SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report: October 18, 1996
OMNI MULTIMEDIA GROUP, INC.
---------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-13656 04-2729490
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification
Number)
50 Howe Avenue, Millbury, Massachusetts 01527-3298
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (508) 865-4451
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
TABLE OF CONTENTS
FORM 8-K
October 18, 1996
Item Page
---- ----
Item 2. Acquisition or Disposition of Assets.
Item 7. Financial Statements and Exhibits.
Signatures
Exhibits
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 4, 1996, OMNI MultiMedia Group, Inc. (the "Company"),
through a wholly-owned subsidiary, completed the acquisition of substantially
all of the assets of Allenbach Industries, Inc. ("Allenbach"), a privately held
corporation having its principal place of business in San Jose, California.
Allenbach conducts a software manufacturing and fulfillment business,
maintaining manufacturing facilities in San Jose, California and Bloomington,
Minnesota.
The acquisition took the form of an asset sale in which Allenbach
transferred substantially all of its assets to a subsidiary of the Company in
exchange for the subsidiary's assumption of certain specified liabilities and
the issuance of shares of the Company's Common Stock, the number of which is to
be calculated based upon the attainment of certain performance objectives.
No material relationship exists between the Company or its subsidiaries
and Allenbach or any of its respective officers, directors or affiliates or any
associate of any such officer or director.
The Company has entered into an Employment Agreement (the "Agreement")
with Philip Kessler, the former President and Chief Executive Officer of
Allenbach. The Agreement provides that Mr. Kessler will be employed by the
Company on the terms specified in the Agreement.
As of the date of this report, the audited financial statements for
Allenbach for its two most recent fiscal years and the unaudited, pro forma
consolidated financial statements of the Company combined with Allenbach are not
available. The Company intends to file the required financial statements as soon
as practicable, in accordance with applicable federal securities laws.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses acquired:
The audited financial statements of Allenbach for the fiscal
years ended December 31, 1994 and 1995 will be filed by
amendment within sixty (60) days after the date of this Report
on Form 8-K.
(b) Pro forma financial information:
The unaudited, consolidated pro forma financial statements of
the Company combined with Allenbach will be filed by amendment
within sixty (60) days after the date of this Report on Form
8-K.
(c) The following exhibits are filed herewith:
Exhibit
No. Title
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10(u) Form of Asset Purchase Agreement, dated as of August 1, 1996,
by and among Allenbach Industries, Inc., A.I. Acquisition
Corporation, Kathleen Allenbach and Phillip H. Kessler.
10(v) Form of Employment Agreement, dated as of October 1, 1996,
between the Company and Phillip H. Kessler.
10(w) Form of Registration Rights Agreement, dated as of October 1,
1996, between the Company and Kathleen Allenbach.
-4-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OMNI MULTIMEDIA GROUP, INC.
By: /s/ Paul F. Johnson
--------------------------
Paul F. Johnson, President
Date: October 18, 1996
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ASSET PURCHASE AGREEMENT
AMONG
ALLENBACH INDUSTRIES, INC.,
A.I. ACQUISITION CORPORATION,
KATHLEEN ALLENBACH
AND
PHILLIP H. KESSLER
Dated as of August 1, 1996
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TABLE OF CONTENTS
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ARTICLE I.....................................................................................................1
DEFINITIONS...................................................................................................1
1.01. Definitions..........................................................................................1
ARTICLE II....................................................................................................5
PURCHASE AND SALE.............................................................................................5
2.01. Purchase and Sale....................................................................................5
2.02. Closing..............................................................................................5
2.03. Transfer Taxes.......................................................................................6
2.04. Books and Records....................................................................................6
ARTICLE III...................................................................................................6
REPRESENTATIONS AND WARRANTIES OF THE SELLER..................................................................6
3.01. Corporate Existence and Power........................................................................6
3.02. Corporate Authorization..............................................................................7
3.03. Governmental Authorization; Consents.................................................................7
3.04. Non-Contravention....................................................................................7
3.05. Subsidiaries.........................................................................................7
3.06. Financial Statements.................................................................................7
3.07. Absence of Certain Changes...........................................................................8
3.08. Property and Equipment..............................................................................10
3.09. No Undisclosed Material Liabilities.................................................................10
3.10. Litigation..........................................................................................10
3.11. Material Contracts..................................................................................11
3.12. Insurance Coverage..................................................................................12
3.13. Compliance with Laws; No Defaults...................................................................12
3.14. Finders, Fees.......................................................................................13
3.15. Intellectual Property...............................................................................13
3.16. Inventories.........................................................................................15
3.17. Receivables.........................................................................................16
3.18. Taxes...............................................................................................16
3.19. Employees...........................................................................................17
3.20. Products............................................................................................17
3.21. Environmental Compliance............................................................................17
3.22. Customers and Suppliers.............................................................................19
3.23. Transactions with Affiliates........................................................................19
3.24. Other Information...................................................................................20
3.25. Intercompany Arrangements...........................................................................20
3.26. Representations.....................................................................................20
ARTICLE IV...................................................................................................20
REPRESENTATIONS AND WARRANTIES OF BUYER......................................................................20
4.01. Organization and Existence..........................................................................20
4.02. Corporate Authorization.............................................................................20
4.03. Governmental Authorization..........................................................................20
4.04. Non-Contravention...................................................................................21
4.05. Finders' Fees.......................................................................................21
4.06. Litigation..........................................................................................21
ARTICLE V....................................................................................................21
COVENANTS OF THE SELLER......................................................................................21
5.01. Conduct of the Seller...............................................................................21
5.02. Access to Information...............................................................................22
5.03. Notices of Certain Events...........................................................................22
5.04. Confidentiality.....................................................................................22
5.05. Continuing Disclosure...............................................................................23
5.06. Non-Competition.....................................................................................23
ARTICLE VI...................................................................................................25
COVENANTS OF BUYER...........................................................................................25
6.01. Confidentiality.....................................................................................25
6.02. Resale Registration Statement.......................................................................25
ARTICLE VII..................................................................................................26
COVENANTS OF ALL PARTIES.....................................................................................26
7.01. Best Efforts........................................................................................26
7.02. Certain Filings.....................................................................................26
7.03. Public Announcements................................................................................26
ARTICLE VIII.................................................................................................26
EMPLOYEE BENEFITS
8.01. Employee Benefits Definitions.......................................................................26
8.02. ERISA Representations...............................................................................27
8.03. No Third Party Beneficiaries........................................................................28
ARTICLE IX...................................................................................................29
CONDITIONS TO CLOSING........................................................................................29
9.01. Conditions to the Obligations of Each Party.........................................................29
9.02. Conditions to Obligation of Buyer...................................................................29
9.03. Conditions to Obligation of Sellers.................................................................30
ARTICLE X....................................................................................................32
SURVIVAL; INDEMNIFICATION....................................................................................32
10.01. Survival............................................................................................32
10.02. Indemnification.....................................................................................32
10.03. Procedures; No Waiver...............................................................................32
10.04. Set-off.............................................................................................33
ARTICLE XI...................................................................................................33
TERMINATION..................................................................................................33
11.01. Grounds for Termination.............................................................................33
11.02. Effect of Termination...............................................................................34
11.03. Break-Up Fee; Security..............................................................................34
ARTICLE XII..................................................................................................34
MISCELLANEOUS................................................................................................34
12.01. Notices.............................................................................................34
12.02. Amendments; No Waivers..............................................................................35
12.03. Expenses............................................................................................36
12.04. Successors and Assigns..............................................................................36
12.05. Further Assurances..................................................................................36
12.06. Governing Law.......................................................................................36
12.07. Counterparts; Effectiveness.........................................................................36
12.08. Entire Agreement....................................................................................36
12.09. Captions............................................................................................36
12.10. Jurisdictions.......................................................................................37
Schedules
Schedule 1.01 Assets
Schedule 3.03 Required Consents
Schedule 3.06 Financial Statements
Schedule 3.07 Certain Changes
Schedule 3.09 Liabilities
Schedule 3.10 Litigation
Schedule 3.11 Material Contracts
Schedule 3.13 Permits
Schedule 3.15 Intellectual Property
Schedule 3.19 Employees
Schedule 3.21 Environmental Liabilities
Schedule 8.02 Employee Plans
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Exhibits
Exhibit A Registration Rights Agreement
Exhibit B Employment Agreement between Omni and the Employee
Exhibit C Assumption Agreement
Exhibit D Bill of Sale
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of August 1, 1996, among
ALLENBACH INDUSTRIES, INC., a California corporation (herein, the "Seller"),
A.I. ACQUISITION CORPORATION, a California corporation (herein, the "Buyer"),
KATHLEEN ALLENBACH of Olivenhain, California (herein, "Allenbach") and PHILLIP
H. KESSLER of Olivenhain, California (herein, the "Employee").
W I T N E S S E T H :
WHEREAS, Buyer desires to purchase from Seller all of the assets owned
by Seller or used in the conduct of its business in accordance with and subject
to the terms, conditions and provisions set forth hereinbelow;
WHEREAS, Seller is willing to sell to Buyer all of its assets, in
accordance with and subject to the terms, conditions and provisions set forth
hereinbelow;
NOW, THEREFORE, in consideration of the foregoing and the various
agreements, transfers, representations, warranties and other undertakings of the
parties set forth herein below, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person, any
Person directly or indirectly controlling, controlled by, or under common
control with such Person.
"Allenbach" means Kathleen Allenbach of Olivenhain,
California, the Chief Executive Officer of Seller.
"Ancillary Agreements" means the Registration Rights
Agreement attached hereto as Exhibit A, the Employment Agreement attached hereto
as Exhibit B, the Assumption Agreement attached hereto as Exhibit C, and the
Bill of Sale attached hereto as Exhibit D.
"Assets" means any and all assets owned (specifically
excluding the two- bedroom, time share unit owned by Seller with respect to
property in Carlsbad, California) or used by Seller or with respect to which
Seller has the right to use in connection with the conduct of its business,
including, without thereby limiting the generality of the foregoing, the
following:
(1) any and all items of equipment listed in Schedule
1.01 annexed hereto;
(2) any and all items of inventory and work-in-process
listed on Schedule 1.01 annexed hereto;
(3) any and all items of furniture listed on Schedule
1.01 annexed hereto;
(4) any and all fixtures and leasehold improvements
listed on Schedule 1.01 annexed hereto;
(5) any and all accounts receivable existing as of the
Closing Date;
(6) any and all cash, cash equivalents, deposits and
other negotiable assets of
the Seller existing as of the Closing Date;
(7) any and all general intangibles of the Seller,
including any and all Intellectual Property Rights,
including those listed on Schedule 1.01 annexed
hereto;
(8) all items of leased equipment, including those shown
on those shown on Schedule 1.01 annexed hereto;
(9) all customers of Seller, including those shown on
Schedule 1.01 annexed hereto;
(10) the lease for its premises at 590 Brennan Street in
San Jose, California and at 8711-8729 Lyndale Avenue
South, in Bloomington, Minnesota (herein,
collectively, the "Premises"), a copy of which is
annexed hereto as Schedule 1.01;
(11) any and all subleases of the Premises, including the
subleases listed on Schedule 1.01 annexed hereto;
(12) any and all good will of Seller;
(13) any and all telephone numbers for the Seller,
including the numbers listed on Schedule 1.01 annexed
hereto;
(14) all pending purchase orders for customers, including
those purchase orders listed on Schedule 1.01 annexed
hereto;
(15) the exclusive right to negotiate with and continue to
seek to employ all current employees of the Seller,
subject to their right to refuse such employment; and
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(16) any and all motor vehicles of Seller, including those
listed on Schedule 1.01 annexed hereto.
"Assumption Agreement" means the Assumption Agreement
in the form set forth in Exhibit C.
"Balance Sheet" means the balance sheet of the Seller
as of July 31, 1996 referred to in Section 3.06.
"Balance Sheet Date" means July 31, 1996.
"Buyer" means A.I. Acquisition Corporation or its
nominee.
"Buyer's Counsel" means the law firm of Arter &
Hadden.
"Closing Date" means the date of the Closing.
"Employee" means Phillip H. Kessler of Olivenhain,
California, the President of Seller.
"Employment Agreement" means the Employment Agreement
in the form set forth in Exhibit B.
"Intellectual Property Right" means any trademark,
trade name, trade dress, service mark, service name, logo, and corporate name,
registration thereof or application for registration therefor; invention,
patent, patent application, patent disclosure and any related continuation,
continuation-in-part, divisional, reissue, re-examination, utility, model,
certificate of invention and design patent, patent application, registration and
application for registration, specifically excluding, however, any and all
rights to the trade name "Moby Disks" and all trade marks incorporating said
name; mask work and registration and application for registration thereof;
computer software, data and documentation; trade secret, know-how, and
confidential business information, whether patentable or nonpatentable and
whether or not reduced to practice, know-how, manufacturing and product
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and information;
copyright, copyright registration, application for copyright registration; or
any other similar type of proprietary intellectual property right, (including
without limitation associated goodwill and remedies against infringements
thereof and rights of protection of an interest therein under the laws of all
jurisdictions) in each case which is owned or licensed by Seller or any
Affiliate of Seller and used or held for use by the Seller.
"Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest, restriction or encumbrance of
any kind in respect of such asset.
3
"Material Adverse Change" means a material adverse
change in the business, assets, condition (financial or otherwise), results of
operations or prospects of the Seller.
"Material Adverse Effect" means a material adverse
effect on the business, assets, condition (financial or otherwise), results of
operations or prospects of the Seller.
"1934 Act" means the Security Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Person" means an individual, corporation,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Registration Rights Agreement" means the
Registration Rights Agreement in the form set forth in Exhibit A.
"Seller" means Allenbach Industries, Inc., a
California corporation.
"Subsidiary" means any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by the Seller.
(b) Each of the following terms is defined in the
Section set forth opposite such term:
Term Section
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Assumed Liabilities 2.01
Benefit Arrangement 8.01
Business 5.06(a)(i)
Buyer Group 10.02(a)
CERCLA 3.21
Claims 10.02
Closing 1.01
Code 3.18
Damages 10.02
Employee Plans 8.01
Environmental Laws 3.21
Environmental Liabilities 3.21
ERISA 8.01
ERISA Affiliate 8.01
Financial Statements 3.06
Finova 3.04
4
Fuji 3.11(a)(viii)
Hazardous Substance 3.21
Indemnified Party 10.03
Indemnifying Party 10.03
Multiemployer Plan 8.01
Omni 5.06(c)
Permit 3.13
Premises 1.01(a)
Regulated Activity 3.21
Release 3.21
Return 3.18
Returns 3.18
Shares 5.06(c)
Tax 3.18
Taxes 3.18
ARTICLE II
PURCHASE AND SALE
2.01. PURCHASE AND SALE. Upon the terms and subject to the conditions
of this Agreement, Seller shall sell to Buyer, and Buyer shall purchase from
Seller, at the Closing, the Assets. The aggregate purchase price for the Assets
shall be the assumption by Buyer of the liabilities and obligations of the
Seller as follows (herein, the "Assumed Liabilities"):
(a) Liabilities disclosed or provided for in the
Balance Sheet;
(b) Liabilities incurred in the ordinary course of
business consistent with past practices since the Balance Sheet Date, which, in
the aggregate, are not material to the Seller;
(c) The liabilities disclosed in Schedules 3.09
(except for any liabilities and obligations to Ronald Clammer or OEM Capital)
and 3.10 hereof; and
(d) The contracts, plans, leases, arrangements and
commitments disclosed in Schedules 1.01, 3.11 and 3.15. Except for the Assumed
Liabilities, it is expressly understood and agreed that Buyer is not assuming,
and Seller is indemnifying and holding Buyer harmless of and from any and all
Claims, Damages and Losses which are not expressly agreed to herein as
constituting Assumed Liabilities.
2.02. CLOSING. The closing (the "Closing") of the purchase and sale of
the Assets hereunder shall take place at the offices of Buyer's Counsel in
Boston, Massachusetts as soon as possible after satisfaction of the conditions
set forth in Article IX, but in no event later than
5
11:59 p.m., Boston time, on September 28, 1996, or at such other time or place
as Buyer and Seller may agree. At the Closing,
(a) Buyer shall deliver to Seller the Assumption
Agreement in the form and substance of Exhibit C, hereto.
(b) Seller shall deliver to Buyer a Bill of Sale for
the Assets in the form and substance of Exhibit D annexed hereto together with
such Certificates of Title or other evidences of title or other documents of
transfer requested by Buyer, all duly executed and acknowledged by Seller, as
requested by Buyer. In addition, full possession to the Assets shall be
delivered to Buyer, together with all keys, security cards and other items and
information, including operating manuals, plans, and the like, held, owned or
controlled by Seller and used or useful in connection with the ownership and
operation of Seller's business.
(c) The Seller shall deliver to Buyer revised
schedules to this Agreement updating the information shown thereon to the
Closing Date.
2.03. TRANSFER TAXES. Buyer shall pay any and all sales, documentary,
use, filing, transfer and other taxes payable as a result of the transfer of the
Assets to the Buyer (including any such state taxes that may be imposed on the
Seller by reason of a deemed transfer of Assets).
2.04. BOOKS AND RECORDS. On the Closing Date, Seller shall deliver to
Buyer, or its representatives, the original copies of all books of account,
leases, other agreements, securities, customer lists, files and other documents,
instruments and papers of any kind or nature belonging to or relating to the
Seller or its business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller and the Employee, jointly and severally, hereby represent
and warrant to Buyer as of the date hereof and as of the Closing Date that:
3.01. CORPORATE EXISTENCE AND POWER. The Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. The Seller is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
make such qualification necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect.
6
3.02. CORPORATE AUTHORIZATION. The execution and delivery by the Seller
of this Agreement and, the performance of its obligations hereunder and the
consummation by the Seller of the transactions contemplated hereby are within
the Seller corporate powers and have been duly authorized by all necessary
corporate action on the part of the Seller. This Agreement constitutes a valid
and binding agreement of the Seller.
3.03. GOVERNMENTAL AUTHORIZATION; CONSENTS.
(a) The execution and delivery by the Seller of this
Agreement and the performance by it of its obligations hereunder require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority.
(b) Except as set forth on Schedule 3.03, no consent,
approval, waiver or other action by any Person under any contract, agreement,
indenture, lease, instrument or other document to which the Seller is a party or
by which it is bound is required or necessary for the execution and delivery of
this Agreement by the Seller, the performance of its obligations hereunder or
the consummation of the transactions contemplated hereby.
3.04. NON-CONTRAVENTION. The execution and delivery by the Seller of
this Agreement, the performance by it of its obligations hereunder, and the
consummation of the transactions contemplated hereby do not and will not (i)
contravene or conflict with the corporate charter or bylaws of the Seller, (ii)
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Seller; (iii) constitute a default under or give rise to any
right of termination, cancellation or acceleration of any right or obligation of
the Seller or to a loss of any benefit to which the Seller is entitled under any
provision of any agreement, contract or other instrument binding upon the Seller
or any permit held by the Seller except for Seller's financing agreements with
Finova Capital Corp. (herein, "Finova") or (iv) assuming the receipt of all
required consents result in the creation or imposition of any Lien on any asset
of the Seller.
3.05. SUBSIDIARIES. The Seller does not have and never has had any
Subsidiaries or any ownership or equity interest in or control of (direct or
indirect) any other Person.
3.06. FINANCIAL STATEMENTS. The Seller has previously furnished Buyer
with a true and complete copy of (i) the balance sheets of the Seller as of
December 31, 1994 and December 31, 1995 and the statements of operations, cash
flows and changes in stockholders' equity of the Seller for the respective
fiscal year then ended, as compiled by the accounting firm of McGiladrey Pullen
and (ii) the balance sheet of the Seller as of July 31, 1996 and the statements
of operations, cash flows and changes in stockholders' equity of the Seller for
the interim period then ended (collectively, the "Financial Statements" which
are attached hereto as Schedule 3.06). Each of the balance sheets included in
the Financial Statements fairly presents in all material respects the
consolidated financial position of the Seller as of its date, and the other
statements included in the Financial Statements fairly present in all material
respects the results of operations, cash flows and stockholders' equity, as the
case may be, of the Seller for the periods
7
therein set forth, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved except as otherwise
stated therein and, with respect to the interim financial statements, for the
omission of footnote disclosures and, to the extent consistent with generally
accepted accounting principles, for normally recurring year-end adjustments.
3.07. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, the
Seller and the Subsidiaries have conducted their businesses in the ordinary
course consistent with past practices and, except as set forth on Schedule 3.07,
there has not been:
(a) any Material Adverse Change or any event,
occurrence, development or state of circumstances or facts which could
reasonably be expected to result in a Material Adverse Change;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any Seller Securities or any
repurchase, redemption or other acquisition by the Seller of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
the Seller;
(c) any amendment of any outstanding security of the
Seller;
(d) any incurance, assumption or guarantee by the
Seller of any indebtedness for borrowed money other than in the ordinary course
of business and in amounts and on terms consistent with past practices;
(e) any creation or assumption by the Seller of any
Lien on any asset;
(f) any making of any loan, advance or capital
contributions to or investment in any Person;
(g) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or assets of the
Seller which, individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect;
(h) any transaction or commitment made, or any
contract or agreement entered into, by the Seller relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Seller of any contract or other right, in either case,
material to the Seller, other than transactions and commitments in the ordinary
course of business consistent with past practices or those contemplated by this
Agreement;
(i) any change in any method of accounting or
accounting practice by the Seller;
8
(j) any (i) grant of any severance or termination pay
to any director, officer or employee of the Seller, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of the
Seller, (iii) change in benefits payable under existing severance or termination
pay policies or employment agreements or (iv) change in compensation, bonus or
other benefits payable to directors, officers or employees of the Seller;
(k) any change in the business or operations or in
the manner of conducting the business or operations of the Seller other than
changes in ordinary course of business;
(l) any mortgage, pledge or subjection of any
properties or assets to any claim, Lien or liability, except claims, Liens or
liabilities for taxes not yet due;
(m) any write-down of the value of any inventory, or
write-off of any notes or accounts receivable or any portion thereof as
uncollectible, other than valuation reserves established for inventory and
receivables;
(n) any cancellation or release of any other debts or
claims, or waivers of any rights;
(o) any sale, transfer or conveyance of any property
or assets, except in the ordinary course of business consistent with past
practice;
(p) any disposition of, or lapse, or other failure to
preserve the exclusive rights of the Seller to any Intellectual Property Right;
(q) any payments, loans or advances of any amount to
or in respect of, or sale, transfer or lease of any properties or assets to, or
entrance into any agreement, arrangement or transaction with, any of the
stockholders, officers or director of the Seller, any Affiliate or associate of
any stockholder of Seller, the Seller or any officer or director of the Seller,
or any business or entity in which any stockholder of Seller or the Seller, or
any Affiliate or associate of any such person, has any direct or material
indirect interest, except for compensation to the officers and employees of the
Seller;
(r) any lease of real or personal property or any
capital expenditures other than in the ordinary course of business or
commitments for additions to property, plant, equipment or capital assets; or
(s) any agreement, whether in writing or otherwise,
to take any action described in this Section 3.07.
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3.08. PROPERTY AND EQUIPMENT.
(a) The Seller has good and marketable title to, or
in the case of leased property have valid leasehold interests in, all Assets.
None of such properties or assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested
in good faith (and for which adequate accruals or reserves
have been established on the Balance Sheet); or
(iii) Liens which do not materially detract from the
value of such property or assets as now used, or materially
interfere with any present or intended use of such property or
assets.
(b) There are no developments affecting any of such
properties or assets pending or, to the knowledge of Seller threatened, which
might materially detract from the value of such property assets, materially
interfere with any present or intended use of any such property or assets or
materially adversely affect the marketability of such properties or assets.
(c) To the best of Seller's knowledge, the equipment
owned by the Seller has no material defects, is in good operating condition and
repair (ordinary wear and tear excepted), and is substantially adequate for the
uses to which it is being put.
(d) The assets owned or leased by the Seller, or
which it otherwise has the right to use, constitute all of the assets held for
use or used in connection with the business of the Seller and are generally
adequate to conduct such business as currently conducted.
3.09. NO UNDISCLOSED MATERIAL LIABILITIES. Except as set forth in
Schedule 3.09, there are no liabilities of the Seller of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability, other than:
(i) liabilities disclosed or provided for in the
Balance Sheet; and
(ii) liabilities incurred in the ordinary course of
business consistent with past practice since the Balance Sheet
Date, which in the aggregate are not material to the Seller.
3.10. LITIGATION. Except as disclosed on Schedule 3.10 hereof there is
no action, suit, investigation or proceeding (or any basis therefor) pending
against, or to the knowledge of Seller threatened against or affecting, the
Seller or any of its properties or the transactions
10
contemplated hereby before any court or arbitrator or any governmental body,
agency, official or authority.
3.11. MATERIAL CONTRACTS.
(a) Except for agreements, contracts, plans, leases,
arrangements or commitments disclosed in other Schedules to this Agreement or
Schedule 3.11, the Seller is not a party to or subject to:
(i) any lease providing for annual rentals of $25,000
or more;
(ii) any contract for the purchase of materials,
supplies, goods, services, equipment or other assets providing
for annual payments by the Seller of $25,000 or more;
(iii) any partnership, joint venture or other similar
arrangement or agreement or any license agreement under which
the Seller is the licensee, or any agency, distributor,
dealer, franchise, sales representative or other similar
contract or commitment;
(iv) except for trade indebtedness incurred in the
ordinary course of business, any loan or credit agreements or
any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of any asset,
business, company or other entity or indebtedness for borrowed
money by way of direct loan, sale of debt securities, purchase
money obligation, conditional sale, guarantee, or otherwise,
or agreement relating to the mortgaging, pledging or otherwise
placing a lien on any assets of the Seller or any guaranty of
indebtedness or performance of others by the Seller;
(v) any contract or other document that limits the
freedom of the Seller to compete in any line of business or
with any Person or in any area or which would so limit the
freedom of the Seller after the Closing Date;
(vi) any guarantees;
(vii) any contract for personal services or
employment (including without limitation contracts with
directors, officers, employees, agents, consultants, advisors,
salesmen, sales representatives, distributors or dealers);
(viii) any agreement or arrangement providing for the
sale of any of the assets, properties or rights of the Seller
(other than in the ordinary course of business) or for the
grant of a preferential right to purchase any of the Seller's
assets (other than the preferential right held by Fuji Photo
Film U.S.A., Inc.
11
(herein, "Fuji"), properties or rights or which required the
consent of any third party to the transfer and assignment of
any of its assets, properties or rights; and
(ix) any other agreements, contracts, leases,
licenses or commitments to which the Seller is a party (or
under which the Seller may be obligated or which the Seller or
any of its rights, properties or assets may be subject or
bound) and which is material to the financial condition,
results of operations, business, property or prospects of the
Seller or is not made in the ordinary course of business that
is material to the Seller.
(v) any contract relating to indebtedness for
borrowed money or the deferred purchase price of property
(whether incurred, assumed, guaranteed or secured by any
asset), except contracts relating to indebtedness incurred in
the ordinary course of business in an amount not exceeding
$10,000.
(b) Each agreement, contract, plan, lease,
arrangement and commitment disclosed in any schedule to this Agreement or
required to be disclosed pursuant to Section 3.11(a) is a valid and binding
agreement of the Seller and is in full force and effect, and neither the Seller,
nor, to the knowledge of the Seller, any other party thereto is in default in
any material respect under the terms of any such agreement, contract, plan,
lease, arrangement or commitment.
3.12. INSURANCE COVERAGE. The Seller has furnished to Buyer a list of,
and true and complete copies of, all insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Seller. There is no claim by the Seller pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
payable under all such policies and bonds have been paid and the Seller is
otherwise in full compliance with the terms and conditions of all such policies
and bonds. Such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) have been in effect since
January 1, 1994 and remain in full force and effect. Such policies of insurance
and bonds are of the type and in amounts customarily carried by Persons
conducting businesses similar to those of the Seller. Seller does not know of
any threatened termination of, or premium increase with respect to, any of such
policies or bonds.
3.13. COMPLIANCE WITH LAWS; NO DEFAULTS.
(a) The Seller is not in violation of, or has since
January 1, 1994 violated, any applicable provisions of any laws, statutes,
ordinances or regulations except for violations that have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(b) Schedule 3.13 correctly describes each license
and permit (a "Permit") material to the business of the Seller, together with
the name of the governmental agency or
12
entity issuing such license or permit. Such licenses and permits are valid and
in full force and effect and none of such licenses or permits will be terminated
or impaired or become terminable as a result of the transactions contemplated
hereby, except as indicated on Schedule 3.13.
(c) The Seller is not in default under, and no
condition exists that with notice or lapse of time or both would constitute a
default under, (i) any mortgage, loan agreement, indenture or evidence of
indebtedness for borrowed money to which the Seller is a party or by which the
Seller or any material amount of its assets is bound or (ii) any judgment, order
or injunction of any court, arbitrator or governmental body, agency, official or
authority which defaults or potential defaults individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect.
3.14. FINDERS, FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Seller who might be entitled to any fee or commission from Buyer, the Seller
or any of their respective Affiliates upon consummation of the transactions
contemplated by this Agreement, except for Ronald Klammer of OEM Capital whose
fees are not to be paid or assumed by Buyer and which fees to the extent valid
shall be paid solely by the Seller and from proceeds (net of selling costs,
taxes and fees paid to defend against any claim of Ronald Klammer or OEM
Capital) of the sale of the 1571 shares of Activision Corp. owned by Seller as
of this date.
3.15. INTELLECTUAL PROPERTY.
(a) Schedule 3.15 includes a list of all Intellectual
Property Rights specifying as to each, as applicable: (i) the nature of such
Intellectual Property Right; (ii) the owner of such Intellectual Property Right;
(iii) the jurisdictions by or in which such Intellectual Property Right is
recognized without regard to registration or has been issued or registered or in
which an application for such issuance or registration has been filed, including
the respective registration or application numbers; and (iv) licenses,
sublicenses and other agreements as to which the Seller or any of its Affiliates
is a party and pursuant to which any Person is authorized to use such
Intellectual Property Right, including the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty and
the term thereof.
(b) Except as set forth on Schedule 3.15, all such
Intellectual Property Rights have been duly registered and filed with or issued
by each appropriate governmental authority in the jurisdictions indicated on
Schedule 3.15, all necessary affidavits or other documents evidencing continuing
use have been filed and all necessary maintenance fees have been paid to
continue all such Intellectual Property Rights in effect.
(c) Except for licenses to use the Seller's products
granted by the Seller in the ordinary course of its business to third parties,
the Seller owns or has the exclusive right to use, sell, license or dispose of,
and has the exclusive right to bring actions for the infringement of, all
Intellectual Property Rights necessary or required for the conduct of its
business as presently conducted.
13
(d) The Seller has licensed each of its products
solely pursuant to executed license agreements substantially in the form
attached to Schedule 3.15.
(e) The Seller has no continuing support or
maintenance obligations with regard to any of its products, except as disclosed
on Schedule 3.15.
(f) The execution and delivery of this Agreement, the
performance by Seller of its obligations hereunder and the consummation of the
other transactions contemplated hereby will not breach, violate or conflict with
any instrument or agreement governing any Intellectual Property Right, will not
cause the forfeiture or termination or give rise to a right of forfeiture or
termination of any Intellectual Property Right or in any way impair the right of
the Seller to sue, sell, license or dispose of, or to bring any action for other
infringement of, any Intellectual Property Right or portion thereof.
(g) Except as disclosed on Schedule 3.15, there are
no royalties, honoraria, fees or other payments payable by the Seller to any
Person by reason of the ownership, use, license, sale or disposition of the
Intellectual Property Rights.
(h) The Seller's manufacture, marketing, license,
sale or use of any product presently licensed or sold by the Seller or proposed
to be licensed or sold by the Seller will not violate any license or agreement
with any third party or infringe any Intellectual Property Right or any other
party.
(i) There is no pending or, to the knowledge of the
Seller, threatened claim or litigation against the Seller, contesting the
validity, ownership or right to use, sell, license or dispose of any
Intellectual Property Right nor, to the knowledge of the Seller, is there any
basis for any such claims, nor has the Seller received any notice asserting that
the proposed use, sale, license or disposition of any of the Seller's products
conflicts or will conflict with the rights of any other party, nor is there, to
the knowledge of the Seller, any basis for any such assertion.
(j) The Seller has not during the three years
preceding the date of this Agreement been sued or charged in writing with or
been a defendant in any claim, suit, action or proceeding relating to its
business that has not been finally terminated prior to the date hereof and that
involves a claim of infringement of any patents, trademarks, service marks or
copyrights. No Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Seller or restricting the licensing thereof by the Seller to any Person. The
Seller has not entered into any agreement to indemnify any other Person against
any charge of infringement of any patent, trademark, service mark or copyright.
(k) The Seller has no knowledge of any continuing
infringement by any other Person of any Intellectual Property Rights of the
Seller.
14
(l) None of the Intellectual Property Rights of the
Seller, the value of which to the Seller is contingent upon maintenance of the
confidentiality thereof, has been disclosed by the Seller, any employee of the
Seller or any Seller to any Person other than employees, representatives and
agents of the Seller who are parties to confidentiality agreements with the
Seller.
(m) To the knowledge of the Seller, no third party
has asserted any claim, or has any reasonable basis to assert any valid claim,
against the Seller with respect to (i) the continued employment by, or
association with, the Seller of any of the present officers, employees of or
consultants to the Seller or (ii) the use by the Seller or any of such Persons
in connection with their activities for or on behalf of the Seller of any
information which the Seller or any of such Persons would be prohibited from
using under any prior agreements or arrangements or any laws applicable to
unfair competition, trade secrets or proprietary information.
(n) The Seller has taken all steps necessary to
safeguard and maintain its proprietary rights in all Intellectual Property
Rights.
(o) None of the former or present employees,
officers, directors, consultants or contractors of the Seller holds any right,
title or interest, directly or indirectly, in whole or in part, in or to any of
the Intellectual Property Rights which the Seller is currently using or the use
of which is necessary for the business of the Seller as presently conducted or
as proposed to be conducted. To the knowledge of the Seller, no employee of the
Seller is in violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such employee with the Seller or any other party because of the nature of the
business conducted or to be conducted by the Seller. No person has any so-called
"moral rights," including any right to identification of authorship, rights of
approval of modifications or limitations on subsequent modifications, in or to
any of the Intellectual Property Rights owned by the Seller. Nothing prohibits
the Seller from (i) modifying, changing, altering, adapting, revising,
translating, adding to or subtracting from any of the Intellectual Property
Rights owned by the Seller, (ii) doing any of the foregoing without obligation
to name the author of any of the Intellectual Property Rights owned by the
Seller or to give credit to any person in connection therewith or (iii) leasing,
licensing, distributing or marketing any of the Intellectual Property Rights
owned by the Seller without the consent of any person.
3.16. INVENTORIES. The inventories (including work-in-process and
finished good inventories) set forth in the Balance Sheet were properly stated
therein at the lesser of cost or fair market value determined in accordance with
generally accepted accounting principles consistently applied by the Seller,
except as disclosed in Schedule 3.07. Since the Balance Sheet Date, the
inventories of the Seller have been maintained in the ordinary course of
business. All such inventory is owned free and clear of all Liens. All of the
inventory recorded on the Balance Sheet consists of, and all inventory on the
Closing Date will consist of, items of a quality usable or salable in the
ordinary course of business consistent with past practices and are
15
and will be in quantities sufficient for the normal operation of the business of
the Seller in accordance with past practice.
3.17. RECEIVABLES. All accounts, notes receivable and other receivables
(other than receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all accounts and notes receivable of the Seller at the
Closing Date will be, valid, genuine and fully collectible within ninety (90)
days in the aggregate amount thereof, subject to normal and customary trade
discounts, less any reserves for doubtful accounts recorded on the Balance Sheet
or Schedule 3.07. All accounts, notes receivable and other receivables of the
Seller at the Balance Sheet Date have been included in the Balance Sheet.
3.18. TAXES.
(a) The term "Taxes" as used herein means all
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs duties, or other
Taxes, fees, assessments or other charges of any kind whatever, together with
any interest and any penalties, additions to Tax or additional amounts with
respect thereto, and the term "Tax" means any one of the foregoing taxes. The
term "Returns" as used herein, means all returns, declarations, reports,
statements and other documents required to be filed in respect of Taxes, and
"Return" means any one of the foregoing Returns. The term "Code" means the
Internal Revenue Code of 1986, as amended. All citations to the Code, or the
Treasury regulations promulgated thereunder, shall include any amendments or any
substitute or successor provisions thereto.
(b) The Seller has filed all Returns required to be
filed and has paid all Taxes owed (whether or not shown as due on such returns),
including, without limitation, all Taxes which the Seller is obligated to
withhold for amounts owing to employees, creditors and third parties. All
Returns have been filed completely and correctly. All Taxes with respect to
which the Seller has become obligated pursuant to elections made by it in
accordance with generally accepted practice have been paid and adequate reserves
have been established for all Taxes accrued but not yet payable. No issues have
been raised (and are currently pending) by any taxing authority in connection
with any of the returns. No waivers of statutes of limitations with respect to
any of the Returns have been given by or requested from the Seller. All
deficiencies asserted or assessments made as a result of any examinations have
been fully paid, or are fully reflected as a liability in the financial
statements of the Seller, or are being contested and an adequate reserve
therefor has been established and is fully reflected in the financial statements
of the Seller. There are no liens for Taxes (other than for current taxes not
yet due and payable) upon the assets of the Seller. All material elections with
respect to Taxes affecting the Seller, as of the date hereof, are set forth in
the financial statements of the Seller, or are annexed hereto in a disclosure
schedule. The Seller is not a party to any agreement, contract, arrangement or
plan that has resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 28OG of
the Code
16
(without regard to the exception in Sections 28OG(b)(4) and 28OG(b)(5) of the
Code). The Seller has not agreed to make any adjustment under Section 48 1 (a)
of the Code by reason of a change in accounting method or otherwise. The Seller
does not have and has not had a permanent establishment in any foreign country,
as defined in any applicable Tax treaty or convention between the United States
of America and such foreign country.
(c) Neither the Seller nor any Seller has ever filed
a consent pursuant to Section 341(f) of the Code, relating to collapsible
corporations.
(d) Seller has timely filed all Returns with respect
to Taxes required to be paid by them attributable to items of income, gain,
deductions, losses and credits of the Seller, and have timely paid all such
Taxes (whether or not shown on such Returns). There has not been any audit of
any Return filed by a Seller with respect to, or which may relate to, items of
income, gain, deduction, loss or credit of the Seller; and no such audit of any
Seller is in progress and such Seller has not been notified by any Tax authority
that any such audit is contemplated or pending.
3.19. EMPLOYEES. Schedule 3.19 sets forth a true and complete list of
(a) the names, titles, annual salaries and other compensations of all employees
of the Seller and (b) the wage rates for non-salaried employees of the Seller.
None of such employees has indicated to the Seller or a Seller that he intends
to resign or retire as a result of the transactions contemplated by this
Agreement or otherwise, except as shown on said schedule.
3.20. PRODUCTS. Each of the products and services developed, marketed,
licensed, distributed, planned, sold or otherwise provided by the Seller (i) is,
and at all times has been, in compliance in all material respects with all
applicable federal, state, local and foreign laws and regulations and (ii) is,
and at all relevant times has been, fit for the ordinary purposes for which it
is intended and conforms in all material respects to any promises or
affirmations of fact made on the packaging for such product or in connection
with its provision or sale. There is no known design defect with respect to any
of such products and each of such products contains adequate warnings, presented
in a reasonably prominent manner, in accordance with applicable laws and current
industry practice with respect to its contents and use. The Seller has no
products placed with its customers under an understanding permitting their
return to the Seller other than pursuant to a breach of warranty.
3.21. ENVIRONMENTAL COMPLIANCE.
(a) ENVIRONMENTAL DEFINITIONS. The following terms,
as used herein, have the following meanings:
"CERCLA" means the Comprehensive Environmental
Responses, Compensation and Liability Act of 1980, as amended.
17
"Environmental Laws" means any and all federal,
state, local and foreign statutes, laws (including common or case law),
regulations, ordinances, rules, judgments, judicial decisions, orders, decrees,
codes, plans, injunctions, permits, concessions, grants, franchises, licenses,
agreements, or governmental restrictions, whether now or hereinafter in effect,
relating to human health, the environment or to emissions, discharges or
releases of pollutants, contaminants, or Hazardous Substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof.
"Environmental Liabilities" means all liabilities of
the Seller and each Subsidiary, whether vested or unvested, contingent or fixed,
actual or potential, known or unknown, which (i) arise under or relate to
articles covered by Environmental Laws or arise in connection with or relate to
any matter disclosed or required to be disclosed in Schedule 3.21 and (ii) arise
from or relate in any way to actions occurring or conditions existing before the
Closing Date.
"Hazardous Substance" means any toxic, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, regulated under Environmental Laws.
"Regulated Activity" means any question, treatment,
storage, recycling, transportation or disposal of any Hazardous Substance.
"Release" has the meaning specified in 42 U.S.C.
ss.9601.
(b) Environmental Representations.
(i) No notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending,
or to the Seller's or a Seller's knowledge, threatened by any governmental or
other entity with respect to any (A) alleged violation by the Seller or any
Subsidiary of any Environmental Law or liability thereunder, (B) alleged failure
by the Seller to have any permit, certificate, license, approval, registration
or authorization required under my Environmental Law, (c) Regulated Activity or
(D) any general, treatment, storage, recycling, Release of Hazardous Substance.
(ii) (A) The Seller has not handled any Hazardous
Substance, other than as a generator, on any property now or previously owned or
leased by it; (B) no polychlorinated biphenyls or urea formaldehyde is or has
been present at any property now or previously owned or leased by the Seller;
(C) no asbestos is or has been present at any property now or previously owned
or leased by the Seller; (D) there are not underground storage tanks for
Hazardous Substances, active or abandoned, at any property now or previously
owned or leased by the
18
Seller; (E) no Hazardous Substance has been Released at, or under any property
now or previously owned or leased by the Seller and (F) no Hazardous Substance
has been, Released or is present, in a reportable or threshold planning
quantity, where such a quantity has been established by statute, ordinance,
rule, regulation or order, at, on or under any property now or previously owned
by the Seller.
(iii) To the best of Seller's knowledge, the Seller
has not transported or arranged for the transportation (directly or indirectly)
of any Hazardous Substance to any location which is listed or proposed for
listing under CERCLA, or on any similar state list or which is the subject of
Federal, state or local enforcement actions or other investigations which may
lead to claims against Buyer for clean-up costs, remedial work, damages to
natural resources or for personal injury claims, including, but not limited to,
claims under CERCLA.
(iv) No oral or written notification of a Release of
a Hazardous Substance has been filed by or on behalf of the Seller and no
property now or previously owned or leased by the Seller is listed or, to the
Seller's or a Seller's knowledge, proposed for listing, on the National
Priorities List promulgated pursuant to CERCLA or on any similar state list of
sites requiring investigation or clean-up.
(v) There are no environmental Liens on any of the
Seller's assets, and no governmental actions have been taken or are in process
that could subject any of such assets to such Liens. The Seller would not be
required to place any notice or restriction relating to the presence of
Hazardous Substances at any property used in connection with the operation of
its business in any deed to such property.
(vi) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or which are in
the possession of the Seller in relation to any property or facility now or
previously owned or leased by the Seller which have not been delivered to Buyer
prior to the date hereof.
3.22. CUSTOMERS AND SUPPLIERS. The Seller has not received notice from
or is otherwise aware that any group of customers who are under common ownership
or control and who accounted as a group for a material percentage of the
aggregate products and services furnished by the Seller during the past 18
months has stopped or intends to stop purchasing the Seller's products or
services, nor has the Seller lost any supplier, or group of suppliers, which
accounted for a material percentage of the aggregate supplies purchased by the
Seller during the past 18 months.
3.23. TRANSACTIONS WITH AFFILIATES. There are no loans, leases, royalty
agreements or other continuing transactions between the Seller and any Affiliate
of any Seller, or any member of any Affiliate's family other than with respect
to Fuji. To the knowledge of the Seller other than with respect to Fuji, none of
the officers or directors of the Seller (a) has any material direct or indirect
interest in any entity which does business with the Seller; (b) has any direct
or indirect interest in any property, asset or right which is used by the Seller
in the conduct of
19
its business; or (c) has any contractual relationship with the Seller other than
such relationships which occur from being an officer, director or stockholder of
the Seller.
3.24. OTHER INFORMATION. None of the documents or written information
delivered to Buyer in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading. The financial projections relating to the Seller delivered to Buyer
constitute the Seller's best estimate of the information purported to be shown
therein, and Seller is not aware of any fact or information that would lead it
to believe that such projections are incorrect or misleading in any material
respect.
3.25. INTERCOMPANY ARRANGEMENTS. The Seller does not own any note,
bond, debenture or other indebtedness, or is otherwise a creditor, any of its
Affiliates. Since the Balance Sheet Date there has not been any payment by the
Seller or any of its Affiliates, charge by any of its Affiliates to the Seller
or other transaction between the Seller and any of its Affiliates, except in any
such case in the ordinary course of business of the Seller consistent with past
practice.
3.26. REPRESENTATIONS. The joint representations and warranties of the
Seller contained in this Agreement, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse Effect,
are true and correct with only such exceptions as would not in the aggregate
reasonably be expected to have a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Seller that:
4.01. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of California and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
4.02. CORPORATE AUTHORIZATION. The execution and delivery by Buyer of
this Agreement, the performance by Buyer of its obligations hereunder and the
consummation by Buyer of the transactions contemplated hereby are within the
corporate powers of Buyer and have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement constitutes a valid and
binding agreement of Buyer
4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other than (i)
compliance with any applicable requirements of the 1934 Act; and (ii) compliance
with the requirements of the American Stock Exchange;
20
and (iii) compliance with applicable federal and state securities laws; all of
which will have been satisfied by the closing.
4.04. NON-CONTRAVENTION. The execution, delivery and performance by
Buyer of this Agreement do not and will not (i) contravene or conflict with the
corporate charter or bylaws of Buyer or (ii) assuming compliance with the
matters referred to in Section 4.03, contravene or conflict with any provision
of any law, regulation, judgment, injunction, order or decree binding upon
Buyer.
4.05. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from the Seller or any
or any Affiliate thereof upon consummation of the transactions contemplated by
this Agreement.
4.06. LITIGATION. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Buyer threatened against or affecting,
Buyer before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE SELLER
The Seller, Allenbach and the Employee, jointly and severally, hereby covenant
to and agree with Buyer as follows:
5.01. CONDUCT OF THE SELLER. From the date hereof until the Closing
Date, Seller shall cause to conduct its business in the ordinary course
consistent with past practices and to use its best efforts to preserve intact
its business organization and relationships with third parties and to keep
available the services of its present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
Seller will not permit the Seller to:
(a) adopt or propose any change in its corporate
charts or bylaws;
(b) merge or consolidate with any other Person or
acquire a material amount of assets of any other Person;
(c) sell, lease, license or otherwise dispose of any
material assets or property except (i) pursuant to existing contracts or
commitments and (ii) in the ordinary course consistent with past practices;
21
(d) effect any direct or indirect redemption,
purchase or other acquisition of any of its stock, or declare, set aside or pay
any dividend or make any other distribution of assets of any kind whatsoever
with respect to any stock.
The Seller will not (i) take or agree or commit to take any action that would
make any of its representations and warranties under this Agreement on the date
of its execution and delivery inaccurate in any respect at, or as of any time
prior to, the Closing Date or (ii) omit or agree or commit to omit to take any
action necessary to prevent any such representation or warranty from being
inaccurate in any respect at any such time.
5.02. ACCESS TO INFORMATION. From the date hereof until the Closing
Date, the Seller (a) will give Buyer, its counsel, financial advisors, financing
sources, auditors and other authorized representatives full access to the
offices, properties, books and records of the Seller, (b) will furnish, and will
cause the Seller to furnish Buyer, its counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information relating to the Seller as such Persons may reasonably request and
(c) will instruct the employees, counsel and financial advisors of, the Seller
to cooperate with Buyer in its investigation of the Seller; provided that no
investigation pursuant to this Section shall affect any representation or
warranty given by the Seller.
5.03. NOTICES OF CERTAIN EVENTS. The Seller will promptly notify Buyer
of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened against, relating to or
involving or otherwise affecting Seller disclosed pursuant to Section 3.10 or
that relate to the consummation of the transactions contemplated by this
Agreement.
5.04. CONFIDENTIALITY. Seller and its Affiliates will hold, and will
use their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning Buyer
furnished to Seller or its Affiliates in connection with the transactions
contemplated by this Agreement, and (after the Closing Date) all confidential
documents and information concerning the Seller, except to the extent that such
information can be shown to have been (i) previously known on a nonconfidential
basis by Seller, (ii) in the public domain through no fault of Seller or (iii)
later lawfully acquired by Seller from sources
22
other than the Seller or Buyer; provided that Seller may disclose such
information to their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such persons are informed by Seller of
the confidential nature of such information and are directed by Seller to treat
such information confidentially. The obligation of Seller and its Affiliates to
hold any such information in confidence shall be satisfied if they exercise the
same care with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, Seller and its Affiliates will, and will use their best efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to Buyer, upon request,
all documents and other materials, and all copies thereof, obtained by Seller or
its Affiliates or on their behalf from Buyer in connection with this Agreement
that are subject to such confidence.
5.05. CONTINUING DISCLOSURE. The Seller shall have the continuing
obligation promptly to advise Buyer with respect to any matter hereafter arising
or discovered that, if existing or known at the date of this Agreement, would
have been required to be set forth or described in a schedule to this Agreement,
or that constitutes a breach or prospective breach of this Agreement by the
Seller or a Seller. The delivery of any such notice shall not affect Buyer's
remedies hereunder.
5.06. NONCOMPETITION.
(a) The parties hereto acknowledge and agree that
Allenbach is a key employee of the Seller who has chosen not to become an
employee of Buyer or any of its Affiliates from and after the Closing.
Therefore, in order to induce Buyer to enter into this Agreement and to perform
its obligations hereunder, Allenbach agrees that for a period of three (3) full
years from the Closing Date, neither she nor any of her Affiliates shall:
(i) engage, directly or indirectly, alone or as a
partner, joint venturer, officer, director, employee,
consultant, agent, independent contractor, unpaid volunteer or
stockholder of any company or business, in any business
activity which is or may be directly or indirectly in
competition with any of the products or services developed,
marketed, licensed, distributed, planned, sold or otherwise
provided by the Seller (the "Business") as it exists on the
Closing Date. The ownership by Allenbach of not more than one
percent of the shares of stock of any corporation having a
class of equity securities actively traded on a national
securities exchange or on Nasdaq shall not be deemed, in and
of itself, to violate the prohibitions of this paragraph.
(ii) solicit, divert or take away, directly or
indirectly, whether alone or as a sole proprietor, partner,
officer, director, consultant, employee, joint venturer,
agent, representative, unpaid volunteer or independent
contractor, whether for her own interest or for the interest
of any other person or entity, customers or business of the
Seller existing on the Closing Date or, directly or
23
indirectly, whether for her own interest or for the interest
of any other person or entity, solicit, receiver or accept the
performance of services by, or discuss with any current or
former employee of the Seller the employment of such Person
by, any company, business organization or any other entity
that develops, licenses, produces or manufactures any product
or provides services that directly or indirectly compete with
those developed, produced, licensed, manufactured or marketed
by the Seller on the Closing Date.
(b) If any provision contained in this Section shall
for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Section, but this Section shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein. It is the intention
of the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than those
contained herein) as shall be valid and enforceable under such applicable law.
Seller, Allenbach and the Employee acknowledge that Buyer would be irreparably
harmed by any breach of this Section and that there would be no adequate remedy
at law or in damages to compensate Buyer for any such breach. They therefore
agree that Buyer shall be entitled to injunctive relief requiring specific
performance by Allenbach of this Section and Allenbach consents to the entry
thereof.
(c) In order to induce Allenbach to enter into the
Noncompetition obligations set forth in this Section, Buyer agrees to pay to
Allenbach the sum of (i) at the Closing, One Hundred Fifty Thousand Dollars plus
(ii) on January 17, 1997, a number of shares (herein, the "Shares") of the
common capital stock of Omni MultiMedia Group, Inc., a Delaware corporation
(herein, "Omni"), the parent company of the Buyer, $0.01 par value per share, as
is determined by dividing $150,000 by the average of the closing reported sale
prices of Omni's common stock on the American Stock Exchange for each trading
date of the period January 2, 1997 through January 10, 1997, both dates
inclusive. The certificate for the Shares shall bear the following legend:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be
sold, transferred or otherwise disposed of except in
accordance with the terms thereof and unless registered with
the Securities and Exchange Commission of the United States
and the securities regulatory authorities of certain states or
unless an exception from such registration is available."
24
(d) Buyer has previously furnished to Allenbach a
copy of Omni's audited financial statement for fiscal 1996 and a copy of Omni's
quarterly report on Form 10-QSB for the quarter ended June 29, 1996. Such Report
neither contains any untrue statement of any material fact or omits to state a
material fact necessary in order to make the statements contained therein not
misleading.
(e) In connection with the issuance of the Shares to
Allenbach, Allenbach and Omni shall have the rights and benefits of the
Registration Rights Agreement in the form and substance of Exhibit A annexed
hereto, which shall be executed and delivered by each of Allenbach and Omni at
the Closing.
ARTICLE VI
COVENANTS OF BUYER
Buyer covenants to and agrees with Seller and Allenbach that:
6.01. CONFIDENTIALITY. Prior to the Closing Date and after any
termination of this Agreement, Buyer and its Affiliates will hold, and will use
their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Seller furnished to Buyer or its Affiliates in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by Buyer,
(ii) in the public domain through no fault of Buyer or (iii) later lawfully
acquired by Buyer from sources other than the Seller; provided that Buyer may
disclose such information to its officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such Persons are informed by Buyer of
the confidential nature of such information and are directed by Buyer to treat
such information confidentially. The obligation of Buyer and its Affiliates to
hold any such information in confidence shall be satisfied if the exercise the
same care with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, Buyer and its Affiliates will, and will use their best efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to Seller, upon request,
all documents and other materials, and all copies thereof, obtained by Buyer or
its Affiliates or on their behalf from a Seller or the Seller in connection with
this Agreement that are subject to such confidence.
6.02. RESALE REGISTRATION STATEMENT. Buyer agrees to use commercially
reasonable efforts to cause a registration statement under the Securities Act on
an appropriate form relating to the resale of the Shares to be filed pursuant to
the Registration Rights Agreement and to have such registration statement
declared effective, all as provided in the Registration Rights Agreement.
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ARTICLE VII
COVENANTS OF ALL PARTIES
The parties hereto hereby covenant to and agree with each other that:
7.01. BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. Seller, Buyer, Allenbach and the Employee each
agree to execute and deliver such other documents, certificates, agreements and
other writings and to take such other actions as may be necessary or desirable
in order to consummate or implement expeditiously the transactions contemplated
by this Agreement.
7.02. CERTAIN FILINGS. The Seller and Buyer shall cooperate with each
other (a) in determining whether any action by or in respect of, or filing with,
any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (b) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
7.03. PUBLIC ANNOUNCEMENTS. The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except as
may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
ARTICLE VIII
EMPLOYEE BENEFITS
8.01. EMPLOYEE BENEFITS DEFINITIONS. The following terms, as used
herein, having the following meanings:
"Benefit Arrangement" means each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan, (ii) is entered into, maintained or
26
contributed to, as the case may be, by Seller or any of their Affiliates and
(iii) covers any employee or former employee of the Seller.
"Employee Plans" means each "employee benefit plan", as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by the Seller or any of its ERISA
Affiliates, as the case may be.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
8.02. ERISA REPRESENTATIONS. The Seller and Allenbach, jointly and
severally, hereby represent and warrant to Buyer that:
(a) Schedule 8.02 lists each Employee Plan that
covers any employee of the Seller, copies or descriptions of all of which have
previously been made available or furnished to Buyer. With respect to each
Employee Plan, the Seller has provided the most recently filed Form 5500 and an
accurate summary description of such plan. The Seller has provided Buyer with
complete age, salary, service and related data as of the most recent practicable
date for employees of the Seller.
(b) Schedule 8.02 also includes a list of each
Benefit Arrangement which (i) is not an Employee Plan, (ii) is entered into,
maintained or contributed to, as the case may be, by Seller or any of its
Affiliates and (iii) covers any employee or former employee of the Seller.
Copies or descriptions of all Benefit Arrangements have been made available or
furnished previously to Buyer.
(c) No Employee Plan is a Multiemployer Plan and no
Employee Plan is subject to Title IV of ERISA. The Seller and its Affiliates
have not incurred any liability under Title IV or ERISA arising in connection
with the termination of any plan covered or previously covered by Title IV of
ERISA.
(d) Each Employee Plan which is intended to be
qualified under Section 401 (a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501 (a) of the Code. The
Seller has furnished to Buyer copies of the most recent Internal Revenue Service
determination letters with respect to each such plan. Each Employee Plan has
been maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such plan.
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(e) Each Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations which are applicable to such
Benefit Arrangement.
(f) With respect to the employees and former
employees of the Seller, there are no employee post-retirement medical or health
plans in effect, except as required by Section 4980B of the Code.
(g) All contributions and payments accrued under each
Employee Plan and Benefit Arrangement, determined in accordance with prior
funding and accrual practices, as adjusted to include proportional accruals for
the period ending on the Closing Date, will be discharged and paid on or prior
to the Closing Date. Except as disclosed in writing to Buyer prior to the date
hereof, there has been no amendment to, written interpretation of or
announcement (whether or not written) by Seller or any of its ERISA Affiliates
relating to, or change in employee participation or coverage under, any Employee
Plan or Benefit Arrangement that would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the fiscal year ended prior to the date
hereof.
(h) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Seller that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 28OG of the Code.
(i) No tax under Section 4980B of the Code has been
incurred in respect of any Employee Plan that is a group health plan, as defined
in Section 5000(b)(1) of the Code.
(j) No employee of the Seller will become entitled to
any bonus, retirement, severance or similar benefit or enhanced benefit solely
as a result of the transactions contemplated hereby.
(k) The Seller does not have, nor is it reasonably
expected to have, any liability under Title IV of ERISA.
8.03. NO THIRD PARTY BENEFICIARIES. No provision of this Article VIII
shall create any third party beneficiary or other rights in any employee or
former employee (including any beneficiary or dependent thereof) of the Seller
in respect of continued employment (or resumed employment) with the Seller and
no provision of this Article VIII shall create any such rights in any such
Persons in respect of any benefits that may be provided, directly or indirectly,
under any Employee Plan or Benefit Arrangement or any plan or arrangement that
may be established by Buyer or any of its Affiliates. No provision of this
Agreement shall constitute a limitation on rights to amend, modify or terminate
after the Closing Date any Employee Plan or Benefit Arrangement.
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ARTICLE IX
CONDITIONS TO CLOSING
9.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
Buyer, Seller, Allenbach and the Employee to consummate the Closing are subject
to the satisfaction of the following conditions:
(a) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Closing shall have been instituted by any Person before any
court, arbitrator or governmental body, agency or official and be pending.
(b) All actions by or in respect of or filings with
any governmental body, agency, official or authority required to permit the
consummation of the Closing shall have been obtained.
(c) The Employee shall have entered into an
Employment Agreement with Omni, or with Buyer but guarantied by Omni,
substantially in the form and substance as set forth in the Employment Agreement
attached hereto as Exhibit B.
The parties agree that they are waiving compliance with Article 6 of the
California Commercial Code.
9.02. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) the Seller shall have performed in all
material respects all of his, her or its obligations hereunder required to be
performed on or prior to the Closing Date, (ii) the representations and
warranties of the Seller and the Employee contained in this Agreement at the
time of its execution and delivery and in any certificate or other writing
delivered by the Seller or a Seller pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true at and as of the Closing Date, as if made
at and as of such date and (iii) Buyer shall have received a certificate signed
by the Employee, individually and as the President of the Seller.
(b) No court, arbitrator or governmental body, agency
or official shall have issued any order, and there shall not be any statute,
rule or regulation, restraining the effective operation by Buyer of the business
of the Seller after the Closing Date, and no proceeding challenging this
Agreement or the transactions contemplated hereby or seeking to prohibit, alter,
prevent or materially delay the Closing shall have been instituted by any Person
before any court, arbitrator or governmental body, agency or official and be
pending.
29
(c) Buyer shall have received an opinion of Seller's
Counsel, dated the Closing Date, to the effect specified in Sections 3.01
through 3.05 and 3.10 and with respect to such other matters as Buyer may
reasonably request. In rendering such opinion, such counsel may assume that
Massachusetts laws are identical in all relevant respects to the laws of
California, may rely upon certificates of public officers, as to matters
governed by the laws of jurisdictions other than or the federal laws of the
United States of America, upon opinions of counsel reasonably satisfactory to
Buyer, copies of which shall be contemporaneously delivered to Buyer, and as to
matters of fact, upon certificates of the Seller or officers of the Seller.
(d) The Seller, Allenbach and the Employee shall have
caused to be executed and delivered each of the Ancillary Agreements to be
entered into by them or it at the Closing, in each case substantially in the
form attached as an exhibit to this Agreement.
(e) Buyer shall have received all other closing
documents specified in Section 2.02 of this Agreement and all other closing
documents that it may reasonably request, all in form and substance reasonably
satisfactory to Buyer.
(f) The Seller shall deliver to Buyer a properly
executed statement in a form reasonably acceptable to Buyer for purposes of
satisfying Buyer's obligations under Treasury Regulation ss.1.1445-2(c)(3).
(g) Buyer shall have received evidence satisfactory
to it of Seller's Stockholder's payment of all costs and expenses incurred by
the Seller in connection with this Agreement, except for the payments of not
more than $25,000 by Seller on account of legal fees incurred with respect to
this transaction.
(h) Finova, the institution providing receivable
financing to Seller, shall agree in writing with Buyer that Buyer may either
prepay all amounts owed by Seller to Finova without imposition of any prepayment
penalty or premium or Buyer may assume, without transfer fee, penalty or
premium, the obligations of Seller to Finova.
(i) To the extent that any lease under which the
Seller is the lessor or lessee, requires the assent of the other party to the
lease for an assignment thereof by Seller to Buyer, such consent shall have been
obtained in writing.
(j) Any right of first refusal with respect to the
sale of Assets to Buyer shall have either lapsed or been waived, and
satisfactory evidence thereof in writing shall have been provided to Buyer.
9.03. CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller,
Allenbach and the Employee to consummate the Closing is subject to the
satisfaction of the following further conditions:
30
(a)(i) Buyer shall have performed in all material
respects all of its obligations hereunder required to be performed by it at or
prior to the Closing Date, (ii) the representations and warranties of Buyer
contained in this Agreement at the time of its execution and delivery and in any
certificate or other writing delivered by Buyer pursuant hereto shall be true in
all material respects at and as of the Closing Date, as if made at and as of
such date and (iii) Seller shall have received a certificate signed by the Chief
Financial Officer of Buyer to the foregoing effect.
(b) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Closing shall have been instituted by any Person before any
court, arbitrator or governmental body, agency or official and be pending.
(c) Seller shall have received an opinion of Buyer's
Counsel, dated the Closing Date, to the effect specified in Sections 5.01
through 5.04 and 5.06 and with respect to such other matters as Seller shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of public officers, as to matters governed by the laws of
jurisdictions other than the Commonwealth of Massachusetts or the federal laws
of the United States of America, upon opinions of counsel reasonably
satisfactory to Seller, copies of which shall be contemporaneously delivered to
Seller, and as to matters of fact, upon certificates of officers of Buyer.
(d) Buyer shall have executed and delivered each of
the Ancillary Agreements to be entered into by it at the Closing, in each case
substantially in the form attached as an exhibit to this Agreement, and shall
have delivered the Shares to Allenbach.
(e) Buyer shall have caused a registration statement
under the Securities Act on an appropriate form relating to the resale of the
Shares to be filed pursuant to the Registration Rights Agreement.
(f) Allenbach and the Employee shall have received a
release from their guaranty of all obligations owing by them to Finova.
(g) Seller shall have received all items specified in
Section 2.02 of this Agreement and all other closing documents that they may
reasonably request, all in form and substance reasonably satisfactory to them.
(h) Buyer shall have delivered 10,000 shares of
Omni's stock to Fuji in exchange for their agreement to waive or release their
rights of first refusal with respect to the transactions contemplated by this
Agreement.
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ARTICLE X
SURVIVAL; INDEMNIFICATION
10.01. SURVIVAL. The representations, warranties and covenants
contained in this Agreement shall survive the Closing and continue until the
date set forth in each such covenant or, if no such date is stated, until two
(2) years from the Closing Date.
10.02. INDEMNIFICATION.
Seller and the Employee, jointly and severally, hereby
indemnify Buyer, its subsidiaries and its directors, officers, agents and
Affiliates (collectively, the "Buyer Group") and Buyer hereby indemnifies Seller
and the Employee against and agrees to defend and hold them harmless from any
and all damage, loss, liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding; "Damages") incurred or
suffered by any member of the Buyer Group or the Seller arising out of (i) any
inaccuracy in or breach or alleged breach of any agreement, representation or
warranty of any party contained in or made pursuant to this Agreement or any
certificate or other writing delivered pursuant hereto or in connection
herewith, (ii) any failure by any party to perform any of their respective
obligations or covenants as set forth in this Agreement or any certificate or
other writing delivered pursuant hereto or in connection herewith, (iii) any
liabilities or other obligations of any party other than obligations
specifically assumed hereunder, and (iv) any and all actions, suits, litigation,
arbitrations, proceedings, investigations or claims arising out of any of the
foregoing and based on facts that have occurred on or prior to the Closing Date
even though such action, suit, litigation, arbitration, proceeding,
investigation or claim may not be filed or come to light until after the Closing
Date (collectively, the "Claims").
10.03. PROCEDURES; NO WAIVER.
(a) The party seeking indemnification under Section
10.02 (the "Indemnified Party") agrees to give prompt notice to the party
against whom indemnity is sought (the "Indemnifying Party") of the assertion of
any claim, or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought under such Section. The Indemnifying Party may,
and at the request of the Indemnified Party shall, participate in and control
the defense of any third party suit, action or proceeding at its own expense.
The Indemnifying Party shall not be liable under Section 10.02 for any
settlement effected without its consent of any claim, litigation or proceeding
in respect of which indemnity may be sought hereunder.
(b) No waiver of a closing condition by either Buyer
or Seller shall limit their rights under Section 10.02.
32
(c) Notwithstanding anything in this Article X to the
contrary, no suit on a right to indemnification may be brought unless and until
the total of all Damages for which indemnification is sought shall equal or
exceed $40,000, in the aggregate.
10.04. SET-OFF. In the event that an Indemnified Party has any right of
indemnification against an Indemnifying Party, the Indemnified Party's sole
recourse for satisfaction of its Damages shall be for it to set-off any amounts
owed by it or any of its affiliates to the Indemnifying Party, against the
amount by which the Indemnified Party is entitled to indemnification. In the
event that an Indemnified Party shall be entitled to indemnification hereunder,
the Indemnified Party may rightfully preserve its rights of set-off hereunder by
withholding any payment due to an Indemnifying Party if the making of such
payment would reduce the balance of the obligation of the Indemnified Party to
the Indemnifying Party to an amount below the asserted amount of the Claim;
provided, however, that if such Claim shall at any time be finally reduced,
settled or determined, then all payments so suspended in excess of such final,
lower amount shall be forthwith delivered to the Indemnifying Party. Such
withholding to be effective, must be accompanied by prompt payment of the
withheld amount to the Indemnified Party's attorney, to be held by him in escrow
in an interest bearing account, with all interest for the account of the
Indemnifying Party, and by notice thereof being given to the Indemnifying Party.
ARTICLE XI
TERMINATION
11.01. GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(i) by written agreement of Seller and Buyer;
(ii) by either Seller or Buyer if the Closing shall
not have been consummated on or before August 31, 1996;
(iii) by either Seller or Buyer if there shall be any
law or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would
violate any nonappealable final order, decree or judgment of
any court or governmental body having competent jurisdiction;
or
(iv) by Seller if any party holding a right of first
refusal with respect to the Assets shall exercise such right
in writing.
The party desiring to terminate this Agreement pursuant to clauses
(ii), (iii) or (iv) shall give notice of such termination to the other parties.
33
11.02. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 11.01(i)(ii) or (iii), such termination shall be without
liability of either party (or any shareholder, director, officer, employee,
agent, consultant or representative of such party) to the other party to this
Agreement; provided that if such termination shall result from a termination
under Section 11.01(iv) or the willful failure of any party to fulfill a
condition to the performance of the obligations of another party or to perform a
covenant of this Agreement or from a willful breach by any party to this
Agreement, such party shall be fully liable for any and all Damages incurred or
suffered by the other party as a result of such failure or breach. The
provisions of Sections 6.01 and 12.03 shall survive any termination hereof
pursuant to Section 11.01.
11.03. BREAK-UP FEE; SECURITY. Buyer acknowledges that Seller's
preferred stockholder has a right of first refusal with respect to the
transactions contemplated by this Agreement. In addition, prior to the Closing
Date, Seller may wish to seek out other parties who may be interested in
purchasing the Assets on terms more advantageous to it than those set forth in
this Agreement. Seller acknowledges that, in either case, Buyer has expended,
and will continue to expend, substantial sums and considerable effort with
respect to the transaction contemplated hereby. Both parties agree that if this
transaction should be terminated for any reason other than in accordance with
the provisions of Section 11.01(i), (ii) or (iii), the exact damages to be
suffered by Buyer would be difficult to ascertain with certainty. Therefore,
Seller and Buyer stipulate and agree that the sum of $100,000 shall be due and
payable to Buyer if the transactions called for under this Agreement shall not
close and this Agreement shall be terminated other than in accordance with the
provisions of Section 11.01(i), (ii) or (iii), or as a consequence of a willful
failure of Buyer to fulfill conditions to the performance of the obligations of
the Seller to perform a covenant of this Agreement, or from any other willful
breach by Buyer to this Agreement. As collateral security for the payment of
such $100,000 liquidated damages, Seller does hereby grant to Buyer a continuing
security interest in and to any and all of its Assets, including all Equipment,
Inventory, Accounts, Accounts Receivable and General Intangibles, as those terms
are defined in the Uniform Commercial Code in effect in California.
Contemporaneously with the execution hereof, Seller shall sign Uniform
Commercial Code financing statements in form and substance satisfactory to
provide notice of record to all parties of the granting of such security
interest and in order to permit Buyer properly to perfect such security
interest.
ARTICLE XII
MISCELLANEOUS
12.01. NOTICES. All notices and other communications which by any
provision of this Agreement are required or permitted to be given shall be given
in writing and shall be (a) mailed by first-class or express mail, postage
prepaid, (b) sent by telex, telegram, telecopy or other form of rapid
transmission, confirmed by mailing (by first class or express mail, postage
prepaid) written confirmation at substantially the same time as such rapid
transmission, or (c) personally delivered to the receiving party (which if other
than an individual shall be an
34
officer or other responsible party of the receiving party). All such notices and
communications shall be mailed, sent or delivered as follows:
if to Buyer, to:
Omni MultiMedia Group, Inc.
50 Howe Avenue
Millbury, Massachusetts 01527
Attn: Robert E. Lee, Executive Vice President
with a copy to:
Richard L. Wise, Esquire
Gordon & Wise
101 Federal Street
Boston, Massachusetts 02110
Telecopy: (617) 261-0789
if to the Seller, to:
Allenbach Industries, Inc.
5973 Avenida Encinas
Carlsbad, California 92008
with a copy to:
Michael P. Ridley, Esquire
Arter & Hadden
5 Park Plaza, Suite 1000
Irvine, California 92614-9809
Telecopy: (714) 833-9604
Notices shall be deemed duly delivered one business day after being sent via a
reputable nationwide express mail service. Notices delivered via any other means
shall be deemed duly delivered upon actual receipt by the individual for whom
such notice is intended.
12.02. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may
be amended or waived prior to the Closing Date if, and only if, such amendment
or waiver is in writing and signed by Buyer and Seller.
(b) No failure or delay by either party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power
35
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
12.03. EXPENSES. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense;
provided, however, that if the Closing shall occur all such costs and expenses
incurred by the Seller shall be paid or reimbursed by Seller's shareholders,
except for up to $25,000 which may be paid by Seller to defray costs of Seller's
counsel with regard to this transaction.
12.04. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of his or its rights or obligations under this
Agreement without the consent of the other parties hereto, except that Buyer may
transfer or assign, in whole or from time to time in part, to one or more of its
Affiliates, the right to purchase all or a portion of the Assets, but no such
transfer or assignment will relieve Buyer of its obligations hereunder.
12.05. FURTHER ASSURANCES. From time to time after the Closing, at the
request of Buyer and without further consideration, Seller and the Employee will
execute and deliver to Buyer such other documents, and take such other action,
as Buyer may reasonably request in order to consummate more effectively the
transactions contemplated hereby and to vest in Buyer good, valid and marketable
title to the Assets.
12.06. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the law of the Commonwealth of Massachusetts, without
regard to the conflicts of law rules of such state.
12.07. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
12.08. ENTIRE AGREEMENT. This Agreement (including the exhibits and
schedules hereto) constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter hereof No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
12.09. CAPTIONS. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
36
12.10. JURISDICTION. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the Commonwealth of
Massachusetts, and each of the parties hereby consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any obligation to venue laid therein. Process in any such
action or proceeding may be served on any party anywhere in the world, whether
within or without the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
A.I. ACQUISITION CORPORATION
By: /s/ Robert E. Lee
------------------------------
Robert E. Lee,
Executive Vice President
ALLENBACH INDUSTRIES, INC.
By: /s/ Phillip H. Kessler
------------------------------
Phillip H. Kessler, President
/s/ Phillip H. Kessler
-----------------------------------
Phillip H. Kessler, Individually
/s/ Kathleen Allenbach
-----------------------------------
Kathleen Allenbach, Individually
37
EXHIBIT A
TO ASSET PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of October 1, 1996 between OMNI MULTIMEDIA GROUP,
INC., a Delaware corporation (herein, the "Company") and KATHLEEN ALLENBACH of
Olivenhain, California (herein, the "Stockholder").
W I T N E S S E T H:
WHEREAS, pursuant to an Asset Purchase Agreement dated as of August 1,
1996 (the "Purchase Agreement"), among Allenbach Industries, Inc., a California
corporation ("Allenbach"), the Stockholder and other parties named therein, a
wholly owned subsidiary of the Company is acquiring all of the assets of
Allenbach;
WHEREAS, in connection therewith, the Stockholder has agreed not to
compete with the business of the wholly owned subsidiary of this Company which
has acquired the assets of Allenbach and, in consideration for such
noncompetition obligation, the Stockholder will be acquiring unregistered shares
of Common Stock of the Company (the "Shares"); and
WHEREAS, the Company and the Stockholders wish to set forth certain
rights and obligations with regard to the registration of the Shares;
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Shares" shall mean the shares of Common Stock of the Company issued to
the Stockholder of even date herewith pursuant to the Purchase
Agreement.
"Common Stock" shall mean the Common Stock, $.01 par value, of the
Company, as constituted as of the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the
time.
"Registration Expenses" shall mean the expenses so described in Section
8.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 9.
2. Compliance with Securities Laws. The Stockholder represents and
warrants that she:
(a) has paid no brokerage or similar commissions in connection
with the acquisition of such Shares.
(b) is acquiring such Shares solely for his or her own
account.
(c) has provided such information as may reasonable have been
requested by the Company in order for the Company or its counsel to evaluate the
availability of an exemption under the Securities Act for the issuance of the
Shares to such Stockholder.
3. Securities Act Matter. Each Stockholder acknowledges and agrees that
the Shares have not been registered under the Securities Act or under the
securities laws of any state, in reliance upon certain exemptive provisions of
such statutes. Each Stockholder recognizes and acknowledges that such claims of
exemption are based, in part, upon each Stockholder's representations contained
in this Agreement. Each Stockholder further recognizes and acknowledges that,
because the Shares are unregistered under federal and state laws, they are not
presently eligible for public resale, and may only be resold in the future
pursuant to an effective registration statement under the Securities Act and any
applicable state securities laws, or pursuant to a valid exemption from such
registration requirements. Each Stockholder recognizes and acknowledges that
Rule 144 or any other exemption promulgated under the Securities Act (which
facilities routine sales of securities in accordance with the terms and
conditions of that Rule, including a holding period requirement) is not now
available for resale of the Shares, and each Stockholder recognizes and
acknowledges that, in the absence of the availability of Rule 144 or any other
exemption under the Securities Act, a sale pursuant to a claim of exemption from
registration under the Securities Act would require compliance with some other
exemption under the Securities Act, none of which may be available for resale of
the Shares. Each stockholder recognizes and acknowledges that, except as set
forth in this Agreement, the Company is under no obligation to register the
Shares, either pursuant to the Securities Act or the securities laws of any
state.
4. Restrictive Legend. Each certificate representing Shares shall,
except as otherwise provided in this Section 4 or in Section 5, be stamped or
otherwise imprinted with a legend substantially in the following form:
"The Securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be sold, transferred or
otherwise disposed of except in
2
accordance with the terms thereof and unless registered with the
Securities and Exchange Commission of the United States and the
securities regulatory authorities of certain states or unless an
exemption from such registration is available."
Such certificates shall not bear such legend if in the opinion of
counsel satisfactory to the Company the securities being sold thereby may be
publicly sold without registration under the Securities Act or if such
securities have been sold pursuant to rule 144, any other exemption under the
Securities Act or an effective registration statement.
5. Notice of Proposed Transfer. Prior to any proposed transfer of any
Shares, the Stockholder shall give written notice to the Company of his or her
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company, shall be accompanied by
an opinion of counsel satisfactory to the Company to the effect that the
proposed transfer may be effected without registration under the Securities Act,
whereupon the Stockholder shall be entitled to transfer such security in
accordance with the terms of his or her notice. Each certificate for shares
transferred as above provided shall bear the legend set forth in Section 4,
except that such certificate shall not bear such legend if (i) such transfer is
in accordance with the provisions of Rule 144 (or any other rule permitting
public sale without registration under the Securities Act) or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee (other than an affiliate of the Company) would be
entitled to transfer such securities in a public sale without registration under
the Securities Act.
6. Required Registration. The Company shall prior to the time for the
delivery of the Shares (i) have caused a Registration Statement on Form S-3 or
any successor thereto for a public offering of all (but not less than all) of
the Shares to be filed with the Securities Exchange Commission on or prior to
the date hereof and (ii) caused the S-3 Registration Statement to be effective.
The Company will use commercially reasonable efforts to cause the S-3
Registration Statement to remain effective until the earlier of (i) two (2)
years after the Closing Date (as defined in the Purchase Agreement); or (ii) the
sale of all Shares covered thereby. Anything to the contrary herein
notwithstanding, the Company may suspend sales at any time under the S-3
Registration Statement immediately upon notice to the Stockholder at her last
known address, for any of the reasons and for the time period set forth in
Section 8.
7. Registration Procedures. If and whenever the Company is required by
the provisions of Section 6 hereof to use commercially reasonable efforts to
effect the registration of the Shares under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
supplements to the S-3 Registration Statement, as may be necessary to comply
with the Securities Act;
(b) furnish to Stockholder such number of copies of the S-3
Registration Statement and each such amendment and supplement thereto (in each
case including exhibits) as
3
such persons reasonably may request in order to facilitate the public sale or
other disposition of the Shares covered by the S-3 Registration Statement;
(c) use commercially reasonable efforts to register or qualify
the Shares covered by the S-3 Registration Statement under the securities or
"blue sky" laws of such jurisdictions as the Stockholders reasonably shall
request provided, however, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(d) use commercially reasonable efforts to have the Shares
covered by the Registration Statement subject to quotation on the American Stock
Exchange; and
(e) promptly notify Stockholder (at her last known addresses)
(i) of the effective date and the date when any post-effective amendment to the
S-3 Registration Statement becomes effective, (ii) of any stop order or
notification from the Commission or any other jurisdiction as to the suspension
of the effectiveness of the S-3 Registration Statement, or (iii) of the
beginning and end of any suspension under Section 8.
8. Suspension.
(a) The rights of the Stockholders to distribute the Shares
pursuant to this Agreement and the Registration Statement may be suspended by
the Company on the occurrence of any of the following events:
(i) the Company has made an initial determination to conduct a
public offering;
(ii) the Company is about to make a normal course disclosure
containing information of a material nature;
(iii) there then exists material, non-public information
relating to the Company which, in the good faith determination of its
management or Board of Directors, would not be appropriate for
disclosure during that time; or
(iv) the Company is engaged in any activity at any time that,
in the good faith determination of its management or Board of
Directors, would be adversely affected by the continued compliance with
this Agreement or the continued distribution of the Shares by the
Stockholders.
(b) The Company shall use commercially reasonable efforts to
minimize the length of any suspension:
4
(i) under Section 8(a)(i), to a period of thirty (30) days,
more or less, beginning on the day that notice of a suspension is given
to the Stockholders and ending on the earlier of: (A) the date of
disclosure of the public offering, or (B) the date which is 30 days
after the beginning of the suspension, provided that during such
suspension, the Company will proceed with commercially reasonable
efforts to file the appropriate documentation in respect of, and
otherwise complete, such public offering as expeditiously as
practicable;
(ii) under Section 8(a)(ii), to a period of three (3) business
days, more or less;
(iii) under Section 8(a)(iii) or 8(a)(iv), if the activity is
a prospective acquisition by the Company, to a period beginning when
the notice of suspension is given to the Stockholders and ending on the
earlier of: (A) the closing of the transaction and the making of all
required filings under the Securities Act or Exchange Act, or (B) the
date on which discussions regarding the acquisition are terminated; and
(iv) under Section 8(a)(iii) or 8(a)(iv), for any reason other
than a prospective acquisition by the Company, to a period beginning
when the notice of suspension is given to the Stockholders and ending
on the earlier of: (A) the disclosure of the activity, or (B) the
reason is no longer operative.
9. Expenses. All expenses incurred by the Company in complying with
Section 7, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses incurred in connection with
complying with state securities or "blue sky" laws, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, and costs of issuance, but excluding any Selling Expenses, are
called "Registration Expenses". All underwriting discounts (if any) and selling
commissions applicable to the sale of the Shares covered by the Registration
Statement are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with the
preparation and filing of the Registration Statement. All Selling Expenses shall
be borne by the Stockholders in proportion to the number of Shares sold by each.
The Company shall not be obligated to pay any Registration Expenses in
connection with the preparation and filing of the Registration Statement if the
Registration Statement is withdrawn, delayed or abandoned for any reason by the
Stockholders.
10. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Stockholder the benefits of Rule 144 promulgated under
the Securities Act and any other rule or regulation thereunder that may at any
time permit the Stockholder to sell securities of the Company to the public
without registration, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
5
(b) maintain registration of its Common Stock under Section 12
of the Exchange Act;
(c) file in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act; and
(d) furnish to the Stockholder, so long as the Stockholder
owns any Shares, forthwith upon request: (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company; and (iii) such other information as may
be reasonably requested in availing the Stockholder of any rule or regulation
under the Securities Act which permits the selling of any such securities
without registration or pursuant to such form.
11. Changes in Common Stock. If, and as often as, there is any change
in the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Shares as so changed.
12. Stockholder's Conduct. With respect to any sale of Shares covered
by the S-3 Registration Statement, the Stockholder understands and agrees as
follows:
(a) The Stockholder will carefully review the information
concerning him or her contained in the Registration Statement and will promptly
notify the Company if such information is not complete and accurate in all
respects, including having properly disclosed any position, office or other
material relationship within the past three years with the Company or its
affiliates;
(b) The Stockholder agrees to sell Shares only in the manner
set forth in the S-3 Registration Statement and in Section 13;
(c) The Stockholder agrees to comply with the
anti-manipulation rules under the Exchange Act in connection with purchases and
sales of securities of the Company during the time the Registration Statement
remains effective;
(d) The Stockholder agrees to only sell Shares in a
jurisdiction after counsel for the Company has advised that such sale is
permissible under the applicable state securities or "Blue Sky" laws;
(e) The Stockholder agrees to comply with the prospectus
delivery requirements of the Exchange Act;
6
(f) The Stockholder agrees to promptly notify the Company of
any and all planned sales and completed sales of Shares; and
(g) The Stockholder agrees to suspend sales during the periods
when sales are to be suspended pursuant to Section 8.
(h) In connection with the registration of the Shares, the
Stockholder will furnish to the Company in writing such information requested by
the Company with respect to themselves and the proposed distribution by them as
shall be necessary in order to assure compliance with federal and applicable
state securities laws.
13. Selling Procedures.
(a) The Stockholder will notify the Company of her intention
to sell Shares not less than five (5) business days prior to the expected date
of such sale by faxing the "Takedown Request" attached hereto as Exhibit A to
the Company. During this period, the Company will review the prospectus to
determine if a suspension pursuant to Section 8 is necessary or appropriate. If
the Company does not notify the Stockholder of a suspension pursuant to Section
8, the Stockholder may conclude the proposed sale, on the proposed date of sale,
strictly in accordance with the Takedown Request.
(b) The Stockholder will notify the Company of each sale in
accordance with the Takedown Request within 24 hours of the sale by taxing the
"Notification of Sale" attached hereto as Exhibit B to the Company. Based on the
information set forth on the Notification of Sale, the Company will prepare or
cause to be prepared the appropriate notifications to its Transfer Agent to
remove the legend described in Section 4 from the Shares so sold.
14. Stockholder's Representations and Covenants. The Stockholder hereby
represents and warrants to the Company as follows:
(a) THE STOCKHOLDER UNDERSTANDS THAT HER INVESTMENT IN THE
SHARES INVOLVES RISK.
(b) THE STOCKHOLDER HAS CONSULTED HER OWN ATTORNEY, ACCOUNTANT
OR INVESTMENT ADVISOR WITH RESPECT TO THE INVESTMENT CONTEMPLATED HEREBY AND ITS
SUITABILITY FOR SUCH STOCKHOLDER. ANY SPECIFIC ACKNOWLEDGMENT SET FORTH BELOW
WITH RESPECT TO ANY STATEMENT OR INFORMATION FURNISHED TO THE STOCKHOLDER SHALL
NOT BE DEEMED TO LIMIT THE GENERALITY OF THIS REPRESENTATION AND WARRANTY.
(c) The Company has made available to the Stockholder, during
the course of this transaction and prior to the acquisition of the Assets, the
opportunity to ask questions of and receive complete and correct answers from
representatives of the Company concerning the
7
terms and conditions of the Shares and to obtain any additional information
relating to the financial condition and business of the Company.
(d) The Stockholder understands that she must bear the
economic risk of this investment until such time as the Shares are registered;
that the Shares are not currently registered under the Securities Act, and,
therefore, cannot be resold unless they are subsequently registered under the
Securities Act or unless an exemption from such registration is available; that
the Stockholder is purchasing the Shares with no present view toward resale or
other distribution thereof, and that the Stockholder agrees not to resell or
otherwise dispose of all or any part of the Shares, except as permitted by law,
including, without limitation, any and all applicable provisions of the Purchase
Agreement and this Agreement and any regulations under the Securities Act and
applicable state securities laws.
(e) The Stockholder has adequate means of providing for his or
her current needs and personal contingencies and has no need for liquidity in
connection with this investment in the Shares.
(f) The Stockholder's overall commitment to investments which
are not readily marketable is not disproportionate to her net worth and the
Stockholder's investment in the Shares will not cause such overall commitment to
become excessive. The acquisition of the Shares by the Stockholder is consistent
with her general investment objectives.
(g) The Stockholder has such knowledge and experience in
financial and business matters that she is capable of evaluating the merits and
risks of the investment in the Shares.
(h) The Stockholder received an offer concerning the Shares
and first learned of this investment in the state or other jurisdiction listed
in such Stockholder's residence address on the signature page hereto, and intend
that the state securities laws of that state or other jurisdiction alone govern
this transaction.
(i) The Stockholder hereby acknowledges receipt of the
documents described in Section 5.06(d) of the Purchase Agreement which documents
each Stockholder has reviewed. The Stockholder further acknowledges and warrants
that, prior to the execution of this Agreement, she has had the opportunity to
ask questions and receive answers from the Company and her counsel concerning
the terms and conditions of the transactions contemplated by the Purchase
Agreement and the issuance of the Shares, and concerning any of the documents
identified above, and to obtain such additional further information from the
Company and her counsel as she has deemed necessary to verify the accuracy of
the information contained in the documents identified above or any other
information furnished to the Stockholders.
(j) The Stockholder understands that the representations,
warranties and covenants set forth herein will be relied upon by the Company,
the stockholders of the Company and their respective counsel and accounting
firms.
8
15. Company's Representations and Covenants.
(a) The Company hereby represents and warrants to the
Stockholder that (i) the documents described in Section 5.06(d) of the Purchase
Agreement are true and complete in all material respects, and (ii) all of the
Shares issued to the Stockholder shall, when so issued, be validly issued, fully
paid for and nonassessable stock of the Company.
(b) The Company covenants and agrees to and with the
Stockholder that it will indemnify Stockholder, and her successors, assigns,
agents, affiliates, spouse and legal representatives (herein, collectively, the
"Stockholder Group") against, and agrees to defend and hold them harmless from
any and all damage, loss, liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding; herein, collectively,
"Damages") incurred or suffered by the Buyer Group arising out of (i) any
inaccuracy in or breach of or alleged breach of any agreement, representation or
warranty of the Company contained in or made pursuant to this Agreement or any
certificate or other writing pursuant hereto or in connection herewith, (ii) any
failure by the Company to perform any of its obligations or covenants as set
forth in this Agreement or any certificate or other writing delivered pursuant
hereto or in connection herewith, or (iii) any of the obligations of Allenbach
which were assumed by a subsidiary of the Company pursuant to the Purchase
Agreement.
If any member of the Stockholder Group seeks indemnification under this
Section 15, it shall give prompt notice to the Company of the assertion of any
claim, or the commencement of any suit, action or proceeding with respect of
which indemnity may be sought under this Section. The Company may, and at the
request of the party claiming indemnification shall, participate in and control
the defense of any third party suit, action or proceeding at its own expense.
The Company shall not be liable under this Section 15 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
16. Miscellaneous.
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto (including
without limitation transferees of any Shares, provided, that such transferee
executes a counterpart signature page to this Agreement), whether so expressed
or not.
(b) All notices and other communications which by any
provision of this Agreement are required or permitted to be given shall be given
in writing and shall be (a) mailed by first-class or express mail, postage
prepaid, (b) sent by telex, telegram, telecopy or other form of rapid
transmission, confirmed by mailing (by first class or express mail, postage
prepaid) written confirmation at substantially the same time as such rapid
transmission, or (c) personally delivered to the receiving party (which if other
than an individual shall be an officer
9
or other responsible party of the receiving party). All such notices and
communications shall be mailed, sent or delivered as follows:
if to the Company, at 50 Howe Avenue, Millbury,
Massachusetts, 01527, Attention: Robert E. Lee;
if to any other party hereto, at the address of such
party set forth on the signature page hereto;
if to any subsequent Stockholder of Shares, to it at
such address as may have been furnished to the Company in
writing by such Stockholder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of the Stockholder) or to the Stockholder
(in the case of the Company) in accordance with the provisions of this
paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
(d) This Agreement may be amended or modified, and provisions
hereof may be waived, with the written consent of the Company and the holders of
the Shares.
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
10
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
OMNI MULTIMEDIA GROUP, INC.
By: ______________________________
Robert E. Lee, Executive Vice President
-----------------------------------
Kathleen Allenbach
[You must complete pages 12-13 of this Agreement]
11
Principal Residence Address:
Note: Non-principal residence addresses and post office boxes cannot be
accepted.
- -------------------------------------
(Number and Street)
- -------------------------------------
(City, State) (Zip Code)
- -------------------------------------
(Residence Telephone)
Mailing Address (if different from above):
- -------------------------------------
(Number and Street)
- -------------------------------------
(City, State) (Zip Code)
Citizenship:_________________________
Social Security or
Taxpayer I.D. No.:___________________
12
If the Stockholder is a natural person and is an accredited investor
described by category 12 or 13 (or both) set forth on the attached Exhibit C,
please check this box. [ ]
If the Stockholder has not checked the box above, please check this box
if at least one of the categories set forth on the attached Exhibit C describes
you. [ ]
13
Exhibit A
to Registration Rights Agreement
TAKEDOWN REQUEST
The undersigned Stockholder intends to offer and sell to the public
Shares of OMNI MULTIMEDIA GROUP, INC. registered under a certain Registration
Statement on Form S-3, File No. _______.
<TABLE>
<CAPTION>
==============================================================================================================================
<S> <C> <C> <C> <C>
Name, Address, Name, Address, Number Number Proposed
Telephone Number and Telephone Number of Shares of Shares Date of
Facsimile Number of and Facsimile Owned to be Sold Sale*
Stockholder Number of Agent,
Broker-Dealer or
Underwriter
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
* MUST BE AT LEAST FIVE (5) BUSINESS DAYS AFTER THE DATE HEREOF.
Other Information:
==============================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The undersigned Stockholder agrees to provide all information and
materials and to take all actions as may be required in order for Omni
MultiMedia Group, Inc. to comply with all applicable securities laws.
----------------------------------
Signature of Stockholder
----------------------------------
Print Name
_________________________________Date
ALL TAKEDOWN REQUESTS SHOULD BE FORWARDED BY FACSIMILE TO:
OMNI MULTIMEDIA GROUP, INC.
50 HOWE AVENUE
MILLBURY, MASSACHUSETTS 01527
TELEPHONE: (508) 865-4451
FACSIMILE: (508) 865-1853
AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO A PROPOSED SALE
Exhibit B
to Registration Rights Agreement
NOTIFICATION OF SALE
The undersigned Stockholder sold to the public Shares of OMNI
MULTIMEDIA GROUP, INC. registered under a certain Registration Statement on Form
S-1, File No. _______, as follows
<TABLE>
<CAPTION>
==============================================================================================================================
<S> <C> <C> <C> <C>
Name, Address, Name, Address, Number Number Date of Sale
Telephone Number and Telephone Number of Shares of Shares
Facsimile Number of and Facsimile Owned to be Sold
Stockholder Number of Agent,
Broker-Dealer or
Underwriter
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Other Information:
==============================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
----------------------------------
Signature of Stockholder
----------------------------------
Print Name
_________________________________Date
ALL NOTIFICATIONS OF SALE SHOULD BE FORWARDED BY FACSIMILE TO:
OMNI MULTIMEDIA GROUP, INC.
50 HOWE AVENUE
MILLBURY, MASSACHUSETTS 01527
TELEPHONE: (508) 865-4451
FACSIMILE: (508) 865-1853
WITHIN 24 HOURS FOLLOWING SALE
Exhibit C
to Registration Rights Agreement
1. A bank (as defined in Section 3(a)(2) of the Securities Act) or a
savings and loan association or other institution (as defined in Section
3(a)(5)(A) of the Securities Act), whether acting in regard to this investment
in its individual or a fiduciary capacity.
2. A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934.
3. An insurance company (as defined in Section 2(13) of the Securities
Act).
4. An investment company registered under the Investment Company Act.
5. A business development company (as defined in Section 2(a)(48) of
the Investment Company Act).
6. A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 3 01 (c) or (d) of the Small Business
Investment Act of 1958.
7. A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if the plan has total assets in
excess of $10,000,000.
8. An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 (an "ERISA Plan") whose decision
to purchase the Interest was made by a plan fiduciary (as defined in Section 3
(2 1) of ERISA), which is either a bank, savings and loan association, insurance
company or registered investment adviser.
9. An ERISA Plan with total assets in excess of $1,000,000 or, if a
self-directed ERISA Plan, with investment decisions made solely by persons that
are "accredited investors."
10. A private business development company (as defined in Section
202(a)(22) of the Investment Advisers Act of 1940).
11. An organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, corporation, Massachusetts or similar business
trust or partnership, not formed for the specific purpose of acquiring the
Interest, with total assets in excess of $10,000,000.
12. A natural person whose net worth (either individually or jointly
with such person's spouse) at the time of the Closing exceeds $1,000,000.
13. A natural person who had an individual income in excess of $200,000
or joint income with such person's spouse in excess of $250,000 in each of the
last two calendar years and who reasonably expects to reach the same income
level in the current calendar year.
14. A trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the Interest, whose purchase of the Interest
is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under
the Securities Act.
15. An entity in which all of the equity owners fit into at least one
of the categories listed under paragraphs 1-14 above.
2
EXHIBIT B
---------
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is made and entered into as of the first day
of October, 1996, by and between OMNI MULTIMEDIA GROUP, INC., a Delaware
corporation having a usual place of business in Millbury, Massachusetts
(hereinafter referred to as the "Corporation") and PHILLIP H. KESSLER of
Olivenhain, California (hereinafter referred to as "the Employee").
W I T N E S S E T H :
WHEREAS, the Corporation is engaged in the business of designing,
fabricating and selling discs, diskettes, computer software programs and
packaging and manuals therefor, and providing general fulfillment services for
third parties (herein, the "Products"); and
WHEREAS, a subsidiary of this Corporation has purchased the assets of
Allenbach Industries, Inc. (herein, "Allenbach"), with respect to which the
Employee was the President and Chief Executive Officer, and the Corporation
wishes to afford itself of the knowledge and expertise of the Employee with
respect to that acquired business as well as to provide such other services
commensurate with the Employee's skills and time constraints; and
WHEREAS, the Corporation desires to engage the Employee, and the
Employee desires to be engaged by the Corporation on the basis and subject to
the terms hereinafter set forth; and
WHEREAS, the parties hereto desire to set forth various terms and
conditions relating to the engagement of the Employee and to be bound by such
terms and conditions;
NOW, THEREFORE, in consideration of the foregoing premises and the
undertakings and covenants of the parties contained hereinbelow, the Corporation
and the Employee hereby agree as follows:
1. Term.
a. Original: The Corporation agrees to employee the Employee and the
Employee agrees to work for the Corporation, upon the terms and conditions
hereinafter contained, for an original term (hereinafter referred to as the
"Original Term") commencing on the date of the execution hereof and ending upon
December 31, 1996; subject, however, to extension and subsequent termination as
hereinafter provided.
b. Renewals: The Corporation and the Employee may, by an agreement in
writing, elect to extend the term hereof upon such terms, conditions and
provisions as they shall deem appropriate.
2. Services of Employee.
Subject to the terms of this Agreement, the Employee shall provide such
advice and assistance to the Corporation and its subsidiaries with reference to
the business and affairs of Allenbach, as the Corporation deems appropriate. In
addition, the Employee may solicit sales on behalf of the Corporation or any of
its subsidiaries as may, from time to time, be agreed to by the Employee and the
Corporation or such subsidiary. The Employee's duties are subject to the
supervision and discretion of the President and the Board of Directors of the
Corporation, whose determination shall be final. All activities and services
performed by the Employee for the Corporation shall be rendered in a faithful,
responsible and competent manner, consistent with standards that may reasonably
be established and maintained by the Corporation from time to time. The extent
of Employee's time required by the Corporation is governed by the provisions of
the Section 3, below.
3. Extent of Service.
During the Original Term hereof, the Employee shall at reasonable times
and following reasonable notice, assist the Corporation as it may, from time to
time, reasonably request, in working with other employees of the Corporation or
its subsidiaries to maintain good relations with or acquire purchase orders
from, or to make presentations to former customers and suppliers of Allenbach,
and otherwise to assist the Corporation in the turnover of the assets and
business of Allenbach. It is understood and agreed that during the Original
Term, the Employee shall devote his best efforts and entire time, effort,
attention and interest to the business and affairs of the Corporation and shall
not, directly or indirectly, engage in or be associated with, either alone or as
a partner, officer, director, stockholder or employee, any business activity
whatsoever so long as he shall be employed by the Corporation, excepting only
for his employment hereunder and further excepting only his ownership of less
than 1% of any publicly traded class or securities of any business entity.
4. Compensation.
a. As total compensation for his services for the Corporation during
any of the Original Term, the Employee shall receive the following:
i. Salary: The Corporation shall pay the Employee a salary at
the rate of $23,000 per month, payable in arrears, in equal installments as may
be the Corporation's then practice, generally, but no less frequently than
monthly.
ii. Commission Compensation: In addition to amounts required
in 4.a.i., hereof, the Corporation shall pay the Employee a commission for any
sales made by the Corporation or any of its subsidiaries to any new customer as
may be agreed to by the Corporation and the Employee after the date hereof
(herein, collectively, the "Agreed Customers" and, individually, an "Agreed
Customer"). The amount payable to the Employee shall be a percentage
commensurate with that paid to its other sales personnel. Following the
2
expiration of the Term hereof, if the Employee shall not be employed by the
Corporation, such commission shall cease.
The amount of the sale for purposes of calculating all
commissions due shall be calculated as of the date of the shipment of each order
to such Agreed Customer and shall be the amount of the invoice for such
shipment, net of freight, insurance, taxes, non-customary products sold and
services provided in connection with such order which have been provided as a
courtesy to the customer and with respect to which the Company has made no
markup charge (other than to cover shipping and handling costs), and credits.
Commission due to the Employee, if any, shall be paid within thirty (30) days
following the close of each calendar quarter during the term of this Agreement.
iii. Medical Insurance: During the Term hereof and until the
Corporation has completed making all of the non-competition payments required of
it under Section J of the Non- Competition Agreement, as hereinafter defined,
the Corporation will cause the Employee and his family to be covered under the
then medical insurance plan which the Corporation makes available, generally, to
its other, employees, at no cost to the Employee.
5. Reimbursement of Expenses:
The Employee shall be entitled to receive from the Corporation
reimbursement for out of pocket expenses actually incurred by the Employee in
the furtherance of the business of the Corporation, provided that such expenses
are reasonable and customary, or have been approved, in advance, by the
President of this Corporation. As a condition to the Employee being entitled to
receive such reimbursement, the Employee shall provide such receipts, and fill
out such reports and informational returns as from time to time reasonably
requested by the Corporation.
6. Nonforfeitability of Payments:
It is understood and agreed that the payments required to be made
hereunder and under the Non-Competition Agreement by the Corporation shall be
due and payable in all events, notwithstanding the death or disability of the
Employee, but shall be subject to setoff and suspension in accordance with the
provisions of Section 10.04 of a certain Asset Purchase Agreement dated as of
August 1, 1996 and pursuant to which this Agreement was entered into.
7. Representations of Employee:
The employee represents and warrants to the Corporation that he has no
contract, obligation or duty of any kind whatsoever which is inconsistent
herewith, and that he is under no disability of any kind to enter into and
perform this Agreement. The Employee agrees to indemnify, defend and hold
harmless the Corporation from and against any claims, suits, actions, expenses
or damages, including, without limitation, all attorneys' fees, which the
Corporation may incur or sustain as a result of any breach which the Corporation
may incur or
3
sustain as a result of any breach of or inaccuracy in any of the representations
contained in this paragraph.
8. Services to Affiliates:
Upon the request of the Corporation, the Employee shall furnish
services to any related, affiliated, parent or subsidiary firm or corporation
without additional compensation so long as such services are within the scope of
his duties and obligations hereunder.
9. Non-Disclosure and Non-Competition.
As a condition to the Employee's employment by the Corporation and in
order to assist the Corporation in preserving its proprietary information and
good will, the employee agrees to be bound by, and to execute separately, a
Non-Disclosure and Non-Competition Agreement in the form and substance of the
Agreement annexed hereto as Exhibit I (herein, the "Non- Competition Agreement".
In addition, the Employee agrees to abide by the Corporation's "Statement of
Company Policy Regarding Insider Trading."
10. Indemnification of Employee.
In order to induce the Employee to enter into this Employment Agreement
and the Non- Competition Agreement, the Corporation covenants and agrees to and
with the Employee that it will indemnify Employee, and his successors, assigns,
agents, affiliates, spouse and legal representations (herein, collectively, the
"Employee Group") against, and agrees to defend and hold them harmless from any
and all damage, loss, liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding; herein, collectively,
"Damages") incurred or suffered by the Employee Group arising out of (i) any
inaccuracy in or breach of or alleged breach of any agreement, representation or
warranty of the Corporation contained in or made pursuant to this Agreement or
any certificate or other writing pursuant hereto or in connection herewith, (ii)
any failure by the Corporation to perform any of its obligations or covenants as
set forth in this Agreement or any certificate or other writing delivered
pursuant hereto or in connection herewith, (iii) the operation of the business
and affairs of Allenbach or its assets after the acquisition of its assets by a
subsidiary of this Corporation, and (iv) any obligations of Allenbach which were
specifically assumed by said subsidiary pursuant to the terms of a certain Asset
Purchase Agreement dated as of August 1, 1996 among Allenbach, the Employee,
Kathleen Allenbach and A.I. Acquisition Corporation.
If any member of the Employee Group seeks indemnification under this
Section 10, it shall give prompt notice to the Corporation of the assertion of
any claim, or the commencement of any suit, action or proceeding with respect of
which indemnity may be sought under this Section. The Corporation may, and at
the request of the party claiming indemnification shall, participate in and
control the defense of any third party suit, action or proceeding at its own
expense. The Corporation shall not be liable under this Section 10 for any
settlement effected
4
without its consent of any claim, litigation or proceeding in respect of which
indemnity may be sought hereunder.
11. Miscellaneous:
a. Captions:
The captions and headings of the various paragraphs and
subparagraphs of this Agreement are inserted for convenience or reference only
and shall not effect the construction or interpretation or this Agreement.
b. Notices:
Except as otherwise specifically provided herein to the
contrary, any notice required or permitted to be given to any party hereunder
shall be given in hand or sent postage prepaid by registered or certified mail,
return receipt requested, to such party at his last known place of address.
Either party may thereafter designate any other address by appropriate notice in
writing. Any notice shall be deemed to have been given fifteen (15) days after
it is mailed or, if delivered by hand, when received.
c. Binding Affect:
This Agreement shall be binding upon and enure to the benefit
of the Corporation, its successors and assigns, and upon and to the Employee,
his heirs and legal representatives; provided, however, that the Employee may
not assign either his obligations or benefits hereunder and any attempt at such
assignment shall be null and void.
d. Governing Law:
This Agreement is entered into and shall be construed and
enforced under and governed by the laws of the Commonwealth of Massachusetts,
without regard to principles of conflict of laws; provided, however, that in the
event that the Corporation does not make any payment required of it hereunder,
the Employee may bring suit for amounts owed to him in any federal court in the
state of California and the Employee's right to any such payments shall be
governed by California law.
e. Integration:
This Agreement represents the entire understanding of the
parties with respect to its subject matter and supersedes all prior agreements
and letters of intent, written or oral, concerning the subject matter hereof and
may not be changed or modified in any regard except by a written statement
signed by the party against whom such change or modification is claimed or
sought to be enforced. No influence shall be drawn from any variance between
this Agreement and any prior drafts thereof.
5
f. Waiver and Delay:
No delay or omission by either party in enforcing any of the
terms or conditions of this Agreement shall be construed as or constitute a
waiver thereof or bar thereto, and no waiver of any breach hereunder shall be
construed as or constitute a waiver of any other or subsequent breach or a bar
to the enforcement of such terms or conditions on any future occasion.
g. Divisibility:
Whenever possible, each paragraph of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any paragraph or any provision thereof is unenforceable or invalid under
such law, then, if possible, such paragraph or provision shall be reformed in
order to conform with said applicable law so that it shall bind the parties
thereto. Alternatively, if such reformation is not possible, then such paragraph
or provision shall be ineffective only to the extent of such enforceability and
the balance of this Agreement shall in such event continue to be binding and in
full force and effect.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
to take effect as a sealed instrument as of the day and year first above
written.
OMNI MULTIMEDIA GROUP, INC.
By:________________________________________
Robert E. Lee, Executive Vice President
----------------------------------------
Phillip H. Kessler
6
EXHIBIT I
NON-DISCLOSURE AND NON-COMPETITION AGREEMENT
THIS NON-DISCLOSURE AND NON-COMPETITION AGREEMENT is made as of the
first of September, 1996 by and between OMNI MULTIMEDIA GROUP, INC., a Delaware
corporation, having a usual place of business in Millbury, Massachusetts
(hereinafter referred to as "the Corporation") and PHILLIP H. KESSLER of
Olivenhain, California (hereinafter, the "Employee").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Employment Agreement between the
Corporation and the Employee of even date, the Corporation agreed to employ the
Employee; and
WHEREAS, the Corporation is in the business of developing and
formulating Products, as hereinafter defined, and is in the business of selling
the Products in the Territory, as hereinafter defined; and
WHEREAS, the Corporation and its parent, affiliated and subsidiary
companies (the Corporation and its affiliated and subsidiary companies, both
those now existing and those hereafter created or acquired, being collectively
referred to herein as the "Companies") have expended and shall continue to
expend substantial sums of money and its officers and employees have invested
and shall continue to invest substantial time, effort and attention in
developing and perfecting the Confidential Materials and Information, as
hereinafter defined; and
WHEREAS, the Employee recognizes and acknowledges that in the course of
his employment, the Corporation may give him access to the Confidential
Materials and Information; and
WHEREAS, the Corporation may expend, and Allenbach Industries, Inc., a
company whose assets were acquired by a subsidiary of this corporation, expended
substantial time, effort and sums of money to train the Employee and to develop
the Employee's expertise and knowledge of the various aspects of the
Corporation's businesses and methods; and
WHEREAS, the Employee acknowledges and recognizes that the Confidential
Materials and Information, as it may exist from time to time, is a valuable,
special and unique asset of the business of the Companies; and
WHEREAS, the Companies desire to protect, and the Employee desires to
assist the Companies in protecting, the Confidential Materials and Information
and to preserve and enhance the Companies' business prospects and the value of
the Companies' good will; and
WHEREAS, to accomplish the purposes set forth in the preceding
paragraph, the Employee is willing to agree with the Corporation not to disclose
the Confidential Materials and
Information and not to compete with the Corporation in the Territory or with its
customers, all as more particularly set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and in order
to induce the Corporation to employ the Employee as set forth in the Employment
Agreement of even date, the Employee hereby agrees with the Corporation as
follows:
1. Definitions:
As used herein, the terms listed below shall have the meanings assigned
to such terms as follows:
a. "Compete", "Competition" and all variations of the foregoing shall
mean the engagement or participation, or the furnishing aid or assistance in
connection with, the development, design, manufacture, distribution, sale or
marketing of the Products, whether or not for profit, within the Territory.
b. "Confidential Materials and Information" shall mean (i) all
confidential or secret processes, plans, formulae, data (including cost and
performance data), inventions, machinery, drawings, papers, writings,
specifications, manufacturing procedures and techniques, methods, technology,
know-how, programs, devices and materials relating to the business, products
(either existing or under development), services or activities of any of the
Companies, regardless of whether or not any or all of the foregoing are or may
be patented or copyrighted, (ii) any other information or aspect of or related
to any of the Companies' trade, businesses, products or activities which are
designated or treated by the Companies as confidential, secret or of a
proprietary nature, or (iii) any customer or supplier usages and requirements
and any of the Companies' lists of clients, customers, suppliers and business
contacts.
c. "Products" shall mean all services, catalogues and all computer
software copies, packaging, management, disks and diskettes, fulfillment
services and project management, of the type heretofore and hereafter provided,
produced, developed, manufactured, owned, licensed, or the like, by or for the
Company.
d. "Territory" shall mean the area comprised of the continental United
States.
2. Confidentiality:
a. The Employee acknowledges and agrees that all Confidential Materials
and Information are, and shall remain, the sole and exclusive property of the
Companies, and the Employee acknowledges that he has no rights thereto or
interest therein. The Employee further acknowledges and agrees that the Employee
had none of the Confidential Materials and Information and no knowledge of or
information relating to the Confidential Materials and Information prior to the
commencement of Employee's employment with the Corporation.
2
b. Except as required in the course of Employee's employment with the
Corporation the Employee agrees that he shall not, during the Employee's
employment with the Corporation or at any time subsequent thereto, directly or
indirectly, copy or reproduce, cause to be copied or reproduced, divulge, use,
furnish, disclose or otherwise make known or accessible to anyone other than any
of the Companies or their respective officers or directors, or cause to be
divulged, used, furnished, disclosed or otherwise made known or accessible to
anyone other than any of the Companies or their respective officers or
directors, any of the Confidential Materials and Information or any knowledge or
information with respect to the Confidential Materials and Information.
c. The Employee agrees that upon the Corporation's request or upon the
cessation of the Employee's employment with the Corporation, regardless of the
reason, all Confidential Materials and Information and all copies, records and
reproductions thereof which are in tangible form shall be forthwith returned to
the Corporation.
d. The Employee agrees not to use for any purpose, except on behalf of
the Corporation while the Employee is in the employ of the Corporation and only
at the request of an authorized officer of the Corporation, the name Omni or
Omni Resources or any other name or trade style now or hereafter used or adopted
by the Corporation or any of the Companies.
3. Trade Secrets, etc.:
The Employee agrees that:
(a) any and all inventions, processes, discoveries, know-how
and improvements (whether or not patentable or copyrightable);
(b) any and all patent rights, letters patent, programs,
copyrights, trademarks, trade names, and applications therefor, whether
in the United States or in any other country;
(c) any and all rights and interests in, to or under any of
the foregoing;
which are related to or affect, directly or indirectly, the business or affairs
of the Corporation as it may exist from time to time and which may be made,
acquired or possessed by the Employee, alone or with others, during the time
that the Employee is employed by the Corporation shall become the exclusive
property of the Corporation and shall at all times and for all purposes be
regarded as acquired and held by the Employee in a fiduciary capacity for the
sole benefit of the Corporation. In furtherance of the foregoing, if requested
by the Corporation, the Employee shall assign to the Corporation his rights to
any and all of items enumerated in phrases (a), (b) and (c) of this section 3
without further compensation. The Employee shall, upon request made by the
Corporation, promptly make all disclosures, execute all instruments and papers,
and perform all acts necessary or desired by the Corporation to vest and confirm
in the Corporation, its successors, assigns and nominees, fully and completely,
all
3
rights created and contemplated by this section 3, and which may be necessary or
desirable to enable the Corporation, its successors, assigns or nominees, to
secure and enjoy the full benefits and advantages thereof, and, without thereby
limiting the generality of the foregoing, shall execute any and all such
applications, writings or other documents as may be necessary for the
Corporation to apply for and obtain, and for it to assign, any patent, trademark
or copyright.
4. Non-Competition:
a. The Employee agrees that while the Employee is employed by the
Corporation and for a period equal to the greater of (i) three (3) years from
the date hereof or (ii) two (2) years after the Employee last receives a
commission payment from any of the Companies, the Employee shall not, directly
or indirectly, as an individual proprietor, partner, stockholder, agent,
consultant, advisor, director, officer, joint venturer or investor, or in any
other capacity whatsoever, either (i) engage in or in any manner be employed by
or associated with any person, company, association, partnership, trust,
corporation, business or other entity engaged in any business or enterprise
(whether or not for profit) which competes with the business of the Company as
it is now operated and as it may be operated in the future anywhere within the
Territory, or (ii) solicit, contact or otherwise seek to obtain purchase orders
for Products from any person or entity who at the time of such termination is or
was a customer of the Corporation or who was a potential customer of the
Corporation which the Corporation was endeavoring to bring in as a customer.
b. The Employee further agrees that while the Employee is employed by
the Corporation and for a period of two (2) years after the Employee's
employment with the Corporation terminates (regardless of the reason), the
Employee shall not, directly or indirectly, whether alone or by any act in
concert with others, employ, attempt to employ, recruit or otherwise solicit or
induce or influence to leave his or her employment, any employee of the
Corporation, for any purpose which, directly or indirectly, would serve to
compete with the Corporation.
5. Non-Competition Payments:
In consideration of the noncompetition obligation set forth in Section
4.a., hereinabove, the Corporation shall pay to the Employee twenty-one (21)
consecutive monthly payments of $23,000 each, such payments to commence on
February 1, 1997 and to continue on the first day of each of the next succeeding
twenty (20) months thereafter. In the event the Corporation fails to make any
payment when due without legal justification for not making such payment, and
such failure shall continue for ten (10) business days following its receipt of
notice of such failure, then, at any time thereafter, the Employee may elect, by
giving notice to the Corporation, to accelerate the balance of the
non-competition payments remaining due hereunder, such that they shall then be
immediately due and payable by the Corporation and, from and after the date of
such notice of acceleration, they shall in addition bear interest at the rate of
ten percent (10%) per annum.
4
6. Interpretation:
Notwithstanding anything in this Agreement to the contrary, in the
event there is any conflict between the terms of this Agreement and the terms of
the Employment Agreement, the terms and provisions of the Employment Agreement
shall govern.
7. Injunctive Relief:
The parties hereto recognize that because the subject matter of this
Agreement is special, unique and of an extraordinary nature, a breach by the
Employee of any of the Employee's obligations hereunder would result in the
Corporation's being severely damaged so that a legal remedy alone would not be
sufficient to protect the Corporation from such breach. Therefore, in addition
to and without limiting any other remedies available at law or hereunder, in the
event that the Employee breaches any of his obligations hereunder, or shall
threaten a breach of any of such obligations, then (i) to protect itself from
such breach the Corporation shall be entitled to obtain equitable remedies,
including specific performance and injunctive relief, without the necessity of
posting a bond, and (ii) the Corporation shall be entitled to recover any and
all costs and expenses, including reasonable attorneys' fees, in enforcing this
Agreement and the provisions of this section against the Employee.
8. Severability:
The Employee and the Corporation hereby recognize and agree that
because any breach of the provisions of this Agreement by the Employee would
result in irreparable harm and damage to the overall reputation of the
Corporation and to its business and affairs and because the Employee is being
compensated therefor under the Employment Agreement, the restrictions set forth
in this Agreement by which the Employee has agreed to be bound, are reasonable,
both as to the covenants of and the duties and restrictions accepted by the
Employee herein, including in terms of extent, time and geographic area.
Therefore, whenever possible, the Employee and the Corporation desire that each
provision of this Agreement be interpreted in such a manner as to be effective,
valid and enforceable under applicable law. However, if any of the covenants,
duties or restrictions which the Employee has accepted hereunder, or any other
provisions of this Agreement, would be deemed to be unreasonable (such as
because any or all of them may be too broad) so that they would be unenforceable
or invalid under such applicable law, then such paragraph, provision, covenant,
duty or restriction shall be reformed in order to conform with such applicable
law so that it shall bind the Employee and the Corporation; such reformation to
be effected to the extent, but only to the extent, so as to eliminate that
portion or the extent by which such provision shall be invalid or unenforceable,
and the remainder of such covenant, duty, restriction, provision or paragraph
shall continue to be binding and in full force and effect.
9. Miscellaneous:
a. This Agreement represents the entire understanding of the parties
with respect to its subject matter and supersedes all prior agreements, written
or oral, concerning the subject
5
matter hereof, and may not be changed or modified in any regard except by an
instrument in writing and signed by a duly authorized officer of the Corporation
and by the Employee. No inferences shall be drawn from any variance between this
Agreement and any prior oral or written negotiations or letters of intent with
respect to, or drafts of, this Agreement.
b. All terms and provisions of this Agreement shall be binding upon and
enure to the benefit of and be enforceable by the Corporation and its
successors, assigns and legal representatives. The rights and benefits of the
Corporation under this Agreement shall be transferable and assignable to any of
the Companies and to any business entity with which the Corporation may merge or
to which it may transfer all or a substantial part of its assets, and all of the
covenants and agreements hereunder shall enure to the benefit of and be
enforceable by the successors and assigns of any such transferee or assignee.
The obligations of the Employee hereunder shall be binding upon the Employee's
heirs, executors, administrators and legal representatives.
c. This Agreement may be executed in one or more counterparts, each one
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
d. No delay or omission by the Corporation in enforcing any of the
terms or conditions of this Agreement shall be construed as or constitute a
waiver thereof or bar thereto, and no waiver of any breach hereunder shall be
construed as or constitute a waiver of any other or subsequent breach or a bar
to the enforcement of such terms or conditions on any future occasion.
e. This Agreement has been entered into with and shall be deemed to be
made under the laws of the Commonwealth of Massachusetts, and for all purposes
shall be governed by, enforced under and construed in accordance with the laws
of said Commonwealth, without regard to principles of conflicts of law;
provided, however, that in the event that the Corporation does not make any
payment required of it hereunder, the Employee may bring suit for amounts owed
to it in any federal court in the state of California and the Employee's right
to any such payments shall be governed by California law.
6
IN WITNESS WHEREOF, the Corporation and the Employee have caused this
Agreement to be executed to take effect as an instrument under seal as of the
day and year first above written.
Witness: OMNI MULTIMEDIA GROUP, INC.
_________________________ By:____________________________________
Robert E. Lee, Executive Vice President
Witness:
- ------------------------ ------------------------------------
Phillip H. Kessler
7
EXHIBIT C
to Asset Purchase Agreement
ASSUMPTION AGREEMENT
KNOW ALL PERSONS BY THESE PRESENCE THAT:
A.I. ACQUISITION CORPORATION, a California corporation, for itself and
its successors and assigns, (herein, collectively, the "Buyer") in consideration
of the transfer to it by ALLENBACH INDUSTRIES, INC., a California corporation
(herein, "Seller") of its "Assets," as that term is defined in a certain Asset
Purchase Agreement dated as of August 1, 1996 by and among Seller, Buyer and
others (herein, the "Agreement") does hereby assume and agree to pay for all of
the "Assumed Liabilities," as that phrase is defined in the Agreement.
The within assumption is expressly made subject to and with the benefit
of, all representations, warranties, covenants and indemnifications provided for
in the Agreement.
IN WITNESS WHEREOF, the Buyer has caused this Assumption Agreement to
be executed to take effect as an instrument under seal as of the first day of
October, 1996.
A.I. ACQUISITION CORPORATION
By: ___________________________________
Robert E. Lee, Executive Vice President
EXHIBIT D
to Asset Purchase Agreement
BILL OF SALE
KNOW ALL PERSONS BY THESE PRESENCE THAT:
ALLENBACH INDUSTRIES, INC., a California corporation, for itself and
its successors and assigns, (hereinafter, collectively, the "Seller") in
consideration of ten dollars ($10.00) and other good and valuable consideration
paid by A.I. ACQUISITION CORPORATION, a California corporation, (hereinafter,
"Buyer"), the receipt and sufficiency whereof is hereby acknowledged by the
Seller, does hereby grant, sell, assign, transfer, bargain, convey and deliver
unto Buyer and its successors, assigns and legal representatives (herein,
collectively, the "Buyer") all of Seller's right, title and interest in and to
its "Assets" as that term is defined in a certain Asset Purchase Agreement dated
as of August 1, 1996, among Seller, Buyer and others (herein, the Agreement).
To have and to hold all and singularly the said Assets to the said Buyer, its
successors, assigns and legal representatives, for its own use and behoof
forever.
The Assets are conveyed subject to and with the benefit of all
representations, warranties, covenants and indemnities in favor of Seller as
provided in the Agreement.
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale to be
executed to take effect as an instrument under seal as of the first day of
October, 1996.
ALLENBACH INDUSTRIES, INC.
By:
Phillip H. Kessler, President
