed by the internal laws (and not the principles of
conflict of laws) of the state of New York.
20. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, as of the date first written above, each
of the Shareholders has executed this Agreement and each of Seller, Purchaser
and the Escrow Agent has caused this Agreement to be executed by its respective
officer or partner thereunto duly authorized.
OG HOLDING CORPORATION,
formerly known as Optimum
Group, Inc.
By: /s/ Thomas E. Lachenman
Thomas E. Lachenman
President
Consented to: ELECTING SMALL BUSINESS TRUST F/B/O
JAMES H. FERGUSON
/s/ James H. Ferguson By: /s/ James H. Ferguson
James H. Ferguson James H. Ferguson, Trustee
22
<PAGE>
Consented to: ELECTING SMALL BUSINESS TRUST F/B/O
MICHAEL J. HALLORAN
/s/ Michael J. Halloran By: /s/ Michael J. Halloran
Michael J. Halloran Michael J. Halloran, Trustee
Consented to: ELECTING SMALL BUSINESS TRUST F/B/O
CHRISTINA M. HEILE
/s/ Christina M. Heile By: /s/ Thomas L. Wessling
Christina M. Heile Thomas L. Wessling, Trustee
Consented to: ELECTING SMALL BUSINESS TRUST F/B/O
DAVID E. HUDDLESTON
/s/ David M. Huddleston By: /s/ David E. Huddleston
David M. Huddleston David E. Huddleston, Trustee
Consented to: ELECTING SMALL BUSINESS TRUST F/B/O
THOMAS E. LACHENMAN
/s/ Thomas E. Lachenman By: /s/ Thomas L. Wessling
Thomas E. Lachenman Thomas L. Wessling, Trustee
23
<PAGE>
Consented to: ELECTING SMALL BUSINESS TRUST F/B/O
RODERICK S. TAYLOR
/s/ Roderick S. Taylor By: /s/ Roderick S. Taylor
Roderick S. Taylor Roderick S. Taylor, Trustee
Consented to: ELECTING SMALL BUSINESS TRUST F/B/O
THOMAS L. WESSLING
/s/ Thomas L. Wessling By: /s/ Thomas L. Wessling
Thomas L. Wessling Thomas L. Wessling, Trustee
/s/ Steven Clements
Steven Clements
/s/ Kimberly Longshore
Kimberly Longshore
/s/ Terry Steding
Terry Steding
OPTIMUM GROUP, INC.,
formerly known as OG
Acquisition Corp.
By: /s/ John P. Benfield
Name: John P. Benfield
Title: Chief Executive
Officer and President
24
<PAGE>
INMARK ENTERPRISES, INC.
By: /s/ John P. Benfield
Name: John P. Benfield
Title: Chief Executive
Officer and President
KRONISH, LIEB, WEINER & HELLMAN LLP
By: /s/ Joseph S. Hellman
Name: Joseph S. Hellman
Title: Partner
25
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On this 26th day of March, 1998, before me personally came THOMAS E.
LACHENMAN, to me known, who, being by me duly sworn, did depose and say that he
resides at 7788 White Road, Rising Sun, Indiana 47040, that he is the President
of OG HOLDING CORPORATION, formerly known as Optimum Group, Inc., an Ohio
corporation, the corporation described in, and which executed, the above
instrument, and that he signed his name thereto by authority of the Board of
Directors of said corporation.
/s/ Douglas L. Westendorf
Notary Public
26
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 27th day of March, 1998, before me personally came
JAMES H. FERGUSON, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his capacity as
Trustee, and that by his signature on the instrument, the entity upon behalf of
which the person acted, executed the instrument.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 27th day of March, 1998, before me personally came
JAMES H. FERGUSON, to me known to be the individual described in, and who
executed the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
27
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
MICHAEL J. HALLORAN, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his capacity as
Trustee, and that by his signature on the instrument, the entity upon behalf of
which the person acted, executed the instrument.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
MICHAEL J. HALLORAN, to me known to be the individual described in, and who
executed the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
28
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
THOMAS L. WESSLING, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his capacity as
Trustee, and that by his signature on the instrument, the entity upon behalf of
which the person acted, executed the instrument.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
CHRISTINA M. HEILE, to me known to be the individual described in, and who
executed the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
29
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
DAVID E. HUDDLESTON, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his capacity as
Trustee, and that by his signature on the instrument, the entity upon behalf of
which the person acted, executed the instrument.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
DAVID M. HUDDLESTON, to me known to be the individual described in, and who
executed the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
30
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
THOMAS L. WESSLING, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his capacity as
Trustee, and that by his signature on the instrument, the entity upon behalf of
which the person acted, executed the instrument.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March 1998, before me personally came
THOMAS E. LACHENMAN, to me known to be the individual described in, and who
executed the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
31
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
RODERICK S. TAYLOR, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his capacity as
Trustee, and that by his signature on the instrument, the entity upon behalf of
which the person acted, executed the instrument.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
RODERICK S. TAYLOR, to me known to be the individual described in, and who
executed the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
32
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
THOMAS L. WESSLING, personally known to me or proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his capacity as
Trustee, and that by his signature on the instrument, the entity upon behalf of
which the person acted, executed the instrument.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
THOMAS L. WESSLING, to me known to be the individual described in, and who
executed the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
33
<PAGE>
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
STEVEN CLEMENTS, to me known to be the individual described in, and who executed
the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
KIMBERLY LONGSHORE, to me known to be the individual described in, and who
executed the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
STATE OF OHIO )
: ss.:
COUNTY OF HAMILTON )
On the 26th day of March, 1998, before me personally came
TERRY STEDING, to me known to be the individual described in, and who executed
the above instrument, and acknowledged that he executed the same.
/s/ Douglas L. Westendorf
Notary Public
34
<PAGE>
STATE OF NEW JERSEY )
: ss.:
COUNTY OF ESSEX )
On this 30th day of March, 1998, before me personally came John P.
Benfield, to me known, who, being by me duly sworn, did depose and say that he
resides at 63 Murray Avenue, Port Washington, New York 11050, that he is the
Chief Executive Officer and President of OPTIMUM GROUP, INC., formerly known as
OG Acquisition Corp., an Ohio corporation, the corporation described in, and
which executed, the above instrument, and that he signed his name thereto by
authority of the Board of Directors of said corporation.
/s/ Barbara Slota
Notary Public
STATE OF NEW JERSEY )
: ss.:
COUNTY OF ESSEX )
On this 30th day of March, 1998, before me personally came John P.
Benfield, to me known, who, being by me duly sworn, did depose and say that he
resides at 63 Murray Avenue, Port Washington, New York 11050, that he is a Chief
Executive Officer and President of INMARK ENTERPRISES, INC., a Delaware
corporation, the corporation described in, and which executed, the above
instrument, and that he signed his name thereto by authority of the Board of
Directors of said corporation.
/s/ Barbara Slota
Notary Public
35
EXHIBIT 99.1
PRESS RELEASE
Inmark Enterprises, Inc. o One Plaza Road o Greenvale, NY 11548
516-625-3500 o Fax: 516-625-3575
For Immediate Release
Date: March 31, 1998
Contact: Donald A. Bernard
Phone: 516-625-3500
Fax: 516-625-3575
INMARK ENTERPRISES, INC. COMPLETES THE ACQUISITION OF OPTIMUM GROUP, INC.
March 31, 1998 (New York) -- Inmark Enterprises, Inc. (Nasdaq-IMKE) announced
today that it has completed the acquisition of Cincinnati, Ohio based Optimum
Group, Inc. for approximately $15 million in a combination consisting of $8.7
million in cash, $2.5 million in notes and 565,385 shares of common stock in
addition to the assumption of approximately $2 million liabilities and debt.
Simultaneously with the closing of the Optimum acquisition, Inmark entered into
a loan agreement with a bank pursuant to which the bank has provided Inmark with
a $5 million five year term loan and a $5 million revolving loan credit
facility.
Optimum Group, Inc., for its year ended December 31, 1997, had net sales of
approximately $10.5 million and pre-tax earnings of approximately $1.5 million.
Thomas E. Lachenman, President and Chief Executive Officer of Optimum will join
the Inmark Board of Directors. Inmark projects that the operations of Optimum
will add to Inmark's income and be accretive to earnings per share.
Optimum Group, Inc., founded in 1973 as a graphic design company, has emerged as
a successful marketing and visual communications business, having been ranked in
the top fifteen for the last three years by PROMO Magazine in their ranking of
the top 100 promotion companies in the United States. Optimum provides
marketing, sales and promotion, creative, graphic and new interactive media
services to clients in varied industries. Optimum assists its clients in
identifying the best and most complete solution for their business communication
needs. It applies leading edge visual communications technology, and serves as a
one-stop shop resource for strategic planning, creative development, production
and implementation of communication strategies.
John P. Benfield, President and Chief Executive Officer of Inmark Enterprises,
Inc. reaffirmed Inmark's strategy to continue to acquire profitable value-added
companies with services complementary to those of Inmark which will provide
clients access to fully integrated marketing and sales promotion services.
Inmark Enterprises, Inc. is a marketing and sales promotion company which
designs, develops and implements sales, marketing and promotional programs
primarily for consumer product client companies. The Company assists its clients
in realizing product recognition and sales by providing promotional programs at
both national and local levels, which are created to address identified trade,
sales and consumer needs.
<PAGE>
Inmark Enterprises, Inc.
Press Release
March 31, 1998
Page 2
Any statements contained in this news release regarding expected financial
results and other planned events are forward-looking statements, subject to
uncertainties and risks, including, but not limited to, the demand for and
implementation of Inmark's and Optimum's services, and the ability of the
Company to successfully implement its strategies, each of which may be impacted,
among other things, by economic and or competitive conditions.
Inmark Enterprises, Inc.'s common stock is currently traded over-the-counter on
the Nasdaq SmallCap Market under the IMKE trading symbol.
EXHIBIT 99.2
LOAN AGREEMENT
dated as of March 31, 1998
by and among
INMARK ENTERPRISES, INC.
INMARK SERVICES, INC.
OPTIMUM GROUP, INC.
(formerly, OG Acquisition Corp.)
and
PNC BANK, NATIONAL ASSOCIATION
<PAGE>
This Agreement is made as of the 31st day of March, 1998 by and among
PNC Bank, National Association ("Lender"), Inmark Enterprises, Inc., a Delaware
corporation ("Parent"), Inmark Services, Inc., a Delaware corporation
("Services"), and Optimum Group, Inc., an Ohio corporation (formerly, OG
Acquisition Corp.) ("New OGI" and together with Services, the "Borrower").
Parent, Services, and New OGI are collectively referred to herein as the "Inmark
Group." Any capitalized term used herein and not otherwise defined herein shall
have the meaning ascribed to such term in Exhibit A to this Agreement.
PRELIMINARY STATEMENT:
To provide a source of funds for the purposes described in section
1.10, the Inmark Group has requested that Lender enter into this Agreement,
agree to make the Revolving Line of Credit available to Borrower and to make the
Term Loan to Borrower. Lender has agreed to make the Revolving Line of Credit
available to Borrower and to make the Term Loan to Borrower subject to and upon
the terms and conditions set forth herein.
AGREEMENT:
1. The Loans.
1.1 Revolving Loans
(a) Amount of Revolving Loans. So long as no Event of
Default has occurred and is continuing, subject to the terms and conditions
hereof, Lender agrees to make available to Borrower a line of credit pursuant to
which Lender will make loans to Borrower on a revolving loan basis (the
"Revolving Loans") from time to time on any Banking Day during the period from
the Closing Date until the Final Maturity Date in an aggregate principal amount
at any one time outstanding not to exceed $5,000,000 (the "Revolving Line of
Credit"). Each borrowing under the Revolving Line of Credit shall be in a
minimum amount of $250,000 or a whole multiple of $50,000 in excess thereof.
During the term of this Agreement, Borrower may use the Revolving Line of Credit
by requesting Lender to make Revolving Loans, repaying Revolving Loans and
reborrowing, all in accordance with and subject to the terms and conditions
hereof. Borrower shall repay to Lender on the Final Maturity Date the aggregate
outstanding principal amount of the Revolving Loans then outstanding.
(b) Revolving Note. The Revolving Loans shall be evidenced
by a promissory note (as amended, supplemented, restated and otherwise modified
from time to time, the "Revolving Note") in the form of Exhibit B. Lender is
hereby authorized to record the amount of each Revolving Loan made to Borrower
and the date and amount of each payment of principal thereof on the schedule
annexed to and constituting a part of the Revolving Note, and any such
recordation shall constitute conclusive evidence of the accuracy of the
information so recorded in the absence of manifest error; provided that the
failure of Lender to make any such recordation shall not affect any obligation
of Borrower hereunder, under the Revolving Note or under any other Loan
Document.
1
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(c) Procedure for Revolving Loan Borrowings. Borrower may
request to borrow under the Revolving Line of Credit on any Banking Day prior to
the Final Maturity Date by giving Lender a notice (a "Notice of Borrowing")
prior to 11:00 a.m. (eastern standard time) no later than one Banking Day prior
to the proposed borrowing date, in the case of a Base Rate Loan, and no later
than three Banking Days prior to the proposed borrowing date, in the case of a
Eurodollar Rate Loan; provided that a Revolving Loan requested to be made (or
the rate of which is reset) within three months of the Final Maturity Date may
only be made (or reset) as a Base Rate Loan. Each Notice of Borrowing shall be
in substantially in the form of Exhibit C, specifying therein (a) the requested
aggregate amount of such borrowing, (b) the requested borrowing date (which must
be a Banking Day), (c) the type of Loan (i.e., Base Rate Loan or Eurodollar Rate
Loan), and (d), in the case of a Eurodollar Loan, the applicable Interest
Period; provided, that if no type of Loan is selected, the requested Revolving
Loan shall be a Base Rate Loan. Each Notice of Borrowing shall be irrevocable
and binding on Borrower. In respect of each Notice of Borrowing, subject to the
terms and conditions of this Agreement, not later than 3:00 p.m. (eastern
standard time) on the borrowing date specified in such Notice of Borrowing,
Lender shall make the amount of such Revolving Loan specified in such Notice of
Borrowing available to Borrower by depositing such amount in immediately
available funds in the account of Borrower with Lender.
1.2 Term Loan.
(a) Amount. Subject to the terms and conditions hereof, on
the Closing Date, Lender will lend to Borrower the principal sum of $5,000,000
on a term basis (the "Term Loan").
(b) Term Note. The Term Loan shall be evidenced by
Borrower's promissory note in the form of Exhibit D (as amended, supplemented,
restated and otherwise modified from time to time, the "Term Note").
(c) Principal Payment. The principal of the Term Loan
shall be repaid in accordance with the following schedule:
Payment Date Principal Payment Amount
June 30, 2000 $312,500.00
September 30, 2000 $312,500.00
December 31, 2000 $312,500.00
March 31, 2001 $312,500.00
June 30, 2001 $468,750.00
September 30, 2001 $468,750.00
December 31, 2001 $468,750.00
March 31, 2002 $468,750.00
June 30, 2002 $468,750.00
September 30, 2002 $468,750.00
December 31, 2002 $468,750.00
March 31, 2003 $468,750.00
Any portion of the principal amount of the Term Loan repaid by Borrower may not
be reborrowed.
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1.3 Interest Rate Provisions.
(a) Interest Rate and Payment. Borrower shall pay to
Lender interest on the unpaid principal amount of each Loan from the date of
such Loan until such principal amount shall be paid in full, at the following
rates per annum and at the following time:
(i) each Loan that is a Base Rate Loan shall
bear interest at a rate per
annum equal at all time to the sum of (A) the Base Rate in effect from time to
time plus (B) the Applicable Margin, payable (I) quarterly in arrears on the
last Banking Day of each March, June, September and December during such period
commencing June 30, 1998, (II) on the date of any prepayment thereof and (III)
on the Final Maturity Date;
(ii) each Loan that is a Eurodollar Loan shall
bear interest at a rate per
annum equal at all times during each Interest Period for each such Loan to the
sum of (A) the Eurodollar Rate for such Interest Period for such Loan plus (B)
the Applicable Margin, payable in arrears on the last day of such Interest
Period and, if such Interest Period has a duration of more than three months, on
each three-month anniversary of the first day of such Interest Period until the
date such Eurodollar Loan shall be Converted or paid in full.
(iii) Whenever, subsequent to the date of this
Agreement, the Base Rate
is increased or decreased, the applicable Base Rate for Base Rate Loans shall be
similarly changed without notice or demand of any kind by an amount equal to the
amount of such change in the Base Rate during the time such change or changes
remain in effect. The Eurodollar Rate shall be adjusted with respect to
Eurodollar Rate Loans without notice or demand of any kind on the effective date
of any change in the Reserve Percentage as of such effective date.
(b) Default Rate. Following the occurrence and during the
continuance of an Event of Default, the interest rate applicable to Loans shall
be increased to the Default Rate and such interest shall be payable on demand.
1.4 Conversions of Loans.
(a) So long as no Event of Default has occurred and is
continuing, subject to the other terms and conditions of this Agreement, upon
receipt by Lender from Borrower of a notice not later than 11:00 a.m. (eastern
standard time) on the third Banking Day prior to the date of the proposed
Conversion, Borrower may Convert all or any portion of the Loans from Base Rate
Loans to Eurodollar Rate Loans, and vice versa; provided (A) all Conversions of
Eurodollar Rate Loans shall only be made on the last day of the Interest Period
applicable thereto and (B) each Eurodollar Rate Loan shall be a minimum of
$250,000 or a whole multiple of $50,000 in excess thereof. Each such notice of
Conversion shall, within the restrictions specified above, specify (I) the date
of such Conversion, (II) the Loans to be Converted and (III) if such Conversion
is into a Eurodollar Rate Loan, the duration of the Interest Period for such
Loan. Each notice of Conversion shall be irrevocable and binding on Borrower.
(b) If Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Loan in accordance with the provisions
contained in the definition of "Interest Period" in Exhibit A, such Eurodollar
Rate Loan will automatically, on the last day of the then existing Interest
Period, Convert into a Base Rate Loan.
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(c) Upon the occurrence and during the continuance of any
Event of Default, anything in this Agreement to contrary notwithstanding, each
Loan that is a Eurodollar Rate Loan shall automatically convert into a Base Rate
Loan at the end of the then applicable Interest Period for the same.
1.5 Optional Prepayments.
(a) At any time and from time to time, Borrower may prepay
the outstanding aggregate principal amount of any Loan, in whole or in part, on
the following terms and conditions:
(i) Lender shall have received no later than
11:00 a.m. (eastern standard time) from Borrower at least three Banking Days
notice of prepayment, specifying the date and amount of such prepayment and
whether such prepayment shall be in respect of Revolving Loans or the Term Loan
and if a combination thereof, the amount of payment allocable to each; provided,
that if Borrower fails to specify whether such prepayment shall be in respect of
Revolving Loans or the Term Loan, such prepayment automatically shall be deemed
to be in respect of first, Revolving Loans that are Base Rate Loans, second,
Revolving Loans that are Eurodollar Loans, and third to the Term Loan.
(ii) each partial prepayment shall be in an
aggregate principal amount of $100,000 or a whole multiple of $25,000 in excess
thereof; and
(iii) if any prepayment of a Eurodollar Rate
Loan is made on a date other than the last day of any Interest Period for such
Loan, Borrower shall pay to Lender any other amounts owing pursuant to this
Agreement, including section 1.9(e).
(b) Each notice of prepayment shall be irrevocable and
binding on Borrower. If a notice of prepayment is given by Borrower pursuant to
section 1.5(a), Borrower shall make such prepayment amount specified in such
notice on the date specified therein, together with accrued interest to such
date on the amount prepaid and any prepayment premium and other additional
amounts required to be so paid pursuant to this Agreement, including those
specified in section 1.5(a)(iii). Optional prepayments of any Term Loan shall be
applied to installments of principal in the inverse order of their scheduled
maturity.
1.6 Mandatory Prepayments.
(a) Within 90 calendar days after the end of each Fiscal
Year, Borrower shall prepay to Lender the outstanding principal amount of the
Term Loan in an amount equal to 50 percent of the amount of Excess Cash Flow for
such Fiscal Year; provided, that Borrower shall have no obligation to make such
mandatory prepayment (A) in respect of the Fiscal Year ended March 31, 1998, (B)
in respect of any Fiscal Year in excess of $1,000,000, (C) if the outstanding
principal amount of the Term Loan is less than $2,500,000 or (D) to reduce the
outstanding principal amount of the Term Loan to less than $2,500,000. If
Borrower fails to deliver to Lender the financial statements referenced in
section 4.5(a) within 90 calendar days after the end of any Fiscal Year (other
than the Fiscal Year ended March 31, 1998), then Lender may deliver to Borrower
a good faith estimated computation of the Excess Cash Flow for such Fiscal Year,
and based upon such estimated computation, Borrower shall prepay to Lender the
outstanding principal amount of the Term Loan in the manner described in the
first sentence of this section 1.6(a); provided, that such prepayment shall be
subject to adjustment when the audited financial statements for the related
Fiscal Year are delivered to Lender as required hereby. The computation made by
Lender shall not be deemed a
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waiver of any rights Lender may have as a result of the failure by any member of
the Inmark Group to deliver such financial statements.
(b) When any member of the Inmark Group sells, leases, or
otherwise transfers or disposes of any Collateral (other than sales and
dispositions permitted pursuant to section 5.2), Borrowers shall repay the Loans
in an amount equal to the net proceeds of such sale (i.e., gross proceeds less
the reasonable costs of such sales or other dispositions); such repayment to be
made promptly but in no event more than one Banking Day following receipt of
such net proceeds, and until the date of payment, such proceeds shall be held in
trust for Lender. The foregoing shall not be deemed to be implied consent to any
such sale otherwise prohibited by the terms and conditions of any Loan Document.
All mandatory prepayments pursuant to this section 1.6(b) shall be applied first
to the installments of the Term Loans that are Base Rate Loans, second to Term
Loans that are Eurodollar Loans, and third to the permanent reduction of the
Revolving Line of Credit.
(c) If the outstanding principal amount of Revolving Loans
on any date exceeds the Revolving Line of Credit on such date, (i) such excess
shall nevertheless constitute Obligations, be secured by the Collateral and be
subject to the terms of this Agreement and (to the extent applicable) the other
Loan Documents, and (ii) Borrower shall make a prepayment of Revolving Loans in
an amount equal to such excess.
(d) Each mandatory prepayment of a Loan shall be
accompanied by payment in full of all accrued interest thereon to and including
the date of such prepayment. Mandatory prepayments of any Loan shall be applied
to installments of principal in the inverse order of their scheduled maturity.
1.7 Termination of Revolving Line of Credit. Upon at least 30
calendar days' prior notice to Lender, subject to the other terms and conditions
of this section 1.7, Borrower may terminate in whole or reduce in part the
Revolving Line of Credit. Such termination or reduction notice shall specify (x)
the date of such termination or reduction, as the case may be, and (y) in the
case of a reduction, the amount of such reduction. Such termination or reduction
notice shall be irrevocable and binding on Borrower. Any and all amounts payable
to Lender under this section 1.7 shall become due and payable on the stated
termination date without presentment, demand, protest, or further notice of any
kind, all of which are hereby expressly waived by Borrower.
(a) If Borrower elects to reduce partially the Revolving
Line of Credit (A) each such partial reduction of the Revolving Line of Credit
shall be in an aggregate amount of $1,000,000 or a whole multiple of $500,000 in
excess thereof and in each case shall reduce permanently the amount of the
Revolving Line of Credit then in effect and (B) Borrower shall prepay to Lender
the Revolving Loans (together in each case with accrued interest on the amount
so prepaid to and including the date of such prepayment and any additional
amounts (other than unpaid but not yet due balances under the Term Loan) owing
pursuant to this Agreement) to the extent, if any, that the amount of the
aggregate amount of Revolving Loans then outstanding exceeds the amount of the
Revolving Line of Credit as then reduced.
(b) If Borrower elects to terminate the Revolving Line of
Credit, Borrower shall pay to Lender in full all Revolving Loans then
outstanding (together in each case with accrued interest on the amount so
prepaid to and including the date of such prepayment and any additional amounts
owing pursuant to this Agreement) (other than unpaid but not yet due balances
under the Term Loan).
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1.8 Payments and Computations.
(a) Time and Method of Payment. (i) Borrower shall make to
Lender each payment (including, prepayments) hereunder and under the Notes,
without any deduction and irrespective of any right of counterclaim or set-off,
on the day when due at Lender's office specified in section 11.2, in each case
prior to 11:00 a.m. (eastern standard time), in lawful money of the United
States and in immediately available funds.
(ii) Lender, without demand, may charge and
withdraw from any checking, loan or other account that Borrower may then have
with Lender or with any affiliate of Lender, any amount that shall become due
from Borrower to Lender under any Loan Document; provided that without limiting
the generality of sections 7 and 8, for so long as no Event of Default has
occurred and is continuing, Lender shall charge and withdraw any such amount due
hereunder only from the account designated by Borrower, unless such account does
not contain adequate funds.
(iii) All computations of interest and fees
hereunder shall be made by Lender on the basis of a year of 360 days and for the
actual number of days elapsed. If any payment to be made hereunder becomes due
and payable on a day other than a Banking Day, except as may otherwise be
expressly provided herein, the due date thereof shall be extended to the next
succeeding Banking Day and such extension of time shall in such case be included
in the computation of payment of interest; provided, that if such extension
would cause payment of interest on or principal of Eurodollar Loans to be made
in the next following calendar month, such payment shall be made on the next
preceding Banking Day.
(b) Maximum Interest Rate. If the interest rate calculated
in accordance with any provision of this Agreement for any Loan (including,
without limitation, any application of the Default Rate) would at any time
exceed the maximum permitted by any law, then for such period as such rate would
exceed the maximum permitted by such law (and no longer), the rate of interest
payable on such Loan shall be reduced to the maximum permitted by such law, and
any excess amounts received by Lender shall be treated as a partial payment or
prepayment of principal, without premium or penalty (except under section 1.5
with respect to Eurodollar Rate Loans).
1.9 Fees; Charges; etc.
(a) Closing Fee. Borrower shall pay to Lender,
simultaneously with the execution and delivery of this Agreement, a closing fee
equal to $100,000.
(b) Commitment Fee. Borrower shall pay to Lender a
commitment fee, from the date hereof until the Final Maturity Date, payable
quarterly in arrears on the last Banking Day of each March, June, September and
December, commencing on June 30, 1998, and on the Final Maturity Date, at the
rate of one-quarter of one percent per annum on the aggregate Unused Revolving
Credit Commitment. In addition, if Borrower elects to reduce partially the
Revolving Line of Credit pursuant to section 1.7(a), on the effective date of
such partial reduction, Borrower shall pay to Lender a commitment fee at the
rate of one-quarter of one percent per annum on the aggregate portion of the
Revolving Line of Credit so reduced pro-rated to the date of the effective date
of such reduction.
(c) Late Charge. In the event that any payment due and
payable hereunder is not received in full by Lender within ten calendar days of
the date such payment was due and payable (except as a result of the failure by
Lender to withdraw such payment from the account designated by
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Borrower pursuant to section 1.8(a)(ii)), Borrower hereby agrees to pay to
Lender, to the extent not prohibited by applicable law and without demand and in
addition to any other amounts payable hereunder, a late charge equal to five
percent of the amount of such delinquent payment for the purpose of defraying
the expense incident to the handling of such delinquent payment.
(d) Reimbursement of Increased Cost to Lender. If any law,
regulation or guideline, including, without limitation, any change in any law,
regulation or guideline and/or in the interpretation or application thereof, or
any order or ruling by any Governmental Authority, or compliance by Lender with
any request or directive (whether or not having the force of law) of any
Governmental Authority, shall impose, modify, or deem applicable to Lender any
reserve, capital, special deposit or other requirement or condition (including,
under Regulation D issued by the Board of Governors of the Federal Reserve
System) in respect of any Loan Document or any of the Loans which results in an
increased cost or reduced benefit to Lender in maintaining, making, issuing or
renewing any Loan (as determined by reasonable allocation of the aggregate of
such increased costs or reduced benefits to Lender resulting from such event),
then Borrower shall pay to Lender from time to time upon demand additional
amounts sufficient to compensate Lender for such increased costs or reduced
benefits, together with interest on each such amount from a date ten calendar
days after the date of such demand until payment in full thereof at the rate
then applicable to such Loan. A certificate setting forth in reasonable detail
such increased cost incurred or reduced benefit realized by Lender as a result
of any such event shall be conclusive as to the amount thereof, absent manifest
error.
(e) Yield Protection. Borrower agrees to indemnify Lender
against any loss which Lender may sustain or incur in liquidating or employing
deposits from third parties acquired to effect, fund or maintain any Eurodollar
Rate Loan as a consequence of either (a) Borrower's failure to make a payment on
the due date thereof, or (b) Borrower's payment, prepayment or Conversion of any
Eurodollar Rate Loan on any day other than the last day of the applicable
Interest Period. Borrower's obligations under this section 1.9(e) shall survive
the repayment of the Obligations and the termination of any Loan Document.
1.10 Use of Proceeds. Subject to the terms and conditions of this
Agreement, the proceeds of the Loans shall be used by Borrower only to partially
finance the purchase by New OGI of the OGI Assets, recapitalize Borrower,
provide working capital to Borrower, pay transaction fees and expenses related
the Loan Documents and the acquisition of the OGI Assets, and acquire all or
substantially all the assets of yet unidentified companies and pay transaction
costs associated with such acquisitions.
1.11 Number of Loans Outstanding. There shall not be at any
one time outstanding more than five Loans in the aggregate.
1.12 Overdrafts. In the event Lender honors a check of Borrower
resulting in Borrower's checking account being overdrawn, then Lender shall be
deemed to have made a Revolving Loan to Borrower in the amount of such
overdraft, pursuant to the terms of this section 1, on the Banking Day on which
Borrower's check is tendered to Lender for collection. Lender shall not be
obligated to honor any overdraft of Borrower at any time, whether or not it has
done so prior to such time.
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2. Conditions Precedent.
2.1 Conditions to Initial Loans. The obligation of Lender to make the
Term Loan and the first Revolving Loan is subject to the satisfaction of each of
the conditions precedent listed on Exhibit E.
2.2 Conditions to All Loans. The obligation of Lender to make each
Revolving Loan after the first Revolving Loan is subject to the satisfaction of
each of the following conditions precedent as of the date of the making of such
Loan:
(a) Representations and Warranties. The representations
and warranties made by each member of the Inmark Group in or pursuant to each
Loan Document, including any contained in any certificate or financial or other
statement or other Document furnished at any time hereunder or thereunder or in
connection herewith or therewith, shall be true, complete and correct in all
material respects on and as of the date such Loan is requested to be made and is
to be made (or if expressly applicable only to an earlier date, such as
financial statements, as of such date).
(b) No Event of Default or Default. No Event of Default or
event which, with the giving of notice, the lapse of time or both, would
constitute an Event of Default, shall have occurred and be continuing (after
giving effect to the Loans requested to be made) on the date such Loan is
requested to be made and is to be made.
3. Representations and Warranties. Each member of the Inmark Group, jointly and
severally, represents and warrants to Lender, knowing and intending that Lender
will rely thereon in making the Loans that the following statements are true,
complete and correct:
3.1 Organization and Qualification.
(a) Each member of the Inmark Group is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it was formed.
(b) Each member of the Inmark Group has the power and
authority, and all necessary licenses and other authorizations, to own, lease,
operate and encumber its properties and to carry on its business as now
conducted or as reasonably anticipated to be conducted, and is duly qualified
and in good standing in each jurisdiction wherein the nature of the property
owned, leased or used or of the business conducted by such member of the Inmark
Group requires such qualification.
3.2 Due Authorization; No Default.
(a) The execution, delivery and performance by each member
of the Inmark Group of each Loan Document to which it is a party are within the
power and authority of such member of the Inmark Group, have been duly
authorized by all necessary action on the part of such member of the Inmark
Group, and do not and will not (i) violate any Organizational Documents of such
member of the Inmark Group or any applicable regulation or law, or any judgment,
order or decree of any Governmental Authority, (ii) constitute a breach of, or
other default under, any agreement or other Document to which such member of the
Inmark Group is a party or by which such member of the Inmark Group may be
subject, affected or bound (any consents required thereby having previously been
obtained), or (iii) result in the imposition of any Lien or restriction on any
assets of such member of the Inmark Group (except in favor of Lender).
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(b) Each member of the Inmark Group has delivered to
Lender true, complete and correct copies of (i) the resolutions of such member
of the Inmark Group necessary to authorize the transactions contemplated by each
Loan Document to which it is a party, and (ii) the Organizational Documents of
such member of the Inmark Group in effect on the date hereof, in each case
certified by a duly authorized officer of such member of the Inmark Group.
(c) Each Loan Document to which one or more members of the
Inmark Group are a party have been duly executed and delivered on behalf of each
such member of the Inmark Group. Each Loan Document to which one or more member
of the Inmark Group are a party is legal, valid and binding obligations of each
such member of the Inmark Group, enforceable against each such member of the
Inmark Group in accordance with their respective terms.
3.3 No Governmental Consent Necessary. Except as set forth on
Schedule 3.3 and those which have been obtained or made and are in full force
and effect, no consent, authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority is required for the due
execution, delivery and performance by each member of the Inmark Group of, or
the validity or enforceability of any Loan Document to which any member of the
Inmark Group is a party.
3.4 No Proceedings. There are no pending or, to the best of knowledge
of each member of the Inmark Group, threatened, claims, actions, proceedings or
investigations before any arbitrator or Governmental Authority that may, singly
or in the aggregate, have a Material Adverse Effect.
3.5 Financial Statements.
(a) Schedule 3.5(a) contains a true, complete and correct
copy of the unaudited pro forma balance sheets of the Inmark Group as at
September 30, 1997 and March 31, 1998; such pro forma balance sheets fairly
presents on a pro forma basis the financial condition of the Inmark Group as of
that date after giving effect to the transactions contemplated by the
Acquisition Agreement and the Loans to be made by Lender on the date hereof.
Such pro forma balance sheets were prepared in accordance with GAAP.
(b) Schedule 3.5(b) contains a true, complete and correct
copy of the projections of the Inmark Group as for the Fiscal Years 1998 through
2001; and such projections are based upon all information which is pertinent
thereto, and to the best knowledge of each member of the Inmark Group, no facts
exist which would result in any material change in any of such projections or in
any estimate reflected therein. Such projections are based upon reasonable
estimates and assumptions, all of which are fair in light of current conditions,
and reflect the reasonable estimate of the Inmark Group of the results of
operations and other information projected therein.
(c) The Inmark Group has delivered to Lender a true,
complete and correct copy of each of the financial statements of the Inmark
Group and Old OGI listed in Part I of Schedule 3.5(c), and such financial
statements (i) were prepared in accordance with the books and records of Parent
and its Subsidiaries or Old OGI, as the case may be, (ii) have been prepared in
accordance with GAAP on a basis consistent with the past practices of Parent and
its Subsidiaries or Old OGI, as the case may be, and (iii) fairly present the
financial condition of Parent and its Subsidiaries or Old OGI, as the case may
be, as at dates to which they purport to relate, and as applicable, the results
of operations and cash flows for such Persons for the period(s) to which they
purports to relate. Except as fully disclosed in such financial statements,
after giving effect to the transactions contemplated by
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the Acquisition Agreement, on the Closing Date, there will be no liabilities of
any member of the Inmark Group, or existing conditions which could reasonably be
expected to result in liabilities of any member of the Inmark Group.
(d) The other financial information, reports and other
Documents listed on Part II of Schedule 3.5(c) that were furnished to Lender
prior to the date hereof are, and, without limiting the scope of any other
certification, representation or warranty that a member of the Inmark Group (or
one of its officers) may make to Lender, all other financial information,
reports and other Documents hereafter furnished will be at the time the same are
so furnished, true, complete and correct in all material respects.
3.6 No Change in Condition; Solvency; Operating Leases.
(a) There has been no material adverse change in condition
(financial or otherwise) of any member of the Inmark Group, or in the results of
operations, assets or operations of any member of the Inmark Group since March
31, 1997.
(b) Each member of the Inmark Group is, and after giving
effect to the transactions contemplated by the Loan Documents and the
Acquisition Agreement on the date hereof, will be Solvent.
(c) Schedule 3.6(c) contains a true, complete and correct
list of each Operating Lease to which any member of the Inmark Group is a party
together with a disclosure of the payments to be made under each such Operating
Lease during the term of such Operating Lease after the Closing Date. No member
of the Inmark Group is in default of any of the terms or conditions of any such
Operating Lease.
3.7 Compliance With Laws. Each member of the Inmark Group is in
compliance with all federal, state and local statutes, rules, regulations,
orders and other provisions or requirements of law applicable to its ownership,
lease or use of properties and its other assets, the conduct of its business and
otherwise; no member of the Inmark Group has received any written notice of
violation of any of the foregoing; and no member of the Inmark Group is in
violation of any judgment, order or decree of any Governmental Authority or any
arbitrator.
3.8 No Other Violations. No member of the Inmark Group is in
violation of any term of its Organizational Documents, and no event or condition
has occurred and is continuing which constitutes or results in (or would
constitute or result in, with the giving of notice, lapse of time or both, or
the occurrence of any other condition) (a) a breach of, or other default under,
any agreement, undertaking, instrument or other Document to which any member of
the Inmark Group is a party or by which any member of the Inmark Group or any of
its property may be subject, affected or bound, except for failures which
individually or in the aggregate would not have a Material Adverse Effect, or
(b) the imposition of any Lien or restriction on any asset of any member of the
Inmark Group.
3.9 Taxes and Assessments. Each member of the Inmark Group has filed
all federal, state and local tax returns and other reports it is required to
file on or prior to the date hereof (or has obtained valid, written extensions
which are in full force and effect as to any not so filed). Each member of the
Inmark Group has paid all taxes, assessments and other governmental charges due
and payable on or prior to the date hereof, and has made adequate provision for
the payment of taxes, assessments and charges accrued but not yet payable, which
provisions are reflected in the pro forma
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balance sheets set forth in Schedule 3.5(a). To the best of knowledge of each
member of the Inmark Group, there is no deficiency or additional assessment in
connection with any taxes, assessments or other governmental charges.
3.10 ERISA and OSHA.
(a) Each member of the Inmark Group is in compliance in
all material respects with the provisions of ERISA. Except for occurrences that
individually or in the aggregate would not result in a liability of or to one or
more members of the Inmark Group in the aggregate in excess of $25,000, neither
a "reportable event" as defined in Section 4043 of ERISA, nor a non-exempt
"prohibited transaction" as defined in Section 406 of ERISA or Section 4975 of
the Code, has occurred and is continuing with respect to any Plan. No notice of
intention to terminate a Plan has been filed nor has any Plan been terminated;
the PBGC has not instituted proceedings to terminate, or to appoint a trustee to
administer, any Plan, nor do circumstances exist that constitute grounds for any
such proceedings; and neither any member of the Inmark Group nor any ERISA
Affiliate has completely or partially withdrawn from any multiemployer Plan
described in Section 4001(a)(3) of ERISA, which withdrawal would result in a
liability of one or more members of the Inmark Group in the aggregate in excess
of $25,000. Each member of the Inmark Group and each ERISA Affiliate has met the
minimum funding standards under ERISA with respect to each of its Plans; no Plan
of any member of the Inmark Group or of any ERISA Affiliate has an accumulated
funding deficiency or waived funding deficiency within the meaning of ERISA; and
no material unpaid liability to the PBGC under ERISA has been incurred by any
member of the Inmark Group or any ERISA Affiliate.
(b) Each member of the Inmark Group has duly complied
with, and its facilities, business, leaseholds, equipment and other assets are
in compliance with, in all material respects, the provisions of the federal
Occupational Safety and Health Act and all rules and regulations thereunder and
all similar state and local laws, rules and regulations; and there are no
outstanding citations, notices or orders of non-compliance issued to any member
of the Inmark Group or relating to its facilities, business, leaseholds,
equipment or other property under any such law, rule or regulation.
3.11 Insurance. The information respecting insurance listed on
Schedule 3.11, consisting of the name of the insurer, the face amount of such
policy, the type of coverage provided for in such policy and the deductible
therefor, is true, complete and correct in all material respects. Each such
insurance policy is in full force and effect and complies with the provisions of
section 4.7(a).
3.12 Environmental Matters. Except as disclosed on Schedule 3.12, no
member of the Inmark Group nor, to the best knowledge of any member of the
Inmark Group, any other Person has ever caused or permitted any Hazardous
Substance to be placed, held, located or disposed of, or otherwise engaged in
any Environmental Activity from, on, under or at any real property owned, leased
or otherwise occupied by any member of the Inmark Group, or any part thereof, in
violation of any applicable Environmental Law, and none of such real property
has been used (whether by any member of the Inmark Group or, to the best
knowledge of each member of the Inmark Group, by any other Person) as a dump
site or storage site (whether permanent or temporary) for any Hazardous
Substance or any other Environmental Activity, except in compliance with
applicable Environmental Laws. Except as disclosed on Schedule 3.12, there are
no pending claims or litigation or other Environmental Complaints, and no member
of the Inmark Group has received any written communication from any Person
concerning the presence or possible presence of any Hazardous Substance or any
other Environmental Activity at any of such real property or concerning any
violation or alleged violation of any applicable Environmental Law.
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3.13 Margin Stock; Investment Company Act. No part of the proceeds of
any Revolving Loan or the Term Loan will be used, directly or indirectly, to
purchase or carry any "margin stock" (as defined in Regulation U issued by the
Board of Governors of the Federal Reserve System), to extend credit to others
for the purpose of purchasing or carrying any such margin stock, or for any
purpose that violates any provision of Regulations G, T, U or X issued by the
Board of Governors of the Federal Reserve System. No member of the Inmark Group
is an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, nor is any member of the Inmark
Group controlled by any such company.
3.14 Proprietary Rights. Each member of the Inmark Group owns, or has
a valid license or sublicense in, all patents, patent and know-how licenses,
inventions, technology permits, Trademarks, copyrights, product designs,
applications, formulae, processes and other intellectual property rights
(collectively, "proprietary rights") used or useful in the operation of its
business in the manner in which it is currently being or proposed to be
conducted. Schedule 3.14 lists all patents, trademarks and copyrights owned by
any member of the Inmark Group in its own name as of the date hereof. To the
best knowledge of each member of the Inmark Group, there is no existing or
threatened infringement or misappropriation of any proprietary rights of others
by any member of the Inmark Group or of any proprietary rights of any member of
the Inmark Group by others. Each patent, trademark and registered copyright of
any such member of the Inmark Group is valid, subsisting, unexpired, enforceable
and has not been abandoned. No patent, trademark or registered copyright of any
member of the Inmark Group is the subject of any licensing or franchise
agreement. To the best knowledge of each member of the Inmark Group, no holding,
decision or judgment has been rendered by any Governmental Authority which
would, or which seeks to, limit, cancel or question the validity of any patents,
trademarks or registered copyrights, and no such action or proceeding is
pending.
3.15 Ownership; Subsidiaries. Schedule 3.15 sets forth a true,
complete and correct list of all the authorized, issued and outstanding
securities (equity and debt) of each member of the Inmark Group and each of
their Subsidiaries, and in the case of Services and New OGI, a list of all the
registered owners of such securities. Schedule 3.15 also sets forth adjacent to
the names of each of the individuals listed therein (the "Management"), a true,
complete and correct list of the offices held by such members of Management in
the Inmark Group and a description and number of all the securities of Parent
beneficially owned by such member of Management.
3.16 SEC Filings. Parent has delivered to Lender true, complete and
correct copies all forms, reports, registration statements and other documents
it has filed with the United States Securities and Exchange Commission (the
"SEC"); and no such form, report, registration statement and other document, as
of their respective dates, contain a misstatement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading. Parent has filed with the SEC all forms,
reports, registration statements and other documents required by it to file with
the SEC under applicable law; all of which forms, reports, registration
statements and other documents have been prepared in accordance with
substantially in accordance with the requirements of applicable law.
3.17 Representations and Warranties True, Complete and Correct;
Confirmation.
(a) None of the representations, warranties or statements
to Lender contained in any Loan Document or in any other Document delivered to
Lender in connection with the Collateral, or any Loan Document or any of the
transactions contemplated thereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make
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such representation, warranty or statement not misleading in light of the
circumstances under which it is made. All of such representations, warranties
and statements shall survive until full and final and indefeasible payment and
performance of the Obligations.
(b) Borrower's acceptance of each Loan under this
Agreement shall constitute a reaffirmation by each member of the Inmark Group of
the representations and warranties set forth in this section 3 as of the date of
such Loan. If requested by Lender, each member of the Inmark Group shall, as a
precondition to such Loan, further confirm such matters by delivery of a
certificate dated the day of such Loan and signed by a duly authorized officer
of each member of the Inmark Group satisfactory to Lender.
4. Affirmative Covenants. Each member of the Inmark Group, jointly and
severally, covenants and agrees that, until full and final payment and
performance of the Obligations and so long as the Revolving Line of Credit
remains in effect, it shall (and, it shall cause each of its Subsidiaries to):
4.1 Maintenance of Existence and Qualifications. Maintain, keep and
preserve in full force and effect its existence and good standing and all other
rights, powers, franchises, licenses and qualifications (including proprietary
rights) necessary or desirable for its ownership, lease or use of properties or
the conduct of its business.
4.2 Payment of Taxes and Other Obligations.
(a) Pay before they become delinquent, all taxes,
assessments and governmental charges imposed upon it or any of its property or
required to be collected by it, other than taxes, assessments and governmental
charges being contested in good faith by appropriate proceedings and with
respect to which such member of the Inmark Group has maintained adequate
reserves in accordance with GAAP.
(b) Perform in all material respects all of its
obligations under the terms of each mortgage, security agreement, debt
instrument and other Document by which it is bound or to which it is a party.
4.3 Maintenance of Properties. Maintain, keep and preserve its
properties and other assets in overall good working order and condition
(ordinary wear and tear excepted).
4.4 Notice of Adverse Events. Promptly notify Lender, in writing, of
the occurrence or existence of any of the following: (a) any Event of Default or
any event which, with the giving of notice, the lapse of time, or both, would
become an Event of Default, (b) any matter or event which has resulted in, or
may result in, a material adverse change in the condition (financial or
otherwise), results of operations, assets or operations of any member of the
Inmark Group, (c) any material claim, action, proceeding or investigation filed
or instituted against, or relating to the operations of, any member of the
Inmark Group, or any adverse determination in any material action, proceeding or
investigation affecting any member of the Inmark Group, (d) any loss from
casualty or theft in excess of $50,000 if not insured, or in excess of $150,000
even if insured, affecting the assets of any member of the Inmark Group, (e)
whether or not otherwise reportable under this section 4.4, any violation by any
member of the Inmark Group of any Environmental Law, or any complaint, citation,
order or other notice of a violation or a claim involving any Environmental Law
(together with a copy of any complaint, citation, order or other notice of a
violation or claim relating thereto), if the liability or penalty therefor may
exceed $50,000 singly or in the aggregate (the notice to Lender to include,
along with other relevant information, the name of any complainant or claimant
and the
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nature and (if known) potential amount of the claim), (f) whether or not
otherwise reportable under this section 4.4, the occurrence or expected
occurrence of any "reportable event" as defined in Section 4043 of ERISA, or a
non-exempt "prohibited transaction" as defined in Section 406 of ERISA or
Section 4975 of the Code, (together with a copy of any complaint, citation,
order or other notice of a violation or claim relating thereto), other than
those occurrences that individually or in the aggregate would not result in a
liability of or to one or more member of the Inmark Group in excess of $25,000,
(g) if any of the representations and warranties made by any member of the
Inmark Group contained in any Loan Document or any other Document delivered to
Lender by or on behalf of any member of the Inmark Group in connection with any
Loan Documents or any of the transactions contemplated thereby, ceases to be
true, complete and correct and (h) if any member of Management ceases to be
employed full time for any reason by a member of the Inmark Group in
substantially the same capacity as he is employed on the Closing Date.
4.5 Information and Documents to be Furnished to Lender. Furnish to
Lender in form and substance satisfactory to Lender:
(a) Annual Financial Statements. As soon as available, but
in no event later than 90 calendar days after the end of each Fiscal Year, a
balance sheet as of the end of such Fiscal Year, a statement of income for such
year, and statements of changes in cash flows and changes in stockholders'
equity for such Fiscal Year (all in reasonable detail and with all notes and
supporting schedules), audited by KPMG Peat Marwick or such other independent
certified public accountant reasonably satisfactory to Lender and certified by
such independent certified public accountant, without qualification or
exception, as presenting fairly the financial condition of the Inmark Group on
consolidated and consolidating basis as of the dates indicated and the results
of operations, changes in cash flow and changes in stockholders equity for the
periods indicated, as appropriate, and as having been prepared in accordance
with GAAP; provided that the parties agree that the portion of the foregoing
financial statements presented on a consolidating basis shall be required to be
reviewed (but not audited) by KPMG Peat Marwick or such other independent
certified public accountant.
(b) Quarterly Financial Statements. As soon as available,
but in no event later than 45 calendar days after the end of each quarter of
each Fiscal Year, a balance sheet of the Inmark Group on a consolidated and
consolidating basis as of the end of such quarter, a statement of income for the
three-month period ending at the end of such quarter, and statements of changes
in cash flows and changes in stockholders' equity for the three-month period
ending at the end of such quarter (all prepared in reasonable detail with all
notes and supporting schedules in accordance with GAAP), reviewed by KPMG Peat
Marwick or such other independent certified public accountant reasonably
satisfactory to Lender; provided that the parties agree that the portion of the
foregoing financial statements presented on a consolidating basis shall be
required to be reviewed (but not audited) by KPMG Peat Marwick or such other
independent certified public accountant.
(c) Monthly Financial Statements and Aging Schedules. As
soon as available, but in no event later than 30 calendar days after the end of
each month, (i) a monthly internally-generated balance sheet and income
statement (all prepared in reasonable detail and in accordance with GAAP) of the
Inmark Group on a consolidated and consolidating basis and setting forth in
comparative form the figures from the corresponding period set forth in the
operating budget and projections required to be delivered to Lender by the
Inmark Group pursuant to this Agreement; and (ii) Account and account payable
aging reports (all prepared in reasonable detail and on a form acceptable to
Lender).
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(d) Certificates Regarding Financial Statements.
(i) [Intentionally omitted.]
(ii) Concurrently with the delivery of the
financial statements referred to
in sections 4.5(a) through 4.5(c), a certificate of the chief financial officer
of Parent in the form of Exhibit F (A) stating that to the best of his or her
knowledge, no Event of Default or no default or other event which, with the
giving of notice, the lapse of time, or both, would become an Event of Default
has occurred except as specified in such certificate, (B) stating that all such
financial state ments (I) are complete and correct in all material respects
(subject, in the case of interim statements, to normal year-end audit
adjustments), (II) present fairly the financial condition of the Inmark Group on
a consolidated and consolidating basis as of the dates indicated and the results
of operations, changes in cash flow and changes in stockholders' equity for the
periods indicated, as appropriate, and (III) have been prepared in accordance
with GAAP, and (C) showing in detail the calculations (I) in the case of the
delivery of the financial statements referred to in sections 4.5(a) and 4.5(b),
supporting compliance with the covenants contained in section 6 and any other
provision in the Loan Documents respecting financial covenants requested by
Lender, (II) in the case of the delivery of the financial statements referred to
in sections 4.5(a) and 4.5(b), supporting compliance with the provision set
forth in section 7.13, and (III) in the case of the delivery of the financial
statements referred to in sections 4.5(a), for Excess Cash Flow, provided, that
the calculations for Excess Cash Flow shall not be required if Borrower has no
mandatory prepayment obligation pursuant to clause (C) of the proviso of section
1.6(a).
(e) Annual Budget. Not later than February 28 of each
calendar year, a copy of the monthly operating budget and projections by the
Inmark Group of income and cash flows of the Inmark Group, on a consolidated and
consolidating basis, for the next succeeding Fiscal Year, all in the form
customarily prepared by the management of the Inmark Group and reasonably
satisfactory to Lender, together with a certificate of the Chief Financial
Officer of Parent to the effect that such operating budget and projections of
income and cash flows have been prepared on the basis of sound financial
planning practice and that such officer has no reason to believe they are
incorrect or misleading in any material respect.
(f) SEC Documents. Within three Banking Days of the filing
of any form, report, registration statement or other Document with the SEC or
any exchange, a true, complete and correct copy of the same.
(g) ERISA Documents. Upon the request of Lender, any ERISA
report, notice, return or other Documents filed as required by or in compliance
with ERISA, whether to the Internal Revenue Service, the Department of Labor,
the PBGC or any other appropriate Governmental Authority.
(h) Other Documents. Promptly after demand:
(i) a certificate of the Chief Financial Officer
or President of Parent satisfactory to Lender stating that there then exists no
Event of Default hereunder and no default or other event which, with the giving
of notice, or the lapse of time, or both, would constitute an Event of Default;
(ii) all original and other Documents evidencing
a right to payment, including, but not limited to, invoices, original orders,
and shipping and delivery receipts; and
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(iii) such other Documents or information as
Lender may reasonably request, including, without limitation, financial
projections and cash flow analysis.
4.6 Access to Records and Property. At any time and from time to time
(and provided no Event of Default has occurred and is continuing, upon
reasonable prior notice from Lender), at the request of Lender, give Lender
and/or any representative of Lender access during normal business hours to
inspect any of the assets (including, without limitation, all Collateral) of any
member of the Inmark Group and to examine, copy and make abstracts from any and
all books, records and Documents in the possession of any member of the Inmark
Group or any independent contractor relating to the affairs (including, returns
for federal income tax and other taxes) of any member of the Inmark Group or the
Collateral .
4.7 Insurance At Inmark Group Expense.
(a) Liability and Property Insurance. Maintain at the
expense of the Inmark Group with financially sound and reputable insurers,
insurance in such amounts, with such deductibles and covering such risks
(including, without limitation, fire, theft, public liability, property damage,
business interruption, employee fidelity and workers' compensation insurance) as
are sufficient and as are usually carried by companies engaged in the same or a
similar business in the same general area; provided that the amount of such
insurance in effect from time to time shall in no event be less than the
replacement value of the assets of the Inmark Group. Such insurance shall be
evidenced by policies (i) in form and substance reasonably satisfactory to
Lender, (ii) designating Lender and its assigns as additional insureds or loss
payees, as their interests may appear from time to time, with acceptable
endorsements, (iii) containing a "breach of warranty clause" whereby the insurer
agrees that a breach of the insuring conditions or any warranties or any
negligence of any member of the Inmark Group or any other Person or any other
action or omission shall not invalidate the insurance as to Lender and its
assigns and (iv) requiring at least 30 calendar days' prior written notice to
Lender and its assigns before cancellation or any material change shall be
effective.
(b) Copies of Policies. Upon demand, deliver to Lender the
original of each policy evidencing insurance required by this section 4.7,
together with evidence of payment of all premiums therefor.
(c) Notice and Proof of Loss. In the event of loss or
damage, forthwith notify Lender and file proofs of loss satisfactory to Lender
with the appropriate insurer, but without limiting the rights of Lender under
any other Loan Document.
(d) Use of Insurance Proceeds. Without limiting the rights
of Lender pursuant to any Loan Document, (i) if no Event of Default has occurred
and is continuing, forthwith upon receipt, endorse and deliver to Lender
insurance proceeds relating to a loss in excess of $250,000, and (ii) if an
Event of Default has occurred and is continuing, forthwith upon receipt, endorse
and deliver to Lender insurance proceeds relating to any loss; it being agreed
that in the case of clause (i), shall be applied at the discretion of Lender to
the reduction in the outstanding principal amount of the Term Loan or to the
replacement or repair of the property subject of such loss.
(e) No Obligation to Verify Policies. In no event shall
Lender be required to ascertain the existence of or examine any insurance
policy.
4.8 Records. Maintain complete and accurate books and records of all
its operations and assets, including records of the Collateral and the status of
each of the Accounts.
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4.9 Maintenance of Account and Banking Relationships. Each member of
the Inmark Group shall maintain a demand deposit account with Lender from which
Lender shall be authorized, at its election and without demand or notice, to
charge and withdraw all amounts that are then due to Lender as provided in
sections 1.6, 1.7, 1.8 and 1.9. Each member of the Inmark Group agrees to
maintain its banking deposits, including operating and/or checking accounts,
solely with Lender for as long as a borrowing/lending relationship exists
between the Inmark Group and Lender; provided that so long as no Event of
Default has occurred and is continuing, Borrower may maintain one or more
payroll accounts for each of its primary business locations at a third-party
bank so long as the Inmark Group (a) notifies Lender prior to Borrower opening
and maintaining any such payroll account, (b) causes the balances of such
payroll account at any time not to exceed (i) the aggregate payroll amount for
the immediately succeeding payroll period of the offices to which it relates
plus (i) an aggregate amount for all such payroll accounts at any one time not
to exceed $5,000 and (c) at the request of Lender, takes such actions as may be
desirable or necessary to assign, transfer and grant to Lender a security
interest in each such payroll account.
4.10 Delivery of Documents. If any proceeds of the Accounts shall
include, or any of the Accounts shall be evidenced by, notes, trade acceptances
or instruments or documents, or if any Inventory is covered by documents of
title or chattel paper, whether or not negotiable, immediately deliver them to
Lender appropriately endorsed in a manner satisfactory to Lender. Each member of
the Inmark Group waives protest regardless of the form of the endorsement. If
any member of the Inmark Group fails to endorse any instrument or document,
Lender is authorized to endorse it on behalf of such member of the Inmark Group.
4.11 Compliance with Laws. Comply in all material respects with all
laws applicable to it and/or its assets.
4.12 Further Assurances. From time to time, execute and deliver such
further Documents and take such further actions as Lender may reasonably request
in order to carry out the purposes of this Agreement, the Notes and the other
Loan Documents.
5. Negative Covenants. Each member of the Inmark Group, jointly and severally,
covenants and agrees that, until full and final payment and performance of the
Obligations and so long as the Revolving Line of Credit remains in effect, it
shall not (and, it shall cause each of its Subsidiaries not to), directly or
indirectly:
5.1 No Consolidation, Merger, Acquisition, Liquidation. (a) Enter
into any merger, consolidation, reorganization or recapitalization, (b) take any
steps in contemplation of dissolution or liquidation, (c) create any Subsidiary,
(d) conduct any part of its business through any Subsidiary, unincorporated
association or other entity (other than Borrower), (e) or acquire the stock or
assets of any Person, whether by merger, consolidation, purchase of stock or
otherwise, except, that a member of the Inmark Group directly or through a
wholly-owned and newly formed Subsidiary (a "Newco") may acquire all or all or
substantially all the assets of any Person (a "Target" and such transaction
being referred herein as an "Asset Acquisition"), so long as (i) the Inmark
Group notifies Lender at least 30 calendar days prior to the closing of the
Asset Acquisition and such notice contains a pro forma calculation of the
financial covenants set forth in section 6 as at the effective date of such
Asset Acquisition certified by the Chief Financial Officer or President of
Parent, (ii) no Event of Default shall have occurred and be continuing or will
occur after giving effect to the Asset Acquisition (and each of the Chief
Financial Officer or President of Parent shall have delivered to Lender a
certificate to such effect within three Banking Days of the closing of the Asset
Acquisition), (iii) the principal business of such Target is the same or
substantially the same as the business of the Inmark Group or
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is primarily a services-related business to the promotion or advertising
industry, (iv) the aggregate consideration paid by the Inmark Group or Newco for
all assets does not exceed for any one Asset Acquisition $2,000,000 or for all
such Asset Acquisitions in the aggregate $4,000,000, (v) at the election of
Lender, (A) Newco guarantees to Lender the full and prompt payment and
performance by the Inmark Group of the Obligations upon substantially the same
terms as the Guarantee or (B) Newco becomes a party to the Loan Documents, (vi)
the Inmark Group shall grant or caused to be granted to Lender a first priority
perfected security interest in and upon the equity interests of Newco and assets
so acquired upon terms and conditions substantially the same as the Collateral
Documents, and (vii) all Indebtedness incurred by the Inmark Group and its
Subsidiaries as a result of such Asset Acquisition shall be subordinated to the
Obligations on terms and conditions satisfactory to Lender -- it being agreed
that no member of the Inmark Group shall or shall permit any of its Subsidiaries
to incur or assume any Funded Indebtedness in connection with any such Asset
Acquisition from any third-party lender (other than the seller of such assets).
5.2 Disposition of Assets or Collateral. Sell, lease, or otherwise
transfer or dispose of any or all of its assets or property other than (a) the
sale of Inventory in the ordinary course of business, and (b) the disposition of
used, worn-out or surplus property in the ordinary course of business.
5.3 Other Liens. Incur, create or permit to exist any Lien (other
than a Permitted Lien) upon or with respect to any of its assets or property,
whether now owned or hereafter acquired.
5.4 Other Liabilities. Incur, create, assume or permit to exist any
Indebtedness or liability on account of either borrowed money or the deferred
purchase price of property or services, except (a) Obligations to Lender, (b)
Indebtedness secured by a Permitted Lien, (c) as contemplated in section 5.1 in
connection with an Asset Acquisition and (d) those liabilities existing on the
date of this Agreement and shown by a pro forma balance sheet set forth in
Schedule 3.5(a).
5.5 Loans. Make loans, advances or other extensions of credit to any
Person except extensions of trade credit in the ordinary course of business or
advances to employees or consultants for services or expenses at any one time
not exceeding $25,000.
5.6 Guaranties; Contingent Liabilities; Investments. (a) Assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, or (b) agree to maintain the working capital or net worth of
any Person or to make investments (by virtue of the purchase of stocks, bonds,
debt or otherwise) in any Person (except (x) as contemplated in section 5.1, (y)
for short-term investments of excess cash in instruments which are guaranteed in
full, directly or indirectly, by the United States Government, or in United
State government securities, which investments shall be made in instruments
maturing less than 90 calendar days from the date of such investment and (z) for
certificates of deposit with maturities of one year or less from the date of
acquisition issued by any United States commercial bank having capital and
surplus in excess of US $1,000,000,000).
5.7 Dividends and Other Distributions. Declare or pay any cash
dividend or make any distribution on, or redeem, retire or otherwise acquire
directly or indirectly, any of its equity interests or any of the equity
interests in its Subsidiaries, or make any distribution of assets to any of its
equity holders; except, that one time in each Fiscal Year (after the Fiscal Year
ended March 31, 1999), Parent may make a cash dividend to its stockholders upon
the following conditions: (a) such dividend shall not in be excess of 25 percent
of the aggregate net income of the Inmark Group for the
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immediately preceding Fiscal Year, (b) no Event of Default shall have occurred
and be continuing or will occur as a result of making such dividend, (c)
Borrower shall have satisfied its obligations under section 1.6(a) in respect of
such Fiscal Year, (d) the Inmark Group shall deliver to Lender a notice
containing (i) a statement with the approximate date on which such dividend will
be made and the amount of such dividend and (ii) a certification from the Chief
Financial Officer or President of Parent that the conditions to the making of
such dividend set forth in this section 5.7 have been satisfied.
5.8 Transactions with Affiliates. Enter into any transactions,
including, the purchase, sale or exchange of property or the rendering of any
services, with any of its Affiliates except (a) for transactions that are (i)
otherwise permitted under this Agreement, (ii) are in the ordinary course of
business of the Inmark Group, and (iii) upon fair and reasonable terms no less
favorable to the subject member of the Inmark Group than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of such
member of the Inmark Group or (b) grants to members of Management one time in
any Fiscal Year of equity securities of Parent pursuant to a Performance Based
Plan so long as no Event of Default shall have occurred and be continuing or
will occur as a result of the granting of such equity securities.
5.9 Sale of Inventory. Sell any of the Inventory on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis, or any
other basis subject to a repurchase obligation or return right.
5.10 Restrictions Regarding Notes and Accounts. (a) Sell, assign,
transfer, discount or otherwise dispose of any Accounts or any promissory note
or other instrument payable to it with or without recourse, except for
collection without recourse in the ordinary course of business, or other than in
the ordinary course of business, grant any extension of the time of payment of
any of the Accounts, release, wholly or partially, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon.
5.11 Modification of Organizational Documents. Change, alter or
modify, or permit any change, alteration or modification of, its Organizational
Documents in any manner that would affect the rights of Lender hereunder and
under the other Loan Documents or the ability of any member of the Inmark Group
to perform its obligations hereunder and thereunder. The Inmark Group shall
provide at least ten calendar days' prior written notice to Lender of any
change, alteration or modification permitted by this section 5.11.
5.12 Change Business. Cause or permit a material change in the nature
of its business as conducted on the date of this Agreement.
5.13 Hazardous Substances. Release, discharge or otherwise dispose
of, or permit the manufacture, storage, transmission or presence of, any
Hazardous Substances, or otherwise cause or permit any Environmental Activity to
be conducted or exist at, over or upon any real property owned, leased or
otherwise occupied by any member of the Inmark Group (a) which constitutes a
violation of any Environmental Law or (b) which may be harmful or create a
foreseeable risk of unreasonable harm to public health or welfare or to natural
resources.
5.14 Inconsistent Agreement; Rights Under Other Agreements; etc. (a)
Enter into any agreement or other Document containing any provision that would
be violated by the performance of any of the obligations of any member of the
Inmark Group under any Loan Document; (b) (i) waive or otherwise relinquish any
of its rights of causes of action under or arising out of the Acquisition
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Agreement or any other documents related thereto, or (ii) amend, modify or
change, or consent or agree to any amendment, modification or change to the
Acquisition Agreement or any of the documents related thereto, (c)(i) make any
voluntary or optional payment or prepayment on, or redemption of, of purchase
of, or defease, or make any payment the effect of which is to defease any
Indebtedness (other than the Indebtedness created under the Loan Documents) or
(ii) amend, modify or change, or consent or agree to any amendment, modification
or change to, any terms of such Indebtedness (other than any amendment,
modification or change that will not or might reasonably be expected not to
adversely affect the rights and interest of Lender).
5.15 Change of Accounting Practices. Change its present accounting
principles or practices in any material respect, except as may be required by
changes in GAAP.
6. Financial Covenants. Until full and final payment and performance of the
Obligations and so long as the Revolving Line of Credit remains in effect:
6.1 Minimum EBITDA. The Inmark Group shall maintain at all times
during each quarter of each Fiscal Year, an EBITDA (as measured on a rolling
four-quarter basis) no less than the Minimum EBITDA corresponding to such
quarter in the following table; provided, that in the case of (a) the quarter
ended June 30, 1998, EBITDA shall be measured by multiplying the EBITDA for such
quarter by four, (b) the quarter ended September 30, 1998, EBITDA shall be
measured by multiplying the EBITDA for the six-months then ended by two, and (c)
the quarter ended December 31, 1998, EBITDA shall be measured by multiplying the
EBITDA for the nine-months then ended by the fraction the numerator of which is
four and the denominator of which is three.
<TABLE>
<S> <C> <C> <C>
Quarter Ended Minimum EBITDA Quarter Ended Minimum EBITDA
June 30, 1998 $4,500,000 December 31, 2000 $5,000,000
September 30, 1998 $4,500,000 March 31, 2001 $5,000,000
December 31, 1998 $4,500,000 June 30, 2001 $5,500,000
March 31, 1999 $4,500,000 September 30, 2001 $5,500,000
June 30, 1999 $5,000,000 December 31, 2001 $5,500,000
September 30, 1999 $5,000,000 March 31, 2002 $5,500,000
December 30, 1999 $5,000,000 June 30, 2002 $5,500,000
March 31, 2000 $5,000,000 September 30, 2002 $5,500,000
June 30, 2000 $5,000,000 December 31, 2002 $5,500,000
September 30, 2000 $5,000,000 March 31, 2003 $5,500,000
</TABLE>
6.2 Maximum Senior Debt Leverage Ratio. The Inmark Group shall
maintain at all times during each quarter of each Fiscal Year, a Senior Debt
Leverage Ratio (as measured on a rolling four-quarter basis) no greater than the
Maximum Senior Debt Leverage Ratio corresponding to such quarter in the
following table; provided, that in the case of (a) the quarter ended June 30,
1998, the EBITDA component of the Senior Debt Leverage Ratio shall be measured
by multiplying the EBITDA for such quarter by four, (b) the quarter ended
September 30, 1998, the EBITDA component of the Senior Debt Leverage Ratio shall
be measured by multiplying the EBITDA for the six-months then ended by two, and
(c) the quarter ended December 31, 1998, the EBITDA component of the Senior Debt
Leverage Ratio shall be measured by multiplying the EBITDA for the nine-months
then ended by the fraction the numerator of which is four and the denominator of
which is three.
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Quarter Ended Maximum Senior Quarter Ended Maximum Senior Debt
Debt Leverage Ratio Leverage Ratio
June 30, 1998 2.00:1 December 31, 2000 1.50:1
September 30, 1998 2.00:1 March 31, 2001 1.50:1
December 31, 1998 2.00:1 June 30, 2001 1.25:1
March 31, 1999 2.00:1 September 30, 2001 1.25:1
June 30, 1999 1.75:1 December 31, 2001 1.25:1
September 30, 1999 1.75:1 March 31, 2002 1.25:1
December 30, 1999 1.75:1 June 30, 2002 1.00:1
March 31, 2000 1.75:1 September 30, 2002 1.00:1
June 30, 2000 1.50:1 December 31, 2002 1.00:1
September 30, 2000 1.50:1 March 31, 2003 1.00:1
</TABLE>
6.3 Fixed Charge Coverage Ratio. The Inmark Group shall maintain at
all times during each quarter of each Fiscal Year, a Fixed Charge Coverage Ratio
(as measured on a rolling four-quarter basis) no less than 1.25:1; provided,
that in the case of (a) the quarter ended June 30, 1998, each element of the
Fixed Charge Coverage Ratio shall be measured by multiplying all such elements
for such quarter by four, (b) the quarter ended September 30, 1998, each element
of the Fixed Charge Coverage Ratio shall be measured by multiplying all such
elements for the six-months then ended by two, and (c) the quarter ended
December 31, 1998, each element of the Fixed Charge Coverage Ratio shall be
measured by multiplying all such elements for the nine-months then ended by the
fraction the numerator of which is four and the denominator of which is three.
6.4 Capital Expenditures. The Inmark Group shall not enter into any
agreement, or be or become liable under any agreement, to purchase and/or pay
for, or become obligated to pay for, Capital Expenditures, long term leases,
Capital Leases or sale lease-backs, in an amount at anytime outstanding, in
excess of $600,000.
6.5 Operating Leases. The Inmark Group shall not enter into any
Operating Lease, or be or become liable under any Operating Lease, not in
existence on the Closing Date, except, that the Inmark Group may enter any
Operating Lease, if immediately after giving effect thereto, the aggregate lease
obligations under all Operating Leases would not exceed at any one time in the
aggregate for the Inmark Group $100,000.
7. Events of Default. The occurrence of any of the following shall constitute an
"Event of Default":
7.1 Failure to Pay. Borrower fails to pay when due (a) any principal
of or interest on any Loan, whether on any principal payment date, required
prepayment dates, by acceleration or otherwise and any fees and expenses, and in
the case of interest payments only, such default shall continue unremedied for
two Banking Days, or (b) any other Obligation, which failure to pay any other
Obligation continues after any applicable grace period.
7.2 Failure to Perform or Observe Covenants. (a) Any member of the
Inmark Group fails to perform or observe any covenant, term or condition
contained any Loan Document (other than those described in other provisions of
this section 7) and (b) such default shall continue unremedied for 20 calendar
days after the earlier of the date on which (i) any President or any Chief
Financial Officer (or other officer holding equivalent positions) of any member
of the Inmark Group becomes
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<PAGE>
aware of such failure or (ii) written notice thereof shall have been given to
any member of the Inmark Group by Lender; provided that the cure period set
forth in the immediately preceding clause (b) shall not apply to any default
that is not reasonably likely to be curable in a 20 calendar day period.
7.3 False Representation or Warranty. Any representation, warranty or
statement by any member of the Inmark Group contained in any Loan Document or
any other Document delivered to Lender in connection with the Collateral, any
Loan Document or any of the transactions contemplated thereby or reaffirmed (or
hereby deemed reaffirmed) is or was when made or reaffirmed (or deemed
reaffirmed) incorrect in any material respect.
7.4 Security. Lender shall not have as of the date hereof or shall at
any time hereafter cease to have a valid and perfected first priority Lien in
all of the Collateral including, without limitation, that the grant of the
security interests in any Loan Document shall never have been effective or shall
cease to be effective to grant to Lender (or Lender shall otherwise not have
obtained or cease to have) a first priority Lien in all of the Collateral.
7.5 Loan Documents. Any of the following occurs: (a) any Loan
Document shall not have been, as of the date hereof or shall cease to be, valid,
effective and enforceable in any material respect, as determined by Lender; or
(b) any member of the Inmark Group asserts that any Loan Document was not as of
the date hereof, or has ceased to be, valid, effective and enforceable in any
material respect.
7.6 Cross Default; Default on Other Debt. (a) any other default
(which has not been waived) by any other Person on or with respect to any of the
Obligations (other than under the Loan Documents) occurs, or (b) any default
(which has not been waived) occurs under any other indebtedness or other
obligation of any member of the Inmark Group, or of any guarantor of any of the
Obligations, in an individual principal amount of $25,000 or more or an
aggregate principal amount of $50,000 or more to any one or more third parties,
that entitles any such third party to declare such indebtedness or other
obligation due prior to its date of maturity; provided that the foregoing
provisions shall not apply in the case of any default of indebtedness that is
trade debt that is being disputed in good faith by a member of the Inmark Group
with the trade creditor and where the Inmark Group has established adequate
reserves on its financial statements for such disputed trade debt and has
notified Lender promptly after the commencement of such dispute of (x) the
parties to such dispute, (y) the amount in dispute and (z) the actions being
taken by each of the parties to such dispute.
7.7 Cessation of Business. (a) Any member of the Inmark Group ceases
to do business as a going concern; or (b) the termination, suspension or loss of
any license or leasehold interest which results in any member of the Inmark
Group having to cease a substantial part of its operations by reason of such
termination, suspension or loss for a period of more than 30 consecutive
calendar days.
7.8 Change in Condition. There occurs any material change in the
condition or affairs, financial or otherwise, of any member of the Inmark Group
or of any endorser, guarantor or surety for any of the Obligations, which in the
opinion of Lender impairs Lender's security or materially and adversely affects
its risks (including, without limitation, the termination of any one or more
material Contracts with respect to the business of any member of the Inmark
Group).
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<PAGE>
7.9 Liquidation or Dissolution. Without limiting the generality of
section 7.10, any member of the Inmark Group takes any action to authorize its
liquidation or dissolution or suffers any liquidation or dissolution.
7.10 Inability to Pay Debts; Bankruptcy or Insolvency. Any one or
more of the following occur: (a) any member of the Inmark Group shall commence
any case, proceeding or other action (collectively, "Proceeding") (i) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition with creditors or other
similar relief with respect to it or its debts, or (ii) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or any member of the Inmark Group shall make a
general assignment for the benefit of its creditors or a bulk sale; (b) there
shall be commenced against any member of the Inmark Group any Proceeding of a
nature referred to in clause (a)(i) above which (A) results either in the entry
of an order for relief ("Order") or an appointment and any such Order or
appointment remains undismissed in a manner reasonably satisfactory to Lender
("Undismissed") for a period of 60 calendar days; the foregoing shall include
the commencement against any member of the Inmark Group of any Proceeding
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an Order for any such relief which remains Undismissed for 60 calendar
days; or (c) any member of the Inmark Group takes any action substantially in
furtherance of, or expressly authorizing or indicating its consent to, approval
of or acquiescence in or expressly proposes to take any of the actions set forth
in clause (a) or (b) above; or (d) any member of the Inmark Group shall
generally not be able to or fail to, or shall expressly admit in writing its
inability to, pay its debts generally as they become due.
7.11 Judgments. One or more judgments or orders for the payment of
money exceeding $50,000 in the aggregate are rendered against any member of the
Inmark Group, and any such judgment or order continues unsatisfied and not
effectively and continuously stayed within 30 calendar days of such judgment or
order.
7.12 ERISA. With respect to any Plan, there occurs or exists any of
the events or conditions described in the following clauses (a) through (h) and
such event or condition, together with all like events or conditions, could in
the opinion of Lender subject any member of the Inmark Group to any tax, penalty
or other liability that might, singly or in the aggregate, result in a liability
of or to any one or more members of the Inmark Group in excess of $25,000: (a) a
"reportable event" as defined in Section 4043 of ERISA, (b) a "prohibited
transaction" as defined in Section 406 of ERISA or Section 4975 of the Code, (c)
the termination of any Plan or filing of notice of intention to terminate, (d)
the institution by the PBGC of proceedings to terminate, or to appoint a trustee
to administer, any Plan, or circumstances that constitute grounds for any such
proceedings, (e) the complete or partial withdrawal from a multiemployer Plan,
or the reorganization, insolvency or termination of a multiemployer Plan, (f) an
accumulated funding deficiency within the meaning of ERISA, (g) violation of the
reporting, disclosure or fiduciary responsibility requirements of ERISA or the
Code, or (h) any act or condition which could result in direct, indirect or
contingent liability to any Plan or the PBGC.
7.13 Minimum Stock Ownership by Management; Cessation of Employment
by Members of Management. (a) The members of Management, at any time during each
six-month period of each Fiscal Year, in the aggregate, own directly less than
the minimum percentage of the issued and outstanding shares of common stock,
$001 par value, of the Parent (together with equity
23
<PAGE>
securities exercisable for or convertible into such common stock, the "Common
Stock"), on a fully diluted basis (except Common Stock shall not include (i)
common stock of Parent that is not currently issued and outstanding and that is
offered and sold publicly after the Closing Date under the Securities Act of
1933, as amended, (ii) any equity security granted to members of Management
after the Closing Date in accordance with section 5.8 or (iii) those 150,000
options granted to members of Management in March 1998) (the "Minimum Ownership
Percentage") corresponding to such six-month period in the following table:
Six-Month Period Ended Minimum Ownership Percentage
September 30, 1998 32.5%
March 31, 1999 30.5%
September 30, 1999 28.5%
March 31, 2000 26.5%
September 30, 2000 24.5%
All Other Six-Month Periods 24.5%
or; (b) two or more members of Management cease to be employed full time for any
reason by a member of the Inmark Group in substantially the same capacity as he
is employed on the Closing Date.
8. Remedies.
8.1 Rights in General. Automatically upon the occurrence of an Event
of Default described in section 7.10, and at the option of Lender, upon the
occurrence of any other Event of Default, (a) the Revolving Line of Credit and
all provisions for the making of additional Revolving Loans under this Agreement
shall terminate, (b) the principal and interest of all the Loans and all other
Obligations shall become and be immediately due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by each member of the Inmark Group, and (c) Lender shall
be entitled to exercise forthwith (to the extent and in such order as Lender may
elect, in its sole and absolute discretion) any or all rights and remedies
provided for in any Loan Document, all rights and remedies of a secured party
under the UCC, and all other rights and remedies that may otherwise be available
to Lender by agreement or at law or in equity. The phrase "upon occurrence and
during the continuance of any Event of Default" and similar phrases shall not
imply in any manner that any member of the Inmark Group has the right to cure
any Event of Default after Lender has declared an Event of Default.
8.2 Set-Off. Each member of the Inmark Group further agrees that:
(a) Upon the occurrence of an Event of Default, Lender is
hereby authorized at any time and from time to time, without notice to any
member of the Inmark Group (any such notice being expressly waived by each
member of the Inmark Group), to set off and apply (or cause any affiliate of
Lender to set off and apply) any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by Lender or such affiliate to or for the credit or the account of
any member of the Inmark Group, against any or all of the Obligations now or
hereafter existing under this Agreement, any Note or otherwise, irrespective of
whether or not Lender shall have made any demand and although such Obligations
may be unmatured.
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<PAGE>
(b) If any other lender has participated or hereafter
participates with Lender with respect to any of the Obligations, each member of
the Inmark Group hereby authorizes such participating lender disclosed to it
prior to set-off, upon the occurrence of any Event of Default, immediately and
without notice or other action, at the request of Lender, to set off against any
of Obligations of any member of the Inmark Group to Lender any deposits held or
money owed by such participating lender in any capacity to any member of the
Inmark Group, whether or not due, and to remit the money set off to Lender.
(c) The rights stated in this section 8.2 are in addition
to other rights and remedies (including, without limitation, other rights of
set-off or lien) that Lender or any participating lender may have.
8.3 Cumulative Remedies; No Waiver by Lender. No remedy referred to
in any Loan Document is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to in any other Loan Document or
otherwise available to Lender by agreement or at law or in equity. No express or
implied waiver by Lender of any default or Event of Default shall in any way be,
or be construed to be, a waiver of any future or subsequent default or Event of
Default. The failure or delay of Lender in exercising any rights granted it
hereunder and/or under any other Loan Document upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such right
upon the continuation or recurrence of any such contingency or similar
contingencies, and any single or partial exercise of any particular right by
Lender shall not exhaust the same or constitute a waiver of any other right.
8.4 Waivers and Consents Relating to Remedies. In connection with any
action or proceeding arising out of or relating in any way to this Agreement,
any other Loan Document, any of the Loans, any of the Collateral, or any act or
omission relating to any of the foregoing:
(a) EACH MEMBER OF THE INMARK GROUP AND LENDER EACH HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED THEREBY;
(b) Each member of the Inmark Group and Lender each
consent to the non-exclusive jurisdiction of any court of the State of New
Jersey and of any federal court located in the State of New Jersey, and hereby
irrevocably and unconditionally waive any right to object to such court as an
inconvenient forum; and
(c) Each member of the Inmark Group hereby unconditionally
and irrevocably waives personal service of any summons, complaint or other
process in connection with any such action or proceeding and agrees that service
thereof may be made, as Lender may elect, by certified mail directed to any
member of the Inmark Group at the location provided for notices to any member of
the Inmark Group under any Loan Document or, in the alternative, in any other
form or manner permitted by law,
8.5 Additional Waivers and Consents of the Inmark Group. To the
fullest extent permitted by law, each member of the Inmark Group (a) waives
demand, presentment, notice of dishonor or protest under any Document evidencing
or otherwise relating to the Collateral and/or under or in connection with any
Loan Document; and (b) consents to any of the following by Lender: (i) any
extension, postponement of time of payment or other indulgence, (ii) any
substitution,
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<PAGE>
exchange or release of Collateral, (iii) any addition to, or release of, any
Person primarily or secondarily liable for any of the Obligations, and (iv)
after the occurrence and during the continuance of an Event of Default, any
acceptance of partial payments on any Accounts or Documents and the settlement,
compromising or adjustment of any thereof.
9. Costs, Expenses and Taxes.
9.1 The Inmark Group agrees to pay to Lender, upon the closing of
this Agreement, and otherwise on demand, all costs and expenses incurred by
Lender in connection with (i) the preparation, negotiation and delivery of the
Loan Documents, and any amendments or modifications thereto, and (ii) collecting
any Loan or instituting, maintaining, preserving, enforcing and foreclosing the
security interest in any of the Collateral, whether through judicial proceedings
or otherwise, or in defending or prosecuting any actions or proceedings arising
out of or relating to any Loan Document, including reasonable fees and expenses
of counsel (which may include costs of in-house counsel), expenses for auditors,
appraisers and environmental consultants, lien searches, recording and filing
fees and taxes.
9.2 The Inmark Group agrees to pay any and all stamp, excise,
mortgage recording and other taxes payable or determined to be payable in
connection with the execution, delivery or performance of each Loan Document,
and to pay on demand all liabilities to which Lender may become subject as the
result of delay in paying or omission to pay such taxes.
10. Indemnification by Inmark Group. Each member of the Inmark Group, jointly
and severally, agrees to indemnify each of Lender, its directors, officers and
employees and each legal entity, if any, who controls Lender (the "Indemnified
Parties") and to hold each Indemnified Party harmless from and against any and
all claims, damages, losses, liabilities and expenses (including, without
limitation, all reasonable fees of counsel with whom any Indemnified Party may
consult and all expenses of litigation or preparation therefor) which any
Indemnified Party may incur or which may be asserted against any Indemnified
Party in connection with or arising out of the matters referred to in any other
Loan Document by any Person (including any Person or entity claiming
derivatively on behalf of any member of the Inmark Group), whether (a) arising
from or incurred in connection with any breach of a representation, warranty or
covenant by any member of the Inmark Group, or (b) arising out of or resulting
from any suit, action, claim, proceeding or governmental investigation, pending
or threatened, whether based on statute, regulation or order, or tort, or
contract or otherwise, before any court or Governmental Authority, which arises
out of or relates to this Agreement, any other Loan Document, or the use of the
proceeds of any Loan; provided, however, that the foregoing indemnity agreement
shall not apply to the extent such claims, damages, losses, liabilities and
expenses are solely attributable to an Indemnified Party's gross negligence or
willful misconduct. The obligations of each member of the Inmark Group under
this section 10 shall survive the repayment of the Obligations and the
termination of any of the Loan Documents.
11. Miscellaneous.
11.1 Entire Agreement; Amendments; Lender's Consent. This Agreement
(including the Exhibits and Schedules hereto) and the other Loan Documents
constitute the entire agreement among the parties hereto with respect to their
subject matter, and supersedes all prior and contemporaneous agreements,
understandings, inducements or conditions among the respective parties, whether
express or implied, oral or written. No amendment or waiver of any provision of
any Loan Document, nor consent to any departure by any member of the Inmark
Group therefrom, shall in any event be effective unless the same shall be in
writing and signed by Lender, and then
26
<PAGE>
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. To the extent this Agreement and any other
Loan Document are actually inconsistent, this Agreement shall control.
11.2 Notices. All notices and other communications relating to the
Loan Documents (unless otherwise specified therein) to be effective shall be in
writing (including by facsimile), and shall be deemed to have been duly given or
made when delivered by hand, or five calendar days after being deposited in the
United States mail, postage prepaid certified mail, return receipt requested, or
one Banking Day after delivery to a nationally recognized overnight courier
service (against a signed receipt) or, in the case of a facsimile notice, when
sent and confirmed as received, addressed as follows:
If to Lender: PNC Bank, National Association
One Garret Mountain Plaza
West Paterson, New Jersey 07424
Attention: Mr. George Ahlmeyer
Mr. Charles W. Jones
Facsimile: 973-881-5288
with a copy to: Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Steven E. Gross, Esq.
Facsimile: (973) 643-6500
If to Inmark Group: Inmark Enterprises, Inc.
One Plaza Road
Greenvale, New York 11548
Attention: John P. Benfield, President
Donald A. Bernard, Executive Vice President
Facsimile: 516-625-3575
with a copy to: Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
Attention: Joseph S. Hellman, Esq.
Facsimile: 212-479-6275
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<PAGE>
WITH A COPY OG Holding Corporation
ALL DEFAULT 9745 Mangham Drive
NOTICES TO BOTH: Cincinnati, OH 45215-2350
Attention: Thomas E. Lachenman
Facsimile: 513-577-7081
and
Wood & Lamping
2500 Cincinnati Commerce Center
600 Vine Street
Cincinnati, OH 45202
Attention: James B. Harrison, Esq.
Facsimile: 513-651-6087
or to such other address as the respective party or its successors or assigns
may subsequently designate by proper notice. Notwithstanding the foregoing,
notices and other communications to Lender pursuant to the definition of
Interest Period in Exhibit A and section 1 shall not be effective until
received.
11.3 Binding Effect. Each Loan Document shall be binding upon and
inure to the benefit of each member of the Inmark Group and Lender that is a
party thereto and their respective successors and assigns, except that no member
of the Inmark Group shall have the right to assign its rights under any Loan
Document or any interest therein without the prior written consent of Lender.
Each member of the Inmark Group consents to Lender's sale of participations,
assignment, transfer or other disposition, at any time or times, or any Loan
Document or any portion thereof, or of any right, obligation or other interest
herein or therein.
11.4 Execution in Counterparts. Any Loan Document may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.
11.5 Severability of Provisions. Any provision of any Loan Document
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or any other Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction and each provision which is not
wholly enforceable shall be enforced to the maximum extent permitted by law.
11.6 Table of Contents; Headings; Terminology. The table of contents
and headings preceding the text of each Loan Document are inserted solely for
convenience of reference and shall not constitute a part of any Loan Document
nor affect its meaning, construction or effect. Amendments of Documents shall
include extensions, renewals and consolidations thereof.
11.7 Exhibits and Schedules. All of the Exhibits and Schedules to
this Agreement are hereby incorporated by reference herein and made a part
hereof.
11.8 Limitation of Liability. No claim may be made by any member of
the Inmark Group or any other Person against Lender and/or any director,
officer, employee, attorney, or agent of Lender for any special, indirect or
consequential damages in respect of any claim for breach of contract arising out
of or relating to the transactions contemplated by Loan Documents, or any act,
omission or event occurring in connection herewith or therewith; and each member
of the Inmark
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<PAGE>
Group hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
11.9 Brokers Fees. Any brokerage commission or finder's fee payable
in connection with the Loans and the transactions contemplated hereby is payable
by the Inmark Group and not by Lender. Each member of the Inmark Group, jointly
and severally, agrees to indemnify Lender, and hold it harmless from and against
any claims of any broker or finder arising out of the transactions contemplated
hereby.
11.10 Governing Law. Each of the Loan Documents shall be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to the principles of conflicts of laws.
11.11 Disclosure of Financial Information. Lender and its affiliates
are hereby authorized to disclose any financial or other information about any
member of the Inmark Group to any regulatory body or agency having jurisdiction
over Lender or any such affiliate or to any present, future or prospective
participant or successor in interest in any loan or other financial
accommodation made by Lender or any such affiliate to any member of the Inmark
Group.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
INMARK ENTERPRISES, INC.
By:/s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President and Chief Financial
Officer
INMARK SERVICES, INC.
By:/s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President and Chief Financial
Officer
OPTIMUM GROUP, INC.
(formerly, OG Acquisition Corp.)
By:/s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President and Chief Financial
Officer
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Charles W. Jones
Name: Charles W. Jones
Title: Vice President
Signature Page
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EXHIBIT A
1.1 Defined Terms. As used herein, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Accounts" means any and all "Accounts" referred to in the Security
Agreements.
"Acquisition Agreement" means the Asset Purchase Agreement including
all exhibits and schedules thereto dated as of December 8, 1997 by and among,
Old OGI, James H. Ferguson, an individual, Michael J. Halloran, an individual,
Christina M. Heile, an individual, David E. Huddleston, an individual, Thomas E.
Lachenman, an individual, Roderick S. Taylor, an individual, Thomas L. Wessling,
an individual, New OGI and Enterprises.
"Affiliate" of any Person means (a) any Person (other than a
Subsidiary) that, directly or indirectly, is in control of, is controlled by, or
is under common control with such Person, or (b) any Person who is a director or
officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 5% or
more of the securities having ordinary voting power for the election of
directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agreement" means this Loan Agreement, as amended, supplemented,
restated or otherwise modified from time to time.
"Applicable Margin" means with respect to the unpaid balance of
Loans, (i) 2.00% in the case of Eurodollar Loans, and 0.50%, in the case of Base
Rate Loans, during the period commencing on the Closing Date and ending on the
last day of the calendar month during which the Inmark Group delivers to Lender
the financial statements referenced in section 4.5(b) for the quarter of the
Fiscal Year ended September 30, 1998 and (ii) for each subsequent period which
shall end on the last day of the calendar month during which the Inmark Group
delivers to Lender the financial statements referenced in section 4.5(b) for the
immediately preceding quarter of the Fiscal Year, the applicable percentage as
set forth below:
Applicable Margin for Applicable Margin for
Total Leverage Ratio Eurodollar Rate Loans Base Rate Loans
less than 1.5:1.0 1.50% 0.00%
less than 2.0:1 but greater 1.75% 0.25%
than or equal to 1.5:1.0
greater than or equal to 2.0:1 2.00% 0.50%
"Banking Day" means any day other than (a) a Saturday or Sunday, (b)
any day (other than Saturday or Sunday) on which commercial banks in New Jersey
are authorized or required by law to close or (c) if the applicable Banking Day
relates to any Eurodollar Rate Loans, any day on which dealings are not carried
on in the London interbank market.
"Base Rate" means the higher of (a) the Prime Rate and (b) one-half
of one percent per annum above the Federal Funds Rate.
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"Base Rate Loan" means each Loan bearing interest at a rate based
upon the Base Rate.
"Borrower" has the meaning ascribed to such term in the Preamble to
this Agreement.
"Capital Expenditures" means, for any Person for any period, the sum
of without duplication, (a) all expenditures made, directly or indirectly, by
such Person or any of its Subsidiaries during such period for equipment, fixed
assets, real property or improvements, or for replacements or substitutions
therefor or additions thereto, that have been or should be, in accordance with
GAAP, reflected as additions to property, plant or equipment on a consolidated
balance sheet or such Person plus (b) the aggregate principal amount of all
Indebtedness assumed or incurred in connection with any such expenditures.
"Capital Lease" means (a) any lease of property, real or personal,
the obligations under which are capitalized on a balance sheet of any member of
the Inmark Group, and (b) any other such lease to the extent that the then
present value of the minimum rental commitment thereunder should, in accordance
with GAAP, be capitalized on a balance sheet of the lessee.
"Closing Date" means March 31, 1998 if the conditions precedent to
the making of the first Revolving Loan and the Term Loan are satisfied (or
properly waived) or such other date, if any, as Lender may select in its sole
discretion.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder.
"Collateral" means any and all "Collateral", "Security Collateral" or
any other asset or property of any member of the Inmark Group referred to in the
Collateral Documents that is or is intended to be subject to any Lien in favor
of Lender.
"Collateral Documents" means Security Agreement, Pledge Agreement,
the Guaranty, the Assignment of Contract and any other Document to which any
member of the Inmark Group or any of its Affiliates is a party and that creates
or purports to create a Lien in favor of Lender.
"Contracts" means any and all "Contracts" referred to in the Security
Agreement.
"Conversion", "Convert" and "Converted" each refer to a conversion of
Revolving Loans from Base Rate Loans to Eurodollar Rate Loans, and vice versa.
"Default Rate" means a rate of interest equal to two percent per
annum in excess of the rate otherwise applicable at the time to a Loan.
"Document" means any agreement, instrument, undertaking, other paper
or writing or other document.
"EBITDA" means for any period, (i) the sum the net income (or net
loss) from continuing operations before extraordinary items and changes in
accounting principles, depreciation, amortization, other non-cash charges to net
income, interest expense and income tax expense minus (ii) non-cash credits to
net income, in each case, of the Inmark Group, for such period, and determined
and consolidated in accordance with GAAP.
"Enterprises" has the meaning ascribed to such term in the Preamble
to this Agreement.
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"Environmental Activity" means any generation, processing, abatement,
manufacture, refining, transportation, treatment, storage, handling, release,
emission, discharge or disposal of any Hazardous Substances or any threat of
such activity.
"Environmental Complaint" means any complaint, order, citation,
notice or other written or express oral communication from any Person with
respect to the existence or alleged existence of a violation of any
Environmental Law or legal liability resulting from any Hazardous Substance, any
Environmental Activity or any other environmental matter at, upon, under, within
or from any real property owned, leased or otherwise occupied by any member of
the Inmark Group or any of its Subsidiaries or otherwise relating to such real
property or the ownership, use, operation or occupancy thereof, or any business,
activity or other property of any member of the Inmark Group or any of its
Subsidiaries.
"Environmental Laws" means all applicable federal, state and local
statutes, rules, regulations, orders, judgments, permits, licenses and other
provisions of law relating to any one or more of the following: air emissions,
water discharge, noise emissions, solid and liquid disposal, Hazardous
Substances, any Environmental Activity and other environmental, health and
safety matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and ruling issued
thereunder.
"ERISA Affiliate" means any corporation or trade or business that is
or was a member of (a) the controlled group of any member of the Inmark Group,
or under common control with any member of the Inmark Group, within the meaning
of Section 414 of the Code or (b) of an affiliated service group within the
meaning of Section 414(m) of the Code.
"Eurodollar Rate Loan" shall mean a Loan at any time that bears
interest based on the Eurodollar Rate.
"Eurodollar Rate" means for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the interest rate per annum determined
by Lender by dividing (the resulting quotient rounded upwards, if necessary, to
the nearest 1/100th of 1% per annum) (i) the rate of interest determined by
Lender in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the average of the London interbank
offered rates of interest per annum for U.S. Dollars set forth on the Telerate
display page 3750 or such other display page on the Telerate System as may
replace such page to evidence the average of rate quoted by banks designated by
the British Bankers' Association (or appropriate successor or, if the British
Bankers' Association or its successor ceases to provide such quotes, a
comparable replacement determined by Lender) at approximately 11:00 a.m. London
time two Banking Days prior to the first day of such Interest Period for an
amount comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage. The Eurodollar Rate may also be expressed by the
following formula:
Telerate page 3750 Quoted by British
Eurodollar Rate = Bankers' Association or appropriate successor
---------------------------------------------
1.00 - Reserve Percentage
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"Event of Default" has the meaning ascribed to such term in defined
in section 7.
"Excess Cash Flow" in respect of any period means, EBITDA for such
period minus the aggregate amount of principal repayments made on the Term Loan
during such period (other than as contemplated in section 1.6(a)) minus the sum
of the following expenses of the Inmark Group for such period (a) Capital
Expenditures, (b) interest expenses, and (c) income tax expenses.
"Federal Funds Rate" means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by PNC from three Federal funds brokers of recognized
standing selected by PNC.
"Final Maturity Date" means the earlier of (i) March 31, 2003 and
(ii) the date of termination in whole of the Revolving Line of Credit.
"Fiscal Year" means the fiscal year of the Inmark Group and its
Subsidiaries ending on March 31 in any calendar year.
"Fixed Charge Coverage Ratio" shall mean and include, with respect to
any period, the ratio of (a) EBITDA for such period to the sum of (b) (i)
interest expenses of the Inmark Group during such period, (ii) all regularly
scheduled principal payments of Funded Debt of the Inmark Group made during such
period, (iii) the aggregate amount of income tax expense incurred by the Inmark
Group during such period, (iv) the aggregate amount of Capital Expenditures
incurred by the Inmark Group during such period, and (v) the aggregate amount of
dividends made by Parent during such period.
"Funded Debt" means of any Person means Indebtedness of such Person
that by its terms matures more than one year after the date of creation or
matures within one year from such date but is renewable or extendible, at the
option of such Person, to a date more than one year after such date or arises
under a revolving credit or similar agreement that obligates the lender or
lenders to extend credit during a period of more than one year after such date,
including, all amounts of Funded Debt of such Person required to be paid or
prepaid within one year after the date of determination.
"GAAP" means generally accepted accounting principles consistently
applied as in effect from time to time.
"Governmental Authority" means any federal, state, local or foreign
governmental authority, agency, department or instrumentality or other
regulatory body of any kind or nature, including any court.
"Guaranty" means the Guaranty, dated as of the Closing Date, by
Parent for the benefit of Lender, and substantially in the form of Exhibit G.
"Hazardous Substances" means (a) any flammable, explosive,
radioactive material or friable asbestos, (b) any "hazardous substance" as such
term is presently defined in the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, (c) any "hazardous material"
as such term is presently defined in the Hazardous Material Transportation Act,
as amended, (d) any "hazardous waste" as presently defined in the Resource
Conservation and Recovery
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Act of 1976, as amended, (e) any additional substances or materials which are
hereafter defined as, incorporated in or added to, the definition of "hazardous
substance", "hazardous material" or "hazardous waste" pursuant to, or for the
purposes of, any applicable Environmental Law (including, without limitation,
the New Jersey Industrial Site Recovery Act), and (f) any additional substances
or materials which are now or hereafter regulated or considered to be hazardous
or toxic under any applicable Environmental Law relating to any real and/or
personal property owned, leased, used or, in the case of real property otherwise
occupied by any member of the Inmark Group or any of its Subsidiaries, the
ownership, use, operation or occupancy thereof or any business, activity or
other property of any member of the Inmark Group or any of its Subsidiaries.
"Indebtedness" of a Person at a particular date shall mean all
obligations of such Person which in accordance with GAAP would be classified
upon a balance sheet as liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of enumeration, shall
include all indebtedness, debt and other similar monetary obligations of such
Person whether direct or guaranteed, and all premiums, if any, due at the
required prepayment dates of such indebtedness, and all indebtedness secured by
a Lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any Lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Inmark Group" has the meaning ascribed to such term in the Preamble
to this Agreement.
"Interest Period" means for each Eurodollar Rate Loan, the period
commencing on the date of such Eurodollar Rate Loan or the date of the
Conversion of any Base Rate Loan into such Eurodollar Loan, and ending on the
last day of the period selected by Borrower pursuant to the provisions below,
and thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the period
selected by Borrower pursuant to the provision below. The duration of each such
Interest Period shall be three or six months, as Borrower, upon notice received
by Lender not later than 11:00 a.m. (eastern standard time) on the third Banking
Day prior the first day of such Interest Period, selects, provided, that:
(a) Borrower may not select any Interest Period with respect to any
Eurodollar Loan that ends after the Final Maturity Date;
(b) Interest Period commencing on the same date for Eurodollar Loans
comprising part of the same borrowing shall be of the same duration;
(c) whenever the last day of any Interest Period would otherwise
occur on a day other than a Banking Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Banking Date, provided, that if such extension would cause the last
day of such Interest Period to occur in the next following calendar
month, the last day of such Interest Period shall occur on the
immediately preceding Banking Day;
(d) whenever the first day of any Interest Period occurs on a day of
an initial calendar month for which there is no numerically
corresponding day in the third calendar month that succeeds such
initial calendar month, such Interest Period shall end on the last
Banking Day of such third succeeding calendar month; and
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(e) the exact length of each Interest Period shall be subject to and
determined by Lender in accordance with any other practices of the
interbank market for offshore Dollar deposits.
"Inventory" means any and all "Inventory" referred to in the Security
Agreement.
"Lender" has the meaning ascribed to such term in the Preamble to
this Agreement.
"Lien" means any mortgage, security interest, assignment, pledge,
hypothecation, lien, conditional sale or other title retention agreement,
financing lease having substantially the same effect as any of the foregoing,
other preferential arrangement or other encumbrance of any kind or nature.
"Loan Documents" means this Agreement, the Collateral Documents, the
Notes and any and all other Documents delivered to Lender pursuant or incident
to this Agreement, as each may be amended, supplemented, restated or otherwise
modified from time to time between any member of the Inmark Group, any Affiliate
of any member of the Inmark Group, any grantor of any Lien securing any
Obligations or any guarantor of any Obligations, on the one hand, and Lender, on
the other, or executed by any member of the Inmark Group, any Affiliate of any
member of the Inmark Group, any such grantor or any such guarantor for the
benefit of Lender.
"Loans" means the Revolving Loans and the Term Loan.
"Management" has the meaning ascribed to such term in section 3.15.
"Material Adverse Effect" means material adverse effect on (a) the
validity or enforceability of any Loan Document (including, the rights and
remedies of Lender thereunder), (b) the ability of any member of the Inmark
Group to perform any of its Obligations, (c) the Collateral, or (d) the
condition (financial or otherwise), results of operations, assets or operations
of any member of the Inmark Group.
"New OGI" has the meaning ascribed to such term in the Preamble to
this Agreement.
"Note" means the Revolving Note or the Term Note.
"Obligations" means any or all of the "Obligations" referred to in
the Collateral Documents.
"OGI Assets" means the "Purchased Assets" referred to in the
Acquisition Agreement.
"Old OGI" means Optimum Group, Inc., an Ohio corporation.
"Operating Lease" means an agreement for the lease, hire or use of
any personal property (other than a Capital Lease).
"Order" has the meaning ascribed to such term in section 7.10.
"Organizational Documents" means with respect to any entity, the
certificate of incorporation or articles of incorporation thereof, as
applicable, and the by-laws thereof, each as heretofore amended and/or restated
and now in effect.
"Parent" has the meaning ascribed to such term in the Preamble to
this Agreement.
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"PBGC" means Pension Benefit Guaranty Corporation.
"Performance Based Plan" means the Inmark Enterprises, Inc. Executive
Incentive Compensation Plan for the Fiscal Year Ending March 31, 1999 or any
other similar incentive compensation Plan of Parent and approved by the Board of
Directors of Parent that has substantially similar performance based criteria.
"Permitted Liens" means (a) the Liens created by the Loan Documents,
(b) Liens for taxes, assessments or governmental charges not yet due or which
are being contested in good faith by appropriate proceedings and with respect to
which the Inmark Group has maintained adequate reserves in accordance with GAAP,
(c) pledges or deposits and Liens under bonds required in connection with
worker's compensation, unemployment insurance and other social security
legislation, (d) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen, repairmen, workmen and other similar Liens
imposed by law created in the ordinary course of business for amounts which are
not past due for more than 30 calendar days and which are being contested in
good faith by appropriate proceedings and with respect to which the Inmark Group
has maintained adequate reserves in accordance with GAAP, (e) Liens (other than
any Lien imposed by ERISA) incurred on deposits or pledges made in the ordinary
course of business (i) in connection with workers' compensation, unemployment
insurance and other types of social security legislation, or (ii) to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money), (f) Liens identified on Schedule 5.3, provided, that, in the case of
this clause (f), no such identified Lien is extended to cover any additional
property after the date hereof and that the amount of Indebtedness secured
thereby, if any, is not increased, and (g) Liens upon equipment purchased by a
member of the Inmark Group in the ordinary course of business which Liens are
created solely for the purpose of securing the payment of the purchase price for
such equipment payable by such member of the Inmark Group to the supplier
thereof, provided, that, in the case of this clause (g), (I) no such Liens shall
extend to or cover any property or assets of any member of the Inmark Group or
any of their respective Subsidiaries other than such equipment for which the
purchase price has not been paid and (II) the aggregate unpaid amount of the
purchase price for all equipment to which such Liens relate shall not exceed
$600,000 outstanding at any time.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, limited liability
company, joint venture, Governmental Authority or other entity of any kind or
nature.
"Plan" means any employee benefit plan within the meaning of Section
3(3) of ERISA established or maintained by any member of the Inmark Group or any
ERISA Affiliate or under which any member of the Inmark Group or any ERISA
Affiliate has any obligation or liability, actual or contingent.
"Pledge Agreement" means the Pledge Agreement, dated as of the
Closing Date, by and among each member of the Inmark Group and Lender and
substantially in the form of Exhibit H.
"Prime Rate" means the rate of interest announced from time to time
by Lender as its "prime rate" or "prime lending rate," which rate is determined
from time to time by Lender as a means of pricing some loans to its customers
and is neither tied to any external rate of interest or index nor necessarily
reflects the lowest rate of interest actually charged by Lender to any
particular class or category of customers.
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"Prime Rate Loan" means each Loan bearing interest at a rate based
upon the Prime Rate.
"Proceeding" has the meaning ascribed to such term in section 7.10.
"Reserve Percentage" shall mean the maximum effective percentage in
effect on any day as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the reserve requirements (including,
without limitation, supplemental, marginal and emergency reserve requirements)
with respect to eurocurency funding.
"Revolving Line of Credit" has the meaning ascribed to such term in
section 1.1(a).
"Revolving Loans" has the meaning ascribed to such term in section
1.1(a).
"Revolving Note" has the meaning ascribed to such term in section
1.1(b).
"Security Agreement" means the Security Agreement, dated as of the
Closing Date, by and among each member of the Inmark Group and Lender and
substantially in the form of Exhibit I.
"Senior Debt Leverage Ratio" means with respect to the Inmark Group
and its Subsidiaries at any date of determination, the ratio of (a) the
Indebtedness of the Inmark Group and its Subsidiaries at such date that
constitutes Obligations to (b) EBITDA for the Inmark Group and its Subsidiaries
for the most recent twelve month period ending on such date.
"Services" has the meaning ascribed to such term in the Preamble to
this Agreement.
"Solvent" with respect to any Person on a particular date, means,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including, contingent liabilities, of such
Person, (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay such debts and liabilities as they mature
and (d) such Person in not engage in business or a transaction, and is not about
to engage in business or a transaction, in each case, for which such Person's
property would constitute an unreasonably small capital.
"Subordination Agreement" means the Subordination Agreement, dated as
of the Closing Date, by and between Old OGI and Lender and substantially in the
form of Exhibit J.
"Subsidiary" shall mean a corporation or other entity of whose shares
of stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Term Loan" has the meaning ascribed to such term in section 1.2(a).
"Term Note" has the meaning ascribed to such term in section 1.2(b).
"Total Leverage Ratio" means with respect to the Inmark Group and its
Subsidiaries at any date of determination, the ratio of (a) the Indebtedness of
the Inmark Group and its Subsidiaries at
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such date to (b) EBITDA for the Inmark Group and its Subsidiaries for the most
recent twelve month period ending on such date.
"UCC" means the Uniform Commercial Code as in effect from time to
time in the relevant jurisdiction.
"Undismissed" has the meaning ascribed to such term in section 7.10.
"Unused Revolving Credit Commitment" means with respect to any time,
(a) the Revolving Line of Credit at such time minus (b) the aggregate principal
amount of all outstanding Revolving Loans at such time.
1.2 Other Definitional Provisions. The singular includes the plural and the
plural includes the singular; (i) "or" is not exclusive; (ii) a reference to any
Person includes its, his or her permitted successors and permitted assigns;
(iii) the words "include," "includes" and "including" are not limiting; (iv) a
reference in a document to a section, Exhibit or Schedule is to the section,
Exhibit or Schedule of such document unless otherwise indicated; (v) references
to any document, instrument or agreement (A) shall include all exhibits,
schedules and other attachments thereto, (B) shall include all documents,
instruments or agreements issued or executed in replacement thereof, and (C)
shall mean such document, instrument or agreement or replacement or predecessor
thereto, as amended, modified or supplemented from time to time and in effect at
any given time; and (vi) the words "hereof," "herein" and "hereunder" and words
of similar import when used in any document shall refer to such document as a
whole and not to any particular provision of such document. The Loan Documents
are a result of negotiations among, and have been reviewed by each member of the
Inmark Group, Lender and their respective counsel. Accordingly, each of the Loan
Documents shall be deemed to be the product of all parties hereto, and no
ambiguity shall be construed in favor of or against any member of the Inmark
Group or Lender.
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EXHIBIT E
CONDITIONS PRECEDENT TO INITIAL LOANS
Conditions Precedent
The obligation of Lender to make the first Revolving Loan and the
Term Loan is subject to the satisfaction of each of the following conditions
precedent on or prior to the date thereof:
(a) Notes. Lender shall have received the Revolving Note
and the Term Note, each payable to the order of Lender, conforming to the
requirements hereof and executed by (a) duly authorized officer(s) of Borrower.
(b) Certain Other Loan Documents. Lender shall have
received each of the following, duly executed and delivered by the parties
thereto (other than Lender) and each of which shall be in full force and effect:
(i) the Guaranty;
(ii) the Pledge Agreement;
(iii) the Security Agreement;
(iv) the Subordination Agreement; and
(v) the letter notifying the account debtors of
each member of the Inmark
Group of the assignment of the Accounts to Lender, substantially in the form of
Exhibit K that may be delivered by Lender after an Event of Default;
(c) Legal Opinion of Counsel to the Inmark Group - Loan
Agreement. Lender shall have received a favorable opinion, dated the Closing
Date, of Kronish, Lieb, Weiner & Hellman LLP, counsel to the Inmark Group,
substantially in the form of Exhibit L.
(d) Legal Opinion of Counsel to the Inmark Group -
Acquisition Agreement. Lender shall have received a favorable opinion, dated the
Closing Date, of Kronish, Lieb, Weiner & Hellman LLP, counsel to the Inmark
Group, substantially in the form of Exhibit I to the Acquisition Agreement.
(e) Legal Opinion of Ohio Counsel - Loan Agreement. Lender
shall have received a favorable opinion, dated the Closing Date, of Wood &
Lamping, counsel to the Inmark Group, substantially in the form of Exhibit M.
(f) Legal Opinion of Ohio Counsel - Acquisition Agreement.
Lender shall have received a favorable opinion, dated the date of this
Agreement, of Wood & Lamping, counsel to Old OGI, substantially in the form of
Exhibit F to the Acquisition Agreement.
(g) Acquisition Agreement Closing; etc. (i) the
transactions contemplated by the Acquisition Agreement shall have been
consummated without any amendment, modification or
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waiver of any of the provisions of the same (other than those made to comply
with the Loan Documents), (ii) the Inmark Group shall have delivered to Lender a
true, complete and correct copy of the Acquisition Agreement and each of the
Documents executed and delivered by the parties thereto in connection therewith,
(iii) each of the parties to the Acquisition Agreement shall have executed and
delivered to Lender a consent to the collateral assignment of the Acquisition
Agreement from New OGI and Parent for the benefit of Lender in the form of
Exhibit N (the "Assignment of Contract"), and (iv) the Inmark Group shall have
delivered to Lender evidence that the Seller's Loans (as defined in the
Acquisition Agreement) are paid-off and terminated and the security interests
granted to the lender parties to the Seller's Loans have been terminated and
released.
(h) Fees and Expenses. All fees and expenses required to
be paid to Lender pursuant to the Loan Documents on or prior to the Closing Date
(including, those described in sections 1.9 and 9) shall have been paid in full.
(i) Certificate of Secretary of Assistant Secretary.
Lender shall have received a certificate from the Secretary or an Assistant
Secretary of each member of the Inmark Group, dated the Closing Date, certifying
(as applicable) that or as to (i) attached to each such certificate is a (A)
true, complete and correct copy of (I) the resolutions of the Board of Directors
of such member of the Inmark Group authorizing among other things (x) the
execution, delivery and performance of each of the Loan Documents and the
borrowings provided for in the Loan Documents, (y) the granting by it of the
Liens provided for in the Loan Documents, and (z) in the case of Parent and New
OGI authorizing the Acquisition Agreement and the transactions contemplated
thereby, (B) the By-Laws of such member of the Inmark Group and (ii) such
resolutions and By-Laws have not been amended, modified, revoked or rescinded
since the dates on which they were adopted and (iii) the incumbency and
signature of each officer signing each of the Loan Documents and any other
certificate or other document to be delivered pursuant thereto (and another
officer of such member of the Inmark Group shall certify as to the incumbency of
such Secretary or Assistant Secretary).
(j) Representations and Warranties; Events of Default. The
following statements shall be true, complete and correct and Lender shall have
received a certificate signed by the President of each member of the Inmark
Group, dated the Closing Date, certifying that: (i) the representations and
warranties made by each member of the Inmark Group in each Loan Document and in
each other Document furnished at any time under or in connection therewith are
true, complete and correct on and as of the Closing Date as though made on and
as of such date, after giving effect to the transactions contemplated by the
Loan Documents and by the Acquisition Agreement; and (ii) no Event of Default
has occurred and is continuing, or would or might reasonably be expected to
result from the consummation of the transactions contemplated by any Loan
Document or the Acquisition Agreement. Anything in the Loan Documents to the
contrary notwithstanding, the foregoing certifications to be made in respect of
the representations and warranties of each member of the Inmark Group in each
Loan Document and the Events of Default shall be deemed made as if the
transactions contemplated by the Acquisition Agreement have been consummated.
(k) Organizational Documents; Good Standing Certificates.
Lender shall have received from each member of the Inmark Group (i) a
certificate of the Secretary of State of the jurisdiction of its incorporation,
dated no more than two weeks prior to the Closing Date, with an attached copy of
the Certificate of Incorporation (or Articles of Incorporation) of such member
of the Inmark Group, and (ii) good standing certificates (or comparable
certificates) from each Secretary of State (or a similar official) of each
jurisdiction where it is qualified to do business.
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(l) Consents, Licenses, Approvals, etc. Lender shall have
received copies of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by each member of the
Inmark Group, and the validity and enforceability against each member of the
Inmark Group of each Loan Documents, including, the consents of each landlord of
real property which is leased by any member of the Inmark Group consenting to a
security interest in all fixtures and equipment located on such real property
pursuant to the Loan Documents, and such consents, licenses and approvals shall
be in full force and effect.
(m) Financial Information; SEC Documents; Solvency. Lender
shall have received (i) a copy of each of the financial statements referred to
in section 3.5 and the Documents referred to in section 3.16, and (ii) a
certification by the Chief Financial Officer of Parent substantially in the form
of Exhibit O regarding such financial statements and the Solvency of the Inmark
Group.
(n) Initial Notice of Borrowing Certificate. Lender shall
have received an initial Notice of Borrowing, dated as of the Closing Date,
executed by a duly authorized officer of Borrower.
(o) Recordings and Filings; Other Actions. Any documents
(including, without limitation, financing statements) required to be filed,
registered or recorded under (and including) any of the Loan Documents in order
to create, in favor of Lender a perfected Lien against the Collateral thereunder
with respect to which a Lien may be perfected by a filing under the Uniform
Commercial Code or any other applicable law shall have been delivered to Lender
duly executed by the appropriate member of the Inmark Group and shall be in
proper form to be filed, registered or recorded in each office in each
jurisdiction required in order to create in favor of Lender a perfected Lien on
the respective Collateral described therein having the priority purported to be
granted thereby. Lender shall have also received evidence that all necessary
filing fees and all taxes or other expenses related to such filings,
registrations or recordings will be paid in full. Lender shall have received
evidence that all other actions necessary or, in the opinion of Lender,
desirable to perfect the Liens created by the Loan Documents have been taken.
(p) Searches. Lender shall have received the results of
recent searches, in form and substance satisfactory to Lender and by a Person
satisfactory to Lender, of (i) Uniform Commercial Code filings which may have
been filed with respect to personal property of each member of the Inmark Group
(including under any tradenames used by it) in each jurisdiction in which it has
or, within the last six months, had personal property, (ii) upper and lower
court judgment filings which may have been filed against any member of the
Inmark Group in each jurisdiction referred to in clause (i) above, (iii) tax
lien filings which may have been filed against any member of the Inmark Group in
each jurisdiction referred to in clause (i) above, and (iv) patent, trademark
and copyright filings by each member of the Inmark Group in each jurisdiction in
which such filings have been made.
(q) Evidence of Insurance. Lender shall have received
evidence satisfactory to it that the Inmark Group has obtained policies of
insurance required pursuant to section 4.7.
(r) No Legal Restraints. There shall be no (i) litigation,
investigation or other proceeding of or before any Governmental Authority
pending or, to the best of knowledge of each member of the Inmark Group,
threatened against any member of the Inmark Group or any of its properties or
revenues that could have a Material Adverse Effect or (ii) injunction, writ,
restraining
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order or any order of any nature issued by any Governmental Authority directing
that the transactions provided for in any Loan Document not be consummated as
therein provided.
(s) Additional Matters. Lender shall have received such
other certificates, opinions, documents and instruments relating to the
transactions contemplated by the Loan Documents as it may have reasonably
requested, and all corporate and other proceedings and all other documents
(including, all documents referred to herein and not appearing as exhibits
hereto) and legal matters in connection with the transactions contemplated by
the Loan Documents shall be satisfactory in form and substance to Lender and its
counsel.
(t) Schedule of Sources and Uses. Lender shall have
received from Borrower a schedule of the sources and uses of funds it will
require for the consummation of the transactions contemplated by the Acquisition
Agreement (including, the payoff of the Seller's Loans (as defined in the
Acquisition Agreement) and for its working capital requirements after the
closing of the transactions contemplated by the Acquisition Agreement.
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<TABLE>
<S> <C>
TABLE OF CONTENTS
Page
1. The Loans............................................................................................ 1
1.1 Revolving Loans........................................................................... 1
(a) Amount of Revolving Loans............................................................ 1
(b) Revolving Note....................................................................... 1
(c) Procedure for Revolving Loan Borrowings.............................................. 2
1.2 Term Loan................................................................................. 2
(a) Amount............................................................................... 2
(b) Term Note............................................................................ 2
(c) Principal Payment.................................................................... 2
1.3 Interest Rate Provisions.................................................................. 3
(a) Interest Rate and Payment............................................................ 3
(b) Default Rate......................................................................... 3
1.4 Conversions of Loans...................................................................... 3
1.5 Optional Prepayments...................................................................... 4
1.6 Mandatory Prepayments..................................................................... 4
1.7 Termination of Revolving Line of Credit................................................... 5
1.8 Payments and Computations................................................................. 6
(a) Time and Method of Payment........................................................... 6
(b) Maximum Interest Rate................................................................ 6
1.9 Fees; Charges; etc........................................................................ 6
(a) Closing Fee.......................................................................... 6
(b) Commitment Fee....................................................................... 6
(c) Late Charge.......................................................................... 6
(d) Reimbursement of Increased Cost to Lender............................................ 7
(e) Yield Protection..................................................................... 7
1.10 Use of Proceeds........................................................................... 7
1.11 Number of Loans Outstanding............................................................... 7
1.12 Overdrafts................................................................................ 7
2. Conditions Precedent................................................................................. 8
2.1 Conditions to Initial Loans............................................................... 8
2.2 Conditions to All Loans................................................................... 8
(a) Representations and Warranties....................................................... 8
(b) No Event of Default or Default....................................................... 8
3. Representations and Warranties....................................................................... 8
3.1 Organization and Qualification............................................................ 8
3.2 Due Authorization; No Default............................................................. 8
3.3 No Governmental Consent Necessary......................................................... 9
3.4 No Proceedings............................................................................ 9
3.5 Financial Statements...................................................................... 9
3.6 No Change in Condition; Solvency; Operating Leases........................................ 10
3.7 Compliance With Laws...................................................................... 10
3.8 No Other Violations....................................................................... 10
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3.9 Taxes and Assessments..................................................................... 10
3.10 ERISA and OSHA............................................................................ 11
3.11 Insurance................................................................................. 11
3.12 Environmental Matters..................................................................... 11
3.13 Margin Stock; Investment Company Act...................................................... 12
3.14 Proprietary Rights........................................................................ 12
3.15 Ownership; Subsidiaries................................................................... 12
3.16 SEC Filings............................................................................... 12
3.17 Representations and Warranties True, Complete and Correct;
Confirmation.............................................................................. 12
4. Affirmative Covenants................................................................................ 13
4.1 Maintenance of Existence and Qualifications............................................... 13
4.2 Payment of Taxes and Other Obligations.................................................... 13
4.3 Maintenance of Properties................................................................. 13
4.4 Notice of Adverse Events.................................................................. 13
4.5 Information and Documents to be Furnished to Lender....................................... 14
(a) Annual Financial Statements.......................................................... 14
(b) Quarterly Financial Statements....................................................... 14
(c) Monthly Financial Statements and Aging Schedules..................................... 14
(d) Certificates Regarding Financial Statements.......................................... 15
(e) Annual Budget........................................................................ 15
(f) SEC Documents........................................................................ 15
(g) ERISA Documents...................................................................... 15
(h) Other Documents...................................................................... 15
4.6 Access to Records and Property............................................................ 16
4.7 Insurance At Inmark Group Expense......................................................... 16
(a) Liability and Property Insurance..................................................... 16
(b) Copies of Policies................................................................... 16
(c) Notice and Proof of Loss............................................................. 16
(d) Use of Insurance Proceeds............................................................ 16
(e) No Obligation to Verify Policies..................................................... 16
4.8 Records................................................................................... 16
4.9 Maintenance of Account and Banking Relationships.......................................... 17
4.10 Delivery of Documents..................................................................... 17
4.11 Compliance with Laws...................................................................... 17
4.12 Further Assurances........................................................................ 17
5. Negative Covenants................................................................................... 17
5.1 No Consolidation, Merger, Acquisition, Liquidation........................................ 17
5.2 Disposition of Assets or Collateral....................................................... 18
5.3 Other Liens............................................................................... 18
5.4 Other Liabilities......................................................................... 18
5.5 Loans..................................................................................... 18
5.6 Guaranties; Contingent Liabilities; Investments........................................... 18
5.7 Dividends and Other Distributions......................................................... 18
5.8 Transactions with Affiliates.............................................................. 19
5.9 Sale of Inventory......................................................................... 19
5.10 Restrictions Regarding Notes and Accounts................................................. 19
5.11 Modification of Organizational Documents.................................................. 19
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5.12 Change Business........................................................................... 19
5.13 Hazardous Substances...................................................................... 19
5.14 Inconsistent Agreement; Rights Under Other Agreement...................................... 19
5.15 Change of Accounting Practices............................................................ 20
6. Financial Covenants.................................................................................. 20
6.1 Minimum EBITDA............................................................................ 20
6.2 Maximum Senior Debt Leverage Ratio........................................................ 20
6.3 Fixed Charge Coverage Ratio............................................................... 21
6.4 Capital Expenditures...................................................................... 21
7. Events of Default.................................................................................... 21
7.1 Failure to Pay............................................................................ 21
7.2 Failure to Perform or Observe Covenants................................................... 21
7.3 False Representation or Warranty.......................................................... 22
7.4 Security.................................................................................. 22
7.5 Loan Documents............................................................................ 22
7.6 Cross Default; Default on Other Debt...................................................... 22
7.7 Cessation of Business..................................................................... 22
7.8 Change in Condition....................................................................... 22
7.9 Liquidation or Dissolution................................................................ 23
7.10 Inability to Pay Debts; Bankruptcy or Insolvency.......................................... 23
7.11 Judgments................................................................................. 23
7.12 ERISA..................................................................................... 23
7.13 Minimum Stock Ownership by Management; Cessation of Employment
by Members of Management.................................................................. 23
8. Remedies............................................................................................. 24
8.1 Rights in General......................................................................... 24
8.2 Set-Off................................................................................... 24
8.3 Cumulative Remedies; No Waiver by Lender.................................................. 25
8.4 Waivers and Consents Relating to Remedies................................................. 25
8.5 Additional Waivers and Consents of the Inmark Group....................................... 25
9. Costs, Expenses and Taxes............................................................................ 26
10. Indemnification by Inmark Group...................................................................... 26
11. Miscellaneous........................................................................................ 26
11.1 Entire Agreement; Amendments; Lender's Consent............................................ 26
11.2 Notices................................................................................... 27
11.3 Binding Effect............................................................................ 28
11.4 Execution in Counterparts................................................................. 28
11.5 Severability of Provisions................................................................ 28
11.6 Table of Contents; Headings; Terminology.................................................. 28
11.7 Exhibits and Schedules.................................................................... 28
11.8 Limitation of Liability................................................................... 28
11.9 Brokers Fees.............................................................................. 29
11.10 Governing Law............................................................................. 29
11.11 Disclosure of Financial Information....................................................... 29
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EXHIBITS AND SCHEDULES
Exhibit A - Definitions
Exhibit B - Form of Revolving Note
Exhibit C - Form of Notice of Borrowing
Exhibit D - Form of Term Note
Exhibit E - Conditions Precedent to Initial Loans
Exhibit F - Form of Certificate of Chief Financial Officer
Exhibit G - Form of Guaranty
Exhibit H - Form of Pledge Agreement
Exhibit I - Form of Security Agreement
Exhibit J - Form of Subordination Agreement
Exhibit K - Form of Letter to Account Debtors
Exhibit L - Form of Legal Opinion of NY Counsel to Borrower
Exhibit M - Form of Legal Opinion of OH Counsel to Borrower
Exhibit N - Form of Assignment of Contract
Exhibit O - Form of Financial Condition and Solvency Certificate
Schedule 3.3- Governmental Consents
Schedule 3.-(a) Pro Formas
Schedule 3.- b) Projections
Schedule 3.- c) Other Financials
Schedule 3.- c) Operating Leases
Schedule 3.-1 Insurance
Schedule 3.12- Environmental Matters
Schedule 3.14- Proprietary Rights
Schedule 3.15- Ownership; Subsidiaries
Schedule 5.3- Certain Permitted Liens
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EXHIBIT 99.3
GUARANTY
GUARANTY (this "Guaranty") made and entered into as of March 31, 1998
by Inmark Enterprises, Inc., a Delaware corporation (the "Guarantor"), in favor
of PNC Bank, National Association, a national banking association, ("Lender").
PRELIMINARY STATEMENT:
Pursuant to the Loan Agreement dated as of the date hereof by and among
Guarantor, Inmark Services, Inc., a Delaware corporation ("Services"), Optimum
Group, Inc., an Ohio corporation (formerly OG Acquisition Corp., "New OGI") and
together with Services, "Borrower") and Lender (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"), Lender has agreed
to make Borrower (a) a term loan (the "Term Loan"), in the aggregate principal
amount of $5,000,000 and upon the terms and subject to the conditions set forth
therein and (b) revolving loans (the "Revolving Loans" and together with the
Term Loan, the "Loans") in the aggregate principal amount of $5,000,000 and upon
the terms and subject to the conditions set forth therein.
The Guarantor owns 100 percent of the issued and outstanding equity
securities of Services which in turn owns 100 percent of the issued and
outstanding equity securities of New OGI. The Loans will be of substantial
benefit to the Guarantor by making funds available to Borrower. The obligation
of Lender to make each of the Term Loan and the Revolving Loans under the Loan
Agreement is conditioned upon, among other things, the execution and delivery by
the Guarantor of this Guaranty.
AGREEMENT:
1. Definitions. Unless otherwise defined herein or unless the context otherwise
requires, all capitalized words and terms used herein shall have the respective
meanings and be construed herein as such words and terms are defined or
construed in the Loan Agreement.
2. Guaranty.
(a) The Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to Lender the prompt and full payment and other performance of all of
the Obligations of Borrower (the "Relevant Obligations") when each of such
Relevant Obligations is due (whether at a specific due date, at the stated
maturity, by acceleration or otherwise). The Guarantor further agrees to pay any
and all reasonable costs and expenses (including, reasonable attorney's fees and
expenses) which may be paid or incurred by Lender in enforcing any of its rights
under this Guaranty. The agreements and other obligations of the Guarantor under
this Guaranty (i) shall be absolute, unconditional and irrevocable, irrespective
(by way of example only) of the validity, legality or enforceability of any Loan
Document, in whole or in part, or of the existence, value or condition of any of
the Collateral, and (ii) shall be continuing and remain in full force and effect
until the indefeasible payment in full
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and other full performance of all of the Relevant Obligations and the full
payment and other performance of the Guarantor's other obligations contained in
this Guaranty.
(b) Without limiting the other provisions of this section 2, the
agreements and other obligations of the Guarantor under this Guaranty shall not
be affected, modified or in any other manner impaired upon the happening, in
whole or in part, of any event or circumstance which could otherwise constitute
a legal or equitable discharge or defense in whole or in part of Borrower and/or
the Guarantor (other than full payment and performance of all of the Relevant
Obligations and full payment and performance of the Guarantor's other
obligations under the Loan Documents), whether or not any one or more such
events or circumstances occur at one or more times and/or from time to time, and
whether or not with notice to, or the consent of, the Guarantor. The Guarantor
hereby absolutely, unconditionally and irrevocably consents to (without, by way
of example only, any reservation of rights on behalf of the Guarantor and
without requirement for notice to or further assent by the Guarantor, all of
which the Guarantor hereby waives), and agrees that the Guarantor's obligations
hereunder shall be absolute and unconditional irrespective of, each and all of
the actions and omissions contemplated by the provisions of this section 2(b),
including, any one or more of the following:
(i) the compromise, surrender, settlement, acceleration,
rescission of acceleration, release or termination of any or all of the
Relevant Obligations;
(ii) the modification, amendment, acceleration, compromise,
renewal, extension or other supplementation of (including, the
termination of any aspect of) the Relevant Obligations or any provision
of any Loan Document (whether material or otherwise);
(iii) any failure, omission, delay or lack of diligence on the
part of Lender to enforce, assert or exercise any right, power or
remedy conferred on Lender in any Loan Document, including, any failure
by Lender to preserve any or all of its rights with respect to any
Collateral or other security securing the Relevant Obligations
(including, the actions and omissions referred to in section 2(b)(v) of
this Guaranty) or otherwise, or any other act or acts on the part of
Lender;
(iv) the release or discharge of the Guarantor from the
performance or observance of all or a portion of the Relevant
Obligations or any other agreement, covenant or other obligation
contained in any Loan Document or by operation of law;
(v) failure to perfect or continue the perfection of its
security interest or any other Lien with respect to, or to protect,
secure or insure, in whole or in part, any of the Collateral or other
security now existing or hereafter obtained in respect of the
Obligations;
(vi) any sale, pledge, surrender, release, waiver, alteration,
exchange, or change in any Collateral or other security now existing or
hereafter obtained in respect of the Obligations;
(vii) the failure to give notice to the Guarantor of the
occurrence of a default or an Event of Default under any Loan Document;
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(viii) any failure of title with respect to the interests of
any member of the Inmark Group in respect of any Collateral or other
security now existing or hereafter obtained in respect of the
Obligations;
(ix) the waiver or release by Lender of the payment,
performance or observance of any or all of the Guarantor's or
Borrower's covenants, agreements or other obligations contained in any
Loan Document;
(x) rescission of any demand made by Lender for payment of any
of the Relevant Obligations and the continuation of any Relevant
Obligations; and
(xi) (A) Any member of the Inmark Group shall have applied for
or consented to the appointment of a custodian, receiver or trustee, or
shall permit or consent to a liquidation of all or a substantial part
of any of their respective assets or properties; (B) a custodian,
receiver, trustee or liquidator for any member of the Inmark Group or
any of their respective assets or properties shall have been appointed
with or without consent of such Person; (C) any member of the Inmark
Group (1) is generally not paying its debts as they become due, (2) has
made a general assignment for the benefit of creditors, (3) has filed a
voluntary petition in bankruptcy, (4) has filed a petition or an answer
seeking reorganization or an arrangement with creditors or seeking to
take advantage of any insolvency law or to reorganize, (5) has filed an
answer admitting the material allegations of a petition in any
bankruptcy, reorganization or insolvency proceeding, or (6) has taken
any action for the purpose of effecting any of the foregoing; (D) a
petition in bankruptcy shall have been filed against any member of the
Inmark Group; (E) an order for relief for the benefit of, or with
respect to, any member of the Inmark Group has been entered under the
Federal Bankruptcy Code; (F) an order, judgment or decree shall have
been entered, without the application, approval or consent of any
member of the Inmark Group, by any court of competent jurisdiction
approving a petition seeking reorganization of any member of the Inmark
Group and appointing a receiver, trustee, custodian or liquidator of
any member of the Inmark Group or a substantial part of its assets and
properties; or (G) any member of the Inmark Group shall have suspended
the transaction of its usual business.
(c) No payment or payments made by any member of the Inmark Group or
any other Person or received or collected by Lender from any member of the
Inmark Group or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Relevant Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of the Guarantor
hereunder, except to the extent that such payment or payments constitute
indefeasible payment of the amount thereof to Lender. The Guarantor shall,
notwithstanding any such payment or payments, remain liable for the Relevant
Obligations (to the extent not indefeasibly paid by any member of the Inmark
Group) until the date the Relevant Obligations have been indefeasibly paid and
otherwise performed in full.
(d) The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to Lender on account of its liability hereunder,
it will notify Lender in writing that such payment is made under this Guaranty
for such purpose.
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(e) The Guarantor waives and agrees not to assert any duty on the part
of Lender to disclose to the Guarantor any facts that Lender may now or
hereafter know about Borrower, regardless of whether Lender (i) has reason to
believe that any such facts materially increase the risk beyond that which the
Guarantor intends to assume, (ii) has reason to believe that such facts are
unknown to the Guarantor or (iii) has reasonable opportunity to communicate such
facts to the Guarantor. The Guarantor hereby agrees that it is fully responsible
for being and keeping informed of the condition (financial or otherwise) of
Borrower and of all circumstances bearing on the risk of the failure of Borrower
to perform its obligations under any Loan Document.
(f) The Guarantor agrees that, notwithstanding any stay, injunction or
other prohibition preventing acceleration of all or any portion of the Relevant
Obligations, such Relevant Obligations (whether or not then due and payable by
Borrower) may, at the election of Lender following the occurrence of an Event of
Default, forthwith become due and payable by the Guarantor for purposes of this
Guaranty.
(g) The Guarantor hereby waives any and all notice of the creation,
renewal, extension or accrual of any of the Relevant Obligations and notice of
or proof of reliance by Lender upon this Guaranty or acceptance of this
Guaranty, and the Relevant Obligations, and any of them shall conclusively be
deemed to have been created, contracted or incurred in reliance upon this
Guaranty, and all dealings between Borrower or the Guarantor, on the one hand,
and Lender, on the other, shall likewise be conclusively presumed to have been
had or consummated in reliance upon this Guaranty.
(h) The Guarantor hereby waives diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or upon Borrower and the
Guarantor with respect to the Relevant Obligations. Without limiting the other
provisions of this section 2, this Guaranty shall be construed as a continuing,
absolute and unconditional guarantee of payment and performance without regard
to the validity, regularity or enforceability of any of the Relevant Obligations
or any other collateral security therefor or guarantee thereof or right of
offset with respect thereto at any time or from time to time held by Lender and
without regard to any defense, set-off or counterclaim which may at any time be
available to or be asserted by any member of the Inmark Group against Lender
(other than payment or performance in full of the Relevant Obligations), or by
any other circumstance whatsoever (with or without notice to or knowledge of the
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Relevant Obligations or the other obligations of the
Guarantor under the Loan Documents, in bankruptcy or in any other instance, and
the obligations and liabilities of the Guarantor hereunder shall not be
conditioned or contingent upon the pursuit by Lender or any other Person at any
time of any right or remedy against Borrower, the Guarantor or any other Person
which may be or become liable in respect of all or any part of the Relevant
Obligations or against any collateral security therefor or guarantee of or right
of offset with respect thereto. This Guaranty shall remain in full force and
effect and be binding in accordance with and to the extent of its terms upon the
Guarantor and the administrators, executors, heirs, successors and permitted
assigns of the Guarantor, until the date all of the Relevant Obligations shall
have been satisfied by indefeasible payment in full and other performance.
(i) Notwithstanding anything to the contrary contained herein, this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment or performance of any of the Relevant Obligations
(whether by Borrower, the Guarantor or any other Person) or any of the
obligations of the Guarantor contained in this Guaranty is rescinded or, in the
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case of payments, must otherwise be returned for any reason, including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower or the
Guarantor or otherwise, all as though such payment had not been made.
3. Obligation Unconditional. Without limiting the provisions of section 2, (i)
no acts of commission or omission of any kind at any time on the part of Lender
(or its successors, assigns or transferees) with respect to any matter
whatsoever, shall in any way impair the rights of Lender to enforce this
Guaranty against the Guarantor, and (ii) no defense, right of set-off,
counterclaim, or any other similar matter of any kind or nature which the
Guarantor or Borrower has or may have against Lender shall be asserted as a
defense to the performance of this Guaranty.
4. Direct Obligation. Lender shall, in its sole discretion, have the right to
proceed first directly against the Guarantor under this Guaranty without
proceeding against Borrower and without exhausting any other rights or remedies
which it may have, including, without resorting to any other collateral or other
security held by Lender. This Guaranty is a guarantee of payment and performance
and not merely of collection.
5. Subordination. The Guarantor hereby waives any and all rights which it may
acquire (a) to be subrogated to any of the rights of Lender against Borrower or
(b) to seek contribution or reimbursement from Borrower in respect of payments
made by the Guarantor in each case prior to satisfaction in full of the Relevant
Obligations. The Guarantor hereby agrees that upon the occurrence and during the
continuance of an Event of Default, any and all of its rights and claims against
Borrower or any of Borrower's properties or revenues, however arising, shall be
subordinate and subject in right of payment to the prior payment and
satisfaction in full of all of the Relevant Obligations. If any amount shall be
paid to the Guarantor on account of such subrogation rights at any time when all
the Relevant Obligations shall not have been indefeasibly paid in full, such
amount shall be held in trust for the benefit of Lender and shall forthwith be
paid to Lender to be credited and applied to the Relevant Obligations, whether
matured or unmatured, in accordance with the terms of the Loan Documents.
6. Benefit of and Enforcement by Lender. This Guaranty is made by the Guarantor
in favor of Lender for the benefit of Lender and its successors, assigns and
transferees, each of which shall be entitled to enforce performance and
observance of this Guaranty to the same extent Lender is entitled to do so.
7. Continuing Guaranty; Reinstatement of Guaranty. This Guaranty is a continuing
agreement and shall remain in full force and effect until the indefeasible
payment in full and other performance in full of the Relevant Obligations and
full performance of the Guarantor's other agreements contained in the Loan
Documents, including, all amounts payable under the Loan Documents by the
Guarantor. If any payment to Lender by the Guarantor is held to constitute a
preference or a voidable transfer under applicable state or federal laws, or if
for any other reason Lender is required to refund any one or more such payments
to the payor thereof or to pay the amount thereof to any other Person, such
payment to Lender shall not constitute a release of the Guarantor from any
liability hereunder, and the Guarantor agrees to pay such amount to Lender on
demand and agrees and acknowledges that this Guaranty shall continue to be
effective or shall be reinstated, as the case may be, to the extent of any such
payment or payments.
-5-
<PAGE>
8. Miscellaneous.
(a) Entire Agreement. This Guaranty together with the other Loan
Documents constitute the entire agreement among the parties with respect to
their subject matter, and supersedes all prior and contemporaneous agreements,
understandings, inducements or conditions among the respective parties, whether
express or implied, oral or written.
(b) Certain Applicable Loan Agreement Provisions. Without limiting the
generality or specificity of anything in the Loan Agreement, for the avoidance
of doubt, the provisions of sections 8, 11.1 (except the first sentence
thereof), 11.2, 11.3, 11.4, 11.5, 11.8 and 11.10 and Exhibit A of the Loan
Agreement apply to this Security Agreement.
[signature page follows]
-6-
<PAGE>
IN WITNESS WHEREOF, the Guarantor, intending to be legally bound
hereby, has executed and delivered this Guaranty as of the date and year first
above written.
INMARK ENTERPRISES, INC.
By: /s/John P. Benfield
-7-
EXHIBIT 99.4
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of March 31, 1998 (this "Pledge Agreement")
made by Inmark Enterprises, Inc., Delaware corporation ("Parent"), Inmark
Services, Inc., a Delaware corporation ("Services"), and Optimum Group, Inc., an
Ohio corporation (formerly OG Acquisition Corp. ("New OGI"), in favor of PNC
Bank, National Association ("Lender"). Parent, Services and New OGI shall
collectively be referred to herein as "Grantors" and each individually as
"Grantor." Any capitalized terms used herein and not otherwise defined in
section 1 shall have the meaning ascribed to such term in the Loan Agreement
dated as of even date herewith (the "Loan Agreement") by and among Grantors and
Lender.
PRELIMINARY STATEMENT:
Pursuant to the Loan Agreement, Lender has agreed to make certain Loans
to Services and New OGI (collectively, "Borrower") upon the terms and conditions
set forth therein and the other Loan Document. Parent has agreed to guarantee
the prompt and full payment and other performance of all of the Obligations of
Borrower pursuant to the Guaranty. Each Grantor is the record owner of (A) those
shares of stock described in Part A of Schedule I (the "Pledged Shares") and
issued by the corporations names therein, (B) those other equity securities,
including securities evidencing interests in limited liability companies and
partnerships (the "Other Pledged Equity Securities") described in Part B of
Schedule I and (C) those instruments and other securities evidencing
indebtedness described in Part C of Schedule I and issued by the obligor named
therein (the "Pledged Debt"). It is a condition precedent to the obligation of
Lender to make the Loans that the Grantors execute and deliver to Lender this
Pledge Agreement.
AGREEMENT:
1. Grant and Pledge of Security; Cross Collateralization.
1.1 Grant and Pledge of Security. As security for the full and punctual
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of all of the Obligations, whether pursuant to any
Loan Document or otherwise, each Grantor hereby pledges, transfers and assigns
to Lender (and its successors and assigns), and grants to Lender (and its
successors and assigns) security interests in all of its Security Collateral.
The security interests granted hereby, and all remedies and other rights stated
or referred to in this Pledge Agreement or any other Loan Document, shall
continue in full force and effect until the later of (i) the termination of the
Revolving Line of Credit or (ii) the full, final and indefeasible payment and
performance of the Obligations. Each Grantor agrees that all of the Security
Collateral constitutes equal security for all of the Obligations of such
Grantor, and agrees that Lender shall be entitled to sell, retain or otherwise
deal with any or all of such Collateral, in any order or simultaneously as
Lender shall determine in its sole and absolute discretion, free of any
requirement for the marshalling of assets or other restriction upon Lender in
dealing with such Security Collateral. Grantor agrees that Lender may at
Lender's election proceed directly against any Grantor for collection of any or
all of its Obligations without
<PAGE>
first selling, retaining or otherwise dealing with any of the Security
Collateral. Without limiting the generality of the foregoing, this Pledge
Agreement secures the payment of all amounts that constitute part of the
Obligations and would be owed by a Grantor to Lender under the Loan Documents
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving such
Grantor.
1.2 Definition of Security Collateral. For the purposes of the Loan
Documents, "Security Collateral" means (a) the Pledged Shares, the certificates
representing the Pledged Shares, and all dividends, cash, instruments, and other
proceeds and other property from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares;
(b) the Other Pledged Equity Securities, and the certificates representing the
Other Pledged Equity Securities, and all dividends, cash, instruments, and other
proceeds and other property from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of the Other Pledged
Equity Securities; (c) the Pledged Debt, the instruments evidencing the Pledged
Debt, and all interest, cash, instruments, and other proceeds and other property
from time to time received, receivable, or otherwise distributed in respect of
or in exchange for any or all of the Pledged Debt; (d) all additional shares of
stock of any issuer of the Pledged Shares or any other issuer from time to time
acquired by any Grantor in any manner, and the certificates representing such
additional shares, and all dividends, cash, instruments, and other proceeds and
other property from time to time received, receivable, or otherwise distributed
in respect of or in exchange for any or all of such shares; (e) all additional
other equity securities of any issuer of the Other Pledged Equity Securities or
any other issuer from time to time acquired by any Grantor in any manner, and
the certificates representing such additional other equity securities, and all
dividends, cash, instruments, and other proceeds and other property from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for any or all of such shares; and (f) all additional indebtedness from time to
time owed to any Grantor by any obligor of the Pledged Debt or any other obligor
and the instruments evidencing such indebtedness, and all interest, cash,
instruments, and other proceeds and other property from time to time received,
receivable, or otherwise distributed in respect of or in exchange for any or all
such indebtedness.
1.3 Cross Collateralization. The Security Collateral of each Grantor
secures all the Obligations and all other obligations now or hereafter
outstanding under all other agreements between any Grantor and Lender or any of
its Affiliates, and the collateral pledged under any such other agreement with
Lender or any of its Affiliates secures the Obligations.
1.4 Delivery of Security Collateral. The Grantors acknowledge that each
has delivered to Lender all certificates, instruments and other Documents
representing Security Collateral that exist on the date hereof and will
immediately deliver to Lender all certificates, instruments and other Documents
representing Security Collateral that comes into existence in the future
immediately after receipt of the same by any Grantor. Concurrently with the
delivery to Lender of each certificate, instrument or other Document
representing Security Collateral, the appropriate Grantor shall, if appropriate,
in form and substance satisfactory to Lender, indorse the same over to Lender in
blank and/or deliver an undated stock powers, bond powers or similar Documents
covering such certificate, instrument or other Document, duly executed in blank
by such Grantor. Pending the delivery by the Grantors of any certificate,
instrument or other Document representing Security Collateral, Grantor shall
hold the same in trust for Lender, as additional collateral security for the
Obligations.
2
<PAGE>
1.5 Further Assurances. Each Grantor shall execute and deliver such
further Documents (in form and substance satisfactory to Lender) and take such
other actions as Lender may request from time to time in order to obtain and
preserve the full benefits of the Loan Documents and the rights and powers
therein granted. Each Grantor also hereby authorizes Lender to file any
financing statement, and all other types of Documents required to be filed to
perfect any of the Liens granted herein, without the signature of such Grantor
to the extent permitted by applicable law. A carbon, photographic or other
reproduction of this Pledge Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
1.6 Grantors Remains Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Security Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Pledge Agreement had not been executed, (b) the exercise by Lender of any
of the rights hereunder shall not release any Grantor from any of its duties or
obligations under the contracts and agreement included in the Security
Collateral and (c) Lender shall not have any obligation or liability under the
contracts and agreements included in the Security Collateral by reason of this
Pledge Agreement or any other Loan Document, nor any Lender be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
2. Representations and Warranties. Each Grantor, jointly and severally,
represents and warrants to Lender that, knowing and intending that Lender will
rely thereon in making the Loans that the following statements are true,
complete and correct:
2.1 Title; Liens; etc. (a) Security Collateral listed on Schedule I
constitutes all of the shares of stock, other equity securities, and debt
securities of any issuer or obligor owned by any Grantor; (b) all of the
information set forth in Schedule I is true, complete and correct; (c) all of
the shares of stock and other equity securities that constitute Security
Collateral have been duly authorized and validly issued and are fully paid and
nonassessable; (d) all of the debt securities that constitute Security
Collateral have been duly authorized, authenticated or issued; (e) the debt
securities that constitute Security Collateral is the legal, valid and binding
obligation of the issuers thereof, enforceable in accordance with its terms, and
is not in default; (f) the Grantor identified as the owner of the Security
Collateral in Schedule I is the legal, record and beneficial owner of, and has
good and marketable title to, such Security Collateral, free and clear of any
Lien except the Lien created by the Collateral Documents; and (g) none of the
Security Collateral is subject to any prohibition against encumbering, pledging,
hypothecating or assigning the same or requires notice or consent in connection
therewith (other than those which have been made or obtained prior to the date
hereof).
2.2 Perfected First Priority Liens. This Pledge Agreement together with
the other Collateral Documents is effective to create in favor of Lender, a
legal, valid and enforceable security interest in all right, title and interest
of Grantors in the Security Collateral. Upon delivery to Lender of the
certificates or instruments evidencing the Security Collateral (together with
stock powers, bond powers or similar Documents executed in blank), this Pledge
Agreement together with the other Collateral Documents shall constitute a fully
perfected first priority Lien on, and security interest in, all right, title and
interest in the Security Collateral for the benefit of Lender.
3. Voting Rights; Dividends; Etc..
3
<PAGE>
3.1 Voting Rights. So long as no Event of Default shall have occurred
and be continuing, each Grantor shall be permitted to exercise (or refrain from
exercising) any and all voting and other consensual rights with respect to the
Security Collateral for any purpose not inconsistent with the terms of any Loan
Document; provided that (A) no Grantor shall exercise (or refrain from
exercising) any such right, if in Lender's judgment, such action (or inaction)
would or might reasonably be expected to impair any Collateral and (B) each
Grantor shall deliver to Lender at least five calendar days' notice of the
manner in which it intends to exercise (or the reasons for refraining from
exercising) any such right.
3.2 Distributions. So long as no Event of Default shall have occurred
and be continuing, each Grantor shall be entitled to receive and retain any
retain all dividends and interest paid in respect of the Security Collateral;
provided, that any and all
(a) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable, or
otherwise distributed in respect of, or in exchange for, any Security
Collateral;
(b) dividends and other distributions paid or payable in cash in
respect of any Security Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus, or paid-in capital surplus; and
(c) cash paid, payable, or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Security
Collateral
shall be, and shall be forthwith delivered to Lender to hold as Security
Collateral and shall, if received by such Grantor, be received in trust for the
benefit of Lender, be segregated from the other property or funds of all
Grantors, and be forthwith delivered to Lender as Security Collateral in the
same form as so received (with any necessary indorsement or assignment).
3.3 Event of Default - Voting Rights and Distributions. If an Event of
Default shall occur and be continuing,
(a) all right of any Grantor to exercise (or refrain from
exercising) the voting and other consensual rights that it would otherwise be
entitled to exercise pursuant to section 3.1 and to receive dividends and
interest payments that it would otherwise be authorized to receive and retain
pursuant to section 3.2 shall cease, and all such rights shall thereupon become
vested in Lender or its nominee who shall thereupon have the sole right to
exercise or refrain from exercising such voting and other consensual rights and
to receive and hold as Collateral such dividends and interest payments, all
without liability except to account for property actually received by it;
provided, that Lender shall have no duty to any Grantor to exercise any such
right and shall not be responsible for any failure to do so or delay in so
doing.
(b) all dividend and interest payments that are received by
any Grantor contrary to the provisions of section 3.3(a) shall be received in
trust for the benefit of Lender, shall be segregated from other funds of Grantor
and shall be forthwith paid over to Lender as Collateral in the same form so
received (with any necessary endorsement or assignment).
4
<PAGE>
(c) The rights of Lender hereunder shall not be conditioned or
contingent upon the pursuit by Lender of any right or remedy against the
Grantors or against any other Person which may be or become liable in respect of
all or any part of the Obligations or against any collateral security therefor,
other guarantee therefor or right of offset with respect thereto. Lender shall
not be liable for any failure to demand, collect or realize upon all or any part
of the Collateral or for any delay in so doing, nor shall Lender be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Grantors or any other person or to take any other action whatsoever with
regard to the Collateral or any part thereof.
3.4 Additional Securities; Other Liens. Each Grantor, jointly and
severally, covenants and agrees that, until full and final payment and
performance of the Obligations and so long as the Revolving Line of Credit
remains in effect, it shall not (and shall cause each of its Subsidiaries and
Affiliates not to) (a) vote to enable, or take any other action to permit, any
of the issuers of any Security Collateral to issue any additional shares of
stock or any additional other equity securities to any Person other than a
Grantor, (b) sell, assign, transfer, exchange or otherwise dispose of, or grant
any option with respect to, the Security Collateral or (c) create, incur or
permit to exist any Lien with respect to, any of the Security Collateral, or any
interest therein, except for the Lien provided for by the Collateral Documents.
4. Additional Powers of Lender.
4.1 Irrevocable Authorization and Instruction. In addition to those
rights, powers and privileges, granted to Lender in section 5 of the Security
Agreement and in other Loan Documents, each Grantor hereby authorizes and
instructs each issuer of any Security Collateral to comply with any instruction
concerning such Security Collateral received by it from Lender in writing that
(a) states that an Event of Default has occurred and is continuing, and (b) is
otherwise in accordance with the terms of the Loan Documents, without any other
or further instructions from any Grantor; and each Grantor agrees that each such
entity shall be fully protected in so complying.
4.2 Irrevocability; Lender's Discretion. Each Grantor, jointly and
severally, covenants and agrees that any action described in section 4.1 may be
taken at Lender's sole and absolute discretion, at any time and from time to
time, and (except as may be stated specifically to the contrary in section 4.1
with respect to any power) and each Grantor hereby ratifies and confirms all
actions so taken. Each Grantor, jointly and severally, further covenants and
agrees that the powers of attorney granted by section 4 are coupled with an
interest and shall be irrevocable until full and final payment and performance
of the Obligations and until the Revolving Line of Credit is no longer in
effect; that said powers are granted solely for the protection of Lender's
interest and Lender shall have no duty to exercise any thereof; that the
decision whether to exercise any of such powers, and the manner of exercise,
shall be solely within Lender's discretion; and that neither Lender nor any of
its directors, officers, employees or agents shall be liable for any act of
omission or commission, or for any mistake or error of judgment, in connection
with any such powers.
5. Rights Regarding Collateral. Upon the occurrence of an Event of Default,
Lender shall be entitled to the rights and remedies, and each Grantor, jointly
and severally, shall have the obligations, set forth in the Loan Documents,
including those in section 8 of the Loan Agreement and those in the Security
Agreement.
5
<PAGE>
6. Registration Rights. If Lender shall determine to exercise its rights to sell
all or any of the Security Collateral pursuant to section 5, each Grantor
jointly and severally agrees that, upon request of Lender, it will, at its own
expense:
(a) execute and deliver, and cause each issuer of the Security
Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver, all such instruments and documents, and
do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of Lender, advisable to register such
Security Collateral under the provisions of the Securities Act of 1933,
as from time to time amended (the "Securities Act"), and to cause the
registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to
be furnished, and to make all amendments and supplements thereto and to
the related prospectus which, in the opinion of Lender, are necessary
or advisable, all in conformity with the requirements of the Securities
Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto;
(b) use its best efforts to qualify the Security Collateral
under the state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Security
Collateral, as requested by Lender;
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earning statement which will
satisfy the provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Security Collateral or any
part thereof valid and binding and in compliance with applicable law.
Each Grantor further acknowledges the impossibility of ascertaining the amount
of damages which would be suffered by Lender or the Banks by reason of the
failure by such Grantor to perform any of the covenants contained in this
section and, consequently, agrees that, if such Grantor shall fail to perform
any of such covenants, it shall pay, as liquidated damages and not as a penalty,
an amount equal to the value of the Security Collateral on the date Lender shall
demand compliance with this section.
7. Security Interest Absolute. All rights of Lender and the pledge, transfer and
assignment and security interest hereunder, and all obligations of each Grantor
hereunder, shall be absolute and unconditional, irrespective of (a) any lack of
validity, regularity, or enforceability of any Loan Document, (b) any change in
time, manner, or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from any Loan Document, including, any increase in the Obligations resulting
from the extension of additional credit to Borrower or any of its Subsidiaries
or Affiliates or otherwise; (c) any taking, exchange, release, or non-perfection
of any other Collateral or any taking, release, or amendment or waiver or
consent to departure from any guaranty, for all or any of the Obligations; (d)
any manner of application of the Collateral, or proceeds thereof, to all or any
of the Obligations, or any manner of sale or other disposition of any Collateral
for all or any of the Obligations or any other assets of Borrower or any of its
Subsidiaries or Affiliates; (e) any change, restructuring, or termination or the
6
<PAGE>
corporate existence of Borrower or any of its Subsidiaries or Affiliates; or (f)
any other circumstance that might otherwise constitute a defense available to,
or a discharge of, Borrower or a third-party Grantor of a security interest.
8. Miscellaneous Provisions.
8.1 Entire Agreement. This Pledge Agreement together with the other
Loan Documents constitute the entire agreement among the parties with respect to
their subject matter, and supersedes all prior and contemporaneous agreements,
understandings, inducements or conditions among the respective parties, whether
express or implied, oral or written.
8.2 Schedules. All of the Schedules to this Pledge Agreement are hereby
incorporated by reference and made a part hereof.
8.3 Certain Applicable Loan Provisions. Without limiting the generality
or specificity of anything in the Loan Agreement, for the avoidance of doubt the
provisions of sections 8, 11.1 (except the first sentence thereof), 11.2, 11.3,
11.4, 11.5, 11.6, 11.8, 11.10 and Exhibit A of the Loan Agreement apply to this
Pledge Agreement.
[signature page follows]
7
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, has caused this Pledge Agreement to be duly executed and delivered on
the date and year first above written.
INMARK ENTERPRISES, INC.
By: /s/ John P. Benfield
Name: John P. Benfield
Title: President
INMARK SERVICES, INC.
By: /s/ John P. Benfield
Name: John P. Benfield
Title: President
OPTIMUM GROUP, INC.
(formerly OG Acquisition Corp.)
By: /s/ John P. Benfield
Name: John P. Benfield
Title: President
8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
SCHEDULE I
Part A
Stock Class of Stock Par Value Number of Percentage
Issuer/Holder Stock Certificate Shares Ownership of
No(s). Issuer
(fully-diluted
basis)
Inmark Common 2 $.001 5,000 100%
Services,
Inc./Inmark
Enterprises, Inc.
Optimum Common 3 None 100 100%
Group, Inc./
Inmark
Services, Inc.
</TABLE>
<TABLE>
====================================================================================================================================
Part B
<S> <C> <C> <C> <C>
Issuer/Holder Description of Certificate Number of Percentage
Equity No(s). Securities Ownership of Issuer
Security (fully-diluted basis)
N/A
====================================================================================================================================
Part C
Issuer/Holder Description of Certificate Final Original Principal
Debt No(s). Maturity Amount
N/A
=========================== =================== =================== =================== ===========================
</TABLE>
9
EXHIBIT 99.5
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of this 31st day of March, 1998, made
by Inmark Enterprises, Inc., Delaware corporation ("Parent"), Inmark Services,
Inc., a Delaware corporation ("Services"), and Optimum Group, Inc., an Ohio
corporation (formerly OG Acquisition Corp. ("New OGI"), in favor of PNC Bank,
National Association ("Lender"). Parent, Services and New OGI shall collectively
be referred to herein as "Grantors" and each individually as "Grantor." Any
capitalized terms used herein and not otherwise defined in section 1 shall have
the meaning ascribed to such term in the Loan Agreement dated as of even date
herewith (the "Loan Agreement") by and among Grantors and Lender.
PRELIMINARY STATEMENT:
Pursuant to the Loan Agreement, Lender has agreed to make certain Loans
to Services and New OGI (collectively, "Borrower") upon the terms and conditions
set forth therein and the other Loan Documents. Parent has agreed to guarantee
the prompt and full payment and other performance of all of the Obligations of
Borrower pursuant to the Guaranty. As security for all the Obligations, Grantors
have agreed to grant to Lender a first priority lien on and security interest in
the Collateral. Lender has agreed to execute and deliver the Loan Agreement upon
the condition, among others, that each Grantor execute and deliver this Security
Agreement to Lender.
AGREEMENT:
1. Defined Terms. As used herein, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Account" means all items of each Grantor described or otherwise
included in the UCC definition thereof (in all cases whether now owned or
hereafter acquired by any Grantor and wherever located) and all of the
following, whether or not so described or included and without limiting the
generality of the foregoing (in all cases whether now existing or hereafter
created): all obligations of any kind or nature at any time due or owing any
Grantor and all rights of any Grantor to receive payment or any other
consideration (whether classified under the UCC or the law of any other state as
accounts, accounts receivable, contract rights, chattel paper, general
intangibles, or otherwise) including, invoices, contract rights, accounts
receivable, general intangibles, choses-in-action, notes, drafts, acceptances,
instruments and all other debts, obligations and liabilities in whatever form
owing to any Grantor from any other Person, together with all security for any
thereof, and all of the Grantors' rights to goods sold (whether delivered,
undelivered, in transit or returns), represented by any thereof, together with
all proceeds and products of any of the foregoing.
"Collateral" means all of the following of each Grantor, wherever
located and whether now existing or hereafter created or arising and whether now
owned or hereafter acquired by any Grantor: (a) all Accounts; (b) all Equipment;
(c) all Inventory; (d) all fixtures; (e) all guaranties, security and liens for
payment of any Accounts; (f) all documents of title, policies or certificates of
insurance,
-1-
<PAGE>
insurance proceeds, proceeds of condemnation or other seizure, securities,
chattel paper and other documents and instruments evidencing or pertaining to
any thereof; (g) all claims of each Grantor against third parties for loss of or
damage to, or otherwise relating to, any of the Collateral; (h) all files,
correspondence, customer lists, computer programs, tapes, discs and related data
processing software, general ledgers, information respecting Accounts
(including, without limitation any identifying any Account debtor or the amount
owed by same), or any books and records owned by any Grantor or in which any
Grantor has an interest, which contains information identifying any of the
Collateral or which would or may otherwise be necessary or helpful in the actual
and/or potential realization on any of the Collateral; (i) all moneys,
securities, drafts, notes, items, Contracts and other contract rights, leases,
documents of title, licenses, goodwill, and all general or special deposits,
balances, sums, proceeds, tax refunds and credits of any Grantor; (j) all
patents and patent applications (including all letters patent of the United
States and all reissues and extensions thereof, any thereof referred to in
Schedule 3.14 of the Loan Agreement, and all applications for letters patent of
the United States and all divisions, continuations and continuations-in-part
thereof or any other country, including, any thereof referred to in Schedule
3.14 of the Loan Agreement) (collectively, "Patents"), patent and know-how
licenses, trade secrets, copyrights, inventions, technology permits, trademarks,
trade names, corporate names, service marks, logos and other source or business
identifiers, and all applications in connection therewith, including, any
thereof referred to in Schedule 3.14 of the Loan Agreement (collectively,
"Trademarks"), and the goodwill associated therewith and other franchises and
licenses in which any Grantor has an interest, and all other intangible personal
property similar to any of the foregoing; (k) all rights and remedies which any
Grantor might exercise with respect to any of the foregoing but for the
execution of this Security Agreement; (l) all goodwill; (m) all general
intangibles not listed in the preceding clauses in this definition of Collateral
and described or otherwise included in the UCC definition thereof; (n) all other
personal property of any kind or nature, tangible or intangible, not listed in
the preceding clauses in this definition of Collateral; and (o) all accessions
and additions to, replacements and substitutions for, and proceeds and products
of, the items described in the preceding clauses in this definition of
Collateral.
"Contracts" means all contracts (including, Capital Leases) or other
Documents in or under which any Grantor may now or hereafter have any right,
title or interest, whether the same pertain to the acquisition, lease, sale or
other disposition of any Inventory, Equipment, fixtures, real property or any
interest in real property, or otherwise, as the same may be amended,
supplemented, restated or otherwise modified from time to time, including, (a)
all rights of any Grantor to receive moneys due and to become due thereunder or
otherwise in connection therewith, (b) all rights of any Grantor to damages
arising out of, or for, any breach or other default in respect thereof and (c)
all rights of any Grantor to perform and to exercise all remedies thereunder.
"Equipment" means all items described or otherwise included in the UCC
definition thereof and all of the following, whether or not described or
included and without limiting the generality of the foregoing (in all cases
whether now owned or hereafter acquired by any Grantor and wherever located):
all machinery, equipment, furnishing and fixtures, whether affixed to real
property or not, and all additions, substitutions for, replacements of or
extensions to any of such items and all attachments, components, parts
(including spare parts) and accessories whether installed thereon or affixed
thereto.
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"Inventory" means all items described or otherwise included in the UCC
definition thereof (in all cases whether now owned or hereafter acquired by any
Grantor and wherever located) and all of the following, whether or not so
described or included and without limiting the generality of the foregoing (in
all cases whether now owned or hereafter acquired by any Grantor and wherever
located): all goods, merchandise or other personal property held by any Grantor
for sale or lease, and all right, title and interest of any Grantor therein and
thereto; all raw materials, work or goods in process; and all materials and
supplies of any kind or description used or usable in connection with the
performance of services by any Grantor and/or the operation of the businesses
operated by any Grantor, together with all proceeds and products of any of the
foregoing.
"Obligations" as to any Grantor, means all of the obligations and
liabilities of such Grantor under the Loan Documents or otherwise to Lender or
any Affiliate of Lender, whether for principal, interest, fees, expenses,
indemnities or otherwise or whether now existing or hereafter incurred under the
Loan Documents or otherwise.
2. Security Interests; Cross Collateralization.
2.1 Grant of Security Interests. As security for the full and punctual
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of all of the Obligations, whether pursuant to any
Loan Document or otherwise, each Grantor hereby pledges, transfers and assigns
to Lender (and its successors and assigns), and grants to Lender (and its
successors and assigns) security interests in, (a) all of the Collateral now or
hereafter owned by it (or to which it has any right, title or interest),
wherever located and whether now existing or hereafter created, and (b) all
accessions and additions thereto, replacements and substitutions therefor, and
proceeds and products thereof. The security interests granted hereby, and all
remedies and other rights stated or referred to in this Security Agreement or
any other Loan Document, shall continue in full force and effect until the later
of (i) the termination of the Revolving Line of Credit or (ii) the full, final
and indefeasible payment and performance of the Obligations. Each Grantor agrees
that all of the Collateral now or hereafter owned by it (or to which it has any
right, title or interest) constitutes equal security for all of the Obligations
of such Grantor, and agrees that Lender shall be entitled to sell, retain or
otherwise deal with any or all of such Collateral, in any order or
simultaneously as Lender shall determine in its sole and absolute discretion,
free of any requirement for the marshalling of assets or other restriction upon
Lender in dealing with such Collateral. Grantor agrees that Lender may at
Lender's election proceed directly against any Grantor for collection of any or
all of its Obligations without first selling, retaining or otherwise dealing
with any of the Collateral. Without limiting the generality of the foregoing,
this Security Agreement secures the payment of all amounts that constitute part
of the Obligations and would be owed by a Grantor to Lender under the Loan
Documents but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
such Grantor.
2.2 Cross Collateralization. The Collateral of each Grantor secures all
the Obligations and all other obligations now or hereafter outstanding under all
other agreements between any Grantor and Lender or any of its Affiliates, and
the collateral pledged under any such other agreement with Lender or any of its
Affiliates secures the Obligations.
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2.3 Further Assurances. Each Grantor shall execute and deliver such
financing statements and other Documents (in form and substance satisfactory to
Lender) and take such other actions as Lender may request from time to time in
order to create, perfect or continue the security interests and other Liens
provided for by this Security Agreement and the other Loan Documents under the
UCC or other laws of the State of New York or under any other state or federal
law, including, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the Liens
created hereby or thereby. Each Grantor also hereby authorizes Lender to file
any such financing or continuation statement, and all other types of Documents
required to be filed to perfect any of the Liens granted herein, without the
signature of such Grantor to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Security Agreement shall be
sufficient as a financing statement for filing in any jurisdiction.
2.4 Collection and Remittance. Each Grantor, jointly and severally,
covenants and agrees that at any time after the occurrence and during the
continuance of an Event of Default, such Grantor shall (a) receive in trust for
and as the property of Lender all payments on its Accounts, whether for the sale
of goods or performance of services or otherwise, all other similar payments on
its Inventory, and all similar payments, in each case whether cash, checks,
drafts, notes, acceptances or other forms of payment, and all chattel paper and
(b) deliver such payments and chattel paper to Lender forthwith in the identical
form in which received (except for its endorsement when required). Without
limiting the generality of the preceding sentence, each Grantor, jointly and
severally, agrees that at any time after the occurrence and during the
continuance of an Event of Default), such Grantor shall deposit all cash, checks
and other instruments related to any of its Accounts or otherwise related to the
sale of products or the performance of services by such Grantor into a blocked
checking account at a branch of Lender on a daily basis and such deposits shall
be applied to the balance of the Loans in such order as Lender elects.
2.5 Grantor Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Security Agreement had not been executed, (b) the exercise by Lender of any of
the rights hereunder shall not release any Grantor from any of its duties or
obligations under the contracts and agreement included in the Collateral and (c)
Lender shall not have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Security Agreement or
any other Loan Document, nor any Lender be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
3. Representations and Warranties. Each Grantor, jointly and severally,
represents and warrants to Lender that, knowing and intending that Lender will
rely thereon in making the Loans that the following statements are true,
complete and correct:
3.1 Accounts. The amount represented by Grantors to Lender from time to
time as owing by each Account debtor and by all Account debtors in respect of
the Accounts and the proper aging therefor was, and at such time as it is
hereafter given to Lender will be, the correct amount actually owing by each
such Account debtor or debtors thereunder, with the aging therefor accurate in
all material respects. No amount payable to any Grantor under or in connection
with any of the
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Accounts is evidenced by an instrument or chattel paper which has not been
delivered to Lender and endorsed by such member in form and substance
satisfactory to Lender.
3.2 Books and Records. Each Grantor maintains its books and records
relative to its Accounts, its Inventory, its Equipment and all other Collateral
at one or more of the locations listed on Schedule 3.2.
3.3 Location of Collateral. Schedule 3.3 contains a true, complete and
correct list of all locations where each item of Equipment, Inventory and other
tangible property constituting part of the Collateral is kept. None of the
Equipment, Inventory or other tangible property constituting part of the
Collateral is or will be, (a) located in or on any premises other than those
identified in Schedule 3.3, or (b) in the possession or under the control of a
warehouseman or other Person. Schedule 3.3 contains a true, complete and correct
list of all landlords of premises leased by each Grantor and of all mortgagees
and similar holders of Liens in or on such premises.
3.4 Places of Business. The principal place of business and chief
executive office of each Grantor is located at the location specified as such in
Schedule 3.4. No Grantor has at any time within the past six months preceding
the execution of this Security Agreement maintained its principal place of
business and chief executive office at any other location. Schedule 3.4 contains
a true, complete and correct list of all of the other offices or locations in or
from which each Grantor conducts any of its business or operations.
3.5 Other Name or Entities. Except as disclosed on Schedule 3.5, no
part of any Grantor's business is conducted through any Subsidiary,
unincorporated association or other entity and each no Grantor has, within the
five years preceding the date of this Security Agreement, (a) changed its name,
(b) used any name other than the name stated in the Loan Agreement, or (c)
merged or consolidated with, or acquired the assets of, any other Person or
business.
3.6 Title and Liens. Grantors have good and marketable title to all of
the Collateral as sole owner thereof, free and clear of any Lien, except the
Permitted Liens. None of the Collateral is subject to any prohibition against
encumbering, pledging, hypothecating or assigning the same or requires notice or
consent in connection therewith (other than those which have been made or
obtained prior to the date hereof).
3.7 Perfected First Priority Liens. This Security Agreement together
with the other Collateral Documents is effective to create in favor of Lender, a
legal, valid and enforceable security interest in all right, title and interest
of Grantors in the Collateral. When financing statements have been filed in the
offices in the jurisdictions listed in Schedule 3.7, this Security Agreement
together with the other Collateral Documents shall constitute a fully perfected
first priority Lien on, and security interest in, all right, title and interest
in the Collateral for the benefit of Lender.
3.8 Consents. No consent of any party to any of the Contracts to which
any Grantor is a party is required, or purports to be required, in connection
with the execution, delivery and performance of any Loan Document by any
Grantor. Each of the Contracts to which any Grantor is a party is in full force
and effect and constitutes a valid and legally enforceable obligation of such
member and, to the best knowledge of Grantor, each other party thereto. No
Grantor or, to the best
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knowledge of any Grantor, any other party to any of the Contracts to which any
Grantor is a party is in default in the performance or observance of any of the
terms thereof. To the best knowledge of Grantor, the right, title and interest
of Grantors in, to and under each of the Contracts to which any Grantor is a
party are not subject to any defense, offset, counterclaim or claim which would
materially adversely affect the value of any such Contract as Collateral, nor
have any of the foregoing been asserted or alleged against any Grantor as to any
Contract. No amount payable to any Grantor under or in connection with any
Contract to which any Grantor is a party is evidenced by any instrument or
chattel paper which has not been delivered to Lender.
4. Covenants.
4.1 Affirmative Covenants. Each Grantor, jointly and severally,
covenants and agrees that, until full and final payment and performance of the
Obligations and so long as the Revolving Line of Credit remains in effect, it
shall (and shall cause each of its Subsidiaries and Affiliates to): (a) defend
the right, title and interest of Lender in and to the Collateral pledged,
transferred and assigned by it against the claims and demands of all Persons;
(b) promptly upon the request of Lender, provide any additional statements and
schedules further identifying and describing the Collateral pledged, transferred
and assigned and such other reports in connection with the Collateral pledged,
transferred and assigned by it as may be reasonably requested by Lender; (c)
advise Lender, in reasonable detail, of any Lien on or claim asserted against
any of the Collateral; (d) at its own expense, endeavor to collect, as and when
due, all amounts due under the Collateral, including the taking of such action
with respect to such collection as Lender may reasonably request; (e) if any of
the Accounts arises out of a contract with the United States of America or any
Governmental Authority immediately notify Lender and if requested by Lender
shall execute any Documents reasonably required by Lender in order that all
money due or to become due under such contract shall be effectively assigned to
Lender and proper notice of the assignment shall be given under the Federal
Assignment of Claims Act; and (f) prior to storing any Inventory with a bailee,
warehouseman or similar Person, cause such Person to enter into a warehouseman's
lien waiver and consent agreement with Lender, in form and substance reasonably
satisfactory to Lender, and take all other actions reasonably required by Lender
in connection therewith.
4.2 Negative Covenants. Each Grantor, jointly and severally, covenants
and agrees that, until full and final payment and performance of the Obligations
and so long as the Revolving Line of Credit remains in effect, it shall not (and
shall cause each of its Subsidiaries and Affiliates not to), directly or
indirectly: (a) without at least 30 calendar days prior written notice to
Lender, (i) change the location of chief executive office/chief place of
business of any Grantor or remove the books and records of any Grantor from the
location specified herein or, (ii) permit any Inventory or Equipment to be kept
at a location other than the locations specified herein; (b) change the name,
identity or corporate structure of any Grantor to such an extent that any
financing statement filed by Lender in connection with any Loan Documents would
become misleading; (c) upon the occurrence and during the continuance of any
Event of Default, without the prior written consent of Lender, grant any
extension of the time of payment of any Account, compromise or settle the same
for less than the full amount thereof, release, in whole or in part, any Person
liable for the payment thereof, or allow any credit or discount whatsoever
thereon; (d) remove, or cause or permit to be removed, any of the assets or
properties of any Grantor (including, the Collateral) from the premises
identified on
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Schedule 3.3, except as permitted by section 5.2 of the Loan Agreement; or (e)
compromise, settle or adjust any claim relating to any of the Collateral in a
material amount;
5. Additional Powers of Lender.
5.1 Powers of Attorney. Each Grantor hereby constitutes and appoints
Lender (and any employee or agent of Lender), with full power of substitution,
its true and lawful attorney and agent in fact to take any or all of the actions
described below in Lender's or such Grantor's name and at such Grantor's
expense:
(a) Evidence of Liens. Lender may execute such financing
statements and other Documents and take such other actions as Lender deems
necessary or proper in order to create, perfect or continue the security
interests and other Liens provided for by the Loan Documents, and Lender may
file the same (or a photocopy of any Loan Document or of any financing statement
signed by such Grantor) in any appropriate governmental office.
(b) Preservation of Collateral. Lender may take any and all
action that it deems necessary or proper to preserve its interest in the
Collateral, including, the payment of debts of such Grantor that might impair
any of the Collateral or Lender's security interest therein (including, the
priority of Lender's security interest therein), the purchase of insurance on
the Collateral, any amounts paid to any landlord of such Grantor (or any of its
Subsidiaries or Affiliates) arising from or otherwise relating to any Document
executed by any such landlord in connection with any Loan Document, the repair
or safeguarding of the Collateral, or the payment of taxes, assessments or other
Liens thereon. All sums so expended by Lender shall constitute Obligations,
shall be secured by the Collateral, and shall be payable on demand with interest
at the Default Rate from the respective dates such sums are expended.
(c) Lender's Right to Cure. In the event such Grantor fails to
perform any of its Obligations, then Lender may perform the same but shall not
be obligated to do so. All sums expended by Lender under this section 5.1(c)
shall constitute Obligations, shall be secured by the Collateral, and shall be
payable on demand with interest at the Default Rate from the respective dates
such sums are expended.
(d) Verification of Accounts. Lender may make test
verifications of any and all Accounts and Inventory in any manner and through
any medium Lender considers advisable, and such Grantor shall render any
assistance reasonably requested by Lender.
(e) Collections; Modification of Terms. Upon the occurrence
and during the continuance of any Event of Default, Lender may demand, sue for,
collect and give receipts for any money, instruments or property payable or
receivable on account of or in exchange for any of the Collateral, or make any
compromises it deems necessary or proper, including, extending the time of
payment, permitting payment in installments, or otherwise modifying the terms or
rights relating to any of the Collateral, all of which may be effected without
notice to or consent by such Grantor and without otherwise discharging or
affecting the Obligations, the Collateral or the Liens granted under any of the
Loan Documents.
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(f) Notification of Account Debtors. Such Grantor, at the
request of Lender, shall notify its Account debtors of Lender's security
interest in its Accounts. Upon the occurrence and during the continuance of any
Event of Default, Lender may notify the Account debtors on any of such Accounts
to make payment directly to Lender (including pursuant to the form of letter
delivered by such Grantor to Lender, which Lender agrees to hold in escrow and
not use unless an Event of Default occurs), and Lender may endorse all items of
payment received by it that are payable to such Grantor; until such time as
Lender elects to exercise such right of notification (and subject to Lender's
rights under section 2.4), such Grantor is authorized to collect and enforce its
Accounts.
(g) Notification as to Inventory. Lender may notify any bailee
of any Inventory of Lender's security interest therein.
(h) Endorsements. Lender may endorse the name of such Grantor
on checks, notes, acceptances, drafts, invoices, bills of lading and any other
Documents requiring such endorsement.
(i) Mails. Upon the occurrence and during the continuance of
any Event of Default, Lender may notify the postal authorities to deliver all
mail, parcels, and other material addressed to such Grantor to Lender at such
address as Lender may direct, and Lender may open and deal with same as it deems
necessary or proper.
(j) Insurance. Lender may file proofs of loss and claims with
respect to any of the Collateral with the appropriate insurer, and may endorse
its own name and the name of such Grantor on any checks or drafts constituting
insurance proceeds.
5.2 Irrevocability; Lender's Discretion. Each Grantor, jointly and
severally, covenants and agrees that any action described in section 5.1 may be
taken at Lender's sole and absolute discretion, at any time and from time to
time, and (except as may be stated specifically to the contrary in section 5.1
with respect to any power) whether prior or subsequent to an Event of Default,
and each Grantor hereby ratifies and confirms all actions so taken. Each
Grantor, jointly and severally, further covenants and agrees that the powers of
attorney granted by section 5.1 are coupled with an interest and shall be
irrevocable until full and final payment and performance of the Obligations and
until the Revolving Line of Credit is no longer in effect; that said powers are
granted solely for the protection of Lender's interest and Lender shall have no
duty to exercise any thereof; that the decision whether to exercise any of such
powers, and the manner of exercise, shall be solely within Lender's discretion;
and that neither Lender nor any of its directors, officers, employees or agents
shall be liable for any act of omission or commission, or for any mistake or
error of judgment, in connection with any such powers.
6. Specific Rights Regarding Collateral. In addition to the rights as stated in
section 8 of the Loan Agreement (and without limitation thereof), each Grantor
agrees that, upon the occurrence of an Event of Default, Lender shall be
entitled to the rights and remedies, and each Grantor, jointly and severally,
shall have the obligations, set forth below:
6.1 Taking Possession and Assembly of Collateral.
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(a) Lender may enter upon the premises where any Collateral is
located and take possession thereof and, at Lender's option, remove or sell in
place any or all thereof; and
(b) Upon notice from Lender, each Grantor shall promptly at
its expense assemble any or all of the Collateral and make it available at a
reasonably convenient place designated by Lender.
6.2 Public or Private Sales.
(a) Lender may, with or without judicial process, sell, lease
or otherwise dispose of any or all of the Collateral at public or private sales
or proceedings, by one or more contracts, in one or more parcels, at the same or
different times and places, with or without having the Collateral at the place
of sale or other disposition, to such Persons, for cash or credit or for future
delivery and upon such other terms, as Lender may in its discretion deem best in
each such matter. The purchaser of any of the Collateral at any such sale shall
hold the same free of any equity of redemption or other right or claim of any
Grantor, all of which, together with all rights of stay, exemption or appraisal
under any statute or other law now or hereafter in effect, each Grantor hereby
unconditionally waives to the fullest extent permitted by law. If any of the
Collateral is sold on credit or for future delivery, Lender shall not be liable
for the failure of the purchaser to pay for same and, in the event of such
failure, Lender may resell such Collateral if it retains the right to do so.
(b) Each Grantor, jointly and severally, hereby further agrees
that notice of the time and place of any public sale, or of the time after which
any private sale or other intended disposition or action relating to any of the
Collateral is to be made or taken, shall be deemed commercially reasonable
notice thereof, and shall satisfy the requirements of any applicable statute or
other law, if such notice (i) is delivered not less than five Banking Days prior
to the date of the sale, disposition or other action to which the notice
relates, or (ii) is mailed (by ordinary first class mail, postage prepaid) not
less than five Banking Days prior thereto. Lender shall not be obligated to make
any sale or other disposition or take other action pursuant to such notice and
may, without other notice or publication, adjourn or postpone any public or
private sale or other disposition or action by announcement at the time and
place previously fixed therefor, and such sale, disposition or action may be
held or accomplished at any times or places to which the same may be so
adjourned or postponed.
(c) Lender may purchase any or all of the Collateral at any
public sale. Lender may purchase at private sale any of the Collateral that is
of a type customarily sold in a recognized market or the subject of widely
distributed price quotations or otherwise unless prohibited by law. Lender may
make payment of the purchase price for any Collateral by credit against the then
outstanding amount of the Obligations.
(d) Lender may at its discretion retain any or all of the
Collateral and apply the same in satisfaction of part or all of the Obligations.
6.3 Application of Proceeds. Any cash proceeds of sale, lease or other
disposition of Collateral shall be applied as follows:
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First: To the expenses of collecting, enforcing, safeguarding,
holding and disposing of the Collateral, and to other expenses of
Lender in connection with the enforcement of the Loan Documents
(including, court costs and the fees and expenses of accountants,
appraisers and in-house and outside attorneys), together with interest
at the Default Rate from the respective dates such sums are expended;
Second: Any surplus then remaining to the payment of interest
and principal of the Loans and other sums payable as part of the
Obligations, in such order as Lender elects; and
Third: Any surplus then remaining to Grantors or whoever may
be lawfully entitled thereto.
7. Security Interest Absolute. All rights of Lender and the pledge, transfer and
assignment and security interest hereunder, and all obligations of each Grantor
hereunder, shall be absolute and unconditional, irrespective of (a) any lack of
validity, regularity, or enforceability of any Loan Document, (b) any change in
time, manner, or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from any Loan Document, including, any increase in the Obligations resulting
from the extension of additional credit to Borrower or any of its Subsidiaries
or Affiliates or otherwise; (c) any taking, exchange, release, or non-perfection
of any other Collateral or any taking, release, or amendment or waiver or
consent to departure from any guaranty, for all or any of the Obligations; (d)
any manner of application of the Collateral, or proceeds thereof, to all or any
of the Obligations, or any manner of sale or other disposition of any Collateral
for all or any of the Obligations or any other assets of Borrower or any of its
Subsidiaries or Affiliates; (e) any change, restructuring, or termination or the
corporate existence of Borrower or any of its Subsidiaries or Affiliates; or (f)
any other circumstance that might otherwise constitute a defense available to,
or a discharge of, Borrower or a third-party Grantor of a security interest.
8. Miscellaneous Provisions.
8.1 Entire Agreement. This Security Agreement together with the other
Loan Documents constitute the entire agreement among the parties with respect to
their subject matter, and supersedes all prior and contemporaneous agreements,
understandings, inducements or conditions among the respective parties, whether
express or implied, oral or written.
8.2 Schedules. All of the Schedules to this Security Agreement are
hereby incorporated by reference and made a part hereof.
8.3 Certain Applicable Loan Provisions. Without limiting the generality
or specificity of anything in the Loan Agreement, for the avoidance of doubt the
provisions of sections 8, 11.1 (except the first sentence thereof), 11.2, 11.3,
11.4, 11.5, 11.6, 11.8, 11.10 and Exhibit A of the Loan Agreement apply to this
Security Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, has caused this Security Agreement to be duly executed and delivered on
the date and year first above written.
INMARK ENTERPRISES, INC.
By: /s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President
INMARK SERVICES, INC.
By: /s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President
OPTIMUM GROUP, INC.
(formerly OG Acquisition Corp.)
By: /s/ Donald A. Bernard
Name: Donald A. Bernard
Title: Executive Vice President
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