<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 26, 1997
-------------------------------
Byron Preiss Multimedia Company, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 1-13084 13-3676574
- --------------------------------------------------------------------------------
State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
24 West 25th Street, New York, New York 10010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 989-6252
--------------------------
Not Applicable
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 2 ACQUISITION OR DISPOSITION OF ASSETS
On November 26, 1997, Byron Preiss Multimedia Company,
Inc. (the "Company"), acquired all of the issued and outstanding capital
stock of each of Multi Dimensional Communications, Inc., a New York
corporation ("MDC"), and New Media Schoolhouse, Inc., a New York
corporation ("NMS") pursuant to the terms of a Stock Purchase Agreement
(the "Stock Purchase Agreement"), dated as of November 26, 1997 among
the Company and each of Nicholas S. Vazzana ("Nicholas") and Elaine
Vazzana ("Elaine") (Elaine and Nicholas are collectively referred to
herein as the "Sellers"). Pursuant to the terms of the Stock Purchase
Agreement, the Company acquired from the Sellers all of the issued and
outstanding capital stock of each of MDC and NMS (the "Shares"), in
exchange for the following consideration (collectively, the
"Consideration"): (a) Thirty Six Thousand One Hundred Thirty-Three
Dollars ($36,133) deposited into escrow pursuant to the terms of an
escrow agreement; (b) Convertible Notes (the "Convertible Notes") in the
aggregate principal amount of Three Hundred Seventy-Five Thousand
Dollars ($375,000.00), which Convertible Notes are secured by a pledge
of, among other things, the Shares pursuant to the terms of the Pledge
Agreements (as defined below); and (c) 225,000 shares (the "Purchaser
Shares") of unregistered common stock, par value $.001 per share
("Common Stock"). Pursuant to the terms of the Stock Purchase Agreement,
the Purchaser agreed to guarantee an aggregate selling price of the
Purchaser Shares at $2.00 per share, before commissions or other
transaction fees, for each such share actually sold on a bona fide trade
on The NASDAQ Market System or such other exchange that the Common Stock
of the Company is then listed or traded during the period beginning one
year and ending two years from November 26, 1997.
The Convertible Notes bear interest at a rate of 6% per annum
from and after November 26, 1997 and are due on January 2, 2000 (the "Maturity
Date"). The outstanding principal balance of the Convertible Notes on December
31, 1997, together with interest accruing thereon, shall be repaid in 24 equal
monthly installments commencing February 1, 1998 and continuing on the first
business day of each succeeding month. The principal amount of the Convertible
Notes, at the holder's option, may be converted into the number of duly
authorized, validly issued, fully-paid and non assessable shares of Common Stock
(the "Conversion Shares") equal to the then unpaid principal amount of the
Convertible Note being converted, divided by $5.75, as may be adjusted from time
to time in accordance with the terms of the Convertible Notes. The Convertible
Notes may be prepaid at the Company's option.
Pursuant to the terms of the Convertible Notes, the entire
unpaid principal amount of the Convertible Notes, together with accrued interest
and charges thereon shall be due and payable upon the occurrence of an "Event of
Default" under the Convertible Notes. An "Event of Default" under the
Convertible Notes includes, such things as, (a) the Company's failure to make
any payment due thereunder within 20 business days after the due date therefor
and failure to make such payment for an additional 20 business days after
written notice of such non-
<PAGE>
payment; (b) the Company's breach of any material obligations under Section 5 of
the Convertible Note, relating to conversion of the Convertible Note, if such
breach has not been cured within 30 days; (c) a "Default" (as described below)
under the Pledge Agreement giving due recognition of any notice and cure
provisions thereof.
The indebtedness evidenced by the Convertible Notes are
secured by each of the Stock Pledge Agreement, dated as of November 26, 1997
between the Company and Elaine and the Stock Pledge Agreement, dated as of
November 26, 1997 between the Company and Nicholas (collectively, the "Pledge
Agreements").
Pursuant to the terms of the Pledge Agreements, the
Company, among other things, granted to the Sellers a continuing lien
and security interest in and to the Shares and the proceeds thereof. The
Company also agreed, among other things, (i) not to liquidate, dissolve,
merge or consolidate MDC or NMS or sell substantially all of their
assets, (ii) not to borrow money from any person other than the Company
or loan money to any person other than the Company and (iii) not to
sell, lease, assign or grant a lien on the Shares. In addition, the
Pledge Agreements generally provide that a "Default" shall occur upon
the occurrence of certain events described in the Pledge Agreements,
such as: (i) any "Event of Default" under the Convertible Notes; (ii)
failure to perform, observe or comply with a material provision of the
Pledge Agreements and cure such breach after written notice thereof;
(iii) liquidation, dissolution or termination of MDC or NMS; (iv)
bankruptcy of the Company, or (v) the Company's dissolution or inability
to pay debts or appointment of a trustee of the Company. Upon and after
the occurrence of a Default, the Sellers may, among other rights and
remedies, exercise their right to sell the Collateral, or any part
thereof in accordance with and subject to the provisions described in
the Pledge Agreements.
Pursuant to a Registration Rights Agreement (the "Registration
Rights Agreement"), dated as of November 26, 1997, the Company granted the
Sellers certain incidental "piggyback" registration rights pertaining to the
Purchaser Shares and the Conversion Shares.
In connection with the transactions contemplated by
the Stock Purchase Agreement, Nicholas and MDC entered into an
Employment Agreement, dated November 26, 1997 (the "Nicholas Employment
Agreement"). The Nicholas Employment Agreement commenced on November 26,
1997 and shall terminate on November 26, 2000, subject to the
possibility of earlier termination pursuant to the provisions thereof.
Pursuant to the terms of the Nicholas Employment Agreement, Mr. Nicholas
Vazzana shall be employed as the President of MDC. The Employment
Agreement provides, among other things, that Nicholas Vazzana shall
receive a "base salary" of not less than One Hundred Thousand Dollars
($100,00.00) per year and shall also be entitled to receive incentive
compensation in an amount equal to MDC's income before income taxes for
the year on a consolidated basis with NMS multiplied by 8%. Nicholas
Vazzana is also entitled to participate in and benefit from certain
benefits of the Company.
-2-
<PAGE>
In addition, Elaine and NMS entered into an Employment
Agreement, dated November 26, 1997 (the "Elaine Employment Agreement").
The Elaine Employment Agreement commenced on November 26, 1997 and shall
terminate on November 26, 2000, subject to the possibility of earlier
termination pursuant to the provisions thereof. Pursuant to the terms of
the Elaine Employment Agreement, Elaine Vazzana shall be employed as the
President of NMS. The Employment Agreement provides, among other things,
that Elaine Vazzana shall be entitled to receive (i) a "base salary" of
not less than Forty Thousand Dollars ($40,00.00) per year, incentive
bonus compensation, predicated upon NMS's successful attainment of
certain "revenue targets" and (iii) incentive compensation in an amount
equal to MDC's income before income taxes for the year on a consolidated
basis with NMS multiplied by 2%, Elaine Vazzana is also entitled to
participate in and benefit from certain benefits of the Company.
The amount of the Consideration paid by the Company to the
Sellers was determined through arms-length negotiation of the parties. The
Company intends to use MDC's and NMS's assets in substantially the same manner
as previously used. The Company anticipates that MDC's and NMS's business will
complement its existing business by, among other things, enhancing the Company's
capabilities to market content for educational and corporate clients.
The foregoing description of Stock Purchase Agreement, the
Convertible Note, the Stock Pledge Agreement and the Registration Rights
Agreement and the transactions contemplated thereby are not intended to be
complete and are qualified in their entirety by the complete text of such
agreements, copies of which are attached to this Form 8-K as exhibits 10.1
through 10.4, respectively.
-3-
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements and Pro Forma Financial
Information.
It is impracticable at this time for the Company to
provide the financial statements that may be required to be included herein. The
Company hereby undertakes to file such financial statements, if required, as
soon as practicable, but in no event later than sixty (60) days following the
date on which this report on Form 8-K is required to be filed.
(c) Exhibits
The following Exhibits are hereby filed as part of
this Current Report on Form 8-K.
EXHIBIT DESCRIPTION
10.1 Stock Purchase Agreement, dated as of November 26, 1997, among
Byron Preiss Multimedia Company, Inc. (the "Company") and each
of Nicholas Vazzana and Elaine Vazzana.
10.2 Form of Convertible Note, dated November 26, 1997
10.3 Form of Stock Pledge Agreement, dated as of November 26, 1997
10.4 Registration Rights Agreement, dated as of November 26, 1997,
among the Company, Nicholas Vazzana and Elaine Vazzana
-4-
<PAGE>
Signatures.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BYRON PREISS MULTIMEDIA COMPANY, INC.
By:/s/ James R. Dellomo
-------------------------------------
Name: James R. Dellomo
Title: Chief Financial Officer
Date: December 10, 1997
-5-
<PAGE>
EXHIBIT INDEX
10.1 Stock Purchase Agreement, dated as of November 26, 1997, among Byron
Preiss Multimedia Company, Inc. (the "Company") and each of Nicholas
Vazzana and Elaine Vazzana.
10.2 Form of Convertible Note, dated November 26, 1997
10.3 Form of Stock Pledge Agreement, dated as of November 26, 1997
10.4 Registration Rights Agreement, dated as of November 26, 1997, among
the Company, Nicholas Vazzana and Elaine Vazzana
<PAGE>
STOCK PURCHASE AGREEMENT
BY AND AMONG
BYRON PREISS MULTIMEDIA COMPANY, INC.
NICHOLAS S. VAZZANA
AND
ELAINE VAZZANA
With respect to the purchase of all of the Capital Stock of
MULTI DIMENSIONAL COMMUNICATIONS, INC. and
NEW MEDIA SCHOOLHOUSE, INC.
NOVEMBER 26, 1997
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement"), dated as of
November 26, 1997, by and among Nicholas S. Vazzana ("Nicholas"), Elaine Vazzana
("Elaine") (Elaine and Nicholas are referred to herein, simply, as a "Seller"
and together as the "Sellers") and Byron Preiss Multimedia Company, Inc., a New
York corporation (the "Purchaser").
W I T N E S E T H:
WHEREAS, Multi Dimensional Communications, a New York
corporation ("MDC") and New Media Schoolhouse, Inc., a New York corporation
("NMS") (MDC and NMS being hereinafter referred to herein as the "Companies")
are engaged principally in the business of producing, publishing and marketing
educational software; and
WHEREAS, the Sellers own all of the issued and outstanding
shares of capital stock of each of the Companies;
WHEREAS, the Sellers desire to sell, and the Purchaser desires
to purchase, all of the Securities (as hereinafter defined) on the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
respective mutual covenants, representations and warranties herein contained,
the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
Definitions
In addition to terms defined elsewhere in this Agreement, the
following terms when used in this Agreement shall have the meanings indicated
below:
"Affiliate" shall have the meaning specified in Rule 144 under
the Securities Act.
"Agreement" shall mean this Stock Purchase Agreement together
with all exhibits and schedules referred to herein.
"Closing" shall have the meaning set forth in Section 6.1.
"Closing Date" shall mean the date that the Closing takes
place.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Company Plans" shall have the meaning set forth in Section
4.26(b).
<PAGE>
"Consideration" shall have the meaning set forth in Section
2.2.
"Convertible Note" or "Convertible Notes" shall mean those
Convertible Promissory Notes of even date herewith from the Purchaser to each of
the Sellers, which Convertible Notes represent a portion of the Consideration
for the Securities.
"Elaine Employment Agreement" means that certain Employment
Agreement of even date herewith between Elaine Vazzanna and NMS.
"Employment Agreements" shall have the meaning set forth in
Section 4.26(a).
"Environmental Laws" shall have the meaning set forth in
Section 4.31.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agreement" means that certain Escrow Agreement of even
date herewith among the Sellers, the Purchaser, and the Escrow Agent.
"Escrow Agent" shall mean the person acting as the escrow
agent under the Escrow Agreement.
"Financial Statements" shall mean the balance sheets of the
Companies as of December 31, 1996, and the related statements of income, cash
flow and retained earnings, for the year ended December 31, 1996, including any
related notes, and the balance sheet of the Companies as of September 30, 1997,
and the related statements of income, cash flow and retained earnings for the
nine months ended September 30, 1997.
"Guaranty" shall mean all liabilities or obligations of any
Person, to guaranty, directly or indirectly, any indebtedness or other
obligations of any other Person in any manner by such Person, through an
agreement, contingent or otherwise, to purchase such indebtedness or obligation,
or to purchase or sell property or services, primarily for the purpose of
enabling the debtor to make payment of such indebtedness or obligation or to
guarantee the payment to the owner of such indebtedness or obligation against
loss, or to supply funds to or in any manner invest in the debtor, or otherwise.
"Hazardous Substances" shall have the meaning set forth in
Section 4.31.
"Indemnified Party" shall have the meaning set forth in
Section 5.3(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5.3(c).
"Intellectual Property" shall have the meaning set forth in
Section 4.20.
-2-
<PAGE>
"Investments" shall mean, with respect to any Person, all
advances, loans or extensions of credit to any other Person, all purchases or
commitments to purchase any stock, bonds, notes, debentures or other securities
of any other Person, and any other investment in any other Person, including
partnerships or joint ventures (whether by capital contribution or otherwise) or
other similar arrangement (whether written or oral) with any Person, including
but not limited to arrangements in which (i) the Person shares profits and
losses, (ii) any such other Person has the right to obligate or bind the Person
to any third party, or (iii) the Person may be wholly or partially liable for
the debts or obligations of such partnership, joint venture or other
arrangement.
"Leased Property" shall have the meaning set forth in Section
4.17.
"Lease" shall have the meaning set forth in Section 4.17.
"Licenses" shall have the meaning set forth in Section 4.19.
"Litigation" shall have the meaning set forth in Section 3.5.
"Material Agreements" shall have the meaning set forth in
Section 4.28.
"MDC Common Stock" shall mean the common stock of MDC, no par
value per share.
"Nicholas Employment Agreement" means that certain Employment
Agreement of even date herewith between Nicholas S. Vazzana and MDC.
"NMS Common Stock: shall mean the common stock of NMS, no par
value per share.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean any natural person, corporation,
unincorporated organization, partnership, limited liability company,
association, joint stock company, joint venture, trust or government, or any
agency or political subdivision of any government or any other entity.
"Pledge Agreement" or "Pledge Agreements" shall mean those
Pledge Agreements of even date herewith between the Purchaser and each of the
Sellers, which Pledge Agreement secures the Purchaser's obligations to the
Sellers under the Convertible Notes.
"Product" shall have the meaning set forth in Section 4.30.
"Purchaser Common Stock" shall mean the common stock of the
Purchaser, par value $.001 per share.
-3-
<PAGE>
"Purchaser Financial Statements" shall have the meaning set
forth in Section 3.11.
"Purchaser Shares" shall have the meaning set forth in Section
2.2, which Purchaser Shares constitute a portion of the Consideration for the
Shares.
"Registration Rights Agreements" shall mean that certain
Registration Rights Agreement of such date herewith between the Purchaser and
the Sellers.
"Related Party" shall have the meaning set forth in Section
4.22.
"SEC Documents" shall mean the following documents as filed
with the Commission: (i) Purchaser's Annual Reports on Form 10-KSB for the years
ended December 31, 1996 and December 31, 1995, (ii) the Purchaser's Quarterly
Reports on Form 10-QSB for the quarters ended March 31, 1996, June 30, 1996,
September 30, 1996, March 31, 1997, June 30, 1997 and the Purchaser's Form
10-QSB for the period ended September 30, 1997 (a copy of which is attached to
Schedule 3.12); (iii) the Purchaser's Proxy Statements in connection with the
1996 Annual Meeting of Shareholders and the 1997 Annual Meeting of Shareholders;
(iv) the Registration Statement on Form SB-2 filed with the Commission on or
about May 10, 1996; (vi) the Current Reports on Form 8-K filed with the
Commission during 1997.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securities" shall mean all of the issued and outstanding
capital stock of each of the Companies.
"Subsidiary" of any Person shall mean any Person, in which
such Person owns, directly or indirectly, an equity interest of more than fifty
percent (50%), or which may effectively be controlled, directly or indirectly,
by such Person.
ARTICLE II
Purchase and Sale of Securities; Consideration
2.1 Purchase and Sale of Securities. Subject to the terms and
conditions set forth herein, at the Closing, each of the Sellers shall sell to
Purchaser, and Purchaser shall purchase from each of the Sellers, all of such
Sellers' right, title and interest in and to the Securities indicated next to
such Sellers' name on Schedule A hereto, which shall collectively constitute one
hundred percent (100%) of the issued and outstanding capital stock of each of
the Companies. At the Closing, each of the Sellers shall deliver to Purchaser
all of the certificates representing the Securities indicated next to such
Sellers name on Schedule A, together with stock powers separate from the
certificates duly executed by each of the Sellers in blank and sufficient to
convey to Purchaser good and marketable title to the Securities free and clear
of any
-4-
<PAGE>
and all claims, liens, charges, security interests, pledges or encumbrances of
any nature whatsoever and together with all accrued benefits and rights
attaching thereto.
2.2 Consideration. The aggregate consideration to be paid at
the Closing (collectively, the "Consideration") shall consist of (a) the
Convertible Notes, in the original principal amount of Three Hundred
Seventy-Five Thousand Dollars ($375,000.00), which Convertible Notes are secured
by a pledge of the Securities pursuant to the Pledge Agreement; (b) Two Hundred
Twenty-Five Thousand (225,000) shares of unregistered Purchaser Common Stock
(the "Purchaser Shares"); and (c) Thirty Six Thousand One Hundred Thirty Three
Dollars ($36,133) payable in immediately available funds, which shall be
deposited into escrow pursuant to the terms of the Escrow Agreement. The
Consideration shall be allocated as set forth on Schedule B hereto. The
Purchaser shall pay all transfer taxes, stamp taxes, or sales taxes, if any,
arising out of the purchase of the Shares. The Purchaser Shares shall possess
the registration rights set forth in the Registration Rights Agreement.
2.3 Purchase Price Adjustment. Purchaser hereby agrees to
guarantee an aggregate selling price of the Purchaser Common Stock at $2.00 per
share, before commissions or other transaction fees, for each such share
actually sold on a bona fide trade on The NASDAQ Market System or such other
exchange that the Purchaser Common Stock is then listed or traded during the
period beginning one (1) year and ending two (2) years from the date hereof (the
"Determination Period"). To the extent that Sellers sell any or all of the
Purchaser's Shares during the Determination Period, Purchaser will pay to the
Sellers the amount of such Seller's Shortfall in cash or stock (the "Shortfall
Shares"), at Purchaser's sole discretion. For purposes of this Agreement, a
"Shortfall" shall mean the difference between (A) the aggregate sales price,
before commissions or other transaction fees, obtained by a Seller in respect of
all of the Purchaser's Shares sold during the Determination Period less (B) the
number of such Purchaser's Shares sold by such Seller during the Determination
Period multiplied by $2.00. In the event of a Shortfall, the Purchaser shall
deliver either cash or Shortfall Shares to the Sellers, within thirty (30) days
of its receipt of written notice by the Sellers of such Shortfall accompanied
with documentation that is reasonably acceptable to the Purchaser that supports
such Shortfall calculation. In the event of a Shortfall, the Purchaser shall
deliver either cash or Shortfall Shares to the Sellers, within forty (40) days
of its receipt of written notice, which notice shall be given no earlier than at
the end of the Determination Period, by the Sellers of such Shortfall
accompanied with documentation that is reasonably acceptable to the Purchaser
that supports such Shortfall calculation. In the event that Purchaser elects to
make up such Shortfall with Shortfall Shares, the value of a Shortfall Share
shall be the average of the closing bid and ask price of the Common Stock for
the twenty (20) business days immediately following the end of the Determination
Period.
-5-
<PAGE>
ARTICLE III
Representations and Warranties of the Purchaser
In order to induce the Sellers to enter into this Agreement
and to consummate the transactions contemplated hereby, the Purchaser makes the
following representations and warranties to the Sellers:
3.1 Organization; Standing and Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York. The Purchaser is duly qualified to transact business
as a foreign corporation in all jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the business, financial condition, results of operations or properties of
Purchaser. The Purchaser has all requisite right, power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The Purchaser has the requisite power and authority to own
or lease and operate its properties and conduct its business as presently
conducted.
3.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement by the Purchaser and the other documents to which
Purchaser is a signatory thereto entered into pursuant to or in connection with
the transactions contemplated by this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby, including without limitation
the issuance and delivery of the Purchaser Shares and the Convertible Note have
been duly authorized by all requisite corporate action on the part of the
Purchaser. This Agreement, the Convertible Notes, the Pledge Agreements, the
Registration Rights Agreement, and all other documents executed by the Purchaser
in connection with this Agreement have been duly executed and delivered by the
Purchaser and constitute legal, valid and binding obligations of the Purchaser,
enforceable in accordance with their terms, except to the extent that
enforcement is limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity.
3.3 No Violation or Conflict. The execution, delivery and
performance of this Agreement by the Purchaser and the consummation by the
Purchaser of the transactions contemplated hereby: (a) do not violate or
conflict with any provision of law or regulation, or any writ, order or decree
of any court or governmental or regulatory authority (the violation of which
would interfere in any material respect with Purchaser's ability to consummate
the transactions contemplated hereby) applicable to the Purchaser, or any
provision of the Purchaser's Certificate of Incorporation or Bylaws; and (b) do
not, with or without the passage of time or the giving of notice, result in the
breach of, or constitute a default, cause the acceleration of performance or
require any consent under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of the Purchaser pursuant to, any
instrument or agreement to which the Purchaser is a party or by which the
Purchaser or its properties may
-6-
<PAGE>
be bound or affected in any material respects, other than instruments or
agreements as to which consent shall have been obtained at or prior to the
Closing (each of which instruments or agreements is specifically identified in
Schedule 3.3 hereto) or the transactions contemplated hereby.
3.4 Consents of Governmental Authorities and Others. Except as
set forth on Schedule 3.4, no consent, approval or authorization of, or
registration, qualification or filing with, any federal, state or local
governmental or regulatory authority, or any other Person, is required to be
made by the Purchaser in connection with the execution, delivery or performance
of this Agreement by the Purchaser or the consummation by the Purchaser of the
transactions contemplated hereby, except where the failure to obtain such would
not have a material adverse effect on the business, financial condition, results
of operations or properties of Purchaser.
3.5 Litigation. Except as set forth on Schedule 3.5, there are
no material actions, suits, investigations, claims or proceedings ("Litigation")
pending or, to the knowledge of the Purchaser, threatened before any court or by
or before any governmental or regulatory authority or arbitrator with respect to
the Purchaser or any of its Subsidiaries.
3.6 Brokers. With the exception of Frost & Berman, Inc., the
Purchaser has not employed any financial advisor, broker or finder in connection
with the transactions contemplated by this Agreement and has not incurred (and
will not incur) any broker's, finder's, investment banking or similar fees,
commissions or expenses in connection with the transactions contemplated by this
Agreement. The Purchaser will be solely responsible for all fees of Frost &
Berman, Inc. incurred in connection with this transaction.
3.7 Compliance. The Purchaser is in compliance with all
federal, state, local and foreign laws, ordinances, regulations, judgments,
rulings and orders applicable to it including, without limitation, those
relating to: (a) the development, manufacture, packaging, distribution and
marketing of its products; and (b) employment, safety and health; except where
the failure to be in compliance would not have a material adverse effect on the
business, financial condition, results of operations or properties of Purchaser.
The Purchaser is not subject to any judicial, governmental or administrative
order, judgment or decree.
3.8 Charter, Bylaws and Corporate Records. True and complete
copies of: (a) the Certificate of Incorporation of the Purchaser, as amended and
in effect on the date hereof, and (b) the Bylaws of the Purchaser, as amended
and in effect on the date hereof, have been previously delivered to the Seller.
3.9 Capitalization. The authorized capital stock of the
Purchaser consists of: (a) 30,000,000 shares of common stock, $.001 par value,
of which 7,174,438 shares are issued and outstanding as of the date hereof; and
(b) 5,000,000 shares of preferred stock, of which there are no shares issued and
outstanding. All shares of the Purchaser's issued and outstanding capital stock
have been duly authorized, are validly issued and outstanding, and are fully
paid and nonassessable. No securities issued by the Purchaser from the date of
its incorporation to
-7-
<PAGE>
the date hereof were issued in violation of any statutory or common law
preemptive rights. There are no dividends which have accrued or been declared
but are unpaid on the capital stock of the Purchaser. Except as set forth on
Schedule 3.3, all permits or authorizations required to be obtained from or
required to be effected with any Person in connection with the Purchaser Shares
have been obtained or effected.
3.10 Rights, Warrants, Options. Except as set forth on
Schedule 3.10, or disclosed in the SEC Documents, the Purchaser does not have
outstanding any: (a) securities or instruments convertible into or exercisable
for any of the capital stock or other equity interests of the Purchaser; (b)
options, warrants, subscriptions or other rights to acquire capital stock or
other equity interests of the Purchaser; or (c) commitments, agreements or
understandings of any kind, including employee benefit arrangements, relating to
the issuance or repurchase by the Purchaser of any capital stock or other equity
interests of the Purchaser, any such securities or instruments convertible into
or exercisable for capital stock or other equity interests of the Purchaser or
any such options, warrants or rights.
3.11 Financial Statements. The financial statements of the
Purchaser contained in its SEC Documents (collectively, the "Purchaser Financial
Statements"): (a) have been prepared in accordance with the books of account and
records of the Purchaser; (b) fairly present in all material respects the
Purchaser's financial condition and the results of its operations at the dates
and for the periods specified therein; and (c) have been prepared in accordance
with GAAP, consistently applied with prior periods.
3.12 Absence of Undisclosed Liabilities. Except as disclosed
in the Purchaser Financial Statements, or Schedule 3.12, to the best of the
Purchaser's knowledge, (i) the Purchaser does not have any material direct or
contingent liabilities, commitments or obligations (other than nonmaterial
liabilities, commitments or obligations incurred since the date of the Purchaser
Financial Statements solely in the ordinary course of business consistent with
past practices to Persons who are not Affiliates of the Purchaser) or any
unrealized or anticipated losses from any commitments of the Purchaser and (ii)
there is no reasonable basis for assertion against the Purchaser of any such
liability, commitment or obligation.
3.13 Employment Policies. Schedule 3.13 contains a list of all
of the Purchaser's material written employee policies, employee manuals or other
material written statements of rules or policies as to working conditions,
vacation and sick leave, a complete copy of each of which has been made
available to Seller.
3.14 Labor Relations. The Purchaser is not a party to,
otherwise bound by or overtly threatened with any labor or collective bargaining
agreement. Without limiting the generality of this Section 3.14, except as
identified on Schedule 3.14: (a) no unfair labor practice complaints have been
filed against the Purchaser with any governmental or regulatory agency, of which
the Purchaser has received written notice; (b) the Purchaser has not received
any written notice or communication reflecting an intention or threat to file
any such complaint; (c) no Person has made or, to the best of Purchaser's
knowledge, threatened any claim, against
-8-
<PAGE>
the Purchaser under any statute, regulation or ordinance relating to
discrimination with respect to employees or employment practices; and (d) no
claim is pending or, to the best of Purchaser's knowledge, threatened against
the Purchaser in connection with the United States Wage and Hour Law, the
Americans with Disabilities Act, the Occupational Safety and Health Act or
similar law.
3.15 Title to Purchaser Shares. Subject to the terms and
conditions of this Agreement, at the Closing the Purchaser will transfer and
convey, and the Sellers will acquire, good and marketable title to the Purchaser
Shares delivered to them pursuant to the terms of this Agreement, free and clear
of all liens, encumbrances, pledges, security interests and claims whatsoever.
ARTICLE IV
Representations and Warranties of the Seller
In order to induce the Purchaser to enter into this Agreement
and to consummate the transactions contemplated hereby, the Sellers, jointly and
severally, make the following representations and warranties to the Purchaser:
4.1 Organization. Each of the Companies is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Each of the Companies is duly qualified to transact business as a
foreign corporation in all jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification and the
failure to so qualify would have a material adverse effect on the business,
financial condition, results of operations or properties of any of the
Companies. Each jurisdiction in which the Companies are so qualified is listed
on Schedule 4.1 hereto. Each of the Companies has all requisite right, power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. Each of the Companies has the requisite power
and authority to own or lease and operate its properties and conduct its
business as presently conducted.
4.2 Authorization; Enforceability. The Sellers each have the
capacity to execute, deliver and perform this Agreement and the other documents
to which the Sellers are a signatory thereto entered into pursuant to or in
connection with the transactions contemplated by this Agreement. All documents
executed and delivered by each of the Companies pursuant to and in connection
with the transactions contemplated by this Agreement have been duly authorized
by all requisite corporate action on the part of the Company, and this Agreement
and all documents to be executed and delivered by the Sellers and the Companies
pursuant to this Agreement have been and will be duly executed and delivered by
each of the Sellers and the Companies and constitute the legal, valid and
binding obligations of the Sellers and the Companies, enforceable in accordance
with their respective terms, except to the extent that their
-9-
<PAGE>
enforcement is limited by bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally and by
general principles of equity.
4.3 No Violation or Conflict. The execution, delivery and
performance of this Agreement by each of the Sellers and the consummation by
each of the Sellers of the transactions contemplated hereby: (a) do not violate
or conflict with any law or regulation (whether federal, state or local), writ,
order or decree of any court or governmental or regulatory authority applicable
to any of the Companies, or any provision of the Companies Certificate of
Incorporation or Bylaws; and (b) except as set forth on Schedule 4.3 hereto, do
not, with or without the passage of time or the giving of notice, result in the
breach of, or constitute a default, cause the acceleration of performance or
require any consent under, or result in the creation of any lien, charge or
encumbrance upon any property or assets of any of the Sellers or the Companies
pursuant to any instrument or agreement to which any of the Sellers or the
Companies are a party or by which any of the Sellers or the Companies or their
respective properties may be bound or affected, other than instruments or
agreements as to which consent shall have been obtained at or prior to the
Closing (each of which instruments or agreements is specifically identified in
Schedule 4.3 hereto).
4.4 Consents of Governmental Authorities and Others. Except as
set forth on Schedule 4.4, no consent, approval or authorization of, or
registration, qualification or filing with, any federal, state or local
governmental or regulatory authority, or any other Person, is required to be
made by any of the Sellers or the Companies in connection with the execution,
delivery or performance of this Agreement by the Sellers or the consummation by
the Sellers of the transactions contemplated hereby, except where the failure to
obtain such would not have a material adverse effect on the business, financial
condition, results of operations or properties of the Companies, collectively.
4.5 Conduct of Business. Except as disclosed on Schedule 4.5
hereto or as contemplated by this Agreement, since September 30, 1997, each of
the Companies has conducted its business in the ordinary and usual course
consistent with past practices and there has not occurred any material adverse
effect in the business, financial condition, results of operations or properties
of the Company. Without limiting the generality of the foregoing, except as
disclosed on Schedule 4.5 or as contemplated by this Agreement, since September
30, 1997, none of the Companies has: (a) amended its Certificate of
Incorporation or Bylaws; (b) issued, sold or authorized for issuance or sale,
shares of any class of its securities (including, but not limited to, by way of
stock split or dividend) or any subscriptions, options, warrants, rights or
convertible securities, or entered into any agreements or commitments of any
character obligating it to issue or sell any such securities; (c) redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of its
capital stock or any option, warrant or other right to purchase or acquire any
such shares; (d) suffered any damage, destruction or loss, whether or not
covered by insurance, which has had or could have a material adverse effect on
business, financial condition, results of operations or properties of any of the
Companies; (e) granted or made any mortgage or pledge or subjected itself or any
of its properties or assets to any lien, charge or encumbrance of any kind,
except statutory liens arising in the ordinary course of
-10-
<PAGE>
business and liens for taxes not currently due; (f) made or committed to make
any capital expenditures in excess of Five Thousand Dollars ($5,000.00); (g)
become subject to any Guaranty; (h) granted any increase in the compensation
payable or to become payable to directors, officers or employees, except as
disclosed on Schedule 4.24, and has not modified any bonus, pension,
profit-sharing or other material employee benefit plan in a manner that will
materially increase the costs thereof; (i) entered into any Material Agreement
not disclosed in the schedules to this Agreement, or terminated any existing
Material Agreement (except through completion) or received notice of any such
termination; (j) experienced any strike, work stoppage or slowdown; (k) received
notice of any material adverse change in any material relationship with any
financial institution or any customer or supplier required to be identified on
Schedule 4.21, nor is it aware of any circumstances likely to lead to such a
material change; or (l) experienced any other event or condition of any
character (including any delay in the development of the Products) which since
September 30, 1997 has had or is likely to have a material adverse effect on the
business, financial condition, results of operations or properties of the
Company.
4.6 Litigation. Except as set forth on Schedule 4.6, there is
no Litigation pending or to the best of the Sellers or any of the Companies
knowledge threatened before any court or by or before any governmental or
regulatory authority or arbitrator: (a) affecting any of the Companies (as
plaintiff or defendant) which could, individually or in the aggregate, have a
material adverse effect on the business, financial condition, results of
operations or properties of any of the Companies; or (b) against any of the
Sellers or the Companies relating to the Securities or the transactions
contemplated by this Agreement. Schedule 4.6 sets forth a list of any Litigation
commenced against any of the Companies in the past year.
4.7 Brokers. With the exception of JPMC Associates, neither
any of the Sellers nor any of the Companies have employed any financial advisor,
broker or finder, and neither of them has incurred or will incur any broker's,
finder's, investment banking or similar fees, commissions or expenses in
connection with the transactions contemplated by this Agreement. The Sellers
will be solely responsible for all fees of JPMC Association in connection with
this transaction.
4.8 Compliance. Each of the Companies is in compliance with
all federal, state, local and foreign laws, ordinances, regulations, judgments,
rulings and orders applicable to it including, without limitation, those
relating to: (a) the development, manufacture, packaging, distribution and
marketing of the Products; and (b) employment, safety and health, except where
the failure to be in compliance would not have a material adverse effect on the
business, financial condition, results or operations or properties of any of the
Companies. None of the Companies are subject to any judicial, governmental or
administrative order, judgment or decree.
4.9 Charter, Bylaws and Corporate Records. True and complete
copies of: (a) the Certificate of Incorporation of each of the Companies, as
amended and in effect on the date hereof, (b) the Bylaws of each of the
Companies, as amended and in effect on the date hereof,
-11-
<PAGE>
and (c) the minute books of each of the Companies have been previously delivered
to the Purchaser. Each of the Companies minute books contain complete and
accurate records of all meetings and other corporate actions of the board of
directors, committees of the board of directors, incorporators and shareholders
of the Company from the date of its incorporation to the date hereof.
4.10 Subsidiaries and Investments. None of the Companies has
Subsidiaries or Investments.
4.11 Capitalization. The authorized capital stock of MDC
consists of 200 shares of common stock, no par value per share, of which 102
shares are issued and outstanding and 20,000 shares of preferred stock par value
$1.00 per share, of which 200 shares are issued and outstanding. The authorized
capital stock of NMS consists of 200 shares of common stock, no par value per
share, of which 10 shares are issued and outstanding. All issued and outstanding
shares of each of the Companies capital stock have been duly authorized, are
validly issued and outstanding, and are fully paid and nonassessable. No
securities issued by any of the Companies from the date of its incorporation to
the date hereof were issued in violation of any statutory or common law
preemptive rights. There are no dividends which have accrued or been declared
but are unpaid on the capital stock of any of the Companies. All taxes required
to be paid in connection with the issuance and any transfers of the Companies
capital stock have been paid. All permits or authorizations required to be
obtained from or required to be effected with any Person in connection with any
and all issuances of securities of any of the Companies from the date of each of
the Companies incorporation to the date hereof have been obtained or effected
and all securities of each of the Companies have been issued and are held in
accordance with the provisions of all applicable securities or other laws. The
Securities constitute one hundred percent (100%) of the issued and outstanding
capital stock of the Companies.
4.12 Rights, Warrants, Options. There are no outstanding: (a)
securities or instruments convertible into or exercisable for any of the capital
stock or other equity interests of any of the Companies; (b) options, warrants,
subscriptions or other rights to acquire capital stock or other equity interests
of any of the Companies; or (c) commitments, agreements or understandings of any
kind, including employee benefit arrangements, relating to the issuance or
repurchase by the Company of any capital stock or other equity interests of any
of the Companies, any such securities or instruments convertible into or
exercisable for capital stock or other equity interests of any of the Companies
or any such options, warrants or rights.
4.13 Financial Statements. The Sellers have previously
delivered to the Purchaser true and complete copies the Financial Statements of
each of the Companies. The Financial Statements: (a) have been prepared in
accordance with the books of account and records of each of the Companies; and
(b) fairly present in all respects each of the Companies financial condition and
results of operations at the dates and for the periods specified in the those
statements; (c) have been prepared in all material respects in accordance with
United States generally accepted accounting principals ("GAAP") in consistently
applied with prior periods. None of the sales reflected on the statement of
income of NMS for the year ended December
-12-
<PAGE>
31, 1996 and nine month period ended September 30, 1997, respectively, represent
sales made by NMS to MDC.
4.14 Absence of Undisclosed Liabilities. Except (a) as
disclosed in the Financial Statements, or (b) as disclosed in Schedule 4.14,
none of the Companies have any direct or contingent liabilities, commitments or
obligations (other than nonmaterial liabilities, commitments or obligations
incurred since the date of said Financial Statements solely in the ordinary
course of business consistent with past practices to Persons who are not
Affiliates of the Sellers or the Companies) or any unrealized or anticipated
losses from any commitments of any of the Companies and there is no reasonable
basis for assertion against the Company of any such liability, commitment or
obligation.
4.15 Title to Shares. The Sellers are the record and
beneficial owners of the Securities and the Securities are owned free and clear
of any liens, encumbrances, pledges, security interests and claims whatsoever,
including, without limitation, claims or rights under any voting trust
agreements, shareholder agreements or other agreements. Subject to the terms and
conditions of this Agreement and the Pledge Agreement, at the Closing the
Sellers will transfer and convey, and the Purchaser will acquire, good and
marketable title to the Securities, free and clear of all liens, encumbrances,
pledges, security interests and claims whatsoever. Upon the transfer of the
Securities to Purchaser, each of the Companies will posses ownership of its
respective entire business necessary to operate the Companies as an on-going
concern, as such business is presently being conducted.
4.16 Title to and Condition of Personal Property. Each of the
Companies has good and marketable title to each item of equipment and other
personal property, tangible and intangible, included as an asset in the
Financial Statements dated December 31, 1996 or acquired since such date (other
than property subsequently utilized or disposed of in the ordinary course of
business since December 31, 1996 to persons who are not Affiliates of the
Companies or Sellers), free and clear of any security interests, liens, claims,
charges or encumbrances whatsoever, except as set forth in Schedule 4.16 hereto
or as set forth in the Financial Statements dated December 31, 1996. Except as
set forth in Schedule 4.16, all tangible personal property owned by any of the
Companies or used by any of the Companies on the date hereof in the operation of
its business is in good operating condition and in a good state of maintenance
and repair. Except for the Lease, personal property leased to any of the
Companies and Intellectual Property licensed to any of the Companies, there are
no material assets owned by any third party which are used in the operation of
the business of any of the Companies, as presently conducted or proposed to be
conducted.
4.17 Real Property. None of the Companies own any fee simple
interest in real property or sublease any real property. None of the Companies
lease any real property other than as set forth on Schedule 4.17, which sets
forth the street address of the sole parcel of real property leased by the
Companies (the "Leased Property"). The Sellers have previously delivered to the
Purchaser a true and complete copy of the lease, as amended to date (the
"Lease"), relating to the Leased Property. Each of the Companies enjoy a
peaceful and
-13-
<PAGE>
undisturbed possession of the Leased Property. No person other than the
Companies has any right to use or occupy the Leased Property. The Lease is in
full force and effect and is a valid and legally binding obligation of each of
the Companies and, to the best of Sellers knowledge, the landlord thereto. All
rent and other sums and charges payable under the Lease are current, no notice
of default or termination under the Lease is outstanding, no termination event
or condition or uncured default on the part of any of the Companies and, to the
best knowledge of the Sellers, the landlord exists under the Lease, and no event
has occurred and no condition exists which, with the giving of notice or the
lapse of time or both, would constitute such a default or termination event or
condition by the Sellers. None of the Companies have experienced any material
interruption in the services provided to the Leased Property within the past
year. To the best of the Sellers knowledge, the landlord under the Lease has no
plans to make any material alteration to the Leased Property, the cost of which
would be borne in any part by the Companies except as otherwise set forth on
Schedule 4.17.
All permits, licenses, franchises, approvals and
authorizations of all governmental authorities having jurisdiction over the
Leased Property required to have been issued to any of the Companies to enable
the Leased Property to be lawfully occupied and used for all of the purposes for
which it is currently occupied are, as of the date hereof, in full force and
effect. Neither the Sellers nor any of the Companies has received or been
informed by a third party of the receipt by it of any notice from any
governmental authority having jurisdiction over any Leased Property or from any
insurance organization threatening a suspension, revocation, modification or
cancellation of any real property permit or of any insurance policies and, to
the best knowledge and belief of Sellers and the Companies, there is no basis
for the issuance of any such notice or the taking of any such action.
There are no liabilities (other than rent and other sums and
charges regularly payable) associated with the Lease including, without
limitation, any liability under any laws or regulation, which is or which may
become payable by Purchaser, with the exception of any Environmental Laws, which
are addressed in Section 4.31 below.
4.18 Insurance. Schedule 4.18 sets forth a true and complete
list of all insurance policies providing insurance coverage of any nature to any
of the Companies. The Sellers have previously made available to the Purchaser a
true and complete copy of all of such insurance policies, as amended to the date
hereof. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and each of the Companies has
complied with all terms and conditions of such policies, including premium
payments. None of the insurance carriers has indicated to Sellers or any of the
Companies an intention to cancel any such policy. Except as set forth on
Schedule 4.18, none of the Companies has a claim pending against any of the
insurance carriers under any of such policies and there has been no actual or
alleged occurrence of any kind which may give rise to any such claim.
4.19 Licenses. Each of the Companies holds all governmental
franchises, authorizations, permits, certificates, variances, exemptions, orders
and approvals, domestic or foreign (collectively, the "Licenses") which are
required or utilized in the operation of the
-14-
<PAGE>
business of the Companies. Schedule 4.19 lists all the Licenses. Each of the
Companies is in substantial compliance with, and has conducted its business so
as to substantially comply with, the terms of its respective Licenses. To the
best knowledge of the Sellers, none of the Companies has engaged in any activity
that would cause revocation or suspension of any such Licenses. No action or
proceeding looking to or contemplating the revocation or suspension of any such
Licenses is pending or, to the knowledge of the Sellers or the Companies,
threatened.
4.20 Proprietary Rights.
(a) Set forth on Schedule 4.20 is a list and
description of all copyrights, copyright registrations, copyright registration
applications, patents, patent registrations, patent registration applications,
trade or service marks, trade or service mark registrations or applications,
trade names, trade name registrations, trade name registration applications,
logo types, processes, inventions, designs, technical data, trade secrets,
know-how, formulae, software, source code and documentation and all tangible
embodiments thereof (in whatever form or medium) applied for, issued to or owned
by any of the Companies or which are licensed and franchised to any of the
Companies, or in which any of the Companies has a material interest and all
similar intellectual property rights (whether or not any registration or filing
has been made in respect thereto) (collectively, the "Intellectual Property").
Except as set forth on Schedule 4.20: (a) the Companies are the sole and
exclusive owners of all right, title and interest in and to all of the
Intellectual Property and in and to each invention, software, trade secret,
technology, product, composition, formula, method of process used by the
Companies, and has the exclusive right to use and license the same, free and
clear of any claim or conflict with the rights of others; (b) no royalties or
fees (license or otherwise) are payable by any of the Companies to any Person by
reason of the ownership or use of any of the Intellectual Property; (c) there
have been no claims made against any of the Companies asserting the invalidity,
abuse, misuse, or unenforceability of any of the Intellectual Property, and to
the best of Sellers knowledge, there are no reasonable grounds for any such
claims; (d) none of the Companies has made any claim of any violation or
infringement by others of its rights in the Intellectual Property, and to the
best of Sellers' knowledge, no reasonable grounds for such claims exist; (e)
none of the Companies has received any written notice or, to the knowledge of
the Sellers other type of overt notice that it is in conflict with or infringing
upon the asserted rights of others in connection with the Intellectual Property
and neither the use of the Intellectual Property by any of the Companies, the
operation of its business, the manufacture of its products, nor any formula,
method, process, part or material employed by any of the Companies in connection
therewith, is to the best of the Companies and Sellers' knowledge infringing or
has infringed upon any rights or others; (f) the Intellectual Property includes
all material rights necessary for the Companies to be legally entitled to
conduct its business as presently being conducted; (g) no material interest or
rights of the Companies to any Intellectual Property has been assigned,
transferred, licensed or sublicensed by the Companies to third parties outside
of the ordinary course of business.
(b) Each of the Companies has all necessary
software, copyrights and other rights to publish its existing titles, subject to
the term of the licenses granted to the
-15-
<PAGE>
Companies with respect to such titles. Schedule 4.20(b) hereto sets forth a
true, complete and correct list of (i) all titles (both published, unpublished
and in process) and primary licensors, (ii) each license agreement in respect of
Intellectual Property pursuant to which any of the Companies has granted or
licensed rights, (iii) for primary titles or imprints in existence as of the
date hereof, each registration with, filing in or issuance by a governmental
agency or authority of the United States, or of any of the states thereof, or of
foreign jurisdictions by the Companies or any of its employees or consultants
with respect thereto, and (iv) each material agreement with a third party
pursuant to which each such third party is developing in excess of 25% of any
title.
(c) Except as set forth on Schedule 4.20(c) hereto,
(i) subject to and/or with the exception of royalty
obligations and any other contractual restrictions
specifically described in Section 4.20 (including
the Schedules thereto), the Companies own, have the
right to use, sell, license, prepare derivative
works for, or dispose of all Intellectual Property
required for or incident to the development,
manufacture, operation and sale of all products and
services in the manner currently or reasonably
expected to be sold by the Companies free and clear
of any rights, liens or claims of others, and has
the right to bring actions for any infringement or
misappropriation of the Intellectual Property;
(ii) the execution, delivery and performance of
this Agreement and the consummation of the
agreements contemplated herein will not breach,
violate or conflict with any instrument or
agreement governing any Intellectual Property right
or in any way exclude the right of the Companies to
use, sell, license or dispose of or bring any
action for the infringement of, any Intellectual
Property right;
(iii) the manufacture, marketing, modification,
license, sale or use of the Intellectual Property
used by the Companies in connection with the
conduct or operation of any of the Companies
business does not violate any license or agreement
with any third party or infringe any license or
agreement with any third party or infringe any
proprietary right or interest of any other party;
and there are no pending or, to any of the
Companies or the Sellers knowledge, threatened
claims or litigation contesting the validity,
ownership or right to use, sell, license or dispose
of any Intellectual Property that is required in
connection with the conduct or operation of the
Companies' business, nor have the Companies
received any written notice asserting that any
Intellectual Property right, or the proposed use,
sale, license or disposition thereof by it
conflicts or will conflict with the rights of any
other party, nor, to the
-16-
<PAGE>
knowledge of the Sellers, is there any reasonable
basis for any such assertion;
(iv) each of the Companies has taken reasonably
prudent measures to protect confidential
Intellectual Property; all persons engaged or
employed by the Companies in any capacity having
access to or knowledge of the Intellectual Property
of a confidential nature that is necessary or
required or otherwise used for or in connection
with the conduct or operation of the Companies
business have entered into appropriate
non-disclosure agreements with the Companies;
(v) to the Sellers' or Companies' knowledge, none
of the Companies has disposed of or permitted to
lapse any rights to the use of any Intellectual
Property;
(vi) no Person (except for employees of the
Companies whose rights are limited to those which
are for the benefit of the Companies) has any
current, conditional or contingent right to have
available to it any Intellectual Property
(including, without limitation, source codes in
respect of software) which is generally not
available to the public and/or which is or ought
reasonably to be considered confidential or
proprietary information; and
(vii) The Companies currently possess all licenses
and sublicenses required to operate the business of
the Companies and are not in default under any said
licenses and sublicenses.
(d) No payments, including maintenance fees, filings or
registrations are required to be made so as to maintain the Intellectual
Property in full force and effect.
4.21 Major customers and Suppliers; Supplies. Set forth on
Schedule 4.21 is a list each of the Companies' largest customers during the
period from January 1, 1996 to the Closing Date of each of the Companies and all
non-employee suppliers of significant goods or services to the Companies for the
year ended December 31, 1996. Except as indicated on Schedule 4.21, no facts,
circumstances or conditions exist which create a reasonable basis for believing
that any of the Companies will be unable to continue to procure the supplies and
services necessary to conduct its business on terms and conditions materially as
favorable to the Companies as the terms and conditions pursuant to which such
supplies and services are currently procured. There has not been any material
adverse change in the relations of any of the Companies or any controversies
with its material customers, suppliers, contractors, licensors and lessors as a
result of the announcement or consummation of the transactions contemplated by
this Agreement, and to the best of each the Companies and the Sellers knowledge
none of
-17-
<PAGE>
the Companies major customers or suppliers is contemplating terminating its
relationship with the Companies.
4.22 Related Parties. Except as set forth on Schedule 4.22,
neither the Sellers nor, any other officer or director of the Companies nor any
Affiliate of the foregoing (individually a "Related Party" and collectively the
"Related Parties"): (a) owns, directly or indirectly, any interest in any
competitor, supplier or customer of any of the Companies; (b) owns, directly or
indirectly, in whole or in part, any property, asset or right, real, personal or
mixed, tangible or intangible (including, but not limited to, any of the
Intellectual Property but excluding personal property identified on Schedule
4.16) which is utilized in the operation of the business of any of the
Companies; or (c) has an interest in or is, directly or indirectly, a party to
any contract, agreement, lease or arrangement pertaining or relating to any of
the Companies, except for employment, consulting or other personal service
agreements that may be in effect and which are listed on Schedule 4.26A hereto.
Since December 31, 1996, the Companies have not made any payments or incurred
any liabilities to any Related Party (excluding any inter-company transactions
but including without limitation dividends, distributions or bonuses to the
Sellers) except as set forth on Schedule 4.22 or for compensation at rates not
exceeding the rates set forth on Schedule 4.24.
4.23 List of Accounts. Set forth on Schedule 4.23 is: (a) the
name and address of each bank or other institution in which any of the Companies
maintain an account (cash, securities or other) or safe deposit box; (b) the
name and phone number of each of the Companies contact person at such bank or
institution; (c) the account number of the relevant account and a description of
the type of account; and (d) the signatories to each such account.
4.24 Personnel. Schedule 4.24 contains the names, job
descriptions and annual salary rates and other compensation of all officers,
directors, consultants and employees of any of the Companies (including
compensation paid or payable by each of the Companies under the Company Plans)
and a list of all material written employee policies, employee manuals or other
material written statements of rules or policies as to working conditions,
vacation and sick leave, a complete copy of each of which has been made
available to the Purchaser.
4.25 Labor Relations.
(a) None of the Companies is a party to, otherwise
bound by or overtly threatened with any labor or collective bargaining
agreement. Without limiting the generality of Section 4.6, except as identified
on Schedule 4.25: (i) no unfair labor practice complaints have been filed
against any of the Companies with any governmental or regulatory agency, of
which either the Sellers or the Companies have received written notice; (ii)
none of the Companies has received any written notice or communication
reflecting an intention or threat to file any such complaint; (iii) no Person
has made any claim or to the best knowledge of the Sellers threatened any claim
against any of the Companies under any statute, regulation or ordinance relating
to discrimination with respect to employees or employment practices; and (iv) no
claim is pending or to the best knowledge of the Sellers or any of the Companies
threatened
-18-
<PAGE>
against any of the Companies in connection with the United States Wage and Hour
Law, the Americans with Disabilities Act, the Occupational Safety and Health Act
or similar law.
(b) To the best of the Sellers' knowledge, no
employee, consultant or agent of any of the Companies is in violation of any
term of any employment contract, confidentiality or non-disclosure agreement or
any other contract, agreement, commitment or understanding relating to the
relationship of such employee, consultant or agent with any of the Companies or
any other party.
(c) Each employee or consultant of the Companies
with permitted access to confidential or proprietary information of the
Companies has executed an agreement obligating such employee or consultant to
hold confidential the Companies proprietary information.
(d) None of the Companies is aware that any officer
or key employee intends to terminate employment with the Company.
4.26 Employment Agreements and Employee Benefit Plans.
(a) Employment Agreements. Except as set forth on
Schedule 4.26A, or as set forth in each of the Companies articles of
incorporation or bylaws, there are no employment, consulting, severance or
indemnification arrangements, or agreements between any of the Companies and any
officer, director, consultant or employee ("Employment Agreements"). The Sellers
have previously delivered to the Purchaser true and complete copies of all of
the Employment Agreements.
(b) Employee Benefit Plans. For purposes of this
Agreement, "Company Plans" shall mean pension, retirement, stock purchase, stock
bonus, stock ownership, stock option, profit sharing, savings, medical,
disability, hospitalization, insurance, deferred compensation, bonus, incentive,
welfare or other employee benefit plan, policy, agreement, arrangement or
practice currently or previously maintained or contributed to by any of the
Companies for any of its directors, officers, consultants, employees or former
employees. Except for the Company Plans set forth on Schedule 4.26B, the
Companies has no material Company Plans. The Sellers have previously delivered
to the Purchaser: (i) a true and complete copy of all of the material Company
Plans (or, if oral, an accurate written summary thereof); (ii) if available, a
current summary plan description (plus summaries of any subsequent material
modifications thereto) for each material Company Plan; (iii) the latest IRS
determination letter obtained with respect to any Company Plan qualified under
Section 401 of the Code; and (iv) the Form 5500 for the last two (2) plan years
for each Company Plan required to file such form except as set forth on Schedule
4.8. Except as set forth on Schedule 4.26B, none of the Company Plans are
subject to ERISA and except as set forth on Schedule 4.26B, none of the
Companies has established, maintained, made or been required to make any
contributions to, or terminated, and has no liability with respect to, any
"employee benefit plan" within the meaning of ERISA. Except as indicated on
Schedule 4.26B or Schedule 4.8, none of the Companies has
-19-
<PAGE>
incurred any liability to the PBGC and no facts or circumstances exist which
might give rise to any liability of the Companies other than the requirement to
pay premiums to the PBGC. Each of the Companies has paid all amounts required
under applicable law and any Company Plan to be paid as a contribution to any
Company Plan through the date hereof. Each of the Companies has set aside
adequate reserves to meet contributions which are not yet due under any Company
Plan. Neither the Sellers, the Companies or to their knowledge any other person
has engaged in any transaction with respect to any Company Plan which would
subject any of the Companies to any tax, penalty or liability for prohibited
transactions. No Company Plan provides post- employment medical, health, or life
insurance benefits for present or future retirees or present or future
terminated employees, except for continuation coverage provided pursuant to the
requirements of Section 4980B of the Code or Sections 601-608 of ERISA or a
similar state law.
4.27 Tax Matters. The Sellers have previously delivered to the
Purchaser true, correct and complete copies of each of the federal, state and
local income tax returns filed by each of the Companies for 1993 through 1996.
All tax returns and tax reports required to be filed with respect to the
business and assets of each of the Companies have been timely filed (or
appropriate extensions have been obtained) with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed, all of the foregoing as filed are true, correct and complete and
reflect accurately all liability for taxes of each of the Companies for the
periods to which such returns relate in all material respects, and all amounts
shown as owing thereon have been paid. All income, profits, franchise, sales,
use, value added, occupancy, property, excise, payroll, FICA, FUTA and other
taxes (including interest and penalties), if any, collectible or payable by each
of the Companies or relating to or chargeable against any of its assets,
revenues or income through December 31, 1996 were fully collected and paid by
such date or provided for by adequate reserves in the December 31, 1996
Financial Statements and all similar items due through the Closing Date will
have been fully paid by that date or provided for by adequate reserves. No
taxation authority has sought to audit the records of any of the Companies for
the purpose of verifying or disputing any tax returns, reports or related
information and disclosures provided to such taxation authority. No claims or
deficiencies have been asserted against any of the Companies with respect to any
taxes or other governmental charges or levies which have not been paid or
otherwise satisfied or for which accruals or reserves have not been made in the
December 31, 1996 Financial Statements, and the Sellers and the Companies have
no reasonable basis to believe that such claims will be made. None of the
Companies has waived any restrictions on assessment or collection of taxes or
consented to the extension of any statute of limitations relating to taxation.
4.28 Material Agreements.
(a) Schedule 4.28 sets forth a brief description of
all material binding contracts or agreements relating to any of the Companies,
including without limitation any: (i) executory contracts including a commitment
or potential commitment for expenditure or other obligation or potential
obligation, or which provides for the receipt or potential receipt, involving in
excess of Five Thousand Dollars ($5,000.00) in any instance, or series of
related executory contracts that in the aggregate give rise to rights or
obligations exceeding such amount; (ii)
-20-
<PAGE>
indenture, mortgage, promissory note, loan agreement, guarantee or other
agreement or commitment for the borrowing or lending of money or encumbrance of
assets involving more than Three Thousand Dollars ($3,000.00) in each instance;
(iii) agreement which restricts any of the Companies from engaging in any line
of business or from competing with any other Person; (iv) warranties made with
respect to products manufactured, packaged, distributed or sold by any of the
Companies; or (v) any other contract, agreement, instrument, arrangement or
commitment that is material to the condition (financial or otherwise), results
of operations or business of any of the Companies (collectively, and together
with the Lease, the Employment Agreements, the Company Plans and all other
agreements required to be disclosed on any Schedule to this Agreement, the
"Material Agreements"). The Seller has previously furnished or made available to
the Purchaser true, complete and correct copies of all written agreements, as
amended, required to be listed on Schedule 4.28.
(b) Except as set forth on Schedule 4.28, none of
the Material Agreements were entered into outside the ordinary course of
business of the Companies, contains any unusual, onerous or burdensome
provisions that will impair or adversely effect in any material way the
operations of the Company, or is reasonably likely to be performed at a material
loss.
(c) The Material Agreements are each in full force
and effect and are the valid and legally binding obligations of each of the
Companies and, to the best of the Sellers' and the Companies knowledge, the
other parties thereto, enforceable in accordance with their respective terms,
subject only to bankruptcy, insolvency or similar laws affecting the rights of
creditors generally and to general equitable principles. None of the Companies
nor the Sellers has received written notice of default by any of the Companies
under any of the Material Agreements and no event has occurred which, with the
passage of time or the giving of notice or both, would constitute a default by
any of the Companies thereunder. To the Sellers' or the Companies' knowledge,
none of the other parties to any of the Material Agreements is in default
thereunder, nor has an event occurred which, with the passage of time or the
giving of notice or both would constitute a default by such other party
thereunder. Neither the Companies nor the Sellers has received notice of the
pending or threatened cancellation, revocation or termination of any of the
Material Agreements, (nor are any of them aware of any facts or circumstances
which are reasonably likely to lead to any such cancellation, revocation or
termination).
(d) Except as otherwise indicated on Schedule 4.28,
the continuation, validity and effectiveness of the Material Agreements under
the current terms thereof will in no way be affected by the consummation of the
transactions contemplated by this Agreement.
4.29 Guaranties. Except as set forth on Schedule 4.29, none of
the Companies is a party to any Guaranty, and no Person is a party to any
Guaranty for the benefit of any of the Companies.
-21-
<PAGE>
4.30 Products. Except as set forth on Schedule 4.30, there
exists no set of facts to the best of Sellers' or the Companies' knowledge which
could furnish a reasonable basis for the recall, withdrawal or suspension of any
title or product distributed or sold by any of the Companies (a "Product").
4.31 Environmental Matters. None of the Leased Property nor
any other property used by any of the Companies in the past has been used to
manufacture, treat, store, or dispose of any Hazardous Substance and such
property is free of all such substances. Each of the Companies is in compliance
in all respects with all laws, regulations and other federal, state or local
governmental requirements, and all applicable judgments, orders, writs, notices,
decrees, permits, licenses, approvals, consents or injunctions relating to the
generation, management, handling, transportation, treatment, disposal, storage,
delivery, discharge, release or emission of Hazardous Substances utilized by the
Companies in its business (collectively, the "Environmental Laws"). For purposes
of this Agreement, "Hazardous Substances" means all substances defined as
Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ss. 300.5, or defined
as such by, or regulated as such under, any Environmental Law. Except as
described on Schedule 4.31, neither the Sellers nor the Companies have received
any complaint, notice, order, or citation of any actual, threatened or alleged
noncompliance by any of the Companies with any of the Environmental Laws, and
there is no proceeding, suit or investigation pending or, to the Sellers'
knowledge, threatened against any of the Companies with respect to any violation
or alleged violation of the Environmental Laws, and to Sellers' knowledge, there
is no reasonable basis for the institution of any such proceeding, suit or
investigation.
4.32 Insolvency. Each of the Companies is able to pay its
debts as they mature and the transfer of the Securities by the Sellers to the
Purchaser in accordance with the terms of this Agreement shall not constitute a
voidable preference or transfer in fraud against any creditor under applicable
federal or state insolvency law.
4.33 Investment Representations.
(a) Each of the Sellers is an "accredited investor"
as such term is defined in Rule 501 of Regulation D as promulgated under the
Securities Act.
(b) Each of the Sellers understands and
acknowledges that neither the Purchaser Shares nor the Convertible Note has been
registered under the Securities Act. Each of the Sellers hereby represents and
warrants to the Purchaser that: (i) the Purchaser Shares and the Convertible
Note are being acquired only for investment for the Sellers own account, and not
as a nominee or agent and not with a view to the resale or distribution thereof,
and the Sellers have no present intention of selling, granting any participation
in or otherwise distributing any interest therein within the meaning of the
Securities Act, (ii) except as contemplated by the Registration Rights
Agreement, the Sellers does not have any contracts, understandings, agreements
or arrangements with any Person to sell, transfer or grant participation to such
-22-
<PAGE>
Person or any third Person, with respect to any of the Purchaser Shares or any
interest in the Convertible Note, and (iii) the Sellers have had an opportunity
to seek outside advice with respect to the terms and conditions of this
Agreement and their investment in the Purchaser Shares and the Convertible Note;
have carefully reviewed the Purchaser Financial Statements; the SEC Documents
and other matters set forth on the Schedules annexed hereto and have had the
opportunity to meet with and ask questions of the officers and representatives
of the Purchaser and have received answers to their satisfaction.
(c) Risk of Investment; Resale. Each of the Sellers
acknowledges that he/she can bear the economic risk of his investment in the
Purchaser Shares and the Convertible Note for an indefinite period of time and
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment therein. The Seller
understands that the Purchaser Shares and the Convertible Note are characterized
as "restricted securities" under federal securities laws since they are being
acquired in a transaction not involving a public offering and that under such
laws and applicable regulations the Purchaser Shares and the Convertible Note
may not be resold without registration or an exemption from registration under
the Securities Act. Each of the Sellers represent that they are generally
familiar with and generally understand the existing resale limitations imposed
by the Securities Act and the rules and regulations promulgated thereunder. Each
of the Sellers understand that, if required by the Purchaser, no disposition of
the Purchase Shares shall be made unless and until (a) the Sellers have each
furnished to the Purchaser an opinion of his counsel that no registration,
post-effective amendment, or notification under the Securities Act is required
with respect to such disposition, and the Purchaser shall have advised the
Sellers that such counsel and such opinion are satisfactory to it (and the
Purchaser agrees that it will not unreasonably delay or withhold its consent to
or approval of said opinion); (b) a post-effective amendment or other
registration or notification has been filed by the Purchaser and has become
effective; or (c) the Sellers have each obtained a "no-action letter" regarding
the proposed disposition from the staff of the Commission and has delivered a
copy thereof to the Purchaser, which no-action letter must be satisfactory to
the Purchaser (and the Purchaser agrees that it will not unreasonably delay or
withhold its consent to or approval of said no-action letter).
(d) Legending of Certificates. Each of the Sellers
understand and agree that the certificates evidencing the Purchaser Shares will
bear an appropriate legend evidencing the restricted nature of the Purchaser
Shares and indicating that no transfer of any of the Purchaser Shares may be
made unless such Purchaser Shares are registered under the Securities Act or an
exemption from such registration is available, and that the Purchaser will
instruct its transfer agents not to transfer any such Purchaser Shares unless
such transfer shall be made in compliance with such legend. The legend shall be
substantially in the form set forth below:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THESE SHARES MAY NOT BE
-23-
<PAGE>
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
DULY REGISTERED UNDER THE ACT OR UNLESS, IN THE OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH
TRANSACTION IS EXEMPT FROM THE REGISTRATION PROVISIONS OF
THE ACT."
ARTICLE V
Additional Agreements
5.1 Survival of Representations and Warranties; Effect of
Representations and Warranties. The representations and warranties of the
Purchaser and of the Sellers set forth in this Agreement shall survive the
Closing Date to the extent provided in Section 5.3(d) hereof.
5.2 Investigation. The representations, warranties, covenants
and agreements set forth in this Agreement shall not be affected or diminished
in any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. All statements contained herein or in any
schedule, certificate, exhibit, list or other document delivered pursuant
hereto, shall be deemed to be representations and warranties for purposes of
this Agreement which are the sole and exclusive representations and warranties
made by the parties.
5.3 Indemnification.
(a) By the Sellers. Subject to Section 5.3(d)
hereof, each of the Sellers agree to indemnify and hold harmless the Purchaser
and its directors, officers, employees and agents from, against and in respect
of, the full amount of any and all liabilities, damages, claims, deficiencies,
fines, assessments, losses, taxes, penalties, interest, costs and expenses,
including, without limitation, reasonable fees and disbursements of counsel,
arising from, in connection with, or incident to (i) any material breach or
violation of any of the representations, warranties, covenants or agreements of
the Sellers or the Companies contained in this Agreement or any agreements
referred to herein and delivered at or prior to the Closing (ii) any and all
third party actions, suits, proceedings, demands, assessments or judgments,
costs and expenses incidental to any of the foregoing.
(b) By the Purchaser. Subject to Section 5.3(d)
hereof, the Purchaser agrees to indemnify and hold harmless each of the Sellers
from, against and in respect of, any and all liabilities, damages, claims,
deficiencies, fines, assessments, losses, taxes, penalties, interest, costs and
expenses, including, without limitation, reasonable fees and disbursements of
counsel, arising from, in connection with, or incident to (i) any material
breach or violation of any of the representations, warranties, covenants or
agreements of the Purchaser contained in this Agreement or any agreement
referred to herein and delivered at or prior to the Closing; (ii)
-24-
<PAGE>
any and all claims arising out of, relating to, resulting from or caused by any
transaction, event, condition, occurrence or situation relating to the conduct
of any of the Companies business occurring after the Closing Date; and (iii) any
and all third party actions, suits, proceedings, demands, assessments, or
judgments incidental to any of the foregoing.
(c) Indemnity Procedure. A party or parties hereto
agreeing to be responsible for or to indemnify against any matter pursuant to
this Agreement is referred to herein as the "Indemnifying Party" and the other
party or parties claiming indemnity is referred to as the "Indemnified Party".
An Indemnified Party under this Agreement shall, with respect
to claims asserted against such party by any third party, give written notice to
the Indemnifying Party of any liability which might give rise to a claim for
indemnity under this Agreement promptly after the receipt of any written claim
from any such third party, and not later than twenty (20) days prior to the date
any answer or responsive pleading is due, and with respect to other matters for
which the Indemnified Party may seek indemnification, give prompt written notice
to the Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided, however, that any failure to give such notice will waive
any rights of the Indemnified Party only to the extent the rights of the
Indemnifying Party are materially prejudiced.
The Indemnifying Party shall have the right, at its election,
to take over the defense or settlement of such claim by giving written notice to
the Indemnified Party at least ten (10) days prior to the time when an answer or
other responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party's approval of
such counsel, which approval shall not be unreasonably withheld), shall be
solely responsible for the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim. The Indemnifying Party shall
not settle any such claim without prior notice to and consultation with the
Indemnified Party, and no such settlement involving any equitable relief and no
settlement which might otherwise have a material adverse effect on the
Indemnified Party may be agreed to without the written consent of the
Indemnified Party (which consent shall not be unreasonably withheld). So long as
the Indemnifying Party is diligently contesting any such claim in good faith,
the Indemnified Party may pay or settle such claim only at its own expense and
the Indemnifying Party will not be responsible for the fees of separate legal
counsel to the Indemnified Party. If the Indemnifying Party does not make such
election, or having made such election does not in the reasonable opinion of the
Indemnified Party proceed diligently to defend such claim, then the Indemnified
Party may (after written notice to the Indemnifying Party), at the expense of
the Indemnifying Party, elect to take over the defense of and proceed to handle
such claim in its discretion and the Indemnifying Party shall be bound by any
defense or settlement that the Indemnified Party may make in good faith with
respect to such claim. In connection therewith, the Indemnifying Party will
fully cooperate with the Indemnified Party should the Indemnified Party elect to
take over the defense of any such claim.
-25-
<PAGE>
The parties agree to cooperate in defending such third party
claims and the Indemnified Party shall provide such cooperation and such access
to its books, records and properties as the Indemnifying Party shall reasonably
request with respect to any matter for which indemnification is sought
hereunder; and the parties hereto agree to cooperate with each other in order to
ensure the proper and adequate defense thereof.
With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be paid by the
Indemnifying Party upon the earlier to occur of: (i) the entry of a judgment
against the Indemnified Party and the expiration of any applicable appeal
period; (ii) the entry of an unappealable judgment or final appellate decision
against the Indemnified Party; or (iii) a settlement of the claim.
Notwithstanding the foregoing, provided that there is no dispute as to the
applicability of indemnification, the reasonable expenses of counsel to the
Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party if such expenses are a liability of the Indemnifying Party. With regard to
other claims for which indemnification is payable hereunder, such
indemnification shall be paid promptly by the Indemnifying Party upon demand by
the Indemnified Party and documentation supporting such demand.
(d) Indemnity Limitations. Notwithstanding anything
to the contrary herein, no claim for indemnification for violation of any
representation or warranty may be asserted after the third anniversary of the
Closing Date and the maximum liability of each of the Purchaser and both of the
Sellers shall be $825,000.
5.4 General Release. As additional consideration for the
purchase and sale of the Securities pursuant to this Agreement, each of the
Sellers hereby unconditionally and irrevocably releases and forever discharges,
effective as of the Closing Date, each of the Companies and officers, directors,
employees and agents, from any and all rights, claims, demands, judgments,
obligations, liabilities and damages, whether accrued or unaccrued, asserted or
unasserted, and whether known or unknown ("Claims"), relating to the Companies
which ever existed, now exist, or may hereafter exist (but excluding any claims
that the Sellers may have against the Companies based upon (i) the failure of
any of the Companies to pay salary or benefits due to him or her after the
Closing Date or (ii) the failure of any of the Companies after the Closing Date
to fulfill any obligation to indemnify the Sellers as employee, officer or
director of any of the Companies), by reason of any tort, breach of contract,
violation of law or other act or failure to act which shall have occurred at or
prior to the Closing Date, or in relation to any other liabilities of any of the
Companies to the Seller as of the Closing Date, except with respect to the
Companies' continuing obligations under the Leased Property and the obligations
of the Companies' described in the Financial Statements. The Sellers expressly
intend that the foregoing release shall be effective regardless of whether the
basis for any claim or right hereby released shall have been known to or
anticipated by the Sellers.
-26-
<PAGE>
ARTICLE VI
Closing; Deliveries; Conditions Precedent
6.1 Closing. Subject to the terms and conditions set forth
herein, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Kane Kessler, P.C., 1350 Avenue of
the Americas, New York, New York 10019, immediately upon execution of this
Agreement, or on such other date and at such other place as may be agreed to by
the parties. All proceedings to be taken and all documents to be executed at the
Closing (including this Agreement) shall be deemed to have been taken, delivered
and executed simultaneously, and no proceeding shall be deemed taken nor
documents deemed executed or delivered until all have been taken, delivered and
executed.
(a) At Closing, the Sellers shall deliver the following
documents to the Purchaser, duly executed and satisfy the following conditions:
(i) the certificates representing the Securities,
together with stock powers duly executed in blank;
(ii) the minute books of the Companies, including its
corporate seals, unissued stock certificates, stock registers, Certificate of
Incorporation, bylaws and corporate minutes;
(iii) a certificate of the Secretary of State of the
State of New York, as of a recent date, as to the good standing of MDC and
certifying its Certificate of Incorporation;
(iv) a certificate of the Secretary of State of the
State of New York, as of a recent date, as to the good standing of NMS and
certifying its Certificate of Incorporation;
(v) any written consent (on terms satisfactory to the
Purchaser) that is required under the terms of the Lease for consummation of the
transactions contemplated hereby and an Amendment to the Lease satisfactory to
Purchaser;
(vi) the written consent of any party to any of the
Material Agreements whose consent is required for consummation of the
transactions contemplated hereby;
(vii) the Nicholas Employment Agreement;
(viii) the Elaine Employment Agreement;
(ix) a certificate, dated the Closing Date, of the
Secretary of each of the Companies, setting forth the authorizing resolutions
adopted by each of the Companies Board of Directors and Shareholders with
respect to the transactions contemplated hereby;
-27-
<PAGE>
(x) the Schedules to this Agreement;
(xi) the Pledge Agreement;
(xii) the Registration Rights Agreement;
(xiii)the Companies shall be released of any and all
Guarantees in favor of Chase Manhattan Bank;
(xiv) the Companies will not have any liabilities,
obligations or indebtedness to the Sellers, other than pursuant to the Lease and
the Nicholas Employment Agreement and the Elaine Employment Agreement.
(xv) an opinion letter from the counsel to the Sellers,
Brown Raysman Millstein Felder & Steiner, LLP, addressed to the Purchaser and in
form and substance reasonably acceptable to the Purchaser; and
(xvi) such other documents and instruments as the
Purchaser may reasonably request.
(b) At Closing, the Purchaser shall deliver the following
documents and instruments, duly executed, to the Sellers:
(i) the Convertible Notes;
(ii) the certificates representing the Purchaser
Shares;
(iii) the Nicholas Employment Agreement;
(iv) the Elaine Employment Agreement;
(v) a certificate of the Secretary of State of the
State of New York, as of a recent date, as to the good standing of the Purchaser
and certifying its Certificate of Incorporation;
(vi) a certificate, dated the Closing Date, of the
Secretary of the Purchaser, setting forth the authorizing resolutions adopted by
the Purchaser's Board of Directors with respect to the transactions contemplated
hereby;
(vii) the Pledge Agreements;
(viii) the Registration Rights Agreement;
-28-
<PAGE>
(ix) the Purchaser shall deliver $36,133 by check,
which shall be deposited into escrow pursuant to the terms of the Escrow
Agreement;
(x) the Purchaser shall deliver $88,889.50 plus per
diem interest of $26.93 from November 4, 1997 to the date hereof (the "Payoff
Amount") to Chase Manhattan Bank;
(xi) an Opinion Letter from the Purchaser's counsel,
Kane Kessler, P.C., addressed to the Sellers, in form and substance reasonably
acceptable to the Sellers; and
(xii) such other documents and instruments as the
Seller may reasonably request.
6.2 Best Efforts. Subject to the terms and conditions provided
in this Agreement, each of the parties shall use their respective best efforts
in good faith to take or cause to be taken as promptly as practicable all
reasonable actions that are within his or its power to cause to be fulfilled
those of the conditions precedent to his or its obligations or the obligations
of the other parties to consummate the transactions contemplated by this
Agreement that are dependent upon his or its actions, including obtaining all
necessary consents, authorizations, orders, approvals and waivers.
ARTICLE VII
Covenants
7.1 Non-Competition. (a) Each of the Sellers agree that,
during the Term (as defined in the Nicholas Employment Agreement) and for a
period of one (1) year after the termination of both of Sellers employment with
the Company (the "restricted period"), each of the Sellers shall not, in the
United States or any other geographic area where any of the Companies do
business, alone or in association with others: (i) engage, directly or
indirectly, in the production, publication or marketing of educational software
(the "Competitive Activities"); and (ii) have any interest in or be employed by
(or act as a consultant to) any company which is engaged in Competitive
Activities. Notwithstanding the foregoing, ownership of any amount of the
securities of the Purchaser, each of the Companies, any company controlled by
the Purchaser and/or each of the Companies or any successors thereof (each, a
"Protected Company") or the ownership of 3% or less of any class of outstanding
securities of a company whose securities are listed on a national securities
exchange (including the NASDAQ Stock Market) or traded on the NASDAQ Small-Cap
Market shall not be deemed to constitute a breach of this Section 7.1.
Notwithstanding anything to the contrary contained herein, in the event that the
Sellers are no longer living as husband and wife, then the aforesaid "restricted
period" shall run as to each Seller for a period of one year after the
termination of each respective Seller.
-29-
<PAGE>
(b) During the same period, each of the Sellers shall
not, and shall use their respective best efforts not to allow any Person under
his/her actual control (including employees and agents of the Company or any
affiliated company under his actual control) to, directly or indirectly, on
behalf of himself/herself or any other Person: (i) call upon or accept business
involving the Competitive Activities from or solicit business involving the
Competitive Activities of any Person who is, or who had been at any time during
the preceding two (2) years, a customer of any Protected Company, or otherwise
divert or attempt to divert any business involving the Competitive Activity from
a Protected Company; (ii) recruit or otherwise solicit or induce any Person who
is an employee of, or otherwise engaged by, a Protected Company to terminate his
or her employment or other relationship with such Protected Company or hire any
Person who has left the employ of any Protected Company during the preceding two
(2) years; or (iii) use or purport to authorize any Person to use any name,
mark, logo, trade dress or other identifying words or images which are the same
as or confusingly similar to those used at any time by a Protected Company in
connection with any product or service.
(c) The restrictions set forth in this Section 7.1 are
considered by the parties to be fair and reasonable. Each of the Sellers
acknowledge that the restrictions contained in this Section 7.1 will not prevent
him/her from earning a livelihood. Each of the Sellers further acknowledge that
the Purchaser would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of this
Section 7.1. Accordingly, each of the Sellers agree that, in addition to any
other remedies available to the Purchaser, the Purchaser shall be entitled to
specific performance, injunction and other equitable relief to secure the
enforcement of these provisions, [and the party seeking such relief shall not be
required to post bond as a condition thereto.] If any provisions of this Section
7.1 relating to the time period, scope of activities or geographic area of
restrictions is declared by a court of competent jurisdiction to exceed the
maximum permissible time period, scope of activities or geographic area, the
maximum time period, scope of activities or geographic area, as the case may be,
shall be reduced to the maximum which such court deems enforceable. If any
provisions of this Section 7.1 other than those described in the preceding
sentence are adjudicated to be invalid or unenforceable, the invalid or
unenforceable provisions shall be deemed amended (with respect only to the
jurisdiction in which such adjudication is made) in such manner as to render
them enforceable and to effectuate as nearly as possible the original intentions
and agreement of the parties.
(d) This Section 7.1 shall forever terminate and be of
no further force and effect with respect to a Seller in the event that (i) the
Purchaser terminates such Seller's employment without Cause (as defined in
Paragraph 9(c) of such Seller's employment agreement), or the Seller has
terminated his employment for Good Reason (as defined in Paragraph 9(d) of such
Seller's employment agreement); and (ii) the Company fails to pay such Seller,
all amounts when due under his or her employment agreement, which failure
continues for more than thirty (30) days after written notice thereof.
7.2 Preparation of Company Tax Returns Through Date of
Closing. The Company shall file final income tax returns as an S corporation for
the period from January 1,
-30-
<PAGE>
1997 through the Closing Date. The Company's federal and state income tax
returns for 1996 and the 1997 period ending on the Closing Date shall be
prepared by Schlossberg, Settler & Co. under the Seller's direction in a manner
similar to previous tax returns.
7.3 Stockholder's Equity, Working Capital. As of September 30,
1997, the Companies had (a) Stockholder's Equity of not less than $95,000, (b)
Working Capital of not less than $290,000, and (c) a cash balance of not less
than $40,000. From the period commencing October 1, 1997 through and including
the Closing Date, the Sellers have caused the Companies to be operated in the
ordinary and usual course consistent with past practices and have not paid or
distributed, directly or indirectly, any cash or property to the Sellers (other
than salary or payments pursuant to the Lease) or taken any action outside the
ordinary and usual course consistent with past practices which would materially
effect the amount of such Stockholder's Equity, Working Capital, the cash
balance or any loans payable to shareholders, as of the date of this Agreement.
In addition, at the Closing Date, (i) the Companies will have loans payable of
not more than $20,000 plus interest accrued from October 10, 1997 and (ii) the
Companies will not have any liabilities, obligations or indebtedness to the
Sellers, other than pursuant to the Lease and the Nicholas Employment Agreement
and the Elaine Employment Agreement.
7.4 Release of Guaranty. As a condition to the Closing, at the
Closing, the Companies shall be released of their Guaranty in favor of Chase
Manhattan Bank (the "Chase Guaranty") simultaneously with the Purchaser's
delivery of the Payoff Amount to Chase Manhattan Bank.
ARTICLE VIII
Miscellaneous
8.1 Notices. Any notice, demand, claim or other communication
under this Agreement shall be in writing and shall be deemed to have been given
upon the delivery, mailing or transmission thereof, as the case may be, if
delivered personally or sent by certified mail, return receipt requested,
postage prepaid, or sent by facsimile or prepaid overnight courier to the
parties at the addresses set forth below their names on the signature pages of
this Agreement (or at such other addresses as shall be specified by the parties
by like notice). A copy of any notices delivered to the Purchaser shall also be
sent to (i) Kane Kessler, P.C. - 26th Floor, 1350 Avenue of the America, New
York, New York 10019, Attention: Robert L. Lawrence, Esq., Facsimile No. (212)
245-3009. A copy of any notices delivered to the Sellers shall also be sent to
Brown Raysman Millstein Felder & Steiner LLP, 120 West Forty Fifth Street, New
York, N.Y. 10036, Attention: Gerard R. Boyce, Esq. Facsimile No. (212) 840- 2429
8.2 Entire Agreement. This Agreement (including the exhibits
and schedules hereto) contains every obligation and understanding between the
parties relating to the subject
-31-
<PAGE>
matter hereof and merges all prior discussions, negotiations and agreements
(including, but not limited to, the Letter of Intent dated May 31, 1997), if
any, between them, and none of the parties shall be bound by any conditions,
definitions, understandings, warranties or representations other than as
expressly provided herein. All exhibits and schedules referenced in this
Agreement are expressly made a part of, and incorporated by reference into, this
Agreement.
8.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs, personal representatives, legal representatives, and permitted assigns.
8.4 Intentionally Omitted.
8.5 Assignment. This Agreement may not be assigned by any
party without the written consent of the other party.
8.6 Waiver and Amendment. Any representation, warranty,
covenant, term or condition of this Agreement which may legally be waived, may
be waived, or the time of performance thereof extended, at any time by the party
entitled to the benefit thereof, and any term, condition or covenant hereof
(including, without limitation, the period during which any condition is to be
satisfied or any obligation performed) may be amended by the parties at any
time. Any such waiver, extension or amendment shall be evidenced by an
instrument in writing executed on behalf of the appropriate party (in the case
of the Purchaser by its President, any Vice President or any other person who
has been authorized by its Board of Directors to execute waivers, extensions or
amendments on its behalf). No waiver by any party hereto, whether express or
implied, of such party's rights under any provision of this Agreement shall
constitute a waiver of such party's rights under such provisions at any other
time or a waiver of such party's rights under any other provision of this
Agreement. No failure by any party to take any action against any breach of this
Agreement or default by another party shall constitute a waiver of the former
party's right to enforce any provision of this Agreement or to take action
against such breach or default or any subsequent breach or default by such other
party.
8.7 No Third Party Beneficiary. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
Person, other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
8.8 Severability. In the event that any one or more of the
provisions contained in this Agreement shall be declared invalid, void or
unenforceable, the remainder of the provisions of this Agreement shall remain in
full force and effect, and such invalid, void or unenforceable provision shall
be interpreted as closely as possible to the manner in which it was written.
-32-
<PAGE>
8.9 Expenses. Each party agrees to pay, without right of
reimbursement from the other party, the costs incurred by it incident to the
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, costs incident
to the preparation of this Agreement, and the fees and disbursements of counsel,
accountants and consultants employed by such party in connection herewith. No
expenses of the Sellers relating to the transaction contemplated hereby shall be
paid by any of the Companies, but all such fees shall be paid directly by the
Sellers.
8.10 Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of any provisions of this Agreement.
8.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
8.12 Time of the Essence. Wherever time is specified for the
doing or performance of any act or the payment of any funds, time shall be
considered of the essence.
8.13 Injunctive Relief. It is possible that remedies at law
may be inadequate and, therefore, the parties hereto shall be entitled to
equitable relief including, without limitation, injunctive relief, specific
performance or other equitable remedies in addition to all other remedies
provided hereunder or available to the parties hereto at law or in equity.
8.14 Remedies Cumulative. No remedy made available by any of
the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity.
8.15 Governing Law. This Agreement has been entered into and
shall be construed and enforced in accordance with the laws of the State of New
York without reference to the choice of law principles thereof.
8.16 Jurisdiction and Venue. This Agreement shall be subject
to the exclusive jurisdiction of the courts of New York County, State of New
York. The parties to this Agreement agree that any breach of any term or
condition of this Agreement shall be deemed to be a breach occurring in the
State of New York by virtue of a failure to perform an act required to be
performed in the State of New York and irrevocably and expressly agree to submit
to the jurisdiction of the courts of the State of New York for the purpose of
resolving any disputes among the parties relating to this Agreement or the
transactions contemplated hereby. The parties irrevocably waive, to the fullest
extent permitted by law, any objection which they may now or hereafter have to
the laying of venue of any suit, action or proceeding arising out of or relating
to this Agreement, or any judgment entered by any court in respect hereof
brought in New York County, State of New York, and further irrevocably waive any
-33-
<PAGE>
claim that any suit, action or proceeding brought in New York County, State of
New York has been brought in an inconvenient forum.
8.17 Participation of Parties. The parties hereto acknowledge
that this Agreement and all matters contemplated herein have been negotiated by
both parties hereto and their respective legal counsel and that both parties
have participated in the drafting and preparation of this Agreement from the
commencement of negotiations at all times through the execution hereof.
8.18 Further Assurances. The parties hereto shall deliver any
and all other instruments or documents required to be delivered pursuant to, or
necessary or proper in order to give effect to, all of the terms and provisions
of this Agreement including, without limitation, all necessary stock powers and
such other instruments of transfer as may be necessary or desirable to transfer
ownership of the Securities.
8.19 Publicity; Public Company. The parties hereto agree to
cooperate in issuing any press release or other public announcement concerning
this Agreement or the transactions contemplated hereby. Each of the Sellers
acknowledge that the Purchaser is a publicly held company and as such is subject
to certain federal and state securities laws concerning the trading of its
securities. The Sellers, Companies and the Purchaser shall not, and they shall
cause their respective affiliates not to, issue any press release or otherwise
make any public statement or respond to any press inquiry with respect to this
Agreement or the transactions contemplated hereby without the prior approval of
the other parties which approval will not be unreasonably withheld, except that
the Purchaser's may issue press releases or make public statements as they may
reasonably believe to be required by law, in which event prior reasonable notice
will be given to the other party.
8.20 Terms in Context. Whenever from the context it appears
appropriate, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in either the masculine, the
feminine or the neuter gender shall include the masculine, feminine and neuter.
8.21 Knowledge of the Parties. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to the
best knowledge of the parties hereto, each of the parties hereto acknowledges
and confirms that it has made "due and diligent inquiry" as to the matters that
are the subject of such representations and warranties. For purposes of this
Section 8.21, "due and diligent inquiry" shall be deemed to mean that such party
has reviewed all appropriate books and records of such party (or of the
Companies and Sellers, if the Sellers are the representing party) and made all
appropriate inquiries of officers of such party (and such other individuals as,
based on the results of the inquiries of such party's officers, a reasonable
person would deem prudent) as to the matters that are the subject of such
representations and warranties, but the term "best knowledge" shall not mean,
require or imply that the representing party has made any further investigation
or inquiry.
-34-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Agreement as of the day and year first above written.
Purchaser:
BYRON PREISS MULTIMEDIA COMPANY, INC.
By: /s/ Byron Preiss
-----------------------------------------------
Name: Byron Preiss
Title: Chief Executive Officer
Facsimile No. (212) 627-2788
Sellers:
/s/ Nicholas S. Vazzana
-----------------------------------------------
Nicholas S. Vazzana
Address: 51 Doeview Lane, Pound Ridge, NY 10576
Facsimile No.
/s/ Elaine Vazzana
-----------------------------------------------
Elaine Vazzana
Address: 51 Doeview Lane, Pound Ridge, NY 10576
Facsimile No.
-35-
<PAGE>
SCHEDULE A
SELLERS SECURITIES
Sellers Securities Owned Percentage
- ------- ---------------- Interest
--------
Multi Dimensional Communications, Inc.
--------------------------------------
Nicholas S. Vazzana 102 Shares Common Stock 100%
200 Shares of Preferred Stock
----
TOTAL 100%
New Media Schoolhouse, Inc.
---------------------------
Elaine Vazzana 10 Shares Common Stock 100%
----
TOTAL 100%
<PAGE>
BYRON PREISS MULTIMEDIA COMPANY, INC.
6% CONVERTIBLE NOTE
Due January 2, 2000
$_____________ November 26, 1997
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF
THIS NOTE IS SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND STATE
SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS DULY REGISTERED
UNDER THE ACT AND STATE SECURITIES LAWS OR UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO BPMC, SUCH
TRANSACTION IS EXEMPT FROM THE REGISTRATION PROVISIONS OF
THE ACT AND STATE SECURITIES LAWS.
BYRON PREISS MULTIMEDIA COMPANY, INC., a New York corporation
("BPMC"), for value received, hereby promises to pay to Nicholas S. Vazzana
("Vazzana" and, together with any permitted assignee of this Note, the "Holder")
the principal sum of ____________________________________________ ($_________),
together with interest thereon.
1. Interest. Interest shall accrue on the unpaid principal
balance of this Note at an annual rate of 6% payable in arrears compounded
monthly. However, interest that accrues during the period from the date hereof
through and ending December 31, 1997 shall be added to the principal balance at
December 31, 1997 (the "Adjusted Principal Balance").
2. Payments. (a) All payments under the Note shall be made by
check to the address designated by Vazzana in writing or to such other address
as the Holder shall designate from time to time in the future. The Adjusted
Principal Balance of this Note on December 31, 1997, together with interest
accruing thereon from and after January 1, 1998, shall be self-liquidating and
shall be repaid in twenty-four (24) equal monthly installments inclusive of a
portion of the Adjusted Principal Balance plus accrued interest, commencing
February 1, 1998 and continuing on the first business day of each succeeding
month.
(b) All unpaid principal, interest and/or other
charges shall be due and payable in full on January 2, 2000 (the "Maturity
Date").
(c) If this Note is not paid in full by the
Maturity Date or after acceleration of this Note, interest shall accrue after
the Maturity Date or after acceleration of this Note (and after any judgment
under this Note) at an annual rate of nine percent (9%).
<PAGE>
(d) All payments under this Note shall be applied
first to interest and then to principal.
3. Prepayment; Partial Conversion. (a) Subject to the
possibility of waiver in writing by the Holder of any advance notice of
prepayment of this Note, if BPMC desires to prepay this Note or any portion
thereof, BPMC shall give the Holder not less than fifteen (15) days advance
written notice substantially in the form of Exhibit A hereto, during which time
the Holder may exercise his conversion rights under Section 5 hereof.
(b) In the event of a partial conversion of this Note into
BPMC Common Stock, BPMC shall give written notice to the Holder, within ten (10)
days after the date of the Holder's conversion notice, specifying either that:
(a) the partial conversion shall not postpone the due date of or change the
amount of any subsequent installment, (other than the final installment(s),
under this Note and shall instead reduce the number of required installments
and/or the amount of the final installment; or (b) the remaining payments under
this Note shall be adjusted so that the remaining principal balance of this Note
and accrued interest thereon shall be repaid in full through that number of
equal monthly payments remaining under Section 2 of this Note. In the event that
BPMC fails to give the written notice specified in the immediately preceding
sentence of its election under the preceding sentence, BPMC shall be deemed to
have elected item (b) in the immediately preceding sentence.
(c) In the event of a partial prepayment of this Note into
BPMC Common Stock, Holder shall give written notice to BPMC within ten (10) days
after the date of the BPMC's prepayment notice, specifying either that: (a) the
partial prepayment shall not postpone the due date of or change the amount of
any subsequent installment, (other than the final installment(s), under this
Note and shall instead reduce the number of required installments and/or the
amount of the final installment; or (b) the remaining payments under this Note
shall be adjusted so that the remaining principal balance of this Note and
accrued interest thereon shall be repaid in full through that number of equal
monthly payments remaining under Section 2 of this Note. In the event that
Holder fails to give the written notice specified in the immediately preceding
sentence of its election under the preceding sentence, Holder shall be deemed to
have elected item (b) in the immediately preceding sentence.
4. Purchase Agreement.
(a) This Note is being given by BPMC to Vazzana
in partial payment of BPMC's obligations under that certain Stock Purchase
Agreement of even date herewith between BPMC, Elaine Vazzana and Nicholas
Vazzana (the "Purchase Agreement"), which Purchase Agreement provides for the
sale of 100% of the outstanding capital stock of each of Multi Dimentional
Communications, Inc. and New Media Schoolhouse, Inc. to BPMC.
2
<PAGE>
(b) In the event that BPMC shall be entitled to
be indemnified by the Payee pursuant to Article V of the Purchase Agreement (an
"Indemnified Claim"), BPMC shall be entitled to set-off against any interest
then due or to become due hereunder and/or the outstanding principal balance due
to Holder hereunder (whether the Holder is Vazzana or a transferee of this
Note), an amount equal to the amount of any such Indemnified Claim, provided,
that, with respect to any Indemnified Claim which arises out of a claim of a
third party, such claim has been reduced to a final judgment or court award
against BPMC or the Company.
(c) Upon a permitted transfer by the Holder of
all or part of this Note, a new Note or Notes will be issued to the transferee
and/or the Holder in exchange therefor, provided, however, the transferee shall
first agree in writing to be bound by the terms of this Note.
5. Conversion of Note.
(a) Conversion into Common Stock. At any time
this Note or any part thereof remains outstanding, subject to and upon
compliance with the provisions of Section 5(b), the entire principal amount of
this Note or at the option of the Holder any portion of the then outstanding
principal amount of this Note which is not less than $100,000 and is any
integral multiple of $1,000, or such portion less than $100,000, if such portion
represents the entire outstanding principal balance of this Note, may be
converted into the number of duly authorized, validly issued, fully-paid and
nonassessable shares of BPMC's Common Stock par value $.001 equal to the then
unpaid principal amount of this Note being converted, divided by Five Dollars
and Seventy-five Cents ($5.75), as may be adjusted from time to time in
accordance with the terms hereof (the "Conversion Price"), provided that this
conversion right may not be exercised by the Holder (and his direct and indirect
transferees) more than seven (7) times in the aggregate. The Company shall at
all times reserve and keep available out of its authorized Common Stock or its
treasury shares, solely for the purposes of issue upon the conversion of this
Note as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of the unpaid principal amount of this Note.
(b) Conversion Procedure. In order to exercise
the conversion rights granted hereunder, the Holder shall surrender this Note to
BPMC, on any business day after 9:00 a.m. and prior to 5:00 p.m. New York time,
at BPMC's principal place of business, accompanied by a written notice
substantially in the form of Exhibit B hereto stating that the Holder
irrevocably elects to convert this Note, or, if less than the entire principal
amount thereof is to be converted, to convert a specified portion of this Note
(which is not less than $100,000 and is any integral multiple of $1,000). The
conversion shall be deemed to have been made at the time that the Note shall
have
3
<PAGE>
been surrendered for conversion with proper notice of the amount to be
converted. Upon surrender to BPMC for conversion: (i) this Note or such portion
as is being converted shall be cancelled by BPMC and the rights of the Holder as
to such converted amount shall cease at such time; (ii) the person or persons
entitled to receive shares of Common Stock upon conversion of this Note (or
portion thereof) shall be treated for all purposes as having become the record
holder or holders of such shares of Common Stock at such time; (iii) BPMC shall
deliver or cause to be delivered to such persons a certificate or certificates
representing the number of duly authorized, validly issued, fully-paid and
nonassessable shares of BPMC's Common Stock into which this Note (or portion
thereof) has been converted in accordance with the provisions of this Section 5;
and (iv) if this Note is converted in part only, BPMC shall execute and deliver
to the Holder a new Note in a principal amount equal to the unconverted portion.
(c) Adjustment for Interest. In the event that
all or any portion of this Note shall be converted, at the option of Holder, any
unpaid accrued interest relating to such period either shall be paid in cash, or
converted into additional shares of Common Stock at the Conversion Price for all
such interest accrued.
(d) Tender. From and after tender to the Holder
of the unpaid principal amount of this Note and all accrued but unpaid interest
thereon on or after the Maturity Date hereof, (i) this Note shall not, for the
purposes of this Note, or any other purpose, be deemed to be outstanding, and
the rights of the Holder under this Note (except to receive the consideration
tendered) shall cease, regardless of whether this Note has been surrendered; and
(ii) the Holder shall be obligated to surrender this Note.
(e) Fractional Interests. No fractional shares
of Common Stock shall be delivered upon conversion of this Note. In lieu of any
fractional shares which otherwise would be deliverable upon exchange of this
Note (or portion thereof), the number of shares issuable upon such conversion
will be rounded up to the next higher whole share (for fractions equal to or
greater than one-half) or rounded down to the next lower whole share (for
fractions less than one-half).
6. Anti-Dilution Provisions. The Conversion Price and the kind
of securities receivable upon the conversion of this Note shall be subject to
adjustment from time to time as hereinafter provided:
(a) Dividend, Etc. If the number of shares of
Common Stock outstanding at any time after the date hereof is increased by a
share dividend payable in Common Stock or by a subdivision or split-up of Common
Stock, then, on the day following the date fixed for the determination of
holders of
4
<PAGE>
Common Stock entitled to receive such share dividend, subdivision or split-up,
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable upon conversion of this Note shall be increased
in proportion to such increase in outstanding shares.
(b) Combination. If the number of shares of
Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding Common Stock, then, on the day following the
effective date of such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable upon conversion
of this Note shall be decreased in proportion to such decrease in outstanding
shares.
(c) Reorganization, Etc. In the case, at any
time after the date hereof, of any capital reorganization, or any
reclassification of the Common Stock of BPMC (other than a change in par value
or from par value to no par value or from no par value to par value or as a
result of a share dividend or subdivision, split-up or combination of shares) or
in case of the consolidation or merger of BPMC with or into any other
corporation (other than a consolidation or merger in which BPMC is the surviving
corporation and which does not result in any change in the Common Stock issuable
upon conversion of this Note), this Note shall after such capital
reorganization, reclassification of Common Stock, consolidation or merger be
convertible into the kind and number of shares or other securities or property
to which the Holder would have been entitled if the Holder had held the Common
Stock issuable upon the conversion of the Note immediately prior to such capital
reorganization, reclassification of Common Stock, consolidation or merger.
(d) Rounding. All calculations under this
Section 6 shall be made to the nearest cent, provided that any adjustment less
than one cent shall be carried forward and made at the time of the next
adjustment which, together with all adjustments so carried forward, equals one
cent or more.
(e) Certificate of Calculation. Whenever the
conversion price shall be adjusted as provided in this Section 6, BPMC shall
forthwith file, at its office designated as herein provided, a statement, signed
by its chief financial officer, showing in detail the facts requiring such
adjustment and the Conversion Price that shall be in effect after such
adjustment. BPMC shall also cause a notice setting forth any such adjustment to
be sent by registered or certified mail, postage prepaid, to the Holder at the
Holder's address appearing on BPMC's records. Where appropriate, such notice may
be given in advance and may be included as a part of any notice required to be
mailed under the provisions of Section 6(f) hereof.
5
<PAGE>
(f) Distributions, Etc. If at any time:
(i) BPMC shall make any distribution to the
holders of its Common Stock, or
(ii)BPMC shall offer for subscription pro
rata to the holders of its Common Stock additional shares of any
class or any other rights, or
(iii)BPMC shall propose to take any action of the
type described in Section 6(c) hereof,
BPMC shall give notice to the Holder of this Note, which notice shall specify,
in the case of any action of the type specified in clauses (i) or (ii) of this
Section 6(f), the record date with respect to any such action or, in the case of
any action of the type specified in clause (iii) of this Section 6(f) the date
on which such action shall take place. In the case of any action of the type
specified in this Section 6(f), such notice shall be given at least 20 days
prior to the taking of such proposed action or, if earlier, to the extent
reasonably practicable, any record date in respect thereof. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of any
such action.
(g) Treasury Dispositions. The sale or other
disposition of any shares of Common Stock theretofore held in the treasury of
BPMC shall be deemed an issuance thereof.
(h) Taxes, Etc. BPMC shall pay all documentary,
stamp or other transactional taxes attributable to the issuance or delivery of
Common Stock upon conversion of this Note.
(i) Reservation of Stock. BPMC shall at all
times reserve and keep available, out of its treasury stock or authorized and
unissued stock, or both, solely for the purpose of effecting the conversion of
this Note, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Note.
7. Security Interest. The indebtedness evidenced by this Note
and the obligations created hereby are secured by a certain Stock Pledge
Agreement of even date herewith between BPMC and Vazzana (the "Pledge
Agreement").
8. Events of Default. The following shall constitute "Events
of Default" hereunder:
(a) BPMC shall have failed to make any payment due
hereunder within twenty (20) business days after the due date therefor,
and shall fail to make such payment for an additional twenty (20)
business days after written notice of such non-payment; or
6
<PAGE>
(b) BPMC shall have breached any material obligation
under Section 5 of this Note, and such breach shall not have been cured
within thirty (30) business days after receipt by BPMC of the Holder's
written demand to cure such breach; or
(c) There shall have occurred any "Default," as
defined in the Pledge Agreement, giving due recognition of any notice
and cure provisions thereof.
Upon the occurrence of any Event of Default hereunder, the Holder may by written
notice to BPMC declare the entire unpaid principal amount of this Note together
with accrued interest and charges thereon due and payable, and such amount may
be collected forthwith. In addition, the Holder may exercise any and all rights
under the Pledge Agreement.
9. General. Time is of the essence of this Note. In the event
this Note, or any part thereof, is collected by or through an attorney-at-law,
BPMC agrees to pay all reasonable costs of collection including, but not limited
to, reasonable attorneys' fees.
Presentment for payment, demand, protest and notice of demand,
protest and nonpayment, and all other notices are hereby waived by BPMC. No
failure to accelerate the debt evidenced hereby by reason of default hereunder,
acceptance of a past due installment, or indulgences granted from time to time
shall be construed (i) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby or as a waiver of such right of acceleration or of
the right of the Holder thereafter to insist upon strict compliance with the
terms of this Note or (ii) to prevent the exercise of such right of acceleration
or any other right granted hereunder or by applicable law; and BPMC hereby
expressly waives the benefit of any statute or rule of law or equity now
provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing. No extension of the time for the
payment of this Note, or any installment due hereunder, made by agreement with
any person now or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change, or affect the original liability of BPMC
under this Note, either in whole or in part unless the Holder agrees otherwise
in writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.
To the extent permitted by law, BPMC hereby waives and
renounces for itself, its successors and assigns, all rights to the benefits of
any moratorium, reinstatement, marshalling, forbearance, valuation, stay,
extension, redemption, appraisement exemption, and homestead now provided, or
which may hereafter be provided by the Constitution and laws of the United
States of America and of any state thereof, both as to itself and in and to
7
<PAGE>
all of its property, real and personal, against the enforcement and collection
of the obligations evidenced by this Note.
This Note shall be construed and enforced in accordance with
the substantive laws of the State of New York, without regard to any contrary
conflict of laws rules of the State of New York.
If for any reason whatsoever fulfillment of any provision of
this Note, at the time performance of such provision shall be due, shall involve
transcending the limit of validity presently prescribed by any applicable usury
statute or any other applicable law, with regard to obligations of like
character and amount, then, ipso facto, the obligations to be fulfilled shall be
reduced to the limit of such validity, so that in no event shall any exaction be
possible under this Note or under any other instrument evidencing or securing
the indebtedness evidenced hereby, that is in excess of the current limit of
such validity, but such obligation shall be fulfilled to the limit of such
validity.
As used herein, the terms "BPMC" and "Holder" shall be deemed
to include their respective heirs, successors, legal representatives, and
permitted assigns, whether by voluntary action of the parties or by operation of
law. Absent the Holder's written agreement to the contrary, the assumption of
BPMC's interest in this Note by any party shall not relieve BPMC of its
obligations hereunder. Absent the written consent of BPMC, Vazzana may not sell
or transfer his interest in this Note. It is expressly understood and agreed
that any transferee of the Holder's interest in this Note shall be subject to
all claims and defenses that BPMC could personally assert against Vazzana under
this Note if Vazzana were to remain as the Holder of this Note.
Prior to the exercise of conversion rights under this Note,
the Holder shall have no rights as a stockholder as to shares into which this
Note may be converted.
As used herein, the term "business day" means any day,
excluding Saturdays and Sundays, when national banks in New York City are
required to be open.
Upon receipt of evidence satisfactory to BPMC of the loss,
theft, destruction or mutilation of this Note, and, in the case of any loss,
theft or destruction, upon receipt of an affidavit of loss from the Holder
reasonably satisfactory to BPMC, or, in the case of any such mutilation, upon
surrender and cancellation of this Note, BPMC will make and deliver, in lieu of
this Note, which Note will thereupon be cancelled, a new Note of like tenor and
unpaid principal amount and dated as of the date to which interest has been paid
on this Note.
8
<PAGE>
IN WITNESS WHEREOF, Byron Preiss Multimedia Company, Inc. has
caused this Note to be signed by its duly authorized officer.
BYRON PREISS MULTIMEDIA COMPANY, INC.
By: ________________________________
Name:
Title:
9
<PAGE>
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is dated as of
November __, 1997, by and between Nicholas S. Vazzana ("Pledgee") and Byron
Preiss Multimedia Company, Inc. (the "Pledgor").
R E C I T A L S
Pursuant to a Stock Purchase Agreement of even date herewith
(the "Purchase Agreement"), the Pledgor has purchased from Pledgee 100% of the
outstanding capital stock (the "Stock") of Multi Dimentional Communications,
Inc. (the "Company"). The consideration for the purchase of the Stock includes a
6% Convertible Note of even date herewith from the Pledgor to Pledgee (the
"Note"). This Agreement is intended to induce Pledgee to sell the Stock to the
Pledgor and accept the Note as partial consideration for the Stock, by securing
repayment of the Note and performance of Pledgor's obligations thereunder.
NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. Definitions. All capitalized terms which are not
specifically defined in this Agreement shall have the meanings assigned to such
terms in the Purchase Agreement or, if not defined in the Purchase Agreement, in
the Note.
"Collateral" has the meaning set forth in Section 2.1 hereof.
"Default" has the meaning set forth in Article V hereof.
"Enforcement Costs" means any and all funds, costs, expenses and
charges (including, without limitation, reasonable attorney's fees and expenses)
advanced, paid or incurred by or on behalf of Pledgee under or in connection
with the enforcement of this Agreement.
"Event of Default" means an event which, with the giving of
notice or the lapse of time, or both, could or would constitute a Default under
the provisions of this Agreement.
<PAGE>
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated association, a
government or political subdivision or agency thereof, or any other entity.
"Security Interests" means the security interests in the
Collateral granted hereunder.
"UCC" means the Uniform Commercial Code of the State of New
York.
SECTION 1.2. Rules of Construction. Unless otherwise defined
herein and unless the context otherwise requires, all terms used herein which
are defined by the UCC shall have the same meanings assigned to them by the UCC
unless and to the extent varied by this Agreement. The words "hereof", "herein",
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section and subsection references are references to sections or
subsections of this Agreement unless otherwise specified. As used herein, the
singular number shall include the plural, the plural the singular, and the use
of the masculine, feminine or neuter gender shall include any other gender, as
the context may require.
ARTICLE II
THE COLLATERAL
SECTION 2.1. The Pledge. In order to secure the full and
punctual payment of the Note in accordance with the terms thereof, the Pledgor
hereby transfers, pledges, assigns, sets over, delivers and grants to Pledgee,
subject to Section 2.5(a)(iv) hereof, a continuing first priority lien and
security interest in and to all of the following collateral, both now owned and
existing and hereafter created, acquired and arising (all being collectively
referred to as the "Collateral") and all right, title and interest of the
Pledgor in and to the Collateral:
(a) Stock. The shares of stock described in Schedule I
hereto (the "Pledged Stock"), the certificates representing the Pledged Stock,
all options and other rights, contractual or otherwise, in respect thereof and
all dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Stock; and
(b) Proceeds. All cash and non-cash proceeds and
products of the portion of the Collateral described in clause (a) above.
SECTION 2.2. Security Interests Only. The Security Interests are
granted as security only and shall not subject Pledgee to, or transfer or in any
way affect or modify, any obligation or liability of the Pledgor with respect to
any of the Collateral or any transaction in connection therewith.
- 2 -
<PAGE>
SECTION 2.3. Delivery, etc. On the date hereof the Pledgor shall
deliver to Pledgee (a) all certificates representing or evidencing the Pledged
Stock, which certificates shall be accompanied by undated and irrevocable stock
powers duly executed in blank by the Pledgor, and (b) all other property,
instruments and papers comprising, representing or evidencing the Collateral or
any part thereof, accompanied by proper instruments of assignment or endorsement
duly executed by the Pledgor.
SECTION 2.4. Record Owner of Collateral. Pledgee shall have the
right in his sole and absolute discretion to hold any stock certificates, notes,
instruments or securities now or hereafter included in the Collateral in the
name of the Pledgee, provided that nothing herein shall preclude Pledgee from
holding such Collateral in his own name upon the occurrence and continuation of
any Default. The Pledgor will give to Pledgee copies of any notices or other
communications received by it with respect to Collateral registered in the name
of the Pledgor.
SECTION 2.5. Voting Rights; Dividends and Interest; etc.
(a) Unless and until a Default shall have occurred and
be continuing:
(i) The Pledgor shall be entitled to exercise any
and all voting and other rights, powers and privileges accruing to an owner of
the Pledged Stock or any part thereof for any purpose consistent with the terms
of this Agreement and the Note provided that no ratification shall be given, nor
any power pertaining to the Pledged Stock exercised, nor any other action taken,
which would violate or be inconsistent with the terms of this Agreement or the
Note.
(ii) Pledgee shall execute and deliver to the
Pledgor, or cause to be executed and delivered to the Pledgor, all such proxies,
powers of attorney, and other instruments as the Pledgor may reasonably request
for the purpose of enabling the Pledgor to exercise the voting and other rights,
powers and privileges which it is entitled to exercise pursuant to subparagraph
(i) above.
(iii) The Pledgor shall be entitled to receive and
retain any and all dividends paid on the Pledged Stock to the extent and only
to the extent that such dividends are permitted by, and otherwise paid in
accordance with, the terms and conditions of this Agreement, the Note and
applicable laws.
(iv) Notwithstanding any language contained herein
to the contrary, the term "Collateral" shall not include any money and/or
property (or cash or non-cash proceeds thereof) received by the Pledgor in
conformity with Section 2.5(a) hereof at a time when no Default shall have
occurred and be continuing.
(v) Pledgee shall not sell, transfer or encumber the
Collateral, except that Pledgee may assign his interest in the Collateral in
connection with any permitted assignment of the Note.
- 3 -
<PAGE>
(b) Upon the occurrence and during the continuance of a
Default, all rights of the Pledgor to dividends and/or other payments which the
Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section
2.5 shall cease, and all such rights shall thereupon become vested in Pledgee,
who shall have the sole and exclusive right and authority to receive and retain
such payments. All payments which are received by the Pledgor contrary to the
provisions of this Section 2.5 shall be received in trust for the benefit of
Pledgee, shall be segregated from other property or funds of the Pledgor and
shall be forthwith delivered to Pledgee in the same form as so received (with
any necessary endorsement, which the Pledgor hereby agrees to make). Any and all
money and other property paid over to or received by Pledgee pursuant to the
provisions of this subparagraph (b) shall be applied to the amounts due under
the Note.
(c) Upon the occurrence and during the continuance of a
Default, all rights of the Pledgor to exercise the voting and other rights,
powers and privileges which it is entitled to exercise pursuant to paragraph
(a)(i) of this Section 2.5 shall cease, and all such rights, powers and
privileges shall thereupon become vested in Pledgee, who shall have the sole
and exclusive right and authority to exercise such voting and other rights,
powers and privileges.
SECTION 2.6. No Assumption. Notwithstanding anything contained
herein to the contrary, whether or not an Event of Default shall have occurred,
and whether or not Pledge elects to foreclose or otherwise realize on its
security interest in the Collateral as set forth herein or exercise any of its
rights under this Agreement or the Note or otherwise, neither this Agreement,
receipt by Pledgee of any distributions, the foreclosure or other realization by
Pledgee of the security interest in the Collateral nor any exercise by Pledgee
of any of its rights under this Agreement or the Note or otherwise, shall in any
way be deemed to obligate Pledgee to assume Pledgor's obligations, duties,
expenses or liabilities with respect to the Collateral or any agreement relating
thereto, and in the event of any such foreclosure, realization or other exercise
of rights, Pledgor shall remain bound and obligated to perform such obligations
and Pledgee shall not be deemed to have assumed any of such obligations.
- 4 -
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants to Pledgee that the
following statements are accurate, assuming the accuracy of Pledgee's
representations to the Pledgor in the Purchase Agreement:
SECTION 3.1. Authority. The Pledgor has full power and authority
to grant the Security Interests to Pledgee in the Collateral pursuant hereto and
to execute, deliver and perform its obligations in accordance with the terms of
this Agreement without the consent or approval of any Person other than any
consent or approval which has been obtained.
SECTION 3.2. Pledged Stock. Subject to the terms of this Pledge
Agreement, the Pledgor is, and at all times will be, the sole legal, record and
beneficial owner of, and has good and marketable title to, all of the
Collateral. The Pledgor has not created and will not create any liens (other
than the liens created hereby), options, security interests, encumbrances or
other rights in the Collateral and is not and will not become a party to and is
not and will not become bound by any agreement (other than this Agreement) which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock.
SECTION 3.3. Survival. All representations and warranties
contained in or made under or in connection with this Agreement: (a) shall
survive the execution, delivery and performance of this Agreement, and (b) shall
be accurate at all times during which any amount remains outstanding under the
Note with the same effect as if such representations and warranties had been
made at such times.
ARTICLE IV
COVENANTS OF PLEDGOR
The Pledgor covenants and agrees with Pledgee as follows:
SECTION 4.1. Title, Liens and Taxes. The Pledgor shall, at its
cost and expense, take any and all actions reasonably necessary to defend the
Security Interests of Pledgee in the Collateral and the priority (or intended
priority) thereof against any adverse lien of any nature whatsoever, except for
liens arising from the actions or omissions of Pledgee and/or the Company prior
to the date hereof.
SECTION 4.2. Further Assurances. The Pledgor shall, from time to
time, at its expense, execute, deliver, acknowledge and cause to be duly filed,
recorded or registered any statement, assignment, endorsement, instrument,
paper, agreement or other document and take any other action that from time to
time may be necessary or desirable, or that Pledgee may reasonably request, in
order to create, preserve, continue, perfect, confirm or validate the
- 5 -
<PAGE>
Security Interests or to enable Pledgee to obtain the full benefits of this
Agreement or to exercise and enforce any of his rights, powers and remedies
hereunder. The Pledgor shall pay all costs of, and incidental to, the filing,
recording or registration of any such document as well as any recordation,
transfer or other tax required to be paid in connection with any such filing,
recordation or registration. The Pledgor agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement
signed by the Pledgor in connection with this Agreement shall be sufficient as a
financing statement.
SECTION 4.3. Care and Protection of Collateral. The Pledgor
shall promptly notify Pledgee of any event causing deterioration, loss or
depreciation in value of any substantial portion of the Collateral and the
amount of such loss or depreciation.
SECTION 4.4. Liquidation, Dissolution, Etc. Without Pledgee's
prior written consent, during the term of this Agreement to the Pledgor will not
allow the Company to (a) liquidate, dissolve, merge, consolidate, sell
substantially all of its assets or engage in any material transaction outside
the ordinary course of business consistent with past practice; (b) borrow money
from any Person other than BPMC or loan money to any Person other than BPMC; (d)
declare and/or pay any cash or non-cash dividends; or (e) issue, sell or
authorize for issuance or sale, shares of any class, options, warrants, rights
or convertible securities, or enter into any agreements or commitments of any
character obligating it to issue or sell any such securities. Notwithstanding
anything to the contrary contained in this Agreement, the Pledgor may cause the
Company to merge with New Media Schoolhouse, Inc., without obtaining the consent
of Pledgee or causing a Default hereunder.
SECTION 4.5. Sale of Collateral. Without the prior written
consent of Pledgee, the Pledgor will not sell, lease, assign, transfer, dispose
of, pledge or grant a lien on the Collateral other than the lien created by this
Agreement.
ARTICLE V
DEFAULT
The occurrence of any one or more of the following events shall
constitute a default under the provisions of this Agreement, and the term
"Default" shall mean, whenever it is used in this Agreement, any one or more of
the following events:
SECTION 5.1. Payment of Obligations; Default under Note. If
there occurs any "Event of Default" as defined in the Note, giving due
consideration to notice and cure provisions thereof;
SECTION 5.2. Breach of This Agreement. If the Pledgor fails to
perform, observe or comply with any material provision of this Agreement and
cure such breach within twenty (20) business days after written notice thereof;
- 6 -
<PAGE>
SECTION 5.3. Liquidation, Termination, Dissolution. If the
Pledgor shall liquidate, dissolve or terminate its existence without Pledgee's
prior written consent;
SECTION 5.4. Inability to Pay Debts, etc. If the Pledgor shall
admit in writing its inability to pay its debts as they mature or shall make any
assignment for the benefit of any of its creditors;
SECTION 5.5. Bankruptcy. If proceedings in bankruptcy, or for
reorganization of the Pledgor, or for the readjustment of any of its debts,
under the Bankruptcy Code, as amended, or any part thereof, or under any other
applicable laws, whether state or federal, for the relief of debtors, now or
hereafter existing, shall be commenced against or by the Pledgor and, except
with respect to any such proceedings instituted by the Pledgor, shall not be
discharged within sixty (60) days of their commencement;
SECTION 5.6. Receiver, etc. If a receiver or trustee shall be
appointed for the Pledgor or for any substantial part of its assets and, except
with respect to any such appointments requested or instituted by the Pledgor,
such receiver or trustee shall not be discharged within sixty (60) days of his
or her appointment;
SECTION 5.7. Dissolution Proceedings. If any proceedings shall
be instituted for the dissolution or the full or partial liquidation of the
Pledgor and, except with respect to any such proceedings instituted by the
Pledgor, such proceedings shall not be discharged within sixty (60) days of
their commencement.
ARTICLE VI
RIGHTS AND REMEDIES
SECTION 6.1. Rights and Remedies of Pledgee.
(a) Subject to the limitations set forth in Section 6.4
hereof, upon and after the occurrence of a Default, Pledgee may sell the
Collateral, or any part thereof, for cash at such price or prices as Pledgee may
deem commercially reasonable. Pledgee shall be authorized in connection with any
such sale (if he deems it advisable to do so) to require potential purchasers to
execute confidentiality agreements reasonably satisfactory to Pledgee and/or to
restrict the prospective bidders or purchasers of any of the Collateral to
Persons who will represent and agree that they are qualified investors and upon
consummationof any such sale Pledgee shall have the right to assign, transfer
and deliver to the purchaser or purchasers thereof the Collateral so sold.
(b) Pledgee shall give the Pledgor sixty (60) days
prior written notice (which the Pledgor agrees is reasonable notice within the
meaning of Section 9-504(3) of the UCC) of Pledgee's intention to make any sale
or other disposition of Collateral and shall afford to the Pledgor's investment
bankers an opportunity to seek purchasers for the Collateral during
- 7 -
<PAGE>
such period, subject to any confidentiality agreements and representation
letters reasonably required by Pledgee and authorized by Section 6.1(a) hereof.
Such notice shall state the date after which such sale or other disposition may
be made. In case any sale of all or any part of the Collateral is made on
credit, the Collateral so sold may be retained by Pledgee until the sale price
is paid in full by the purchaser or purchasers thereof, but Pledgee shall not
incur any liability in case any such purchaser or purchasers shall fail to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. After the date specified in the
notice given under this Section 6.1(b), and subject to Section 6.4 hereof,
Pledgee may bid for or purchase, free from any right of redemption, stay or
appraisal on the part of the Pledgor (all of such rights being also hereby
waived and released by the Pledgor), the Collateral or any part thereof offered
for sale, provided that Pledgee bids for or purchases such Collateral for an
amount not less than the amount offered by the highest bona fide competing
purchaser willing to purchase the Collateral for cash. Pledgee may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to the Pledgor therefor.
(c) As an alternative to or in addition to exercising
the power of sale herein conferred upon it, Pledgee may exercise any right, not
inconsistent with the terms of this Agreement, afforded by the UCC or applicable
law.
SECTION 6.2. Application. The proceeds of collection, sale or
other disposition of all or any part of the Collateral coming into Pledgee's
possession may be applied by Pledgee to the amounts outstanding under the Note
and to the Enforcement Costs, whether matured or unmatured, in such order and
manner as Pledgee may determine in his sole discretion.
SECTION 6.3. No Waiver, etc. No failure or delay by Pledgee to
insist upon the strict performance of any term, condition, covenant or agreement
of this Agreement or the Note, or to exercise any right, power or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant or agreement or of any such breach, or preclude Pledgee from
exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Agreement
or the Note, Pledgee shall not be deemed to waive the right either to require
prompt payment when due of all other amounts payable under this Agreement or the
Note, or to declare a Default for failure to effect such prompt payment of any
such other amount. The payment by the Pledgor or any other Person and the
acceptance by Pledgee of any other amount due and payable under the provisions
of this Agreement or the Note during which a Default exists shall not in any way
or manner be construed as a waiver of such Default by Pledgee or preclude
Pledgee from exercising any right of power or remedy consequent upon such
Default.
SECTION 6.4. Vote. In the event of a Default, Pledgee may vote
all or any part of the Pledged Stock (whether or not transferred into the name
of the Pledgee) and give all consents, waivers and ratifications in respect to
the Pledge Stock and otherwise act with respect thereto as though he were the
outright owner thereof.
- 8 -
<PAGE>
SECTION 6.5. Acknowledgement. The Pledgor and Pledgee each
acknowledge and agree that any sale of the Collateral effected in conformity
with the procedures outlined herein shall be "commercially reasonable" within
the meaning of the UCC.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Course of Dealing; Amendment. The failure of
Pledgee at any time or times to enforce his rights under such provisions,
strictly in accordance with the same, shall not be construed as having created a
custom in any way or manner contrary to specific provisions of this Agreement or
the Note or as having in any way or manner modified or waived the same. This
Agreement may not be amended, modified, or changed in any respect except by an
agreement, in writing, signed by Pledgee and the Pledgor.
SECTION 7.2. Waiver of Default. Pledgee may, at any time and
from time to time, execute and deliver to the Pledgor a written instrument
waiving, on such terms and conditions as Pledgee may specify in such written
instrument, any of the requirements of this Agreement or any Event of Default or
Default and its consequences, provided that any such waiver shall be for such
period and subject to such conditions as shall be specified in any such
instrument. In the case of any such waiver, the Pledgor and Pledgee shall be
restored to their former positions prior to such Event of Default or Default and
shall have the same rights as they had hereunder. No such waiver shall extend to
any subsequent or other Event of Default or Default, or impair any right
consequent thereto and shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 7.3. Notices. All notices, requests and demands to or
upon the parties to this Agreement shall be deemed to have been given or made
when made in accordance with the requirements set forth in the Purchase
Agreement.
SECTION 7.4. Additional Provisions Concerning the Pledged
Collateral. The Pledgor hereby irrevocably appoints the Pledgee the Pledgor's
attorney-in-fact and proxy, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time in the
Pledgee 's discretion, to take any action and to execute any instrument which
the Pledgee may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, indorse and collect all
instruments made payable to the Pledgor representing any dividend or other
distribution in respect of any Pledged Collateral and to give full discharge for
the same. The powers of attorney granted pursuant to this Agreement shall not
impose any duty upon the attorney-in-fact to exercise such powers. Such powers
of attorney are coupled with an interest and are irrevocable.
SECTION 7.5 Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the indefeasible payment or satisfaction in full of
the Note, (ii) be binding upon Pledgor, its
- 9 -
<PAGE>
permitted transferees, representatives, successors and assigns, and (iii) inure,
together with the rights and remedies of Pledgee hereunder, to the benefit of
Pledgee and its permitted transferees, representatives, successors and assigns.
Upon the indefeasible payment or satisfaction in full of the Note, (x) Pledgor
shall be entitled to the return, upon their request and at the expense, of such
portion of the Collateral as shall not have been sold or otherwise applied or
forfeited pursuant to the terms hereof, and (y) this Agreement shall be of no
further force or effect.
SECTION 7.6. Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (a) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of Pledgee in order
to carry out the intentions of the parties hereto as nearly as may be possible,
(b) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction, and (c) the parties hereto shall endeavor in good
faith negotiations to replace the invalid or unenforceable provisions with valid
and enforceable provisions, the economic effect of which comes as close as
possible to that of the invalid or unenforceable provisions.
SECTION 7.7. Survival. All representations, warranties and
covenants contained herein shall survive the execution and delivery of this
Agreement and the Note.
SECTION 7.8. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the Pledgor and Pledgee and their respective
personal representatives, successors and assigns, except that the Pledgor shall
not have the right to assign its rights hereunder or any interest herein without
the prior written consent of Pledgee.
SECTION 7.9. Applicable Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the substantive laws of the State of New York, both in
interpretation and performance, without regard to any conflicting conflict of
laws rules of the State of New York.
SECTION 7.10. Duplicate Originals and Counterparts. This
Agreement may be executed in any number of duplicate originals or counterparts,
each of such duplicate originals or counterparts shall be deemed to be an
original and all taken together shall constitute but one and the same
instrument.
SECTION 7.11. Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only, shall not
constitute a part of this Agreement for any other purpose and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
SECTION 7.12. Expenses. Upon demand, Pledgor will pay to Pledgee
the amount of any and all expenses, including reasonable attorney's fee and fees
of any experts and agents, which the Pledgee may reasonably incur in connection
with (i) the sale of, collection from, or other realization upon, any of the
Collateral or (ii) the exercise or enforcement of any of the Pledgee's rights
hereunder.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first written above.
BYRON PREISS MULTIMEDIA
COMPANY, INC.
BY:
---------------------------
------------------------------
NICHOLAS S. VAZZANA
Intending to be legally bound hereby,
the Company agrees not to take any action
that would cause the Pledgor to breach its
obligations under Section 4.4 of this
Agreement.
Multi Dimensional Communications, Inc.
BY:_______________________________________
Nicholas S. Vazzana, President
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
November 26, 1997, between BYRON PREISS MULTIMEDIA COMPANY, INC., a New York
corporation ("BPMC"), and each of NICHOLAS S. VAZZANA ("Nicholas") and ELAINE
VAZZANA ("Elaine").
W I T N E S E T H :
WHEREAS, the parties hereto are parties to a certain Stock
Purchase Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, pursuant to the terms of the Purchase Agreement, BPMC
is delivering to each of Nicholas and Elaine, a convertible note of even date
herewith (the "Convertible Notes") and 150,000 and 41,620 unregistered shares of
BPMC's common stock, par value $.001 per share (the "Common Stock"),
respectively;
WHEREAS, additional shares of BPMC Common Stock (the
"Conversion Shares") may be issued to each of Nicholas and Elaine (or subsequent
holders of the Convertible Notes) pursuant to the conversion privilege of the
Convertible Notes;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto hereby agree as follows:
1. Certain Definitions. Capitalized terms used herein which
are not otherwise defined herein and which are defined in, or by reference in,
the Purchase Agreement shall have the meanings given therein. For the purposes
of this Agreement, the following terms shall have the following meanings:
"Additional Seller(s)" shall mean those shareholders of BPMC
whose names are set forth on Exhibit "A" hereto.
"Agreement" shall mean this Registration Rights Agreement, as
the same may be amended, modified or supplemented from time to time.
"Conversion Securities" shall mean Registrable Securities that
are Conversion Shares or securities issued in exchange for or substitution of
any thereof, or as a result of a stock split, in connection with a
recapitalization, merger, consolidation or other reorganization, or as a
dividend or other distribution in respect of any thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be
<PAGE>
deemed to include a reference to the comparable section, if any, of any such
similar federal statute.
"Holder" shall mean Nicholas, Elaine and each Person to whom
Registrable Securities are transferred so long as such Person holds such
Registrable Securities.
"Registrable Securities" shall mean the Basic Shares and the
Conversion Shares (collectively, the "Shares") and any securities issued in
exchange for or substitution of any thereof, or as a result of a stock split, in
connection with a recapitalization, merger, consolidation or other
reorganization, or as a dividend or other distribution in respect of any
thereof. As to any particular Registrable Securities, once issued, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) they shall have been
disposed of pursuant to Rule 144 (or any successor provision) under the
Securities Act, (iii) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by BPMC and subsequent disposition of them shall not require
registration or qualification of them under the Securities Act or any similar
state law then in force (and the Holder thereof shall have received an opinion
of independent counsel for the Holder reasonably satisfactory to BPMC to the
foregoing effects), or (iv) they shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance with this Agreement, including without
limitation, (i) all SEC and National Association of Securities Dealers, Inc. or
stock exchange registration, listing and filing fees, (ii) all fees and expenses
of complying with securities or blue sky laws (including reasonable fees and
disbursements of counsel for BPMC, the underwriters or the Holders in connection
with blue sky qualification of the Registrable Securities (in a maximum of ten
(10) states)), (iii) all printing, messenger, telephone and delivery expenses
and transfer taxes, (iv) the fees and disbursements of counsel for BPMC and of
its independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance, (v) any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, and (vii) the reasonable fees and expenses of
any special experts retained in connection with the requested registration, but
excluding the respective underwriting discounts and commissions of underwriters,
agents or dealers relating to the distribution of the Registrable Securities, if
any, transfer taxes and legal expenses of the Holders.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.
2
<PAGE>
"SEC" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act or the
Exchange Act.
2. Registration Rights.
Incidental "Piggy-Back" Registration. (i) If at any
time BPMC proposes to register any of its equity securities (the "Basic
Securities") under the Securities Act (other than a registration on Form S-4 or
Form S-8) whether or not for sale for its own account, it will each such time
give at least twenty (20) days prior written notice to all Holders of
Registrable Securities of its intention to do so and of such Holders' rights
under this Section 2. Upon the written request of any such Holder made within
twenty (20) days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such Holder and
the intended method of disposition thereof), BPMC will use its best efforts to
effect the registration under the Securities Act of all Registrable Securities
(on a pro-rata basis with any other equity securities which BPMC is seeking to
register pursuant to incidental registration but subject to the priorities set
forth in Section 2(ii) below) which BPMC has been so requested to register by
the Holders thereof, to the extent requisite to permit the disposition (in
accordance with such intended methods thereof) of the Registrable Securities so
to be registered; provided that if, at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration BPMC shall
determine for any reason not to register such securities, BPMC may, at its
election, give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration. BPMC
will pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.
(ii) If a registration pursuant to this
Section 2 involves an underwritten offering and the managing underwriter advises
BPMC in writing that, in its opinion, the number of securities requested to be
included in such registration exceeds the number of securities which would have
an adverse effect on such offering, including the price at which such shares can
be sold, BPMC will include in such registration the securities proposed to be
registered by BPMC for its own account and the maximum number of other
securities which it is so advised can be sold without such an adverse effect,
allocated as follows:
(A) If at any time BPMC proposes to register any of its equity
securities under the Securities Act all securities proposed to be
registered by BPMC for its own account and all securities proposed to
be registered for the benefit of the Additional Sellers, and all
securities proposed to be registered by Viacom International Inc. or
each the foregoing persons or entities tranferors, shall have priority
over the registration of all securities proposed to be registered by
Holder under this Section 2; and any other
3
<PAGE>
securities proposed to be registered by BPMC and all securities
proposed to be registered by Holder under this Section 2 shall have the
next priority (if necessary, allocated pro rata among all requesting
holders on the basis of the relative number of shares or securities
each such holder has requested to be included in such registration).
3. Registration Procedures. Whenever BPMC effects or causes
the registration of the Registrable Securities under the Securities Act as
provided in this Agreement, BPMC will use its best efforts to permit the sale of
such Registrable Securities in accordance with the intended method or methods of
distribution thereof, and will, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, provided, however, that BPMC
may discontinue any registration of its securities which is being effected
pursuant to Section 2 herein at any time prior to the effective date of the
registration statement relating thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period not in excess of two years from the effective date thereof and to
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 Holders set forth in
such registration statement;
(c) furnish to the Holders such number of executed and
conformed copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits and all documents
incorporated by reference therein), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus
and supplemental prospectus), and such other documents as the Holders may
reasonably request in order to facilitate the disposition of the Registrable
Securities by such Holders;
(d) use its best efforts to register or qualify (and keep
effective such registration or qualification) such Registrable Securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions within the United States as may be reasonably
required to permit the Holders to sell the Registrable Securities or as the
Holders shall reasonably request, and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Holders to consummate the
disposition in such jurisdictions of the Registrable Securities; provided that
BPMC shall not for any such purpose be required
4
<PAGE>
to qualify generally to do business as a foreign corporation in any jurisdiction
where, but for the requirements of this subsection (d), it would not be
obligated to be so qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction; provided, further, that this subsection (d) shall not be construed
to require BPMC to register as a broker-dealer in any jurisdiction any third
person to whom or through whom a Holder proposes to sell Registrable Securities;
(e) immediately notify the Holders, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in subsection (b) of this Section 3, of
BPMC becoming aware that the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
and at the request of the Holders promptly prepare and furnish to such Holders a
reasonable number of copies of an amended or supplemented prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing;
(f) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, beginning with the first month after the
effective date of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(g) use its best efforts to list such Registrable
Securities on NASDAQ or any securities exchange on which securities of such
class are then listed, if such Registrable Securities are not already so listed,
and to provide a transfer agent and registrar for such Registrable Securities
covered by such registration statement not later than the effective date of such
registration statement;
(h) enter into such agreements (including an underwriting
agreement in customary form) and take such other actions as the Holders
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(i) whether or not the registration related to an
underwritten offering, make such representations and warranties to the Holders
and to the underwriters, if any, as are customarily made by issuers to
underwriters in underwritten offerings, obtain opinions of counsel to BPMC
addressed to each Holder and to the underwriters, if any, covering the matters
customarily covered in underwritten offerings, and obtain a "cold comfort"
letter or letters and updates thereof from BPMC's independent public accountants
in customary form and covering
5
<PAGE>
matters of the type customarily covered in underwritten offerings, in each case
as the underwriters or the Holders shall reasonably request; and
(j) make available for inspection (at reasonable times and
upon reasonable notice) by the Holders, by any underwriter participating in any
disposition to be effected pursuant to such registration statement and by any
attorney, accountant, or other agent retained by the Holders or any such
underwriter, all pertinent financial and other records and pertinent corporate
documents of BPMC, and cause all of BPMC's executive officers and directors to
supply all information reasonably requested by the Holders, underwriter,
attorney, accountant or agent in connection with such registration statement.
BPMC may require the Holders to furnish BPMC such information
regarding the Holders and the distribution of such securities for use in the
registration statement relating to such registration as BPMC may from time to
time reasonably request in writing and to do such reasonable acts and things as
BPMC may from time to time reasonably request in order to permit BPMC to comply
with the requirements of law.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from BPMC of the
happening of any event of the kind described in subsection (e) of this Section
3, such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subsection (e) of this Section 3, and if so directed
by BPMC, such Holder will deliver to BPMC all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event BPMC shall give any such notice, the period mentioned in subsection (b) of
this Section 3 shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to subsection (e)
of this Section 3 to and including the date when each Holder of Registrable
Securities covered by such registration statement shall have received the copies
of the supplemented or amended prospectus contemplated by subsection (e) of this
Section 3.
BPMC shall have no obligation to register any of the
Registrable Securities pursuant to this Agreement if BPMC has obtained an
opinion of counsel to the effect that the Registrable Securities may be
immediately sold to the public without registration thereof, whether pursuant to
Rule 144 (provided that the volume of sales or manner of sale restrictions
thereof shall not be applicable to such sale) promulgated under the Securities
Act, any successor rule or otherwise.
6
<PAGE>
4. Indemnification.
(a) Indemnification by BPMC. In the event of any registration
of any securities of BPMC under the Securities Act pursuant to Section 2 herein,
BPMC will, and it hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, the seller of any Registrable Securities covered by
such registration statement, its directors and officers or general and limited
partners (and directors and officers thereof), and each other Person, if any,
who controls such seller within the meaning of the Securities Act, against any
and all losses, claims, damages or liabilities, joint or several, and expenses
(including legal, accounting and other reasonable expenses incurred in
connection with investigation, preparation or defense of any of the foregoing),
to which such seller, any such director or officer or general or limited partner
or any such controlling Person may become subject under the Securities Act, the
Exchange Act, common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon (a) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary, final or
supplemental prospectus contained therein, or any amendment or supplement
thereto, or (b) 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, and BPMC will reimburse such seller and each such director,
officer, general or limited partner, and controlling Person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
preparing for and defending any such loss, claim, liability, action or
proceeding from time to time as such expenses are incurred; provided that BPMC
shall not be liable in any such case to any such person, to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement or
amendment or supplement thereto or in any such preliminary, final or
supplemental prospectus in reliance upon and in conformity with written
information furnished to BPMC through an instrument duly executed by such seller
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, general or
limited partner or controlling Person and shall survive the transfer of such
securities by such seller.
(b) Indemnification by the Holders of Registrable Securities.
As a condition to including any Registrable Securities in any registration
statement filed in accordance with Section 2 herein, Gardner will and it hereby
does (and BPMC may require, as a condition to including any Registrable
Securities in any registration statement filed in accordance with Section 2
herein, any Holder of Registrable Securities, to provide an undertaking
reasonably satisfactory to BPMC pursuant to which such Holder shall indemnify
and hold harmless BPMC upon the terms set forth in this Section 4(b)) indemnify
and hold harmless (in the same manner and to the same extent as set forth in
subsection (a) of this Section 4) BPMC, its directors and officers signing the
registration statement and its controlling persons and all other prospective
selling
7
<PAGE>
Holders and their respective controlling persons with respect to any statement
or alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or supplemental prospectus contained therein,
or any amendment or supplement, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to BPMC through an instrument duly executed by
such seller specifically stating that it is for use in the final or supplemental
prospectus or amendment or supplement, or a document incorporated by reference
into any of the foregoing; provided however, in no event shall the liability of
any selling Holder of Registrable Securities be greater in amount than the
amount of proceeds received by such selling Holder upon such sale. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of BPMC or any other prospective sellers or any of their
respective directors, officers or controlling Persons and shall survive the
transfer of such securities by such selling Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 4, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 4, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment (which is based on the written opinion of its counsel) a conflict of
interest between such indemnified and indemnifying parties exists in respect of
such claim, the indemnifying party will be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof. If in an indemnified party's reasonable judgment (which is
based on the written opinion of its counsel) a conflict of interest between the
indemnified and indemnifying parties exists in respect of a claim or if the
indemnifying party refuses to participate in and to assume the defense of any
action brought against an indemnified party, the indemnified party may assume
the defense of such claim or action with counsel of its choosing which shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 4. No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
8
<PAGE>
(d) Contribution. If the indemnification provided for in or
pursuant to this Section 4 is due in accordance with the terms hereof but is
held by a court to be unavailable or unenforceable in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified person,
shall contribute to the amount paid or payable by such indemnified person as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified person on the other in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying party on the one hand and of the
indemnified person on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified person and by such
persons' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. In no event shall the liability
of any selling Holder of Registrable Securities be greater in amount than the
amount of proceeds received by such Holder upon such sale.
5. Rule 144. BPMC covenants that it will use its best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if
BPMC is not required to file such reports, it will, upon the request of the
Holders, make publicly available such information as is necessary to permit
sales pursuant to Rule 144 under the Securities Act), and it will do all such
other acts and things from time to time as requested by the Holders to the
extent required from time to time to enable each Holder to sell shares of
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereunder adopted by the SEC. Upon the request of any Holder, BPMC will deliver
to such Holder a written statement as to whether it has complied with such
requirements.
6. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be amended and
BPMC may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if BPMC shall have obtained the written
consent to such amendment, action or omission to act, of Gardner. Holders of
Registrable Securities shall be bound by any consent authorized by this Section
6(a), whether or not such Registrable Securities shall have been marked to
indicate such consent.
(b) Successors, Assigns and Transferees. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
legal successors-in-interest, and
9
<PAGE>
nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
(c) Notices. All notices and other communications provided for
hereunder shall be given and shall be effective as provided in the Purchase
Agreement.
(d) Descriptive Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise effect the
meaning of terms contained herein.
(e) Severability. In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of such provision, paragraph, word, clause, phrase, or sentence
in every other respect and of the remaining provisions, paragraphs, words,
clauses, phrases or sentences hereof shall not be in any way impaired, it being
intended that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than on such
counterpart.
(g) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
(h) Remedies. BPMC acknowledges that monetary damages will not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions hereof and agrees, to the fullest extent permitted by law, to
waive the defense of adequacy of legal remedies in any action for specific
performance hereof.
(i) Merger, etc. If, directly or indirectly: (i) BPMC shall
merge with and into, or consolidate with, any other Person, (ii) any Person
shall merge with and into, or consolidate with, BPMC and BPMC shall be the
surviving corporation of such merger or consolidation and, in connection with
such merger or consolidation, all or part of the Registrable Securities shall be
changed into or exchanged for stock or other securities of any other Person, or
(iii) BPMC shall sell substantially all of its assets to any other Person in
exchange for stock or other securities of any other Person, then, in each case,
proper provision shall be made so that such Person shall be bound by the
provisions of this Agreement, the Holder shall have registration rights with
respect to the stock or other securities of the surviving entity or successor to
the business of BPMC and the term "BPMC" shall thereafter be deemed to include
any successor to BPMC with respect to the obligations hereunder, by merger,
consolidation or otherwise. For purposes hereof, the term "Person" shall mean
any individual, corporation, partnership, trust or other non-governmental
entity.
10
<PAGE>
7. Termination. Except as otherwise provided herein, BPMC's
obligations under Section 2 hereof shall terminate on the date upon which there
shall be no Registrable Securities outstanding.
IN WITNESS WHEREOF, each of the undersigned has caused this
Registration Rights Agreement to be executed on its behalf as of the date first
written above.
BYRON PREISS MULTIMEDIA COMPANY, INC.
By: /s/ Byron Preiss
------------------------------
Name: Byron Preiss
Title: Chief Executive Officer
/s/ Nicholas S. Vazzana
------------------------------
Nicholas S. Vazzana
/s/ Elaine Vazzana
------------------------------
Elaine Vazzana
11
<PAGE>
EXHIBIT "A"
Additional Sellers
1. Byron Preiss
2. Preiss Charitable Foundation, Inc.
3. Martin L. Berman
4. Phyllis Berman
5. Steven C. Berman
6. Alison A. Berman Lifetime Income Trust
7. Mark K. Berman Lifetime Income Trust
8. Martin L. Berman Foundation
9. Andrew K. Gardner
10. Viacom International, Inc.
12
