SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 28, 1996
Commission file number 1-13656
OMNI MULTIMEDIA GROUP, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 04-2729490
(State of Organization) (I.R.S. Employer
Identification Number)
50 Howe Avenue
Millbury, Massachusetts 01527
(508) 865-4451
(Address, including zip code, and telephone number,
including area code, of issuer's principal executive offices)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Number of Shares Outstanding
----- as of November 15, 1996
----------------------------
Common Stock, $.01 par value 5,889,498 shares
Series A Preferred Stock, $.01 par value 591 shares
OMNI MULTIMEDIA GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION.
---------------------
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS PAGE
----
<S> <C>
Condensed Consolidated Balance Sheet -
as of March 30, 1996 (Audited) and September 28, 1996 (Unaudited).................................. 1
Condensed Consolidated Statements of Operations (Unaudited)
for the three months ended September 30, 1995 and September 28, 1996............................... 3
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the six months ended September 30, 1995 and September 28, 1996................................. 4
Notes to Condensed Consolidated Financial Statements................................................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................. 6
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.......................................................................... 8
ITEM 2. CHANGES IN SECURITIES...................................................................... 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................................................ 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS........................................ 9
ITEM 5. OTHER INFORMATION.......................................................................... 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................................... 9
SIGNATURES........................................................................................... 10
</TABLE>
<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
------
September 28, March 30,
1996 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Current Assets
Cash and cash equivalents $9,208,351 $ 5,706,822
Accounts receivable, net of
allowance for doubtful accounts
of $85,000 at September 28, 1996 and
$25,000 at March 30, 1996 1,514,187 1,306,212
Stock Subscription -- 1,790,374
Inventories 1,035,695 966,665
Prepaid expenses and other
current assets 760,926 812,103
Refundable income taxes 15,850 --
Deferred tax assets, net 101,844 101,844
----------- -----------
12,636,853 10,684,020
----------- -----------
Property and equipment, net 18,320,398 8,427,275
Due from related parties 542,980 532,761
Other assets, net 1,068,803 954,230
----------- -----------
$32,569,034 $20,598,286
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 28, March 30,
1996 1996
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Current liabilities
Accounts payable $1,287,552 $1,775,225
Line of credit 1,150,057 1,068,967
Current portion of long-term debt
and capital lease obligations 2,081,000 1,025,600
Accrued expenses 348,805 332,561
Income taxes payable -- 190,063
----------- -----------
4,867,414 4,392,416
----------- -----------
Long-term debt 3,768,784 2,207,479
Capital lease obligations 6,987,378 1,760,919
Deferred tax liability 141,761 141,761
------------ -----------
Stockholders' Equity
Convertible Preferred Stock; $.01 par value;
1,000,000 shares authorized; 856 Series
A shares issued and outstanding 9 --
Common Stock, $.01 par value; 14,000,000
shares authorized; 4,433,449 and 3,889,950 shares issued
and outstanding at September 28, 1996 and
March 30, 1996, respectively 38, 901 38,899
Additional paid-in-capital 20,988,646 11,635,675
Retained earnings (accumulated deficit) (4,223,859) 421,137
----------- -----------
16,803,697 12,095,711
----------- -----------
$32,569,034 $20,598,286
=========== ===========
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
-------------------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
Net sales $ 2,183,289 $ 5,450,120 $ 4,615,478 $ 7,711,778
Cost of goods sold 2,959,807 4,024,578 5,871,124 5,783,669
--------------- ------------ -------------- ------------
Gross profit (loss) (776,518) 1,425,542 (1,255,646) 1,928,109
---------------- ------------ ------------- ------------
Operating expenses
Selling 974,773 630,727 1,615,633 971,609
General and administrative 842,992 451,241 1,522,597 853,245
----------------- ------------- -------------- -------------
1,817,765 1,081,968 3,138,230 1,824,854
--------------- ------------ -------------- ------------
Income (loss) from operations (2,594,283) 343,574 (4,393,876) 103,255
Other income 147,223 17,890 243,366 38,390
----------------- -------------- --------------- --------------
( 2,447,060) 361,464 (4,150,510) 141,645
--------------- -------------- ------------- -------------
Other expenses
Interest expense 343,583 45,236 425,713 91,869
Other expenses 34,350 - 68,774 1,245
------------------------------------- ---------------- ---------------
377,933 45,236 494,487 93,114
---------------- --------------- --------------- --------------
Income (loss) before income taxes (2,824,993) 316,228 (4,644,997) 48,531
Income tax provision - 23,544 - 24,000
---------------------- --------------- -------------------- --------------
Net income (loss) $ (2,824,993) $ 292,684 $ (4,644,997) $ 24,531
============ ============= ============ ===============
Primary net income (loss) per share $ (0.70) $ 0.10 $ (1.17) $ 0.01
Primary weighted average common
shares outstanding 4,033,232 2,943,050 3,961,591 2,864,192
Fully diluted net income (loss)
per share $ (0.64) $ 0.10 $ (1.05) $ 0.01
Fully diluted weighted average
(common shares outstanding) 4,433,449 2,987,980 4,433,449 2,987,980
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
September 28, September 30,
1996 1995
------------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,644,997) $ 24,531
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 1,010,186 225,541
Provision for losses on accounts receivable 219,468 --
(Gain) loss on disposal of fixed asset (590) 26,265
Increase in accounts receivable (427,443) (1,960,122)
Increase in inventories (69,030) (1,366,287)
Decrease in prepaid expenses
and other current assets 51,177 176,084
Increase in refundable income taxes (15,850) --
Increase in other assets (112,517) (800,761)
Increase (decrease) in accounts payable (487,673) 1,658,997
Decrease in accrued expenses 16,244 31,059
Decrease in income taxes payable (190,063) --
------------ ------------
Net cash used in operating activities (4,651,088) (1,984,693)
------------ ------------
Cash flows from investing activities:
Expenditures for property and equipment (4,246,004) (697,899)
Proceeds from sale of fixed assets 18,100 --
------------ ------------
Net cash used in investing activities (4,227,904) (697,899)
------------ ------------
Cash flows from financing activities:
Repayments on long-term borrowing and capital
lease obligations (706,387) (117,035)
Repayments on notes payable - redeemable
Common Stock -- (346,000)
Repayments on notes payable - redeemable
Preferred Stock -- (298,000)
Repayment on Interim Financing -- (325,000)
Proceeds from long term borrowing 1,952,900 38,950
Net advances (repayments) on revolving line of credit 81,090 173,456
Repayments on loans from stockholders -- (25,000)
Decrease in stock subscription receivable 1,790,374 --
Proceeds from issuance of Preferred Stock 9,352,982 --
Proceeds from issuance of Common Stock -- 4,072,496
Increase in due from related parties (10,219) (19,712)
Increase in debt issue costs (80,219) --
------------ ------------
-4-
Net cash provided by financing activities 12,380,521 3,154,155
------------ ------------
Increase in cash and cash equivalents 3,501,529 471,563
Cash and cash equivalents, beginning of period 5,706,822 266,674
------------ ------------
Cash and cash equivalents, end of period $ 9,208,351 $ 738,237
============ ============
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
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OMNI MULTIMEDIA GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of OMNI MultiMedia Group, Inc. (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete consolidated financial
statements.
In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) considered necessary for a fair statement of the
interim financial data have been included. Results from operations for the three
month period ended September 28, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ending March 29, 1997.
For further information, refer to the consolidated financial statements
and the footnotes thereto for the year ended March 30, 1996, contained in the
Company's Annual Report on Form 10- KSB as amended.
Net income (loss) per share is computed based upon the weighted average
number of common and dilutive common equivalent shares outstanding during the
period.
NOTE 2. SIGNIFICANT EVENT
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
An extensive online multimedia catalog featuring popular software and CD-ROM
titles, as well as related hardware peripherals, and has introduced this catalog
on the Internet.
GENERAL
The following discussion and analysis should be read in conjunction
with the Condensed Consolidated Financial Statements of the Company (including
the Notes thereto) included under Item 1 of this report.
RESULTS OF OPERATIONS
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THREE MONTHS ENDED SEPTEMBER 28, 1996 ("SECOND QUARTER 1997") COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1995 ("SECOND QUARTER 1996")
Net sales decreased to $2,183,289 for Second Quarter 1997, a decrease
of 60% over net sales of $5,450,120 in Second Quarter 1996. This decrease was
primarily due to the faster than expected decline in demand for software
duplication services for 31/2" diskettes, which the Company believes to be
industry-wide. This decline was combined with the start-up phase of the
Company's CD-ROM manufacturing facility, during which the Company deferred
accepting orders until the new facility was fully operational, which occurred at
the very end of the first fiscal quarter. This facility is now fully
operational, with several CD-ROM manufacturing lines running. The Company
expects revenues from its CD-ROM manufacturing operations to increase during the
current quarter and expects continued increased production from the facility
over time. Management estimates that this facility as currently configured can
produce approximately $35 to $40 million in annual revenues from the manufacture
of CD-ROM titles. In addition, the facility has room for additional capacity and
management expects to add additional capacity over time on an as-needed basis.
In addition, during Second Quarter 1997, the Company delayed its
planned promotion of its 4CD's electronic catalog, which had appeared on the
Internet on a trial basis, while the Company added five language capabilities
for instructions appearing on the home page. The Company anticipates that adding
language capability for product descriptions will be commenced in the near
future. The Company is actively soliciting orders on the Internet. Initial sales
are modest, and the Company expects sales in this sector to increase in the next
quarter.
Selling expenses in Second Quarter 1997 were $974,773, a 55% increase
over operating expenses of $630,727 in Second Quarter 1996. This increase was
due to costs associated with the costs of hiring sales staff to run the new
CD-ROM manufacturing facility.
General and administrative expenses were $842,992 in Second Quarter
1997, an increase of 87% over general and administrative expenses of $451,241 in
Second Quarter 1996. This increase was due primarily to increases in
administrative staffing, principally MIS, and SIMIX manufacturing systems, as
well as increased travel, consulting, public relations and professional fees.
As a result of decreases in net sales and increases in manufacturing
operations, and increased sales, general and administrative expenses, the
Company incurred a loss from operations of $2,594,283 in Second Quarter 1997, as
contrasted to income from operations of $343,574 in Second Quarter 1996.
As a result of the factors described above, the Company incurred a net
loss of $2,824,993 in Second Quarter 1997 as compared to a net income of
$292,684 in Second Quarter 1996. This translates to a net loss of $0.70 and
$0.64 per share for primary and fully diluted earnings per share, respectively,
in Second Quarter 1997 as contrasted to a net profit of $.10 per share in Second
Quarter 1996. During Second Quarter 1997, there were 4,033,232 and 4,433,449
common shares outstanding on a weighted average basis for primary and fully
diluted earnings per share,
-7-
respectively, as contrasted to 2,943,050 shares issued and outstanding on a
weighted average basis for Second Quarter 1996.
LIQUIDITY AND CAPITAL RESOURCES
During Second Quarter 1997, the Company was in the process of acquiring
through a wholly owned subsidiary, of substantially all of the assets of
Allenbach Industries, Inc. ("Allenbach"), a software replication and CD-ROM
manufacturing facility in California and Minnesota. The Company also announced
it had entered into a letter of intent to acquire another company. Management
used and expects to issue a combination of cash and stock to acquire these
assets. Completion of the second acquisition is anticipated over the next 30
days.
Management anticipates that its current cash position, together with
cash generated from anticipated results of operations and credit and equipment
lease facilities will be adequate for at least the next 12 months. The Company
routinely explores acquisitions and, although not currently anticipated, the
Company may seek additional capital to finance future acquisitions, strategic
partnerships, or to provide additional working capital.
At September 28, 1996, the Company had cash and cash equivalents of
$9,208,351. Cash used in operating activities for the six months ended September
28, 1996 was ($4,651,088), compared to cash used in operating activities for the
six months ended September 30, 1995 of $(1,984,693), primarily reflecting the
net loss for the period. Cash used in investing activities included ($4,
246,004) of expenditures for property and equipment in connection with the
start-up of the Company's CD-ROM manufacturing facility. Cash provided by
financing activities was $12,380,521 during Second Quarter 1997, reflecting
principally the proceeds from the issuance of the Company's Series A Preferred
Stock in May 1996.
GENERAL
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
[Not applicable.]
ITEM 2. CHANGES IN SECURITIES.
[Not applicable.]
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
-8-
[Not applicable.]
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
At the Company's Annual Meeting of Stockholders held on September 26,
1996, the Company's stockholders approved the election of Paul F. Johnson by
vote of 3,095,814 for and 324,390 withheld; for Robert E. Lee by vote of
2,007,495 for and 1,314,712 withheld; Richard A. Pilotte by vote of 2,996,815
for and 324,751 withheld; Ronald F. Ladner by vote of 2,997,456 for and 324,751
withheld and Richard L. Wise by vote of 2,003,937 for and 1,318,830 withheld, as
members of the Board of Directors. The Company's stockholders also ratified the
selection of Price Waterhouse LLP as independent auditors for the Company for
the fiscal year ending March 29, 1997 by the following vote: 3,033,804 shares in
favor and 8,687 shares against. The Company's stockholders approved an amendment
to the Company's 1994 Stock Option Plan (the "Plan") to increase from 270,000 to
2,000,000 the aggregate number of shares of Common Stock of the Company reserved
for issuance under the Plan by a vote of 1,408,830 shares in favor, 1,475,809
shares against and 8,475 shares abstaining. Finally, the Company's stockholders
approved an amendment to the Company's Certificate of Incorporation to increase
from 14,000,000 to 19,000,000 the aggregate number of authorized shares of
Common Stock of the Company by a vote of 1,891,620 shares in favor, 1,427,510
shares against and 4,077 shares abstaining.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 10u. Employment Agreements between Paul F. Johnson,
Robert E. Lee, Richard A. Pilotte, and the Company.
Exhibit 11. Statement regarding computation of per share
earnings.
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on October 18,
1996 reporting the acquisition on October 4, 1996 of
substantially all of the assets of Allenbach, Inc., by a
wholly-owned subsidiary of the Company.
-9-
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 thereunto duly authorized.
OMNI MULTIMEDIA GROUP, INC.
Date: November 18, 1996 By: /s/ Paul F. Johnson
------------------------ -------------------------------
Paul F. Johnson, President and
Chief Executive Officer
Date: November 18, 1996 By: /s/ Robert E. Lee
----------------------- ------------------------------
Robert E. Lee, Treasurer and
Chief Financial Officer
-10-
EXHIBIT 10u
---------------
AMENDED AND RESTATED
KEY EMPLOYEE AGREEMENT
---------------
To: Mr. Paul F. Johnson As of April 20, 1995
47 Colonial Drive and Amended on October 1, 1996
Shrewsbury, Massachusetts 01545
The undersigned, OMNI MultiMedia Group, Inc., a Delaware corporation
(the "Company"), in consideration of the salary and benefits provided you
herein, and for other good and valuable consideration, the sufficiency and
receipt whereof are hereby acknowledged, hereby agrees with you as follows:
l. Position and Responsibilities.
1.1 You shall serve as President of the Company, (or in such
other executive capacity as shall be designated by the Board of Directors and
reasonably acceptable to you) and shall perform the duties customarily
associated with such capacity from time to time and at such executive offices of
the Company (provided that such offices are within a ten (10) mile radius of
Millbury, Massachusetts) as the Company shall designate are appropriate and
necessary in connection with such employment.
1.2 You will, to the best of your ability, devote your full
time and best efforts to the performance of your duties hereunder and the
business and affairs of the Company. You agree to perform such executive duties
as may be assigned to you by or on authority of the Company's Board of Directors
from time to time. After receipt of notice of termination of your employment
hereunder, you shall continue to be available to the Company on a part-time
basis for a period of up to one month to assist in any necessary transition.
1.3 You will duly, punctually and faithfully perform and
observe any and all rules and regulations which the Company may now or shall
hereafter establish governing the conduct of its business.
2. Term of Employment.
2.1 The initial term of this Agreement shall be from the date
hereof until December 31, 1999. Thereafter, this Agreement shall be
automatically renewed for successive periods of three (3) years, unless the
Company shall give you not less than one (1) year's written notice of
non-renewal. You may terminate your employment pursuant to this Agreement at any
time after giving the Company three (3) months' notice. Your employment with the
Company may be terminated at any time as provided in Section 2.2.
2.2 The Company shall have the right, on written notice to
you, to terminate your employment:
(a) immediately at any time for "cause" as defined
herein; or
(b) at any time without cause, provided the Company
shall be obligated to pay to you as severance pay an amount equal to
your "Compensation Package" for a period of three (3) years following
the date of termination of your employment (which Compensation Package
shall include your Base Salary and all other benefits as set forth on
Exhibit A hereto, including but not limited to your most recent bonus
for the prior fiscal year annualized over the remaining term of this
Agreement). Such sums shall be reduced by applicable taxes and other
required withholdings and any amounts you may owe to the Company.
2.3 For purposes of Section 2.2, the term "cause" shall mean:
(a) your intentional failure or refusal to perform
the material services specified herein, or to carry out any reasonable
and lawful directions of the Company with respect to the material
services to be rendered or the manner of rendering such material
services by you; provided, however, that (i) such failure or refusal is
material and repetitive, and (ii) you have been given reasonable
written notice and explanation of each refusal or failure by the Board
of Directors, and reasonable opportunity to cure such refusal or
failure, and no cure has been effected within sixty (60) days after
written notice;
(b) conviction of a felony;
(c) fraud or embezzlement involving the assets of the
Company, its customers, suppliers or affiliates;
(d) inability for a continuous period of at least one
hundred and eighty (180) days to perform duties hereunder due to a
physical or mental disability; or
(e) breach of any term of this Agreement other than
as noted in (a) above;
provided, however, that prior to any such termination, you have had a reasonable
opportunity to be heard thereon.
2.4 In the event of a "Change of Control" in the Company, you
shall receive (i) an annual compensation of $300,000 in base salary and all
other benefits and bonuses, such benefits to be at a level commensurate with
that in effect as of the date of the "Change in Control" (assuming that 100% of
your time is devoted to the operations of the Company, except as set forth in
Exhibit B hereto); (ii) an equal one-third share in a performance bonus equal to
twenty percent of the net income of the Company before income taxes,
amortization and depreciation; and (iii) fringe benefits
2
at a benefit level commensurate with the level of fringe benefits accorded to
you as of the date of the Change of Control, all for the remaining term of this
Agreement. In addition, you will also have the option to terminate your
employment subject to the provisions of Section 2.1 herein. If your duties are
reduced or if you decide to terminate your employment or if your employment is
terminated by the Company following a Change in Control, you shall be entitled
to receive: (i) the right to sell any shares of the Common Stock of the Company
(including any vested options) to the Company at the greater of the public
offering price for the units offered in the Company's initial public offering,
the then current bid and ask price, book value per share or appraisal value per
share; (ii) the balance of your Compensation Package (as described in Exhibit
"A" as modified by the first sentence of this Section 2.4) for a period of three
(3) years from the effective date of termination of your employment, to be paid
to you either in a lump sum or in such installments as you in your sole
discretion may direct; (iii) an executive fee equal to $300,000 in exchange for
the covenant not to compete described in Section 7, to be paid to you either in
a lump sum or in such installments as you in your sole discretion may direct;
(iv) the immediate removal of all loan guarantees and the forgiveness of all
loans or advances made to you by the Company; (v) the accelerated vesting of all
unvested stock options; and (vi) a consulting agreement providing for you to
provide up to eighty (80) hours of consulting services per calendar month at the
Company's principal offices in Millbury, Massachusetts (but in any event no more
than twenty (20) hours in any week), pursuant to which you shall perform such
consulting services as the Company may reasonably direct and as it shall set
forth in prior written notice to you, payable at the rate of $15,000.00 per
month and reimbursement by the Company of all expenses incurred by you in
providing such consulting services, for a period of no less than thirty-six (36)
months commencing as of the effective date of termination of your employment.
For purposes of this Agreement, "Change in Control" means and shall be deemed to
occur if any of the following occurs:
(a) the acquisition, after April 20, 1995, by an
individual, entity or group [within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act")] of beneficial ownership (within the meaning of Rule
13d- 3 promulgated under the Exchange Act) of 25% or more of either (i)
the outstanding shares of common stock, par value $.01 per share, of
the Company (the "Common Stock"); or (ii) the combined voting power of
the voting securities of the Company entitled to vote generally in the
election of directors (the "Voting Securities"); or
(b) individuals who, on April 20, 1995, constituted
the Board of Directors of the Company (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors
of the Company; or
(c) approval by the Board of Directors or the
shareholders of the Company of a (i) tender offer to acquire any of the
Common Stock or Voting Securities, (ii) reorganization, (iii) merger,
or (iv) consolidation, other than a reorganization, merger or
consolidation with respect to which all or substantially all of the
individuals and entities who were the beneficial owners, immediately
prior to such reorganization, merger or consolidation, of the Common
Stock and Voting Securities beneficially own, directly or
3
indirectly, immediately after such reorganization, merger or
consolidation, more than 80% of the then outstanding Common Stock and
Voting Securities (entitled to vote generally in the election of
directors) of the Company resulting from such reorganization, merger or
consolidation in substantially the same proportions as their respective
ownership, immediately prior to such reorganization, merger or
consolidation, of the Common Stock and the Voting Securities; or
(d) approval by the Board of Directors or the
shareholders of the Company of (i) a complete or substantial
liquidation or dissolution of the Company, or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
excluding a reorganization of the Company under the corporate laws of a
state other than Delaware.
Any sums not paid hereunder on a timely basis shall accrue interest at
the rate of one and one-half percent (1 1/2%) per month.
3. Compensation. You shall receive the compensation and benefits set
forth on Exhibit A hereto ("Compensation") for all services to be rendered by
you hereunder and for your transfer of property rights pursuant to an agreement
relating to proprietary information and inventions of even date herewith
attached hereto as Exhibit C between you and the Company (the "Proprietary
Information and Inventions Agreement").
4. Other Activities During Employment.
4.1 Except for any outside employments and directorships
currently held by you as listed on Exhibit B hereto, and except with the prior
written consent of the Company's Board of Directors, you will not during the
term of this Agreement undertake or engage in any other employment, occupation
or business enterprise other than one in which you are an inactive investor.
4.2 You hereby agree that, except as disclosed on Exhibit B
hereto, during your employment hereunder, you will not, directly or indirectly,
engage (a) individually, (b) as an officer, (c) as a director, (d) as an
employee, (e) as a consultant, (f) as an advisor, (g) as an agent (whether a
salesperson or otherwise), (h) as a broker, or (i) as a partner, coventurer,
stockholder or other proprietor owning directly or indirectly more than five
percent (5%) interest, in any firm, corporation, partnership, trust,
association, or other organization which is engaged in any line of business
engaged in or under demonstrable development by the Company (such firm,
corporation, partnership, trust, association, or other organization being
hereinafter referred to as a "Prohibited Enterprise"). Except as may be shown on
Exhibit B hereto, you hereby represent that you are not engaged in any of the
foregoing capacities (a) through (i) in any Prohibited Enterprise.
5. Former Employers.
5.1 You represent and warrant that your employment by the
Company will not conflict with and will not be constrained by any prior or
current employment, consulting agreement
4
or relationship whether oral or written. You represent and warrant that you do
not possess confidential information arising out of any such employment,
consulting agreement or relationship which, in your best judgment, would be
utilized in connection with your employment by the Company in the absence of
Section 5.2.
5.2 If, in spite of the second sentence of Section 5.1, you
should find that confidential information belonging to any other person or
entity might be usable in connection with the Company's business, you will not
intentionally disclose to the Company or use on behalf of the Company any
confidential information belonging to any of your former employers; but during
your employment by the Company you will use in the performance of your duties
all information which is generally known and used by persons with training and
experience comparable to your own all information which is common knowledge in
the industry or otherwise legally in the public domain.
6. Proprietary Information and Inventions. You agree to execute,
deliver and be bound by the provisions of the Proprietary Information and
Inventions Agreement attached hereto as Exhibit C and incorporated herein.
7. Post-Employment Activities.
7.1 For a period of one (1) year after the termination or
expiration, for any reason, of your employment with the Company hereunder,
absent the Company's prior written approval, you will not directly or indirectly
engage in activities similar or reasonably related to those in which you shall
have engaged hereunder during the two years immediately preceding termination or
expiration, nor render services similar or reasonably related to those which you
shall have rendered hereunder during such two years, to any person or entity
whether now existing or hereafter established which directly competes with (or
proposes or plans to directly compete with) the Company ("Direct Competitor") in
any line of business engaged in or under development by the Company. Nor shall
you entice, induce or encourage any of the Company's other employees to engage
in any activity which, were it done by you, would violate any provision of the
Proprietary Information and Inventions Agreement or this Section 7. As used in
this Section 7.1, the term "any line of business engaged in or under development
by the Company" shall be applied as at the date of termination of your
employment, or, if later, as at the date of termination of any post-employment
consulting arrangement.
7.2 For a period of one (1) year after the termination of your
employment with the Company, the provisions of Section 4.2 shall be applicable
to you and you shall comply there with. As applied to such one (1) year
post-employment period, the term "any other line of business engaged in or under
development by the Company," as used in Section 4.2, shall be applied as at the
date of termination of your employment with the Company or, if later, as at the
date of termination of any post-employment consulting arrangement with the
Company.
5
7.3 No provision of this Agreement shall be construed to
preclude you from performing the same services which the Company hereby retains
you to perform for any person or entity which is not a Direct Competitor of the
Company upon the expiration or termination of your employment (or any
post-employment consulting arrangement) so long as you do not thereby violate
any term of the Proprietary Information and Inventions Agreement.
8. Remedies. Your obligations under the Proprietary Information and
Inventions Agreement and the provisions of Sections 6, 7, 8 and 9 of this
Agreement (as modified by Section 10, if applicable) shall survive the
expiration or termination of your employment (whether through your resignation
or otherwise) with the Company. You acknowledge that a remedy at law for any
breach or threatened breach by you of the provisions of the Proprietary
Information and Inventions Agreement or Section 7 would be inadequate and you
therefore agree that the Company shall be entitled to such injunctive relief in
case of any such breach or threatened breach.
9. Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation and any
assignee of all or substantially all of its business and properties, but, except
as to any such successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or by you,
except by operation of law.
10. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any
one or more of the provisions contained in this Agreement (including the
provisions of Sections 2.4 and 7) for any reason shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. MOREOVER, IT IS THE INTENT OF THE
PARTIES THAT in case any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, such provision shall be construed by
limiting and reducing it as determined by a court of competent jurisdiction, so
as to be enforceable to the maximum extent compatible with applicable law.
11. Notices. Any notice which the Company is required to or may desire
to give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at your address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the Company at its principal
office, or at such other office as the Company may from time to time designate
in writing. The date of personal delivery or the date of mailing any notice
under this Section 11 shall be deemed to be the date of delivery thereof.
12. Waivers. If either party should waive any breach of any provision
of this Agreement, such party shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6
13. Complete Agreement; Amendments. The foregoing including
Exhibits A, B and C hereto, is the entire agreement of the parties with respect
to the subject matter hereof, superseding any previous oral or written
communications, representations, understandings, or agreements with the Company
or any officer or representative thereof. Any amendment to this Agreement or
waiver by the Company of any right hereunder shall be effective only if
evidenced by a written instrument executed by the parties hereto, upon
authorization of the Company's Board of Directors.
14. Headings. The headings of the Sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning of this Agreement.
15. Counterparts. This Agreement may be signed in two
counterparts, each of which shall be deemed an original and both of which shall
together constitute one agreement.
16. Governing Law. This Agreement shall be governed by and
construed under Massachusetts law
17. Arbitration.
17.1 Any dispute, controversy or claim arising out of or
relating to this Agreement or the agreements referenced herein, including the
breach thereof, shall be settled by an amicable effort on the part of both
parties. An attempt to arrive at a settlement shall be deemed to have failed ten
(10) days after either party so notifies the other party in writing, and neither
party shall institute arbitration or any related proceeding until expiration of
that notice period.
17.2 If an attempt at settlement has failed, and written
notice thereof has been given as provided herein, any dispute, controversy or
claim between the parties arising out of or in connection with this Agreement or
the agreements referenced herein (or any amendments hereto or subsequent
agreements), including, but not limited to, as to its existence, validity,
interpretation, performance or non-performance, breach, or damages, shall be
decided by binding arbitration pursuant to the commercial Arbitration Rules, as
amended and in effect January 1, 1996, of the American Arbitration Association
(the "Rules"), subject to the following:
(a) The arbitration shall take place in Millbury,
Massachusetts, and in no other place.
(b) The parties to any such arbitration shall be the
Company and the Employee and shall be each entitled to designate one
arbitrator. Within thirty (30) days after receipt by a party of a
written notice of arbitration, each party shall notify the other party
of its designated arbitrator. The arbitrators so chosen shall designate
a third neutral arbitrator by unanimous vote within thirty (30) days of
their designation. That neutral arbitrator shall act as Chair to the
arbitration. In the event that a neutral arbitrator is not designated
pursuant to this subsection within fifteen (15) days after receipt by a
party of a written notice of arbitration, either party may request that
the American Arbitration Association select such
7
neutral arbitrator using its normal procedures; provided, however, that
such neutral arbitrator shall be a member of both the American Board of
Trial Advocates and the American College of Trial Lawyers.
Neither party shall have any ex parte contact with any of the
arbitrators after designation of the neutral arbitrator. If a
designated arbitrator cannot for any reason continue to serve as an
arbitrator, then the party that so designated that arbitrator shall
have the right to appoint a replacement for that arbitrator.
(c) An arbitration hearing shall be conducted not
later than twenty (20) days after selection of the neutral arbitrator.
At the arbitration hearing, each party may make written and oral
presentations to the arbitration panel, present testimony and written
evidence, and examine witnesses. Legal privileges against disclosure
shall apply.
(d) The written decision of the arbitration panel
shall be final and binding, and may be entered and enforced in any
court of competent jurisdiction. Each party hereby waives any right to
jury trial in connection with the enforcement of such written decision.
(e) The Company shall pay all of the fees and
expenses of the arbitration, including all legal fees and expenses.
Notwithstanding the foregoing, the arbitration panel, by majority vote,
may agree to assess arbitration costs and the costs and fees of the
arbitrators against either party.
8
If you are in agreement with the foregoing, please sign your name below
and also at the bottom of the Proprietary Information and Inventions Agreement,
whereupon this Agreement shall become binding in accordance with its terms.
Please then return this Agreement to the Company. (You may retain for your
records the accompanying counterpart of this Agreement enclosed herewith).
Very truly yours,
OMNI MULTI MEDIA GROUP, INC.
By:_______________________________________
Robert E. Lee, Executive Vice President
Accepted and Agreed:
- -----------------------------------
Paul F. Johnson, President
9
Exhibit A
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF PAUL F. JOHNSON
l. Term. The term of the Agreement to which this Exhibit A is annexed and
incorporated shall be until December 31, 1999.
2. Compensation.
(a) Base Salary. Effective January 1, 1996, your Base Salary shall be
increased to $192,500.00 per annum, payable in accordance with the
Company's payroll policies. Salaries will be reviewed for increase by
the Company's Compensation Committee annually and, for each year of the
term of this Agreement, the Compensation Committee shall increase your
Base Salary by a minimum of ten percent (10%) of the Base Salary then
in effect.
(b) Additional Bonus. In addition to the sums described above, the
Compensation Committee may establish an additional bonus plan for you
at its sole discretion.
(c) Automobile Allowance. The Company will provide you with an
automobile, not to exceed an annual base lease value of Eighteen
Hundred Dollars ($1,800) per month. You will also be reimbursed for all
automotive insurance and all maintenance and operating expenses. You
will reimburse the Company for all personal use (except that personal
use shall not be deemed to include commuting to and from the Company's
principal place of business).
(d) Club Membership. The Company shall reimburse you for club
memberships, in accordance with the Company's prior practice.
(e) Home Office. You will have an allowance of up to Ten Thousand
Dollars ($10,000) for furnishing your home office with furniture, a
computer and laser printer, a fax machine, a telephone, telephone lines
and a small photocopier. In addition, you will have an annual allowance
of up to Five Thousand Dollars ($5,000) for upgrading such home office,
furniture or equipment.
(f) Travel Advance. The Company shall advance to you up to Twelve
Thousand Dollars ($12,000) to cover travel and other related expenses.
You shall not be obligated to repay this amount, which shall not bear
interest, until the last date of your employment with the Company.
A-1
3. Vacation. You shall be entitled to all legal and religious holidays,
and six (6) weeks paid vacation per annum. In the event that you should
elect not to use all six (6) weeks of your allotted yearly vacation,
you shall be entitled to carry forward into the following calendar year
any of the unused days; or, to receive at the end of such calendar
year, in addition to your Base Salary, an amount equal to your per diem
Base Salary for each business day (not to include Saturday or Sunday)
not taken as vacation.
4. Insurance and Benefits.
(a) Health Insurance. You shall be eligible for participation in any
health or other group insurance plan which may be established by the
Company or which the Company is required to maintain by law. The
Company shall also provide supplemental health insurance for you and
your family to provide full indemnification . You shall also be
eligible to receive any other benefits which are provided to any of the
executive officers of the Company.
(b) Life Insurance. The Company shall obtain a term life insurance
policy on your life, payable to the Company, of One Million Dollars
($1,000,000). In addition, the Company will pay for life term insurance
policies on your life in the amount of One Million Dollars
($1,000,000), payable to the beneficiaries of your choice. The Company
may select to switch this insurance to a whole-life insurance or
similar plan on a split-dollar basis.
(c) Disability Insurance. The Company shall provide and maintain a
disability insurance policy for you equal to a minimum of sixty percent
(60%) of your Base Salary on an after-tax basis. In the event that the
Company presently maintains group disability insurance for its other
employees, your individual disability insurance policy may be
supplemented by such group insurance. However, in no event shall any
group insurance policy limitations or restrictions apply to your
minimum entitlement as set forth above.
(d) Retirement Plan. You shall be eligible for participation in any
retirement plan or pension program which may be established by the
Company or which the Company is required to maintain by law. In
addition to the Company's 401(k) Plan, the Board of Directors intends
to establish a separate non-qualified pension plan for the three
executive officers, subject to the approval of the Compensation
Committee.
5. Stock Options. You shall be eligible to participate in any of the
Company's Stock Option Plans in the amounts as may be determined by the
Company's Compensation Committee.
A-2
Exhibit B
OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS OF
PAUL F. JOHNSON
NONE
B-1
Exhibit C
------------------------------------------------
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
------------------------------------------------
To: OMNI MultiMedia Group, Inc.
50 Howe Avenue
Millbury, Massachusetts 01527 As of April 20, 1995
The undersigned, in consideration of and as a condition of my
employment or continued employment by you and/or by companies which you own,
control, or are affiliated with or their successors in business (collectively,
the "Company"), hereby agrees as follows:
1. Confidentiality. I agree to keep confidential, except as the Company
may otherwise consent in writing, and, except for the Company's benefit, not to
disclose or make any use of at any time either during or subsequent to my
employment, any Inventions (as hereinafter defined), trade secrets, confidential
information, knowledge, data or other information of the Company relating to
products, processes, know-how, designs, formulas, test data, customer lists,
business plans, marketing plans and strategies, pricing strategies, or other
subject matter pertaining to any business of the Company or any of its
affiliates, which I may produce, obtain, or otherwise acquire during the course
of my employment, except as herein provided. I further agree not to deliver,
reproduce or in any way allow any such trade secrets, confidential information,
knowledge, data or other information, or any documentation relating thereto, to
be delivered to or used by any third parties without specific direction or
consent of a duly authorized representative of the Company.
2. Conflicting Employment; Return of Confidential Material. I agree
that during my employment with the Company I will not engage in any other
employment, occupation, consulting or other activity relating to the business in
which the Company is now or may hereafter become engaged, or which would
otherwise conflict with my obligations to the Company. In the event my
employment with the Company terminates for any reason whatsoever, I agree to
promptly surrender and deliver to the Company all records, materials, equipment,
drawings, documents and data which I may obtain or produce during the course of
my employment, and I will not take with me any description containing or
pertaining to any confidential information, knowledge or data of the Company
which I may produce or obtain during the course of my employment.
C-1
3. Assignment of Inventions.
3.1 I hereby acknowledge and agree that the Company is the
owner of all Inventions. In order to protect the Company's rights to such
Inventions, by executing this Agreement I hereby irrevocably assign to the
Company all my right, title and interest in and to all Inventions to the
Company.
3.2 For purposes of this Agreement, "Inventions" shall mean
all discoveries, processes, designs, technologies, devices, or improvements in
any of the foregoing or other ideas, whether or not patentable and whether or
not reduced to practice, made or conceived by me (whether solely or jointly with
others) during the period of my employment with the Company which relate in any
manner to the actual or demonstrably anticipated business, work, or research and
development of the Company, or result from or are suggested by any task assigned
to me or any work performed by me for or on behalf of the Company.
3.3 Any discovery, process, design, technology, device, or
improvement in any of the foregoing or other ideas, whether or not patentable
and whether or not reduced to practice, made or conceived by me (whether solely
or jointly with others) which I develop entirely on my own time not using any of
the Company's equipment, supplies, facilities, or trade secret information
("Personal Invention") is excluded from this Agreement provided such Personal
Invention (a) does not relate to the actual or demonstrably anticipated
business, research and development of the Company, and (b) does not result,
directly or indirectly, from any work performed by me for the Company.
4. Disclosure of Inventions. I agree that in connection with any
Invention, I will promptly disclose such Invention to my immediate superior at
the Company in order to permit the Company to enforce its property rights to
such Invention in accordance with this Agreement. My disclosure shall be
received in confidence by the Company.
5. Patents and Copyrights; Execution of Documents.
5.1 Upon request, I agree to assist the Company or its nominee
(at its expense) during and at any time subsequent to my employment in every
reasonable way to obtain for its own benefit patents and copyrights for
Inventions in any and all countries. Such patents and copyrights shall be and
remain the sole and exclusive property of the Company or its nominee. I agree to
perform such lawful acts as the Company deems to be necessary to allow it to
exercise all right, title and interest in and to such patents and copyrights.
5.2 In connection with this Agreement, I agree to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all documents, including assignments of title, patent or copyright
applications, assignments of such applications, assignments of patents or
copyrights upon issuance, as the Company may determine necessary or desirable to
protect the Company's or its nominee's interest in Inventions, and/or to use in
obtaining patents or
C-2
copyrights in any and all countries and to vest title thereto in the Company or
its nominee to any of the foregoing.
6. Maintenance of Records. I agree to keep and maintain adequate and
current written records of all Inventions made by me (in the form of notes,
sketches, drawings and other records as may be specified by the Company), which
records shall be available to and remain the sole property of the Company at all
times.
7. Prior Inventions. It is understood that all Personal Inventions, if
any, whether patented or unpatented, which I made prior to my employment by the
Company, are excluded from this Agreement. To preclude any possible uncertainty,
I have set forth on Schedule A attached hereto a complete list of all of my
prior Personal Inventions, including numbers of all patents and patent
applications and a brief description of all unpatented Personal Inventions which
are not the property of a previous employer. I represent and covenant that the
list is complete and that, if no items are on the list, I have no such prior
Personal Inventions. I agree to notify the Company in writing before I make any
disclosure or perform any work on behalf of the Company which appears to
threaten or conflict with proprietary rights I claim in any Personal Invention.
In the event of my failure to give such notice, I agree that I will make no
claim against the Company with respect to any such Personal Invention.
8. Other Obligations. I acknowledge that the Company from time to time
may have agreements with other persons or with the U.S. Government or agencies
thereof, which impose obligations or restrictions on the Company regarding
Inventions made during the course of work thereunder or regarding the
confidential nature of such work. I agree to be bound by all such obligations
and restrictions and to take all action necessary to discharge the Company's
obligations.
9. Trade Secrets of Others. I represent that my performance of all the
terms of this Agreement and my position as an employee of the Company do not and
will not breach any agreement to keep confidential proprietary information,
knowledge or data acquired by me in confidence or in trust prior to my
employment with the Company, and I will not disclose to the Company, or induce
the Company to use, any confidential or proprietary information or material
belonging to any previous employer or others. I agree not to enter into any
agreement either written or oral in conflict herewith.
10. Modification. I agree that any subsequent change or changes in my
employment duties, salary or compensation or, if applicable, in any Employment
Agreement between the Company and me, shall not affect the validity or scope of
this Agreement.
11. Successors and Assigns. This Agreement shall be binding upon my
heirs, executors, administrators or other legal representatives and is for the
benefit of the Company, its successors and assigns.
C-3
12. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any
one or more of the provisions contained in this Agreement shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT in case any one or more of the provisions contained
in this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by limiting and reducing it in accordance with a judgment of a court
of competent jurisdiction, so as to be enforceable to the extent compatible with
applicable law.
13. Waivers. If either party should waive any breach of any provision
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
14. Complete Agreement, Amendments. I acknowledge receipt of this
Agreement, and agree that with respect to the subject matter thereof it is my
entire agreement with the Company, superseding any previous oral or written
communications, representations, understandings, or agreements with the Company
or any officer or representative thereof. Any amendment to this Agreement or
waiver by either party of any right hereunder shall be effective only if
evidenced by a written instrument executed by the parties hereto, and, in the
case of the Company, upon written authorization of the Company's Board of
Directors.
15. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
16. Counterparts. This Agreement may be signed in two counterparts,
each of which shall be deemed an original and both of which shall together
constitute one agreement.
17. Governing Law. This Agreement shall be governed and construed under
Massachusetts law.
------------------------------------
Paul F. Johnson
President
Accepted and Agreed:
OMNI MultiMedia Group, Inc.
By:________________________________
(Duly Authorized)
C-4
SCHEDULE A
LIST OF PRIOR INVENTIONS
Identifying Number or
Title Date Brief Description
- ----- ---- -----------------
NONE
---------------
AMENDED AND RESTATED
KEY EMPLOYEE AGREEMENT
---------------
To: Mr. Robert E. Lee As of April 20, 1995
3770 Route 21 South and Amended on October 1, 1996
Canandaigua, New York 11424
The undersigned, OMNI MultiMedia Group, Inc., a Delaware corporation
(the "Company"), in consideration of the salary and benefits provided you
herein, and for other good and valuable consideration, the sufficiency and
receipt whereof are hereby acknowledged, hereby agrees with you as follows:
l. Position and Responsibilities.
1.1 You shall serve as Executive Vice President of the
Company, (or in such other executive capacity as shall be designated by the
Board of Directors and reasonably acceptable to you) and shall perform the
duties customarily associated with such capacity from time to time and at such
executive offices of the Company (provided that such offices are within a ten
(10) mile radius of Millbury, Massachusetts) as the Company shall designate are
appropriate and necessary in connection with such employment.
1.2 You will, to the best of your ability, devote your full
time and best efforts to the performance of your duties hereunder and the
business and affairs of the Company. You agree to perform such executive duties
as may be assigned to you by or on authority of the Company's Board of Directors
from time to time. After receipt of notice of termination of your employment
hereunder, you shall continue to be available to the Company on a part-time
basis for a period of up to one month to assist in any necessary transition.
1.3 You will duly, punctually and faithfully perform and
observe any and all rules and regulations which the Company may now or shall
hereafter establish governing the conduct of its business.
2. Term of Employment.
2.1 The initial term of this Agreement shall be from the date
hereof until December 31, 1999. Thereafter, this Agreement shall be
automatically renewed for successive periods of three (3) years, unless the
Company shall give you not less than one (1) year's written notice of
non-renewal. You may terminate your employment pursuant to this Agreement at any
time after giving the Company three (3) months' notice. Your employment with the
Company may be terminated at any time as provided in Section 2.2.
2.2 The Company shall have the right, on written notice to
you, to terminate your employment:
(a) immediately at any time for "cause" as defined
herein; or
(b) at any time without cause, provided the Company
shall be obligated to pay to you as severance pay an amount equal to
your "Compensation Package" for a period of three (3) years following
the date of termination of your employment (which Compensation Package
shall include your Base Salary and all other benefits as set forth on
Exhibit A hereto, including but not limited to your most recent bonus
for the prior fiscal year annualized over the remaining term of this
Agreement). Such sums shall be reduced by applicable taxes and other
required withholdings and any amounts you may owe to the Company.
2.3 For purposes of Section 2.2, the term "cause" shall mean:
(a) your intentional failure or refusal to perform
the material services specified herein, or to carry out any reasonable
and lawful directions of the Company with respect to the material
services to be rendered or the manner of rendering such material
services by you; provided, however, that (i) such failure or refusal is
material and repetitive, and (ii) you have been given reasonable
written notice and explanation of each refusal or failure by the Board
of Directors, and reasonable opportunity to cure such refusal or
failure, and no cure has been effected within sixty (60) days after
written notice;
(b) conviction of a felony;
(c) fraud or embezzlement involving the assets of the
Company, its customers, suppliers or affiliates;
(d) inability for a continuous period of at least one
hundred and eighty (180) days to perform duties hereunder due to a
physical or mental disability; or
(e) breach of any term of this Agreement other than
as noted in (a) above;
provided, however, that prior to any such termination, you have had a reasonable
opportunity to be heard thereon.
2.4 In the event of a "Change of Control" in the Company, you
shall receive (i) an annual compensation of $300,000 in base salary and all
other benefits and bonuses, such benefits to be at a level commensurate with
that in effect as of the date of the "Change in Control" (assuming that 100% of
your time is devoted to the operations of the Company, except as set forth in
Exhibit B hereto); (ii) an equal one-third share in a performance bonus equal to
twenty percent of the net income of the Company before income taxes,
amortization and depreciation; and (iii) fringe benefits
2
at a benefit level commensurate with the level of fringe benefits accorded to
you as of the date of the Change of Control, all for the remaining term of this
Agreement. In addition, you will also have the option to terminate your
employment subject to the provisions of Section 2.1 herein. If your duties are
reduced or if you decide to terminate your employment or if your employment is
terminated by the Company following a Change in Control, you shall be entitled
to receive: (i) the right to sell any shares of the Common Stock of the Company
(including any vested options) to the Company at the greater of the public
offering price for the units offered in the Company's initial public offering,
the then current bid and ask price, book value per share or appraisal value per
share; (ii) the balance of your Compensation Package (as described in Exhibit
"A" as modified by the first sentence of this Section 2.4) for a period of three
(3) years from the effective date of termination of your employment, to be paid
to you either in a lump sum or in such installments as you in your sole
discretion may direct; (iii) an executive fee equal to $300,000 in exchange for
the covenant not to compete described in Section 7, to be paid to you either in
a lump sum or in such installments as you in your sole discretion may direct;
(iv) the immediate removal of all loan guarantees and the forgiveness of all
loans or advances made to you by the Company; (v) the accelerated vesting of all
unvested stock options; and (vi) a consulting agreement providing for you to
provide up to eighty (80) hours of consulting services per calendar month at the
Company's principal offices in Millbury, Massachusetts (but in any event no more
than twenty (20) hours in any week), pursuant to which you shall perform such
consulting services as the Company may reasonably direct and as it shall set
forth in prior written notice to you, payable at the rate of $15,000.00 per
month and reimbursement by the Company of all expenses incurred by you in
providing such consulting services, for a period of no less than thirty-six (36)
months commencing as of the effective date of termination of your employment.
For purposes of this Agreement, "Change in Control" means and shall be deemed to
occur if any of the following occurs:
(a) the acquisition, after April 20, 1995, by an
individual, entity or group [within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act")] of beneficial ownership (within the meaning of Rule
13d- 3 promulgated under the Exchange Act) of 25% or more of either (i)
the outstanding shares of common stock, par value $.01 per share, of
the Company (the "Common Stock"); or (ii) the combined voting power of
the voting securities of the Company entitled to vote generally in the
election of directors (the "Voting Securities"); or
(b) individuals who, on April 20, 1995, constituted
the Board of Directors of the Company (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors
of the Company; or
(c) approval by the Board of Directors or the
shareholders of the Company of a (i) tender offer to acquire any of the
Common Stock or Voting Securities, (ii) reorganization, (iii) merger,
or (iv) consolidation, other than a reorganization, merger or
consolidation with respect to which all or substantially all of the
individuals and entities who were the beneficial owners, immediately
prior to such reorganization, merger or consolidation, of the Common
Stock and Voting Securities beneficially own, directly or
3
indirectly, immediately after such reorganization, merger or
consolidation, more than 80% of the then outstanding Common Stock and
Voting Securities (entitled to vote generally in the election of
directors) of the Company resulting from such reorganization, merger or
consolidation in substantially the same proportions as their respective
ownership, immediately prior to such reorganization, merger or
consolidation, of the Common Stock and the Voting Securities; or
(d) approval by the Board of Directors or the
shareholders of the Company of (i) a complete or substantial
liquidation or dissolution of the Company, or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
excluding a reorganization of the Company under the corporate laws of a
state other than Delaware.
Any sums not paid hereunder on a timely basis shall accrue interest at
the rate of one and one-half percent (1 1/2%) per month.
3. Compensation. You shall receive the compensation and benefits set
forth on Exhibit A hereto ("Compensation") for all services to be rendered by
you hereunder and for your transfer of property rights pursuant to an agreement
relating to proprietary information and inventions of even date herewith
attached hereto as Exhibit C between you and the Company (the "Proprietary
Information and Inventions Agreement").
4. Other Activities During Employment.
4.1 Except for any outside employments and directorships
currently held by you as listed on Exhibit B hereto, and except with the prior
written consent of the Company's Board of Directors, you will not during the
term of this Agreement undertake or engage in any other employment, occupation
or business enterprise other than one in which you are an inactive investor.
4.2 You hereby agree that, except as disclosed on Exhibit B
hereto, during your employment hereunder, you will not, directly or indirectly,
engage (a) individually, (b) as an officer, (c) as a director, (d) as an
employee, (e) as a consultant, (f) as an advisor, (g) as an agent (whether a
salesperson or otherwise), (h) as a broker, or (i) as a partner, coventurer,
stockholder or other proprietor owning directly or indirectly more than five
percent (5%) interest, in any firm, corporation, partnership, trust,
association, or other organization which is engaged in any line of business
engaged in or under demonstrable development by the Company (such firm,
corporation, partnership, trust, association, or other organization being
hereinafter referred to as a "Prohibited Enterprise"). Except as may be shown on
Exhibit B hereto, you hereby represent that you are not engaged in any of the
foregoing capacities (a) through (i) in any Prohibited Enterprise.
5. Former Employers.
5.1 You represent and warrant that your employment by the
Company will not conflict with and will not be constrained by any prior or
current employment, consulting agreement
4
or relationship whether oral or written. You represent and warrant that you do
not possess confidential information arising out of any such employment,
consulting agreement or relationship which, in your best judgment, would be
utilized in connection with your employment by the Company in the absence of
Section 5.2.
5.2 If, in spite of the second sentence of Section 5.1, you
should find that confidential information belonging to any other person or
entity might be usable in connection with the Company's business, you will not
intentionally disclose to the Company or use on behalf of the Company any
confidential information belonging to any of your former employers; but during
your employment by the Company you will use in the performance of your duties
all information which is generally known and used by persons with training and
experience comparable to your own all information which is common knowledge in
the industry or otherwise legally in the public domain.
6. Proprietary Information and Inventions. You agree to execute,
deliver and be bound by the provisions of the Proprietary Information and
Inventions Agreement attached hereto as Exhibit C and incorporated herein.
7. Post-Employment Activities.
7.1 For a period of one (1) year after the termination or
expiration, for any reason, of your employment with the Company hereunder,
absent the Company's prior written approval, you will not directly or indirectly
engage in activities similar or reasonably related to those in which you shall
have engaged hereunder during the two years immediately preceding termination or
expiration, nor render services similar or reasonably related to those which you
shall have rendered hereunder during such two years, to any person or entity
whether now existing or hereafter established which directly competes with (or
proposes or plans to directly compete with) the Company ("Direct Competitor") in
any line of business engaged in or under development by the Company. Nor shall
you entice, induce or encourage any of the Company's other employees to engage
in any activity which, were it done by you, would violate any provision of the
Proprietary Information and Inventions Agreement or this Section 7. As used in
this Section 7.1, the term "any line of business engaged in or under development
by the Company" shall be applied as at the date of termination of your
employment, or, if later, as at the date of termination of any post-employment
consulting arrangement.
7.2 For a period of one (1) year after the termination of your
employment with the Company, the provisions of Section 4.2 shall be applicable
to you and you shall comply there with. As applied to such one (1) year
post-employment period, the term "any other line of business engaged in or under
development by the Company," as used in Section 4.2, shall be applied as at the
date of termination of your employment with the Company or, if later, as at the
date of termination of any post-employment consulting arrangement with the
Company.
5
7.3 No provision of this Agreement shall be construed to
preclude you from performing the same services which the Company hereby retains
you to perform for any person or entity which is not a Direct Competitor of the
Company upon the expiration or termination of your employment (or any
post-employment consulting arrangement) so long as you do not thereby violate
any term of the Proprietary Information and Inventions Agreement.
8. Remedies. Your obligations under the Proprietary Information and
Inventions Agreement and the provisions of Sections 6, 7, 8 and 9 of this
Agreement (as modified by Section 10, if applicable) shall survive the
expiration or termination of your employment (whether through your resignation
or otherwise) with the Company. You acknowledge that a remedy at law for any
breach or threatened breach by you of the provisions of the Proprietary
Information and Inventions Agreement or Section 7 would be inadequate and you
therefore agree that the Company shall be entitled to such injunctive relief in
case of any such breach or threatened breach.
9. Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation and any
assignee of all or substantially all of its business and properties, but, except
as to any such successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or by you,
except by operation of law.
10. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any
one or more of the provisions contained in this Agreement (including the
provisions of Sections 2.4 and 7) for any reason shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. MOREOVER, IT IS THE INTENT OF THE
PARTIES THAT in case any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, such provision shall be construed by
limiting and reducing it as determined by a court of competent jurisdiction, so
as to be enforceable to the maximum extent compatible with applicable law.
11. Notices. Any notice which the Company is required to or may desire
to give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at your address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the Company at its principal
office, or at such other office as the Company may from time to time designate
in writing. The date of personal delivery or the date of mailing any notice
under this Section 11 shall be deemed to be the date of delivery thereof.
12. Waivers. If either party should waive any breach of any provision
of this Agreement, such party shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
6
13. Complete Agreement; Amendments. The foregoing including Exhibits A,
B and C hereto, is the entire agreement of the parties with respect to the
subject matter hereof, superseding any previous oral or written communications,
representations, understandings, or agreements with the Company or any officer
or representative thereof. Any amendment to this Agreement or waiver by the
Company of any right hereunder shall be effective only if evidenced by a written
instrument executed by the parties hereto, upon authorization of the Company's
Board of Directors.
14. Headings. The headings of the Sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning of this Agreement.
15. Counterparts. This Agreement may be signed in two counterparts,
each of which shall be deemed an original and both of which shall together
constitute one agreement.
16. Governing Law. This Agreement shall be governed by and construed
under Massachusetts law
17. Arbitration.
17.1 Any dispute, controversy or claim arising out of or
relating to this Agreement or the agreements referenced herein, including the
breach thereof, shall be settled by an amicable effort on the part of both
parties. An attempt to arrive at a settlement shall be deemed to have failed ten
(10) days after either party so notifies the other party in writing, and neither
party shall institute arbitration or any related proceeding until expiration of
that notice period.
17.2 If an attempt at settlement has failed, and written
notice thereof has been given as provided herein, any dispute, controversy or
claim between the parties arising out of or in connection with this Agreement or
the agreements referenced herein (or any amendments hereto or subsequent
agreements), including, but not limited to, as to its existence, validity,
interpretation, performance or non-performance, breach, or damages, shall be
decided by binding arbitration pursuant to the commercial Arbitration Rules, as
amended and in effect January 1, 1996, of the American Arbitration Association
(the "Rules"), subject to the following:
(a) The arbitration shall take place in Millbury,
Massachusetts, and in no other place.
(b) The parties to any such arbitration shall be the
Company and the Employee and shall be each entitled to designate one
arbitrator. Within thirty (30) days after receipt by a party of a
written notice of arbitration, each party shall notify the other party
of its designated arbitrator. The arbitrators so chosen shall designate
a third neutral arbitrator by unanimous vote within thirty (30) days of
their designation. That neutral arbitrator shall act as Chair to the
arbitration. In the event that a neutral arbitrator is not designated
pursuant to this subsection within fifteen (15) days after receipt by a
party of a written notice of arbitration, either party may request that
the American Arbitration Association select such
7
neutral arbitrator using its normal procedures; provided, however, that
such neutral arbitrator shall be a member of both the American Board of
Trial Advocates and the American College of Trial Lawyers.
Neither party shall have any ex parte contact with any of the
arbitrators after designation of the neutral arbitrator. If a
designated arbitrator cannot for any reason continue to serve as an
arbitrator, then the party that so designated that arbitrator shall
have the right to appoint a replacement for that arbitrator.
(c) An arbitration hearing shall be conducted not
later than twenty (20) days after selection of the neutral arbitrator.
At the arbitration hearing, each party may make written and oral
presentations to the arbitration panel, present testimony and written
evidence, and examine witnesses. Legal privileges against disclosure
shall apply.
(d) The written decision of the arbitration panel
shall be final and binding, and may be entered and enforced in any
court of competent jurisdiction. Each party hereby waives any right to
jury trial in connection with the enforcement of such written decision.
(e) The Company shall pay all of the fees and
expenses of the arbitration, including all legal fees and expenses.
Notwithstanding the foregoing, the arbitration panel, by majority vote,
may agree to assess arbitration costs and the costs and fees of the
arbitrators against either party.
8
If you are in agreement with the foregoing, please sign your name below
and also at the bottom of the Proprietary Information and Inventions Agreement,
whereupon this Agreement shall become binding in accordance with its terms.
Please then return this Agreement to the Company. (You may retain for your
records the accompanying counterpart of this Agreement enclosed herewith).
Very truly yours,
OMNI MULTI MEDIA GROUP, INC.
By:_________________________________
(Duly Authorized)
Accepted and Agreed:
- -----------------------------------
Robert E. Lee
Executive Vice President
9
EXHIBIT A
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF ROBERT E. LEE
l. Term. The term of the Agreement to which this Exhibit A is annexed and
incorporated shall be until December 31, 1999.
2. Compensation.
(a) Base Salary. Effective January 1, 1996, your Base Salary shall be
increased to $176,000.00 per annum, payable in accordance with the
Company's payroll policies. Salaries will be reviewed for increase by
the Company's Compensation Committee annually and, for each year of the
term of this Agreement, the Compensation Committee shall increase your
Base Salary by a minimum of ten percent (10%) of the Base Salary then
in effect.
(b) Additional Bonus. In addition to the sums described above, the
Compensation Committee may establish an additional bonus plan for you
at its sole discretion.
(c) Automobile Allowance. The Company will provide you with an
automobile, not to exceed an annual base lease value of Eighteen
Hundred Dollars ($1,800) per month. You will also be reimbursed for all
automotive insurance and all maintenance and operating expenses. You
will reimburse the Company for all personal use (except that personal
use shall not be deemed to include commuting to and from the Company's
principal place of business).
(d) Club Membership. The Company shall reimburse you for club
memberships, in accordance with the Company's prior practice.
(e) Home Office. You will have an allowance of up to Ten Thousand
Dollars ($10,000) for furnishing your home office with furniture, a
computer and laser printer, a fax machine, a telephone, telephone lines
and a small photocopier. In addition, you will have an annual allowance
of up to Five Thousand Dollars ($5,000) for upgrading such home office,
furniture or equipment.
(f) Travel Advance. The Company shall advance to you up to Twelve
Thousand Dollars ($12,000) to cover travel and other related expenses.
You shall not be obligated to repay this amount, which shall not bear
interest, until the last date of your employment with the Company.
A-1
3. Vacation. You shall be entitled to all legal and religious holidays,
and six (6) weeks paid vacation per annum. In the event that you should
elect not to use all six (6) weeks of your allotted yearly vacation,
you shall be entitled to carry forward into the following calendar year
any of the unused days; or, to receive at the end of such calendar
year, in addition to your Base Salary, an amount equal to your per diem
Base Salary for each business day (not to include Saturday or Sunday)
not taken as vacation.
4. Insurance and Benefits.
(a) Health Insurance. You shall be eligible for participation in any
health or other group insurance plan which may be established by the
Company or which the Company is required to maintain by law. The
Company shall also provide supplemental health insurance for you and
your family to provide full indemnification . You shall also be
eligible to receive any other benefits which are provided to any of the
executive officers of the Company.
(b) Life Insurance. The Company shall obtain a term life insurance
policy on your life, payable to the Company, of One Million Dollars
($1,000,000). In addition, the Company will pay for life term insurance
policies on your life in the amount of One Million Dollars
($1,000,000), payable to the beneficiaries of your choice. The Company
may select to switch this insurance to a whole-life insurance or
similar plan on a split-dollar basis.
(c) Disability Insurance. The Company shall provide and maintain a
disability insurance policy for you equal to a minimum of sixty percent
(60%) of your Base Salary on an after-tax basis. In the event that the
Company presently maintains group disability insurance for its other
employees, your individual disability insurance policy may be
supplemented by such group insurance. However, in no event shall any
group insurance policy limitations or restrictions apply to your
minimum entitlement as set forth above.
(d) Retirement Plan. You shall be eligible for participation in any
retirement plan or pension program which may be established by the
Company or which the Company is required to maintain by law. In
addition to the Company's 401(k) Plan, the Board of Directors intends
to establish a separate non-qualified pension plan for the three
executive officers, subject to the approval of the Compensation
Committee.
5. Stock Options. You shall be eligible to participate in any of the
Company's Stock Option Plans in the amounts as may be determined by the
Company's Compensation Committee.
A-2
EXHIBIT B
OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS OF
ROBERT E. LEE
As of April 20, 1995
Twenty percent (20%) owner, President and Director of:
East Beach Associates Inc.
3770 Rt. 21 South
Canandaigua, New York 14424
Director as an individual and Consultant through East Beach Associates, Inc.
Eagle Comtronics Inc.
4562 Waterhouse Road
Clay, New York 13041
Fifty percent (50%) owner, Director, Treasurer and Consultant through
East Beach Associates, Inc.
B&L Inc. d/b/a Blow Molded Specialties
Box 29130
99 Hartford Avenue
Providence, Rhode Island 02909
B-1
EXHIBIT C
------------------------------------------------
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
------------------------------------------------
To: OMNI MultiMedia Group, Inc.
50 Howe Avenue
Millbury, Massachusetts 01527 As of April 20, 1995
The undersigned, in consideration of and as a condition of my
employment or continued employment by you and/or by companies which you own,
control, or are affiliated with or their successors in business (collectively,
the "Company"), hereby agrees as follows:
1. Confidentiality. I agree to keep confidential, except as the Company
may otherwise consent in writing, and, except for the Company's benefit, not to
disclose or make any use of at any time either during or subsequent to my
employment, any Inventions (as hereinafter defined), trade secrets, confidential
information, knowledge, data or other information of the Company relating to
products, processes, know-how, designs, formulas, test data, customer lists,
business plans, marketing plans and strategies, pricing strategies, or other
subject matter pertaining to any business of the Company or any of its
affiliates, which I may produce, obtain, or otherwise acquire during the course
of my employment, except as herein provided. I further agree not to deliver,
reproduce or in any way allow any such trade secrets, confidential information,
knowledge, data or other information, or any documentation relating thereto, to
be delivered to or used by any third parties without specific direction or
consent of a duly authorized representative of the Company.
2. Conflicting Employment; Return of Confidential Material. I agree
that during my employment with the Company I will not engage in any other
employment, occupation, consulting or other activity relating to the business in
which the Company is now or may hereafter become engaged, or which would
otherwise conflict with my obligations to the Company. In the event my
employment with the Company terminates for any reason whatsoever, I agree to
promptly surrender and deliver to the Company all records, materials, equipment,
drawings, documents and data which I may obtain or produce during the course of
my employment, and I will not take with me any description containing or
pertaining to any confidential information, knowledge or data of the Company
which I may produce or obtain during the course of my employment.
C-1
3. Assignment of Inventions.
3.1 I hereby acknowledge and agree that the Company is the
owner of all Inventions. In order to protect the Company's rights to such
Inventions, by executing this Agreement I hereby irrevocably assign to the
Company all my right, title and interest in and to all Inventions to the
Company.
3.2 For purposes of this Agreement, "Inventions" shall mean
all discoveries, processes, designs, technologies, devices, or improvements in
any of the foregoing or other ideas, whether or not patentable and whether or
not reduced to practice, made or conceived by me (whether solely or jointly with
others) during the period of my employment with the Company which relate in any
manner to the actual or demonstrably anticipated business, work, or research and
development of the Company, or result from or are suggested by any task assigned
to me or any work performed by me for or on behalf of the Company.
3.3 Any discovery, process, design, technology, device, or
improvement in any of the foregoing or other ideas, whether or not patentable
and whether or not reduced to practice, made or conceived by me (whether solely
or jointly with others) which I develop entirely on my own time not using any of
the Company's equipment, supplies, facilities, or trade secret information
("Personal Invention") is excluded from this Agreement provided such Personal
Invention (a) does not relate to the actual or demonstrably anticipated
business, research and development of the Company, and (b) does not result,
directly or indirectly, from any work performed by me for the Company.
4. Disclosure of Inventions. I agree that in connection with any
Invention, I will promptly disclose such Invention to my immediate superior at
the Company in order to permit the Company to enforce its property rights to
such Invention in accordance with this Agreement. My disclosure shall be
received in confidence by the Company.
5. Patents and Copyrights; Execution of Documents.
5.1 Upon request, I agree to assist the Company or its nominee
(at its expense) during and at any time subsequent to my employment in every
reasonable way to obtain for its own benefit patents and copyrights for
Inventions in any and all countries. Such patents and copyrights shall be and
remain the sole and exclusive property of the Company or its nominee. I agree to
perform such lawful acts as the Company deems to be necessary to allow it to
exercise all right, title and interest in and to such patents and copyrights.
5.2 In connection with this Agreement, I agree to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all documents, including assignments of title, patent or copyright
applications, assignments of such applications, assignments of patents or
copyrights upon issuance, as the Company may determine necessary or desirable to
protect the Company's or its nominee's interest in Inventions, and/or to use in
obtaining patents or
C-2
copyrights in any and all countries and to vest title thereto in the Company or
its nominee to any of the foregoing.
6. Maintenance of Records. I agree to keep and maintain adequate and
current written records of all Inventions made by me (in the form of notes,
sketches, drawings and other records as may be specified by the Company), which
records shall be available to and remain the sole property of the Company at all
times.
7. Prior Inventions. It is understood that all Personal Inventions, if
any, whether patented or unpatented, which I made prior to my employment by the
Company, are excluded from this Agreement. To preclude any possible uncertainty,
I have set forth on Schedule A attached hereto a complete list of all of my
prior Personal Inventions, including numbers of all patents and patent
applications and a brief description of all unpatented Personal Inventions which
are not the property of a previous employer. I represent and covenant that the
list is complete and that, if no items are on the list, I have no such prior
Personal Inventions. I agree to notify the Company in writing before I make any
disclosure or perform any work on behalf of the Company which appears to
threaten or conflict with proprietary rights I claim in any Personal Invention.
In the event of my failure to give such notice, I agree that I will make no
claim against the Company with respect to any such Personal Invention.
8. Other Obligations. I acknowledge that the Company from time to time
may have agreements with other persons or with the U.S. Government or agencies
thereof, which impose obligations or restrictions on the Company regarding
Inventions made during the course of work thereunder or regarding the
confidential nature of such work. I agree to be bound by all such obligations
and restrictions and to take all action necessary to discharge the Company's
obligations.
9. Trade Secrets of Others. I represent that my performance of all the
terms of this Agreement and my position as an employee of the Company do not and
will not breach any agreement to keep confidential proprietary information,
knowledge or data acquired by me in confidence or in trust prior to my
employment with the Company, and I will not disclose to the Company, or induce
the Company to use, any confidential or proprietary information or material
belonging to any previous employer or others. I agree not to enter into any
agreement either written or oral in conflict herewith.
10. Modification. I agree that any subsequent change or changes in my
employment duties, salary or compensation or, if applicable, in any Employment
Agreement between the Company and me, shall not affect the validity or scope of
this Agreement.
11. Successors and Assigns. This Agreement shall be binding upon my
heirs, executors, administrators or other legal representatives and is for the
benefit of the Company, its successors and assigns.
C-3
12. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any
one or more of the provisions contained in this Agreement shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT in case any one or more of the provisions contained
in this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by limiting and reducing it in accordance with a judgment of a court
of competent jurisdiction, so as to be enforceable to the extent compatible with
applicable law.
13. Waivers. If either party should waive any breach of any provision
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
14. Complete Agreement, Amendments. I acknowledge receipt of this
Agreement, and agree that with respect to the subject matter thereof it is my
entire agreement with the Company, superseding any previous oral or written
communications, representations, understandings, or agreements with the Company
or any officer or representative thereof. Any amendment to this Agreement or
waiver by either party of any right hereunder shall be effective only if
evidenced by a written instrument executed by the parties hereto, and, in the
case of the Company, upon written authorization of the Company's Board of
Directors.
15. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
16. Counterparts. This Agreement may be signed in two counterparts,
each of which shall be deemed an original and both of which shall together
constitute one agreement.
17. Governing Law. This Agreement shall be governed and construed under
Massachusetts law.
------------------------------
Robert E. Lee
Executive Vice President
Accepted and Agreed:
OMNI MultiMedia Group, Inc.
By:________________________________
(Duly Authorized)
C-4
SCHEDULE A
LIST OF PRIOR INVENTIONS
Identifying Number or
Title Date Brief Description
- ----- ---- -----------------
NONE
-----------------
AMENDED AND RESTATED
KEY EMPLOYEE AGREEMENT
-----------------
To: Mr. Richard A. Pilotte As of April 20, 1995
26 Dolly Drive and Amended on October 1, 1996
Worcester, Massachusetts 01604
The undersigned, OMNI MultiMedia Group, Inc., a Delaware corporation
(the "Company"), in consideration of the salary and benefits provided you
herein, and for other good and valuable consideration, the sufficiency and
receipt whereof are hereby acknowledged, hereby agrees with you as follows:
l. Position and Responsibilities.
1.1 You shall serve as Vice President of Operations of the
Company, (or in such other executive capacity as shall be designated by the
Board of Directors and reasonably acceptable to you) and shall perform the
duties customarily associated with such capacity from time to time and at such
executive offices of the Company (provided that such offices are within a ten
(10) mile radius of Millbury, Massachusetts) as the Company shall designate are
appropriate and necessary in connection with such employment.
1.2 You will, to the best of your ability, devote your full
time and best efforts to the performance of your duties hereunder and the
business and affairs of the Company. You agree to perform such executive duties
as may be assigned to you by or on authority of the Company's Board of Directors
from time to time. After receipt of notice of termination of your employment
hereunder, you shall continue to be available to the Company on a part-time
basis for a period of up to one month to assist in any necessary transition.
1.3 You will duly, punctually and faithfully perform and
observe any and all rules and regulations which the Company may now or shall
hereafter establish governing the conduct of its business.
2. Term of Employment.
2.1 The initial term of this Agreement shall be from the date
hereof until December 31, 1999. Thereafter, this Agreement shall be
automatically renewed for successive periods of three (3) years, unless the
Company shall give you not less than one (1) year's written notice of
non-renewal. You may terminate your employment pursuant to this Agreement at any
time after giving the Company three (3) months' notice. Your employment with the
Company may be terminated at any time as provided in Section 2.2.
2.2 The Company shall have the right, on written notice to
you, to terminate your employment:
(a) immediately at any time for "cause" as defined
herein; or
(b) at any time without cause, provided the Company
shall be obligated to pay to you as severance pay an amount equal to
your "Compensation Package" for a period of three (3) years following
the date of termination of your employment (which Compensation Package
shall include your Base Salary and all other benefits as set forth on
Exhibit A hereto, including but not limited to your most recent bonus
for the prior fiscal year annualized over the remaining term of this
Agreement). Such sums shall be reduced by applicable taxes and other
required withholdings and any amounts you may owe to the Company.
2.3 For purposes of Section 2.2, the term "cause" shall mean:
(a) your intentional failure or refusal to perform
the material services specified herein, or to carry out any reasonable
and lawful directions of the Company with respect to the material
services to be rendered or the manner of rendering such material
services by you; provided, however, that (i) such failure or refusal is
material and repetitive, and (ii) you have been given reasonable
written notice and explanation of each refusal or failure by the Board
of Directors, and reasonable opportunity to cure such refusal or
failure, and no cure has been effected within sixty (60) days after
written notice;
(b) conviction of a felony;
(c) fraud or embezzlement involving the assets of the
Company, its customers, suppliers or affiliates;
(d) inability for a continuous period of at least one
hundred and eighty (180) days to perform duties hereunder due to a physical or
mental disability; or
(e) breach of any term of this Agreement other than
as noted in (a) above;
provided, however, that prior to any such termination, you have had a reasonable
opportunity to be heard thereon.
2.4 In the event of a "Change of Control" in the Company, you
shall receive (i) an annual compensation of $300,000 in base salary and all
other benefits and bonuses, such benefits to be at a level commensurate with
that in effect as of the date of the "Change in Control" (assuming that 100% of
your time is devoted to the operations of the Company, except as set forth in
Exhibit B hereto); (ii) an equal one-third share in a performance bonus equal to
twenty percent of the net income of the Company before income taxes,
amortization and depreciation; and (iii) fringe benefits
2
at a benefit level commensurate with the level of fringe benefits accorded to
you as of the date of the Change of Control, all for the remaining term of this
Agreement. In addition, you will also have the option to terminate your
employment subject to the provisions of Section 2.1 herein. If your duties are
reduced or if you decide to terminate your employment or if your employment is
terminated by the Company following a Change in Control, you shall be entitled
to receive: (i) the right to sell any shares of the Common Stock of the Company
(including any vested options) to the Company at the greater of the public
offering price for the units offered in the Company's initial public offering,
the then current bid and ask price, book value per share or appraisal value per
share; (ii) the balance of your Compensation Package (as described in Exhibit
"A" as modified by the first sentence of this Section 2.4) for a period of three
(3) years from the effective date of termination of your employment, to be paid
to you either in a lump sum or in such installments as you in your sole
discretion may direct; (iii) an executive fee equal to $300,000 in exchange for
the covenant not to compete described in Section 7, to be paid to you either in
a lump sum or in such installments as you in your sole discretion may direct;
(iv) the immediate removal of all loan guarantees and the forgiveness of all
loans or advances made to you by the Company; (v) the accelerated vesting of all
unvested stock options; and (vi) a consulting agreement providing for you to
provide up to eighty (80) hours of consulting services per calendar month at the
Company's principal offices in Millbury, Massachusetts (but in any event no more
than twenty (20) hours in any week), pursuant to which you shall perform such
consulting services as the Company may reasonably direct and as it shall set
forth in prior written notice to you, payable at the rate of $15,000.00 per
month and reimbursement by the Company of all expenses incurred by you in
providing such consulting services, for a period of no less than thirty-six (36)
months commencing as of the effective date of termination of your employment.
For purposes of this Agreement, "Change in Control" means and shall be deemed to
occur if any of the following occurs:
(a) the acquisition, after April 20, 1995, by an
individual, entity or group [within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act")] of beneficial ownership (within the meaning of Rule
13d- 3 promulgated under the Exchange Act) of 25% or more of either (i)
the outstanding shares of common stock, par value $.01 per share, of
the Company (the "Common Stock"); or (ii) the combined voting power of
the voting securities of the Company entitled to vote generally in the
election of directors (the "Voting Securities"); or
(b) individuals who, on April 20, 1995, constituted
the Board of Directors of the Company (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors
of the Company; or
(c) approval by the Board of Directors or the
shareholders of the Company of a (i) tender offer to acquire any of the
Common Stock or Voting Securities, (ii) reorganization, (iii) merger,
or (iv) consolidation, other than a reorganization, merger or
consolidation with respect to which all or substantially all of the
individuals and entities who were the beneficial owners, immediately
prior to such reorganization, merger or consolidation, of the Common
Stock and Voting Securities beneficially own, directly or
3
indirectly, immediately after such reorganization, merger or
consolidation, more than 80% of the then outstanding Common Stock and
Voting Securities (entitled to vote generally in the election of
directors) of the Company resulting from such reorganization, merger or
consolidation in substantially the same proportions as their respective
ownership, immediately prior to such reorganization, merger or
consolidation, of the Common Stock and the Voting Securities; or
(d) approval by the Board of Directors or the
shareholders of the Company of (i) a complete or substantial
liquidation or dissolution of the Company, or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
excluding a reorganization of the Company under the corporate laws of a
state other than Delaware.
Any sums not paid hereunder on a timely basis shall accrue interest at
the rate of one and one-half percent (1 1/2%) per month.
3. Compensation. You shall receive the compensation and benefits
set forth on Exhibit A hereto ("Compensation") for all services to be rendered
by you hereunder and for your transfer of property rights pursuant to an
agreement relating to proprietary information and inventions of even date
herewith attached hereto as Exhibit C between you and the Company (the
"Proprietary Information and Inventions Agreement").
4. Other Activities During Employment.
4.1 Except for any outside employments and directorships
currently held by you as listed on Exhibit B hereto, and except with the prior
written consent of the Company's Board of Directors, you will not during the
term of this Agreement undertake or engage in any other employment, occupation
or business enterprise other than one in which you are an inactive investor.
4.2 You hereby agree that, except as disclosed on Exhibit B
hereto, during your employment hereunder, you will not, directly or indirectly,
engage (a) individually, (b) as an officer, (c) as a director, (d) as an
employee, (e) as a consultant, (f) as an advisor, (g) as an agent (whether a
salesperson or otherwise), (h) as a broker, or (i) as a partner, coventurer,
stockholder or other proprietor owning directly or indirectly more than five
percent (5%) interest, in any firm, corporation, partnership, trust,
association, or other organization which is engaged in any line of business
engaged in or under demonstrable development by the Company (such firm,
corporation, partnership, trust, association, or other organization being
hereinafter referred to as a "Prohibited Enterprise"). Except as may be shown on
Exhibit B hereto, you hereby represent that you are not engaged in any of the
foregoing capacities (a) through (i) in any Prohibited Enterprise.
5. Former Employers.
5.1 You represent and warrant that your employment by the
Company will not conflict with and will not be constrained by any prior or
current employment, consulting agreement
4
or relationship whether oral or written. You represent and warrant that you do
not possess confidential information arising out of any such employment,
consulting agreement or relationship which, in your best judgment, would be
utilized in connection with your employment by the Company in the absence of
Section 5.2.
5.2 If, in spite of the second sentence of Section 5.1, you
should find that confidential information belonging to any other person or
entity might be usable in connection with the Company's business, you will not
intentionally disclose to the Company or use on behalf of the Company any
confidential information belonging to any of your former employers; but during
your employment by the Company you will use in the performance of your duties
all information which is generally known and used by persons with training and
experience comparable to your own all information which is common knowledge in
the industry or otherwise legally in the public domain.
6. Proprietary Information and Inventions. You agree to execute,
deliver and be bound by the provisions of the Proprietary Information and
Inventions Agreement attached hereto as Exhibit C and incorporated herein.
7. Post-Employment Activities.
7.1 For a period of one (1) year after the termination or
expiration, for any reason, of your employment with the Company hereunder,
absent the Company's prior written approval, you will not directly or indirectly
engage in activities similar or reasonably related to those in which you shall
have engaged hereunder during the two years immediately preceding termination or
expiration, nor render services similar or reasonably related to those which you
shall have rendered hereunder during such two years, to any person or entity
whether now existing or hereafter established which directly competes with (or
proposes or plans to directly compete with) the Company ("Direct Competitor") in
any line of business engaged in or under development by the Company. Nor shall
you entice, induce or encourage any of the Company's other employees to engage
in any activity which, were it done by you, would violate any provision of the
Proprietary Information and Inventions Agreement or this Section 7. As used in
this Section 7.1, the term "any line of business engaged in or under development
by the Company" shall be applied as at the date of termination of your
employment, or, if later, as at the date of termination of any post-employment
consulting arrangement.
7.2 For a period of one (1) year after the termination of your
employment with the Company, the provisions of Section 4.2 shall be applicable
to you and you shall comply there with. As applied to such one (1) year
post-employment period, the term "any other line of business engaged in or under
development by the Company," as used in Section 4.2, shall be applied as at the
date of termination of your employment with the Company or, if later, as at the
date of termination of any post-employment consulting arrangement with the
Company.
5
7.3 No provision of this Agreement shall be construed to
preclude you from performing the same services which the Company hereby retains
you to perform for any person or entity which is not a Direct Competitor of the
Company upon the expiration or termination of your employment (or any
post-employment consulting arrangement) so long as you do not thereby violate
any term of the Proprietary Information and Inventions Agreement.
8. Remedies. Your obligations under the Proprietary Information
and Inventions Agreement and the provisions of Sections 6, 7, 8 and 9 of this
Agreement (as modified by Section 10, if applicable) shall survive the
expiration or termination of your employment (whether through your resignation
or otherwise) with the Company. You acknowledge that a remedy at law for any
breach or threatened breach by you of the provisions of the Proprietary
Information and Inventions Agreement or Section 7 would be inadequate and you
therefore agree that the Company shall be entitled to such injunctive relief in
case of any such breach or threatened breach.
9. Assignment. This Agreement and the rights and obligations of
the parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation and any
assignee of all or substantially all of its business and properties, but, except
as to any such successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or by you,
except by operation of law.
10. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case
any one or more of the provisions contained in this Agreement (including the
provisions of Sections 2.4 and 7) for any reason shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. MOREOVER, IT IS THE INTENT OF THE
PARTIES THAT in case any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, such provision shall be construed by
limiting and reducing it as determined by a court of competent jurisdiction, so
as to be enforceable to the maximum extent compatible with applicable law.
11. Notices. Any notice which the Company is required to or may
desire to give you shall be given by personal delivery or registered or
certified mail, return receipt requested, addressed to you at your address of
record with the Company, or at such other place as you may from time to time
designate in writing. Any notice which you are required or may desire to give to
the Company hereunder shall be given by personal delivery or by registered or
certified mail, return receipt requested, addressed to the Company at its
principal office, or at such other office as the Company may from time to time
designate in writing. The date of personal delivery or the date of mailing any
notice under this Section 11 shall be deemed to be the date of delivery thereof.
12. Waivers. If either party should waive any breach of any
provision of this Agreement, such party shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.
6
13. Complete Agreement; Amendments. The foregoing including
Exhibits A, B and C hereto, is the entire agreement of the parties with respect
to the subject matter hereof, superseding any previous oral or written
communications, representations, understandings, or agreements with the Company
or any officer or representative thereof. Any amendment to this Agreement or
waiver by the Company of any right hereunder shall be effective only if
evidenced by a written instrument executed by the parties hereto, upon
authorization of the Company's Board of Directors.
14. Headings. The headings of the Sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning of this Agreement.
15. Counterparts. This Agreement may be signed in two
counterparts, each of which shall be deemed an original and both of which shall
together constitute one agreement.
16. Governing Law. This Agreement shall be governed by and
construed under Massachusetts law
17. Arbitration.
17.1 Any dispute, controversy or claim arising out of or
relating to this Agreement or the agreements referenced herein, including the
breach thereof, shall be settled by an amicable effort on the part of both
parties. An attempt to arrive at a settlement shall be deemed to have failed ten
(10) days after either party so notifies the other party in writing, and neither
party shall institute arbitration or any related proceeding until expiration of
that notice period.
17.2 If an attempt at settlement has failed, and written
notice thereof has been given as provided herein, any dispute, controversy or
claim between the parties arising out of or in connection with this Agreement or
the agreements referenced herein (or any amendments hereto or subsequent
agreements), including, but not limited to, as to its existence, validity,
interpretation, performance or non-performance, breach, or damages, shall be
decided by binding arbitration pursuant to the commercial Arbitration Rules, as
amended and in effect January 1, 1996, of the American Arbitration Association
(the "Rules"), subject to the following:
(a) The arbitration shall take place in Millbury,
Massachusetts, and in no other place.
(b) The parties to any such arbitration shall be the
Company and the Employee and shall be each entitled to designate one
arbitrator. Within thirty (30) days after receipt by a party of a
written notice of arbitration, each party shall notify the other party
of its designated arbitrator. The arbitrators so chosen shall designate
a third neutral arbitrator by unanimous vote within thirty (30) days of
their designation. That neutral arbitrator shall act as Chair to the
arbitration. In the event that a neutral arbitrator is not designated
pursuant to this subsection within fifteen (15) days after receipt by a
party of a written notice of arbitration, either party may request that
the American Arbitration Association select such
7
neutral arbitrator using its normal procedures; provided, however, that
such neutral arbitrator shall be a member of both the American Board of
Trial Advocates and the American College of Trial Lawyers.
Neither party shall have any ex parte contact with any of the
arbitrators after designation of the neutral arbitrator. If a
designated arbitrator cannot for any reason continue to serve as an
arbitrator, then the party that so designated that arbitrator shall
have the right to appoint a replacement for that arbitrator.
(c) An arbitration hearing shall be conducted not
later than twenty (20) days after selection of the neutral arbitrator.
At the arbitration hearing, each party may make written and oral
presentations to the arbitration panel, present testimony and written
evidence, and examine witnesses. Legal privileges against disclosure
shall apply.
(d) The written decision of the arbitration panel
shall be final and binding, and may be entered and enforced in any
court of competent jurisdiction. Each party hereby waives any right to
jury trial in connection with the enforcement of such written decision.
(e) The Company shall pay all of the fees and
expenses of the arbitration, including all legal fess and expenses.
Notwithstanding the foregoing, the arbitration panel, by majority vote,
may agree to assess arbitration costs and the costs and fees of the
arbitrators against either party.
8
If you are in agreement with the foregoing, please sign your name below
and also at the bottom of the Proprietary Information and Inventions Agreement,
whereupon this Agreement shall become binding in accordance with its terms.
Please then return this Agreement to the Company. (You may retain for your
records the accompanying counterpart of this Agreement enclosed herewith).
Very truly yours,
OMNI MULTI MEDIA GROUP, INC.
By:_________________________________
(Duly Authorized)
Accepted and Agreed:
- -----------------------------------
Richard A. Pilotte
Vice President of Operations
9
EXHIBIT A
EMPLOYMENT TERM, COMPENSATION AND BENEFITS
OF RICHARD A. PILOTTE
l. Term. The term of the Agreement to which this Exhibit A is annexed and
incorporated shall be until December 31, 1999.
2. Compensation.
(a) Base Salary. Effective January 1, 1996, your Base Salary shall be
increased to $165,000.00 per annum, payable in accordance with the
Company's payroll policies. Salaries will be reviewed for increase by
the Company's Compensation Committee annually and, for each year of the
term of this Agreement, the Compensation Committee shall increase your
Base Salary by a minimum of ten percent (10%) of the Base Salary then
in effect.
(b) Additional Bonus. In addition to the sums described above, the
Compensation Committee may establish an additional bonus plan for you
at its sole discretion.
(c) Automobile Allowance. The Company will provide you with an
automobile, not to exceed an annual base lease value of Eighteen
Hundred Dollars ($1,800) per month. You will also be reimbursed for all
automotive insurance and all maintenance and operating expenses. You
will reimburse the Company for all personal use (except that personal
use shall not be deemed to include commuting to and from the Company's
principal place of business).
(d) Club Membership. The Company shall reimburse you for club
memberships, in accordance with the Company's prior practice.
(e) Home Office. You will have an allowance of up to Ten Thousand
Dollars ($10,000) for furnishing your home office with furniture, a
computer and laser printer, a fax machine, a telephone, telephone lines
and a small photocopier. In addition, you will have an annual allowance
of up to Five Thousand Dollars ($5,000) for upgrading such home office,
furniture or equipment.
(f) Travel Advance. The Company shall advance to you up to Twelve
Thousand Dollars ($12,000) to cover travel and other related expenses.
You shall not be obligated to repay this amount, which shall not bear
interest, until the last date of your employment with the Company.
A-1
3. Vacation. You shall be entitled to all legal and religious holidays,
and six (6) weeks paid vacation per annum. In the event that you should
elect not to use all six (6) weeks of your allotted yearly vacation,
you shall be entitled to carry forward into the following calendar year
any of the unused days; or, to receive at the end of such calendar
year, in addition to your Base Salary, an amount equal to your per diem
Base Salary for each business day (not to include Saturday or Sunday)
not taken as vacation.
4. Insurance and Benefits.
(a) Health Insurance. You shall be eligible for participation in any
health or other group insurance plan which may be established by the
Company or which the Company is required to maintain by law. The
Company shall also provide supplemental health insurance for you and
your family to provide full indemnification . You shall also be
eligible to receive any other benefits which are provided to any of the
executive officers of the Company.
(b) Life Insurance. The Company shall obtain a term life insurance
policy on your life, payable to the Company, of One Million Dollars
($1,000,000). In addition, the Company will pay for life term insurance
policies on your life in the amount of One Million Dollars
($1,000,000), payable to the beneficiaries of your choice. The Company
may select to switch this insurance to a whole-life insurance or
similar plan on a split-dollar basis.
(c) Disability Insurance. The Company shall provide and maintain a
disability insurance policy for you equal to a minimum of sixty percent
(60%) of your Base Salary on an after-tax basis. In the event that the
Company presently maintains group disability insurance for its other
employees, your individual disability insurance policy may be
supplemented by such group insurance. However, in no event shall any
group insurance policy limitations or restrictions apply to your
minimum entitlement as set forth above.
(d) Retirement Plan. You shall be eligible for participation in any
retirement plan or pension program which may be established by the
Company or which the Company is required to maintain by law. In
addition to the Company's 401(k) Plan, the Board of Directors intends
to establish a separate non-qualified pension plan for the three
executive officers, subject to the approval of the Compensation
Committee.
5. Stock Options. You shall be eligible to participate in any of the
Company's Stock Option Plans in the amounts as may be determined by the
Company's Compensation Committee.
A-2
EXHIBIT B
OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS OF
RICHARD A. PILOTTE
NONE
B-1
EXHIBIT C
------------------------------------------------
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
------------------------------------------------
To: OMNI MultiMedia Group, Inc.
50 Howe Avenue
Millbury, Massachusetts 01527 As of April 20, 1995
The undersigned, in consideration of and as a condition of my
employment or continued employment by you and/or by companies which you own,
control, or are affiliated with or their successors in business (collectively,
the "Company"), hereby agrees as follows:
1. Confidentiality. I agree to keep confidential, except as the Company
may otherwise consent in writing, and, except for the Company's benefit, not to
disclose or make any use of at any time either during or subsequent to my
employment, any Inventions (as hereinafter defined), trade secrets, confidential
information, knowledge, data or other information of the Company relating to
products, processes, know-how, designs, formulas, test data, customer lists,
business plans, marketing plans and strategies, pricing strategies, or other
subject matter pertaining to any business of the Company or any of its
affiliates, which I may produce, obtain, or otherwise acquire during the course
of my employment, except as herein provided. I further agree not to deliver,
reproduce or in any way allow any such trade secrets, confidential information,
knowledge, data or other information, or any documentation relating thereto, to
be delivered to or used by any third parties without specific direction or
consent of a duly authorized representative of the Company.
2. Conflicting Employment; Return of Confidential Material. I agree
that during my employment with the Company I will not engage in any other
employment, occupation, consulting or other activity relating to the business in
which the Company is now or may hereafter become engaged, or which would
otherwise conflict with my obligations to the Company. In the event my
employment with the Company terminates for any reason whatsoever, I agree to
promptly surrender and deliver to the Company all records, materials, equipment,
drawings, documents and data which I may obtain or produce during the course of
my employment, and I will not take with me any description containing or
pertaining to any confidential information, knowledge or data of the Company
which I may produce or obtain during the course of my employment.
C-1
3. Assignment of Inventions.
3.1 I hereby acknowledge and agree that the Company is the
owner of all Inventions. In order to protect the Company's rights to such
Inventions, by executing this Agreement I hereby irrevocably assign to the
Company all my right, title and interest in and to all Inventions to the
Company.
3.2 For purposes of this Agreement, "Inventions" shall mean
all discoveries, processes, designs, technologies, devices, or improvements in
any of the foregoing or other ideas, whether or not patentable and whether or
not reduced to practice, made or conceived by me (whether solely or jointly with
others) during the period of my employment with the Company which relate in any
manner to the actual or demonstrably anticipated business, work, or research and
development of the Company, or result from or are suggested by any task assigned
to me or any work performed by me for or on behalf of the Company.
3.3 Any discovery, process, design, technology, device, or
improvement in any of the foregoing or other ideas, whether or not patentable
and whether or not reduced to practice, made or conceived by me (whether solely
or jointly with others) which I develop entirely on my own time not using any of
the Company's equipment, supplies, facilities, or trade secret information
("Personal Invention") is excluded from this Agreement provided such Personal
Invention (a) does not relate to the actual or demonstrably anticipated
business, research and development of the Company, and (b) does not result,
directly or indirectly, from any work performed by me for the Company.
4. Disclosure of Inventions. I agree that in connection with any
Invention, I will promptly disclose such Invention to my immediate superior at
the Company in order to permit the Company to enforce its property rights to
such Invention in accordance with this Agreement. My disclosure shall be
received in confidence by the Company.
5. Patents and Copyrights; Execution of Documents.
5.1 Upon request, I agree to assist the Company or its nominee
(at its expense) during and at any time subsequent to my employment in every
reasonable way to obtain for its own benefit patents and copyrights for
Inventions in any and all countries. Such patents and copyrights shall be and
remain the sole and exclusive property of the Company or its nominee. I agree to
perform such lawful acts as the Company deems to be necessary to allow it to
exercise all right, title and interest in and to such patents and copyrights.
5.2 In connection with this Agreement, I agree to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all documents, including assignments of title, patent or copyright
applications, assignments of such applications, assignments of patents or
copyrights upon issuance, as the Company may determine necessary or desirable to
protect the Company's or its nominee's interest in Inventions, and/or to use in
obtaining patents or
C-2
copyrights in any and all countries and to vest title thereto in the Company or
its nominee to any of the foregoing.
6. Maintenance of Records. I agree to keep and maintain adequate and
current written records of all Inventions made by me (in the form of notes,
sketches, drawings and other records as may be specified by the Company), which
records shall be available to and remain the sole property of the Company at all
times.
7. Prior Inventions. It is understood that all Personal Inventions, if
any, whether patented or unpatented, which I made prior to my employment by the
Company, are excluded from this Agreement. To preclude any possible uncertainty,
I have set forth on Schedule A attached hereto a complete list of all of my
prior Personal Inventions, including numbers of all patents and patent
applications and a brief description of all unpatented Personal Inventions which
are not the property of a previous employer. I represent and covenant that the
list is complete and that, if no items are on the list, I have no such prior
Personal Inventions. I agree to notify the Company in writing before I make any
disclosure or perform any work on behalf of the Company which appears to
threaten or conflict with proprietary rights I claim in any Personal Invention.
In the event of my failure to give such notice, I agree that I will make no
claim against the Company with respect to any such Personal Invention.
8. Other Obligations. I acknowledge that the Company from time to time
may have agreements with other persons or with the U.S. Government or agencies
thereof, which impose obligations or restrictions on the Company regarding
Inventions made during the course of work thereunder or regarding the
confidential nature of such work. I agree to be bound by all such obligations
and restrictions and to take all action necessary to discharge the Company's
obligations.
9. Trade Secrets of Others. I represent that my performance of all the
terms of this Agreement and my position as an employee of the Company do not and
will not breach any agreement to keep confidential proprietary information,
knowledge or data acquired by me in confidence or in trust prior to my
employment with the Company, and I will not disclose to the Company, or induce
the Company to use, any confidential or proprietary information or material
belonging to any previous employer or others. I agree not to enter into any
agreement either written or oral in conflict herewith.
10. Modification. I agree that any subsequent change or changes in my
employment duties, salary or compensation or, if applicable, in any Employment
Agreement between the Company and me, shall not affect the validity or scope of
this Agreement.
11. Successors and Assigns. This Agreement shall be binding upon my
heirs, executors, administrators or other legal representatives and is for the
benefit of the Company, its successors and assigns.
C-3
12. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any
one or more of the provisions contained in this Agreement shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT in case any one or more of the provisions contained
in this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by limiting and reducing it in accordance with a judgment of a court
of competent jurisdiction, so as to be enforceable to the extent compatible with
applicable law.
13. Waivers. If either party should waive any breach of any provision
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
14. Complete Agreement, Amendments. I acknowledge receipt of this
Agreement, and agree that with respect to the subject matter thereof it is my
entire agreement with the Company, superseding any previous oral or written
communications, representations, understandings, or agreements with the Company
or any officer or representative thereof. Any amendment to this Agreement or
waiver by either party of any right hereunder shall be effective only if
evidenced by a written instrument executed by the parties hereto, and, in the
case of the Company, upon written authorization of the Company's Board of
Directors.
15. Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
16. Counterparts. This Agreement may be signed in two counterparts,
each of which shall be deemed an original and both of which shall together
constitute one agreement.
17. Governing Law. This Agreement shall be governed and construed under
Massachusetts law.
------------------------------------
Richard A. Pilotte
Vice President of Operations
Accepted and Agreed:
OMNI MultiMedia Group, Inc.
By:________________________________
(Duly Authorized)
C-4
SCHEDULE A
LIST OF PRIOR INVENTIONS
Identifying Number or
Title Date Brief Description
- ----- ---- ---------------------
NONE
EXHIBIT 11
<TABLE>
<CAPTION>
OMNI MULTIMEDIA GROUP, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
Three Months Ended Six Months Ended
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
------------------ ----------------- ----------------- -----------
<S> <C> <C> <C> <C>
Net income (loss) $ (2,824,993) $ 292,684 $ (4,644,997) $ 24,531
Primary weighted common shares outstanding:
Common Stock 4,033,232 2,751,500 3,961,591 2,751,500
Stock options -- (1) 112,206 -- (1) 107,392
Stock warrants -- (1) 79,344 -- (1) 5,300
Primary weighted average shares $ 4,033,232 $2,943,050 $ 3,961,591 $2,864,192
============ ========== ============ ==========
Primary net income (loss)
per share $ (0.70) $ 0.10 $ (1.17) $ 0.01
============ ========== ============ ==========
Fully diluted weighted common shares outstanding:
Common Stock 4,033,449 2,251,500 3,961,591 2,751,500
Stock options -- (1) 52,613 -- (1) 52,613
Stock warrants -- (1) 183,867 -- (1) 183,867
Shares attributable to Preferred
Stock converted using the if
converted method 400,217 -- 471,858 --
------------ ------------ ---------- ----------
Fully diluted weighted average
shares $ 4,433,449 $ 2,987,980 $4,433,449 $2,987,980
============ ============ ========== ==========
Fully diluted net income (loss)
per share $ (0.64) $ 0.10 $ (1.05) $ 0.01
============ ============ ========== ==========
- ------------------
(1) Inclusion of stock options and warrants in the weighted average share
calculation would have an anti-dilutive effect on the calculation for
the three and six months ended September 28, 1996, and has therefore
been excluded.
(2) Issuances of Common Stock upon conversion of Convertible Preferred
Stock are treated as if converted at the beginning of the period under
the fully diluted net loss per share calculation.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> SEP-28-1996
<CASH> 9,208,351
<SECURITIES> 0
<RECEIVABLES> 1,514,187
<ALLOWANCES> 85,000
<INVENTORY> 1,035,695
<CURRENT-ASSETS> 12,636,853
<PP&E> 18,320,398
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,569,034
<CURRENT-LIABILITIES> 4,867,414
<BONDS> 0
0
0
<COMMON> 4,312,281
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 32,569,034
<SALES> 2,183,289
<TOTAL-REVENUES> 2,183,289
<CGS> 2,959,807
<TOTAL-COSTS> 974,773
<OTHER-EXPENSES> 842,992
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 343,583
<INCOME-PRETAX> (2,824,993)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,824,992)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> (0.64)
</TABLE>
