SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
Commission File Number 000-23388
INTERNATIONAL POST LIMITED
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
545 Fifth Avenue New York, NY 10017
(Address and zip code of principal executive offices)
13-3735647
(IRS Employer Identification Number)
(212) 986-6300
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, $.01 par value
per share, as of March 13, 1997, was 6,226,958.
<PAGE>
INTERNATIONAL POST LIMITED
PART I
FINANCIAL INFORMATION
The audited consolidated financial information at July 31, 1996 and the
unaudited consolidated financial information at January 31, 1997 and for the
three and six month periods ended January 31, 1996 and 1997 relate to
International Post Limited and its subsidiaries.
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets as of
July 31, 1996 and January 31, 1997 3
Consolidated Statements of Income for the
three months ended January 31, 1996 and 1997 4
Consolidated Statements of Income for the
six months ended January 31, 1996 and 1997 5
Consolidated Statements of Cash Flows for the
six months ended January 31, 1996 and 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4 SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
2
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of July 31, 1996 and January 31, 1997
(in thousands)
<TABLE>
<CAPTION>
July 31, January 31,
1996 1997
-------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 104 $ 359
Accounts receivable, net ........................ 10,308 12,266
Deferred income taxes ........................... 597 402
Prepaid expenses and other current assets ....... 1,654 1,470
------- -------
Total current assets........................ 12,663 14,497
Fixed assets, net ............................... 29,533 28,357
Excess of cost over fair value of
net assets acquired, net ........................ 22,397 22,599
Deferred income taxes ........................... 1,770 1,930
Other assets .................................... 1,498 3,313
------- -------
Total assets................................ $67,861 $70,696
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ........... $ 5,070 $ 6,534
Due to related parties .......................... 408 -
Current portion of long-term debt ............... 3,856 4,059
Income taxes payable ............................ 2,283 198
------- -------
Total current liabilities................... 11,617 10,791
Long-term debt .................................. 19,797 22,702
Subordinated debt ............................... 5,096 5,183
Other liabilities ............................... 1,516 1,729
------- -------
Total liabilities........................... 38,026 40,405
------- -------
Commitments and contingencies
Stockholders' equity:
Preferred stock: $.01 par value - 3,000
shares authorized; no shares outstanding
at July 31, 1996 and January 31, 1997.......... - -
Common stock: $.01 par value - 15,000
shares authorized; 6,227 shares
outstanding at July 31, 1996 and
January 31, 1997, respectively................. 62 62
Additional paid-in-capital....................... 24,979 24,979
Retained earnings................................ 4,794 5,250
------- -------
Total stockholders' equity.................. 29,835 30,291
------- -------
Total liabilities and stockholders' equity.. $67,861 $70,696
======= =======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months ended January 31, 1996 and 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
----------------------
1996 1997
----------------------
<S> <C> <C>
Revenues ............................................ $ 12,099 $ 12,965
Direct salaries and costs ........................... 5,646 7,096
Selling, general and administrative expenses ........ 3,164 3,339
Depreciation ........................................ 1,653 1,779
Amortization ........................................ 289 293
--------- ---------
Income from operations ......................... 1,347 458
Other expense (income):
Interest expense ............................... 632 559
Interest income and other ...................... (22) 29
--------- ----------
Income (loss) before taxes ................ 737 (130)
Provision for income taxes:
Income taxes .............................. 332 9
-------- ----------
Net income (loss) ................................... $ 405 $ (139)
======== ==========
Net income (loss) per share ......................... $ 0.07 $ (0.02)
======== ==========
Weighted average number of shares outstanding ....... 6,214 6,227
======== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Six Months ended January 31, 1996 and 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
----------------------
1996 1997
----------------------
<S> <C> <C>
Revenues ............................................ $ 24,489 $ 26,741
Direct salaries and costs ........................... 11,299 13,772
Selling, general and administrative expenses ........ 6,241 6,609
Depreciation ........................................ 3,224 3,577
Amortization ........................................ 565 586
--------- ---------
Income from operations ......................... 3,160 2,197
Other expense (income):
Interest expense ............................... 1,238 1,116
Interest income and other ...................... (38) 21
--------- ----------
Income before taxes ....................... 1,960 1,060
Provision for income taxes:
Income taxes .............................. 882 604
-------- ----------
Net income .......................................... $ 1,078 $ 456
======== ==========
Net income per share ................................ $ 0.17 $ 0.07
======== ==========
Weighted average number of shares outstanding ....... 6,214 6,227
======== ==========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months ended January 31, 1996 and 1997
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
---------------------
1996 1997
---------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ............................................. $ 1,078 $ 456
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ....................................... 3,224 3,577
Amortization ....................................... 565 586
Provision for bad debts ............................ 63 48
(Gain) loss on disposal of fixed assets ............ (14) 19
Deferred taxes ..................................... 110 36
(Increase) decrease in operating assets:
Accounts receivable ................................ (2,408) (2,007)
Prepaid expenses and other current assets .......... (373) 210
Other assets ....................................... (74) (977)
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities ........... (954) 1,464
Income taxes payable ............................... (46) (2,085)
Other liabilities .................................. (47) 213
-------- --------
Net cash provided by operating activities ...... 1,124 1,540
-------- --------
Cash Flows From Investing Activities:
Additions to fixed assets .......................... (3,901) (1,016)
Proceeds from sale of fixed assets ................. 14 135
Deposits on fixed assets ........................... (417) (1,652)
-------- --------
Net cash (used in) investing activities ........ (4,304) (2,533)
-------- --------
Cash Flows From Financing Activities:
Proceeds from revolving credit facility, net ....... 4,700 3,500
Proceeds from subordinated debt .................... 81 87
Proceeds from related parties ...................... 14 -
Repayments to related parties ...................... -- (408)
Repayment of long-term debt ........................ (1,947) (1,931)
-------- --------
Net cash provided by financing activities ...... 2,848 1,248
-------- --------
Net (decrease) increase in cash .. (332) 255
Cash and cash equivalents, beginning of period ........... 368 104
-------- --------
Cash and cash equivalents, end of period ................. $ 36 $ 359
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during period for:
Interest .......................................... $ 813 $ 885
Income taxes ...................................... 800 2,654
Equipment acquired under capital lease obligations .. - 1,539
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
International Post Limited ("IPL" or the "Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted from this report, as is permitted by such rules and
regulations; however, IPL believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Form 10-K for
the fiscal year ended July 31, 1996.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable and long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell. SFAS No. 121 also establishes
the procedures for review of recoverability, and measurement of impairment if
necessary, of long-lived assets and certain identifiable intangibles to be held
and used by an entity. The Company adopted SFAS No. 121 during the first quarter
of 1997. Based on the provisions of SFAS No. 121, the Company determined that no
impairment provision of the carrying cost of its long-lived assets was
necessary.
In the opinion of management, the information furnished reflects all
adjustments, all of which are of a normal recurring nature, necessary for a fair
presentation of the results for the reported interim periods.
Effective December 24, 1996, Big Picture/Even Time Limited, a wholly owned
subsidiary of the Company, changed its name to "CABANA corp.". CABANA corp.
consolidated its operations into one facility in New York City during January
1997.
Also during January 1997, the Company settled the remaining liability
associated with the restructuring charge recorded in August 1992.
NOTE 2 - ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
July 31, January 31,
1996 1997
----------- -----------
<S> <C> <C>
Accounts Receivable, trade ..................... $11,032,078 $12,856,589
Less: Allowance for doubtful accounts ......... 724,565 590,102
----------- -----------
$10,307,513 $12,266,487
=========== ===========
</TABLE>
7
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - FIXED ASSETS
Fixed assets, at cost, including equipment under capitalized leases,
summarized by major categories consist of the following:
<TABLE>
<CAPTION>
July 31, January 31,
1996 1997
----------- -----------
<S> <C> <C>
Machinery and Equipment .................... $35,092,788 $35,208,900
Leasehold Improvements ..................... 12,147,475 12,408,768
Furniture and Fixtures ..................... 1,918,573 1,980,812
Equipment under Capital Leases ............. - 1,904,149
----------- -----------
49,158,836 51,502,629
Less: Accumulated Depreciation ............. 19,625,422 23,145,147
----------- -----------
$29,533,414 $28,357,482
=========== ===========
</TABLE>
NOTE 4 - LONG-TERM DEBT
<TABLE>
<CAPTION>
July 31, January 31,
1996 1997
----------- -----------
<S> <C> <C>
Senior secured term loan ....................... $18,320,000 $16,480,000
Senior secured revolving credit loan ........... 5,000,000 8,500,000
Collateralized by fixed assets
Notes payable to credit institutions
bearing interest at 8.0%
originally payable through 1996 .......... 4,815 -
Capitalized lease obligations ............. 328,665 1,781,334
----------- -----------
23,653,480 26,761,334
Less: Current Maturities .................. 3,856,292 4,059,279
----------- -----------
$19,797,188 $22,702,055
=========== ===========
</TABLE>
SENIOR SECURED LONG-TERM DEBT - The Company's $22,000,000 senior secured term
loan (the "Term Loan") and the Revolving Loan (as defined herein) with a
syndicate of financial institutions (the "Bank Syndicate") are secured by 1) all
assets of the Company and its existing and future directly and indirectly owned
subsidiaries and 2) the capital stock of all such subsidiaries. The Term Loan
and the Revolving Loan bore interest at the Bank of New York's Prime rate or
LIBOR (London Interbank Offered Rate) plus 1.375% through July 31, 1996 and now
floats at such Prime rate plus .375% or LIBOR plus 1.75%, and contains various
covenants limiting future debt, dividends and capital expenditures. In addition,
the Company must maintain certain cash flow and leverage ratios.
8
<PAGE>
INTERNATIONAL POST LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
REVOLVING CREDIT FACILITY - The Company maintains a $10,000,000 senior secured
revolving credit facility (the "Revolving Loan") with the Bank Syndicate. The
Company had outstanding direct borrowings of $5,000,000 and $8,500,000 under the
Revolving Loan at July 31, 1996 and January 31, 1997, respectively. The Company
is being charged a commitment fee equal to 0.375% on the unused amount of the
Revolving Loan. The Company also had outstanding under the Revolving Loan
letters of credit $1,196,482 at July 31, 1996 and January 31, 1997.
SUBORDINATED DEBT - the Company, in connection with the acquisition of The Big
Picture Editorial, Inc. and Even Time Ltd. in May 1995, issued $6,350,000
principal amount of eight year convertible subordinated notes, due May 4, 2003,
with an interest rate of 4.0%, convertible at $14 per share after five years and
redeemable after six years. The debt was valued at $4,890,000 at the date of
acquisition using an effective rate of 8.34%. The valuation discount is being
amortized over the life of the notes.
NOTE 5 - OTHER
On January 7, 1997 the Company and Video Services Corporation ("VSC"), a
privately-held company located in Northvale, New Jersey, signed a letter of
intent providing for the merger of their respective companies. VSC is a leading
provider of technical services to the communications industry. These services
include satellite transmission services with fiber optic capabilities, video
switching with first and last mile connections to the broadcast and cable
television industries, design and integration of turnkey video systems for the
broadcast, cable and professional markets, and video equipment rental to
broadcast, cable and industrial markets. Under the terms of the proposed merger,
which is subject to completion of due diligence and approval by the Company's
Board of Directors, the Company will issue approximately 6.7 million shares of
its common stock in exchange for 100% of the common stock of VSC.
On January 22, 1997, Cognitive Communications, LLC, a Delaware limited
liability company ("CCL") which is a majority-owned subsidiary of the Company,
purchased substantially all of the operating assets of Cognitive Communications,
Inc., a corporation principally engaged in providing strategic consulting
services in the area of communications and content strategy for, and research
relating to the implementation of, and the design and production of, intranets,
extranets and internets ("CCI"), for an aggregate purchase price of $600,000.
CCL is approximately 98% owned by the Company and approximately 2% owned by two
former stockholders of CCI. The two former stockholders of CCI and a former
employee of Manhattan Transfer, defined herein, now a current employee of CCL,
also have options to purchase in the aggregate an additional approximate 23%
membership interest in CCL in the event of Company's transfer of its membership
interest in CCL.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
SECOND QUARTERS ENDED JANUARY 31, 1997 AND 1996
Revenues increased by $866,000 or 7% to $12,965,000 in the second quarter
of fiscal year 1997 compared to the second quarter of fiscal year 1996. The
growth in revenues was primarily attributable to increases in revenue at The
Post Edge, Inc. ("Post Edge"), Audio Plus Video International, Inc. ("Audio Plus
Video"), Manhattan Transfer/Edit Inc. ("Manhattan Transfer"), and the additional
revenues associated with CCL, defined herein. These increases were partially
offset by lower revenues at CABANA corp. ("CABANA"). The increase at Post Edge,
approximately $612,000, is primarily due to additional network services at the
South Beach facility and the new Hollywood facility operating for the complete
second quarter of fiscal year 1997 versus its construction phase in the second
quarter of fiscal year 1996. The decrease at CABANA, approximately $295,000, was
mainly a result of the general slow down of the commercial market, and the
interruption of business associated with the consolidation of its operations
into one facility during January 1997. The combined increases at Audio Plus
Video, Manhattan Transfer and CCL accounted for the remainder of the revenue
growth.
Direct salaries and costs (consisting primarily of salaries and benefits
paid to artists, technicians and engineers, outside labor, occupancy costs,
direct costs including tape stock, equipment rental and commissions and client
costs) increased as a percentage of revenues to 54.7% in the second quarter of
fiscal year 1997 compared to 46.7% in the second quarter of the prior fiscal
year. This increase was a result of higher direct salaries and costs as a
percentage of revenues at Post Edge, CABANA and Manhattan Transfer. The increase
at Post Edge, approximately $497,000, was primarily due to additional salaries
for artists and technicians, outside labor and equipment rental as the facility
expanded. At CABANA actual direct salaries and costs were comparable to the
second quarter of fiscal year 1996, however, lower revenues caused costs to
increase as a percentage of revenues. The increase at Manhattan Transfer was
primarily due to outside labor and salaries of approximately $340,000 related to
start-up costs for web site technologies which eventually were contributed to
CCL. Although costs increased at Audio Plus Video the increase in revenues was
proportionate.
Selling, general and administrative expenses decreased as a percentage of
revenues to 25.8% in the second quarter of fiscal year 1997 compared to 26.2% in
the second quarter of the prior fiscal year. The ratio decrease was primarily
attributable to the increased revenues of the Company; while the increase in
costs were primarily attributable to administrative salaries and occupancy
costs.
Depreciation expense was $1,779,000 and $1,653,000 in the second quarter of
fiscal years 1997 and 1996, respectively. The increase was primarily the result
of capital expenditures made in fiscal 1996 and the first six months of fiscal
1997.
Interest expense was $559,000 and $632,000 in the second quarter of fiscal
years 1997 and 1996, respectively. The decrease in interest expense was due to
the decrease in the Term Loan since the second quarter of fiscal year 1996
coupled with lower interest rates during the second quarter of fiscal year 1997.
10
<PAGE>
The income tax rate applied against pre-tax loss during the second quarter
of fiscal 1997 was a positive 7%; while the income tax rate applied against
pre-tax income was 45% in the second quarter of fiscal year 1996. The current
quarter's tax rate was adjusted to compensate for the increase in amortization
of intangibles, which are not deductible for income tax purposes, as a
percentage of taxable income.
The Company posted a net loss of $139,000 in the second quarter of fiscal
year 1997 compared to net income of $405,000 in the prior year's second quarter.
This decrease is a result of the items discussed above.
SIX MONTHS ENDED JANUARY 31, 1997 AND 1996
Revenues increased by $2,252,000 or 9% to $26,741,000 in the first half of
fiscal year 1997 compared to the first half of fiscal year 1996. The growth in
revenues was primarily attributable to increases in revenue at Post Edge, Audio
Plus Video, Manhattan Transfer and the acquisition of CCL. These increases were
partially offset by lower revenues at CABANA. The increase at Post Edge,
approximately $1,407,000, is primarily due to additional network services at the
South Beach facility and the new Hollywood facility operating for the entire
first six months of fiscal year 1997 versus its construction and implementation
during the first six months of fiscal year 1996. The decrease at CABANA,
approximately $461,000, was mainly a result of the general slow down of the
commercial market, and the interruption of business associated with the
consolidation of its operations into one facility during January 1997. The
combined increases at Audio Plus Video, Manhattan Transfer and the addition of
CCL accounted for the remainder of the revenue growth.
Direct salaries and costs (consisting primarily of salaries and benefits
paid to artists, technicians and engineers, outside labor, occupancy costs,
direct costs including tape stock, equipment rental and commissions and client
costs) increased as a percentage of revenues to 51.5% in the first half of
fiscal year 1997 compared to 46.1% in the first half of the prior fiscal year.
This increase was a result of higher direct salaries and costs as a percentage
of revenues at CABANA and Manhattan Transfer. At CABANA actual direct salaries
and costs were comparable to the first half of fiscal year 1996, however, lower
revenues caused costs to increase as a percentage of revenues. The increase at
Manhattan Transfer, approximately $973,000, was largely related to (i) salaries
of artists and technicians at Manhattan Transfer of approximately $411,000 and
(ii) approximately $447,000 of start-up costs for outside labor and salaries for
web site technologies which eventually were contributed to CCL. Although costs
also increased at Audio Plus Video and Post Edge the increase in revenues were
proportionally greater.
Selling, general and administrative expenses decreased as a percentage of
revenues to 24.7% in the first half of fiscal year 1997 compared to 25.5% in the
first half of the prior fiscal year. The decrease was primarily attributable to
the increased revenues of the Company.
Depreciation expense was $3,577,000 and $3,224,000 in the first half of
fiscal years 1997 and 1996, respectively. The increase was primarily the result
of capital expenditures made in fiscal 1996 and the first half of fiscal 1997.
Interest expense was $1,116,000 and $1,238,000 in the first half of fiscal
years 1997 and 1996, respectively. The decrease in interest expense was due to
11
<PAGE>
the decrease in the Term Loan since the second quarter of fiscal year 1996
coupled with lower interest rates during the first six months of fiscal year
1997.
The income tax rate applied against pre-tax income was 57% and 45% in the
first half of fiscal years 1997 and 1996, respectively. The current period's tax
rate was higher because of the increase in amortization of intangibles, which
are not deductible for income tax purposes, as a percentage of taxable income.
Net income decreased to $456,000 in the first half of fiscal year 1997
compared to $1,078,000 in the prior year's first half. This decrease is a result
of the items discussed above.
Liquidity and Capital Resources:
Six Months Ended January 31, 1997
The Company's strategy is to continue to expand the range of video-related
services which it provides to existing clients and to increase its customer base
through internal growth and acquisition. On January 7, 1997 the Company and
Video Services Corporation ("VSC"), a privately-held company located in
Northvale, New Jersey, signed a letter of intent providing for the merger of
their respective companies. VSC is a leading provider of technical services to
the communications industry. These services include satellite transmission
services with fiber optic capabilities, video switching with first and last mile
connections to the broadcast and cable television industries, design and
integration of turnkey video systems for the broadcast, cable and professional
markets, and video equipment rental to broadcast, cable and industrial markets.
Under the terms of the proposed merger, which is subject to completion of due
diligence and approval by the Company's Board of Directors, the Company will
issue approximately 6.7 million shares of its common stock in exchange for 100%
of the common stock of VSC. On January 22, 1997, Cognitive Communications, LLC,
a Delaware limited liability company ("CCL") which is a majority-owned
subsidiary of the Company, purchased substantially all of the operating assets
of Cognitive Communications, Inc., a corporation principally engaged in
providing strategic consulting services in the area of communications and
content strategy for, and research relating to the implementation of, and the
design and production of, intranets, extranets and internets ("CCI"), for an
aggregate purchase price of $600,000. CCL is approximately 98% owned by the
Company and approximately 2% owned by two former stockholders of CCI. The two
former stockholders of CCI and a former employee of MTE, now a current employee
of CCL, also have options to purchase in the aggregate an additional approximate
23% membership interest in CCL in the event of the Company's transfer of its
membership interest in CCL.
During 1995, the Company entered into the $22,000,000 six year Term Loan.
In addition, the Company maintains a $10,000,000 Revolving Loan for working
capital with the same Bank Syndicate. Pricing is at the Bank of New York's Prime
rate plus .375% or LIBOR plus 1.75%. Outstandings on the Term Loan ($16,480,000
at January 31, 1997) currently bear interest at 7.25%. The Term Loan and
Revolving Loan are secured by all assets of the Company and contain covenants
limiting future debt, dividends and capital expenditures. In addition, the
Company must maintain certain cash flow and leverage ratios. During September
1996, the Company amended the Credit Agreement, pursuant to which certain
covenants were changed for fiscal year 1996 and prospective periods.
12
<PAGE>
Capital expenditures were $2,555,000 in the first six months of fiscal year
1997. The expenditures were used to purchase new revenue producing digital
technology and software, upgrade/replace existing equipment, and complete the
consolidation at Post Edge. Audio Plus Video and Manhattan Transfer purchased
equipment and software to replace and make technological enhancements to
existing equipment.
The Company generated net cash from operations of $1,540,000 in the first
six months of fiscal year 1997. Net cash used in investing activities to
purchase capital equipment was $1,016,000 and to make deposits on fixed assets
was $1,652,000. New cash provided by financing activities was $1,248,000
consisting of an increase in the revolving credit facility less repayments of
long-term debt, including amounts paid to related parties. These activities
resulted in a net increase in cash of $255,000.
The Company's capital structure remains strong. Total long-term debt
(excluding current portion of long-term debt), including subordinated debt at
January 31, 1997, was $27,885,000. The Company's stockholders' equity was
$30,291,000 at January 31, 1997. Outstandings under the Company's $10,000,000
Revolving Loan were $8,500,000 at January 31, 1997. The Company's capital budget
for fiscal year 1997 is $5,269,000, a decrease from fiscal years 1996 and 1995.
Capital projects of approximately $340,000, approved in fiscal year 1996, will
be incurred in fiscal year 1997 bringing total capital outlays to approximately
$5,609,000 in fiscal year 1997. Management believes that these expenditures can
be financed either by internally generated funds or by the Revolving Loan.
The above discussion contains forward-looking statements. There are certain
important factors that could cause results to differ materially from those
anticipated by the statements made above. These factors include, but are not
limited to: general performance of the economy, specifically as it affects the
advertising industry; the international economic and political climate which
could impact the sale of domestic programming overseas; significant changes in
video technology in the post-production industry and the loss of key personnel.
13
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Number Exhibits
------- --------------------------------------------------
10.1 Asset Purchase Agreement, dated as of January 22,
1997, by and among Cognitive Communications, Inc.,
Susan Wiener, Michael Rudnick and Cognitive
Communications, LLC;
10.2 Agreement, dated as of January 22, 1997, by and
among the Company, Susan Wiener, Michael Rudnick,
Cognitive Communications, Inc. and David Leveen;
10.3 Employment Agreement, dated as of January 22,
1997, by and among Cognitive Communications, LLC
and Susan Wiener;
10.4 Employment Agreement, dated as of January 22,
1997, by and among Cognitive Communications, LLC
and Michael Rudnick;
10.5 Employment Agreement, dated as of January 22,
1997, by and among Cognitive Communications, LLC
and David Leveen;
10.6 Put Agreement, dated as of January 22, 1997, by
and among Cognitive Communications, LLC, the
Company, Susan Wiener, Michael Rudnick and David
Leveen;
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
Exhibit
Number Exhibits
------- --------------------------------------------------
10.7 Sale Option Agreement, dated as of January 22,
1997, by and between Cognitive Communications,
LLC, and Susan Wiener;
10.8 Sale Option Agreement, dated as of January 22,
1997, by and between Cognitive Communications,
LLC, and Michael Rudnick;
10.9 Sale Option Agreement, dated as of January 22,
1997, by and between Cognitive Communications,
LLC, and David Leveen;
10.10 Incentive Compensation Agreement, dated as of
January 22, 1997, by and among Cognitive
Communications, LLC, Susan Wiener, Michael
Rudnick, and David Leveen;
10.11 Form of Incentive Option Agreement, undated, by
and between Cognitive Communications, LLC, and
Optionee;
10.12 Consulting Agreement, dated February 15, 1997, by
and among the Company and Jeffrey J. Kaplan; and
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
(b) None.
SIGNATURE(S)
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.
INTERNATIONAL POST LIMITED
(Registrant)
<TABLE>
<S> <C>
DATED: March 13, 1997 BY: /s/ MARTIN IRWIN
---------------------------
Martin Irwin
President and
Chief Executive Officer
</TABLE>
15
<PAGE>
ASSET PURCHASE AGREEMENT
dated as of January 22, 1997,
by and among
COGNITIVE COMMUNICATIONS, INC.,
SUSAN WIENER,
MICHAEL RUDNICK
and
COGNITIVE COMMUNICATIONS, LLC
<PAGE>
TABLE OF CONTENTS
1. Definitions..............................................................1
-----------
1.1 Defined Terms...................................................1
-------------
1.2 Use of Defined Terms............................................8
--------------------
1.3 Accounting Terms................................................8
----------------
1.4 Sections, Exhibits and Schedules................................8
--------------------------------
1.5 Miscellaneous Terms.............................................8
-------------------
2. Sale and Payment.........................................................8
----------------
2.1 Sale and Purchase of the Assets.................................8
-------------------------------
2.2 CCL-DL Interests................................................8
-----------------
2.3 Assumption of Liabilities.......................................9
-------------------------
2.4 Allocation of Consideration.....................................9
---------------------------
3. The Closing..............................................................9
-----------
4. Representations and Warranties of the Seller and the Stockholders........9
-----------------------------------------------------------------
4.1 Organization, Good Standing, Power and Qualification............9
----------------------------------------------------
4.2 Capital Structure..............................................10
-----------------
4.3 Subsidiaries...................................................10
------------
4.4 Consents.......................................................10
--------
4.5 No Conflict....................................................10
-----------
4.6 No Brokers.....................................................11
----------
4.7 Investment Purpose; Private Placement..........................11
-------------------------------------
4.8 Disclosure.....................................................12
----------
4.9 Financial Statements...........................................12
--------------------
4.10 Absence of Undisclosed Liabilities.............................12
----------------------------------
4.11 Absence of Specified Changes...................................12
----------------------------
4.12 Taxes..........................................................14
-----
4.13 Insurance......................................................15
---------
4.14 Contracts......................................................15
---------
4.15 Real Property..................................................16
-------------
4.16 Tangible Property..............................................17
-----------------
4.17 Intangible Property; Intellectual Property.....................18
------------------------------------------
4.18 Software.......................................................18
--------
4.19 Employee Benefit Plans.........................................19
----------------------
4.20 Employees......................................................21
---------
4.21 Inventory......................................................21
---------
4.22 Accounts Receivable............................................21
-------------------
4.23 Customers and Suppliers........................................21
-----------------------
- ii -
<PAGE>
4.24 Compliance With Laws...........................................22
--------------------
4.25 Licenses and Permits...........................................22
--------------------
4.26 Legal Proceedings..............................................22
-----------------
4.27 Absence of Certain Practices...................................23
----------------------------
4.28 Intercompany Transactions......................................23
-------------------------
4.29 Books and Records..............................................23
-----------------
4.30 Bulk Sales and Transfer Taxes..................................23
-----------------------------
4.31 Assets.........................................................23
------
5. Representations and Warranties of the Purchaser.........................24
-----------------------------------------------
5.1 Organization, Standing, Power and Qualification................24
-----------------------------------------------
5.2 Authorization..................................................24
-------------
5.3 No Conflict....................................................25
-----------
5.4 Consents.......................................................25
--------
5.5 Legal Proceedings..............................................25
-----------------
5.6 No Brokers.....................................................25
----------
5.7 Disclosure.....................................................25
----------
6. Covenants and Other Agreements..........................................25
------------------------------
6.1 Employment, Incentive Compensation and Put Agreements;
Sale Options; Managers.........................................26
----------------------
6.2 Reasonable Efforts; Further Assurances.........................26
--------------------------------------
6.3 Collections....................................................26
-----------
6.4 Option Plan....................................................27
-----------
6.5 Change of Name.................................................27
--------------
7. Deliveries by the Seller and the Stockholders at the Closing............27
------------------------------------------------------------
8. Deliveries by the Purchaser at the Closing..............................28
------------------------------------------
9.1 Survival of Representations, Warranties, Covenants
and Agreements.................................................29
--------------
9.2 General Indemnity..............................................29
-----------------
9.3 Claims.........................................................30
------
9.4 Disputes.......................................................31
--------
10. Cooperation.............................................................31
-----------
11. Registration Rights.....................................................32
-------------------
11.1 Demand Registration............................................32
-------------------
11.2 Piggyback Registration.........................................33
----------------------
11.3 Conditions to Registration.....................................33
--------------------------
11.4 Provisions Regarding Registration Generally....................33
-------------------------------------------
11.5 Registration Procedures........................................34
-----------------------
11.6 Indemnification................................................35
---------------
- iii -
<PAGE>
12. Miscellaneous...........................................................36
-------------
12.1 Fees and Expenses..............................................36
-----------------
12.2 Publicity; Confidentiality.....................................36
--------------------------
12.3 Headings.......................................................37
--------
12.4 Notices........................................................37
-------
12.5 Successors and Assigns.........................................38
----------------------
12.6 Governing Law: Consent to Jurisdiction.........................38
--------------------------------------
12.7 Entire Agreement...............................................39
----------------
12.8 Counterparts...................................................39
------------
12.9 Severability...................................................39
------------
12.10 No Prejudice...................................................39
------------
12.11 No Third Party Beneficiaries...................................39
----------------------------
12.12 Amendment and Modification.....................................39
--------------------------
12.13 Waiver.........................................................39
------
12.14 Right to Setoff................................................39
---------------
- iv -
<PAGE>
SCHEDULES
Schedule 2.1(a) - Excluded Assets
Schedule 2.1(b) - Assets
Schedule 2.3 - Assumed Contracts
Schedule 4.1 - Qualification of the Seller
Schedule 4.2 - Capital Structure
Schedule 4.4 - Seller's and Stockholders' Consents
Schedule 4.9 - Financial Statements
Schedule 4.10 - Absence of Undisclosed Liabilities
Schedule 4.11 - Absence of Specified Changes
Schedule 4.12 - Taxes
Schedule 4.13 - Insurance
Schedule 4.14 - Contracts
Schedule 4.15 - Real Property
Schedule 4.16 - Tangible Property
Schedule 4.17 - Intangible Property
Schedule 4.18 - Software
Schedule 4.19 - Employee Benefit Plans
Schedule 4.20 - Employees
Schedule 4.23 - Customers and Suppliers
Schedule 4.24 - Judgments
Schedule 4.25 - Licenses and Permits
Schedule 4.26 - Legal Proceedings
Schedule 4.28 - Intercompany Transactions
Schedule 5.4 - Purchaser's Consents
- v -
<PAGE>
EXHIBITS
Exhibit A - Bill of Sale
Exhibit B - Agreement among IPL, Seller and Optionholders
Exhibit C - Employment Agreements
Exhibit D - Incentive Compensation Agreement
Exhibit E - Put Agreement
Exhibit F - Sale Options
Exhibit G - Opinion of Seller's and Stockholders' Counsel
Exhibit H - Limited Liability Company Operating Agreement of
the Purchaser
Exhibit I - Opinion of Purchaser's Counsel
- vi -
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of January 22, 1997, by and among Cognitive Communications, Inc., a Connecticut
corporation (the "Seller"), Susan Wiener and Michael Rudnick (collectively, the
"Stockholders") and Cognitive Communications, LLC, a Delaware limited liability
company (the "Purchaser") which is a majority-owned subsidiary of Manhattan
Transfer/Edit, Inc., a Delaware corporation ("MTE") which is a wholly-owned
subsidiary of International Post Limited, a Delaware corporation ("IPL").
W I T N E S S E T H :
WHEREAS, the Seller is in the business of providing strategic consulting
services in the area of communications and content strategy for, and research
relating to the implementation of, and the design and production of, intranets,
extranets and internets and is 100% owned by the Stockholders; and
WHEREAS, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell to the Purchaser, certain of the Seller's assets and properties,
on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. Definitions
1.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
Affiliate: With respect to any Person, any director or officer of
such Person and any member of the immediate family of any such director or
officer and any other Person who or which, directly or indirectly, controls, is
controlled by, or is under common control with such Person.
Affiliate Contracts: Defined in Section 4.20.
Agreement: This Asset Purchase Agreement, including all of the
Exhibits and Schedules annexed hereto.
Assets: All of the Seller's properties, assets, privileges, rights,
interests and claims, real and personal, tangible and intangible, of every type
and description (including all Intangible Property, Tangible Property and Real
Property of the Seller), except the Excluded Assets and any Assets disposed of
by the Seller prior to the Closing not in violation of this Agreement, whether
owned or leased or otherwise possessed, used or held for use in the Business,
whether or not
- 1 -
<PAGE>
described in the Schedules to this Agreement and whether or not reflected on the
Financial Statements, now in existence or hereafter acquired by the Seller prior
to the Closing.
Assumed Contracts: All Contracts which are listed on Schedule 2.3
annexed hereto or which the Purchaser shall agree to assume in writing prior to
the Closing.
Assumed Liabilities: The liabilities, duties and obligations of the
Seller expressly agreed to be assumed by the Purchaser pursuant to Section
2.3(a) and such other liabilities, duties and obligations of the Seller, if any,
as the Purchaser, in its sole discretion, shall expressly agree to assume in
writing prior to the Closing.
Base EBITDA: (a) With respect to the Purchaser's fiscal year ending
July 31, 1998, One Million One Hundred Thousand Dollars ($1,100,000) and (b)
with respect to the Purchaser's fiscal years ending July 31, 1999; July 31,
2000; July 31, 2001 and July 31, 2002, the greater of (i) One Million One
Hundred Thousand Dollars ($1,100,000) and (ii) the Purchaser's highest EBITDA
for any previous fiscal year.
Benefit Plans: Defined in Section 4.19.
Bill of Sale: A Bill of Sale and Assignment and Instrument of
Assumption substantially in the form annexed hereto as Exhibit A.
Business: The business currently conducted by the Seller,
including, without limitation, providing strategic consulting services in the
area of communications and content strategy for, and research relating to the
implementation of, and the design and production of, intranets, extranets and
internets.
Business Day: Any day of the year on which banks are not required
or authorized to be closed in the State of New York.
Cash Portion: Defined in Section 2.1.
CCL-DL Interests: Defined in Section 2.2.
CCL-DL Membership Interests: The ownership interests in the
Purchaser.
Closing: Defined in Article 3.
Closing Date: Defined in Article 3.
Code: The Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
- 2 -
<PAGE>
Commission: Securities and Exchange Commission.
Company Group Member: The Seller and its subsidiaries and
predecessors, if any, and (i) each Person that is or was at any time within the
preceding five (5) Benefit Plan years a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as the Seller or
any of its subsidiaries or predecessors, if any, (ii) each trade or business,
whether or not incorporated, that is or was at any time within the preceding
five (5) Benefit Plan years under common control (within the meaning of Section
414(c) of the Code) with the Seller or any of its subsidiaries or predecessors,
if any, and (iii) each trade or business, whether or not incorporated, that is
or was at any time a member of the same affiliated service group (within the
meaning of Sections 414(m) and (o) of the Code) as the Seller or any of its
subsidiaries or predecessors.
Consents: All governmental and third party consents, permits,
approvals, orders, authorizations, qualifications, and waivers necessary for the
consummation of the transactions contemplated by this Agreement or that
thereafter may be necessary to effectuate the transfer or renewal of any
Contract, License and Permit or other license, permit, approval, order,
authorization, qualification or waiver.
Contingent Payment: For each of the Seller's fiscal years ending
July 31, 1998; July 31, 1999; July 31, 2000; July 31, 2001 and July 31, 2002,
the lesser of (a) the amounts distributed to the Stockholders under the
Profit-Sharing Program for such fiscal year, as defined in, and in accordance
with, the Incentive Compensation Agreement and (b) an amount equal to the
difference between (i) the sum of twenty five percent (25%) (the "Contingent
Percentage") of the Base EBITDA for such fiscal year and (ii) any amounts
distributed, or to be distributed, to the Stockholders for such fiscal year as a
result of their ownership interests in the Purchaser. Termination of either
Stockholder's Employment Agreement (x) by the Purchaser for Cause, as defined in
the Employment Agreement, or (y) by either Stockholder other than due to
Constructive Termination, as defined in the Employment Agreement, will reduce
the Contingent Percentage to (1) 12.5% in the event of the termination of one
such Stockholder and (2) 0% in the event of the termination of both
Stockholders. Termination of either Stockholder's Employment Agreement (A) by
the Purchaser other than for Cause, (B) by either Stockholder as a result of
Constructive Termination or (C) upon such Stockholder's death or disability will
not affect the Contingent Percentage after such termination.
Contract: Any contract, agreement, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant, right,
instrument or other similar document or agreement, whether written or oral.
Demand Registration: Defined in Section 11.1(a).
Dollars or "$": The legal currency of the United States of America.
- 3 -
<PAGE>
EBITDA: Earnings before interest, taxes, depreciation and
amortization, calculated in accordance with GAAP; provided, however, that EBITDA
shall be computed by taking into account directly allocated overhead expenses of
MTE and/or IPL with respect to the Purchaser, including property and casualty
insurance, workmen's compensation, employee fringe benefit costs, and other
direct costs normally allocated by MTE and/or IPL among their respective
Subsidiaries based in part on the size of such Subsidiaries, and by excluding:
(a) all special overhead charges of the Purchaser (including the 3% of revenues
overhead charge) and (b) the cost of all term life, health, accident and/or
other insurance covering any employee of the Purchaser for which it or any of
its Subsidiaries or Affiliates, including MTE and/or IPL, is the beneficiary.
Employment Agreements: Defined in Section 6.1.
Environmental Laws: Any Laws relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes into the
environment (including ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants (including asbestos), chemicals or
industrial, toxic or hazardous substances or wastes.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
Excluded Assets: The assets and properties of the Seller listed on
Schedule 2.1(a) annexed hereto.
GAAP: Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, applied on a consistent basis and
consistent with past practices.
Governmental Authority: Any United States or foreign governmental
authority, including all agencies, bureaus, commissions, authorities or bodies
of the federal government or any state, county, municipal or local government,
including any court, judge, justice or magistrate.
Holder: The holders of the CCL-DL Interests, the Incentive Options
and the Incentive Option Interests.
Incentive Compensation Agreement: Defined in Section 6.1.
- 4 -
<PAGE>
Incentive Options: Defined in the Incentive Compensation Agreement.
Incentive Option Interests: The CCL-DL Membership Interests
issuable upon exercise of the Incentive Options, as defined in the Incentive
Compensation Agreement.
Installment Payments: Defined in Section 2.1.
Insurance: Defined in Section 4.13.
Intangible Property: All Contracts, certificates of deposit, bank
accounts, securities, partnership or other ownership interests, rights to
receive money or property by assignment, future interests, claims and rights
against third parties, accounts receivable, notes receivable, Intellectual
Property, prepaid expenses, acquisition costs and other intangible property
(other than Software) of any nature owned, leased, licensed, used or held for
use, directly or indirectly, by, on behalf of or for the account of a Person.
Intellectual Property: All patents, trademarks, trademark rights,
trade names, product designations, service marks, copyrights, other intellectual
property, and applications for any of the foregoing, owned, leased, licensed,
used or held for use, directly or indirectly, by, on behalf of or for the
account of a Person.
IPL: International Post Limited, a Delaware corporation.
IPL Agreement: The agreement by and among IPL, the Seller and the
Optionholders substantially in the form annexed hereto as Exhibit B.
Judgment: Any judgment, writ, order, injunction, determination,
award or decree of or by any Governmental Authority.
Law: Any statute, ordinance, code, rule, regulation, order or other
law enacted, adopted, promulgated, applied or followed by any Governmental
Authority.
Licenses and Permits: Defined in Section 4.25.
Lien: Any security agreement, financing statement (whether or not
filed), security or other interest, conditional sale or other title retention
agreement, lease, consignment or bailment given for security purposes, lien,
charge, restrictive agreement, mortgage, deed of trust, indenture, pledge,
option, encumbrance, limitation, restriction, adverse interest, constructive or
other trust, claim, charge, attachment, exception to or defect in title or other
ownership interest (including reservations, rights of entry, possibilities or
reverter, encroachments, easements, rights of way, restrictive covenants and
licenses) of any kind, whether direct, indirect, accrued or contingent.
Material Adverse Effect: Defined in Section 4.1.
- 5 -
<PAGE>
MTE: Manhattan Transfer/Edit, Inc., a Delaware corporation.
Optionholders: Each of the Stockholders and Mr. David Leveen.
PBGC: The Pension Benefit Guaranty Corporation.
Person: Any individual, trustee, corporation, general or limited
partnership, limited liability partnership, limited liability company, joint
venture, joint stock company, bank, firm, Governmental Agency, trust,
association, organization or unincorporated entity of any kind or nature
whatsoever.
Piggyback Registration: Defined in Section 11.2.
Providee: Defined in Section 12.2.
Provider: Defined in Section 12.2.
Purchaser: Cognitive Communications, LLC, a Delaware limited
liability company.
Purchaser's Counsel: The law firm of Shereff, Friedman, Hoffman &
Goodman, LLP.
Purchase Price: Defined in Section 2.1.
Real Property: All realty, fixtures, easements, rights-of-way and
other interests (excluding Tangible Property) in real property, buildings,
improvements and construction-in-progress.
Registrable Securities: The CCL-DL Interests and the Incentive
Option Interests (and any equity securities of the Purchaser issued as (or
issuable upon the conversion or exercise of any right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such above-described securities). Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144
under the Securities Act or sold in a private transaction in which the
transferor's rights under Article 11 are not assigned.
Registration Expenses: Defined in Section 11.4.
Returns: All returns, declarations and reports and all information
returns and statements of any kind or nature whatsoever.
Sale Options: Defined in Section 6.1.
Seller: Cognitive Communications, Inc., a Connecticut corporation.
- 6 -
<PAGE>
Seller's and Stockholders' Counsel: The law firm of Roberts,
Sheridan & Kotel.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
Stockholders: Susan Wiener and Michael Rudnick.
Software: All electronic data processing systems, information
systems, computer software programs, program specifications, charts, procedures,
source codes, input data, routines, data bases, report layouts, formats, record
file layouts, diagrams, functional specifications, narrative descriptions, flow
charts and other related material developed specifically for the Seller and
used, licensed, leased or owned, directly or indirectly, by the Seller.
Subsidiary: With respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the issued and outstanding stock or equivalent thereof having ordinary voting
power is owned or controlled by such Person, by one or more Subsidiaries or by
such Person and one or more Subsidiaries.
Survival Period: Defined in Section 9.1.
Surviving Lien: Any Lien affecting the Assets which the Purchaser,
prior to the Closing, expressly agrees in writing or by a notation on a Schedule
shall survive the Closing.
Tangible Property: All cash, furnishings, machinery, equipment,
computer systems and Software, supplies, inventories, vehicles, books and
records and other tangible property and facilities of any kind or nature
whatsoever.
Taxes: All foreign, federal, state, county, local and other taxes,
levies, impositions, deductions, charges and withholdings, including any
interest, penalties or additions thereto. Taxes shall include, but not be
limited to, income, franchise, gross receipts, sales, commercial rent and
employment taxes.
Unassumed Liabilities: Any and all liabilities, duties and
obligations of, and claims against or relating to, the operation of the Business
by the Seller or the ownership, possession or use of any of the Assets prior to
the Closing, whether accrued, unaccrued, absolute, contingent, known or unknown,
asserted or unasserted and whether now existing or arising at any time prior to,
at, or after the Closing (including, without limitation, all liabilities of the
Seller to any of the Stockholders, or to any employee, consultant, officer or
director of the Seller, or to their respective spouses and/or children and/or
Affiliates, in any amount whatsoever) and any Lien upon any of the Assets,
except only the Assumed Liabilities and Surviving Liens.
- 7 -
<PAGE>
1.2 Use of Defined Terms. Any defined term used in the plural shall refer to
all members of the relevant class, and any defined term used in the singular
shall refer to any one or more of the members of the relevant class. The use of
any gender shall be applicable to all genders.
1.3 Accounting Terms. All accounting terms not otherwise defined in this
Agreement shall be construed in conformity with, and all financial data required
to be submitted by this Agreement shall be prepared in conformity with, GAAP.
1.4 Sections, Exhibits and Schedules. References in this Agreement to
Sections, Exhibits and Schedules are to Sections, Exhibits and Schedules of and
to this Agreement. All Exhibits and Schedules to this Agreement are hereby
incorporated herein by this reference as if fully set forth herein.
1.5 Miscellaneous Terms. The term "or" shall not be exclusive. The terms
"herein," "hereof," "hereto," "hereunder" and other terms similar to such terms
shall refer to this Agreement as a whole and not merely to the specific article,
section, paragraph or clause where such terms may appear. The term "including"
shall mean "including, but not limited to."
2. Sale and Payment.
2.1 Sale and Purchase of the Assets. Upon the terms and subject to the
conditions of this Agreement, and on the basis of the representations and
warranties contained in this Agreement, the Seller agrees that, on the Closing
Date, it will sell, assign, convey, transfer and deliver to the Purchaser, and
the Purchaser agrees to acquire, accept and receive from the Seller, for the
Purchase Price and in the manner herein below provided, all of the Seller's
rights, title and interests in and to all of the Assets. The Seller and the
Stockholders have endeavored to list all of the Assets with a value in excess of
$1,000 as of the date hereof on Schedule 2.1(b) annexed hereto.
In consideration of the sale, assignment, conveyance, transfer and
delivery of the Assets to the Purchaser, the Purchaser shall pay, as the
purchase price therefor, an aggregate of $600,000 (the "Purchase Price"). The
Purchaser shall pay the Purchase Price by payment to the Seller of (a) $50,000
at the Closing, by wire transfer of immediately available funds to an account or
accounts designated by the Seller or by check payable to the Seller (the "Cash
Portion") and (b) $550,000, in eleven (11) equal installments of $50,000 each,
payable on each of the first eleven (11) month anniversaries of the Closing
Date, by wire transfer of immediately available funds to an account or accounts
designated by the Seller or by check payable to the Seller (the "Installment
Payments"). Notwithstanding anything contained herein to the contrary, the
Purchaser agrees that it shall not be entitled to off-set any claims (whether
for indemnification hereunder or otherwise) against the Seller and/or any of the
Stockholders against any of the Installment Payments.
2.2 CCL-DL Interests. Simultaneously with the Closing, the Purchaser shall
issue and sell to the Stockholders an approximate 2% ownership interest in the
Purchaser for an aggregate purchase price of $1.00 (the "CCL-DL Interests").
- 8 -
<PAGE>
2.3 Assumption of Liabilities.
(a) Subject to the terms and conditions of this Agreement, the
Purchaser shall assume as of the Closing all of the Seller's obligations to be
performed after the Closing Date pursuant to the express terms of the Assumed
Contracts; provided, however, that in no event shall the Purchaser assume or
otherwise be bound by or responsible or liable for any liability, duty or
obligation incurred by the Seller in violation of the provisions of this
Agreement or which is not disclosed in writing to the Purchaser prior to the
Closing Date or any liability, duty or obligation arising out of a breach,
violation or default by the Seller of or under any Assumed Contract or other
Assumed Liability, any Law or Judgment (including any event occurring or fact or
circumstance existing as of or prior to the Closing Date that, with the passage
of time or the giving of notice or both, may become such a breach, violation or
default).
(b) The Purchaser shall not assume or otherwise be bound by or
responsible or liable for any Unassumed Liabilities.
(c) The Seller and the Stockholders covenant and agree that they
shall use their best efforts to cause, prior to or simultaneously with the
Closing Date, all Unassumed Liabilities of the Seller to be paid, discharged and
performed in full or shall obtain from the persons to whom such Unassumed
Liabilities are owed, unconditional releases, in form and substance reasonably
satisfactory to the Purchaser and its counsel, of the Purchaser and the Assets
and Business from all responsibilities, liabilities and claims with respect to
such Unassumed Liabilities.
2.4 Allocation of Consideration. The Purchaser and the Seller hereby agree
that the Purchase Price and the other consideration to be payable by the
Purchaser in connection with the sale and purchase of the Assets shall be
allocated by the Purchaser and the Seller among the Assets in accordance with
their relative fair market values as soon as practical after the Closing (but in
any event within thirty days). Such agreed allocation will be intended to comply
with Section 1060 of the Code, and the Purchaser and the Seller hereby agree to
report the transactions contemplated by this Agreement for Federal income tax
purposes in accordance with such allocation.
3. The Closing. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Shereff, Friedman, Hoffman & Goodman, LLP, 919
Third Avenue, New York, New York, on the date this Agreement is executed by the
parties hereto (the day on which the Closing takes place is referred to herein
as the "Closing Date").
4. Representations and Warranties of the Seller and the Stockholders. Each of
the Seller and the Stockholders, jointly and severally, hereby represent and
warrant to the Purchaser as follows:
4.1 Organization, Good Standing, Power and Qualification. The Seller is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Connecticut, and has all necessary power and authority to carry
on its business as currently conducted, to enter into
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this Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of the Seller and the Stockholders and, assuming due
authorization, execution and delivery by the Purchaser, this Agreement
constitutes a legal, valid and binding obligation of the Seller and the
Stockholders enforceable against such parties in accordance with its terms,
except as may be limited by bankruptcy, reorganization, moratorium, fraudulent
conveyance and insolvency Laws and by other Laws affecting the rights of
creditors generally and except as may be limited by the availability of
equitable remedies. The Seller is duly licensed or qualified and in good
standing as a foreign corporation authorized to do business in each jurisdiction
set forth on Schedule 4.1 annexed hereto, and such jurisdictions constitute the
only jurisdictions where the character of the assets owned or leased by the
Seller and/or the nature of the activities conducted by the Seller makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified is not reasonably likely to have a material adverse effect on the
Seller's financial condition, assets, results of operations, future prospects
(business, financial or otherwise) or the Business as currently conducted by the
Seller or as proposed to be conducted by the Purchaser after the Closing (a
"Material Adverse Effect")(provided, however, that only with respect to the
provisions of this Section 4.1, the "Business proposed to be conducted by the
Purchaser after the Closing" shall assume that the Purchaser proposes to conduct
the Business after the Closing substantially the same as the Seller conducted
the Business immediately prior to the Closing).
4.2 Capital Structure. The authorized, issued and outstanding capital stock
of the Seller is set forth on Schedule 4.2 annexed hereto. The Stockholders are
the only holders of the issued and outstanding capital stock of the Seller. Each
of the Stockholders owns on the date hereof, and shall own on the Closing Date,
the number of shares of common stock of the Seller set forth on Schedule 4.2
annexed hereto, free and clear of all Liens.
4.3 Subsidiaries. The Seller does not have any Subsidiaries or control,
directly or indirectly, or have any direct or indirect equity participation in,
any Person.
4.4 Consents. Except as set forth on Schedule 4.4 annexed hereto, the
execution and delivery of this Agreement by the Seller and the Stockholders do
not, and the consummation of the transactions contemplated hereby shall not,
require any Consents to be obtained by any of the Seller or the Stockholders.
4.5 No Conflict. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby shall not, result in or
constitute (a) a default, breach or violation of the organizational documents of
the Seller or any Contract to which any of the Seller or the Stockholders is a
party or by which any of the assets or properties of any of the Seller or the
Stockholders may be bound or affected; (b) an event which (with notice or lapse
of time or both) would permit any Person to terminate, accelerate the
performance required by, or accelerate the maturity of any indebtedness or
obligation of any of the Seller or the Stockholders under any Contract to which
any of the Seller or the Stockholders is a party or by which any of the assets
or properties of any of the Seller or the Stockholders may be bound or affected;
(c) the creation or
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imposition of any Lien on the Assets; or (d) subject to the receipt of the
Consents required as set forth on Schedule 4.4 annexed hereto, a violation of
any Law or Judgment of any Government Authority or any other restriction of any
kind or character by which any of the Seller or the Stockholders or any of the
assets or properties of any of the Seller or the Stockholders may be bound or
affected.
4.6 No Brokers. None of the Seller (or any of its officers, directors,
employees or agents) or the Stockholders has entered into any Contract,
arrangement or understanding with any Person which may result in the obligation
of any party hereto to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with this Agreement or the transactions
contemplated hereby.
4.7 Investment Purpose; Private Placement.
(a) Each of the Stockholders is acquiring the CCL-DL Interests
solely for the purpose of investment and not with a view to the distribution
thereof, and each of the Stockholders acknowledge that the CCL-DL Interests are
not registered under the Exchange Act and that the acquisition of the CCL-DL
Interests is not registered under the Securities Act. Therefore, each of the
Stockholders acknowledge that the CCL-DL Interests may not be transferred, sold,
hypothecated or otherwise disposed of except pursuant to the registration
provisions of the Securities Act or pursuant to an applicable exemption
therefrom and subject to state securities Laws, as applicable.
(b) Each of the Stockholders acknowledge that the CCL-DL Interests
involve a great deal of risk and that there is no existing or other market for
the CCL-DL Interests. Each of the Stockholders are able to (i) bear the economic
risk of their investment in the Purchaser, (ii) afford a complete loss of such
investment and (iii) hold indefinitely the CCL-DL Interests. In reaching an
informed decision to invest in the Purchaser, each of the Stockholders has
obtained sufficient information to evaluate the merits and risks of an
investment in the Purchaser. In that connection, representatives of the
Purchaser have (x) fully and satisfactorily answered all questions which each of
the Stockholders desired to ask concerning the Purchaser and its business, and
(y) furnished each of the Stockholders with any additional information or
documents requested to verify the accuracy of or supplement any information
previously delivered to or discussed with each of the Stockholders.
(c) None of the Stockholders has construed the contents of this
Agreement or any additional agreement with respect to their proposed investment
in the Purchaser, or any prior or subsequent communications from the Purchaser,
or any of its officers, managers, employees or representatives, as investment,
tax or legal advice or as information necessarily applicable to the particular
financial situation of any Stockholder. The Stockholders have consulted their
own financial advisors, tax advisors, legal counsel and accountants, as
necessary or desirable, as to matters concerning their respective investment in
the Purchaser.
(d) Each of the Stockholders are "accredited investors" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act.
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4.8 Disclosure. No representation, warranty or statement made by any of the
Seller or the Stockholders in this Agreement, the Exhibits attached hereto, or
in any other material furnished or to be furnished by any of the Seller or the
Stockholders to the Purchaser or its representatives, attorneys and accountants
pursuant to or in connection with this Agreement or the transactions
contemplated hereby, contains or shall contain any untrue statement of a
material fact, or omits or shall omit to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
4.9 Financial Statements. Schedule 4.9 annexed hereto contains a complete
and correct copy of the Trial Balance and General Ledger of the Seller as of
October 31, 1996 and schedules of the Seller's accounts receivable and accounts
payable as of January 14, 1997 (collectively, the "Financial Statements"). The
Financial Statements has been prepared in accordance with the books and records
of the Seller and fairly present the Seller's financial position, assets and
liabilities as of the date set forth therein.
4.10 Absence of Undisclosed Liabilities. Except to the extent set forth on
Schedule 4.10 annexed hereto and in the Financial Statements, the Seller does
not have any indebtedness, duty, responsibility, liability or obligation of any
nature, whether absolute, accrued, contingent or otherwise, whether as
principal, agent, partner, co-venturer, guarantor or in any capacity whatsoever,
related to or arising from the operation of its business or other ownership,
possession or use of its assets or properties.
4.11 Absence of Specified Changes. Except as set forth on Schedule 4.11
annexed hereto, since October 31, 1996, there has not been with respect to the
Seller any:
(a) event which has had or which is reasonably likely to have a
Material Adverse Effect;
(b) transaction not in the ordinary course of business, including
any sale of all or substantially all of the assets of the Seller or any merger
of the Seller and any other entity;
(c) material damage, destruction or loss, whether or not insured,
affecting the Business, as currently conducted by the Seller or as proposed to
be conducted by the Purchaser after the Closing, or any assets of the Seller;
(d) failure to maintain in full force and effect substantially the
same level and types of Insurance coverage as in effect on October 31, 1996 for
destruction, damage to, or loss of any asset of the Seller (whether or not
covered by Insurance);
(e) change in accounting principles, methods or practices,
investment practices, claims, payment and processing practices or policies
regarding intercompany transactions, except for such changes as were necessary
to conform with GAAP;
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(f) revaluation of any assets of the Seller;
(g) declaration, setting aside, or payment of a dividend or other
distribution in respect of the Seller's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any shares of the Seller's capital
stock;
(h) issuance or sale of any shares of capital stock or of any other
equity security or of any security convertible into or exchangeable for equity
securities;
(i) amendment to the Certificate of Incorporation or By-laws or
equivalent organizational documents of the Seller;
(j) disposition of or lapse of any Intangible Property or Software
of the Seller, or any license, permit or authorization to use any of the
foregoing, other than dispositions or lapses in the ordinary course of business
of Intangible Property or Software not material to the Seller or the Business;
(k) creation of any Lien, other than in the ordinary course of
business;
(l) discharge or satisfaction of any Lien or payment or
cancellation of any liability, other than in the ordinary course of business;
(m) cancellation of any assets, debt or claims or waiver or release
of any Contract, right or claim, other than cancellations, waivers and releases
in the ordinary course of business which do not exceed $1,000 in the aggregate;
(n) indebtedness incurred or any commitment to borrow money, any
incurrence of a contingent liability or any guaranty or commitment to guarantee
the indebtedness of others entered into, by the Seller, other than expenditures
incurred or commitments made pursuant to clause (p) below or customary
transactions in the ordinary course of business not in excess of $1,000 in the
aggregate;
(o) capital expenditure or capital commitment requiring an
expenditure of monies, other than customary transactions in the ordinary course
of business not in excess of $1,000 in the aggregate;
(p) increase or commitment to increase the salary or other
compensation payable or to become payable to any of its officers, directors or
employees, agents or independent contractors, or the payment of any bonus to the
foregoing Persons;
(q) loan or extension of credit to officers or employees; or
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(r) agreement or understanding to take any of the actions described
above in this Section 4.11.
4.12 Taxes.
(a) Except as set forth on Schedule 4.12 annexed hereto, all Tax
Returns for all periods which end prior to or which include the Closing Date
that are or were required to be filed by, or with respect to, the Seller have
been or shall be filed on a timely basis in accordance with the Laws of each
Governmental Authority. The Seller and the Stockholders shall timely file or
cause to be filed all Tax Returns that shall be required to be filed after the
Closing Date by, or with respect to, the Seller, for all periods which end prior
to or which include the Closing Date, in accordance with applicable Laws. All
such Tax Returns that have been filed were, when filed, and continue to be,
true, correct and complete in all material respects. All such Tax Returns that
will be filed shall be true, correct and complete in all material respects when
filed by the Seller and/or the Stockholders.
(b) Schedule 4.12 annexed hereto lists all United States federal,
state, local and foreign income Tax Returns that have been filed since 1992, by
or with respect to the Seller and that have been audited by any Governmental
Authority or are closed by the applicable statute of limitations. Schedule 4.12
annexed hereto describes all adjustments to income Tax Returns filed by, or on
behalf of, the Seller for all taxable years since 1992 that have been proposed
by any representative of any Governmental Authority, and the resulting Taxes, if
any, proposed to be assessed. All deficiencies proposed (plus interest,
penalties and additions to Tax that were or are proposed to be assessed thereon,
if any) as a result of any examinations have been paid, reserved against,
settled, or, as set forth on Schedule 4.12 annexed hereto, are being contested
in good faith by appropriate proceedings. Except as set forth on Schedule 4.12
annexed hereto, there are no outstanding waivers or extensions of any statute of
limitations relating to the payment of Taxes for which the Seller and/or any of
the Stockholders may be liable and no Governmental Authority has either formally
or informally requested such a waiver or extension.
(c) The Seller has paid, or made provision for the payment of, all
Taxes that have or may become due for all periods which end prior to or which
include the Closing Date, including all Taxes reflected on the Tax Returns
referred to in this Section 4.12, or in any assessment, proposed assessment or
notice, either formal or informal, received by any of the Seller or the
Stockholders, except such Taxes, if any, as are set forth on Schedule 4.12
annexed hereto that are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided. The charges,
accruals and reserves with respect to Taxes on the books and records of the
Seller (determined in accordance with GAAP) are adequate and are at least equal
to the liabilities of the Seller for Taxes. All Taxes that the Seller is or was
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the appropriate Governmental
Authorities. There are no Liens with respect to Taxes upon any of the assets of
the Seller (except for Taxes not yet due). All Taxes that may later become due
and payable with respect to any taxable period which ends prior to or which
includes the Closing Date for the Seller shall be paid by the Seller and the
Stockholders.
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(d) The Seller is not a party (other than as an investor) to any
industrial development bond.
(e) For purposes of this Section 4.12, references to the Seller
shall also refer to any predecessor companies.
4.13 Insurance. Schedule 4.13 annexed hereto sets forth an accurate, correct
and complete list and summary description (including the name of the insurer,
coverage, premium and expiration date) of all binders or policies of fire,
liability, product liability, workers compensation, vehicular, unemployment and
other insurance, self insurance programs and fidelity bonds (collectively,
"Insurance") maintained by the Seller or in which the Seller is a named insured.
All Insurance has been issued under valid and enforceable policies or binders
for the benefit of the Seller, and all such policies or binders are in full
force and effect and none of the premiums therefor are past due. The Seller is
in compliance with the terms of all such policies and binders. In the opinion of
the Seller and the Stockholders, all Insurance is of such types and in such
amounts and for such risks, casualties and contingencies as are customarily
insured against by enterprises in operations similar to the Business, as
currently conducted by the Seller. There are no pending or asserted claims
against any Insurance carrier as to which any insurer has denied liability, and
there are no claims under any Insurance policy or binder that have been
disallowed or improperly filed. Except as set forth on Schedule 4.13 annexed
hereto, no notice of cancellation or nonrenewal with respect to, or increase of
premium on, any Insurance has been received by the Seller since October 31,
1996.
4.14 Contracts. Schedule 4.14 annexed hereto sets forth an accurate, correct
and complete list of the following Contracts to which the Seller is a party or
may be bound or affected, by which its assets may be bound or affected or
pursuant to which the Seller is an obligor or a beneficiary:
(a) Contracts with respect to Real Property, Tangible Property,
Insurance, Intangible Property and Software, and all Affiliate Contracts,
Benefit Plans and Licenses and Permits;
(b) Any Contract for capital expenditures or for the purchase of
Tangible Property or services by the Seller which involves consideration payable
by any party thereto in excess of $1,000 in any fiscal year;
(c) Any Contract evidencing any indebtedness in excess of $1,000 or
obligation for the deferred purchase price of assets in excess of $1,000
(excluding normal trade payables) or guaranteeing any indebtedness, obligation
or liability in excess of $1,000;
(d) Any Contract concerning confidentiality or non-competition;
(e) Any Contract with any of the Stockholders, or any Affiliate of
any of the Stockholders;
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(f) Any joint venture, partnership, cooperative arrangement or any
other Contract involving a sharing of profits;
(g) Any Contract with any Governmental Authority;
(h) Any power of attorney, proxy or similar instrument;
(i) Any Contract to indemnify any Person or to share any Tax
liability of any of the Stockholders;
(j) Any other Contract related to the Business, as currently
conducted by the Seller or as proposed to be conducted by the Purchaser after
the Closing (other than those Contracts excluded by an express exception from
the descriptions set forth in clauses (a) through (i) above), which (A) involves
consideration payable by any party thereto in excess of $1,000 in any fiscal
year or (B) provides for a period of performance which extends beyond twelve
(12) months from the date hereof; and
(k) Any proposed arrangement or Contract which the Seller
reasonably expects to be near consummation and of a type that if entered into
would be a Contract described in clauses (a) through (j) above.
Accurate, correct and complete copies of each such Contract have
been delivered by the Seller and the Stockholders to the Purchaser. Each such
Contract is in full force and effect. The Seller has complied in all material
respects with all commitments and obligations on its part to be performed or
observed under each such Contract. To the best knowledge of the Seller and the
Stockholders, each party to each such Contract other than the Seller has
complied with all commitments and obligations on its part to be performed or
observed thereunder, except for such noncompliance which is not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect. No
event has occurred which is or, after the giving of notice or passage of time or
both, would constitute a default under any such Contract. The Seller has not
received any notice of a default, offset or counterclaim under any such
Contract.
4.15 Real Property.
(a) Schedule 4.15 annexed hereto sets forth an accurate, correct
and complete list of all Real Property leased or subleased by the Seller. The
Seller does not own any Real Property. All such Real Property is in good
operating condition and repair (reasonable wear and tear excepted), is suitable
for the purposes for which it is presently being used and is adequate to meet
all present and reasonably anticipated future requirements of the Business, as
currently conducted by the Seller or as proposed to be conducted by the
Purchaser after the Closing. The Seller has been in peaceable possession of the
premises covered by each Real Property lease or sublease of the Seller since the
commencement of the original term of such lease or sublease.
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(b) Each of the Real Property leases and subleases of the Seller
(and leases underlying such subleases) is in full force and effect and contains
no terms other than the terms contained in the copies heretofore delivered to
the Purchaser. The Seller has complied with all commitments and obligations on
its part to be performed or observed under each such Real Property lease or
sublease. To the best knowledge of the Seller and the Stockholders, each party
to each such Real Property lease or sublease other than the Seller has complied
with all commitments and obligations on its part to be performed or observed
thereunder, except for such noncompliance which is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. The Seller
has not received any notice of a default, offset or counterclaim under any Real
Property lease or sublease of the Seller (or lease underlying such sublease) and
no event or condition has happened or presently exists which constitutes a
default or, after notice or lapse of time or both, would constitute a default
under any Real Property lease or sublease of the Seller (or lease underlying
such sublease). There is no Lien affecting any leasehold interest under any Real
Property lease or sublease of the Seller. The Closing will not constitute a
default under any of the Real Property leases or subleases of the Seller.
(c) There is no pending or, to the best knowledge of the Seller and
the Stockholders, threatened action or proceeding (including condemnation and
foreclosure) which could affect the Real Property of the Seller.
(d) To the best knowledge of the Seller and the Stockholders, there
are no defaults by the landlords under any of the Real Property leases or
subleases of the Seller and such landlords have performed all of their
obligations thereunder, except for such defaults which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect. The
Seller has not waived any obligation of any such landlord or any right under any
of the Real Property leases or subleases of the Seller. There is no pending or,
to the best knowledge of the Seller and the Stockholders, threatened action or
proceeding which could affect the Real Property leases or subleases of the
Seller.
4.16 Tangible Property.
(a) Schedule 4.16 annexed hereto sets forth an accurate, correct
and complete list of all Tangible Property owned or leased by the Seller with a
value in excess of $1,000. The Seller has good and clear title to all of the
Tangible Property set forth on Schedule 4.16 annexed hereto as being owned by
the Seller, free and clear of all Liens. All such Tangible Property is in good
operating condition and repair (reasonable wear and tear excepted), is suitable
for the purposes for which it is presently being used and is adequate to meet
all present requirements of the Business as currently conducted by the Seller.
The Seller has been in peaceable possession of the Tangible Property covered by
each Tangible Property lease of the Seller since the commencement of the term
thereof.
(b) Each of the Tangible Property leases of the Seller is in full
force and effect. The Seller has complied with all commitments and obligations
on its part to be performed or observed under each such Tangible Property lease.
To the best knowledge of the Seller and the Stockholders, each party to each
such Tangible Property lease other than the Seller has complied with all
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commitments and obligations on its part to be performed or observed thereunder,
except for such noncompliance which is not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect. The Seller has not received
any notice of a default, offset or counterclaim under any Tangible Property
lease of the Seller, and no event or condition has happened or presently exists
which constitutes a default or, after notice or lapse of time or both, would
constitute a default under any such Tangible Property lease. There is no Lien
affecting any leasehold interest under any such Tangible Property lease.
4.17 Intangible Property; Intellectual Property.
(a) Schedule 4.17 annexed hereto sets forth an accurate, correct
and complete list of all Intangible Property of the Seller. Schedule 4.17
annexed hereto sets forth an accurate, correct and complete list of all licenses
and other Contracts entered into by the Seller relating to the Intangible
Property of the Seller. The Seller is the sole and exclusive owner of the
Intangible Property of the Seller set forth on Schedule 4.17 annexed hereto as
being owned by the Seller and, to the best knowledge of the Seller and the
Stockholders after due inquiry, has the right to use the Intangible Property of
the Seller set forth on Schedule 4.17 annexed hereto as being leased, licensed
or otherwise used by the Seller. No action, suit, proceeding or investigation is
pending or, to the best knowledge of the Seller and the Stockholders, threatened
with respect to the Intangible Property of the Seller.
(b) To the best knowledge of the Seller and the Stockholders after
due inquiry, none of the Intellectual Property of the Seller interferes with,
infringes upon, conflicts with or otherwise violates the rights of any Person
or, to the best knowledge of the Seller and the Stockholders, is being
interfered with or infringed upon by any Person, and none of the Intellectual
Property of the Seller is subject to any outstanding Judgment. Except as set
forth on Schedule 4.17 annexed hereto, there are no royalty, commission or
similar arrangements, and no licenses, sublicenses or Contracts, pertaining to
the Intellectual Property of the Seller. The Seller has not agreed to indemnify
any Person for or against any infringement of or by the Intellectual Property of
the Seller. Except as set forth on Schedule 4.17 annexed hereto, all items of
Intellectual Property of the Seller are properly registered under applicable
Law.
4.18 Software.
(a) Schedule 4.18 annexed hereto sets forth an accurate, correct
and complete list of all computer Software programs used, licensed, leased or
owned, directly or indirectly, by the Seller and all pending Software
development projects, together with an identification of the Persons undertaking
such projects. The Seller is the sole and exclusive owner of the Software set
forth on Schedule 4.17 or Schedule 4.18 annexed hereto as being owned by the
Seller and, to the best knowledge of the Seller and the Stockholders after due
inquiry, has the right to use the Software set forth on such schedules as being
leased, licensed or otherwise used by the Seller.
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(b) All documentation relating to Software material to the Seller
or the Business is current, accurate and sufficient in detail and content to
identify and explain the nature thereof and to allow its full and proper use by
the Seller without reliance on the special knowledge or memory of others. No
proprietary rights in any Software have been transferred, whether by sale,
assignment or license, or have been lost. All Software material to the Seller or
the Business is presently protected, and is not part of the public knowledge or
literature, nor has any Software been used, divulged or appropriated for the
benefit of any other Person or to the detriment of the Seller. The rights of the
Seller in the Software are free and clear of all Liens. The Seller has not
received notice of any violation of trade secret rights, copyrights or other
proprietary rights with respect to any Software, and neither the Seller nor any
Stockholders knows of any basis therefor. Any and all copies of Software are in
the sole and exclusive possession and control of the Seller.
4.19 Employee Benefit Plans.
(a) Benefit Plans. Schedule 4.19 annexed hereto sets forth an
accurate, correct and complete list of all "employee benefit plans" (as defined
in Section 3(3) of ERISA), bonus, profit sharing, deferred compensation,
incentive or other compensation plans or arrangements, and other employee fringe
benefit plans, whether funded or unfunded, qualified or unqualified, maintained
or contributed to by any of the Company Group Members for the benefit of any of
their respective directors, officers or employees or other Persons (all the
foregoing are collectively referred to herein as the "Benefit Plans"). All
Benefit Plans, related trust Contracts or annuity Contracts (or any other
funding instrument), and all plans, Contracts, arrangements and commitments
referred to in this Section 4.19, are in full force and effect. No liability to
any Company Group Member exists with respect to any Benefit Plan which has been
terminated.
(b) Funding. All contributions to, and payments from, the Benefit
Plans that may have been required to be made in accordance with the Benefit
Plans have been made in a timely manner since the commencement of such Benefit
Plans. All such contributions to, and payments from, the Benefit Plans for any
period ending before the Closing that are not yet required to be made will be,
as of the Closing, properly accrued on the Financial Statements delivered prior
to the Closing. None of the Company Group Members currently have any unfunded
pension benefit liabilities and no liability, contingent or otherwise, of any
Company Group Member currently exists with respect to any past unfunded pension
benefit liabilities, if any. There currently are no, and there have never been
any uncorrected, accumulated funding deficiencies, as defined in Sections 302 of
ERISA and Section 412 of the Code, whether or not waived, in any Benefit Plan
and no liability, contingent or otherwise, of any Company Group Member currently
exists on account of any accumulated funding deficiencies, if any. No Benefit
Plan is underfunded on a termination basis, as calculated in accordance with the
rules of the PBGC.
(c) Compliance With the Code and ERISA. Each of the Company Group
Members and each Benefit Plan (and any related trust agreement or annuity
contract or any other funding instrument) comply currently, and have complied in
all material respects in the past, both as
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to form and operation, with the provisions of all Laws applicable to Benefit
Plans. All necessary governmental approvals for the Benefit Plans have been
obtained.
(d) Administration. Each Benefit Plan has been administered to date
in material compliance with the requirements of the Code and ERISA. There is no
liability for failure to file or distribute reports, Returns and similar
documents with respect to the Benefit Plans required to be filed since the
commencement of the Benefit Plans with any Government Authority or distributed
to any Benefit Plan participant on a timely basis. To the best knowledge of the
Seller and the Stockholders, there are no investigations by any Governmental
Authority, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Benefit Plans), suits or proceedings
against or involving any Benefit Plan or asserting any rights or claims to
benefits under any Benefit Plan pending or threatened that could give rise to
any liability to any of the Stockholders, any of the Company Group Members, or
the directors, officers or employees of the Seller or a trustee, administrator
or other fiduciary of any trusts created under any Benefit Plan.
(e) Prohibited Transactions. No "prohibited transaction" (as
defined in Section 4975 of the Code or Section 406 of ERISA) has ever occurred
which involves the assets of any Benefit Plan and which could subject any of the
Stockholders, the Company Group Members, or any of the directors, officers or
employees of the Seller, or a trustee, administrator or other fiduciary of any
trusts created under any Benefit Plan, to the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or the sanctions imposed under
Title I of ERISA. None of the Stockholders, the Company Group Members, the
directors, officers or employees of the Seller, a trustee, administrator or
other fiduciary of any Benefit Plan, nor any agent of any of the foregoing, has
ever engaged in any transaction or acted or failed to act in a manner which
could subject any of the Company Group Members, their businesses or the
Purchaser to any liability for breach of fiduciary duty under ERISA or any other
applicable Law.
(f) Liabilities to Pension Benefit Guaranty Corporation. None of
the Company Group Members has any liability to the PBGC or has ever had any such
event which could result in a liability to any Company Group Member following
the Closing. There has never been a "reportable event" (as defined in Section
4043(b) of ERISA and the regulations of the PBGC under such Section) with
respect to any Benefit Plan subject to Title IV of ERISA for which thirty (30)
day reporting requirements have not been waived.
(g) Multi-employer Plans. None of the Benefit Plans is, and none of
the Company Group Members has ever been a party to, a "multi-employer pension
plan" as defined in Section 3(37) of ERISA.
(h) Welfare Plans. No welfare plan (as defined in Section 3(1) of
ERISA) maintained by any Company Group Member provides medical or death benefits
with respect to current or former employees beyond their termination of
employment (other than coverage mandated by Law). Each such welfare plan to
which Sections 601-609 of ERISA and Section 4980B of the Code apply has been
administered in compliance with such sections.
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(i) Compensation. No Contract entitles any individual to severance
or termination pay or accelerates the time of payment and vesting, or increases
the amount, of compensation due, or benefits payable under any Benefit Plan with
respect to, any Person.
4.20 Employees.
(a) Contracts. Schedule 4.20 annexed hereto sets forth an accurate,
correct and complete list of all Contracts with Stockholders, officers,
directors and employees of the Seller, or Affiliates of any of the foregoing
(collectively, "Affiliate Contracts").
(b) Compensation. Schedule 4.20 annexed hereto sets forth an
accurate, correct and complete list of all employees of the Seller as of the
date hereof, including name, title or position and their present annual
compensation (including bonuses, commissions, fringe benefits and deferred
compensation). Except as set forth in the Financial Statements, the Seller has
not, except in the ordinary course of its business consistent with past
practice, (i) paid, or made any accrual or arrangement relating to severance or
termination of employment, to any of its present or former officers or directors
or to any of its employees who are not officers or directors of the Seller; (ii)
made any general wage or salary increases; or (iii) increased or altered any
other benefits or Insurance provided to any officer, director or employee of the
Seller. No officer, director or employee of the Seller is eligible for payments
that would constitute "excess parachute payments" under Section 280G of the
Code.
(c) Disputes. There are no controversies pending or, to the best
knowledge of the Seller and the Stockholders, threatened involving any group of
employees of the Seller and there are no collective bargaining or other union
Contracts to which the Seller is a party or by which the Seller may be bound or
affected. The Seller has not suffered or sustained any work stoppage and, to the
best knowledge of the Seller and the Stockholders, no such work stoppage is
threatened. No union organizing, election or other activities involving any
employees of the Seller are in progress or threatened.
4.21 Inventory. All inventory of the Seller was acquired by the Seller in
the ordinary course of business and is in good condition and is usable and
saleable in the ordinary course of such business. The Seller has good and valid
title to the inventory, free and clear of all Liens.
4.22 Accounts Receivable. All accounts receivable of the Seller reflected on
the Financial Statements as at October 31, 1996 and January 14, 1997 and all
accounts receivable of the Seller arising subsequent to the date thereof are as
a result of bona fide services performed by the Seller in the ordinary course of
business of the Seller and, to the best knowledge of the Seller and the
Stockholders, are subject to no defenses, offsets or counterclaims.
4.23 Customers and Suppliers. Schedule 4.23 annexed hereto sets forth an
accurate, correct and complete list of the ten (10) largest customers (in terms
of gross revenues) of the Seller and all suppliers (in terms of purchases)
material to the Business, as currently conducted by the Seller,
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for the fiscal year ended December 31, 1995. Since October 31, 1996, none of the
customers set forth on Schedule 4.23 annexed hereto has (i) ceased doing
business with, or materially decreased the amount of business given to, the
Seller, (ii) notified the Seller (nor does the Seller or any Stockholder have
any reason to believe) that it does not intend to enter into a business
relationship with the Purchaser after the Closing substantially on the same
terms as such customer had with the Seller prior to the Closing, or (iii)
materially modified the terms on which it does business with the Seller nor, to
the best knowledge of the Seller and the Stockholders, threatened to do any of
the foregoing. Since October 31, 1996, none of the suppliers set forth on
Schedule 4.23 annexed hereto has cancelled or otherwise terminated its
relationship with the Seller.
4.24 Compliance With Laws. Each of the Seller, the Business and the Assets
comply with all Laws, including Environmental Laws, applicable to the Seller,
the Business and the Assets, except for such noncompliance which is not
reasonably likely to have a Material Adverse Effect. An accurate, correct and
complete list of all Judgments applicable to the Seller, the Business and the
Assets are set forth on Schedule 4.24 annexed hereto, and the Seller is in
compliance with all such Judgments.
4.25 Licenses and Permits. Schedule 4.25 annexed hereto contains an
accurate, correct and complete list of each license, permit, certificate,
approval, franchise, registration, accreditation or authorization issued to the
Seller and used in the Business, as currently conducted by the Seller or as
proposed to be conducted by the Purchaser after the Closing, or which are
required under applicable Environmental Laws (collectively, "Licenses and
Permits"). The Licenses and Permits are valid and in full force and effect and
there are no pending or, to the best knowledge of the Seller and the
Stockholders, threatened proceedings which could result in the termination,
revocation, limitation or impairment of any of the Licenses and Permits. The
Seller has all Licenses and Permits as are necessary or appropriate to enable it
to own and conduct the Business, as currently conducted by the Seller or as
proposed to be conducted by the Purchaser after the Closing (assuming the
Purchaser proposes to conduct the Business after the Closing substantially the
same as the Seller conducted the Business immediately prior to the Closing), and
comply with all applicable Environmental Laws, and all of such Licenses and
Permits are included in the Assets.
4.26 Legal Proceedings. Except as set forth on Schedule 4.26 annexed hereto,
there is no action, suit, proceeding, complaint, charge, Tax or other audit,
investigation or arbitration or other method of settling disputes or
disagreements by or before any Governmental Authority pending or, to the best
knowledge of the Seller and the Stockholders, threatened against or affecting
any of the Seller, Business or Assets or which questions the validity of this
Agreement or any action taken or to be taken in connection with the actions
contemplated hereby. Except as set forth on Schedule 4.26 annexed hereto,
neither the Seller, the Business nor any of the Assets are subject to any
Judgment or other agreement which restricts the ability of any of the Seller,
the Stockholders or the Purchaser from consummating the transactions
contemplated hereby or from operating the business as currently conducted by the
Seller or as proposed to be conducted by the Purchaser after the Closing
(assuming the Purchaser proposes to conduct the Business after the Closing
substantially the same as the Seller conducted the Business immediately prior to
the Closing).
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4.27 Absence of Certain Practices. None of the Seller, any Stockholder,
director, officer, agent or employee of the Seller or any other Person acting on
behalf of the Seller, including the Stockholders, has given or agreed to give
any gift or similar benefit of more than nominal value to any customer,
supplier, or governmental employee or official or any other Person who is or may
be in a position to help or hinder the Seller in connection with any proposed
transaction involving the Seller. None of the Seller, any Stockholder, director,
officer, agent or employee of the Seller or any other Person acting on behalf of
the Seller has, contrary to Law, (i) used any corporate or other funds for
contributions, payments, gifts, or entertainment, or made any expenditures
relating to political activity to, or on behalf of, government officials or
others, (ii) accepted or received any contributions, payments, gifts or
expenditures or (iii) had any transaction or payment which was not recorded in
its accounting books and records or disclosed on its financial statements
(including the Financial Statements).
4.28 Intercompany Transactions. Schedule 4.28 annexed hereto contains a
complete and accurate list of all services and transactions currently provided
to the Seller by any of the Stockholders (or any of their Affiliates), or
provided by the Seller to any of the Stockholders (or any of their Affiliates),
including a description of the financial terms of such transactions.
4.29 Books and Records. The books of account and other financial records of
the Seller are accurate, correct and complete in all material respects. The
minute books of the Seller contain accurate, correct and complete records of the
charter (as amended or restated) and By-laws (as amended or restated) and of all
meetings of the Seller, and accurately reflect all other corporate action of the
Stockholders, the Board of Directors and the committees of the board of
directors of the Seller.
4.30 Bulk Sales and Transfer Taxes. Neither the sale and transfer of the
Assets pursuant to this Agreement, nor the Purchaser's ownership, possession or
use thereof from and after the Closing as a result of such sale and transfer,
will result in or be subject to: (a) any Law pertaining to bulk sales or
transfers or fraudulent conveyances which might make such sale or transfer or
any part thereof ineffective as to creditors of or claimants against the Seller;
(b) any State or local sales, use, transfer, excise, or license tax, fee, or
charge applicable to any of the Assets; or (c) the imposition of any liability
upon the Purchaser for appraisal rights or any other liability of any nature
whatsoever owing to any stockholder of the Seller or any other person which has
not been expressly assumed by the Purchaser in this Agreement.
4.31 Assets.
(a) There are no properties or assets used, held for use or usable
by the Seller in the Business valued in excess of $1,000 which are not set forth
on the Schedules hereto and, except for contemplated additions or deletions in
the ordinary course of business that are not material in the aggregate, the
Assets include all properties and assets the ownership, holding or use of which
is necessary for the performance by the Purchaser of any Assumed Liability and
the lawful conduct of the Business.
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(b) The Seller has good and marketable title to all of the Assets
owned by it, free and clear of any Lien except (i) the lien of property taxes
not delinquent, and (ii) the Liens listed on the Schedules hereto. The Seller is
the sole and exclusive owner of all of the Assets, other than those listed on
the Schedules hereto as being leased, licensed or otherwise used by the Seller,
and, except as disclosed on the Schedules hereto, the Seller does not use any of
the Assets by the consent of any other person and is not required to make any
payments to others with respect to the Assets. To the best knowledge of the
Seller and the Stockholders after due inquiry, the Seller has the right to use
all of the Assets leased, licensed or otherwise used by it. Upon the Closing,
the Purchaser will indefeasibly own and hold good and marketable title to the
Assets owned by the Seller, free and clear of all Liens (except for any
Surviving Liens) of any nature whatsoever, whether such Liens are now existing
or perfected or at any time hereafter arise or become perfected pursuant to any
Law, Contract or otherwise, and the Purchaser will have the right to use all of
the Assets leased, licensed or otherwise used by the Seller.
(c) All leases, subleases, licenses and other Contracts which are
being transferred to the Purchaser at the Closing will be, upon the consummation
of the transactions contemplated by this Agreement, in good standing, valid and
effective and grant the leasehold estates or rights of occupancy or use they
purport to grant.
5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Seller and the Stockholders as follows:
5.1 Organization, Standing, Power and Qualification. The Purchaser is a
limited liability company duly formed, validly existing and in good standing
under the Laws of the State of Delaware, and has all necessary power and
authority to own, lease and operate the assets it now owns, leases and operates,
to carry on its business, as currently conducted or as proposed to be conducted,
to enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Purchaser, and assuming due authorization,
execution and delivery by the Seller and the Stockholders, this Agreement
constitutes a legal, valid and binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms, except as may be limited by
bankruptcy, reorganization, moratorium, fraudulent conveyance and insolvency
Laws and by other Laws affecting the rights of creditors generally and except as
may be limited by the availability of equitable remedies.
5.2 Authorization. The Sale Options to be issued hereunder are duly
authorized and constitute legal, valid and binding obligations of the Purchaser
enforceable against the Purchaser in accordance with their terms, except as may
be limited by bankruptcy, reorganization, moratorium, fraudulent conveyance and
insolvency Laws and by other Laws affecting the rights of creditors generally
and except as may be limited by the availability of equitable remedies. The
CCL-DL Membership Interests to be issued upon exercise of the Sale Options shall
be, when issued and paid for in accordance with the terms thereof, assuming the
truth of the representations and warranties of the Stockholders, duly authorized
and validly issued, free of any and all Liens and all preemptive, subscription
and other rights (in each case other than those created by the Stockholders).
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5.3 No Conflict. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby shall not, result in or
constitute (a) a default, breach or violation of the Certificate of Formation or
Operating Agreement of the Purchaser or any Contract to which the Purchaser is a
party or by which any of its assets may be bound or affected; (b) an event which
(with notice or lapse of time or both) would permit any Person to terminate,
accelerate the performance required by, or accelerate the maturity of any
indebtedness or obligation of the Purchaser under any Contract to which the
Purchaser is a party or by which any of its assets may be bound or affected; (c)
the creation or imposition of any Lien on any assets of the Purchaser; or (d)
subject to the receipt of the Consents required as set forth on Schedule 5.4
annexed hereto, a violation of any Law or Judgment of any Governmental Authority
or any other restriction of any kind or character by which the Purchaser or any
of its Assets may be bound or affected.
5.4 Consents. Except as set forth on Schedule 5.4 annexed hereto, the
execution and delivery of this Agreement by the Purchaser do not, and the
consummation of the transactions contemplated hereby shall not, require any
Consents to be obtained by the Purchaser.
5.5 Legal Proceedings. There is no action, suit, proceeding, complaint,
charge, Tax or other audit, investigation or arbitration or other method of
settling disputes or disagreements by or before any Governmental Authority
pending or, to the best knowledge of the Purchaser, threatened against or
affecting the Purchaser or its assets or which questions the validity of this
Agreement or any action taken or to be taken in connection with the transactions
contemplated thereby. Neither the Purchaser nor any of its assets are subject to
any Judgment or other agreement which restricts the ability of the Purchaser
from consummating the transactions contemplated hereby or purchasing the Assets.
5.6 No Brokers. Neither the Purchaser nor any of its officers, managers,
employees or agents has entered into any Contract, arrangement or understanding
with any Person which could result in the obligation of any party hereto to pay
any finder's fees, brokerage or agent's commissions or other like payments in
connection with this Agreement or the transactions contemplated hereby.
5.7 Disclosure. No representation, warranty or statement made by the
Purchaser in this Agreement, the Exhibits and Schedules annexed hereto, or in
any other material furnished or to be furnished by the Purchaser to the Seller
or any Stockholders or their respective representatives, attorneys and
accountants pursuant to or, in connection with this Agreement or the
transactions contemplated hereby, contains or shall contain any untrue statement
of a material fact, or omits or shall omit to state a material fact required to
be stated herein or therein or necessary to make the statements contained herein
or therein, in light of the circumstances under which they were made, not
misleading.
6. Covenants and Other Agreements.
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6.1 Employment, Incentive Compensation and Put Agreements; Sale Options;
Managers.
(a) At the Closing, the Purchaser shall enter into (i) employment
agreements with each of the Optionholders (the "Employment Agreements"),
substantially in the form annexed hereto as Exhibit C, (ii) an incentive
compensation agreement with the Optionholders (the "Incentive Compensation
Agreement"), substantially in the form annexed hereto as Exhibit D, and (iii) a
put agreement with the Optionholders (the "Put Agreement"), substantially in the
form annexed hereto as Exhibit E. Additionally, at the Closing, the Purchaser
shall issue to the Optionholders options (the "Sale Options") to purchase CCL-DL
Membership Interests substantially in the form annexed hereto as Exhibit F, and
MTE and the Stockholders shall enter into the Limited Liability Company
Operating Agreement of the Purchaser substantially in the form annexed hereto as
Exhibit H.
(b) From and after the Closing, the Managers of the Purchaser shall
consist solely of Gary Strack, Dan Rosen, Martin Irwin and each of the
Stockholders, and each of such Managers shall serve for a term of five (5) years
from the Closing Date. As long as the Stockholders beneficially own the CCL-DL
Interests and the Sale Options and prior to the consummation of a public
offering of securities of the Purchaser, each Stockholder/Member shall have the
right to designate a Manager of the Purchaser reasonably acceptable to MTE. It
is acknowledged and agreed to that each of SW and MR are deemed reasonably
acceptable to MTE as Managers of the Purchaser, subject to the provisions of
their respective Employment Agreements.
6.2 Reasonable Efforts; Further Assurances. Each of the parties hereto will
use their reasonable efforts to take or cause to be taken all actions and to do
or cause to be done all things necessary, proper or advisable under applicable
Laws to consummate and make effective the transactions contemplated by this
Agreement (and each other agreement delivered or to be delivered in connection
herewith), and each of the Seller and the Stockholders will use their best
efforts to insure that the Purchaser has the benefits of all of the covenants
and agreements contained in this Agreement (and each other agreement delivered
or to be delivered in connection herewith). From and after the date hereof, each
of the Seller and the Stockholders shall, at the request of the Purchaser,
execute and deliver to the Purchaser, without further consideration, all such
further assignments, endorsements, instruments of conveyance and transfer, and
other documents as the Purchaser may reasonably request in order to fully
effectuate the transactions contemplated by this Agreement (and each other
agreement delivered or to be delivered in connection herewith).
6.3 Collections. On and after the Closing Date, the Purchaser shall have the
sole right and authority (in consultation with its officers and subject to the
review of the Stockholders) to collect, for its own account and sole benefit,
all monies payable in respect of the Assets, no matter how or when earned. If
the Seller or any Stockholder shall receive any such monies, they shall hold all
such monies in trust for the sole benefit of the Purchaser. Within five (5)
business days after receipt thereof, the Seller or any Stockholder shall cause
the transfer and delivery to the Purchaser of any monies or other property which
any of them may receive after the Closing Date in respect of the Assets. The
Seller authorizes the Purchaser to endorse in the Seller's name all notes,
checks, drafts, money orders or other instruments of payment in respect of the
foregoing which may come into the
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possession of the Purchaser, and the Seller hereby ratifies all that the
Purchaser shall lawfully do or cause to be done by virtue hereof. This right
shall become irrevocable upon Closing.
6.4 Option Plan. The Purchaser agrees to establish a option plan authorizing
the issuance to its key senior employees of options to purchase up to an
aggregate 5% ownership interest in the Purchaser (assuming exercise of the Sale
Options) to be administered by the Managers of the Purchaser, or a designated
committee thereof. Options granted thereunder will be exercisable at the fair
market value of the interests so purchased as determined in good faith by the
Managers, or a committee thereof, on the grant date.
6.5 Change of Name. As soon as practicable after the Closing, and in any
event within twenty (20) days, the Seller shall, and the Stockholders shall
cause the Seller to, change its name to any name not containing the words
"Cognitive" or "Communication" or words similar to or susceptible of confusion
with such words, or any combination or abbreviation thereof, by appropriate
amendment to its Certificate of Incorporation (or other charter document), and
the Stockholders further agree not to use any such words in the name of any
business entity they may form or otherwise control.
7. Deliveries by the Seller and the Stockholders at the Closing.
At or prior to the Closing, the Seller and the Stockholders shall have
delivered to the Purchaser all of the following:
(a) the Bill of Sale;
(b) resolutions duly adopted by the Board of Directors of the
Seller authorizing the transactions which are the subject of this Agreement,
certified by all of the directors of the Seller;
(c) certificates issued by appropriate Governmental Authorities
evidencing, as of a recent date, the good standing and tax status of the Seller
in its jurisdiction of incorporation and in those jurisdictions in which it is
qualified to do business;
(d) a copy of the Certificate of Incorporation or other applicable
charter instruments and all amendments thereto of the Seller, certified by all
of the directors of the Seller;
(e) a copy of the By-laws or comparable documents, including all
amendments thereto, of the Seller, certified by all of the directors of the
Seller;
(f) the purchase price for the CCL-DL Interests as set forth in
Section 2.2;
(g) all Consents set forth in Schedule 4.4 annexed hereto;
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(h) the Employment Agreements, the Incentive Compensation Agreement
and the Put Agreement duly executed by the Optionholders, in each case in
substantially the forms annexed hereto as Exhibit C, Exhibit D and Exhibit E,
respectively;
(i) the favorable opinion, dated the date of the Closing, of the
Seller's and Stockholders' Counsel, reasonably satisfactory in substance and
form to the Purchaser, substantially in the form annexed hereto as Exhibit G;
and
(j) the Limited Liability Company Operating Agreement of the
Purchaser duly executed by the Stockholders, in substantially the form annexed
hereto as Exhibit H.
8. Deliveries by the Purchaser at the Closing.
At the Closing, the Purchaser shall deliver to the Seller and/or the
Stockholders the following:
(a) the Bill of Sale;
(b) the Cash Portion;
(c) a copy of the Certificate of Formation and all amendments
thereto of the Purchaser, certified by the Secretary of State of the State of
Delaware;
(d) all Consents set forth on Schedule 5.4 annexed hereto;
(e) the Employment Agreements, the Incentive Compensation Agreement
and the Put Agreement duly executed by the Purchaser, in each case in
substantially the forms annexed hereto as Exhibit C, Exhibit D and Exhibit E,
respectively;
(f) the Sale Options duly executed by the Purchaser, in
substantially the form annexed hereto as Exhibit F;
(g) the IPL Agreement duly executed by IPL;
(h) the Limited Liability Company Operating Agreement of the
Purchaser duly executed by MTE, in substantially the form annexed hereto as
Exhibit H;
(i) the favorable opinion, dated the date of the Closing, of the
Purchaser's Counsel, reasonably satisfactory in substance and form to the
Stockholders, substantially in the form annexed hereto as Exhibit I;
(j) resolutions duly adopted by the Board of Directors of IPL
authorizing the transactions which are the subject of this Agreement, certified
by the Secretary of IPL; and
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(k) resolutions duly adopted by the Managers of the Purchaser
authorizing the transactions which are the subject of this Agreement, certified
by the Secretary of the Purchaser.
9. Indemnification.
9.1 Survival of Representations, Warranties, Covenants and Agreements.
Except as otherwise expressly provided for herein, all representations,
warranties, covenants and agreements of the parties hereto included or provided
for herein, or in other instruments or agreements delivered or to be delivered
pursuant hereto shall survive for a period of eighteen (18) months following the
Closing Date (the "Survival Period"); provided, however, that all
representations, warranties, covenants or agreements relating to Taxes shall
survive until the expiration of the applicable statute of limitations relating
to such Taxes, taking into account any extensions of the statute of limitations
pursuant to the Code or pursuant to any Contract. The respective
representations, warranties, covenants and agreements contained herein shall not
be deemed waived or otherwise affected or impaired by the consummation of the
transactions hereunder, notwithstanding that any party has notice of a breach or
failure to perform by any other party hereto or that any party may have made any
investigation; provided, however, that, with respect to the representations,
warranties, covenants and agreements of the Seller and/or the Stockholders, if
either of the persons currently serving as IPL's Chief Operating Officer or
Chief Financial Officer has actual notice as of the date hereof of such breach
or failure, the preceding clause shall not apply.
9.2 General Indemnity.
(a) Each of the Seller and the Stockholders, jointly and severally,
agree to indemnify the Purchaser and its Affiliates, and all directors,
managers, officers, employees and representatives of each of the foregoing,
against (i) any and all damage, loss, claim, expense, deficiency or cost in
connection with the breach or threatened breach by any of the Seller or the
Stockholders of any representation or warranty made by any of such parties
hereunder or from any state of facts which is misrepresented in or omitted from
any certificate, Exhibit, Schedule or other instrument furnished by any of them
to the Purchaser hereunder, or the failure to comply or threatened failure to
comply by any of them with any covenant made by any of them hereunder, (i) any
and all damage, loss, claim, expense, deficiency or cost related to any of the
Unassumed Liabilities or Excluded Assets, (iii) any liability of any of the
Seller or the Stockholders relating to the conduct of the Business on or prior
to the Closing Date, including for Taxes or with respect to any Benefit Plan,
and (iv) any and all actions, suits, proceedings, demands, assessments,
Judgments, costs, costs of collection and legal and other expenses incident to
any of the foregoing.
(b) The Purchaser agrees to indemnify and hold harmless the Seller
and the Stockholders against (i) any and all damage, loss, claim, expense,
deficiency or cost in connection with the breach or threatened breach by the
Purchaser of any representation or warranty made by the Purchaser hereunder or
from any state of facts which is misrepresented in or omitted from any
certificate, Exhibit, Schedule or other instrument furnished by the Purchaser to
the Seller and/or the Stockholders hereunder or the failure to comply or
threatened failure to comply by the Purchaser with
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any covenant contained herein, and (ii) any and all actions, suits, proceedings,
demands, assessments, Judgments, costs, costs of collection and legal and other
expenses incident to any of the foregoing.
(c) The indemnification obligations of the Seller and the
Stockholders pursuant to Section 9.2(a) hereof, other than indemnification
obligations relating to Section 4.22 of this Agreement or Taxes, shall not
exceed the amount of the Purchase Price and the aggregate Contingent Payments.
The Purchaser shall not assert any claim for indemnification pursuant to this
Agreement, other than indemnification obligations relating to Section 4.22 of
this Agreement or Taxes, unless and until the aggregate amount of such claims
exceeds Thirty Five Thousand Dollars ($35,000) in the aggregate, in which case
the Purchaser may assert all such claims.
9.3 Claims.
(a) In the event that at any time a claim is made by any Person not
a party to this Agreement with respect to any matter to which the indemnity
provided for by Section 9.2(a) relates, the Purchaser, on not less than twenty
(20) days' notice to the Seller and the Stockholders, may make settlement of
such claim and such settlement shall be binding upon the Seller and the
Stockholders; provided, however, that the Seller and the Stockholders shall have
the option, to be exercised by notice to the Purchaser within ten (10) days
after such first mentioned notice shall have been given, to assume the contest
and defense of such claim; provided further, however, that none of the Seller or
the Stockholders shall be liable for any settlement of any such claim effected
by the Purchaser without their written consent but, if settled with their
written consent, the Seller and the Stockholders agree to indemnify and hold
harmless the Purchaser from and against any loss, liability, damage or expense
by reason of such settlement. If the Seller and the Stockholders shall exercise
such option, they shall have control over such contest and defense and over the
payment, settlement or compromise of such claim, and the Purchaser agrees to
cooperate fully with the Seller and the Stockholders and their attorneys with
respect to such contest and defense. Any payment or settlement resulting from
such contest, together with the total expenses thereof, including reasonable
attorneys' fees, shall be binding upon the Seller, the Stockholders and the
Purchaser. Notwithstanding the foregoing, the Seller and the Stockholders agree
that, without the Purchaser's prior written consent, they will not settle,
compromise or consent to the entry of any Judgment in any pending or threatened
claim in respect of which indemnification could be sought under the
indemnification provisions of this Article 9 (whether or not the Purchaser or
any other Person who may be indemnified hereunder is an actual or potential
party to such claim) unless such settlement compromise or consent includes an
unconditional release of the Purchaser and each other Person who may be
indemnified hereunder from all loss, liability, damage or expense arising out of
such claim.
(b) In the event that at any time a claim is made by any Person not
a party to this Agreement with respect to any matter to which the indemnity
provided for by Section 9.2(b) relates, the Seller and the Stockholders, on not
less than twenty (20) days' notice to the Purchaser, may make settlement of such
claim and such settlement shall be binding upon the Purchaser; provided,
however, that the Purchaser shall have the option, to be exercised by notice to
the Seller and the Stockholders within ten (10) days after such first mentioned
notice shall have been given, to assume the contest and
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defense of such claim; provided further, however, that the Purchaser shall not
be liable for any settlement of any such claim effected by the Seller and the
Stockholders without its written consent but if settled with its written
consent, the Purchaser agrees to indemnify and hold harmless the Seller and the
Stockholders from and against any loss, liability, damage or expense by reason
of such settlement. If the Purchaser shall exercise such option, it shall have
control over such contest and defense and over the payment, settlement or
compromise of such claim, and the Seller and the Stockholders agree to cooperate
fully with the Purchaser and its attorneys with respect to such contest and
defense. Any payment or settlement resulting from such contest, together with
the total expenses thereof, including but not limited to reasonable attorneys'
fees, shall be binding upon the Purchaser, the Seller and the Stockholders.
Notwithstanding the foregoing, the Purchaser agrees that, without the prior
written consent of the Seller and the Stockholders, the Purchaser will not
settle, compromise or consent to the entry of any Judgment in any pending or
threatened claim in respect of which indemnification could be sought under the
indemnification provisions of this Article 9 (whether or not the Seller, the
Stockholders or any other Person who may be indemnified hereunder is an actual
or potential party to such claim) unless such settlement compromise or consent
includes an unconditional release of the Stockholders and each other Person who
may be indemnified hereunder from all loss, liability, damage or expense arising
out of such claim.
9.4 Disputes.
(a) If the Purchaser claims that any Seller or Stockholder is
liable with respect to any matter to which the foregoing indemnity relates, the
Purchaser shall give written notice to such party, which notice shall specify
the amount claimed and the facts upon which the claim is based. Each claim shall
be deemed approved by the applicable party unless such party gives the Purchaser
written notice of disapproval within twenty (20) days of receipt of such claim.
The parties shall undertake, in good faith, to adjust any such claim which is so
disapproved.
(b) If any of the Seller or the Stockholders claim that the
Purchaser is liable with respect to any matter to which the foregoing indemnity
relates, they shall give written notice to the Purchaser, which notice shall
specify the amount claimed and the facts upon which the claim is based. Each
claim shall be deemed approved by the Purchaser, unless the Purchaser gives the
Seller and the Stockholders written notice of disapproval within twenty (20)
days of receipt of such claim. The parties shall undertake, in good faith, to
adjust any such claim which is so disapproved.
10. Cooperation.
(a) Each of the Purchaser, the Seller and the Stockholders shall provide the
other parties with such assistance as may reasonably be requested by any of them
in connection with any claim arising under this Agreement, and each shall retain
and provide the others with any records or information that may be relevant to
any claim.
(b) If any of the Seller, the Stockholders or the Purchaser, as the case may
be, fails to provide any information requested by another party within a
reasonable period, or otherwise fails to
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do any act required of it under this Article 10, then such party shall be
obligated, notwithstanding any other provision of this Agreement, to indemnify
such other party and shall hold such other party harmless from and against any
and all costs, claims, or damages. For purposes of the indemnification
provisions of this Agreement, the failure to give any notice in a timely manner
shall not relieve the indemnifying party of its obligations hereunder unless the
indemnifying party is prejudiced by such failure.
11. Registration Rights.
11.1 Demand Registration.
(a) At any time after the first anniversary of the date of the
consummation of the Purchaser's initial public offering under the Securities
Act, the Holders of 50% or more of the then outstanding Registrable Securities
may make a written request to the Purchaser to register such number of
Registrable Securities under the Securities Act as such Holders may request in
writing to the Purchaser (such requests are referred to herein as a "Demand
Registration"). Any such request from the Holders shall specify the number of
Registrable Securities proposed to be sold and the intended method of
distribution thereof. Subject to the penultimate sentence of Section 11.1(b),
the Purchaser shall have no obligation to file more than one (1) registration
statement under the Securities Act with respect to a Demand Registration and
shall have no obligation to register any Registrable Securities with respect to
a Demand Registration unless such Registrable Securities may be registered on a
Form S-3 registration statement (or any successor form with similar "short-form"
disclosure permitting the inclusion or incorporation of information by reference
to other documents filed by the Purchaser with the Commission). The Purchaser
shall give written notice of any such requests to all of the Holders within
thirty (30) days after receipt thereof. Within fifteen (15) days after receipt
of such notice by the Holder, the Holder may request in writing that any of his
Registrable Securities be included in the registration statement with respect to
the Demand Registration.
(b) Except as otherwise provided in Section 11.1 hereof, a
registration will not be deemed to be a Demand Registration unless it has been
declared effective by the Commission; provided, however, that if, after the
registration statement has been declared effective by the Commission, the
offering of Registrable Securities pursuant to such registration statement is or
becomes subject to any stop order, injunction or other order or requirement of
the Commission or any other governmental or administrative agency, or if any
court prevents or otherwise limits the sale of the Registrable Securities
pursuant to the registration statement, such registration statement will be
deemed not to have been effected for purposes of this Section 11.1. If a
registration statement requested pursuant to this Section 11.1 is deemed not to
have been effected, then the Purchaser shall continue to be obligated to effect
a Demand Registration in accordance with this Section 11.1. The Holders shall be
permitted to withdraw all or any part of the Registrable Securities to be
offered for their benefit at any time prior to the effective date of the Demand
Registration; provided, however, that the withdrawing holders shall be
responsible for all fees and expenses incurred by them prior to such withdrawal.
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11.2 Piggyback Registration. If, at any time, the Purchaser proposes to file
a registration statement under the Securities Act with respect to an offering
for its own account or for the account of others of any class of equity
securities of the Purchaser (other than a registration relating solely to
employee benefit plans, a transaction under Rule 145 of the Act or a
registration on any registration form which does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of the Registrable Securities and other than a registration
relating to the Purchaser's initial public offering unless (and pro rata, based
on the aggregate number of equity securities of the Purchaser then owned by such
persons, to the same extent as) IPL or any of its Subsidiaries or Affiliates are
selling any of their equity securities of the Purchaser pursuant to such
registration), then the Purchaser shall give written notice of such proposed
filing to the Holders at least twenty-five (25) days before the anticipated
filing date, and such notice shall offer the Holders the opportunity to register
such number of Registrable Securities as such Holder may request in writing to
the Purchaser within fifteen (15) days after the date such Holder first received
notice of such registration (a "Piggyback Registration"); provided, however,
that the Purchaser shall have no obligation to register any Registrable
Securities pursuant to this Section 11.2 unless Holders shall request that 50%
or more of the then outstanding Registrable Securities be included in such
registration.
11.3 Conditions to Registration. The Holder may not participate in any
registration hereunder unless the Holder:
(a) agrees to sell his Registrable Securities on the basis provided
in any underwriting agreements approved by the Purchaser;
(b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting agreements and which are customary with
industry practice; and
(c) agrees that if an underwriter advises the Purchaser in writing
that the number of securities proposed to be sold in such registration is
greater than the number of securities which the underwriter believes is feasible
to sell at that time, at the price and on the terms approved by the Purchaser,
then the underwriter may exclude some or all of the Registrable Securities to be
offered by the Holders from such registration. The Purchaser shall advise the
Holders of the limitation and that the number of Registrable Securities to be
offered by the Holders will be reduced to the number recommended by the
underwriter.
11.4 Provisions Regarding Registration Generally.
(a) Registration Expenses. In any registration initiated as a
Demand Registration or a Piggyback Registration, the Purchaser will pay or cause
to be paid all costs, fees and expenses in connection therewith ("Registration
Expenses"), including, without limitation, the Purchaser's legal and accounting
fees, printing expenses and "blue sky" fees and expenses, except that the
Purchaser shall not pay for (i) underwriting discounts and commissions, (ii)
state transfer taxes, (iii) brokerage
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commissions, (iv) fees and expenses of counsel and accountants for the Holders
and (v) blue sky fees and expenses in jurisdictions where the Purchaser is not
currently registered or qualified, whether or not the registration statement
becomes effective.
(b) Holdback Agreements. To the extent not inconsistent with
applicable Law, the Holders agree not to effect any public sale or distribution
of securities of the Purchaser, including a sale pursuant to Rule 144 or in
reliance on any other exemption from registration under the Securities Act,
during the fourteen (14) days prior to, and during the ninety (90) day period
beginning on, the effective date of a registration statement that includes
Registrable Securities (except as part of such registration), but only if and to
the extent requested in writing (with reasonable prior written notice) by the
underwriter(s) in the case of an underwritten public offering of securities of
the Purchaser.
(c) Alternative Disposition. Notwithstanding the other provisions
of this Article 11, the Purchaser shall not be obligated to register any
Registrable Securities of any Holder pursuant to this Article 11 if, in the
opinion of counsel to the Purchaser, the sale or other disposition of the
Registrable Securities of such Holder or Holders could be effected without
registration under the Securities Act during the four (4) week period
immediately preceding the effective date of the registration.
11.5 Registration Procedures. In connection with any registration under
Article 11, the Purchaser covenants and agrees that it shall use its best
efforts to:
(a) prepare and file with the Commission a registration statement
with respect to the Registrable Securities to be offered by the Holders and use
its best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Purchaser will furnish to the counsel
selected by the Holders copies of all such documents proposed to be filed);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith and such other documents necessary to comply with the Securities Act,
the Exchange Act and the rules and regulations promulgated thereunder, as may be
necessary to keep such registration statement effective for a period of not less
than six (6) months and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish to the Holders such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents, including correspondence with the Commission, as the
Holders may reasonably request in order to facilitate the disposition of the
Registrable Securities to be offered by the Holders;
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<PAGE>
(d) use its best efforts to continue to qualify the Registrable
Securities to be offered by the Holders under such other securities or "blue
sky" laws of such jurisdictions as the Purchaser is already registered or
qualified;
(e) notify the Holders, 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 contains an untrue statement of a material fact or omits any fact
necessary to make the statement therein not misleading, and at the request of
the Holders, the Purchaser will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of the Registrable
Securities to be offered by the Holders, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading; and
(f) cause all Registrable Securities to be offered by the Holders
to be listed on each securities exchange on which the equity securities of the
Purchaser are then listed.
11.6 Indemnification.
(a) The Purchaser agrees to indemnify and hold harmless the Holders
against all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue or
alleged untrue statement of material fact contained in any registration
statement, any amendment or supplement thereto, any prospectus or preliminary
prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same arise out of or are based upon any such
untrue statement or omission based upon information with respect to the Holders
furnished in writing to the Purchaser by or on behalf of the Holders expressly
for use therein; provided, however, that in the event the prospectus shall have
been amended or supplemented and copies thereof, as so amended or supplemented,
shall have been furnished to the Holders prior to the confirmation of any sales
of Registrable Securities by the Holders, such indemnity with respect to the
prospectus shall not inure to the benefit of any Holder if the person asserting
such loss, claim, damage or liability did not, at or prior to the confirmation
of the sale of Registrable Securities by such Holder to such person, receive a
copy of the prospectus as so amended or supplemented and the untrue statement or
omission of a material fact contained in the prospectus was corrected in the
prospectus as so amended or supplemented.
(b) In connection with any registration statement in which the
Holders participate, the Holders will furnish to the Purchaser in writing such
information with respect to the Holders as the Purchaser reasonably requests for
use in connection with any such registration statement or prospectus, and each
Holder agrees to indemnify and hold harmless the Purchaser, its managers and
officers and each person who controls the Purchaser (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue or alleged untrue statement of material fact contained in any
registration statement, any amendment or supplement thereto, any prospectus or
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preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent that such untrue statement is contained in
or such omission relates to any information with respect to such Holder so
furnished in writing by such Holder specifically for inclusion in any prospectus
or registration statement.
(c) In order to provide for just and equitable contribution in
circumstances in which the foregoing indemnification is applicable in accordance
with its terms but for any reason is held to be unavailable from the Purchaser
or the Holders, the Purchaser and the Holders shall contribute to the total
losses, claims, damages, liabilities and expenses and damages (including
reasonable costs of investigation) to which the Purchaser and the Holders may be
subject in such proportion as shall be appropriate to reflect the relative fault
of the Purchaser, on the one hand, and the Holders, on the other hand, with
respect to the statements or omissions which resulted in such loss, claim,
damage, liability or expense, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Purchaser or the Holders, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Purchaser and
the Holders agree that it would not be just and equitable if contributions
pursuant to this clause (c) were to be determined by pro rata allocation (even
if the Holders were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. Notwithstanding anything contained herein to
the contrary, no person found guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
12. Miscellaneous.
12.1 Fees and Expenses. Except as otherwise provided in this Agreement,
each party shall bear its own legal and accounting expenses, and any finder's
fees, broker's or agent's commission or similar payments incurred by such party,
in connection with the transactions contemplated by this Agreement; provided,
however, that the Purchaser agrees that if the Closing hereunder is consummated
it shall pay up to $25,000 to Seller's and Stockholders' Counsel at the Closing
for their fees and expenses incurred by the Seller and the Stockholders in
connection with this Agreement and the transactions contemplated hereby.
12.2 Publicity; Confidentiality.
(a) The parties shall agree with each other as to timing and
content prior to issuing any announcement, press release, public statement or
other information to the press or any third party with respect to this Agreement
or the transactions contemplated hereby; provided, however, that, nothing herein
shall prohibit any party to this Agreement from making any public disclosure
regarding
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this Agreement and the transactions contemplated hereby if, in the opinion of
counsel to such party, such disclosure is required by Law or by valid judicial
process.
(b) Each of the parties (each a "Providee") hereto shall, and
shall cause their respective officers, directors, managers, employees and
advisors to, keep confidential any information or document provided by or
otherwise obtained from any other party hereto or its Subsidiaries or Affiliates
(collectively, the "Providers") concerning the business and/or operations of the
Providers, unless such information or document (i) was already or becomes
generally available to the public, other than as a result of a disclosure by the
Providee, (ii) was or becomes available on a non-confidential basis from a
source other than the Providers provided that such source is not known by the
Providee to be bound by a confidentiality agreement with, or an obligation of
confidentiality to, the Providers, or (iii) is required to be disclosed by Law
or by valid judicial process.
12.3 Headings. Section headings contained in this Agreement are
included for convenience only and shall not affect the interpretation of any
provisions of this Agreement.
12.4 Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served, (ii) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid or (iii) on the date sent if sent by
facsimile, to the parties at the following addresses or facsimile numbers (or at
such other address or facsimile number for a party as shall be specified by like
notice):
If to the Seller or the Stockholders, to:
Cognitive Communications, Inc.
2 Gannett Drive
Suite 200
White Plains, New York 10604
Fax No.:
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<PAGE>
with a copy to:
Roberts, Sheridan & Kotel
12 East 49th Street
New York, New York 10017
Attention: David H. Wollmuth, Esq.
Fax No.: (212) 299-8686
If to the Purchaser, to:
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 758-9526
12.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. None of the parties hereto shall assign any rights or delegate any
duties hereunder without the prior written consent of other parties hereto;
however, the Purchaser may assign its rights and remedies, and delegate its
obligations, to any one or more of its or IPL's Subsidiaries or Affiliates.
12.6 Governing Law: Consent to Jurisdiction. This Agreement shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as applied to contracts made and to be performed entirely within the
State of New York. Any legal action, suit or proceeding arising out of or
relating to this Agreement may be instituted in any state or federal court
located within the County of New York, State of New York, and each party hereto
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
action, suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such court, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court. Each party hereto further irrevocably submits to the jurisdiction of
any such court in any such action, suit or proceeding.
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12.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, sets forth the entire understanding and agreement of the
parties with respect to their subject matter and supersede any and all prior
understandings, negotiations or agreements among the parties hereto, both
written and oral, with respect to such subject matter.
12.8 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which together shall constitute
a single agreement.
12.9 Severability. In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, in whole or in part, the validity of the
remaining provisions shall not be affected and the remaining portion of any
provision held to be invalid, illegal or unenforceable shall in no way be
affected, prejudiced or disturbed thereby.
12.10 No Prejudice. This Agreement has been jointly prepared and
negotiated by the parties hereto and the terms hereof shall not be construed in
favor of or against any party on account of its participation in such
preparation.
12.11 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person except as expressly provided herein other
than the parties hereto and their respective successors and permitted assigns.
12.12 Amendment and Modification. This Agreement may be amended or
modified only by written agreement executed by all parties hereto.
12.13 Waiver. At any time prior to the Closing, each of the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (iii) waive compliance with any of the covenants, agreements
or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed by the party granting such waiver. Such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or future failure.
12.14 Right to Setoff. Except as expressly provided in Section 2.1, the
Seller and the Stockholders guarantee to the Purchaser the accuracy and
truthfulness of the representations and warranties and the due performance of
the covenants and agreements made by them pursuant to this Agreement and to
insure the availability of funds for the payment of amounts, claims or other
expenses of the type set forth in this Agreement, including, without limitation,
in Article 10, the Purchaser shall be entitled to off-set claims against any
Seller arising under this Agreement against any accrued and unpaid amounts due
(or amounts which may accrue and become due) to the Seller
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or the Stockholders from the Purchaser as a Contingent Payment and against the
Seller and the Stockholders, or any of them, directly. This right of set-off
shall not be exclusive and shall not preclude the Purchaser from exercising any
of its rights or remedies.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
COGNITIVE COMMUNICATIONS, INC.
By: -----------------------------------
Name:
Title:
-----------------------------------
Susan Wiener
-----------------------------------
Michael Rudnick
COGNITIVE COMMUNICATIONS, LLC
By: -----------------------------------
Jeffrey J. Kaplan
Executive Vice President and
Chief Financial Officer
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AGREEMENT
AGREEMENT (the "Agreement"), dated as of January 22, 1997, by and among
International Post Limited, a Delaware corporation ("IPL"), Susan Wiener ("SW"),
Michael Rudnick ("MR"), Cognitive Communications, Inc., a Connecticut
corporation (the "Seller"), and David Leveen ("DL").
WHEREAS, concurrently herewith Cognitive Communications, LLC, a
Delaware limited liability company and a majority-owned indirect subsidiary of
IPL (the "Purchaser"), SW, MR and the Seller are entering into an Asset Purchase
Agreement (the "Purchase Agreement") pursuant to which the Purchaser is
acquiring from the Seller all rights, title and interests of the Seller in and
to certain assets as set forth therein;
WHEREAS, as of the date hereof, the Purchaser is entering into
employment agreements (individually, an "Employment Agreement" and collectively,
the "Employment Agreements") with each of SW, MR and DL (collectively, the
"Employees"); and
WHEREAS, in connection with the transactions contemplated by the
Purchase Agreement and the Employment Agreements, the Seller, SW, MR and DL have
requested that IPL enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agrees as follows:
1. Guarantee.
(a) IPL hereby fully and unconditionally guarantees the due
and punctual payment of all of the Purchaser's payment obligations under Section
2.1 of the Purchase Agreement and, subject to the next sentence, under Section
6.3 of each Employment Agreement when, and to the extent that, any of the same
shall become due and payable (including amounts which would be paid but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. 362(a) or any other provision of bankruptcy law) (collectively, the
"Guaranteed Obligations"). IPL's guarantee of the Purchaser's payment
obligations under Section 6.3 of the Employment Agreements shall only apply in
the event of the termination of the employment of at least two (2) Employees
pursuant to Section 6.3 of such Employee's Employment Agreement.
(b) IPL hereby agrees that its obligations hereunder shall be
unconditional, irrevocable, and absolute, irrespective of the validity,
regularity or enforceability of any Guaranteed Obligation, the absence of any
action to enforce the same, any waiver or consent by the Seller, SW or MR with
respect to any provision of the Purchase Agreement or the Employment Agreements,
or any other circumstance which might otherwise constitute a legal or
1
<PAGE>
equitable discharge or defense of a guarantor. IPL hereby waives any right to
require a proceeding first against the Purchaser.
(c) IPL hereby acknowledges and agrees that the foregoing
guarantee constitutes a guarantee of payment by the Purchaser of the Guaranteed
Obligations when due under Section 2.1 of the Purchase Agreement or Section 6.3
of the Employment Agreements, as the case may be, and not of collection only.
(d) If a claim is ever made upon the Seller and/or SW, MR or
DL for repayment or recovery of any amount or amounts received in payment or on
account of any of the Guaranteed Obligations and they repay all or part of said
amount by reason of any judgment, decree or order of any court or administrative
body having jurisdiction over them or any of their respective properties, IPL
shall be and remain liable to the Seller, SW, MR and DL hereunder for the amount
so repaid or recovered to the same extent as if such amount had never originally
been received by them.
(e) IPL hereby waives absolutely and irrevocably any claim
which it may have against the Purchaser by reason of any payment to the Seller,
SW, MR or DL or to any other Person pursuant to or in respect of the foregoing
guarantee whether by subrogation or otherwise.
2. Asset Contribution. Simultaneously with the closing of the
transactions contemplated by the Purchase Agreement, IPL shall, and shall cause
its subsidiaries and affiliates to, assign, convey, transfer and deliver to the
Purchaser all of their respective rights, title and interest in and to all of
the properties and assets of Blue Highway, one of IPL's divisions, and each such
party shall deliver such instruments and documents as may be necessary or
reasonably desirable to evidence the assignment, conveyance and transfer of such
rights, title and interest.
3. Capital Contributions. Moreover, from January 1997 through July
2000, IPL agrees to, or cause its subsidiaries or affiliates to, fund the (i)
capital expenditures of the Purchaser (pursuant to operating leases or
otherwise) in the amounts set forth on Schedule 1 annexed hereto (at such times
during the applicable fiscal year noted on Schedule 1 as required in the
reasonable judgment of the executive officers of the Purchaser), and (ii)
operating expenses of the Purchaser in the amounts and at the times set forth on
Schedule 2 annexed hereto provided that, in each case, such funding is dependent
upon the Purchaser attaining at least 90% of the applicable projected "Operating
Income" reflected on Schedule 2. In the event the Operating Income of the
Purchaser for any month exceeds any such projected amount set forth on Schedule
2, then the related funding of operating expenses required by IPL pursuant to
the preceding sentence shall be increased if reasonably required for the conduct
of the Purchaser's business to an amount equal to the product of (i) such
required funding multiplied by a (ii) fraction, the numerator of which is the
realized Operating Income and the denominator of which is the projected
Operating Incomes set forth on Schedule 2. Up to $1,026,000 of such required
funding shall be treated as a capital contribution to the Purchaser, and any
excess shall be treated as an
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advance of funds payable upon substantially the same terms and subject to
substantially the same conditions as other advances made by IPL to its other
subsidiaries.
4. Managers. IPL agrees to vote, or cause to be voted, all ownership
interests in the Purchaser it or any of its subsidiaries or affiliates may own
in favor of the election of SW and MR as the Purchaser's Managers in accordance
with the provisions of Section 6.1 of the Purchase Agreement.
5. Non-Competition. From the date of the closing of the transactions
contemplated by the Purchase Agreement and as long as either SW or MR is
employed by the Purchaser under the terms of his/her Employment Agreement, IPL
agrees that neither it nor any of its subsidiaries, affiliates or divisions
(other than the Purchaser) shall, directly or indirectly, provide strategic
consultation in the area of communications and other content strategy for, or
research related to the implementation of, or the design and production of,
intranets, extranets or internets and further agrees that neither it nor any of
its subsidiaries, affiliates or divisions (other than the Purchaser) will enter
into any joint venture, partnership or other agreement with any entity that
competes with the Purchaser for the purpose of marketing such (or another)
entity as providing such strategic consultation to unrelated third parties;
provided, however, that nothing herein shall interfere with or otherwise
restrict the ability of IPL or its subsidiaries, affiliates and divisions to
provide post-production, editing or other design or production services to
customers that directly or indirectly approach it for a specific intranet,
extranet or internet project.
6. Successors and Assigns. This Agreement shall be binding upon IPL and
its successors and assigns (including purchasers of all or substantially all of
its assets and purchasers of all of the ownership interests of the Purchaser
owned by IPL or its subsidiaries or affiliates) and shall inure to the benefit
of the respective permitted successors and assigns of the Seller, SW, MR and DL.
7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NEW YORK.
8. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
sent by facsimile transmission, overnight delivery service or certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed or sent by facsimile
transmission, or by overnight delivery service, one (1) day after the date of
deposit to such overnight delivery service of, if mailed, three (3) days after
the date of deposit in the United States mail, to:
If to IPL: International Post Limited
545 Fifth Avenue
New York, New York 10017
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Attention: President
Fax No.: (212) 986-1364
With a Copy to: Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 758-9526
If to the
Seller, SW, MR or DL: Cognitive Communications, Inc.
2 Gannett Drive
Suite 200
White Plains, New York 10604
Fax No.:
With a Copy to: Roberts, Sheridan & Kotel
12 East 49th Street
New York, New York 10017
Attention: David H. Wollmuth, Esq.
Fax No.: (212) 299-8686
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the day and year first above written.
INTERNATIONAL POST LIMITED
By: ----------------------------
Jeffrey J. Kaplan
Executive Vice President and
Chief Financial Officer
----------------------------
Susan Wiener
----------------------------
Michael Rudnick
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<PAGE>
COGNITIVE COMMUNICATIONS, INC.
By: --------------------------
Name:
Title:
---------------------------
David Leveen
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<PAGE>
SCHEDULE 1
COGNITIVE COMMUNICATIONS, LLC
CAPITAL EXPENDITURES
Fiscal 1997 (eight months) and 1998:
Office furniture $271,600
Personal computers 154,000
Software 25,000
Telephone system 100,000
Web site 20,000
--------
$570,600
========
Fiscal 1999 - Various office furniture, personal computers and software:
$300,000
========
Fiscal 2000 - Various office furniture, personal computers and software:
$300,000
========
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EMPLOYMENT AGREEMENT
AGREEMENT (this "Agreement"), dated as of January 22, 1997,
by and between Cognitive Communications, LLC, a Delaware limited liability
company ("CCL"), and Susan Wiener ("Employee").
W I T N E S S E T H :
WHEREAS, Employee is currently serving as an executive
officer of Cognitive Communications, Inc., a Connecticut corporation (the
"Company"), and owns 50% of the outstanding common stock of the Company;
WHEREAS, the Company, Employee and Michael Rudnick, the owner of
50% of the outstanding common stock of the Company, have entered into a Purchase
Agreement (the "Purchase Agreement") with CCL, dated as of the date hereof,
pursuant to which CCL will purchase the operating assets and assume the
operating liabilities of the Company;
WHEREAS, Employee possesses an intimate knowledge of the business
and affairs of the Company, its policies, methods of operation, personnel,
customers and suppliers;
WHEREAS, the execution of this Agreement is a condition precedent
to the consummation of the transactions contemplated by the Purchase Agreement;
and
WHEREAS, CCL desires to employ Employee, and Employee desires to
accept such employment, upon the terms and subject to the conditions set forth
in this Agreement.
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, the parties hereto agree
as follows:
1. Employment. CCL hereby employs Employee, and Employee hereby
accepts employment with CCL, for the Term (as hereinafter defined), in the
position and with the duties and responsibilities set forth in Section 3 below,
and upon the other terms and subject to the conditions hereinafter set forth.
2. Term. Unless (i) sooner terminated as provided in Section 6
hereof or (ii) extended as provided for in that certain Put Agreement between
CCL and Employee and entered into in connection with the Purchase Agreement (the
"Put Agreement"), Employee's employment hereunder shall be for a term commencing
on the date hereof and ending on July 31, 2002. The actual term of employment
hereunder, giving effect to any early termination, or extension, of employment
under Section 6 hereof, or the Put Agreement, respectively, is referred to
herein as the "Term."
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3. Position, Duties, Responsibilities and Services.
3.1 Position, Duties and Responsibilities. During the
Term, Employee shall serve as the President of CCL and shall be responsible for
the duties attendant to such office as specified in the Limited Liability
Company Operating Agreement of CCL, and such additional managerial duties and
responsibilities with CCL or its subsidiaries or divisions as may be assigned by
the Chief Executive Officer of International Post Limited, an indirect parent of
CCL ("IPL"), or by such other executive corporate officer of IPL who is not the
chief executive officer or chief operating officer of another subsidiary or
division of IPL as such CEO may designate (the "IPL Officer"). Employee shall
also report directly to the IPL Officer. During the Term, CCL's operations shall
be located within New York City.
In addition, Employee shall abide by the policies of IPL
relating to the Powers Reserved/Delegated and to Corporate Conduct (Conflict of
Interest) as such policies are from time to time in effect. Copies of the
policies currently in effect are annexed as exhibits hereto.
3.2 Services to be Provided. During the Term, Employee
shall (i) devote all of her working time, attention and energies to the affairs
of CCL and its subsidiaries and divisions, (ii) use her best efforts to promote
its and their best interests, (iii) faithfully and diligently perform her duties
and responsibilities hereunder, and (iv) comply with and be bound by the
operational policies, procedures and practices of CCL from time to time in
effect during the Term; provided, however, that nothing in this Agreement shall
preclude Employee from (x) engaging in charitable and community affairs or (y)
giving attention to her passive personal investments or (z) performing
administrative functions related to the winding down of the remaining business
of the Company including such research in the area of employee communications as
may be approved in writing by IPL after the date hereof, so long as such
activities do not interfere with the regular performance of her duties and
responsibilities under this Agreement.
3.3 Exclusive Agreement. Employee hereby represents and
warrants to CCL that (i) her execution of this Agreement and the performance of
her duties and responsibilities hereunder does not and will not violate or
result in the breach of, or in any manner be prohibited or restricted by, the
terms of any agreement, arrangement or understanding (whether written or oral),
order or decree to which she is a party or by which she is bound and (ii) she is
not a party to any agreement or arrangement, whether written or oral, which
would prevent Employee from rendering services to CCL during the Term or which
would create any conflict with or involve any business relationship with
customers, suppliers or competitors of CCL, IPL or their respective affiliates,
subsidiaries or divisions.
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<PAGE>
4. Compensation.
4.1 Base Salary. For all services rendered by Employee
hereunder and all covenants and conditions undertaken by her pursuant to this
Agreement, CCL shall pay Employee an annual base salary (the "Base Salary")
during the Term at the rate of one hundred fifty thousand dollars ($150,000),
payable at such intervals as the executive officers of IPL are paid, but in any
event at least on a semi-monthly basis. If the first or last month of the Term
is not a full calendar month, then any calculation of Base Salary for such
period shall be prorated for the number of days employed in such month.
4.2 Incentive Compensation.
(a) Employee shall receive a certain percentage of
CCL's earnings before interest, taxes, depreciation and amortization and certain
incentive stock options as provided for in that certain Incentive Compensation
Agreement, a copy of which is attached hereto.
(b) During the Term, Employee shall be entitled to
participate in all equity related incentive programs that CCL makes generally
available to officers and employees of CCL, subject to the terms and conditions
of such programs.
(c) Employee hereby acknowledges that,
notwithstanding anything contained herein to the contrary, IPL shall in no way
be obligated to cause Employee to participate in any stock option or other
equity related incentive programs that IPL makes generally available to officers
and employees of IPL and its other subsidiaries, affiliates or divisions.
4.3 Withholding. CCL shall withhold from any payments due to
Employee under this Agreement all Federal, state and local taxes, FICA and other
amounts required to be withheld pursuant to any applicable law.
5. Employee Benefits.
5.1 Benefit Programs. During the Term, Employee shall be
entitled to participate in such group life, health, accident, disability and
hospitalization insurance plans, pension plans and retirement plans that IPL
makes generally available to officers and employees of IPL and its subsidiaries.
5.2 Vacation. During each twelve month period of the Term,
Employee shall be entitled to four (4) weeks of vacation to be taken at times
determined by Employee which do not unreasonably interfere with the performance
of her duties hereunder; provided, however, that, other than up to one (1) week
of vacation not taken during a year which may be taken during the first quarter
of the following year, any such vacation time not taken
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<PAGE>
during any year shall be forfeited. Employee shall also be entitled to all paid
holidays given by IPL to its officers and employees.
5.3 Automobile. During the Term, CCL shall lease and provide
the Employee with an appropriate automobile, as determined by the CCL Board, and
shall pay all expenses relating to the insurance, maintenance and operation
thereof.
5.4 Insurance. Employee agrees that CCL may request Employee
to apply for and take out term life, health, accident, and/or other insurance
covering Employee, either independently or together with others, in an aggregate
amount determined by the CCL Board. CCL shall pay all premiums for such
insurance and shall determine the beneficiary of, and own all rights in, any
such insurance policies and proceeds thereof, and Employee shall not have any
right, title or interest therein or any obligation to pay any of the premiums
therefor. If requested, Employee shall submit to medical examinations and shall
otherwise cooperate in all respects to procure such insurance.
As soon as practical after the date hereof, CCL shall
obtain "directors and officers liability insurance" on behalf and for the
benefit of the Employee on substantially the same terms and subject to
substantially the same conditions as provided to directors and officers of other
subsidiaries of IPL.
5.5 Expenses. During the Term, Employee is authorized to
incur reasonable expenses in the performance of her duties hereunder, and, upon
presentation of a detailed itemization account thereof, CCL shall pay or
reimburse Employee for such reasonable expenses so incurred by Employee.
6. Termination of Employment.
6.1 Death; Disability. Employee's employment hereunder shall
terminate upon her death, or, at the election of CCL by written notice to
Employee, if, as a result of the occurrence of mental or physical disability
during the Term, Employee has been unable to perform her duties hereunder for a
period of three (3) consecutive months or ninety (90) days in any consecutive
three hundred sixty-five (365) day period, as determined in good faith by the
CCL Board. In the event of a termination of Employee's employment for death or
disability, CCL shall pay Employee (or her legal representatives, as the case
may be): (i) her unpaid Base Salary through the date of termination, (ii) the
value of her accrued and unpaid vacation days as of the date of termination
(calculated based on Employee's Base Salary computed on a 365-day year), and
(iii) all amounts due under Section 5.5 hereof. In addition, Employee shall be
entitled to any amounts due under the programs referred to in Section 5.1
hereof, as and to the extent set forth in such programs.
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<PAGE>
6.2 Termination for Cause.
(a) In addition to any other remedies available to
it at law or in equity, CCL shall have the right, upon written notice to
Employee, to terminate Employee's employment under this Agreement if Employee:
(i) breaches in any material respect any provision of this Agreement and such
breach is not remedied within thirty (30) days after written notice thereof from
the CCL Board setting forth in reasonable detail the matters constituting such
breach; (ii) fails or refuses to perform in any material respect such duties as
may be assigned to her from time to time by the IPL Officer or the CCL Board;
(iii) has been convicted of a felony; or (iv) has committed any act of fraud,
misappropriation of funds or embezzlement in connection with her employment
hereunder or has willfully disclosed any Confidential Information (as defined
below) (termination pursuant to the provisions of any of clauses (i) through
(iv) above is referred to herein as termination for "Cause").
(b) In the event Employee is terminated for Cause,
CCL shall pay Employee (i) her unpaid Base Salary through the date of
termination, (ii) the value of her accrued and unpaid vacation days as of the
date of termination (calculated based on Employee's Base Salary computed on a
365-day year), and (iii) all amounts due under Section 5.5 hereof. In addition,
Employee shall be entitled to any amounts due under the programs referred to in
Section 5.1 hereof, as and to the extent set forth in such programs.
(c) In the event Employee is terminated for Cause
other than pursuant to clause (ii) of subparagraph (a) above, Employee hereby
agrees to resign as a manager of CCL, effective as of the date of such
termination, and from any other positions she holds with CCL.
6.3 Termination Other than for Cause, Death or Disability.
Notwithstanding any provision to the contrary herein, CCL may at any time upon
written notice to Employee, in its sole and absolute discretion and for any or
no reason, terminate the employment of Employee hereunder without Cause. If this
Agreement is terminated (i) by CCL, other than as a result of the death or
disability of Employee or for Cause, or (ii) as a result of a Constructive
Termination (as defined below), CCL shall pay Employee (A) her unpaid Base
Salary through the end of the Term (payable as provided in Section 4.1 hereof),
(B) the value of her accrued and unpaid vacation days as of the date of
termination (calculated based on Employee's Base Salary computed on a 365-day
year), and (C) all amounts due under Section 5.5 hereof. In addition, Employee
shall be entitled to any amounts due under the programs referred to in Section
5.1 hereof, as and to the extent set forth in such programs. For purposes of
this Agreement, "Constructive Termination" shall be deemed to have occurred upon
any material breach by CCL of the provisions of this Agreement which breach
shall continue for at least thirty (30) days after written notice is provided by
Employee to CCL setting forth in reasonable detail the matters constituting such
breach.
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<PAGE>
7. Inventions; Confidential Information; Non-Competition.
7.1 Inventions. All processes, technologies, improvements,
discoveries, trademarks, trade names, and inventions (collectively,
"Inventions") conceived, developed, invented, made or found by Employee, alone
or with others, during her employment with CCL or within six (6) months after
the termination of her employment, whether or not conceived, developed,
invented, made or found during Employee's employment with CCL or with the use of
the facilities or materials of CCL and which relate to the consulting business
in the area of communications and content strategy for, or research relating to
the implementation of, or the design and production of, intranets, extranets or
internets or any other business conducted by CCL or any of its subsidiaries or
divisions (the "CCL Companies"), whether or not patentable, shall be the
property of CCL and shall be promptly and fully disclosed by Employee to CCL.
Employee shall perform all necessary acts (including, without limitation,
executing and delivering any assignments, documents or instruments requested by
CCL) to vest title to any such Inventions in CCL and to entitle CCL, at its
expense, to secure and maintain domestic and/or foreign patents or any other
rights for such Inventions.
7.2 Confidential Information.
(a) Employee shall not, at any time during the
Term and thereafter, directly or indirectly, disclose or furnish to any other
person, firm, partnership, corporation or any other entity, except in the course
of the proper performance of her duties hereunder (including, without
limitation, during marketing and new business presentations, seminars and
workshops authorized by CCL), any Confidential Information (as defined below)
pertaining to the business of the CCL Companies, unless required to do so by a
court of competent jurisdiction, by any governmental agency having supervisory
authority over the business of the CCL Companies, or by any administrative body
or legislative body (including a committee thereof) with jurisdiction to order
Employee to divulge, disclose or make accessible such information; provided,
however, that Employee shall provide CCL with notice of the requirement of such
disclosure promptly after Employee is notified thereof and prior to her
disclosure thereof so as to enable CCL to challenge the order compelling such
disclosure. In the event that Employee's employment is terminated hereunder for
any reason, Employee shall promptly return to CCL all Confidential Information
and all other documents, drawings, work papers, lists, memoranda, notes, records
and other data (including copies thereof) constituting or pertaining to any of
the Confidential Information.
(b) For purposes of this Agreement, "Confidential
Information" shall mean non-public information concerning any financial data,
statistical data, strategic business plans, product development (or other
proprietary product data), customer and supplier lists, customer and supplier
information, information relating to practices, processes, techniques,
procedures, methods, trade secrets, marketing plans and other non-public,
proprietary and confidential information of any of the CCL Companies, that, in
any case, (i) is not otherwise generally available to the public, (ii) is not
generally known in any industry in which any of the
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<PAGE>
CCL Companies is or was involved, and (iii) has not been disclosed by the CCL
Companies to others not subject to confidentiality agreements.
7.3 Non-Competition. Subject to the provisions of Section
3.2, Employee agrees that during the Non-Competition Period (as hereinafter
defined), she will not in any manner, directly or indirectly, except as
specifically contemplated by the terms of her employment or expressly set forth
in this Agreement, (i) be employed by, engaged in or participate in the
ownership, management, operation or control of, or act in any advisory or other
capacity for, any entity which now or at any time during the Non-Competition
Period engages in any business activity competitive, directly or indirectly,
with the business of CCL or any of its subsidiaries or divisions within any
greater metropolitan area in which CCL or any of its subsidiaries or divisions
are currently engaged in business or, at the termination of Employee's
employment, within which there was a bona fide intention on the part of CCL or
any of its subsidiaries or divisions to engage in business in the future, except
that Employee may be retained in an "in-house" or similar position relating to
the area of communications and content strategy for, or research relating to the
implementation of, or the design and production of, intranets, extranets or
internets by an entity which is not engaged in the business of providing
services in such area to other unaffiliated entities, (ii) solicit or divert
from CCL or any of its subsidiaries or divisions any business or any customer,
or divert from CCL or any of its subsidiaries or divisions any supplier thereto,
in each case which customer or supplier was a customer or supplier of CCL or any
of its subsidiaries or divisions during the eighteen (18) months immediately
preceding such date of solicitation or diversion, or assist any person, firm or
corporation in doing so or attempting to do so, or (iii) on her own behalf or on
behalf of any person or entity, directly or indirectly, hire or solicit the
employment or other retention of any employee or consultant who was employed or
retained by CCL or any of its subsidiaries or divisions at any time during the
twelve (12) months immediately preceding such date of hiring or solicitation;
provided, however, that, notwithstanding the foregoing, nothing herein shall
preclude Employee from making solely passive investments in any class or series
of equity securities of any entity which is publicly traded so long as Employee
shall not own or control, directly or indirectly, either as principal, manager,
partner, investor, lender or in any other capacity, equity securities which
constitute five percent (5%) or more of the voting rights or equity ownership of
such entity. For purposes of this Section 7.3, a "bona fide intention" to engage
in business in a certain geographical area shall be deemed not to have existed
at the time of termination of Employee's employment if (i) within three (3)
months after the termination of Employee's employment, CCL or any of its
subsidiaries or divisions shall not have entered into a letter of intent or made
a public announcement of intention to engage in business in such geographical
area or (ii) within one (1) year after the termination of Employee's employment,
CCL or any of its subsidiaries or divisions shall not have consummated an
agreement to engage, or otherwise actually engaged, in business in such
geographical area. The provisions of this Section 7.3 shall extend for the Term
and survive the Term for eighteen (18) months after the end of the Term;
provided, however, that in the case of a termination of employment pursuant to
the provisions of Section 6.1, the provisions of this Section 7.3 shall extend
until eighteen (18) months after the last payment of Base Salary is made
pursuant to Section 6.1(i); provided further, however, that in the case of a
termination of
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employment pursuant to the provisions of Sections 6.3, the provisions of this
Section 7.3 shall extend until the last payment of Base Salary is made pursuant
to Section 6.3(A) (the period described in this sentence is referred to herein
as the "Non-Competition Period").
7.4 Breach of Provisions. Employee and CCL hereby agree that
the covenants contained in this Section 7 are reasonable and necessary covenants
for the protection of CCL and its business under the circumstances, and further
agree that if, in the opinion of any court of competent jurisdiction such
covenants are not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of these
covenants that such court deems unreasonable and to enforce the remainder of
these covenants as so amended. Employee agrees that any breach or threatened
breach of the covenants contained in this Section 7 would irreparably injure CCL
and that there is no adequate remedy at law for any such breach or threatened
breach. Accordingly, Employee agrees that CCL, in addition to pursuing any other
remedies it may have in law or in equity, may obtain injunctive relief in any
court, foreign or domestic, having the capacity to grant such relief, to
restrain any such breach or threatened breach by Employee and to enforce the
provisions of this Section 7.
8. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served, (ii) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid, or (iii) on the date sent if sent by
facsimile, to the parties at the following addresses or facsimile numbers (or at
such other address or facsimile number for a party as shall be specified by like
notice):
If to CCL, to: International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to: Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 980-4665
If to Employee, to the address set forth beside her signature on the signature
page to this Agreement.
9. Entire Agreement. This Agreement, the Purchase Agreement and
the agreements referenced herein and therein set forth the entire understanding
and agreement of the parties with respect to their subject matter and supersede
any and all prior understandings,
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negotiations or agreements among the parties hereto, both written and oral, with
respect to such subject matter.
10. Authority. The parties each represent and warrant that such
party has the power, authority and right to enter into this Agreement and to
carry out and perform the terms, covenants and conditions hereof.
11. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of CCL and its successors and assigns (including
purchasers of substantially all of CCL's assets) and Employee. Except as
otherwise expressly set forth in this Agreement, the rights and obligations of
Employee under this Agreement shall not be assignable or otherwise transferable.
12. Amendment or Modification; Waiver. This Agreement may be
amended or modified only by written agreement executed by all parties hereto.
Any of the parties hereto may extend the time for the performance of any of the
obligations or other acts of any other party hereto, waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto, or waive compliance with any of the covenants, agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed by the party granting such waiver. Such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or future failure.
13. No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
14. Governing Law; Consent to Jurisdiction. This Agreement shall
be construed in accordance with, and governed by, the internal laws of the State
of New York as applied to contracts made and to be performed entirely within the
State of New York. Any legal action, suit or proceeding arising out of or
relating to this Agreement may be instituted in any state or federal court
located within the County of New York, State of New York, and each party hereto
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
action, suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such court in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. Each party hereto further
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding.
15. Headings. Section headings contained in this Agreement are
included for convenience only and shall not affect the interpretation of any
provisions of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
counter parts, each of which shall be deemed to be an original, but all of
which, when taken together, shall constitute one and the same agreement.
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17. Severability. Subject to Section 7.4 hereof, in the event
that any one or more of the provisions contained in this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, in whole
or in part, the validity of the remaining provisions shall not be affected and
the remaining portion of any provision held to be invalid, illegal or
unenforceable shall in no way be affected, prejudiced or disturbed thereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first set forth above.
COGNITIVE COMMUNICATIONS, LLC
BY:
--------------------------
Jeffrey J. Kaplan
Vice President and
Chief Financial Officer
--------------------------
Susan Wiener
Address: 1370 Baptist Church Road
Yorktown Heights, NY 10598
Phone No.: (914) 245-3226
Fax No.: (914) 245-9247
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EMPLOYMENT AGREEMENT
AGREEMENT (this "Agreement"), dated as of January 22, 1997, by
and between Cognitive Communications, LLC, a Delaware limited liability company
("CCL"), and Michael Rudnick ("Employee").
W I T N E S S E T H :
WHEREAS, Employee is currently serving as an executive officer
of Cognitive Communications, Inc., a Connecticut corporation (the "Company"),
and owns 50% of the outstanding common stock of the Company;
WHEREAS, the Company, Employee and Susan Wiener, the owner of
50% of the outstanding common stock of the Company, have entered into a Purchase
Agreement (the "Purchase Agreement") with CCL, dated as of the date hereof,
pursuant to which CCL will purchase the operating assets and assume the
operating liabilities of the Company;
WHEREAS, Employee possesses an intimate knowledge of the
business and affairs of the Company, its policies, methods of operation,
personnel, customers and suppliers;
WHEREAS, the execution of this Agreement is a condition
precedent to the consummation of the transactions contemplated by the Purchase
Agreement; and
WHEREAS, CCL desires to employ Employee, and Employee desires
to accept such employment, upon the terms and subject to the conditions set
forth in this Agreement.
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, the parties hereto agree
as follows:
1. Employment. CCL hereby employs Employee, and Employee hereby accepts
employment with CCL, for the Term (as hereinafter defined), in the position and
with the duties and responsibilities set forth in Section 3 below, and upon the
other terms and subject to the conditions hereinafter set forth.
2. Term. Unless (i) sooner terminated as provided in Section 6 hereof or
(ii) extended as provided for in that certain Put Agreement between CCL and
Employee and entered into in connection with the Purchase Agreement (the "Put
Agreement"), Employee's employment hereunder shall be for a term commencing on
the date hereof and ending on July 31, 2002. The actual term of employment
hereunder, giving effect to any early termination, or extension, of employment
under Section 6 hereof, or the Put Agreement, respectively, is referred to
herein as the "Term."
<PAGE>
3. Position, Duties, Responsibilities and Services.
3.1 Position, Duties and Responsibilities. During the Term, Employee
shall serve as an Executive Vice President of CCL and shall be responsible for
the duties attendant to such office as specified in the Limited Liability
Company Operating Agreement of CCL, and such additional managerial duties and
responsibilities with CCL or its subsidiaries or divisions as may be assigned by
the Chief Executive Officer of International Post Limited, an indirect parent of
CCL ("IPL"), or by such other executive corporate officer of IPL who is not the
chief executive officer or chief operating officer of another subsidiary or
division of IPL as such CEO may designate (the "IPL Officer"). Employee shall
also report directly to the IPL Officer. During the Term, CCL's operations shall
be located within New York City.
In addition, Employee shall abide by the policies of IPL relating to
the Powers Reserved/Delegated and to Corporate Conduct (Conflict of Interest) as
such policies are from time to time in effect. Copies of the policies currently
in effect are annexed as exhibits hereto.
3.2 Services to be Provided. During the Term, Employee shall (i)
devote all of his working time, attention and energies to the affairs of CCL and
its subsidiaries and divisions, (ii) use his best efforts to promote its and
their best interests, (iii) faithfully and diligently perform his duties and
responsibilities hereunder, and (iv) comply with and be bound by the operational
policies, procedures and practices of CCL from time to time in effect during the
Term; provided, however, that nothing in this Agreement shall preclude Employee
from (x) engaging in charitable and community affairs or (y) giving attention to
his passive personal investments or (z) performing administrative functions
related to the winding down of the remaining business of the Company including
such research in the area of employee communications as may be approved in
writing by IPL after the date hereof, so long as such activities do not
interfere with the regular performance of his duties and responsibilities under
this Agreement.
3.3 Exclusive Agreement. Employee hereby represents and warrants to
CCL that (i) his execution of this Agreement and the performance of his duties
and responsibilities hereunder does not and will not violate or result in the
breach of, or in any manner be prohibited or restricted by, the terms of any
agreement, arrangement or understanding (whether written or oral), order or
decree to which he is a party or by which he is bound and (ii) he is not a party
to any agreement or arrangement, whether written or oral, which would prevent
Employee from rendering services to CCL during the Term or which would create
any conflict with or involve any business relationship with customers, suppliers
or competitors of CCL, IPL or their respective affiliates, subsidiaries or
divisions.
4. Compensation.
4.1 Base Salary. For all services rendered by Employee hereunder and
all covenants and conditions undertaken by him pursuant to this Agreement, CCL
shall pay Employee an annual base salary (the "Base Salary") during the Term at
the rate of one hundred fifty thousand dollars ($150,000), payable at such
intervals as the executive officers of IPL are
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paid, but in any event at least on a semi-monthly basis. If the first or last
month of the Term is not a full calendar month, then any calculation of Base
Salary for such period shall be prorated for the number of days employed in such
month.
4.2 Incentive Compensation.
(a) Employee shall receive a certain percentage of CCL's earnings
before interest, taxes, depreciation and amortization and certain incentive
stock options as provided for in that certain Incentive Compensation Agreement,
a copy of which is attached hereto.
(b) During the Term, Employee shall be entitled to participate in all
equity related incentive programs that CCL makes generally available to officers
and employees of CCL, subject to the terms and conditions of such programs.
(c) Employee hereby acknowledges that, notwithstanding anything
contained herein to the contrary, IPL shall in no way be obligated to cause
Employee to participate in any stock option or other equity related incentive
programs that IPL makes generally available to officers and employees of IPL and
its other subsidiaries, affiliates or divisions.
4.3 Withholding. CCL shall withhold from any payments due to Employee
under this Agreement all Federal, state and local taxes, FICA and other amounts
required to be withheld pursuant to any applicable law.
5. Employee Benefits.
5.1 Benefit Programs. During the Term, Employee shall be entitled to
participate in such group life, health, accident, disability and hospitalization
insurance plans, pension plans and retirement plans that IPL makes generally
available to officers and employees of IPL and its subsidiaries.
5.2 Vacation. During each twelve month period of the Term, Employee
shall be entitled to four (4) weeks of vacation to be taken at times determined
by Employee which do not unreasonably interfere with the performance of his
duties hereunder; provided, however, that, other than up to one (1) week of
vacation not taken during a year which may be taken during the first quarter of
the following year, any such vacation time not taken during any year shall be
forfeited. Employee shall also be entitled to all paid holidays given by IPL to
its officers and employees.
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5.3 Automobile. During the Term, CCL shall lease and provide the
Employee with an appropriate automobile, as determined by the CCL Board, and
shall pay all expenses relating to the insurance, maintenance and operation
thereof.
5.4 Insurance. Employee agrees that CCL may request Employee to apply
for and take out term life, health, accident, and/or other insurance covering
Employee, either independently or together with others, in an aggregate amount
determined by the CCL Board. CCL shall pay all premiums for such insurance and
shall determine the beneficiary of, and own all rights in, any such insurance
policies and proceeds thereof, and Employee shall not have any right, title or
interest therein or any obligation to pay any of the premiums therefor. If
requested, Employee shall submit to medical examinations and shall otherwise
cooperate in all respects to procure such insurance.
As soon as practical after the date hereof, CCL shall obtain
"directors and officers liability insurance" on behalf and for the benefit of
the Employee on substantially the same terms and subject to substantially the
same conditions as provided to directors and officers of other subsidiaries of
IPL.
5.5 Expenses. During the Term, Employee is authorized to incur
reasonable expenses in the performance of his duties hereunder, and, upon
presentation of a detailed itemization account thereof, CCL shall pay or
reimburse Employee for such reasonable expenses so incurred by Employee.
6. Termination of Employment.
6.1 Death; Disability. Employee's employment hereunder shall terminate
upon his death, or, at the election of CCL by written notice to Employee, if, as
a result of the occurrence of mental or physical disability during the Term,
Employee has been unable to perform his duties hereunder for a period of three
(3) consecutive months or ninety (90) days in any consecutive three hundred
sixty-five (365) day period, as determined in good faith by the CCL Board. In
the event of a termination of Employee's employment for death or disability, CCL
shall pay Employee (or his legal representatives, as the case may be): (i) his
unpaid Base Salary through the date of termination, (ii) the value of his
accrued and unpaid vacation days as of the date of termination (calculated based
on Employee's Base Salary computed on a 365-day year), and (iii) all amounts due
under Section 5.5 hereof. In addition, Employee shall be entitled to any amounts
due under the programs referred to in Section 5.1 hereof, as and to the extent
set forth in such programs.
6.2 Termination for Cause.
(a) In addition to any other remedies available to it at law or in
equity, CCL shall have the right, upon written notice to Employee, to terminate
Employee's employment under this Agreement if Employee: (i) breaches in any
material respect any provision
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of this Agreement and such breach is not remedied within thirty (30) days after
written notice thereof from the CCL Board setting forth in reasonable detail the
matters constituting such breach; (ii) fails or refuses to perform in any
material respect such duties as may be assigned to him from time to time by the
IPL Officer or the CCL Board; (iii) has been convicted of a felony; or (iv) has
committed any act of fraud, misappropriation of funds or embezzlement in
connection with his employment hereunder or has willfully disclosed any
Confidential Information (as defined below) (termination pursuant to the
provisions of any of clauses (i) through (iv) above is referred to herein as
termination for "Cause").
(b) In the event Employee is terminated for Cause, CCL shall pay
Employee (i) his unpaid Base Salary through the date of termination, (ii) the
value of his accrued and unpaid vacation days as of the date of termination
(calculated based on Employee's Base Salary computed on a 365-day year), and
(iii) all amounts due under Section 5.5 hereof. In addition, Employee shall be
entitled to any amounts due under the programs referred to in Section 5.1
hereof, as and to the extent set forth in such programs.
(c) In the event Employee is terminated for Cause other than pursuant
to clause (ii) of subparagraph (a) above, Employee hereby agrees to resign as a
manager of CCL, effective as of the date of such termination, and from any other
positions he holds with CCL.
6.3 Termination Other than for Cause, Death or Disability.
Notwithstanding any provision to the contrary herein, CCL may at any time upon
written notice to Employee, in its sole and absolute discretion and for any or
no reason, terminate the employment of Employee hereunder without Cause. If this
Agreement is terminated (i) by CCL, other than as a result of the death or
disability of Employee or for Cause, or (ii) as a result of a Constructive
Termination (as defined below), CCL shall pay Employee (A) his unpaid Base
Salary through the end of the Term (payable as provided in Section 4.1 hereof),
(B) the value of his accrued and unpaid vacation days as of the date of
termination (calculated based on Employee's Base Salary computed on a 365-day
year), and (C) all amounts due under Section 5.5 hereof. In addition, Employee
shall be entitled to any amounts due under the programs referred to in Section
5.1 hereof, as and to the extent set forth in such programs. For purposes of
this Agreement, "Constructive Termination" shall be deemed to have occurred upon
any material breach by CCL of the provisions of this Agreement which breach
shall continue for at least thirty (30) days after written notice is provided by
Employee to CCL setting forth in reasonable detail the matters constituting such
breach.
7. Inventions; Confidential Information; Non-Competition.
7.1 Inventions. All processes, technologies, improvements,
discoveries, trademarks, trade names, and inventions (collectively,
"Inventions") conceived, developed, invented, made or found by Employee, alone
or with others, during his employment with CCL or within six (6) months after
the termination of his employment, whether or not conceived,
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<PAGE>
developed, invented, made or found during Employee's employment with CCL or with
the use of the facilities or materials of CCL and which relate to the consulting
business in the area of communications and content strategy for, or research
relating to the implementation of, or the design and production of, intranets,
extranets or internets or any other business conducted by CCL or any of its
subsidiaries or divisions (the "CCL Companies"), whether or not patentable,
shall be the property of CCL and shall be promptly and fully disclosed by
Employee to CCL. Employee shall perform all necessary acts (including, without
limitation, executing and delivering any assignments, documents or instruments
requested by CCL) to vest title to any such Inventions in CCL and to entitle
CCL, at its expense, to secure and maintain domestic and/or foreign patents or
any other rights for such Inventions.
7.2 Confidential Information.
(a) Employee shall not, at any time during the Term and thereafter,
directly or indirectly, disclose or furnish to any other person, firm,
partnership, corporation or any other entity, except in the course of the proper
performance of his duties hereunder (including, without limitation, during
marketing and new business presentations, seminars and workshops authorized by
CCL), any Confidential Information (as defined below) pertaining to the business
of the CCL Companies, unless required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over the
business of the CCL Companies, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order Employee to divulge,
disclose or make accessible such information; provided, however, that Employee
shall provide CCL with notice of the requirement of such disclosure promptly
after Employee is notified thereof and prior to his disclosure thereof so as to
enable CCL to challenge the order compelling such disclosure. In the event that
Employee's employment is terminated hereunder for any reason, Employee shall
promptly return to CCL all Confidential Information and all other documents,
drawings, work papers, lists, memoranda, notes, records and other data
(including copies thereof) constituting or pertaining to any of the Confidential
Information.
(b) For purposes of this Agreement, "Confidential Information" shall
mean non-public information concerning any financial data, statistical data,
strategic business plans, product development (or other proprietary product
data), customer and supplier lists, customer and supplier information,
information relating to practices, processes, techniques, procedures, methods,
trade secrets, marketing plans and other non-public, proprietary and
confidential information of any of the CCL Companies, that, in any case, (i) is
not otherwise generally available to the public, (ii) is not generally known in
any industry in which any of the CCL Companies is or was involved, and (iii) has
not been disclosed by the CCL Companies to others not subject to confidentiality
agreements.
7.3 Non-Competition. Subject to the provisions of Section 3.2,
Employee agrees that during the Non-Competition Period (as hereinafter defined),
he will not in any manner, directly or indirectly, except as specifically
contemplated by the terms of his
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employment or expressly set forth in this Agreement, (i) be employed by, engaged
in or participate in the ownership, management, operation or control of, or act
in any advisory or other capacity for, any entity which now or at any time
during the Non-Competition Period engages in any business activity competitive,
directly or indirectly, with the business of CCL or any of its subsidiaries or
divisions within any greater metropolitan area in which CCL or any of its
subsidiaries or divisions are currently engaged in business or, at the
termination of Employee's employment, within which there was a bona fide
intention on the part of CCL or any of its subsidiaries or divisions to engage
in business in the future, except that Employee may be retained in an "in-house"
or similar position relating to the area of communications and content strategy
for, or research relating to the implementation of, or the design and production
of, intranets, extranets or internets by an entity which is not engaged in the
business of providing services in such area to other unaffiliated entities, (ii)
solicit or divert from CCL or any of its subsidiaries or divisions any business
or any customer, or divert from CCL or any of its subsidiaries or divisions any
supplier thereto, in each case which customer or supplier was a customer or
supplier of CCL or any of its subsidiaries or divisions during the eighteen (18)
months immediately preceding such date of solicitation or diversion, or assist
any person, firm or corporation in doing so or attempting to do so, or (iii) on
his own behalf or on behalf of any person or entity, directly or indirectly,
hire or solicit the employment or other retention of any employee or consultant
who was employed or retained by CCL or any of its subsidiaries or divisions at
any time during the twelve (12) months immediately preceding such date of hiring
or solicitation; provided, however, that, notwithstanding the foregoing, nothing
herein shall preclude Employee from making solely passive investments in any
class or series of equity securities of any entity which is publicly traded so
long as Employee shall not own or control, directly or indirectly, either as
principal, manager, partner, investor, lender or in any other capacity, equity
securities which constitute five percent (5%) or more of the voting rights or
equity ownership of such entity. For purposes of this Section 7.3, a "bona fide
intention" to engage in business in a certain geographical area shall be deemed
not to have existed at the time of termination of Employee's employment if (i)
within three (3) months after the termination of Employee's employment, CCL or
any of its subsidiaries or divisions shall not have entered into a letter of
intent or made a public announcement of intention to engage in business in such
geographical area or (ii) within one (1) year after the termination of
Employee's employment, CCL or any of its subsidiaries or divisions shall not
have consummated an agreement to engage, or otherwise actually engaged, in
business in such geographical area. The provisions of this Section 7.3 shall
extend for the Term and survive the Term for eighteen (18) months after the end
of the Term; provided, however, that in the case of a termination of employment
pursuant to the provisions of Section 6.1, the provisions of this Section 7.3
shall extend until eighteen (18) months after the last payment of Base Salary is
made pursuant to Section 6.1(i); provided further, however, that in the case of
a termination of employment pursuant to the provisions of Sections 6.3, the
provisions of this Section 7.3 shall extend until the last payment of Base
Salary is made pursuant to Section 6.3(A) (the period described in this sentence
is referred to herein as the "Non-Competition Period").
7.4 Breach of Provisions. Employee and CCL hereby agree that the
covenants contained in this Section 7 are reasonable and necessary covenants for
the protection of
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CCL and its business under the circumstances, and further agree that if, in the
opinion of any court of competent jurisdiction such covenants are not reasonable
in any respect, such court shall have the right, power and authority to excise
or modify such provision or provisions of these covenants that such court deems
unreasonable and to enforce the remainder of these covenants as so amended.
Employee agrees that any breach or threatened breach of the covenants contained
in this Section 7 would irreparably injure CCL and that there is no adequate
remedy at law for any such breach or threatened breach. Accordingly, Employee
agrees that CCL, in addition to pursuing any other remedies it may have in law
or in equity, may obtain injunctive relief in any court, foreign or domestic,
having the capacity to grant such relief, to restrain any such breach or
threatened breach by Employee and to enforce the provisions of this Section 7.
8. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served, (ii) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid, or (iii) on the date sent if sent by
facsimile, to the parties at the following addresses or facsimile numbers (or at
such other address or facsimile number for a party as shall be specified by like
notice):
If to CCL, to: International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to: Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 980-4665
If to Employee, to the address set forth beside his signature on the signature
page to this Agreement.
9. Entire Agreement. This Agreement, the Purchase Agreement and the
agreements referenced herein and therein set forth the entire understanding and
agreement of the parties with respect to their subject matter and supersede any
and all prior understandings, negotiations or agreements among the parties
hereto, both written and oral, with respect to such subject matter.
10. Authority. The parties each represent and warrant that such party has
the power, authority and right to enter into this Agreement and to carry out and
perform the terms, covenants and conditions hereof.
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11. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of CCL and its successors and assigns (including purchasers
of substantially all of CCL's assets) and Employee. Except as otherwise
expressly set forth in this Agreement, the rights and obligations of Employee
under this Agreement shall not be assignable or otherwise transferable.
12. Amendment or Modification; Waiver. This Agreement may be amended or
modified only by written agreement executed by all parties hereto. Any of the
parties hereto may extend the time for the performance of any of the obligations
or other acts of any other party hereto, waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or waive compliance with any of the covenants, agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed by the party granting such waiver. Such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or future failure.
13. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
14. Governing Law; Consent to Jurisdiction. This Agreement shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as applied to contracts made and to be performed entirely within the
State of New York. Any legal action, suit or proceeding arising out of or
relating to this Agreement may be instituted in any state or federal court
located within the County of New York, State of New York, and each party hereto
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
action, suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such court in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. Each party hereto further
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding.
15. Headings. Section headings contained in this Agreement are included for
convenience only and shall not affect the interpretation of any provisions of
this Agreement.
16. Counterparts. This Agreement may be executed in one or more counter
parts, each of which shall be deemed to be an original, but all of which, when
taken together, shall constitute one and the same agreement.
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17. Severability. Subject to Section 7.4 hereof, in the event that any one
or more of the provisions contained in this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect, in whole or in
part, the validity of the remaining provisions shall not be affected and the
remaining portion of any provision held to be invalid, illegal or unenforceable
shall in no way be affected, prejudiced or disturbed thereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
------------------------------------------
Jeffrey J. Kaplan
Vice President and Chief Financial Officer
----------------------------------------
Michael Rudnick
Address: 2 Possum Lane
Rowayton, CT 06853
Phone No.: (203) 853-3888
Fax No.:
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EMPLOYMENT AGREEMENT
AGREEMENT (this "Agreement"), dated as of January 22, 1997, by
and between Cognitive Communications, LLC, a Delaware limited liability company
("CCL"), and David Leveen ("Employee").
W I T N E S S E T H :
WHEREAS, CCL desires to employ Employee, and Employee desires
to accept such employment, upon the terms and subject to the conditions set
forth in this Agreement.
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
adequacy and receipt of which are hereby acknowledged, the parties hereto agree
as follows:
1. Employment. CCL hereby employs Employee, and Employee hereby
accepts employment with CCL, for the Term (as hereinafter defined), in the
position and with the duties and responsibilities set forth in Section 3 below,
and upon the other terms and subject to the conditions hereinafter set forth.
2. Term. Unless (i) sooner terminated as provided in Section 6 hereof
or (ii) extended as provided for in that certain Put Agreement dated as of the
date hereof between CCL and Employee (the "Put Agreement"), Employee's
employment hereunder shall be for a term commencing on the date hereof and
ending on July 31, 2002. The actual term of employment hereunder, giving effect
to any early termination, or extension, of employment under Section 6 hereof, or
the Put Agreement, respectively, is referred to herein as the "Term."
3. Position, Duties, Responsibilities and Services.
3.1 Position, Duties and Responsibilities. During the Term,
Employee shall serve as an Executive Vice President of CCL and shall be
responsible for the duties attendant to such office as specified in the Limited
Liability Company Operating Agreement of CCL, and such additional managerial
duties and responsibilities with CCL or its subsidiaries or divisions as may be
assigned by the Chief Executive Officer of International Post Limited, an
indirect parent of CCL ("IPL"), or by such other executive corporate officer of
IPL who is not the chief executive officer or chief operating officer of another
subsidiary or division of IPL as such CEO may designate (the "IPL Officer").
Employee shall also report directly to the IPL Officer. During the Term, CCL's
operations shall be located within New York City.
In addition, Employee shall abide by the policies of IPL relating
to the Powers Reserved/Delegated and to Corporate Conduct (Conflict of Interest)
as such policies are from time to time in effect. Copies of the policies
currently in effect are annexed as exhibits hereto.
<PAGE>
3.2 Services to be Provided. During the Term, Employee shall (i)
devote all of his working time, attention and energies to the affairs of CCL and
its subsidiaries and divisions, (ii) use his best efforts to promote its and
their best interests, (iii) faithfully and diligently perform his duties and
responsibilities hereunder, and (iv) comply with and be bound by the operational
policies, procedures and practices of CCL from time to time in effect during the
Term; provided, however, that nothing in this Agreement shall preclude Employee
from (x) engaging in charitable and community affairs or (y) giving attention to
his passive personal investments, so long as such activities do not interfere
with the regular performance of his duties and responsibilities under this
Agreement.
3.3 Exclusive Agreement. Employee hereby represents and warrants
to CCL that (i) his execution of this Agreement and the performance of his
duties and responsibilities hereunder does not and will not violate or result in
the breach of, or in any manner be prohibited or restricted by, the terms of any
agreement, arrangement or understanding (whether written or oral), order or
decree to which he is a party or by which he is bound and (ii) he is not a party
to any agreement or arrangement, whether written or oral, which would prevent
Employee from rendering services to CCL during the Term or which would create
any conflict with or involve any business relationship with customers, suppliers
or competitors of CCL, IPL or their respective affiliates, subsidiaries or
divisions.
4. Compensation.
4.1 Base Salary. For all services rendered by Employee hereunder
and all covenants and conditions undertaken by him pursuant to this Agreement,
CCL shall pay Employee an annual base salary (the "Base Salary") during the Term
at the rate of one hundred fifty thousand dollars ($150,000), payable at such
intervals as the executive officers of IPL are paid, but in any event at least
on a semi-monthly basis. If the first or last month of the Term is not a full
calendar month, then any calculation of Base Salary for such period shall be
prorated for the number of days employed in such month.
4.2 Incentive Compensation.
(a) Employee shall receive a certain percentage of CCL's
earnings before interest, taxes, depreciation and amortization and certain
incentive stock options as provided for in that certain Incentive Compensation
Agreement, a copy of which is attached hereto.
(b) During the Term, Employee shall be entitled to
participate in all equity related incentive programs that CCL makes generally
available to officers and employees of CCL, subject to the terms and conditions
of such programs.
(c) Employee hereby acknowledges that, notwithstanding
anything contained herein to the contrary, IPL shall in no way be obligated to
cause Employee to participate in any stock option or other equity related
incentive programs that IPL makes
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generally available to officers and employees of IPL and its other subsidiaries,
affiliates or divisions.
4.3 Withholding. CCL shall withhold from any payments due to
Employee under this Agreement all Federal, state and local taxes, FICA and other
amounts required to be withheld pursuant to any applicable law.
5. Employee Benefits.
5.1 Benefit Programs. During the Term, Employee shall be entitled
to participate in such group life, health, accident, disability and
hospitalization insurance plans, pension plans and retirement plans that IPL
makes generally available to officers and employees of IPL and its subsidiaries.
5.2 Vacation. During each twelve month period of the Term,
Employee shall be entitled to four (4) weeks of vacation to be taken at times
determined by Employee which do not unreasonably interfere with the performance
of his duties hereunder; provided, however, that, other than up to one (1) week
of vacation not taken during a year which may be taken during the first quarter
of the following year, any such vacation time not taken during any year shall be
forfeited. Employee shall also be entitled to all paid holidays given by IPL to
its officers and employees.
5.3 Automobile. During the Term, CCL shall lease and provide the
Employee with an appropriate automobile, as determined by the CCL Board, and
shall pay all expenses relating to the insurance, maintenance and operation
thereof.
5.4 Insurance. Employee agrees that CCL may request Employee to
apply for and take out term life, health, accident, and/or other insurance
covering Employee, either independently or together with others, in an aggregate
amount determined by the CCL Board. CCL shall pay all premiums for such
insurance and shall determine the beneficiary of, and own all rights in, any
such insurance policies and proceeds thereof, and Employee shall not have any
right, title or interest therein or any obligation to pay any of the premiums
therefor. If requested, Employee shall submit to medical examinations and shall
otherwise cooperate in all respects to procure such insurance.
As soon as practical after the date hereof, CCL shall obtain
"directors and officers liability insurance" on behalf and for the benefit of
the Employee on substantially the same terms and subject to substantially the
same conditions as provided to directors and officers of other subsidiaries of
IPL.
5.5 Expenses. During the Term, Employee is authorized to incur
reasonable expenses in the performance of his duties hereunder, and, upon
presentation of a
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detailed itemization account thereof, CCL shall pay or reimburse Employee for
such reasonable expenses so incurred by Employee.
6. Termination of Employment.
6.1 Death; Disability. Employee's employment hereunder shall
terminate upon his death, or, at the election of CCL by written notice to
Employee, if, as a result of the occurrence of mental or physical disability
during the Term, Employee has been unable to perform his duties hereunder for a
period of three (3) consecutive months or ninety (90) days in any consecutive
three hundred sixty-five (365) day period, as determined in good faith by the
CCL Board. In the event of a termination of Employee's employment for death or
disability, CCL shall pay Employee (or his legal representatives, as the case
may be): (i) his unpaid Base Salary through the date of termination, (ii) the
value of his accrued and unpaid vacation days as of the date of termination
(calculated based on Employee's Base Salary computed on a 365-day year), and
(iii) all amounts due under Section 5.5 hereof. In addition, Employee shall be
entitled to any amounts due under the programs referred to in Section 5.1
hereof, as and to the extent set forth in such programs.
6.2 Termination for Cause.
(a) In addition to any other remedies available to it at law
or in equity, CCL shall have the right, upon written notice to Employee, to
terminate Employee's employment under this Agreement if Employee: (i) breaches
in any material respect any provision of this Agreement and such breach is not
remedied within thirty (30) days after written notice thereof from the CCL Board
setting forth in reasonable detail the matters constituting such breach; (ii)
fails or refuses to perform in any material respect such duties as may be
assigned to him from time to time by the IPL Officer or the CCL Board; (iii) has
been convicted of a felony; or (iv) has committed any act of fraud,
misappropriation of funds or embezzlement in connection with his employment
hereunder or has willfully disclosed any Confidential Information (as defined
below) (termination pursuant to the provisions of any of clauses (i) through
(iv) above is referred to herein as termination for "Cause").
(b) In the event Employee is terminated for Cause, CCL shall
pay Employee (i) his unpaid Base Salary through the date of termination, (ii)
the value of his accrued and unpaid vacation days as of the date of termination
(calculated based on Employee's Base Salary computed on a 365-day year), and
(iii) all amounts due under Section 5.5 hereof. In addition, Employee shall be
entitled to any amounts due under the programs referred to in Section 5.1
hereof, as and to the extent set forth in such programs.
(c) In the event Employee is terminated for Cause other than
pursuant to clause (ii) of subparagraph (a) above, Employee hereby agrees to
resign as a manager of CCL, effective as of the date of such termination, and
from any other positions he holds with CCL.
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6.3 Termination Other than for Cause, Death or Disability.
Notwithstanding any provision to the contrary herein, CCL may at any time upon
written notice to Employee, in its sole and absolute discretion and for any or
no reason, terminate the employment of Employee hereunder without Cause. If this
Agreement is terminated (i) by CCL, other than as a result of the death or
disability of Employee or for Cause, or (ii) as a result of a Constructive
Termination (as defined below), CCL shall pay Employee (A) his unpaid Base
Salary through the end of the Term (payable as provided in Section 4.1 hereof),
(B) the value of his accrued and unpaid vacation days as of the date of
termination (calculated based on Employee's Base Salary computed on a 365-day
year), and (C) all amounts due under Section 5.5 hereof. In addition, Employee
shall be entitled to any amounts due under the programs referred to in Section
5.1 hereof, as and to the extent set forth in such programs. For purposes of
this Agreement, "Constructive Termination" shall be deemed to have occurred upon
any material breach by CCL of the provisions of this Agreement which breach
shall continue for at least thirty (30) days after written notice is provided by
Employee to CCL setting forth in reasonable detail the matters constituting such
breach.
7. Inventions; Confidential Information; Non-Competition.
7.1 Inventions. All processes, technologies, improvements,
discoveries, trademarks, trade names, and inventions (collectively,
"Inventions") conceived, developed, invented, made or found by Employee, alone
or with others, during his employment with CCL or within six (6) months after
the termination of his employment, whether or not conceived, developed,
invented, made or found during Employee's employment with CCL or with the use of
the facilities or materials of CCL and which relate to the consulting business
in the area of communications and content strategy for, or research relating to
the implementation of, or the design and production of, intranets, extranets or
internets or any other business conducted by CCL or any of its subsidiaries or
divisions (the "CCL Companies"), whether or not patentable, shall be the
property of CCL and shall be promptly and fully disclosed by Employee to CCL.
Employee shall perform all necessary acts (including, without limitation,
executing and delivering any assignments, documents or instruments requested by
CCL) to vest title to any such Inventions in CCL and to entitle CCL, at its
expense, to secure and maintain domestic and/or foreign patents or any other
rights for such Inventions.
7.2 Confidential Information.
(a) Employee shall not, at any time during the Term and
thereafter, directly or indirectly, disclose or furnish to any other person,
firm, partnership, corporation or any other entity, except in the course of the
proper performance of his duties hereunder (including, without limitation,
during marketing and new business presentations, seminars and workshops
authorized by CCL), any Confidential Information (as defined below) pertaining
to the business of the CCL Companies, unless required to do so by a court of
competent jurisdiction, by any governmental agency having supervisory authority
over the business of the CCL Companies, or by any administrative body or
legislative body (including a
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committee thereof) with jurisdiction to order Employee to divulge, disclose or
make accessible such information; provided, however, that Employee shall provide
CCL with notice of the requirement of such disclosure promptly after Employee is
notified thereof and prior to his disclosure thereof so as to enable CCL to
challenge the order compelling such disclosure. In the event that Employee's
employment is terminated hereunder for any reason, Employee shall promptly
return to CCL all Confidential Information and all other documents, drawings,
work papers, lists, memoranda, notes, records and other data (including copies
thereof) constituting or pertaining to any of the Confidential Information.
(b) For purposes of this Agreement, "Confidential
Information" shall mean non-public information concerning any financial data,
statistical data, strategic business plans, product development (or other
proprietary product data), customer and supplier lists, customer and supplier
information, information relating to practices, processes, techniques,
procedures, methods, trade secrets, marketing plans and other non-public,
proprietary and confidential information of any of the CCL Companies, that, in
any case, (i) is not otherwise generally available to the public, (ii) is not
generally known in any industry in which any of the CCL Companies is or was
involved, and (iii) has not been disclosed by the CCL Companies to others not
subject to confidentiality agreements.
7.3 Non-Competition. Subject to the provisions of Section 3.2,
Employee agrees that during the Non-Competition Period (as hereinafter defined),
he will not in any manner, directly or indirectly, except as specifically
contemplated by the terms of his employment or expressly set forth in this
Agreement, (i) be employed by, engaged in or participate in the ownership,
management, operation or control of, or act in any advisory or other capacity
for, any entity which now or at any time during the Non-Competition Period
engages in any business activity competitive, directly or indirectly, with the
business of CCL or any of its subsidiaries or divisions within any greater
metropolitan area in which CCL or any of its subsidiaries or divisions are
currently engaged in business or, at the termination of Employee's employment,
within which there was a bona fide intention on the part of CCL or any of its
subsidiaries or divisions to engage in business in the future, except that
Employee may be retained in an "in-house" or similar position relating to the
area of communications and content strategy for, or research relating to the
implementation of, or the design and production of, intranets, extranets or
internets by an entity which is not engaged in the business of providing
services in such area to other unaffiliated entities, (ii) solicit or divert
from CCL or any of its subsidiaries or divisions any business or any customer,
or divert from CCL or any of its subsidiaries or divisions any supplier thereto,
in each case which customer or supplier was a customer or supplier of CCL or any
of its subsidiaries or divisions during the eighteen (18) months immediately
preceding such date of solicitation or diversion, or assist any person, firm or
corporation in doing so or attempting to do so, or (iii) on his own behalf or on
behalf of any person or entity, directly or indirectly, hire or solicit the
employment or other retention of any employee or consultant who was employed or
retained by CCL or any of its subsidiaries or divisions at any time during the
twelve (12) months immediately preceding such date of hiring or solicitation;
provided, however, that, notwithstanding the foregoing, nothing herein shall
preclude Employee from making solely
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passive investments in any class or series of equity securities of any entity
which is publicly traded so long as Employee shall not own or control, directly
or indirectly, either as principal, manager, partner, investor, lender or in any
other capacity, equity securities which constitute five percent (5%) or more of
the voting rights or equity ownership of such entity. For purposes of this
Section 7.3, a "bona fide intention" to engage in business in a certain
geographical area shall be deemed not to have existed at the time of termination
of Employee's employment if (i) within three (3) months after the termination of
Employee's employment, CCL or any of its subsidiaries or divisions shall not
have entered into a letter of intent or made a public announcement of intention
to engage in business in such geographical area or (ii) within one (1) year
after the termination of Employee's employment, CCL or any of its subsidiaries
or divisions shall not have consummated an agreement to engage, or otherwise
actually engaged, in business in such geographical area. The provisions of this
Section 7.3 shall extend for the Term and survive the Term for eighteen (18)
months after the end of the Term; provided, however, that in the case of a
termination of employment pursuant to the provisions of Section 6.1, the
provisions of this Section 7.3 shall extend until eighteen (18) months after the
last payment of Base Salary is made pursuant to Section 6.1(i); provided
further, however, that in the case of a termination of employment pursuant to
the provisions of Sections 6.3, the provisions of this Section 7.3 shall extend
until the last payment of Base Salary is made pursuant to Section 6.3(A) (the
period described in this sentence is referred to herein as the "Non-Competition
Period").
7.4 Breach of Provisions. Employee and CCL hereby agree that the
covenants contained in this Section 7 are reasonable and necessary covenants for
the protection of CCL and its business under the circumstances, and further
agree that if, in the opinion of any court of competent jurisdiction such
covenants are not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of these
covenants that such court deems unreasonable and to enforce the remainder of
these covenants as so amended. Employee agrees that any breach or threatened
breach of the covenants contained in this Section 7 would irreparably injure CCL
and that there is no adequate remedy at law for any such breach or threatened
breach. Accordingly, Employee agrees that CCL, in addition to pursuing any other
remedies it may have in law or in equity, may obtain injunctive relief in any
court, foreign or domestic, having the capacity to grant such relief, to
restrain any such breach or threatened breach by Employee and to enforce the
provisions of this Section 7.
8. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served, (ii) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid, or (iii) on the date sent if sent by
facsimile, to the parties at the following addresses or facsimile numbers (or at
such other address or facsimile number for a party as shall be specified by like
notice):
If to CCL, to: International Post Limited
545 Fifth Avenue
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New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to: Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 980-4665
If to Employee, to the address set forth beside his signature on the signature
page to this Agreement.
9. Entire Agreement. This Agreement and the agreements referenced
herein set forth the entire understanding and agreement of the parties with
respect to their subject matter and supersede any and all prior understandings,
negotiations or agreements among the parties hereto, both written and oral, with
respect to such subject matter.
10. Authority. The parties each represent and warrant that such party
has the power, authority and right to enter into this Agreement and to carry out
and perform the terms, covenants and conditions hereof.
11. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of CCL and its successors and assigns (including
purchasers of substantially all of CCL's assets) and Employee. Except as
otherwise expressly set forth in this Agreement, the rights and obligations of
Employee under this Agreement shall not be assignable or otherwise transferable.
12. Amendment or Modification; Waiver. This Agreement may be amended
or modified only by written agreement executed by all parties hereto. Any of the
parties hereto may extend the time for the performance of any of the obligations
or other acts of any other party hereto, waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or waive compliance with any of the covenants, agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed by the party granting such waiver. Such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or future failure.
13. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
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14. Governing Law; Consent to Jurisdiction. This Agreement shall be
construed in accordance with, and governed by, the internal laws of the State of
New York as applied to contracts made and to be performed entirely within the
State of New York. Any legal action, suit or proceeding arising out of or
relating to this Agreement may be instituted in any state or federal court
located within the County of New York, State of New York, and each party hereto
agrees not to assert, by way of motion, as a defense, or otherwise, in any such
action, suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such court in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. Each party hereto further
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding.
15. Headings. Section headings contained in this Agreement are
included for convenience only and shall not affect the interpretation of any
provisions of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
counter parts, each of which shall be deemed to be an original, but all of
which, when taken together, shall constitute one and the same agreement.
17. Severability. Subject to Section 7.4 hereof, in the event that any
one or more of the provisions contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, in whole or in
part, the validity of the remaining provisions shall not be affected and the
remaining portion of any provision held to be invalid, illegal or unenforceable
shall in no way be affected, prejudiced or disturbed thereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
--------------------------------------
Jeffrey J. Kaplan
Vice President and Chief Financial Officer
------------------------------------
David Leveen
Address: 1370 Baptist Church Road
Yorktown Heights, NY 10598
Phone No.: (914) 245-3226
Fax No.: (914) 245-9247
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PUT AGREEMENT
THIS PUT AGREEMENT (this "Agreement") is made and entered into as of
January 22, 1997, by and among Cognitive Communications, LLC, a Delaware limited
liability company ("CCL"), International Post Limited, a Delaware corporation
and the indirect parent of CCL ("IPL"), Susan Wiener ("SW"), Michael Rudnick
("MR") and David Leveen ("DL" and together with SW and MR, the "Optionholders").
W I T N E S S E T H :
WHEREAS, as of the date hereof, CCL is purchasing the operating assets
of Cognitive Communications, Inc., a Connecticut corporation (the "Company"),
pursuant to an Asset Purchase Agreement among CCL, the Company, SW and MR (the
"Purchase Agreement");
WHEREAS, pursuant to the Purchase Agreement, CCL is issuing and selling
to SW and MR a 2% ownership interest in CCL (the "CCL-DL Interests");
WHEREAS, as of the date hereof, CCL also is issuing to the
Optionholders certain options to purchase ownership interests in CCL (the "Sale
Options") upon the disposition by Manhattan Transfer/Edit, Inc. ("MTE") of its
ownership interests in CCL, as more fully set forth therein;
WHEREAS, as of the date hereof, in connection with CCL's employment of
the Optionholders CCL is entering into an Incentive Compensation Agreement with
the Optionholders relating to, among other things, CCL's grant to the
Optionholders of certain options to purchase ownership interests in CCL (the
"Incentive Options") upon the attainment of certain EBITDA targets, as more
fully set forth therein; and
WHEREAS, CCL and IPL desires to grant the Optionholders certain put
rights with respect to the CCL-DL Interests, the Sale Options and the Incentive
Options, as more fully set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
1. Grant of Put.
Each Optionholder shall have the right (the "Put") to sell, in
whole but not in part, to CCL or IPL such Optionholder's CCL-DL Interests, Sale
Options and Incentive Options, including any ownership interests in CCL issued
upon exercise of the Sale Options or Incentive Options (and any equity
securities of CCL issued as (or issuable upon the conversion or exercise of any
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities) (collectively, the "Put Securities"), in accordance with the
provisions set forth in this Agreement.
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2. Purchase Price.
The purchase price (the "Purchase Price") for the Put
Securities shall be their Fair Market Value (as hereinafter defined) as
determined by a firm of independent public accountants or an independent
investment bank mutually acceptable to CCL or IPL, as the case may be, and the
selling Optionholder; provided, however, that a "Big 6" accounting firm, other
than the accounting firms then used by CCL, IPL or any of the Optionholders,
shall be deemed to be mutually acceptable for these purposes. The Fair Market
Value of the Put Securities shall be based upon the average of a (i) comparable
company valuation of CCL and (ii) discounted cash flow valuation of CCL. The
parties shall be deemed to have accepted such valuation as final and binding
(the "First Valuation"), unless notice is given to the other party of a dispute
within thirty (30) days after receipt of such valuation. Such dispute shall be
referred to another firm of independent public accountants or an independent
investment bank mutually acceptable to CCL or IPL, as the case may be, and the
selling Optionholder (the "Second Valuation") (provided, however, that a "Big 6"
accounting firm, other than the accounting firms then used by CCL, IPL or any of
the Optionholders, shall be deemed to be mutually acceptable for these
purposes), which accountants or investment bank shall also determine the Fair
Market Value of the Put Securities based upon the average of a (i) comparable
company valuation of CCL and (ii) discounted cash flow valuation of CCL. The
final and binding Fair Market Value of the Put Securities shall then be the
average of the First Valuation and the Second Valuation. The fees and expenses
of any accountants or bankers retained pursuant to the provisions of this
Section 2 shall be borne equally by CCL or IPL, as the case may be, and the
selling Optionholder.
3. Exercise of Put.
(a) The Put may be exercised by any Optionholder at any time
on one (1) occasion upon written notice to CCL or IPL as follows:
(i) In the event an Optionholder's employment by CCL
is terminated (x) by CCL with or without cause or
(y) by CCL as a result of the Optionholder's death
or disability or (z) by the Optionholder as a
result of Constructive Termination, as defined in
the Optionholders' Employment Agreements with CCL
dated as of the date hereof, then the Put may be
exercised by such Optionholder after such
termination upon written notice to CCL or IPL. The
Put Securities so desired to be sold shall be
valued as of the ninetieth (90th) day after such
notice of exercise is received by CCL or IPL. As
promptly as practicable after the Purchase Price
is calculated pursuant to Section 2, but in any
event within fifteen (15) days thereafter, CCL or
IPL, as the case may be, shall notify the selling
Optionholder of the place, time and date for the
closing of the purchase and sale of the Put
Securities, which closing
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shall be as promptly as practicable
after such notice, but in any event
within five (5) days thereafter.
(ii) In the event that an Optionholder's employment
with CCL is terminated by the Optionholder other
than as a result of Constructive Termination, then
the Put may be exercised by such Optionholder
after such termination upon three hundred and
sixty (360) days prior written notice to CCL or
IPL. The Put Securities so desired to be sold
shall be valued as of the three hundred and
sixtieth (360th) day after such notice of exercise
is received by CCL or IPL. As promptly as
practicable after the Purchase Price is calculated
pursuant to Section 2, but in any event within
fifteen (15) days thereafter, CCL or IPL, as the
case may be, shall notify the selling Optionholder
of the place, time and date for the closing of the
purchase and sale of the Put Securities, which
closing shall be as promptly as practicable after
such notice, but in any event within five (5) days
thereafter. Notwithstanding the foregoing, in no
event shall the closing occur prior to July 31,
2001.
(iii)The Put may also be exercised by an Optionholder
after July 31, 2000 upon sixty (60) days prior
written notice to CCL or IPL and the Put
Securities so desired to be sold shall be valued
as of the sixtieth (60th) day after such notice of
exercise is received by CCL or IPL; provided that
in such event the Optionholder is then an employee
of CCL and agrees to continue to remain a
full-time employee of CCL for a one (1) year
period following the notice of exercise upon the
same terms and conditions as contained in such
Optionholder's most recent employment agreement
with CCL. The closing of the purchase and sale of
the Put Securities shall take place as promptly as
practicable after the expiration of such one (1)
year employment period (but in any event within
five (5) days thereafter) at such place, time and
date as CCL or IPL, as the case may be, shall
notify the selling Optionholder in writing.
CCL agrees that during the period commencing upon its receipt of
a notice of exercise of the Put from an Optionholder until the valuation of the
Put Securities so desired to be sold, it shall continue to operate its business
in the ordinary course, except as otherwise reasonably required.
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(b) Notwithstanding the foregoing, the Put shall become
immediately exercisable upon ten (10) days written notice to CCL or IPL upon a
Change in Control (as hereinafter defined) of CCL. The Put Securities so desired
to be sold shall be valued as of the tenth (10th) day after such notice of
exercise is received by CCL or IPL, as the case may be. A Change in Control
shall be deemed to occur upon any of the following (provided, however, that the
provisions of clause (iii) below shall no longer apply and be deemed a Change in
Control upon consummation of a public offering of securities of CCL):
(i) any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, (the "Exchange Act"), other than
International Post Limited ("IPL") or any of its
affiliates or subsidiaries, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of
securities of CCL representing fifty percent (50%)
or more of the combined voting power of CCL's then
outstanding securities;
(ii) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act, other than
IPL or any of its affiliates or subsidiaries,
acquires, directly or indirectly, substantially
all of the assets of CCL;
(iii)SW and MR (or their designees) cease to
constitute 40% of the Managers of CCL or designees
of IPL or any of its affiliates or subsidiaries
cease to constitute 60% of the current Managers of
CCL, in each case other than as specifically
provided in the Operating Agreement of CCL; or
(iv) the members of CCL or the shareholders of MTE
approve a merger or consolidation of CCL with any
other entity, other than a merger or consolidation
which would result in the voting securities of CCL
outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or
by being converted into voting securities of the
surviving entity) more than eighty percent (80%)
of the combined voting power of the voting
securities of CCL or such surviving entity
outstanding immediately after such merger or
consolidation.
(c) Notwithstanding anything contained herein to the contrary,
CCL shall have the right to restrict the Optionholders' exercise of the Put for
a one hundred and twenty (120) day period (the "Restricted Period") in any
consecutive three hundred and sixty five (365) day period upon prior written
notice by CCL for any reason. In the event that an Optionholder exercises the
Put
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within ten (10) days after the expiration of the Restricted Period, the date the
Optionholder specifies in such notice as the date during the Restricted Period
that CCL or IPL would have otherwise received a notice of exercise if not for
such exercise restriction will be deemed such date of receipt for valuation and
closing purposes in accordance with Sections 3(a) and (b).
4. Closing.
At the closing, (a) CCL or IPL, as the case may be, shall pay to
the selling Optionholder the Purchase Price by wire transfer of immediately
available funds to an account designated by the selling Optionholder or by check
payable to the selling Optionholder, and (b) the selling Optionholder shall
deliver to CCL or IPL, as the case may be, any certificates representing the Put
Securities so purchased and sold, duly endorsed or accompanied by applicable
instruments of transfer, free and clear of any liens, charges, pledges, security
interests, voting or stockholders agreements or encumbrances. In the event that
the Purchase Price to be paid to the selling Optionholder is equal to $1 million
or more, the Purchase Price shall be payable over five (5) years in five (5)
equal installments payable on the anniversary date of the closing, together with
interest thereon at the rate of 8% per annum (calculated on the basis of a
360-day year consisting of twelve 30-day months); provided, however, that each
minimum installment payment shall be equal to the lesser of $1 million or the
remaining unpaid purchase price, plus applicable interest.
5. Miscellaneous.
(a) Section headings contained in this Agreement are included for
convenience only and shall not affect the interpretation of any provisions of
this Agreement.
(b) Any notice, demand, request, waiver, or other communication
under this Agreement shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given (i) on the date of service
if personally served, (ii) on the third day after mailing if mailed to the party
to whom notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid or (iii) on the date sent if sent by facsimile, to
the parties at the following addresses or facsimile numbers (or at such other
address or facsimile number for a party as shall be specified by like notice):
If to the Optionholders, to:
Cognitive Communications, Inc.
2 Gannett Drive
Suite 200
White Plains, New York 10604
Fax No.:
with a copy to:
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Roberts, Sheridan & Kotel
12 East 49th Street
New York, New York 10017
Attention: David H. Wollmuth, Esq.
Fax No.: (212) 299-8686
If to CCL or IPL, to:
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 758-9526
(c) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. Except as
otherwise expressly set forth in this Agreement, the rights of the Optionholders
shall not be assignable or transferable.
(d) This Agreement shall be construed in accordance with, and
governed by, the internal laws of the State of New York as applied to contracts
made and to be performed entirely within the State of New York. Any legal
action, suit or proceeding arising out of or relating to this Agreement may be
instituted in any state or federal court located within the County of New York,
State of New York, and each party hereto agrees not to assert, by way of motion,
as a defense, or otherwise, in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of such court, that the
action, suit or proceeding is brought in an inconvenient forum, that the venue
of the action, suit or proceeding is improper or that this Agreement or the
subject matter hereof may not be enforced in or by such court. Each party hereto
further irrevocably submits to the jurisdiction of any such court in any such
action, suit or proceeding.
(e) This Agreement, including the Exhibits and Schedules hereto,
sets forth the entire understanding and agreement of the parties with respect to
their subject matter and supersede any and all prior understandings,
negotiations or agreements among the parties hereto, both written and oral, with
respect to such subject matter.
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(f) This Agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which together shall constitute a single
agreement.
(g) In the event that any one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, in whole or in part, the validity of the remaining
provisions shall not be affected and the remaining portion of any provision held
to be invalid, illegal or unenforceable shall in no way be affected, prejudiced
or disturbed thereby.
(h) This Agreement may be amended or modified only by written
agreement executed by all parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
-----------------------------
Jeffrey J. Kaplan
Vice President and Chief Financial Officer
INTERNATIONAL POST LIMITED
By:
-----------------------------
Jeffrey J. Kaplan
Executive Vice President
and Chief Financial Officer
-----------------------------
Susan Wiener
-----------------------------
Michael Rudnick
-----------------------------
David Leveen
8
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SALE OPTION AGREEMENT
SALE OPTION AGREEMENT, dated as of January 22, 1997 (this
"Agreement"), by and between COGNITIVE COMMUNICATIONS, LLC, a Delaware limited
liability company (the "Company"), and SUSAN WIENER (the "Optionee").
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Limited Liability Company Operating Agreement of the Company
dated as of January 22, 1997, as the same may be amended from time to time (the
"Operating Agreement").
R E C I T A L S:
WHEREAS, the Company desires to grant to the Optionee an
option (the "Option") on the terms and conditions set forth herein and Optionee
desires to accept such Option.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Company and the
Optionee hereby agree as follows:
Section 1. Grant of Option; Reservation of Shares.
(a) The Company hereby grants to the Optionee an Option
exercisable for the period and upon the terms hereinafter set forth, to purchase
an aggregate of 450,000 Shares and a Capital Account which represents a portion
of the Capital Accounts of all of the Shares outstanding immediately following
such exercise which is proportionate to the number of Shares being purchased by
the Optionee as of such date, at an aggregate exercise price of $1.00 for all
Shares purchasable hereunder (the "Exercise Price").
(b) The Company represents and agrees that all Shares which
may be issued upon the exercise of the Option, upon issuance and payment of the
Exercise Price in accordance with the terms hereof, will be fully paid and
nonassessable, and free of all taxes, liens and charges with respect
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<PAGE>
to the issuance thereof. The Company agrees that, at all times during the Term
(as hereinafter defined), it shall reserve and keep available, out of its
aggregate authorized but unissued Shares, the number of Shares deliverable upon
the exercise of this Option.
Section 2. Vesting.
(a) Subject to the provisions of Section 3, the Option shall
be exercisable during the Term (as hereinafter defined) in the event of a
transfer or other disposition (a "Transfer") by Manhattan Transfer/Edit, Inc., a
Delaware corporation ("MTE"), of all or a portion of its Shares; provided,
however, that in the event of a Transfer by MTE of only a portion of its Shares,
the number of Shares purchasable hereunder shall be pro rated so that for every
three (3) Shares Transferred by MTE, the Option shall be exercisable with
respect to one (1) Share. The Company shall give the Optionee prior written
notice of a Transfer. Any pledge by MTE of any of its Shares shall not be deemed
a "Transfer", and any transfer by MTE of any of its Shares to any of its
subsidiaries or affiliates also shall not be deemed a "Transfer"; provided,
however, that any subsequent Transfer by such subsidiary or affiliate of any
Share (other than to any subsidiary or affiliate of such subsidiary or
affiliate) shall be deemed a Transfer by MTE for the purposes hereof.
(b) Notwithstanding the foregoing, the Option shall be deemed
exercised by the Optionee upon the exercise by the Optionee of the put right
granted to the Optionee pursuant to the Put Agreement with the Company dated as
of the date hereof (the "Put Agreement") solely for valuation purposes
thereunder.
(c) The Company further agrees to furnish prompt written
notice to the Optionee of any event outlined in Section 8 hereof.
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<PAGE>
Section 3. Term of the Option.
The term (the "Term") of the Option(s) granted hereunder shall
commence upon the date hereof.
Section 4. Non-Transferability.
The Optionee may not transfer the Option except by will or the
laws of descent and distribution. Subject to the terms of this Agreement, the
Option may not be otherwise transferred, assigned, pledged, hypothecated or
disposed of in any way, whether by operation of law or otherwise, and may be
exercised during the Optionee's lifetime only by the Optionee; provided, that
upon the Optionee's death or Disability prior to the termination of the Option,
such Option may be exercised by the Optionee's legal guardian or other
representatives in accordance with the terms of this Agreement.
Section 5. Manner of Exercise.
The Option may be exercised in whole or in part. The Optionee
shall purchase Shares upon exercise of the Option by making a cash payment to
the Company, equal to the product of (a) the Exercise Price therefor and (b) the
number of Shares to be purchased at that time. At any time during which the
Shares or any securities for which the Shares have been exchanged (collectively,
the "Registrable Securities") are registered under the Securities Exchange Act
of 1934, as amended, the Optionee may exercise her/his right to purchase some or
all of the Registrable Securities subject to such Option, on a net basis, such
that, without the exchange of any funds, the Optionee receives that number of
Registrable Securities subscribed to pursuant to such Option less that number of
shares of Registrable Securities having an aggregate Fair Market Value (as
hereinafter defined) at the time
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<PAGE>
of exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the Optionee for the number of Registrable Securities subscribed to
pursuant to such Option.
As used herein, the term "Fair Market Value", for any given
day, means (i) the last sale price reported in the Wall Street Journal or other
trade publication regular way or, in case no such reported sale takes place on
such date, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the
Registrable Securities are admitted to trading or listed if that is the
principal market for the Registrable Securities, or (iii) if not listed or
admitted to trading on any national securities exchanges or if such national
securities exchange is not the principal market for the Registrable Securities,
the last sale price as reported by the National Association of Securities
Dealers, Inc. Automated Quotation National Market System ("NASDAQ") or its
successor, if any, or (iii) if the Registrable Securities are not so reported,
the average of the reported bid and asked prices in the over-the counter market,
as furnished by the National Quotation Bureau, Inc., or if such firm is not then
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business and selected by the Managers of the Company
or, if there is no such firm, as furnished by any NASD member selected by the
Managers of the Company. The Option may be exercised by written notice to the
Company, substantially in the form annexed hereto as Exhibit A, stating that the
representations and warranties contained in Section 7 hereof are true and
correct at the time of the exercise and setting forth the number of Shares to be
purchased and the date on which that purchase shall occur, which date shall be
at least five (5) days after the giving of the aforementioned written notice,
unless an earlier date shall have been agreed upon between the Optionee and the
Company. On the date scheduled for the closing of a purchase, the Optionee shall
deliver to the Company (A) an executed
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<PAGE>
counterpart signature page to the Operating Agreement, if not previously
executed, pursuant to which the Optionee shall be bound by all provisions of the
Operating Agreement and (B) full payment for the Shares to be purchased at that
time, together with all amounts which, under federal, state or local law, the
Company is required to withhold upon exercise of the Option, in cash or by check
payable to the Company, and the Company shall (x) duly record on its books the
issuance of the Shares to Optionee and (y) establish the Optionee's Capital
Account in accordance herewith. Without limiting the generality of the
foregoing, the Company may require an opinion of counsel acceptable to it to the
effect that any subsequent transfer of Shares acquired on an Option exercise
does not violate the Securities Act of 1933, as amended (the "Act"), and may
issue stop-transfer orders covering such Shares. In the event the Option shall
be exercised by any person or persons other than the Optionee, the Company may
require appropriate proof of the right of such person or persons to exercise the
Option.
Section 6. Legend.
Certificates (if any certificates are to be issued which
determination shall be in the discretion of the Company) representing any Shares
shall have endorsed thereon the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES ACTS OF ANY STATE. SUCH SHARES
HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR HER/HIS
OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING
SHARES UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES
LAWS OR THE RECEIPT BY THE COMPANY OF AN OPINION OF THE
REGISTERED HOLDER'S COUNSEL (REASONABLY SATISFACTORY TO
5
<PAGE>
THE COMPANY AND ITS COUNSEL), OR AN OPINION OF THE COMPANY'S
COUNSEL, THAT SUCH SALE, OFFER, TRANSFER OR DISPOSITION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT, AND APPLICABLE STATE SECURITIES
LAWS."
Section 7. Representations and Warranties.
(a) In connection with the granting of the Option and upon
each exercise of the Option, the Optionee agrees, represents and warrants for
himself and for all other persons that may be permitted to exercise the Option
hereunder as follows (subject to the provisions of the Put Agreement and the
tag-along rights granted in the Operating Agreement):
(i) The Optionee is acquiring the Option and, upon
exercise of the Option, the Shares, (the Option and the Shares
being referred to herein collectively as the "Securities"),
solely for her/his own account for investment without a view
to, or for resale in connection with, any distribution thereof
within the meaning of the Act. The Optionee further represents
that she/he does not have any present intention of selling,
offering to sell or otherwise disposing of or distributing the
Securities or any portion thereof; and that she/he is
purchasing the entire legal and beneficial interest in the
Securities for her/his own account and neither in whole nor in
part for the account of any other person.
(ii) The Company has disclosed to the Optionee that,
except as otherwise agreed between the Company and the
Optionee, the Shares, when issued, will not be registered
under the Act and must be held indefinitely unless the Shares
are subsequently registered under the Act or an exemption from
the registration
6
<PAGE>
requirements is available, and that, except as otherwise
agreed between the Company and the Optionee, the Company is
under no obligation to register the Shares when issued.
(iii) The Optionee understands that the rights,
preferences and powers of the Shares are set forth in the
Operating Agreement, and the Optionee acknowledges receipt of
a copy of the Operating Agreement from the Company.
(b) The Company represents and warrants that this Agreement has
been duly authorized, executed and delivered on behalf of the Company, that all
action required in connection with such authorization, execution and delivery
has been duly taken, that no consent of any third party is required in
connection with the authorization, execution and delivery of this Agreement and
that this Agreement, when executed, will be a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms. The Company
has delivered to the Optionee a true, correct and complete copy of the Operating
Agreement and hereby agrees to deliver to the Optionee copies of each amendment
or supplement thereto promptly upon the execution and delivery thereof.
Section 8. Adjustments.
In the event that the outstanding Shares are changed into or
exchanged for a different number or kind of equity or other securities of the
Company, or of another entity, by reason of reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
issuance of equity or stock dividend or combination of equity units or shares or
similar event, the Company shall make an appropriate and equitable adjustment in
the Option. Nothing in this Section 8 shall prohibit the Company from issuing
additional Shares or options or warrants
7
<PAGE>
convertible into additional Shares after the date hereof without any adjustment
pursuant to this Section 8.
Section 9. Transfers in Violation of Agreement.
The Company shall not be required to transfer on its books any
Shares which have been sold or transferred in violation of any of the provisions
set forth in this Agreement or the Operating Agreement nor shall the Company be
required (a) to treat as the owner of any Shares, (b) to accord the right to
vote any Shares as the owner thereof to or (c) to pay distributions to, any
transferee to whom any Shares shall have been so transferred.
Section 10. Rights in Shares Before Issuance and Delivery.
No person shall be entitled to the privileges of ownership in
respect of any Shares issuable upon exercise of this Option, unless and until
such Shares have been issued to such person as fully-paid Shares in accordance
with the terms hereof; provided, however, that the Optionee shall be entitled to
all the rights of a member of the Company or of a minority stockholder, at law
and in equity (including the rights, if any, provided to limited liability
company members or minority stockholders under Delaware law or under the
Operating Agreement), other than the right to vote as a Member and the right to
receive distributions. Except as expressly provided in the Operating Agreement,
the Optionee shall only have such voting and distribution rights to the extent
she/he exercises the Option and owns Shares upon exercise thereof.
Section 11. Further Instruments.
The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
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<PAGE>
Section 12. Notice.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one (1) day after deposit with
an overnight courier, or if mailed, five (5) days after the date of deposit in
the United States mails, as follows:
If to the Company, to:
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 758-9526
If to the Optionee, to:
Susan Wiener
1370 Baptist Church Road
Yorktown Heights,NY 10598
Telephone No.: (914) 245-3226
Fax No.: (914) 245-9247
Section 13. Entire Agreement.
This Agreement contains the entire Agreement between the
parties hereto with respect to the matters contemplated herein and supersedes
all prior agreements or understandings among the parties related to such
matters.
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<PAGE>
Section 14. Binding Effect.
Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon and inure to the benefit of the Company and
its successors and assigns and upon the Optionee and her/his assigns, heirs,
executors, administrators and legal representatives. "Successors and assigns"
shall mean, in the case of the Company, any successor pursuant to a merger,
consolidation, or sale, or other transfer of all or substantially all of the
assets of the Company.
Section 15. Amendment or Modification; Waiver.
This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by all of the parties hereto or, in the case of a
waiver, by the party waiving compliance. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
Section 16. Governing Law.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of Delaware, without giving effect to the principles of conflicts of law
thereof.
Section 17. Headings.
Headings to the Sections in this Agreement are intended solely
for convenience and no provision of this Agreement is to be construed by
reference to the heading of any Section.
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Section 18. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Agreement.
Section 19. Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms and provisions of
this Agreement in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
------------------------------
Jeffrey J. Kaplan
Vice President and Chief Financial Officer
OPTIONEE:
------------------------------
Susan Wiener
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EXHIBIT A
NOTICE OF EXERCISE
(To be executed upon exercise of an Option)
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Ladies and Gentlemen:
I, the undersigned holder of an option (the "Option") granted
pursuant to the Option Agreement (the "Option Agreement") to which this Notice
of Exercise is attached, have irrevocably elected to exercise the right thereby
granted to purchase _______ Shares (the "Shares"), and (check one):
|_| have tendered $_______ as payment for such Shares to
the order of Cognitive Communications, LLC (the
"Company") in accordance with the terms of the Option
Agreement.
|_| authorizes the Company to withhold upon exercise of
the Option that number of Registrable Securities (as
defined in the Option Agreement) having a Fair Market
Price (as defined in the Option Agreement) equal to
$_________.
I hereby deliver to the Company an executed counterpart to the
Operating Agreement of the Company and agree to be bound by all provisions
thereof.
I hereby certify to the Company that the representations and
warranties set forth in Section 7 of the Option Agreement are true and correct
on the date hereof and are hereby made again to the Company as if set forth
herein in their entirety. I hereby agree to indemnify the Company against, and
hold it free and harmless from, any loss, damage, expense or liability resulting
to the Company arising out of or based upon the breach or inaccuracy of any such
representation or warranty.
Very truly yours,
Dated: ------------------------
OPTIONEE
Dated: ------------------------
WITNESS
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SALE OPTION AGREEMENT
SALE OPTION AGREEMENT, dated as of January 22, 1997 (this
"Agreement"), by and between COGNITIVE COMMUNICATIONS, LLC, a Delaware limited
liability company (the "Company"), and MICHAEL RUDNICK (the "Optionee").
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Limited Liability Company Operating Agreement of the Company
dated as of January 22, 1997, as the same may be amended from time to time (the
"Operating Agreement").
R E C I T A L S:
WHEREAS, the Company desires to grant to the Optionee an
option (the "Option") on the terms and conditions set forth herein and Optionee
desires to accept such Option.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Company and the
Optionee hereby agree as follows:
Section 1. Grant of Option; Reservation of Shares.
(a) The Company hereby grants to the Optionee an Option
exercisable for the period and upon the terms hereinafter set forth, to purchase
an aggregate of 450,000 Shares and a Capital Account which represents a portion
of the Capital Accounts of all of the Shares outstanding immediately following
such exercise which is proportionate to the number of Shares being purchased by
the Optionee as of such date, at an aggregate exercise price of $1.00 for all
Shares purchasable hereunder (the "Exercise Price").
(b) The Company represents and agrees that all Shares which
may be issued upon the exercise of the Option, upon issuance and payment of the
Exercise Price in accordance with the terms hereof, will be fully paid and
nonassessable, and free of all taxes, liens and charges with respect
1
<PAGE>
to the issuance thereof. The Company agrees that, at all times during the Term
(as hereinafter defined), it shall reserve and keep available, out of its
aggregate authorized but unissued Shares, the number of Shares deliverable upon
the exercise of this Option.
Section 2. Vesting.
(a) Subject to the provisions of Section 3, the Option shall
be exercisable during the Term (as hereinafter defined) in the event of a
transfer or other disposition (a "Transfer") by Manhattan Transfer/Edit, Inc., a
Delaware corporation ("MTE"), of all or a portion of its Shares; provided,
however, that in the event of a Transfer by MTE of only a portion of its Shares,
the number of Shares purchasable hereunder shall be pro rated so that for every
three (3) Shares Transferred by MTE, the Option shall be exercisable with
respect to one (1) Share. The Company shall give the Optionee prior written
notice of a Transfer. Any pledge by MTE of any of its Shares shall not be deemed
a "Transfer", and any transfer by MTE of any of its Shares to any of its
subsidiaries or affiliates also shall not be deemed a "Transfer"; provided,
however, that any subsequent Transfer by such subsidiary or affiliate of any
Share (other than to any subsidiary or affiliate of such subsidiary or
affiliate) shall be deemed a Transfer by MTE for the purposes hereof.
(b) Notwithstanding the foregoing, the Option shall be deemed
exercised by the Optionee upon the exercise by the Optionee of the put right
granted to the Optionee pursuant to the Put Agreement with the Company dated as
of the date hereof (the "Put Agreement") solely for valuation purposes
thereunder.
(c) The Company further agrees to furnish prompt written
notice to the Optionee of any event outlined in Section 8 hereof.
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<PAGE>
Section 3. Term of the Option.
The term (the "Term") of the Option(s) granted hereunder shall
commence upon the date hereof.
Section 4. Non-Transferability.
The Optionee may not transfer the Option except by will or the
laws of descent and distribution. Subject to the terms of this Agreement, the
Option may not be otherwise transferred, assigned, pledged, hypothecated or
disposed of in any way, whether by operation of law or otherwise, and may be
exercised during the Optionee's lifetime only by the Optionee; provided, that
upon the Optionee's death or Disability prior to the termination of the Option,
such Option may be exercised by the Optionee's legal guardian or other
representatives in accordance with the terms of this Agreement.
Section 5. Manner of Exercise.
The Option may be exercised in whole or in part. The Optionee
shall purchase Shares upon exercise of the Option by making a cash payment to
the Company, equal to the product of (a) the Exercise Price therefor and (b) the
number of Shares to be purchased at that time. At any time during which the
Shares or any securities for which the Shares have been exchanged (collectively,
the "Registrable Securities") are registered under the Securities Exchange Act
of 1934, as amended, the Optionee may exercise her/his right to purchase some or
all of the Registrable Securities subject to such Option, on a net basis, such
that, without the exchange of any funds, the Optionee receives that number of
Registrable Securities subscribed to pursuant to such Option less that number of
shares of Registrable Securities having an aggregate Fair Market Value (as
hereinafter defined) at the time
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<PAGE>
of exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the Optionee for the number of Registrable Securities subscribed to
pursuant to such Option.
As used herein, the term "Fair Market Value", for any given
day, means (i) the last sale price reported in the Wall Street Journal or other
trade publication regular way or, in case no such reported sale takes place on
such date, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the
Registrable Securities are admitted to trading or listed if that is the
principal market for the Registrable Securities, or (iii) if not listed or
admitted to trading on any national securities exchanges or if such national
securities exchange is not the principal market for the Registrable Securities,
the last sale price as reported by the National Association of Securities
Dealers, Inc. Automated Quotation National Market System ("NASDAQ") or its
successor, if any, or (iii) if the Registrable Securities are not so reported,
the average of the reported bid and asked prices in the over-the counter market,
as furnished by the National Quotation Bureau, Inc., or if such firm is not then
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business and selected by the Managers of the Company
or, if there is no such firm, as furnished by any NASD member selected by the
Managers of the Company. The Option may be exercised by written notice to the
Company, substantially in the form annexed hereto as Exhibit A, stating that the
representations and warranties contained in Section 7 hereof are true and
correct at the time of the exercise and setting forth the number of Shares to be
purchased and the date on which that purchase shall occur, which date shall be
at least five (5) days after the giving of the aforementioned written notice,
unless an earlier date shall have been agreed upon between the Optionee and the
Company. On the date scheduled for the closing of a purchase, the Optionee shall
deliver to the Company (A) an executed
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<PAGE>
counterpart signature page to the Operating Agreement, if not previously
executed, pursuant to which the Optionee shall be bound by all provisions of the
Operating Agreement and (B) full payment for the Shares to be purchased at that
time, together with all amounts which, under federal, state or local law, the
Company is required to withhold upon exercise of the Option, in cash or by check
payable to the Company, and the Company shall (x) duly record on its books the
issuance of the Shares to Optionee and (y) establish the Optionee's Capital
Account in accordance herewith. Without limiting the generality of the
foregoing, the Company may require an opinion of counsel acceptable to it to the
effect that any subsequent transfer of Shares acquired on an Option exercise
does not violate the Securities Act of 1933, as amended (the "Act"), and may
issue stop-transfer orders covering such Shares. In the event the Option shall
be exercised by any person or persons other than the Optionee, the Company may
require appropriate proof of the right of such person or persons to exercise the
Option.
Section 6. Legend.
Certificates (if any certificates are to be issued which
determination shall be in the discretion of the Company) representing any Shares
shall have endorsed thereon the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES ACTS OF ANY STATE. SUCH SHARES
HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR HER/HIS
OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING
SHARES UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES
LAWS OR THE RECEIPT BY THE COMPANY OF AN OPINION OF THE
REGISTERED HOLDER'S COUNSEL (REASONABLY SATISFACTORY TO
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<PAGE>
THE COMPANY AND ITS COUNSEL), OR AN OPINION OF THE COMPANY'S
COUNSEL, THAT SUCH SALE, OFFER, TRANSFER OR DISPOSITION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT, AND APPLICABLE STATE SECURITIES
LAWS."
Section 7. Representations and Warranties.
(a) In connection with the granting of the Option and upon
each exercise of the Option, the Optionee agrees, represents and warrants for
himself and for all other persons that may be permitted to exercise the Option
hereunder as follows (subject to the provisions of the Put Agreement and the
tag-along rights granted in the Operating Agreement):
(i) The Optionee is acquiring the Option and, upon
exercise of the Option, the Shares, (the Option and the Shares
being referred to herein collectively as the "Securities"),
solely for her/his own account for investment without a view
to, or for resale in connection with, any distribution thereof
within the meaning of the Act. The Optionee further represents
that she/he does not have any present intention of selling,
offering to sell or otherwise disposing of or distributing the
Securities or any portion thereof; and that she/he is
purchasing the entire legal and beneficial interest in the
Securities for her/his own account and neither in whole nor in
part for the account of any other person.
(ii) The Company has disclosed to the Optionee that,
except as otherwise agreed between the Company and the
Optionee, the Shares, when issued, will not be registered
under the Act and must be held indefinitely unless the Shares
are subsequently registered under the Act or an exemption from
the registration
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<PAGE>
requirements is available, and that, except as otherwise
agreed between the Company and the Optionee, the Company is
under no obligation to register the Shares when issued.
(iii) The Optionee understands that the rights,
preferences and powers of the Shares are set forth in the
Operating Agreement, and the Optionee acknowledges receipt of
a copy of the Operating Agreement from the Company.
(b) The Company represents and warrants that this Agreement
has been duly authorized, executed and delivered on behalf of the Company, that
all action required in connection with such authorization, execution and
delivery has been duly taken, that no consent of any third party is required in
connection with the authorization, execution and delivery of this Agreement and
that this Agreement, when executed, will be a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms. The Company
has delivered to the Optionee a true, correct and complete copy of the Operating
Agreement and hereby agrees to deliver to the Optionee copies of each amendment
or supplement thereto promptly upon the execution and delivery thereof.
Section 8. Adjustments.
In the event that the outstanding Shares are changed into or
exchanged for a different number or kind of equity or other securities of the
Company, or of another entity, by reason of reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
issuance of equity or stock dividend or combination of equity units or shares or
similar event, the Company shall make an appropriate and equitable adjustment in
the Option. Nothing in this Section 8 shall prohibit the Company from issuing
additional Shares or options or warrants
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<PAGE>
convertible into additional Shares after the date hereof without any adjustment
pursuant to this Section 8.
Section 9. Transfers in Violation of Agreement.
The Company shall not be required to transfer on its books any
Shares which have been sold or transferred in violation of any of the provisions
set forth in this Agreement or the Operating Agreement nor shall the Company be
required (a) to treat as the owner of any Shares, (b) to accord the right to
vote any Shares as the owner thereof to or (c) to pay distributions to, any
transferee to whom any Shares shall have been so transferred.
Section 10. Rights in Shares Before Issuance and Delivery.
No person shall be entitled to the privileges of ownership in
respect of any Shares issuable upon exercise of this Option, unless and until
such Shares have been issued to such person as fully-paid Shares in accordance
with the terms hereof; provided, however, that the Optionee shall be entitled to
all the rights of a member of the Company or of a minority stockholder, at law
and in equity (including the rights, if any, provided to limited liability
company members or minority stockholders under Delaware law or under the
Operating Agreement), other than the right to vote as a Member and the right to
receive distributions. Except as expressly provided in the Operating Agreement,
the Optionee shall only have such voting and distribution rights to the extent
she/he exercises the Option and owns Shares upon exercise thereof.
Section 11. Further Instruments.
The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
8
<PAGE>
Section 12. Notice.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one (1) day after deposit with
an overnight courier, or if mailed, five (5) days after the date of deposit in
the United States mails, as follows:
If to the Company, to:
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 758-9526
If to the Optionee, to:
Michael Rudnick
2 Possum Lane
Rowayton, CT 06853
Telephone No.: (203) 853-3888
Section 13. Entire Agreement.
This Agreement contains the entire Agreement between the
parties hereto with respect to the matters contemplated herein and supersedes
all prior agreements or understandings among the parties related to such
matters.
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<PAGE>
Section 14. Binding Effect.
Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon and inure to the benefit of the Company and
its successors and assigns and upon the Optionee and her/his assigns, heirs,
executors, administrators and legal representatives. "Successors and assigns"
shall mean, in the case of the Company, any successor pursuant to a merger,
consolidation, or sale, or other transfer of all or substantially all of the
assets of the Company.
Section 15. Amendment or Modification; Waiver.
This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by all of the parties hereto or, in the case of a
waiver, by the party waiving compliance. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
Section 16. Governing Law.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of Delaware, without giving effect to the principles of conflicts of law
thereof.
Section 17. Headings.
Headings to the Sections in this Agreement are intended solely
for convenience and no provision of this Agreement is to be construed by
reference to the heading of any Section.
10
<PAGE>
Section 18. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Agreement.
Section 19. Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms and provisions of
this Agreement in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
------------------------------------------
Jeffrey J. Kaplan
Vice President and Chief Financial Officer
OPTIONEE:
------------------------------------------
Michael Rudnick
11
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be executed upon exercise of an Option)
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Ladies and Gentlemen:
I, the undersigned holder of an option (the "Option") granted
pursuant to the Option Agreement (the "Option Agreement") to which this Notice
of Exercise is attached, have irrevocably elected to exercise the right thereby
granted to purchase _______ Shares (the "Shares"), and (check one):
|_| have tendered $_______ as payment for such Shares to
the order of Cognitive Communications, LLC (the
"Company") in accordance with the terms of the Option
Agreement.
|_| authorizes the Company to withhold upon exercise of
the Option that number of Registrable Securities (as
defined in the Option Agreement) having a Fair Market
Price (as defined in the Option Agreement) equal to
$_________.
I hereby deliver to the Company an executed counterpart to the
Operating Agreement of the Company and agree to be bound by all provisions
thereof.
I hereby certify to the Company that the representations and
warranties set forth in Section 7 of the Option Agreement are true and correct
on the date hereof and are hereby made again to the Company as if set forth
herein in their entirety. I hereby agree to indemnify the Company against, and
hold it free and harmless from, any loss, damage, expense or liability resulting
to the Company arising out of or based upon the breach or inaccuracy of any such
representation or warranty.
Very truly yours,
Dated: -------------------------
OPTIONEE
Dated: -------------------------
WITNESS
12
<PAGE>
SALE OPTION AGREEMENT
SALE OPTION AGREEMENT, dated as of January 22, 1997 (this
"Agreement"), by and between COGNITIVE COMMUNICATIONS, LLC, a Delaware limited
liability company (the "Company"), and DAVID LEVEEN (the "Optionee").
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Limited Liability Company Operating Agreement of the Company
dated as of January 22, 1997, as the same may be amended from time to time (the
"Operating Agreement").
R E C I T A L S:
WHEREAS, the Company desires to grant to the Optionee an
option (the "Option") on the terms and conditions set forth herein and Optionee
desires to accept such Option.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Company and the
Optionee hereby agree as follows:
Section 1. Grant of Option; Reservation of Shares.
(a) The Company hereby grants to the Optionee an Option
exercisable for the period and upon the terms hereinafter set forth, to purchase
an aggregate of 250,000 Shares and a Capital Account which represents a portion
of the Capital Accounts of all of the Shares outstanding immediately following
such exercise which is proportionate to the number of Shares being purchased by
the Optionee as of such date, at an aggregate exercise price of $1.00 for all
Shares purchasable hereunder (the "Exercise Price").
(b) The Company represents and agrees that all Shares which
may be issued upon the exercise of the Option, upon issuance and payment of the
Exercise Price in accordance with the terms hereof, will be fully paid and
nonassessable, and free of all taxes, liens and charges with respect
1
<PAGE>
to the issuance thereof. The Company agrees that, at all times during the Term
(as hereinafter defined), it shall reserve and keep available, out of its
aggregate authorized but unissued Shares, the number of Shares deliverable upon
the exercise of this Option.
Section 2. Vesting.
(a) Subject to the provisions of Section 3, the Option shall
be exercisable during the Term (as hereinafter defined) in the event of a
transfer or other disposition (a "Transfer") by Manhattan Transfer/Edit, Inc., a
Delaware corporation ("MTE"), of all or a portion of its Shares; provided,
however, that in the event of a Transfer by MTE of only a portion of its Shares,
the number of Shares purchasable hereunder shall be pro rated so that for every
three (3) Shares Transferred by MTE, the Option shall be exercisable with
respect to one (1) Share. The Company shall give the Optionee prior written
notice of a Transfer. Any pledge by MTE of any of its Shares shall not be deemed
a "Transfer", and any transfer by MTE of any of its Shares to any of its
subsidiaries or affiliates also shall not be deemed a "Transfer"; provided,
however, that any subsequent Transfer by such subsidiary or affiliate of any
Share (other than to any subsidiary or affiliate of such subsidiary or
affiliate) shall be deemed a Transfer by MTE for the purposes hereof.
(b) Notwithstanding the foregoing, the Option shall be deemed
exercised by the Optionee upon the exercise by the Optionee of the put right
granted to the Optionee pursuant to the Put Agreement with the Company dated as
of the date hereof (the "Put Agreement") solely for valuation purposes
thereunder.
(c) The Company further agrees to furnish prompt written
notice to the Optionee of any event outlined in Section 8 hereof.
2
<PAGE>
Section 3. Term of the Option.
The term (the "Term") of the Option(s) granted hereunder shall
commence upon the date hereof.
Section 4. Non-Transferability.
The Optionee may not transfer the Option except by will or the
laws of descent and distribution. Subject to the terms of this Agreement, the
Option may not be otherwise transferred, assigned, pledged, hypothecated or
disposed of in any way, whether by operation of law or otherwise, and may be
exercised during the Optionee's lifetime only by the Optionee; provided, that
upon the Optionee's death or Disability prior to the termination of the Option,
such Option may be exercised by the Optionee's legal guardian or other
representatives in accordance with the terms of this Agreement.
Section 5. Manner of Exercise.
The Option may be exercised in whole or in part. The Optionee
shall purchase Shares upon exercise of the Option by making a cash payment to
the Company, equal to the product of (a) the Exercise Price therefor and (b) the
number of Shares to be purchased at that time. At any time during which the
Shares or any securities for which the Shares have been exchanged (collectively,
the "Registrable Securities") are registered under the Securities Exchange Act
of 1934, as amended, the Optionee may exercise her/his right to purchase some or
all of the Registrable Securities subject to such Option, on a net basis, such
that, without the exchange of any funds, the Optionee receives that number of
Registrable Securities subscribed to pursuant to such Option less that number of
shares of Registrable Securities having an aggregate Fair Market Value (as
hereinafter defined) at the time
3
<PAGE>
of exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the Optionee for the number of Registrable Securities subscribed to
pursuant to such Option.
As used herein, the term "Fair Market Value", for any given
day, means (i) the last sale price reported in the Wall Street Journal or other
trade publication regular way or, in case no such reported sale takes place on
such date, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the
Registrable Securities are admitted to trading or listed if that is the
principal market for the Registrable Securities, or (iii) if not listed or
admitted to trading on any national securities exchanges or if such national
securities exchange is not the principal market for the Registrable Securities,
the last sale price as reported by the National Association of Securities
Dealers, Inc. Automated Quotation National Market System ("NASDAQ") or its
successor, if any, or (iii) if the Registrable Securities are not so reported,
the average of the reported bid and asked prices in the over-the counter market,
as furnished by the National Quotation Bureau, Inc., or if such firm is not then
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business and selected by the Managers of the Company
or, if there is no such firm, as furnished by any NASD member selected by the
Managers of the Company. The Option may be exercised by written notice to the
Company, substantially in the form annexed hereto as Exhibit A, stating that the
representations and warranties contained in Section 7 hereof are true and
correct at the time of the exercise and setting forth the number of Shares to be
purchased and the date on which that purchase shall occur, which date shall be
at least five (5) days after the giving of the aforementioned written notice,
unless an earlier date shall have been agreed upon between the Optionee and the
Company. On the date scheduled for the closing of a purchase, the Optionee shall
deliver to the Company (A) an executed
4
<PAGE>
counterpart signature page to the Operating Agreement, if not previously
executed, pursuant to which the Optionee shall be bound by all provisions of the
Operating Agreement and (B) full payment for the Shares to be purchased at that
time, together with all amounts which, under federal, state or local law, the
Company is required to withhold upon exercise of the Option, in cash or by check
payable to the Company, and the Company shall (x) duly record on its books the
issuance of the Shares to Optionee and (y) establish the Optionee's Capital
Account in accordance herewith. Without limiting the generality of the
foregoing, the Company may require an opinion of counsel acceptable to it to the
effect that any subsequent transfer of Shares acquired on an Option exercise
does not violate the Securities Act of 1933, as amended (the "Act"), and may
issue stop-transfer orders covering such Shares. In the event the Option shall
be exercised by any person or persons other than the Optionee, the Company may
require appropriate proof of the right of such person or persons to exercise the
Option.
Section 6. Legend.
Certificates (if any certificates are to be issued which
determination shall be in the discretion of the Company) representing any Shares
shall have endorsed thereon the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES ACTS OF ANY STATE. SUCH SHARES
HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR HER/HIS
OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING
SHARES UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES
LAWS OR THE RECEIPT BY THE COMPANY OF AN OPINION OF THE
REGISTERED HOLDER'S COUNSEL (REASONABLY SATISFACTORY TO
5
<PAGE>
THE COMPANY AND ITS COUNSEL), OR AN OPINION OF THE COMPANY'S
COUNSEL, THAT SUCH SALE, OFFER, TRANSFER OR DISPOSITION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT, AND APPLICABLE STATE SECURITIES
LAWS."
Section 7. Representations and Warranties.
(a) In connection with the granting of the Option and upon
each exercise of the Option, the Optionee agrees, represents and warrants for
himself and for all other persons that may be permitted to exercise the Option
hereunder as follows (subject to the provisions of the Put Agreement and the
tag-along rights granted in the Operating Agreement):
(i) The Optionee is acquiring the Option and, upon
exercise of the Option, the Shares, (the Option and the Shares
being referred to herein collectively as the "Securities"),
solely for her/his own account for investment without a view
to, or for resale in connection with, any distribution thereof
within the meaning of the Act. The Optionee further represents
that she/he does not have any present intention of selling,
offering to sell or otherwise disposing of or distributing the
Securities or any portion thereof; and that she/he is
purchasing the entire legal and beneficial interest in the
Securities for her/his own account and neither in whole nor in
part for the account of any other person.
(ii) The Company has disclosed to the Optionee that,
except as otherwise agreed between the Company and the
Optionee, the Shares, when issued, will not be registered
under the Act and must be held indefinitely unless the Shares
are subsequently registered under the Act or an exemption from
the registration
6
<PAGE>
requirements is available, and that, except as otherwise
agreed between the Company and the Optionee, the Company is
under no obligation to register the Shares when issued.
(iii) The Optionee understands that the rights,
preferences and powers of the Shares are set forth in the
Operating Agreement, and the Optionee acknowledges receipt of
a copy of the Operating Agreement from the Company.
(b) The Company represents and warrants that this Agreement has
been duly authorized, executed and delivered on behalf of the Company, that all
action required in connection with such authorization, execution and delivery
has been duly taken, that no consent of any third party is required in
connection with the authorization, execution and delivery of this Agreement and
that this Agreement, when executed, will be a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms. The Company
has delivered to the Optionee a true, correct and complete copy of the Operating
Agreement and hereby agrees to deliver to the Optionee copies of each amendment
or supplement thereto promptly upon the execution and delivery thereof.
Section 8. Adjustments.
In the event that the outstanding Shares are changed into or
exchanged for a different number or kind of equity or other securities of the
Company, or of another entity, by reason of reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
issuance of equity or stock dividend or combination of equity units or shares or
similar event, the Company shall make an appropriate and equitable adjustment in
the Option. Nothing in this Section 8 shall prohibit the Company from issuing
additional Shares or options or warrants
7
<PAGE>
convertible into additional Shares after the date hereof without any adjustment
pursuant to this Section 8.
Section 9. Transfers in Violation of Agreement.
The Company shall not be required to transfer on its books any
Shares which have been sold or transferred in violation of any of the provisions
set forth in this Agreement or the Operating Agreement nor shall the Company be
required (a) to treat as the owner of any Shares, (b) to accord the right to
vote any Shares as the owner thereof to or (c) to pay distributions to, any
transferee to whom any Shares shall have been so transferred.
Section 10. Rights in Shares Before Issuance and Delivery.
No person shall be entitled to the privileges of ownership in
respect of any Shares issuable upon exercise of this Option, unless and until
such Shares have been issued to such person as fully-paid Shares in accordance
with the terms hereof; provided, however, that the Optionee shall be entitled to
all the rights of a member of the Company or of a minority stockholder, at law
and in equity (including the rights, if any, provided to limited liability
company members or minority stockholders under Delaware law or under the
Operating Agreement), other than the right to vote as a Member and the right to
receive distributions. Except as expressly provided in the Operating Agreement,
the Optionee shall only have such voting and distribution rights to the extent
she/he exercises the Option and owns Shares upon exercise thereof.
Section 11. Further Instruments.
The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
8
<PAGE>
Section 12. Notice.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one (1) day after deposit with
an overnight courier, or if mailed, five (5) days after the date of deposit in
the United States mails, as follows:
If to the Company, to:
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 758-9526
If to the Optionee, to:
David Leveen
1370 Baptist Church Road
Yorktown Heights, NY 10598
Telephone No.: (914) 245-3226
Fax No.: (914) 245-9247
Section 13. Entire Agreement.
This Agreement contains the entire Agreement between the
parties hereto with respect to the matters contemplated herein and supersedes
all prior agreements or understandings among the parties related to such
matters.
9
<PAGE>
Section 14. Binding Effect.
Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon and inure to the benefit of the Company and
its successors and assigns and upon the Optionee and her/his assigns, heirs,
executors, administrators and legal representatives. "Successors and assigns"
shall mean, in the case of the Company, any successor pursuant to a merger,
consolidation, or sale, or other transfer of all or substantially all of the
assets of the Company.
Section 15. Amendment or Modification; Waiver.
This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by all of the parties hereto or, in the case of a
waiver, by the party waiving compliance. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
Section 16. Governing Law.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of Delaware, without giving effect to the principles of conflicts of law
thereof.
Section 17. Headings.
Headings to the Sections in this Agreement are intended solely
for convenience and no provision of this Agreement is to be construed by
reference to the heading of any Section.
10
<PAGE>
Section 18. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Agreement.
Section 19. Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms and provisions of
this Agreement in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
------------------------------------------
Jeffrey J. Kaplan
Vice President and Chief Financial Officer
OPTIONEE:
-----------------------------------------
David Leveen
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<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be executed upon exercise of an Option)
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Ladies and Gentlemen:
I, the undersigned holder of an option (the "Option") granted
pursuant to the Option Agreement (the "Option Agreement") to which this Notice
of Exercise is attached, have irrevocably elected to exercise the right thereby
granted to purchase _______ Shares (the "Shares"), and (check one):
|_| have tendered $_______ as payment for such Shares to
the order of Cognitive Communications, LLC (the
"Company") in accordance with the terms of the Option
Agreement.
|_| authorizes the Company to withhold upon exercise of
the Option that number of Registrable Securities (as
defined in the Option Agreement) having a Fair Market
Price (as defined in the Option Agreement) equal to
$_________.
I hereby deliver to the Company an executed counterpart to the
Operating Agreement of the Company and agree to be bound by all provisions
thereof.
I hereby certify to the Company that the representations and
warranties set forth in Section 7 of the Option Agreement are true and correct
on the date hereof and are hereby made again to the Company as if set forth
herein in their entirety. I hereby agree to indemnify the Company against, and
hold it free and harmless from, any loss, damage, expense or liability resulting
to the Company arising out of or based upon the breach or inaccuracy of any such
representation or warranty.
Very truly yours,
Dated: ----------------------
OPTIONEE
Dated: ----------------------
WITNESS
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<PAGE>
INCENTIVE COMPENSATION AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of
January 22, 1997, by and among Cognitive Communications, LLC, a Delaware limited
liability company ("CCL"), Susan Wiener ("SW"), Michael Rudnick ("MR") and David
Leveen ("DL"; each of SW, MR and DL are sometimes hereinafter referred to
individually as an "Employee" and collectively as the "Employees").
W I T N E S S E T H :
WHEREAS, as of the date hereof each of the Employees is entering into
an employment agreement with CCL (collectively, the "Employment Agreements");
and
WHEREAS, in connection with the execution of the Employment Agreements,
CCL desires to provide certain incentive compensation to the Employees, as more
fully set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
1. Profit Pool.
(a) During the period commencing with August 1, 1997 and
ending on July 31, 2002, the Employees will participate equally in a
profit-sharing program to be established by CCL (the "Profit-Sharing Program"),
which will provide for an aggregate profit pool consisting of the difference
between (x) twenty-five percent (25%) (the "Profit Percentage") of the EBITDA
(as hereinafter defined) for each fiscal year commencing with CCL's fiscal year
ending July 31, 1998 and (y) any amounts distributed, or to be distributed, to
the Employees by CCL for such fiscal year as a result of their ownership
interests in CCL (the "Employees' Distribution").
(b) Payment of any amounts under the Profit-Sharing Program to
the Employees shall be made as soon as practicable after the end of each of such
five (5) fiscal years, and in any event within ninety (90) days thereafter, and
shall be accompanied by a copy of the relevant financial statements, together
with a copy of the work papers showing the calculation by CCL of the EBITDA (as
hereinafter defined) and the Employees' Distribution. The Employees shall be
deemed to have accepted such financial statements as final and binding, unless
CCL is notified in writing by them within thirty (30) days after receipt of such
financial statements. If the Employees dispute any of the calculations in the
financial statements, the dispute shall be referred to a firm of independent
public accountants mutually acceptable to CCL and the Employees; provided,
however, that a "Big 6" accounting firm, other than the accounting firms then
used by CCL, any Employee or any of their respective affiliates shall be deemed
to be mutually acceptable for purposes of this Section 1(b). In the event of a
dispute, the determination of such accountants shall be final and binding. In
the event of a dispute, the losing party in such dispute shall pay the fees and
expenses of such accountants. If any review so conducted shall result in an
underpayment by CCL of any amount payable hereunder,
<PAGE>
CCL shall pay the amount of such underpayment within twenty (20) days after the
completion of such review, together with interest thereon at the rate of 8% per
annum (calculated on the basis of a 360- day year consisting of twelve 30-day
months). If any review so conducted shall result in an overpayment by CCL of any
amount payable hereunder, the Employees shall refund the amount of such
overpayment, together with interest thereon at the rate of 8% per annum
(calculated on the basis of a 360-day year consisting of twelve 30-day months),
to CCL within twenty (20) days after written request for such refund is made to
them by CCL or, at CCL's option, the amount of such refund shall be netted
against any other amounts due to the Employees.
(c) Termination of an Employment Agreement (i) by CCL for
Cause, as defined in the Employment Agreement, or (ii) by the Employee other
than due to Constructive Termination, as defined in the Employment Agreement,
will also terminate such Employee's rights to receive any amounts under the
Profit-Sharing Program after such termination and will also reduce the Profit
Percentage to 16.67% in the event of one Employee's termination, 8.33% in the
event of two Employees' termination and 0% in the event of the termination of
all three Employees; provided, however, that Mr. Leveen's termination prior to
either Ms. Wiener's or Mr. Rudnick's termination will not reduce the Profit
Percentage, however, in the event of either Ms. Wiener's or Mr. Leveen's
termination concurrently with or after Ms. Wiener's or Mr. Rudnick's
termination, the Profit Percentage will be reduced to 8.33%. Termination of an
Employment Agreement (y) by CCL other than for Cause or (z) by the Employee as a
result of Constructive Termination will not terminate or otherwise affect such
Employee's rights to receive any amounts under the Profit-Sharing Program as set
forth herein after such termination nor reduce the Profit Percentage.
Termination of an Employment Agreement upon an Employee's death or disability
will also terminate such Employee's rights to receive any amounts under the
Profit-Sharing Program after such termination (provided, however, that his/her
estate or legal representative shall receive a pro rata portion of the profit
pool for the fiscal year in which such termination occurs based upon the number
of days the Employee was employed during such fiscal year) and the Profit
Percentage shall not otherwise be affected by such termination.
2. Definitions.
(a) For purposes of this Agreement, EBITDA shall be defined as
CCL's earnings before interest, taxes, depreciation and amortization, calculated
in accordance with generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, applied on a consistent basis and
consistent with past practices; provided, however, that EBITDA shall be computed
by taking into account directly allocated overhead expenses of CCL's parent,
Manhattan Transfer/Edit, Inc., a Delaware corporation ("MTE"), or MTE's parent,
International Post Limited, a Delaware corporation ("IPL") with respect to CCL,
including property and casualty insurance, workmen's compensation, employee
fringe benefit costs, and other direct costs normally allocated by MTE and/or
IPL among their respective subsidiaries based in part on the size of such
subsidiaries, and by excluding: (a) all special overhead charges of CCL
(including the 3% of revenues overhead charge) and (b) the cost of all term
life,
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health, accident and/or other insurance covering any employee of CCL for which
it or any of its subsidiaries or affiliates, including MTE and/or IPL, is the
beneficiary.
3. Incentive Options.
(a) During the period commencing with August 1, 1997 and
ending on July 31, 2002, the Employees will receive options (the "Incentive
Options") to purchase an aggregate of 50,000 Shares of CCL in each of the five
(5) full fiscal years of CCL commencing with the fiscal year ending July 31,
1998 provided that CCL has attained the annual EBITDA targets for such fiscal
year (at a minimum) set forth below. In the event that in any fiscal year the
annual EBITDA target is not satisfied, the Incentive Options which could have
been earned for such fiscal year shall be awarded if and when the foregoing
cumulative EBITDA target is satisfied for a subsequent fiscal year.
CUMULATIVE EBITDA
TARGET FOR SUCH
FISCAL YEAR AND
ANNUAL EBITDA PRIOR FISCAL YEARS
TARGET FOR SUCH BEGINNING
FISCAL YEAR WITH FISCAL 1998
Fiscal 1998 (i.e., fiscal year
ending July 31, 1998)............. $3,217,000 $3,217,000
Fiscal 1999 (i.e., fiscal year
ending July 31, 1999)............. $5,124,000 $7,583,000
Fiscal 2000 (i.e., fiscal year
ending July 31, 2000)............. $7,982,000 $14,839,000
Fiscal 2001 (i.e., fiscal year
ending July 31, 2001)............. $12,163,000 $25,896,000
Fiscal 2002 (i.e., fiscal year
ending July 31, 2002)............. $18,434,000 $42,654,000
(b) CCL shall issue any Incentive Options which the Employees
are entitled to receive pursuant to the provisions hereof promptly upon the
final determination of the EBITDA for the relevant fiscal year as set forth
above in Section 1, and in any event within ten (10) days thereafter. The
Incentive Options shall be substantially in the form annexed hereto as Exhibit
A. Incentive Options shall be allocated equally among the Employees.
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<PAGE>
(c) Termination of an Employment Agreement (i) by CCL for
Cause, as defined in the Employment Agreement, or (ii) by the Employee other
than due to Constructive Termination, as defined in the Employment Agreement,
will also terminate such Employee's rights to receive any Incentive Options
hereunder after such termination but will not reduce the number of Incentive
Options available for issuance to the other Employees. Termination of an
Employment Agreement (y) by CCL other than for Cause or (z) by the Employee as a
result of Constructive Termination will not terminate or otherwise affect such
Employee's rights to receive any Incentive Options after such termination.
Termination of an Employment Agreement upon an Employee's death or disability
will also terminate such Employee's rights to receive any Incentive Options
after such termination (provided, however, that his/her estate or legal
representative shall receive a pro rata portion of any Incentive Options for the
fiscal year in which such termination occurs based upon the number of days the
Employee was employed during such fiscal year) and the aggregate number of
Incentive Options shall not otherwise be affected by such termination.
4. Miscellaneous.
(a) Section headings contained in this Agreement are included
for convenience only and shall not affect the interpretation of any provisions
of this Agreement.
(b) Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served, (ii) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid or (iii) on the date sent if sent by
facsimile, to the parties at the following addresses or facsimile numbers (or at
such other address or facsimile number for a party as shall be specified by like
notice):
If to the Employees, to:
Cognitive Communications, Inc.
2 Gannett Drive
Suite 200
White Plains, New York 10604
Fax No.:
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<PAGE>
with a copy to:
Roberts, Sheridan & Kotel
12 East 49th Street
New York, New York 10017
Attention: David H. Wollmuth, Esq.
Fax No.: (212) 299-8686
If to CCL, to:
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 758-9526
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
(d) This Agreement shall be construed in accordance with, and
governed by, the internal laws of the State of New York as applied to contracts
made and to be performed entirely within the State of New York. Any legal
action, suit or proceeding arising out of or relating to this Agreement may be
instituted in any state or federal court located within the County of New York,
State of New York, and each party hereto agrees not to assert, by way of motion,
as a defense, or otherwise, in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of such court, that the
action, suit or proceeding is brought in an inconvenient forum, that the venue
of the action, suit or proceeding is improper or that this Agreement or the
subject matter hereof may not be enforced in or by such court. Each party hereto
further irrevocably submits to the jurisdiction of any such court in any such
action, suit or proceeding.
(e) This Agreement, including the Exhibits and Schedules
hereto, sets forth the entire understanding and agreement of the parties with
respect to their subject matter and supersede any and all prior understandings,
negotiations or agreements among the parties hereto, both written and oral, with
respect to such subject matter.
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<PAGE>
(f) This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which together shall constitute a
single agreement.
(g) In the event that any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, in whole or in part, the validity of the
remaining provisions shall not be affected and the remaining portion of any
provision held to be invalid, illegal or unenforceable shall in no way be
affected, prejudiced or disturbed thereby.
(h) This Agreement may be amended or modified only by written
agreement executed by all parties hereto.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
------------------------------------------
Jeffrey J. Kaplan
Vice President and Chief Financial Officer
------------------------------------
Susan Wiener
------------------------------------
Michael Rudnick
-------------------------------
David Leveen
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<PAGE>
INCENTIVE OPTION AGREEMENT
INCENTIVE OPTION AGREEMENT, dated as of ________ ___, _____
(this "Agreement"), by and between COGNITIVE COMMUNICATIONS, LLC, a Delaware
limited liability company (the "Company"), and _____ (the "Optionee").
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Limited Liability Company Operating Agreement of the Company
dated as of January __, 1997, as the same may be amended from time to time (the
"Operating Agreement").
R E C I T A L S:
WHEREAS, the Company desires to grant to the Optionee an
option (the "Option") on the terms and conditions set forth herein and Optionee
desires to accept such Option.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Company and the
Optionee hereby agree as follows:
Section 1. Grant of Option; Reservation of Shares.
(a) The Company hereby grants to the Optionee an Option
exercisable for the period and upon the terms hereinafter set forth, to purchase
___ Shares and a Capital Account which represents a portion of the Capital
Accounts of all of the Shares outstanding immediately following such exercise
which is proportionate to the number of Shares being purchased by the Optionee
as of such date, at an aggregate exercise price of $1.00 for all Shares
purchasable hereunder (the "Exercise Price").
(b) The Company represents and agrees that all Shares which
may be issued upon the exercise of the Option, upon issuance and payment of the
Exercise Price in accordance with the terms hereof, will be fully paid and
nonassessable, and free of all taxes, liens and charges with respect
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<PAGE>
to the issuance thereof. The Company agrees that, at all times during the Term
(as hereinafter defined), it shall reserve and keep available, out of its
aggregate authorized but unissued Shares, the number of Shares deliverable upon
the exercise of this Option.
Section 2. Vesting.
(a) Subject to subsection (c) below and to the provisions of
Section 3 relating to termination of the Option provided herein, the Option
shall be exercisable as of the date hereof with respect to all of the Shares
which are the subject hereof.
(b) The Company agrees to furnish prompt written notice to the
Optionee of any event outlined in Section 8 hereof.
(c) If (i) the Optionee's employment relationship is
terminated either by the Company or the Optionee, or (ii) the Optionee becomes
unable to render services or perform her/his duties to the Company by reason of
death or Disability (as defined in the Optionee's employment agreement or, if
not defined in the Optionee's employment agreement, as defined by a majority of
the Managers in their sole discretion), the Optionee, or her/his legal guardian
or other representatives, as the case may be, shall be permitted to exercise the
unexercised portion of the Option which the Optionee would have been eligible to
exercise on the date on which the Optionee ceased to be an employee of the
Company (y) during the thirty (30) day period following the date of termination
in the event the employment relationship is terminated or (z) during the three
(3) month period following the date of termination due to Disability or the date
of the Optionee's death in the event of the Optionee's death or Disability. In
no event, however, shall the Optionee exercise the Option after the Expiration
Date (as defined herein).
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<PAGE>
Section 3. Term of the Option.
Subject to Section 2(c) hereof, the Option(s) granted
hereunder shall terminate ten (10) years from the date hereof (the "Expiration
Date").
Section 4. Non-Transferability.
The Optionee may not transfer the Option except by will or the
laws of descent and distribution. Subject to the terms of this Agreement, the
Option may not be otherwise transferred, assigned, pledged, hypothecated or
disposed of in any way, whether by operation of law or otherwise, and may be
exercised during the Optionee's lifetime only by the Optionee; provided, that
upon the Optionee's death or Disability prior to the termination of the Option,
such Option may be exercised by the Optionee's legal guardian or other
representatives in accordance with the terms of this Agreement.
Section 5. Manner of Exercise.
The Option may be exercised in whole or in part. The Optionee
shall purchase Shares upon exercise of the Option by making a cash payment to
the Company, equal to the product of (a) the Exercise Price therefor and (b) the
number of Shares to be purchased at that time. At any time during which the
Shares or any securities for which the Shares have been exchanged (collectively,
the "Registrable Securities") are registered under the Securities Exchange Act
of 1934, as amended, the Optionee may exercise her/his right to purchase some or
all of the Registrable Securities subject to such Option, on a net basis, such
that, without the exchange of any funds, the Optionee receives that number of
Registrable Securities subscribed to pursuant to such Option less that number of
shares of Registrable Securities having an aggregate Fair Market Value (as
hereinafter defined) at the time
3
<PAGE>
of exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the Optionee for the number of Registrable Securities subscribed to
pursuant to such Option.
As used herein, the term "Fair Market Value", for any given
day, means (i) the last sale price reported in the Wall Street Journal or other
trade publication regular way or, in case no such reported sale takes place on
such date, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the
Registrable Securities are admitted to trading or listed if that is the
principal market for the Registrable Securities, or (iii) if not listed or
admitted to trading on any national securities exchanges or if such national
securities exchange is not the principal market for the Registrable Securities,
the last sale price as reported by the National Association of Securities
Dealers, Inc. Automated Quotation National Market System ("NASDAQ") or its
successor, if any, or (iii) if the Registrable Securities are not so reported,
the average of the reported bid and asked prices in the over-the counter market,
as furnished by the National Quotation Bureau, Inc., or if such firm is not then
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business and selected by the Managers of the Company
or, if there is no such firm, as furnished by any NASD member selected by the
Managers of the Company. The Option may be exercised by written notice to the
Company, substantially in the form annexed hereto as Exhibit A, stating that the
representations and warranties contained in Section 7 hereof are true and
correct at the time of the exercise and setting forth the number of Shares to be
purchased and the date on which that purchase shall occur, which date shall be
at least five (5) days after the giving of the aforementioned written notice,
unless an earlier date shall have been agreed upon between the Optionee and the
Company. On the date scheduled for the closing of a purchase, the Optionee shall
deliver to the Company (A) an executed
4
<PAGE>
counterpart signature page to the Operating Agreement, if not previously
executed, pursuant to which the Optionee shall be bound by all provisions of the
Operating Agreement and (B) full payment for the Shares to be purchased at that
time, together with all amounts which, under federal, state or local law, the
Company is required to withhold upon exercise of the Option, in cash or by check
payable to the Company, and the Company shall (x) duly record on its books the
issuance of the Shares to Optionee and (y) establish the Optionee's Capital
Account in accordance herewith. Without limiting the generality of the
foregoing, the Company may require an opinion of counsel acceptable to it to the
effect that any subsequent transfer of Shares acquired on an Option exercise
does not violate the Securities Act of 1933, as amended (the "Act"), and may
issue stop-transfer orders covering such Shares. In the event the Option shall
be exercised by any person or persons other than the Optionee, the Company may
require appropriate proof of the right of such person or persons to exercise the
Option.
Section 6. Legend.
Certificates (if any certificates are to be issued which
determination shall be in the discretion of the Company) representing any Shares
shall have endorsed thereon the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES ACTS OF ANY STATE. SUCH SHARES
HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR HER/HIS
OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING
THE SHARES UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES
LAWS OR THE RECEIPT BY THE COMPANY OF AN OPINION OF THE
REGISTERED HOLDER'S COUNSEL (REASONABLY SATISFACTORY TO
5
<PAGE>
THE COMPANY AND ITS COUNSEL), OR AN OPINION OF THE COMPANY'S
COUNSEL, THAT SUCH SALE, OFFER, TRANSFER OR DISPOSITION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT, AND APPLICABLE STATE SECURITIES
LAWS."
Section 7. Representations and Warranties.
(a) In connection with the granting of the Option and upon
each exercise of the Option, the Optionee agrees, represents and warrants for
himself and for all other persons that may be permitted to exercise the Option
hereunder as follows (subject to the provisions of the Put Agreement between the
Company and the Optionee and the tag-along rights granted in the Operating
Agreement):
(i) The Optionee is acquiring the Option and, upon
exercise of the Option, the Shares (the Option and the Shares
being referred to herein collectively as the "Securities"),
solely for her/his own account for investment without a view
to, or for resale in connection with, any distribution thereof
within the meaning of the Act. The Optionee further represents
that she/he does not have any present intention of selling,
offering to sell or otherwise disposing of or distributing the
Securities or any portion thereof; and that she/he is
purchasing the entire legal and beneficial interest in the
Securities for her/his own account and neither in whole nor in
part for the account of any other person.
(ii) The Company has disclosed to the Optionee that,
except as otherwise agreed between the Company and the
Optionee, the Shares, when issued, will not be registered
under the Act and must be held indefinitely unless the Shares
are
6
<PAGE>
subsequently registered under the Act or an exemption from the
registration requirements is available, and that, except as
otherwise agreed between the Company and the Optionee, the
Company is under no obligation to register the Shares when
issued.
(iii) The Optionee understands that the rights,
preferences and powers of the Shares are set forth in the
Operating Agreement, and the Optionee acknowledges receipt of
a copy of the Operating Agreement from the Company.
(b) The Company represents and warrants that this Agreement
has been duly authorized, executed and delivered on behalf of the Company, that
all action required in connection with such authorization, execution and
delivery has been duly taken, that no consent of any third party is required in
connection with the authorization, execution and delivery of this Agreement and
that this Agreement, when executed, will be a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms. The Company
has delivered to the Optionee a true, correct and complete copy of the Operating
Agreement and hereby agrees to deliver to the Optionee copies of each amendment
or supplement thereto promptly upon the execution and delivery thereof.
Section 8. Adjustments.
In the event that the outstanding Shares are changed into or
exchanged for a different number or kind of equity or other securities of the
Company, or of another entity, by reason of reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
issuance of equity or stock dividend or combination of equity units or shares or
similar event, the Company shall make an appropriate and equitable adjustment in
the Option. Nothing in this Section 8 shall prohibit the Company from issuing
additional Shares or options or warrants
7
<PAGE>
convertible into additional Shares after the date hereof without any adjustment
pursuant to this Section 8.
Section 9. Transfers in Violation of Agreement.
The Company shall not be required to transfer on its books any
Shares which have been sold or transferred in violation of any of the provisions
set forth in this Agreement or the Operating Agreement nor shall the Company be
required (a) to treat as the owner of any Shares, (b) to accord the right to
vote any Shares as the owner thereof to or (c) to pay distributions to, any
transferee to whom any Shares shall have been so transferred.
Section 10. Rights in Shares Before Issuance and Delivery.
No person shall be entitled to the privileges of ownership in
respect of any Shares issuable upon exercise of this Option, unless and until
such Shares have been issued to such person as fully-paid Shares in accordance
with the terms hereof.
Section 11. Further Instruments.
The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
Section 12. Notice.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one (1) day after deposit with
an overnight courier, or if mailed, five (5) days after the date of deposit in
the United States mails, as follows:
8
<PAGE>
If to the Company, to:
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Fax No.: (212) 986-1364
with a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Jeffry S. Hoffman, Esq.
Fax No.: (212) 758-9526
If to the Optionee, to:
[ ]
[ ]
[ ]
Section 13. Entire Agreement.
This Agreement contains the entire Agreement between the
parties hereto with respect to the matters contemplated herein and supersedes
all prior agreements or understandings among the parties related to such
matters.
Section 14. Binding Effect.
Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon and inure to the benefit of the Company and
its successors and assigns and upon the Optionee and her/his assigns, heirs,
executors, administrators and legal representatives. "Successors and assigns"
shall mean, in the case of the Company, any successor pursuant to a merger,
consolidation, or sale, or other transfer of all or substantially all of the
assets of the Company.
Section 15. Amendment or Modification; Waiver.
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<PAGE>
This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by all of the parties hereto or, in the case of a
waiver, by the party waiving compliance. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
Section 16. Governing Law.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of Delaware, without giving effect to the principles of conflicts of law
thereof.
Section 17. Headings.
Headings to the Sections in this Agreement are intended solely
for convenience and no provision of this Agreement is to be construed by
reference to the heading of any Section.
Section 18. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Agreement.
Section 19. Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms and provisions of
this Agreement in any other jurisdiction.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
------------------------------
Name:
Title:
OPTIONEE:
------------------------------
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EXHIBIT A
NOTICE OF EXERCISE
(To be executed upon exercise of an Option)
Cognitive Communications, LLC
c/o International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President
Ladies and Gentlemen:
I, the undersigned holder of an option (the "Option") granted
pursuant to the Option Agreement (the "Option Agreement") to which this Notice
of Exercise is attached, have irrevocably elected to exercise the right thereby
granted to purchase ___ Shares (the "Shares") and (check one):
|_| have tendered $_______ as payment for such Shares to
the order of Cognitive Communications, LLC (the
"Company") in accordance with the terms of the Option
Agreement.
|_| authorizes the Company to withhold upon exercise of
the Option that number of Registrable Securities (as
defined in the Option Agreement) having a Fair Market
Price (as defined in the Option Agreement) equal to
$_________.
I hereby deliver to the Company an executed counterpart to the
Operating Agreement of the Company and agree to be bound by all provisions
thereof.
I hereby certify to the Company that the representations and
warranties set forth in Section 7 of the Option Agreement are true and correct
on the date hereof and are hereby made again to the Company as if set forth
herein in their entirety. I hereby agree to indemnify the Company against, and
hold it free and harmless from, any loss, damage, expense or liability resulting
to the Company arising out of or based upon the breach or inaccuracy of any such
representation or warranty.
Very truly yours,
Dated:
-------------------
OPTIONEE
Dated:
-------------------
WITNESS
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<PAGE>
CONSULTING AGREEMENT
AGREEMENT, dated as of February 15, 1997, by and between
International Post Limited, a Delaware corporation (the "Company"), Kapcorp
Incorporated, a New York corporation (the "Consultant"), and Jeffrey J. Kaplan
("JJK").
W I T N E S S E T H :
WHEREAS, the Company and JJK, an Executive Vice President and
the Chief Financial Officer of the Company, are parties to an Employment
Agreement, dated as of February 15, 1994 (the "Employment Agreement");
WHEREAS, the Company and JJK desire to terminate JJK's
employment with the Company under the Employment Agreement;
WHEREAS, the Company has entered into a letter of intent,
dated January 7, 1997 (the "Letter of Intent"), with Video Services Corporation,
a New Jersey corporation ("VSC"), providing for the merger of VSC and the
Company (the "Merger");
WHEREAS, JJK is the sole stockholder, director and officer of
the Consultant;
WHEREAS, the Company desires to retain the benefits of the
experience and expertise of JJK and in connection therewith desires to retain
the Consultant to cause JJK to provide consulting services to the Company with
respect to the Merger; and
WHEREAS, the Consultant desires to have JJK provide such
consulting services to the Company and to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Termination of Employment Agreement and Related Matters.
(a) Each of JJK and the Company agree that the Employment
Agreement is hereby terminated, effective as of February 14, 1997, without any
further liability or obligation of either party except as otherwise specifically
set forth herein.
(b) JJK hereby resigns, effective as of February 14, 1997
(the "Termination Date"), from all positions and directorships he has with the
Company and its affiliates (other than as a director of the Company).
(c) Concurrently with the execution of this Agreement, the
Company shall pay JJK the following: (1) any accrued but unpaid Base Salary (as
defined in the Employment
<PAGE>
Agreement) as of the Termination Date; (2) a cash payment equal to JJK's Base
Salary on a daily basis (computed on a 365-day year) in effect on the
Termination Date, multiplied by the number of accrued and unused vacation days
at the Termination Date; (3) any accrued but unpaid expenses incurred by JJK as
of the Termination Date in accordance with Section 3.02 of the Employment
Agreement; (4) any accrued but unpaid benefits to which JJK may be entitled
pursuant to Section 3.01 of the Employment Agreement; and (5) any other accrued
but unpaid compensation payable to JJK as of the Termination Date.
(d) For purposes of the Company's Stock Option Agreements
with JJK dated as of February 15, 1994 and April 10, 1996 relating to options to
purchase an aggregate of 271,818 shares of the Company's common stock,
termination of the Employment Agreement shall be deemed a "Termination of
Employment without Cause" and, therefore, in accordance with the provisions of
such stock option agreements, as of the Termination Date, all of the stock
options shall be deemed to be fully vested and immediately exercisable until
February 14, 2002.
2. Consulting Services. Upon the terms and subject to the
conditions hereinafter set forth, the Consultant hereby agrees to cause JJK to
provide consulting services to the Company in connection with the Merger as may
be reasonably assigned to JJK by the President and Chief Executive Officer of
the Company during the Term (as defined in Section 2). JJK shall report directly
to the President and Chief Executive Officer of the Company.
The Consultant shall cause JJK, and JJK agrees, to
faithfully and diligently perform his duties and responsibilities hereunder in a
good and businesslike manner and comply with, and be bound by, the operational
policies, procedures and practices of the Company in effect from time to time.
The Consultant shall cause JJK, and JJK agrees, to devote such portion of his
working time, attention and energies to the affairs of the Company as is
necessary to fulfill his obligations hereunder, and, except as otherwise
specifically authorized by the President and Chief Executive Officer of the
Company, no other person may fulfill any of the JJK's obligations hereunder.
Notwithstanding the foregoing, this Agreement shall not be construed as
preventing JJK from accepting other consulting engagements or employment on a
full or part-time basis or otherwise preventing JJK from engaging in other
activities as long as JJK is available to assist the Company in completing the
Merger as provided herein and, further, that all such activities shall be
subject to the agreements and covenants contained herein and in the Employment
Agreement as referenced in Section 8.
The Consultant shall provide JJK's consulting services as
an independent contractor, and, except as provided herein, neither the
Consultant nor JJK shall be entitled to any additional benefits or compensation
for services rendered to the Company. Any agents appointed by JJK or the
Consultant are at his/its own risk, expense and supervision and shall have no
claim against the Company for salaries, commissions or other expenses.
Unless otherwise specifically authorized by the President
and Chief Executive Officer of the Company, neither JJK nor the Consultant (or
the Consultant's directors, officers, employees and agents) shall have authority
or power to (i) accept orders or otherwise bind
2
<PAGE>
or commit the Company to agreements of any kind, (ii) incur any debt, obligation
or liability or enter into any contract or commitment on behalf of the Company
or (ii) alter, amend, terminate or otherwise change any sales order, contract or
other document issued by the Company.
3. Term. Unless (i) sooner terminated as provided in Section 7
hereof or (ii) extended as provided in the following sentence, the term of this
Agreement shall commence on the date hereof and shall continue for a period of
one (1) year. In the event of the consummation of the Merger at any time during
such one (1) year period, the expiration date of this Agreement shall
automatically (without any further action by any party hereto) be deemed
extended to such date that is the third year anniversary date of the
consummation of the Merger. The actual term of this Agreement, giving effect to
any early termination or extension hereunder, is referred to herein as the
"Term."
4. Representations and Warranties.
(a) Each of the parties hereto represent and warrant that
(i) such party has the power, authority and right to enter into this Agreement
and to carry out and perform its/his obligations hereunder, and (ii) this
Agreement has been duly executed and delivered by such party and constitutes a
legal, valid and binding obligation of such party enforceable against such party
in accordance with its terms.
(b) Further, each of the Consultant and JJK represent and
warrant to the Company that (i) such party's execution of this Agreement and the
performance of its/his duties and responsibilities hereunder does not and will
not violate or result in the breach of, or in any manner be prohibited or
restricted by, the terms of any agreement, arrangement or understanding (whether
written or oral), order or decree to which such party is a party or by which
such party is bound, and (ii) such party is not a party to any agreement or
arrangement, whether written or oral, which would prevent such party from
rendering services to the Company during the Term, or which would create any
conflict or which would involve any business relationship with customers,
suppliers or competitors of the Company.
5. Compensation. For all consulting services the Consultant
shall cause JJK to render to the Company during the Term, the Company shall pay
the Consultant a fee (the "Fee") during the Term at an annual rate of $190,000,
payable at such intervals as the executive officers of the Company are paid;
provided, however, that the Fee shall be reduced to an annual rate of $100,000
concurrently with the consummation of the Merger.
In addition, the Consultant shall be entitled to a bonus
of $50,000 payable concurrently with, and only upon, the consummation of the
Merger during the Term.
Any other fees, compensation or remuneration earned or
otherwise received by the Consultant or JJK during the Term from any party other
than the Company will not relieve the Company from making any payments to the
Consultant due hereunder or otherwise diminish, reduce or affect the amount and
timing of such payments.
3
<PAGE>
6. Expenses. During the Term, the Company shall promptly pay
or reimburse the Consultant for all reasonable business expenses incurred by JJK
at the request of the Company in carrying out his duties and responsibilities
hereunder upon submission to the Company of an itemized account thereof.
7. Termination.
(a) Death; Disability. The Consultant's engagement
hereunder shall terminate upon JJK's death, or, at the election of the Company
by written notice to the Consultant, if, as a result of the occurrence of mental
or physical disability during the Term, JJK has been unable to perform the
duties contemplated hereunder for a period of three (3) consecutive months or
ninety (90) days in any consecutive three hundred sixty-five (365) day period,
as determined in good faith by the Company. In the event of a termination of the
Consultant's services for death or disability of JJK, the Company shall pay the
Consultant (within ten (10) days after the termination date) (i) any accrued but
unpaid Fees through the termination date, (ii) any accrued but unpaid expenses
incurred by the Consultant as of the termination date in accordance with Section
6 and (iii) any other accrued but unpaid compensation payable to the Consultant
as of the termination date. Further, in the event of a termination of the
Consultant's services for death or disability of JJK prior to the time that at
least $190,000 of Fees have been paid under this Agreement, the Company shall
continue to pay the Consultant the Fee, as and when such Fee would have been
paid had the termination not taken place, until the aggregate Fees paid by the
Company under this Agreement shall equal $190,000.
(b) Termination for Cause. In addition to any other
remedies available to it at law or in equity, the Company shall have the right,
upon written notice to the Consultant, to terminate the Consultant's services
under this Agreement if (i) the Consultant or JJK breaches in any material
respect any material provision of this Agreement and such breach is not remedied
within thirty (30) days after written notice thereof from the Company setting
forth in reasonable detail the matters constituting such breach; (ii) JJK
willfully fails or refuses to perform in any material respect such duties as may
be assigned to him from time to time by the President and Chief Executive
Officer of the Company in accordance with the provisions hereof and fails to
cure such failure or refusal within thirty (30) days after receipt of written
notice thereof from the Company stating with specificity the nature of such
failure or refusal; (iii) the Consultant or JJK has been convicted of a felony;
or (iv) the Consultant or JJK has committed any act of fraud, misappropriation
of funds or embezzlement in connection with the services hereunder. (Termination
pursuant to the provisions of any of clauses (i) through (iv) above is referred
to herein as termination for "Cause"). In the event the Consultant's services
are terminated for Cause, the Company shall pay the Consultant (within ten days
after the termination date) (i) any accrued but unpaid Fees through the
termination date, (ii) any accrued but unpaid expenses incurred by the
Consultant as of the termination date in accordance with Section 6 and (iii) any
other accrued but unpaid compensation payable to the Consultant as of the
termination date.
(c) Termination Other than for Cause, Death or Disability.
Notwithstanding any provision to the contrary herein, the Company may at any
time upon written
4
<PAGE>
notice to the Consultant, in its sole and absolute discretion and for any or no
reason, terminate the services of the Consultant hereunder without Cause. If
this Agreement is terminated (i) by the Company, other than as a result of the
death or disability of JJK or for Cause, or (ii) by the Consultant as a result
of a Constructive Termination (as defined below), the Company shall pay the
Consultant its unpaid Fees through the end of the Term (payable as provided in
Section 5 hereof) in addition to any accrued but unpaid expenses incurred by the
Consultant as of the termination date in accordance with Section 6 and any other
accrued but unpaid compensation payable to the Consultant as of the termination
date. For purposes of this Agreement, "Constructive Termination" shall be deemed
to have occurred upon any material breach by the Company of any material
provision of this Agreement, which breach shall continue for at least thirty
(30) days after written notice is provided by the Consultant to the Company
setting forth in reasonable detail the matters constituting such breach.
8. Inventions, Non-Disclosure and Non-Competition.
Notwithstanding anything contained herein to the contrary (including, but not
limited to, the provisions of Section 1 hereof), in consideration of the
agreements and mutual covenants contained herein, Article V of the Employment
Agreement relating to Inventions, Non-Disclosure and Non-Competition shall
survive the termination of the Employment Agreement in accordance with the
provisions set forth therein; provided, however, that the term "Non-Competition
Term" as used therein shall mean the Term of this Agreement plus any additional
period in which the Consultant or JJK is receiving compensation from the
Company.
9. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, heirs, successors and assigns; provided, that the rights and
obligations of the Consultant and JJK under this Agreement shall not be
assignable by it/him (except, in the case of the Consultant, to JJK).
10. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served, (ii) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid, or (iii) on the date sent if sent by
facsimile, to the parties at the following addresses or facsimile numbers (or at
such other address or facsimile number for a party as shall be specified by like
notice):
If to the Company:
International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: President and Chief Executive Officer
Fax No.: (212) 986-1364
5
<PAGE>
If to the Consultant or JJK:
Jeffrey J. Kaplan
16 Tor Terrace
New City, New York 10956
Fax No.:
11. Severability. If any provision of this Agreement, or
portion thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or portion thereof, and shall not in any manner affect or render
invalid or unenforceable any other provision of this Agreement or portion
thereof, and this Agreement shall be carried out as if any such invalid or
unenforceable provision or portion thereof was not contained herein. In
addition, any such invalid or unenforceable provision or portion thereof shall
be deemed, without further action on the part of the parties hereto, modified,
amended or limited to the extent necessary to render the same valid and
enforceable.
12. Waiver. No waiver by a party hereto of a breach or default
hereunder by the other party shall be considered valid, unless in writing signed
by such first party, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or any other nature.
13. Entire Agreement. Except as otherwise specifically
provided herein, this Agreement sets forth the entire agreement between the
parties with respect to the subject matter hereof, and supersedes any and all
prior agreements between them, whether written or oral, relating to any or all
matters covered by and contained or otherwise dealt with in this Agreement.
14. Amendment. No modification, change or amendment of this
Agreement or any of its provisions shall be valid, unless in writing and signed
by the party against whom such claimed modification, change or amendment is
sought to be enforced.
15. Titles. The titles of the Sections of this Agreement are
inserted merely for convenience and ease of reference and shall not affect or
modify the meaning of any of the terms, covenants or conditions of this
Agreement.
16. Applicable Law. This Agreement, and all of the rights and
obligations of the parties in connection with the relationship established
hereby, shall be governed by and construed in accordance with the internal laws
of the State of New York without giving effect to principles relating to
conflicts of law.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
INTERNATIONAL POST LIMITED
By:
-----------------------------
Name:
Title:
KAPCORP INCORPORATED
By:
------------------------------
Name:
Title:
------------------------------
Jeffrey J. Kaplan
7
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
INCOME.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 359
<SECURITIES> 0
<RECEIVABLES> 12,857
<ALLOWANCES> 590
<INVENTORY> 0
<CURRENT-ASSETS> 14,497
<PP&E> 52,419
<DEPRECIATION> 23,145
<TOTAL-ASSETS> 70,696
<CURRENT-LIABILITIES> 10,791
<BONDS> 0
0
0
<COMMON> 62
<OTHER-SE> 30,229
<TOTAL-LIABILITY-AND-EQUITY> 70,696
<SALES> 12,965
<TOTAL-REVENUES> 12,965
<CGS> 7,096
<TOTAL-COSTS> 7,096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 48
<INTEREST-EXPENSE> 559
<INCOME-PRETAX> (130)
<INCOME-TAX> 9
<INCOME-CONTINUING> (139)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (139)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
