Conformed Copy
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 10, 1998
- ---------------------------------------------------------------------
Date of Report (Date of earliest event reported)
NEW PARADIGM SOFTWARE CORP.
- ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 0-26336 13-3725764
- ---------------------------------------------------------------------
(State or other jurisdiction Commission (IRS Employer
of incorporation) File Number) Identification No.)
630 Third Avenue, New York, New York 10017
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)-557-0933
-------------------------
EXHIBIT INDEX ON SEQUENTIALLY NUMBERED PAGE 3
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets
- ---------- -----------------------------------------
(a) On April 13, 1998 New Paradigm Acquisition I Co.,
Inc.("NPAC"), a wholly owned subsidiary of New Paradigm
Software Corp. (the "Corporation") acquired certain
assets of Kapelus & Cipriano, Inc.("SKC"), a New York
Corporation. SKC's primary business was as an
advertising agency. The assets purchased incuded all
trademarks, copyrights and patents of SKC as well as the
contracts with the clients of SKC. The Corporation
issued 250,000 shares of its common stock, par value
$.01, to SKC in consideration for the assets and NPAC
also agreed to assume $55,000 worth of debt from SKC and
the media liabilities of SKC.
Under the agreements, the principals of SKC, Mr. Milton
Kapelus and Mr. Rocco Cipriano, agreed to terminate
SKC's partnership agreement and enter into three year
contracts as officers and directors of NPAC. In
consideration for this, NPAC will pay each of the
principals a sum equal to one sixth of the revenue of
NPAC for each of the next 3 years. Mr. Kapelus has also
agreed to join the board of directors of the
Corporation.
NPAC intends to continue servicing the existing clients
of SKC.
Item 7. Financial Statements and Exhibits.
- --------- ------------------------------------------
(a) Financial Statements of Schoen, Kapelus & Cipriano, Inc.
this Form 8-K.
FRANK SISCO, cpa
550 Mamaroneck Avenue, Suite 510
Harrison, NY 10528
Tel 914-381-3737, Fax 914-698-5335
Independent Auditors Report
To the Board of Directors of New Paradigm Software Corporation
I have audited the accompanying balace sheet of Schoen, Kapelus & Cipriano,Inc.
as of December 31, 1997 and 1996, and the related statements of income and
shareholders' equity, and cash flows for the years then ended. These financial
statements are the responsibilty of the Company's Management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted audit standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material mis-
statement. An audit includes examing, on the test bases, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting princle used and significant estimates made by
management, as well as evaluating the overall fincial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
As further explained in Note 1 to the financial statements, the Company in April
1998 entered into a purchase and sale of assets agreement and related agreements
whereby certain assets of the Company were sold to a 100% owned subsidairy of
New Paradigm Software Corporation.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the results of its operations and its cash flow for the years
then ended in conformity with generally accepted accounting principles.
/s/ Frank Sisco
Frank Sisco
May 22,1998
Schoen, Kapelus & Cipriano, Inc.
(SKC Advertising)
Balance Sheet
<TABLE>
<S> <C> <C>
December 31, December 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents (overdraft) ($4,730) $1,736
Accounts receivable, net 313,765 452,798
Project costs, net 5,929 0
Prepaid expenses and deferred lease
finance charges 10,416 7,924
Total current assets 325,380 462,458
Property and equipment, net 37,931 1,442
Other assets
Due from shareholders 154,027 92,142
Security deposit for office lease 18,176 0
Total other assets 172,203 92,142
Total assets $535,514 $556,042
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $313,460 $278,174
Accrued expenses 37,518 59,109
Sales tax payable 5,393 4,497
Bank loans payable 81,464 61,332
Capital lease obligations 53,391 0
Total current liabilities 491,226 403,112
Other liabilities 0 0
Total liabilities 491,226 403,112
Shareholders' equity:
Common stock, 200 shares, issued
and outstanding 2,000 2,000
Paid in capital 11,580 11,580
Retained earnings 30,708 139,350
Total shareholders' equity 44,288 152,930
Total liabilities and shareholders'equity $535,514 $556,042
</TABLE>
The accompanying notes are an integral part of these statements.
Schoen, Kapelus & Cipriano, Inc.
(SKC Advertising)
Statement of Income and Shareholders Equity
<TABLE>
<S> <C> <C>
For the years ended December 31,
1997 1996
Revenues
Gross billings (1997 - $3,019,518;
1996 - $2,183,898) less costs $556,470 $439,572
Operating expenses
Salaries - principals 158,437 98,621
Salaries - staff 176,216 108,096
Payroll taxes and fees 39,853 17,776
New business development 21,857 1,884
Travel, lodging, meals, entertainment
and educational expenses 8,155 7,765
Insurance - business and medical 23,868 10,571
Auto expenses 14,428 12,898
Dues, fees and subscriptions 3,916 3,438
Professional services - accounting 9,339 2,784
Professional services - legal 4,373 0
Rent expense and office space
relocation 65,937 50,890
Rental of equipment and furniture 5,668 1,365
Repairs and maintenance 2,945 1,179
Office supplies and expenses 19,097 10,862
Telephone including voicemail
installation 16,671 10,416
Computer-related expenses 6,666 8,051
Postage and delivery 8,614 7,160
Bank fees 1,059 259
Miscellaneous expenses 3,410 1,947
State franchise taxes 325 325
Provision for bad debts 41,945 0
Depreciation 12,136 1,690
Amortization of restrictive covenant 0 7,900
Total operating expenses 644,915 365,877
Income (loss) from operations (88,445) 73,695
Interest expense on loans and leases 20,197 6,775
Net income (loss) (108,642) 66,920
Shareholders'equity at beginning of period 152,930 86,010
Net income (loss) (108,642) 66,920
Shareholders' equity at end of period $44,288 $152,930
</TABLE>
The accompanying notes are an integral part of these statements.
Schoen, Kapelus & Cipriano, Inc.
(SKC Advertising)
Statement of Cash Flows
<TABLE>
<S> <C> <C>
For the years ended December 31,
1997 1996
Cash flows from Operating Activities
Net income (loss) ($108,642)" $66,920
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization 12,136 9,590
Changes in assets and liabilities -
Decrease (increase) in assets:
Accounts receivable, net 139,033 (178,179)
Project costs, net (5,929) 0
Prepaid expenses and deferred
lease finance charges (2,492) (7,924)
Increase (decrease) in liabilities:
Accounts payable 35,286 94,868
Accrued expenses and sales
tax payable (20,695) 27,678
Net cash used for operating activities 48,697 12,953
Cash flows from Investing Activities
Additions to (deletions from) property
and equipment (48,625) 2,893
Security deposit for office lease (18,176) 0
Net cash used for investing activities (66,801) 2,893
Cash flows from Financing Activities
Proceeds from bank loans, less repayments 20,132 14,665
Financing of capital leases, less repayments 53,391 0
Advances to shareholders, net (61,885) (30,416)
Net cash provided by (used for)
financing activities 11,638 (15,751)
Net increase (decrease) in cash and
cash equivalents (6,466) 95
Cash and cash equivalents at beginning
of period 1,736 1,641
Cash and cash equivalents at end of period ($4,730) $1,736
Supplementary information:
Interest paid on a cash basis 20,197 6,775
Income taxes paid on a cash basis 0 0
</TABLE>
The accompanying notes are an integral part of these statements.
Schoen, Kapelus & Cipriano, Inc.
(SKC Advertising)
Notes to Financial Statements
For the years ended December 31, 1997 and 1996
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business Background and new developments :
Schoen, Kapelus & Cipriano, Inc. (The Company) was incorporated in New York on
October 24, 1991, and its election as an S Corporation was effective since
1/1/92. The Company's incorporation name is Kapelus & Cipriano, Inc., although
it does business as Schoen, Kapelus & Cipriano, Inc. and more recentlly as SKC
Advertising. The Company's corporate offices are located in Harrison, New York.
SKC is an advertising and marketing communications agency, offering a
comprehensive range of services, including (a) advertising (b) public relations
(c) direct mail/marketing (d) collateral (design and production of brochures and
other sales literature) (e) comprehensive marketing plans and (f) new media
(interactive computer presentations, internet marketing and website development)
. Past and present clients in the specialized category of travel, tourism and
hospitality include airlines, hotels, hotel reservations, hotel representatives,
cruiselines, foreign destinations, car rental and retail travel.
The Company had been wholly-owned since inception through March 31, 1998, in
equal shares, by its president, Milton Kapelus, and its executive vice president
- - creative, Rocky Cipriano. During that period, the principals grew the
business through attracting new clients and staff, and also through the purchase
of other smaller agencies and merging them into the Company.
On April 8, 1998, the Company entered into a pruchase and sale of assets
agreement and related agreements whereby certain assets of the Company were sold
to a 100% owned subsidiary of New Paradigm Software Corporation (NPSC), a public
company (Symbol - NPSC). NPSC exchanged 10% of its outstanding shares for
certain assets, including the SKC Advertising name, and certain liabilities of
the Company. NPSC granted Messrs. Kapelus and Cipriano certain stock options,
employment agreements and commitments for participation in NPSC business as well
as continued management of SKC Advertising, Inc., a subsidiary of NPSC. The
Company plans to (a) liquidate or assign assets and liabilities not acquired by
NPSC and (b) distribute the received NPSC shares to Messrs. Kapelus and Cipriano
in consideration of their termination of a shareholder agreement. The
combination is in accord with the mission of both entities to grow larger by
(a) providing integrated creative services to clients and (b) acquiring other
organizations to join NPSC and SKC Advertising, anticipating that the greater
wherewithal and integration will result in increased profits and shareholder
value.
Summary of significant accounting policies:
Consistency of accounting policies and methods
Since inception, the Company has been consistent in its significant accounting
policies and methods, and has not made any changes that would have a significant
or important impact upon the financial statements. The Company uses the accrual
basis for its financial statements and books and records. For corporate income
tax returns, the Company uses the cash basis. Additionally, there are
differences between book and tax methods, such as the accelerated expensing for
tax purposes of certain equipment purchases.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the period. Actual results
could differ from those estimated.
Revenue recognition
The substantial portion of revenues are derived from commissions for placement
of advertisements in various media and from fees for staffing and for production
of advertisements and marketing projects. Revenue is generally recognized when
billed. Billings are primarilly rendered upon presentation date for media, when
staff is used, when cost are incurred or printed production is completed.
Cash equivalents
The Company considers all investments purchased with an origanal maturity of
three months or less to be cash equivalents. The Company's overdraft position
at December 31, 1998 was settled by a deposit received a few days later.
Project costs and payments in excess of costs
For projects incomplete at the end of an accounting period total project cost
are capitalized instead of expensed.For these projects and other incomplete
projects, payments from clients in excess of cost are credited on the balance
sheet rather than taken into income. If not significant, these balances are
netted.
Property and equipment
Depreciation and amortization of property and equipment is provided for by the
modified accelerated cost recovery method (double-declining balance method)
over the estimated useful lives of the respective assets. Assets acquired
under capital leases are recorded at the present value of the related lease
obligations. For tax purposes, the Company eleted first year expensing of
computer equipment totaling $18,000 (under Section 179) instead of regular
depreciation as was done for book purposes.
Income taxes
The Company is treated as an S Corporation for Federal and state income taxes.
Consequently, Federal and state income taxes are not payable by the Company,
but rather by the shareholders for their share of Company earnings and tax
deductions, and thus no income taxes have been provided for in the Company's
financial statements. The Company does not anticipate a material tax effect of
the combination transaction with NPSC.
2. PROPERTY AND EQUIPMENT, NET:
Property and equipment at December 31, 1997 by major classification are
summarized as follows:
<TABLE>
<S> <C> <C> <C>
Asset Accumulated Depreciable
Depreciation lives
Various assets owned at 12/31/96 $19,802 $19,802
Leased furniture and fixtures $20,449 $3,652 7 years
Leased computer equipment 22,627 5,656 5 years
Leased audiovisual equipment 5,551 1,388 10 years
Subtotals 68,429 30,498
Total property and equipment, net $37,931
</TABLE>
3. BANK LOANS PAYABLE
The various bank loans outstanding as of December 31, 1997 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Creditor Type of loan Balance outstanding Interest rate Maturity date
Bank of New York Installment $26,667 Prime + 3% 8/22/2000
Wells Fargo Bank Credit line 27,142 Prime +3.5% Open
Signet Credit line 8,802 15.99% 12/31/20001
Bank One Credit line 18,831 15.25% Open
Total $81,464
</TABLE>
The loans due Signet and Bank One are owed by Messrs. Kapelus and Cipriano,
personally. However, the Company has assumed responsibility for payment of
these debts from corporate cash flow, and accordingly are included in the
Company's bank loans payable. As of March 31, 1998, all loans have been paid
off except Wells Fargo Bank.
4. COMMITMENTS AND CONTINGENCIES:
All noncancellable leases have been classified as operating or capital leases.
The Company leases its administrative offices (operating lease) under a five
year lease to expire in April 2002. The annual base rent for the first year
is $68,107 for the next three years is $71,168 and for the remaining year is
$72,698. The Company is responsible for insurance and any escalation of
property taxes. In addition, the Company leases certain computer equipment,
audiovisual equipment, and furniture and fixtures (capital leases )
ranging from three to four years.
The Company's management does not believe there is likely to be any claim
against the Company from any matter, which will cause the Company a
significant expense or curtailment of activities, nor are they
aware of any development in the
Company's operations, or in the regulatory or business environment in which the
company operates or financial condition. The Company is unaware of any event
between inception and the date of the auditor's report which warrants disclosure
as a significant subsequent event because of the possible effect upon the
Company and these financial statements, except for the combination with NPSC as
described in these notes.
5. SHAREHOLDERS' EQUITY AND RELATED PARTY TRANSACTIONS:
The transactions described in Notes 1 and 3 involve related parties. In
addition, there have been other transactions between the Company and the
shareholders, all of which, according to these individuals and other Company
personnel, have individuals and other Company personnel, have been recorded
at amounts that would have been the case had they been in arm's length
transactions. These transactions include Officers' salaries, insurance,
auto expenses, and travel,meals and entertainment.
6. RISKS AND UNCERTAINTIES:
Financial instruments that potentially subject the Company to credit risk
consist principally of trade accounts receivables. The percentage of accounts
receivable that were concentrated with one client for the indicated periods
are show below. The Company generally does not require collateral on accounts
receivable because the majority of the Company's are well established
companies.
The Company had three major clients for which revenues for 1997 each exceeded
10% of total revenues. The Company projects that 1998 revenues from two
of these clients and from two other clients will exceed 10% of total revenues
for 1998. Besides the largest client in 1997, there were ten other clients
which accounted for approximately $357,500, or 64% of total 1997 revenues.
The Company's business is primarily with domestic companies, and not
significantly subject to risks of international business. There were two
clients for which the outstanding balances of accounts receivable at December
31, 1997 and 1996 were in excess of 10%.
The Company had many suppliers, including media, from whom purchases each
exceeded 10% of cost of sales for 1997 and 1996; however, Company management
believes that it is dependant upon these suppliers because other suppliers can
provide similar products and services on comparable terms without any
significant disruption to the Company's operation or significant adverse
effect upon the financial statements.
The risks of changing prices is not significant for the Company because projects
are not of an unusually long duration and as a result costs incurred and billed
seldom rise above estimates. Other risks in the industry in which the Company
operates involve acquiring new clients and retaining existing clients, or
replacing those with whom business is no longer transacted. The Company
believes it has lessened the risks of losing a significant amount business by
(a) maintaining high standards in delivering services to clients (b) acquiring
new clients (c) diversifying the business over many clients and varied services
and (d) building a team with individuals who have varied skills. In addition,
the combination with NPSC is expected to lessen business risk and forster
quicker and more significant growth.
(b) Pro Forma Financial Statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries Pro Forma
Consolidated Balance Sheets
<TABLE>
<S> <C> <C> <C>
New Paradigm SKC Assets Combined
Purchased New Paradigm
and SKC Assets
December 31 December 31 December 31
1997 1997 1997
Pro-Forma
(Note 2)
Assets
Current:
Cash and cash equivalents $342,343 $ (4,730) $ 337,633
Accounts receivable 55,326 313,765 369,091
Other receivables and prepayments 20,096 16,345 36,441
Total current assets 417,758 325,380 743,165
Property and equipment, less accumulated
depreciation and amortization 129,059 37,931 166,990
Goodwill 189,739 189,739
Note Receivable 371,293 371,293
Other assets, less accumulated
amortization 1,449 18,176 19,625
$919,586 $571,226 $1,490,812
Liabilities and Shareholders Equity
Current:
Accounts payable and accrued expenses $184,430 $356,371 $540,801
Loan payable 81,464 81,464
Capital lease obligation 53,391 53,391
Total current liabilities 184,430 491,226 675,656
Shareholders equity:
Common stock, $.01 par value - shares
authorized 50,000,000;issued and
outstanding 2,451,729and 2,701,729
(Note 2) 24,517 2,500 27,017
Preferred Stock, $.01 par value -
shares authorized 10,000,000;
Series D shares authorized, 100;
50 issued and outstanding 3 3
Additional paid-in capital 9,150,209 77,500 9,227,709
Capital Deficit (8,439,573) (8,439,573)
Total shareholders equity 735,156 80,000 815,156
$919,586 $571,226 $1,490,812
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries Pro Forma
Consolidated Statements of Operations
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
New Paradigm SKC Combined New Paradigm SKC Combined
Year ended Year ended Year ended Nine months Nine months Nine months
March 31, December 31, March 31, ended ended ended
1997 1996 1997 December 31, December 31, December 31,
Pro Forma 1997 1997 1997
(Note 3) (Note 4) Pro Forma
(Note 4)
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Revenue $ 64,976 $ 439,572 $ 504,548 $ 104,747 $ 417,353 $ 522,100
64,976 439,572 504,548 104,747 417,353 522,100
Expenses:
General and administrative 971,360 300,864 1,272,224 546,092 360,880 906,972
Professional fees 244,731 2,784 247,515 69,692 10,284 80,246
Marketing 164,238 9,649 173,887 7,241 22,509 29,750
Occupancy 197,230 50,890 248,120 101,010 49,453 150,463
Bad debt 31,459 31,459
Depreciation and amortization 49,604 1,690 51,294 47,695 9,102 56,797
1,627,163 365,877 1,993,040 772,000 483,686 1,255,686
Profit (Loss) from operations (1,562,187) 73,695 (1,488,492) (667,253) (66,334) (733,587)
Other income (expense):
Interest income 25,099 25,099 23,108 23,108
Interest expense (6,775) (6,775) (15,148) (15,148)
25,099 (6,775) 18,324 23,108 (15,148) 7,960
Net profit (loss) $(1,537,088) $66,920 $(1,470,168) $(644,145) $(81,482) $(725,627)
Net loss per share $(.63) $(.54) $(.26) $(.27)
Weighted average common
shares outstanding 2,449,428 2,699,428 2,451,729 2,701,729
</TABLE>
See accompanying notes to consolidated financial statements
NEW PARADIGM SOFTWARE CORP. and subsidiaries Pro Forma
Note 1 -
The accompanying financial statements should be read in conjunction
with the Company's 10-KSB financial statements for the fiscal year
ended March 31, 1997, together with the accompanying notes and the
audited accounts of SKC for the fiscal year ended December 31, 1997.
In the opinion of management, the Pro Forma statements reflect all
adjustments which are necessary for a fair statement of the results of
the combined entities. The interim results are not necessarily
indicative of the results for the full year.
Note 2 -
Includes the consideration of 250,000 New Paradigm Common shares at
$.31 (the market price at the date of purchase) issued for the
purchase of certain assets from SKC.
Note 3 -
SKC fiscal year ends December 31. The twelve months ended December
31, 1996 for SKC were combined with the Company's twelve month period
ended March 31, 1997.
Note 4 -
Three quarters (3/4) of the Audited Statements of Operations for SKC
for the period ended December 31, 1997 were used to calculate the nine
month period ended December 31, 1997 since an exact nine months were
impossible to obtain and ,it is managements belief that the distribution
of revenue and expenses were uniform throughout the twelve month period
ended December 31, 1997.
(c) Exhibits.
---------
10.24 Agreement of Purchase and Sale of Assets
<PAGE>
SIGNATURE
- ------------------
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this
Current Report to be signed on its behalf by the undersigned
thereunto duly authorized.
NEW PARADIGM SOFTWARE CORP.
------------------------------
(Registrant)
By /s/ Mark Blundell
-------------------------
Mark Blundell
President
and CEO
Date: June 10, 1998
EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
- --------- -------------
10.24 Agreement of Purchase and Sale of Assets 5
Exhibit 10.24
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement (the "Agreement") is entered into as
of April 13, 1998, by and between New Paradigm Acquisition I
CO., Inc., a Delaware corporation ("Buyer"), and Kapelus &
Cipriano, Inc., a New York sub-chapter S corporation
("Seller"), Milton Kapelus of 1864 Palmer Avenue, Larchmont,
New York, 10538, and Rocco Cipriano, of 126 Highview Street,
Mamaroneck, New York, 10543 ("Principals").
W I T N E S E T H:
WHEREAS, Seller desires to transfer, convey and
assign to Buyer all rights in and to certain assets related
to its advertising business and the business, activities and
operations of Seller of or related thereto, on the terms and
subject to the conditions hereinafter set forth (with all
such business, activities and operations of or related to the
advertising business engaged in by or through Seller being
referred to herein as the "Business").
NOW, THEREFORE, in consideration of the premises
and the mutual covenants and agreements hereinafter set
forth, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. Subject to and upon the
terms and conditions of this Agreement, on the Closing Date,
Seller shall sell, transfer, convey, assign, and deliver to
Buyer all of Seller's right, title and interest to the
tangible assets of Seller listed on Schedule 1.1 attached
hereto (the "Equipment"), and all intellectual property and
other related assets of or used in the Business, of every
kind, nature and description, owned, leased or licensed,
wherever located and whether or not carried or reflected on
the books or records of Seller, as the same shall exist on
the Closing Date, except for the Excluded Assets (as
hereinafter defined), including, without limiting the
generality of the foregoing:
(a) all trademarks, trademark applications,
trade names, designs, logos and service marks owned or used
by Seller in the Business, including without limitation,
"SKC", "SKC Advertising", and the other names, designs and
logos set forth on Schedule 1.1(a) hereto, and any names
similar to or any derivation or variation of any and all such
names, designs and logos, and the goodwill pertaining thereto
and the right to fully exploit such names (collectively,
"Marks");
(b) all copyrights and copyright applications
owned or used by Seller in the Business, including without
limitation, the copyrights and copyright applications set
forth on Schedule 1.1(b) hereto (collectively, "Copyrights");
(c) all mailing lists and lists and records
of customers and prospects and related information and data
base or bases used by Seller in connection with the Business,
including without limitation, the names of all persons
actually known to have purchased products or services of or
from the Business, other users of such products and services
known to Seller and user prospects of such products and
services known to Seller set forth on Schedule 1.1 (c) hereto
(collectively, the "Lists");
(d) all know-how and other intellectual
property of Seller relating to or necessary for the operation
of the Business, and all trade secrets, vendor information,
lists and data bases, each literary work, whether or not
copyrightable, ideas, concepts, designs, discoveries,
formulae, patents, patent applications, product and service
developments, inventions, improvements, disclosures, all
vendor and customer sales and purchase records and files of
or related to the Business, and all publishing, outsourcing,
fulfillment, reseller and manufacturing information
(collectively, together with the Marks, Copyrights, and
Lists, "Proprietary Rights");
(e) each contract, agreement, lease,
license, franchise, purchase order, sale order, permit,
instrument, commitment, arrangement and understanding (in
each case, whether written or oral and including all
amendments thereto) to which Seller is a party or by which it
is bound or under which it has any rights or is entitled to
benefits, relating to the Business, including, without
limitation, all supply, purchase, distribution, advertising
and promotional services agreements including, without
limitation, those listed on Schedule 1.1(e) hereto
(collectively, "Contracts");
(f) the right to all restrictive and
negative covenants, non-competition, proprietary property and
confidentiality agreements in favor of Seller, including,
without limitation, those with any and all former or current
employees, consultants, customers, vendors or others having
access to Proprietary Rights or rendering services to Seller
in connection with the Business;
(g) all inventory, samples, goods-in-
transit, work-in-process, raw materials, promotional
materials and other materials and supplies of every kind,
nature and description used or which are used in or necessary
for the operation of the Business, including, without
limitation, all advertising, artwork, templates and related
creative materials for advertisements, catalog insertions,
page layouts, promotional and product literature and
displays, sales literature, marketing materials, brochures,
pamphlets and packaging and printed material related to any
of the foregoing, in each case, in which Seller has any
right, title or interest and of the type sold or offered for
sale by or through the Business (collectively, "Business
Materials");
(h) all accounts, notes and other
receivables of Seller arising from the Business or products
or services sold by or through the Business (whether payable
in cash or product) outstanding as of the Closing Date, and
all rights of Seller under any security agreements with
respect thereto, including rights to all files and
documentation substantiating Seller's rights to said
Receivables in sufficient diary form to effect an efficient
collection of said receivables (collectively, "Receivables");
(i) the proceeds of any insurance, and the
right to receive the proceeds of any insurance, with respect
to any claims which have been or may be asserted in
connection with any of the Purchased Assets (as hereinafter
defined) and the right to continue and maintain any insurance
with respect thereto;
(j) all unfilled sales, purchase orders and
commitments of or related to the Business made or entered
into by Seller in the ordinary course of its business and all
rights which Seller may have against its licensors and other
suppliers under express or implied warranties related to the
Business or products or services sold or offered by or
through the Business, and the right to receive mail and other
communications and shipments of merchandise addressed to
Seller related to the Business;
(k) all books and records necessary for the
use of any of the Purchased Assets and used in or necessary
for the operation of the Business, and all of the goodwill of
the Business as a going concern.
(l) the account balance in the Seller's
account with Bank of New York in an amount not less than that
described in Schedule 1.1 (l)
The Equipment, Marks, Copyrights, Lists, Proprietary Rights,
Contracts, Business Materials, Receivables and all other
rights to be sold, transferred, conveyed, assigned, granted
and/or delivered to Buyer are hereinafter sometimes
collectively referred to as the "Purchased Assets". The
Purchased Assets shall be transferred to Buyer at the Closing
pursuant to the form of Bill of Sale annexed as Exhibit 1.1
hereto (the "Bill of Sale").
1.2 Excluded Assets. Notwithstanding anything
to the contrary contained in this Agreement, it is understood
that Seller is not selling and Buyer is not acquiring those
assets which are listed on Schedule 1.2 hereto ("Excluded
Assets").
1.3 Title to Purchased Assets. At the Closing,
Seller shall deliver or cause to be delivered to Buyer all
right, title and interest of Seller in and to the Purchased
Assets, free and clear of any and all mortgage, pledge,
hypothecation, assignment, deposit arrangement, claim,
encumbrance, lien (statutory or other), preference, priority
or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale
or other title retention agreement or any financing statement
filed under the Uniform Commercial Code or comparable law of
any jurisdiction) (collectively, "Liens"), except for those
Liens listed on Schedule 1.3 hereto.
1.4 Collection of Accounts Receivable. Seller
agrees that after the Closing Date Buyer shall have the right
and authority to collect for its own account all Receivables
and other items which shall be included within the Purchased
Assets and to endorse with the name of Seller any checks
received on account of any such Receivables or other items.
1.5 Excluded Liabilities.
(a) Without limiting the generality of the
foregoing, Buyer shall not assume any of the following
(herein collectively referred to as the "Excluded
Liabilities"):
(i) any obligation or liability of
Seller to distribute to its shareholders or otherwise apply
all or any part of the Purchase Price received hereunder;
(ii) any obligation or liability of
Seller based upon acts or omissions of Seller occurring after
the Closing Date;
(iii) Seller's obligations under any
stock option or profit-sharing plans or under any outstanding
qualified or non-qualified stock options;
(iv) any brokerage or finder's fee
payable by Seller in connection with the transactions
contemplated hereby;
(v) any liabilities of Seller to any
of its present or former shareholders as such arising out of
any action by Seller in connection with the transactions
contemplated hereby;
(vi) any and all obligations of
Seller for indebtedness for borrowed money or other amounts
payable to third parties in the nature of "break-up" fees;
(vii) any and all debts, liabilities
and obligations of Seller incurred or accrued with respect to
any period, or circumstances, or state of facts or
occurrences, on or prior to the Closing Date, relating to
bonuses, salaries, wages, incentive compensation, compensated
absences, workmen's compensation, FICA, unemployment taxes,
employee benefits, deferred compensation, wage continuation,
severance, termination, pension, section 401(k) plans,
cafeteria, retirement, profit-sharing or similar plans or
arrangements and any and all vacation, holiday or sick pay or
leave incurred or accrued with respect to any employees of
Seller whether or not such employees become employees of
Buyer, and any and all liabilities or obligations incurred or
accrued under Benefit Plans (as hereinafter defined),
including, without limitation, contractual and statutory wage
continuation, severance, reemployment assistance, termination
pay and other benefits;
(viii) any and all domestic and
foreign federal, state and local income, payroll, property,
sales, use, franchise or value added tax liabilities, imposed
on Seller or with respect to income or activities of Seller,
including assessments and governmental charges or levies
imposed in respect of such taxes;
(ix) any and all obligations and
liabilities of Seller arising under this Agreement
(including, without limitation, indemnification obligations
and obligations to pay expenses arising out of this
Agreement), or from its failure to perform any of its
agreements contained herein or incurred by it in connection
with the consummation of the transactions contemplated
hereby, or for which Seller is responsible under this
Agreement, including, without limitation, fees of lawyers,
accountants and other advisors;
(x) any and all liabilities and
obligations with respect to claims, suits, legal,
administrative, arbitral or other actions, proceedings and
judgments with respect to causes of action or disputes
arising, and other non-contractual liabilities of Seller
asserted or imposed, or arising out of, any events occurring,
or circumstances or state of facts existing, on or prior to
the Closing Date, or any product liability or warranty claim
with respect to products sold, licensed or distributed or
services rendered by Seller prior to the Closing Date;
(xi) any and all leases of real
property or improvements thereon, including, without
limitation, any and all premises occupied by Seller, all
leases of tangible personal property not specifically assumed
pursuant to the Liabilities Undertaking hereto; and
(xii) any commitment, liability or
obligation under any contracts or other agreements other than
those liabilities under the Contracts specifically assumed by
Buyer pursuant to Schedule 1.5.(b)
(b) Assumption of Liabilities. Buyer agrees
to assume those contractual liabilities of Seller
specifically listed on Schedule 1.5 (b) hereto ("Assumed
Liabilities"). Except for the Assumed Liabilities Buyer
shall not assume or be responsible for any debts,
commitments, obligations or liabilities of Seller of any
nature whatsoever.
Liabilities Adjustment. Without limiting
any of its rights under the Agreement, and except for Assumed
Liabilities, Buyer may, but shall have no obligation to,
assume any other trade and other accounts payable and accrued
expenses payable and other indebtedness and liabilities of
Seller of or related to the Business, and reduce any payment
under the Buyout Agreement in accordance with its terms (the
"Liabilities Adjustment"). Buyer agrees to give Seller not
less than five (5) days prior written notice of its intention
to assume and satisfy any such liabilities of Seller.
1.6 Satisfaction of Liabilities. (a) On Closing
Seller shall cause to be delivered to the Buyer a release and
discharge of the Lien held by Bank of New York ("Bank of New
York Lien") including, without limitation, all required Form
UCC-3 releases, in form and substance reasonably satisfactory
to Buyer.
(b) On or prior to the Closing, Seller shall
cause all Liens in addition to the Bank of New York Lien
securing indebtedness of Seller or otherwise in, on or
against any of the Purchased Assets to be released and to
cause to be delivered at the Closing releases and discharges
of all Liens relating to any of such indebtedness (including,
without limitation, all required Form UCC-3 releases) in form
and substance reasonably satisfactory to Buyer, except those
listed on Schedule 1.3 hereto.
1.7 Assignments of Contracts. Buyer and Seller
acknowledge that certain of the Contracts included in the
Purchased Assets, and the rights and benefits thereunder, may
not, by their terms, be assignable. Anything in this
Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement to assign any such Contract
if an attempted assignment thereof, without the consent of a
third party thereto, would constitute a breach thereof or
adversely affect the rights under any such Contract of Buyer
or Seller thereunder. In such event, Seller will cooperate
with Buyer and use its best efforts to provide for Buyer all
benefits to which Seller is entitled under such Contracts,
and any transfer or assignment to Buyer by Seller of any such
Contract or any right or benefit arising thereunder or
resulting therefrom which shall require the consent or
approval of any third party shall be made subject to such
consent or approval being obtained. Seller shall use its
best efforts to obtain such consents and approvals. If and
when any such consent or approval shall be obtained or such
Contract shall otherwise become assignable to Buyer, Seller
shall promptly assign all of its rights thereunder to Buyer.
Until such time, Seller shall not enter into any amendment of
any such Contract without the prior written consent of Buyer.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. Subject to and upon the
terms and conditions of this Agreement, Buyer shall pay or
deliver to or for the benefit of Seller, in full payment and
consideration for the Purchased Assets, a total amount (the
"Purchase Price") payable as follows:
(a) At the Closing, Buyer shall pay to or for
the benefit of Seller Two Hundred and Fifty Thousand Shares
of Common Stock of New Paradigm Software Corp. ("Closing
Payment").
(b) As soon as practicable after March 31, in
1999, 2000, and 2001, and in any case before New Paradigm
Software Corp. ("NPSC") is required to file its annual report
on Form 10-KSB for each of said years, Buyer shall pay Seller
one third of the book value of the net of the Purchased
Assets acquired, less the liabilities assumed as of the
closing. For this purpose book value shall be the value of
the Purchased Asset net of depreciation shown on the audited
financial statements of Seller as of December 31, 1997 ("Book
Value"). If this amount is a positive number, payment will
be made in common stock of NPSC, valued at the average of the
closing mid-point between bid and offer for the stock on the
twenty business days prior to March 31 of the relevant year.
(c) As soon as practicable after March 31,
1999, 2000 and 2001, and in any case before NPSC is required
to file its annual report on form 10-KSB for each of said
years, each of the Principals will receive the following
payments from the Buyer in consideration of the termination
simultaneously herewith of their Shareholders Agreement dated
May 331, 1995 ("Shareholder Agreement"):
(i) To be paid in cash: 8.334% of the net
revenue of Buyer for the previous fiscal year ended March 31,
less one sixth of its net liabilities defined as all Assumed
Liabilities less the total of the Purchased Assets, less the
total of any Receivables not collected by Buyer prior to
March 31, 1999.
(ii) To be paid in stock: 8.333% of the
net revenue of Buyer for the previous fiscal year ended March
31. This portion of the payment will be in shares of Common
Stock of NPSC, valued at the average of the closing mid-point
between the bid and offer for the stock on the twenty
business days prior to such March 31 and issued as a
conversion of the shares of Series E Preferred Stock issed in
accordance with the terms and provisions of the Buyout
Agreement
as the same shall be determined, calculated
and payable in accordance with, and containing such other
terms and provisions as are set forth in the Buyout Agreement
attached hereto as Schedule 2.1 ("Buyout Agreement").
2.2 Allocation of Purchase Price. The parties
hereto hereby agree that the Purchase Price shall be
allocated in accordance with Schedule 2.2 hereto.
ARTICLE 3
CONTEMPORANEOUS ACTIONS AND DELIVERIES; OTHER AGREEMENTS
3.1 Contemporaneous Actions and Deliveries.
Contemporaneously with the execution and delivery of this
Agreement, Seller and/or Buyer have taken the following
actions and executed and/or delivered the following
agreements, assets and documentation:
(a) The Principals have each terminated
their employment with Seller and entered into an Employment
Agreement with Buyer, in the form attached as Exhibit
3.1(a)(i) and Exhibit 3.1(a)(ii) hereto, respectively (the
"Employment Agreements")
(b) The parties hereto have delivered all
documents to be delivered pursuant to Article 4 hereof.
3.2 Further Assurances. At any time and from
time to time after the date hereof, at Buyer's request, and
without further consideration therefor, Seller will execute
and deliver such other instruments or agreements as Buyer
may reasonably deem necessary in order more effectively to
transfer to Buyer, and to confirm Buyer's interest in, the
Purchased Assets, and to assist Buyer in exercising all
rights with respect thereto. Buyer and Seller hereby agree
to cooperate to effectively vest in Buyer the rights
transferred to Buyer pursuant to this Agreement.
ARTICLE 4
CLOSING; DELIVERIES
4.1 Closing. (a) The Closing under this
Agreement (the "Closing") shall take place at the offices of
the Buyer at 630 Third Avenue, New York, New York, 10017, at
10:00 A.M. local time on March 31, 1998, or such other date,
place or time as the parties hereto shall mutually agree upon
(the date of the Closing being called the "Closing Date").
In the event either of the parties is entitled not to close
on the scheduled date because a condition to the Closing set
forth in Section 4.5 or 4.6 hereof has not been met (or
waived in writing by the party or parties entitled to waive
it), such party may postpone the Closing from time to time
until the condition has been met, but in no event to a date
later than June 30, 1998. Any such postponement shall not
affect the rights or remedies to which a party is entitled to
in respect of any breach of non-compliance with this
Agreement.
(b) All proceedings to be taken and all
documents to be executed and delivered by all parties at the
Closing shall be deemed to have been taken and executed
simultaneously and no proceedings shall be deemed taken nor
any documents executed or delivered until all have been
taken, executed and delivered.
4.2 Deliveries of Seller. At the Closing Seller
shall deliver to Buyer:
(a) the Bill of Sale, executed by Seller;
(b) an Assignment of Copyrights in the form
of Exhibit 4.2(b)-1 hereto, and an Assignment of Trademarks
in the form of Exhibit 4.2(b)-2, in each case in recordable
form, each executed by Seller (collectively, the "Proprietary
Rights Assignments");
(c) possession and control over, (i) a copy
of the Lists, (ii) copies of all agreements, commitments,
records and other data relating to the Purchased Assets
reasonably necessary for the carrying out of the Business by
Buyer, (iii) all master artwork in existence on the Closing
Date used for current or future advertising in suitable form,
and (iv) all Business Materials and other tangible and
intangible property constituting part of the Purchased
Assets; and
(d) Instruments of Assignment and Assumption
in the forms attached as Exhibit 4.2(d) hereto (each a
"Contract Assignment" and collectively the "Contract
Assignments"), with respect to each of the Contracts listed
on Schedule 4.2(d) hereto (the "Assumed Contracts"), executed
by Seller as assignor and, if such consent is required by the
terms of such Contract, consented to in writing (in form and
substance reasonably required by Buyer) by each applicable
contracting party;
(e) the legal opinion of Karen M Riggio in
the form of Exhibit 4.2(e), hereto, duly executed (the
"Closing Legal Opinion");
(f) a long form certificate of good standing
of Seller, issued as of a date within sixty (60) days of the
Closing by the Secretary of State of the State of New York;
(g) a certificate of the Secretary or an
Assistant Secretary of Seller, dated the Closing Date, in
form and substance reasonably satisfactory to Buyer, as to
(i) the resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of this
Agreement and each exhibit hereto to which it is a party and
the consummation of the transactions contemplated herein and
therein; and (ii) the incumbency and signatures of the
officers of Seller executing this Agreement and any Seller
Documents (as hereinafter defined); and
(h) all other documents, materials, items
and property required by the terms of this Agreement to be
delivered to Buyer under or to effect the provisions of this
Agreement.
4.3 Deliveries of Buyer. At the Closing, Buyer
will deliver to Seller:
(a) the Closing Payment to Seller;
(b) a certificate of good standing of Buyer,
issued as of a date within sixty (60) days of Closing by the
Secretary of State of the State of Delaware;
(c) a certificate of the Secretary of Buyer,
dated the Closing Date, in form and substance reasonably
satisfactory to Seller, as to (i) the resolutions of the
Board of Directors of Buyer authorizing the execution
delivery and performance of this Agreement and each exhibit
hereto to which it is a party and the consummation of the
transactions contemplated herein and therein; and (ii) the
incumbency and signatures of the officers of Buyer executing
this Agreement and each exhibit hereto to which it is a
party; and
(d) all other documents required by the terms
of this Agreement to be delivered to Seller at the Closing
under or to effect the provisions of this Agreement.
4.4 Further Assurances. At any time and from
time to time after the Closing, at Buyer's request, and
without further consideration therefor, Seller will execute
and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation as Buyer may
reasonably deem necessary in order more effectively to
transfer, convey and assign to Buyer, and to confirm Buyer's
title to, all of the Purchased Assets, whether tangible or
intangible, to put Buyer in actual possession and operating
control thereof, and to assist Buyer in exercising all rights
with respect thereto. Buyer and Seller hereby agree to
cooperate to effectively transfer the Purchased Assets to
Buyer.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Buyer as
follows:
5.1 Organization, Standing and Qualification;
Subsidiaries. (a) Seller is a corporation duly organized,
validly existing and in good standing under the laws of the
State of New York and has all requisite power and authority
and is entitled to own, lease and operate its properties and
to carry on its business as and in the places such properties
are now owned, leased or operated and where such business is
presently conducted. Seller is qualified to do business and
is in good standing in each state or jurisdiction listed in
Schedule 5.1, which states constitute all states in which the
failure to be so qualified could have a material adverse
effect on the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or results of the
operations of Seller. The copies of the Certificate of
Incorporation and By-Laws of Seller delivered by Seller to
Buyer are complete and correct.
No part or aspect of the Business has been
conducted through any direct or indirect subsidiary or any
direct or indirect affiliate of Seller.
5.2 Authority; Options. (a) Seller has all
requisite power and authority to enter into this Agreement,
and each other agreement, document and instrument to be
executed or delivered by it in accordance with this
Agreement, including, without limitation, the Bill of Sale,
the Proprietary Rights Assignments and the Contract
Assignments (the "Seller Documents"), and to carry out the
transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Seller
Documents by Seller have been duly authorized and approved by
its board of directors and, no other corporate proceedings on
the part of Seller are necessary to authorize this Agreement,
the Seller Documents and the transactions contemplated hereby
and thereby. This Agreement has been duly authorized,
executed and delivered by Seller and is the legal, valid and
binding obligation of Seller enforceable in accordance with
its terms, and each of the Seller Documents has been duly
authorized by Seller and is, or upon execution and delivery
by Seller of any thereof at the Closing will be, a legal,
valid and binding obligation of Seller enforceable in
accordance with its terms.
5.3 No Violation. Except as required under the
Business Corporation Law of the State of New York and the
Securities Exchange Act of 1934, as amended (the "1934 Act"),
and except as set forth in Schedule 5.3, neither the
execution or delivery of this Agreement, nor the consummation
of the transactions contemplated herein, will with or without
the giving of notice or the lapse of time or both (a) violate
or conflict with any provision of Seller's Certificate of
Incorporation or Bylaws, as each may have been amended, (b)
result in (i) a breach of, or violate, or be in conflict with
or constitute a default under, or result in the termination
or cancellation of, or accelerate the performance required
under, any security instrument, mortgage, note, debenture,
indenture, loan, lease, contract, agreement or other
instrument, to which Seller is a party or by which it or any
of its properties or assets are bound, or (ii) the loss or
adverse modification of any lease, franchise, license or
other contractual right or other authorization granted to or
otherwise held by Seller or with respect to the Purchased
Assets, (c) require the consent of any party to any such
agreement or commitment to which Seller is a party or by
which any of its properties or assets are bound, (d) result
in the creation or imposition of any Lien upon any property
or assets of Seller, (e) require any consent, approval,
authorization, order, filing, registration or qualification
of or with any court or governmental authority or arbitrator
to which Seller is subject or by which any of its properties
or assets may be bound or affected.
5.4 Financial Statements. Seller has delivered to
Buyer copies of the unaudited financial statements of Seller
set out on Schedule 5.4 (the "Financial Statements"),
including without limitation, the unaudited balance sheet and
income statement of Seller for the years ended December 31,
1996 and 1997. Seller will provide Buyer within 30 days of
the date hereof unaudited accounts of the period from January
1, 1998 to March 31, 1998. All of the Financial Statements
are complete and correct, have been prepared from the books
and records of Seller in accordance with generally accepted
accounting principles ("GAAP") consistently applied and
maintained throughout the periods indicated, except as noted
in 5.4 (a) below, and fairly present the financial condition
of Seller as at their respective dates and the results of
operations of Seller for the periods covered thereby. Such
Financial Statements do not contain any items of special or
nonrecurring income or any other income not earned in the
ordinary course of business except as expressly specified
therein, and include all adjustments, which consist only of
normal recurring accruals, necessary for such fair
presentation.
(a) the Financial Statements have not been
prepared in accordance with GAAP in the following respects:
(i) the Financial Statements do not include notes to
the accounts;
(ii) the receivables from Messrs.
Kapelus & Cipriano are to be written off effective December
31, 1997;
(iii) some work in progress was
accounted for on an "as billed" basis rather than percentage
of completion basis. the affects of this change would not be
material to the Financial Statements;
(iv) no provision has been made for
deferred taxation;
(v) deferred finance charges are
understated by $6,684.
5.5 Absence of Undisclosed Liabilities. Except
as and to the extent set forth on Schedule 5.5, as of the
Closing Date, Seller had no debts, liabilities or obligations
(whether absolute, accrued, contingent or otherwise) in
excess of Five Thousand Dollars ($5,000) in aggregate.
5.6 Absence of Changes or Events. Except as set
forth on Schedule 5.6, since December 31, 1997 ("the Balance
Sheet Date") Seller has conducted its business only in the
ordinary course in a manner consistent with past practices.
Without limiting the foregoing, since such date, Seller has
not:
(a) incurred any obligation or liability,
absolute, accrued, contingent or otherwise, whether due or to
become due, except current liabilities for trade or business
obligations incurred in the ordinary course of business and
consistent with its prior practice, none of which
liabilities, in any case or in the aggregate, materially and
adversely affects the condition (financial or otherwise),
prospects or results of operations of Seller or the Business
or the Purchased Assets;
(b) mortgaged, pledged or subjected to any
Lien any of its property, business or assets, tangible or
intangible;
(c) sold, transferred, leased to others or
otherwise disposed of any assets used in or necessary to
conduct the Business, or canceled or compromised any material
debt or claim, or waived or released any right of substantial
value of or relating to the Purchased Assets and/or the
Business;
(d) received any notice of actual or
threatened termination of any contract, lease or other
agreement or other business relationship or suffered any
damage, destruction or loss (whether or not covered by
insurance) which, in any case or in the aggregate, has had or
could have a materially adverse effect on the condition
(financial or otherwise), prospects or results of operations
of Seller or of or on the Business or the Purchased Assets;
it is hereby expressly acknowledged that Seller has notified
Buyer of the termination by Cruiseworld Inc. of its business
relationship with Seller as of December 31, 1997;
(e) had any material change in its relations
with its employees, agents, customers or suppliers or any
governmental regulatory authority or self-regulatory
authorities;
(f) made any capital expenditures or capital
additions or betterment in excess of an aggregate of Five
Thousand Dollars ($5,000);
(g) transferred or granted any rights under,
or entered into any settlement regarding the breach or
infringement of, any license, patent, copyright, trademark,
trade name, service mark or other Proprietary Rights, or
modified any then existing rights with respect thereto of or
relating to the Purchased Assets and/or the Business;
(h) instituted, settled or agreed to settle
any litigation, action or proceeding before any court or
governmental body relating to Seller or any of its assets,
properties or rights;
(i) suffered any damage, destruction, loss,
change, event or condition which, in any case or in the
aggregate, has had or may have a material adverse effect on
the condition (financial or otherwise), prospects or results
of operations of Seller or of or on the Business or the
Purchased Assets, including, without limitation, any change
in revenues, costs, levels or types of warranty or defective
product claims, or relations with employees, landlords,
agents, customers or suppliers;
(j) entered into any transaction, contract
or commitment other than in the ordinary course of business,
or paid or agreed to pay any brokerage, finder's fee, or
other compensation in connection with, or incurred any
severance pay obligations or "break-up" fee obligations by
reason of, this Agreement or the transactions contemplated
hereby;
(k) received any notice from any customer or
supplier that it, nor has knowledge that any customer or
supplier, intends to cease doing business with Seller, which,
in any case, has had or could have a material adverse effect
on the condition (financial or otherwise), prospects or
results of operations of Seller or of or on the Business or
the Purchased Assets;
(l) made any purchase commitment in excess
of the normal, ordinary and usual requirements of the
Business or made any material change in its selling, pricing,
advertising or personnel practices inconsistent with Seller's
prior practice relating to the Business; or
(m) made any payment to either of the
Principals or any other employee or consultant of Seller,
other than in the ordinary course of business;
(n) entered into any agreement or made any
commitment to take any of the types of actions described in
any of subsections (a) through (m) above.
5.7 Title to and Condition of Purchased Assets;
Leases. (a) Seller does not own any real property. Except
for the assets subject to Personal Property Leases (as
hereinafter defined), Seller has good and marketable title to
all of the Purchased Assets which it owns or uses in the
Business or purports to own. Except as set forth in Schedule
1.3 hereto, none of the Purchased Assets are subject to any
Lien of any nature whatsoever, direct or indirect, whether
accrued, absolute, contingent or otherwise.
(a) All of the tangible Purchased Assets are
in good operating condition and repair, are suitable for the
purposes used and are adequate and sufficient for the
operation of the Business. Seller enjoys peaceful possession
of all leasehold interests and personal property constituting
any part of the Purchased Assets and held under lease or
license.
(b) The Purchased Assets constitute all of
the assets, properties, and rights necessary to conduct the
Business as presently conducted. None of the Excluded Assets
are assets, properties or rights necessary to conduct the
Business as presently conducted.
(c) Seller has delivered to Buyer true and
complete copies of each of the Contracts prior to the
execution of this Agreement. To the best of Seller's
knowledge, all of the Contracts are in full force and effect
with respect to Seller in accordance with their terms and
there is no violation or default under the Contracts and to
the best of Seller's knowledge no event has occurred or
circumstance exists which with notice or lapse of time or
both would constitute an event of default, or give rise to a
right of termination or cancellation, or result in the loss
or adverse modification of any right or benefit thereunder.
No party to any Contract has given Seller written notice of
or made a claim with respect to, and Seller is not otherwise
aware of, any material breach or default under any thereof.
To the best of Seller's knowledge, Seller enjoys peaceful
possession and quiet enjoyment of the Purchased Assets,
tangible and intangible, held under license; and all such
licenses are in good standing, in full force and effect and
are valid, binding and enforceable obligations of Seller, and
to the best of Seller's knowledge, of the licensors
thereunder. None of the Contracts impose any obligation on
Seller other than to provide service in the ordinary course.
Except as set forth on Schedule 5.7(c), there have been no
oral or written modifications to the terms or provisions of
any of the Contracts. No amount payable or reserved under
any Contract has been assigned or anticipated and no amount
payable under any Contract is in arrears or has been
collected in advance and to the best of Seller's knowledge,
there exists no offset or defense to payment of any amount
under a Contract.
5.8 Proprietary Rights. (a) Seller owns or
possesses the perpetual and royalty-free licenses and other
rights to use all Proprietary Rights used in or necessary to
conduct the Business as it is presently operated. To the best
of Seller's knowledge, Seller is not infringing upon or
otherwise acting adversely to any copyrights, trademarks,
trademark rights, service marks, service names, trade names,
patents, patent applications, licenses or trade secrets or
other proprietary rights or intellectual property of any
other person or entity. No claim, suit, demand, proceeding
or investigation is pending, has been asserted or is
threatened by or against Seller with respect to, based on or
alleging infringement of any such rights or the proprietary
rights or intellectual property of any third party, or
challenging the validity or effectiveness of any license for
such rights, and Seller knows of no basis for any such claim,
suit, demand, proceeding or investigation.
(b) Seller is not a party to or bound by any
oral or written contract or understanding relating to or
which might interfere with the full exploitation of any
rights or property being transferred to Buyer under this
Agreement or which restricts its right to enter into this
Agreement or to perform in accordance herewith. Seller has
not has not entered into any transactions with respect to any
assets, liabilities or business operations referred to or
contemplated by this Agreement with any party other than
Buyer, except in the ordinary course of business.
5.9 Litigation. There is no action, suit,
proceeding, arbitration or investigation pending against,
asserted by, or affecting Seller or the transactions
contemplated by this Agreement, nor to the best of the
knowledge of Seller, any basis therefor or threat thereof
which, in any case or in the aggregate, could if adversely
determined have a material adverse effect on the business,
assets, liabilities, operations or financial condition of
Seller, the Business or the Purchased Assets or the use
thereof by Buyer. Seller is not subject to any court or
administrative order, writ, injunction or decree, applicable
to it or to its business, property or employees, nor is it in
default with respect to any order, writ, injunction or
decree, of any court or federal, state, municipal or other
governmental department, commission, board, agency or
instrumentality, domestic or foreign.
5.10 Compliance; Permits. Neither Seller, nor
any officer or director thereof has violated any law, rule,
regulation, order, judgment or decree applicable to Seller,
any of its employees, any of the Purchased Assets and/or any
aspect of the Business, including without limitation, any
laws, rules, regulations, ordinances, codes, orders,
judgments or decrees as to zoning, building requirements or
standards, import, export, environmental, health and/or
safety matters, which violation could have a material adverse
effect on the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or results of the
operations of Seller, the Purchased Assets or the Business.
Seller has all licenses, consents, certificates, franchises,
permits, and authorizations issued by any department, board,
commission, bureau or instrumentality ("Governmental
Licenses") necessary to conduct the Business in the manner
that it is currently conducted by it, and none of operations
of Seller are being conducted in any manner which violates in
any material respect any of the terms of conditions under
which such Governmental License was granted. Each
Governmental License has been duly obtained, is valid and in
full force and effect, and is not subject to any pending or,
to the knowledge of Seller, threatened administrative or
judicial proceeding to revoke, cancel or declare such
Governmental License invalid in any respect. No Governmental
Licenses by their terms will terminate or lapse by reason of
the transaction contemplated by this Agreement.
5.11 Absence of Certain Business Practices.
Neither Seller nor any officer, employee or agent of Seller,
nor any other person acting on its behalf, has, directly or
indirectly, within the past five years given or agreed to
give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a
position to help or hinder the business of Seller (or assist
Seller in connection with any actual or proposed transaction)
which (a) might subject Seller to any damage or penalty in
any civil, criminal or governmental litigation or proceeding,
(b) if not given in the past, might have had an adverse
effect on the assets, business or operations of Seller or the
Business or the Purchased Assets, or (c) if not continued in
the future, might adversely affect Seller's assets, business,
operations or prospects or the Business or Purchased Assets
or which might subject Seller to suit or penalty in any
private or governmental litigation or proceeding.
5.12 Schedules. Schedule 5.12 contains a true,
complete and accurate list and description of the following:
(a) all real property in which Seller has an
ownership, leasehold or other interest or which is used by
Seller in connection with the conduct of its business (the
"Properties");
(b) all material items of hardware and other
equipment, owned, leased or used by Seller in the Business,
and setting forth with respect to all such listed property a
summary description of all leases relating thereto,
identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms
thereof (the "Personal Property Leases");
(c) all sales, agency, supply, purchase,
distribution, advertising, promotional, support, maintenance,
outsourcing, manufacture and fulfillment agreements or
franchises, author agreements and publishing agreements of or
relating to the Purchased Assets or the Business, and all
agreements providing for the services of an independent
contractor to which Seller is a party or by which it is bound
and which relate to any of the Purchased Assets or the
conduct of the Business, including, without limitation, a
true and complete itemized description of all contracts
pursuant to which any royalty or similar payment shall be
payable;
(d) all contracts, agreements, commitments,
purchase orders, leases, licenses or other understandings or
arrangements to which Seller is a party or by which it or any
of its property is bound or affected, relating to the
Business or the Purchased Assets, except for (i) those listed
on Schedule 5.12(c) (ii) entered into in the ordinary course
of business that are terminable by Seller on less than 30
days' notice without any penalty or consideration, and
(iii) involve payments or receipts during the entire life of
such contracts by Seller of less than $500 in the case of any
single contract but not more than $2,000 in the aggregate;
(e) all guarantees, loan agreements,
indentures, mortgages and pledges, all conditional sale or
title retention agreements, security agreements, equipment
obligations, leases or lease purchase agreements as to items
of personal property (excluding equipment obligations, leases
or lease purchase agreements not relating to the Purchased
Assets), in each case to which Seller is a party or by which
it is bound or under which it has rights;
(f) all employment and consulting
agreements, including, without limitation, obligations for
severance, reemployment assistance, termination, deferred
compensation, or vacation pay, to which Seller is a party or
by which it is bound;
(g) as of a date no earlier than March 31,
1998, all of Seller's accounts receivables relating to or
arising out of the Business, together with information as to
each such listed receivable which has been outstanding for
more than 30 days;
(h) as of a date no earlier than March 31,
1998, all of Seller's accounts payable relating to or
arising out of the Business;
True and complete copies of all contracts,
agreements, plans, arrangements, commitments and documents
required to be listed or identified pursuant to this Section
5.12 (to the extent in writing or if not in writing, an
accurate summary thereof), together with any and all
amendments thereto, have either been delivered to Buyer or
attached to Schedule 5.12;
Except as expressly identified on Schedule
5.12, all of the contracts and agreements required to be
listed or identified pursuant to this Section 5.12 (other
than those which have been fully performed) are legal, valid,
binding and enforceable in accordance with their respective
terms, in full force and effect, do not require the consent
or approval of any party to the assignment thereof and will
be unaffected by the sale or other transfer of the Purchased
Assets to Buyer hereunder, and Buyer will be entitled to the
full benefits thereof, and none of such contracts and
agreements is with a governmental agency or authority. To
the best of the knowledge of Seller, there is not under any
contract or agreement required to be listed or identified
pursuant to this Section 5.12 any existing default or event
which, after notice or lapse of time, or both, would
constitute a default or result in a right to accelerate or
loss of rights. There have been no oral or written
modifications to the terms or provisions of any of such
agreements. No amount payable or reserved under any such
agreement has been assigned or anticipated and no amount
payable under any such agreement is in arrears or has been
collected in advance and to the best of the knowledge of
Seller, there exists no offset or defense to payment of any
amount under such an agreement.
5.13 Taxes. Seller has paid or made adequate
provision for the payment of all taxes, fees, assessments and
charges, including, without limitation, income, property,
sales, use, franchise, added value, employees' income
withholding and social security taxes, imposed by the United
States or by any foreign country, or by any state,
municipality or instrumentality of any of same or by any
other taxing authority, and for all penalties and interest
thereon, which has or may become due for or during all
periods ending, and in respect of all operations, on or prior
to the Closing Date. All tax returns required to be filed in
connection therewith have been accurately prepared and filed
and all deposits required by law to be made by Seller with
respect thereto have been duly made. Seller is not a party
to any pending action, proceeding or audit by any
governmental authority for assessment or collection of any
amount of taxes for which it may be directly or indirectly
liable, and there is no claim for assessment or collection of
any amount of taxes for which it may be directly or
indirectly liable.
5.14 Employee Benefits; Labor Matters. (a) All
pension, retirement, profit-sharing, deferred compensation,
bonus, incentive, medical, vision, dental and other health
insurance, life insurance or any other employees benefit
plan, arrangement or understanding and any trusts or
insurance contracts maintained in connection therewith
(collectively, "Benefit Plans"), conform to, and the
administration thereof is in material compliance with, all
applicable laws and regulations, including, without
limitation, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), the Internal Revenue Code of
1986, as amended (the "Code"), and neither the operation or
administration of any such Benefit Plan, nor the transactions
contemplated by this Agreement will result in any liability
to Seller or Buyer under or in respect of any of such Benefit
Plans, in Buyer incurring or suffering any liability, or have
any adverse effect on the financial condition, assets
liabilities or results of operations of Seller, Buyer, the
Purchased Assets or the Business. All contributions
required, by law or by contract, to be made to any Benefit
Plans subject to ERISA for any plan year, or other period on
the basis of which contributions are required, ending before
the date hereof, have been made as of the date hereof.
Seller has complied in all material respects with all
reporting and disclosure requirements with respect to each
Benefit Plan. No such Benefit Plan (including any trust
created thereunder), nor any trustee or administrator
thereof, has engaged in any transaction prohibited by ERISA,
or by Section 4975 of the Code, which could subject Seller,
or such Plan to any penalty imposed under ERISA or to any tax
imposed by Section 4975 of the Code or, if any such
transaction has occurred, it has been corrected within the
meaning of Section 4975 of the Code, and all applicable taxes
and penalties with respect thereto have been paid. No
"reportable event" as that term is defined in ERISA has
occurred with respect to any of the Benefit Plans. No
liability to the Pension Benefit Guaranty Corporation or
comparable foreign authority has been or is expected to be
incurred with respect to any of such Benefit Plans. Seller
does not participate, maintain or contribute to (or within
the preceding three (3) years participated, maintained or
contributed to) and has no liability or obligation under or
with respect to any multi-employer plan governed by or
subject to ERISA or any foreign law, nor has it participated,
maintained, contributed or incurred any liability in respect
of any thereof within the last three fiscal years. Seller
has no liability or obligation with respect to any Benefit
Plan or trust related thereto that may have been terminated
prior to the date hereof.
(b) Seller has complied in all material
respects with all applicable laws, rules and regulations
relating to the employment of labor, including those relating
to hiring, wages, hours, collective bargaining and the
payment and withholding of taxes, and has withheld all
amounts required by law, regulation or agreement to be
withheld from the wages or salaries of its employees and is
not liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing. Seller has
not engaged in any unfair labor practice, and there is no
unfair labor practice, sexual harassment or other employment-
related complaint pending, or, to the knowledge of Seller,
threatened against Seller or any officer, director or
employee thereof. There do not exist any pending workmen's
compensation claims against Seller that are not adequately
provided for by insurance, or any pending or, to the
knowledge of Seller, threatened claims that the workplace of
Seller is unsafe or that Seller has engaged in unfair labor
practices, employment discrimination or wrongful discharge.
No union, trade, guild or collective bargaining unit
represents any employees of Seller, and no union organizing
or election activities involving any non-union employees of
Seller is now in progress or, to the best of Seller's
knowledge, threatened.
5.15 Accounts Receivables. All Receivables
constituting any part of the Purchased Assets have arisen
only from bona fide transactions in the ordinary course of
business and are to the best of Seller's knowledge
collectible in accordance with their terms.
5.16 Environmental Matters. (a) As a result of
Seller's action or inaction, and to the best knowledge of
Seller, no Hazardous Substance (as hereinafter defined) is
present or at any time has been stored, treated, recycled,
released, disposed of or discharged on, about, from or
affecting the Properties, Business or Purchased Assets in any
material amounts, and Seller has no liability or potential
liability which is based upon or related to the environmental
conditions under or about the Properties, Business or
Purchased Assets.
(b) Neither Seller nor, to the knowledge of
Seller, any prior or current owner, tenant or occupant of any
of Properties, has received (i) any notification or advice
from or given any report or notice to any governmental agency
or authority involving the use, handling, transport,
presence, spill, escape, leakage, release, remediation or
clean-up of any Hazardous Substance on or about any of the
Properties or caused by Seller or any affiliate of Seller or
(ii) any complaint, order, citation or notice with regard to
any emission, discharge, storage or disposal, any Hazardous
Substance or any other environmental, health or safety matter
affecting any of the Properties, or any property or location
at any time occupied or used by any Seller, under any other
federal, state or local law, ordinance, rule or regulation.
(c) To the best of Seller's knowledge, there
are no fuel or gasoline storage tanks presently in use or at
any time abandoned in, on or under any of the Properties.
None of the Properties contains any asbestos or asbestos-
containing materials.
(d) The term "Hazardous Substance" as used
in this Agreement shall include, without limitation,
gasoline, oil and other petroleum products, explosives,
radioactive materials and related and similar materials, and
any other substance or material defined as a hazardous, toxic
or polluting substance or material by any federal, state or
local law, ordinance, rule or regulation, including asbestos
and asbestos-containing materials, PCBs and urea formaldehyde
foam insulation.
5.18 Customers and Suppliers. Set forth in
Schedule 5.18 is a list of the names and addresses of the ten
(10) largest customers and the ten (10) largest suppliers
(measured by dollar volume of purchases or sales in each
case) of the Business and the percentage of the business of
the Business which each such customer or supplier represented
during each of the years ended December 31, 1997 and 1996.
Except as expressly identified in Schedule 5.18, there exists
no actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business
relationship of Seller with any supplier or customer listed
such Schedule 5.18.
5.19 Disclosure. No representation or warranty
by Seller contained in this Agreement nor any written
statement or certificate furnished or to be furnished by or
on behalf of Seller to Buyer in connection herewith contains
or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to
make the statements herein or therein contained, under the
circumstances under which made, not misleading or necessary
in order to provide Buyer with adequate information as to the
operations of Seller, the Business and the Purchased Assets
and Seller has disclosed to Buyer in writing all material
adverse facts known to it relating to the same. The
representations and warranties contained in this Agreement or
any document delivered in connection with this Agreement
shall not be affected or deemed waived by reason of the fact
that Buyer and/or any of its representatives knew or should
have known that any such representation or warranty is or
might be inaccurate in any respect.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
6.1 Organization and Standing. Buyer is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all
requisite corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated
hereby.
6.2 Authority of Buyer. The execution, delivery
and performance of this Agreement and all the agreements and
instruments of Buyer relating hereto and the consummation of
the transactions contemplated hereby shall have been duly
authorized by all necessary corporate action on the part of
Buyer at or prior to the Closing; this Agreement has been
duly executed by a duly authorized officer of Buyer; and this
Agreement and such agreements and instruments constitute the
legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their terms.
6.3 Public Filings. NPSC's Form 10-KSB as of
March 31, 1997 and Form 10-QSB as of December 31, 1997 as
filed with the Securities and Exchange Commissions are true
in all material respects. Specifically the number of shares
of Common Stock authorized and outstanding as at that date is
accurate as stated therein and no shares of Common Stock have
been issued since that date, and since that date no agreement
has been entered into which would result in such issuance
6.4 Material Adverse Change. Since December 31,
1997 there has been no material adverse change in the
financial position of NPSC.
6.5 Change of Name. Buyer warrants that it will
take such steps as may be necessary to change its name to
"SKC Advertising, Inc." as soon as possible after the Closing
Date.
6.6 Key Man Policy. NPSC warrants that it will
maintain a "key man" Life Insurance policy on Mark Blundell
for which NPSC is the beneficiary in an amount of not less
than One Million Dollars ($1,000,000) until at least March
31, 2001.
ARTICLE 7
COVENANTS OF SELLER
7.1 Employees. (a) Seller shall terminate all of
its employees prior to Closing. Buyer has no obligation to
employ any of Seller's employees in its business following
the date hereof or the Closing Date. Notwithstanding any
offer or determination to so employ any employee, Buyer shall
not be obligated to maintain any employee for any specific
length of time and, except as otherwise provided by the
Employment Agreements, all such employees shall be employees
at will.
(b) Seller shall promptly pay all
amounts due and payable to, or accrued in respect of, its
employees in the nature of wages, commissions, salary,
insurance and other benefits (including accrued vacation and
sick pay and unearned bonuses), and shall pay all withholding
tax and similar obligations in each case with respect to all
employees of Seller and all periods ending on or prior to the
Closing Date.
(c) Seller shall be solely responsible
for, and shall indemnify and hold harmless Buyer from and
against, any and all claims and obligations, if any,
including but not limited to severance pay, termination pay
and other benefits arising or claimed to arise out of (i) the
termination of employment of any employee of Seller on or
prior to the Closing Date, (ii) the effect of the
transactions contemplated by this Agreement on the employment
status of any of the employees of Seller, including the
Principals and any others which may hereafter be employed by
Buyer, and/or (iii) the termination of employment with Buyer
within 120 days after the Closing Date of any employee,
including the Principals, who prior to the Closing Date was
an employee of Seller and thereafter becomes an employee of
Buyer (in this latter case to the same extent as if any such
employee were then still employed by Seller, but only with
respect to such severance pay, termination pay or other
benefits which arise or are claimed to arise out of the
employee's employment with Seller).
(d) Nothing in this Section 7.1 or
elsewhere in this Agreement, express or implied, shall be
construed to confer any rights or remedies on any employee of
Seller. All liabilities of Seller under this Section shall
constitute Excluded Liabilities.
ARTICLE 8
FURTHER AGREEMENTS.
8.1 Sales and Other Taxes. Seller shall pay all
sales tax, transfer tax, intangibles tax, filing fees,
recording and registration fees and similar government
charges applicable to the transactions contemplated by this
Agreement, including, without limitation, all taxes and
charges payable, if any, upon the transfer of title to any
Purchased Assets. Buyer and Seller will cooperate to prepare
and file with the proper public officials, as and to the
extent available and necessary, all appropriate sales tax
exemption certificates or similar instruments as may be
necessary to avoid the imposition of sales, transfer and
similar taxes on the transfer of Purchased Assets pursuant
hereto. The parties will co-operate to comply with the
provisions of New York State bulk sales laws.
8.2 Brokerage and Finder's Fee. Buyer
represents and warrants to Seller and Seller represents and
warrants to Buyer, that no person is entitled to any
brokerage commissions or finder's fees in connection with the
transactions contemplated by this Agreement as a result of
any action taken by it or any of its affiliates, officers,
directors or employees.
8.3 Referral. Seller shall use its best efforts
to refer all requests for and forward all orders for products
to Buyer at such telephone number and address as Buyer from
time to time informs Seller. Seller and Buyer shall each
attempt in good faith to direct or deliver to the other all
incoming mail, telephone or other communications or
deliveries which are not received by the appropriate party
(that is, Buyer in the case of matters or materials
pertaining to the Business and Seller in the case of all
other matters or materials).
ARTICLE 9
INDEMNIFICATION, SURVIVAL, OFFSETS
9.1 Obligation to Indemnify. (a) Buyer hereby
assumes and agree to save, indemnify and hold harmless Seller
from and against, and shall on demand reimburse Seller for:
(i) any and all loss, liability,
damage or deficiency suffered or incurred by Seller by reason
of any misrepresentation or breach of warranty by Buyer or
nonfulfillment of any covenant or agreement to be performed
or complied with by Buyer under this Agreement or in any
agreement, certificate, document or instrument executed by
Buyer and delivered to Seller pursuant to or in connection
with this Agreement; and
(ii) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs
and expenses, including reasonable attorneys' fees, incident
to any of the foregoing, or reasonably incurred in
investigating or attempting to avoid the same or to oppose
the imposition thereof, or in enforcing any of the
obligations under this Section 9.1(a).
(b) Seller and Principals hereby jointly
and severally assume and agree to save, indemnify and hold
harmless Buyer from, against and in respect of, and shall on
demand reimburse Buyer for:
(i) any and all loss, liability,
damage or deficiency suffered or incurred by Buyer by reason
of any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement to be performed
or complied with by Seller under this Agreement or any
agreement, certificate, document or instrument executed by
Seller and delivered to Buyer pursuant to or in connection
with this Agreement;
(ii) any and all loss, liability,
damage, cost or expense suffered or incurred by Buyer in
respect of or in connection with any and all debts,
liabilities and obligations of, and any and all violation of
laws, rules, regulations, codes or orders by Seller, direct
or indirect, fixed, contingent, legal, statutory, contractual
or otherwise, which exist at or as of the Closing Date or
which arise after the Closing Date but which are based upon
or arise from any act, transaction, circumstance, sale of
goods or services, state of facts or other condition which
occurred or existed on or before the Closing Date, whether or
not then known, due or payable, except to the extent
specifically assumed by Buyer under the terms of this
Agreement;
(iii) any and all loss, liability,
damage, cost or expense suffered or incurred by Buyer based
on or arising out of the infringement or alleged infringement
of any proprietary rights of any third party arising out of
the Business or the Purchased Assets;
(iv) any and all loss, liability,
damage, cost or expense suffered or incurred by Buyer based
on or arising out of any defective or allegedly defective
product or service warranty and/or third party liability
claims (whether alleged in contract, tort, strict liability
or otherwise), which exist at or as of the Closing Date or
which arise after the Closing Date but which are based upon
or arise from any act, transaction, circumstance, sale of
goods or services, state of facts or other condition which
occurred or existed on or before the Closing Date, including,
without limitation, any products manufactured, assembled,
sold or distributed by Seller or its predecessors in interest
at any time;
(v) any and all loss, liability,
damage, cost or expense suffered or incurred by Buyer based
on or arising from (A) the presence of any Hazardous
Substance on or about any premises occupied by Seller or any
hazardous discharge on or prior to the Closing Date, and/or
any environmental complaint, and/or the failure to obtain any
license or permit required in connection with any Hazardous
Substance or hazardous discharge or the retention, disposal,
treatment or use thereof, and/or arising out of any
noncompliance with any environmental, health or safety law,
ordinance, rule or regulation (each, an "Environmental
Requirement"), in each case, based on or arising from any
act, transaction, state of facts or other condition which
occurred or existed on or before the Closing Date, whether or
not then known, (B) any personal injury (including wrongful
death) or property damage (real or personal) arising out of
or related to any hazardous discharge, the presence, use,
disposal or treatment of a Hazardous Substance, or
noncompliance with any Environmental Requirement, on or prior
to the Closing Date, and/or (C) any environmental complaint
and/or any demand of any government agency or authority prior
to, on or after the Closing Date which is based upon or in
any way related to any hazardous discharge, the presence,
use, disposal or treatment of a Hazardous Substance, and/or
noncompliance with any Environmental Requirement on or prior
to the Closing Date, and including, without limitation and in
each such case under this clause (v), the reasonable costs
and expenses of all remedial action and clean-up, attorney
and consultant fees, investigation, sampling and laboratory
fees, court costs and litigation expense and costs arising
out of emergency or temporary assistance or action undertaken
by or as required by any duly authorized regulatory body in
connection with any of the foregoing;
(vi) any and all taxes, including,
without limitation, income, franchise, property, sales, use,
added value, employees' income withholding and social
security taxes, and all assessments or governmental charges
imposed by the United States or by any foreign country or by
any state, municipality, subdivision or instrumentality of
the United States or of any foreign country, or by any other
taxing authority, which are due or payable by Seller in
connection with or arising out of the operation of Seller's
business on or prior to the Closing Date of this transaction
and all interest and penalties thereon;
(vii) any and all loss, liability,
damage, cost or expense suffered or incurred by Buyer by
reason of any claims of or entitlements to severance pay,
termination pay and/or other benefits arising or accruing or
claimed to arise or accrue with respect to any employee of
Seller, whether by reason of or in connection with any of the
transactions contemplated by this Agreement or otherwise to
the extent based on any employment of such employee by
Seller; and
(viii) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, costs
and expenses, including, without limitation, reasonable
attorneys' fees, incident to any of the foregoing or
reasonably incurred in investigating or attempting to avoid
the same or to oppose the imposition thereof, or in enforcing
any of the obligations under this Section 9.1(b).
9.2 Survival and Other Matters. Each
representation, warranty, indemnity, covenant and agreement
of each of the parties hereto shall survive the Closing;
provided, however, that no party shall be entitled to assert
claims against the other for misrepresentations or breach of
warranty under or pursuant to this Agreement unless the party
asserting such claim shall notify the other in writing of
such claim within four (4) years after the Closing Date;
provided, further, that the foregoing limitation on the
survival of representations and warranties shall not apply to
any of the representations and warranties in Sections 5.2,
5.7(a), 5.13 and 5.16 hereof.
9.3 Offsets. Without limiting its other rights
and remedies, Buyer shall have the right to set off the
amount of any claims reasonably asserted by Buyer in good
faith that it is entitled to a deduction or setoff in respect
of any obligation under Section 9.1(b) or otherwise under
this Agreement against any instrument or agreement executed
and delivered by Buyer in accordance with or as contemplated
by this Agreement, including, without limitation, the Buyout
Payments, in each case at the option of Buyer, in such order
as Buyer shall determine. No such setoff shall constitute a
default under this Agreement or otherwise, it being agreed
that Buyer shall have a period of ten (10) days after the
final and binding resolution of all such good faith claims
and/or disputes relating to such non-payment to pay the
amounts determined as a result of such resolution to be due
and payable. If it shall be determined that Buyer improperly
(despite Buyer's good faith belief that such setoff was
proper) withheld any payment under this Section, such amount
shall bear interest at the rate of ten percent (10%) per
annum from the date such amount was due. The remedies
provided for in this Agreement are not exclusive and shall be
in addition to any other remedies that Buyer may have at law,
in equity or otherwise.
ARTICLE 10
MISCELLANEOUS
10.1 Specific Performance. Seller agrees that the
Purchased Assets are unique property that cannot be readily
obtained on the open market and that Buyer will be
irreparably injured if this Agreement is not specifically
enforced. Therefore, Buyer shall have the right specifically
to enforce the performance of Seller under this Agreement
without the necessity of posting any bond or other security,
and Seller hereby waives the defense in any such suit that
Buyer has an adequate remedy at law and agree not to
interpose any opposition, legal or otherwise, as to the
propriety of specific performance as a remedy. The remedy of
specifically enforcing any or all of the provisions of this
Agreement in accordance with this Section 10.1 shall not be
exclusive of any other rights which Buyer may have to
terminate this Agreement, or of any other rights or remedies
which Buyer may otherwise have under this Agreement or
otherwise, all of which rights and remedies shall be
cumulative.
10.2 Binding Agreement; Assignment. All the terms
and provisions of this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the parties hereto
and their respective heirs, legal representatives, successors
and assigns. This Agreement and all rights of Buyer shall be
assignable to one or more subsidiaries or affiliates of Buyer
on giving of prior written notice to Seller. Such assignment
shall not relieve Buyer of its obligations hereunder.
10.3 No Public Announcement. No party hereto
shall, without the prior written approval of all of the other
parties, make any press release or other public announcement
concerning the transactions contemplated by this Agreement,
except as and to the extent that Buyer or Seller shall be so
obligated by law or the rules of any stock exchange, in which
case such party shall so advise the other party and Buyer and
Seller shall use their reasonable best efforts to cause a
mutually agreeable release or announcement to be issued;
provided that the foregoing shall not preclude communications
or disclosures necessary to implement the provisions of this
Agreement or to comply with accounting and SEC disclosure or
reporting obligations.
10.4 Law To Govern. This Agreement shall be
construed and enforced in accordance with the internal laws
of the State of New York, without regard to principles of
conflict of laws.
10.5 Notices. All notices shall be in writing and
shall be deemed to have been duly given to a party hereto if
delivered personally, then on the date of such delivery, or
on the fifth day after being deposited in the mail if mailed
via registered or certified mail, return receipt requested,
postage prepaid, or on the next business day after being sent
by recognized national overnight courier services, in each
case, to such party, at the following respective addresses:
if to Seller, to:
Kapelus & Cipriano, Inc.
550 Mamaroneck Avenue
Harrison
NY 10528
with a copy to:
Karen M Riggio
20 Sherwood Road
Stamford
CT 06905
if to Buyer, to:
New Paradigm Acquisition I CO., Inc.
630 Third Avenue
New York, New York 10017
Attention: President
with a copy to:
Curto Barton & Alesi, P.C.
One Huntington Quadrangle
Suite One North Five
Melville NY 11747
Attn.: Joseph P. Glynn, Esq.
or to such other address as any such party may designate in
writing in accordance with this Section 10.5.
10.6 Fees and Expenses. Except as expressly set
forth in this Agreement, each of the parties shall pay its
own fees and expenses with respect to the transactions
contemplated hereby.
10.7 Entire Agreement. This Agreement sets forth
the entire understanding of the parties hereto in respect of
the subject matter hereof and may not be modified, amended or
terminated except by a written agreement specifically
referring to this Agreement signed by all of the parties
hereto. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such subject
matter.
10.8 Waivers. The failure by any party to this
Agreement to comply with any of its obligations hereunder may
be waived by any Seller in the case of a default by Buyer and
by Buyer in case of a default by Seller. No waiver shall be
effective unless in writing and signed by the party granting
such waiver, and no such waiver shall be deemed a waiver of
any subsequent breach or default of the same or similar
nature.
10.9 No Third-Party Beneficiaries. Nothing
herein, express or implied, is intended or shall be construed
to confer upon or give to any person, firm, corporation or
legal entity, other than the parties hereto, any rights,
remedies or other benefits under or by reason of this
Agreement or any documents executed in connection with this
Agreement.
10.10 Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall
be deemed an original but all of which shall constitute one
and the same agreement.
10.11 Headings. The Section and paragraph
headings contained herein are for the purposes of convenience
only and are not intended to define or limit the contents of
said Sections and paragraphs.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
NEW PARADIGM SOFTWARE CORP.
By:________________________
NEW PARADIGM ACQUISITION I CO., INC.
By:________________________
KAPELUS & CIPRIANO, Inc.
By:________________________
MILTON KAPELUS
_____________________________
ROCCO CIPRIANO
___________________________
EXHIBIT 1.1
FORM OF BILL OF SALE
THIS BILL OF SALE ("Bill of Sale"), dated MARCH 31,
1998, is entered into by and between NEW PARADIGM ACQUISITION
I CO., Inc., a Delaware corporation (the "Buyer"), and
Kapelus & Cipriano, Inc., a New York sub-chapter S
corporation ("Seller") pursuant to the terms of the Agreement
of Purchase and Sale of Assets dated March 31, 1998 (the
"Agreement"), by and among Buyer and Seller.
Capitalized terms used herein shall have the same meanings
and definitions as set forth in the Agreement, unless
otherwise specifically defined in this Bill of Sale.
KNOW ALL MEN BY THESE PRESENTS, that pursuant to
the terms and conditions of the Agreement and for the
consideration set forth therein, the receipt and sufficiency
of which are hereby acknowledged, Seller hereby grants,
conveys, assigns, transfers and delivers to Buyer all of
Seller's right, title, interest and benefit, of whatever kind
and nature, in and to the Purchased Assets and excepting only
those assets listed on Schedule A hereto (the "Excluded
Assets"), free and clear of any liens, charges and
encumbrances of any nature whatsoever except as otherwise
provided in Schedule B hereto.
TO HAVE AND TO HOLD the same unto Buyer, its
successors and assigns forever.
All of the terms and provisions of this Bill of
Sale will be binding upon and inure to the benefit of the
parties hereto and their successors and assigns.
Seller hereby constitutes and appoints Buyer, and
its successors and assigns, the true and lawful attorney or
attorneys of Seller, with full power of substitution, in the
name of Buyer or in the name of Seller, by and on behalf of
and for the sole benefit of Buyer, its successors and
assigns, to demand and receive from time to time any and all
of the Purchased Assets, and from time to time to institute
and prosecute, in the name of Seller or otherwise, any and
all proceedings at law, in equity or otherwise, which Buyer
or its successors or assigns, may deem necessary or desirable
in order to receive, collect, assert or enforce any claim,
right or title of any kind in or to the Purchased Assets
hereby transferred, assigned and conveyed to Buyer and to
defend and compromise any and all actions, suits or
proceedings in respect thereof and to do all such acts and
things and execute any instruments in relation thereto as
Buyer or its successors or assigns shall deem advisable.
Without limitation of the foregoing, Seller hereby authorize
any officer of Buyer to endorse or assign any instrument,
contract or chattel paper relating to the Purchased Assets.
Seller agrees that the foregoing appointment made and the
powers hereby granted are coupled with an interest and shall
be irrevocable.
Notwithstanding the foregoing, no provision of this
Bill of Sale shall in any way modify, replace, amend, change,
rescind, waive or in any way affect the express provisions
(including the warranties, covenants, agreements, conditions,
representations or any of the obligations and
indemnifications, and the limitations related thereto) set
forth in the Agreement, this Bill of Sale being intended
solely to effect the transfer of property sold and purchased
pursuant to the Agreement in accordance with the Agreement.
IN WITNESS WHEREOF, each of the parties hereto has
executed this Bill of Sale on the date first above written.
NEW PARADIGM ACQUISITION I CO.
INC.
By:/s/Mark Blundell_________________
Name: Mark Blundell
Title: President
KAPELUS & CIPRIANO, INC.
By:/s/ Milton Kapelus_______________
Name: Milton Kapelus
Title: President
Schedule A
[Schedule 1.1 of Agreement]
Schedule B
[Schedules 1.5 and 3.2 of Agreement]
Schedule 1.1.
[Equipment]
Attached list of computer equipment not subject to specific
financing
Attached list of furniture not subject to financing
Honda Accord 1987
Security Deposit with Landlord in an amount of approximately
$17,000
Bank Balance with Bank of New York, Mamaroneck in an amouont
not less than $65,000
Schedule 1.1(a)
[trademarks, names designs, logos etc.]
SKC Advertising
SKC
SK&C logo
Schedule 1.1 (b)
[copyrights, copyright applications]
All copyright in all work undertaken by Seller in any
capacity not owned by clients
All copyright in any current "work in progress"
Schedule 1.1 (c)
Attached lists of all clients, prospects, contacts,
contractors, suppliers etc.
Schedule 1.1 (e)
[contracts etc.]
All client contracts -Pace Honda, BMW dated 4/7/97
Peter Deilmann EropAmerica Cruises dated 4/10/96
Kemwell Holiday Autos dated 11/7/97 and 3/23/97
Carlton Hotel
All ongoing supplier contracts - none
All contracts with freelancers and other third parties - none
Lease
Schedule 1.1 (l)
The full balance in the Seller's account with Bank of New
York in an amount of not less than Sixty Five Thousand
Dollars ($65,000).
Schedule 1.2
[Excluded Assets - any assets of or used by Seller not being
transferred]
Furniture subject to lease agreement -indicated with the word
"lease" on the attached list
Computer equipment subject to attached financing agreement
and set out therein
Schedule 1.3
[Liens]
Bank of New York Lien -
Apple Computer Lien -
Furniture lease -
Schedule 1.5
Attached list of media accounts payabl
EXHIBIT 2.1
THE BUYOUT AGREEMENT
In consideration of each of the Principals
surrendering any rights he may have under the Shareholder
Agreement and terminating the same simultaneously herewith,
and subject to and upon the terms and conditions of this
Agreement, Buyer shall pay to each of the Principals (i) 3
Shares of Series E Preferred Stock to be issued within 60
days of the date hereof and being substantially in the form
set out in Appendix A hereto; and (ii) buyout payments
("Buyout Payments"), determined and payable as follows:
1. Calculation of the Buyout Payments. (a) The
Buyout Payments shall be equal to sixteen point six six seven
percent (16.667%) of "Net Revenue" of Buyer commencing on the
Closing Date and ending on the third anniversary of the
Closing Date, less one sixth of the "Net Liabilities". For
purposes hereof, "Net Revenue" shall be equal to the amount
of cash received and retained by Buyer from the sale of
advertising and related services less the sum of (i) the
costs of the provision of such services payable to any third
party not in the employ of Buyer, except as otherwise agreed
in writing between the parties, (ii) any introductory or
finder's fee or similar fee or charge payable in respect of
the acquisition of such sale, (iii) any applicable credits,
discounts and rebates, including, but not limited to,
quantity, dealer, distributor and promotional credits,
discounts, adjustments and rebates, and (iv) taxes (such as
sales, use or similar taxes) paid or payable by Buyer in
connection with such sale. If Buyer refunds or issues a
credit memo on a customer's price due to customer
dissatisfaction or other valid reason, this negative price
shall result in a reduction in Net Revenue and therefore a
reduction of the Buyout Payment due to Principals. For
purposes hereof, "Net Liabilities" shall be equal to all
liabilities which are assumed by Buyer under the Agreement,
less the total of (a) the book value of assets acquired under
this Agreement; and (b) the value of any receivables acquired
under the Agreement not received in cash prior to March 31,
1999.
(b) In the event that either of the
Principals introduces to Buyer or NPSC or any subsidiary
thereof any other advertising agency or related business
which is acquired by such affiliated company within three (3)
years of the date hereof, then two and one half percent
(2.5%) of the Net Revenue of the acquired entity will be
considered as Net Revenue of the Buyer for the purpose of the
calculation of the amounts payable hereunder.
(c) In the event that either (i) New
Paradigm Software Corp. ("NPSC") makes an acquisition where
the acquired company has a client competitive with a client
of Seller, and the Principals notify NPSC of this in writing
prior to such acquisition, and Buyer loses the account
specified in such notice solely by reason of this competitive
client, or (ii) NPSC transfers any existing client of Seller
to another subsidiary, then the calculations of Buyer's Net
Revenue for the purposes of the Buyout Payments hereunder
shall be made as if that client had continued to generate Net
Revenue at the same rate as in the 6 months preceding such
loss or transfer.
2. Payment of the Buyout Payments. The Buyout
payments shall be paid to each Principal on an annual basis,
prior to the filing of the form 10-KSB of NPSC as required by
the Securities and Exchange Commission for the fiscal years
ending March 31, 1999, 2000, 2001 (each such payment being
referred to herein as a "Buyout Payment"). Such payment
shall consist of 8.334% of the Net Revenue of Buyer less one
sixth of the Net Liabilities to be paid in cash and 8.333% of
the Net Revenue of Buyer to be paid in shares of the Common
Stock of NPSC, valued at the average of the closing mid-point
between the bid and offer for the stock on the twenty
business days prior to March 31 of the relevant year. Such
Common Stock shall be issued as a result of conversion of one
share of Series E Preferred Stock.
3. Offset Right. The provisions of this Buyout
Agreement are subject to the provisions of Section 9.3 of the
Agreement.
4. Event of Default by Buyer. It shall be an
Event of Default by Buyer under this Buyout Agreement if:
(a) Buyer fails to meet any material term
of the Employment Contracts on the due date and such payment
is not made by Guarantor (as defined in the Employment
Agreements) within 10 days of receipt of written notice from
the Principal;
(b) NPSC fails to issue Stock
Certificates for any stock payments due to be made by Buyer
within 30 days of the due date;
(c) If Buyer or NPSC shall file or
consent by answer or otherwise to the entry of an order for
relief or approving a petition for relief or arrangement or
any other petition in bankruptcy, or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or shall
make an assignment for the benefit of its creditors, or shall
consent to the appointment of a receiver, trustee or other
officer with similar powers of itself or of any substantial
part of its property, or shall be adjudicated bankrupt or
insolvent, or shall take action for the purpose of any of the
foregoing; or if a court or governemntal authority of
competent jurisdiction shall enter an order appointing a
custodian, receiver, trustee or other officer with similar
powers with respect to NPSC or Buyer or any substantial part
of its property, or constituting an order for relief or any
other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding up or
liquidation of Buyer or NPSC, provided that any such order or
petition is not dismissed within 60 days.
If an Event of Default by Buyer shall occur and be continuing
30 days after the giving of written notice by Principals and
Seller specifying the nature of the default, then Seller
shall be entitled to acquire 100% of the shares of Buyer for
an aggregate price of One Dollar ($1.00) and Principals
shall be entitled to terminate the Employment Contracts and
the restrictive covenants attached thereto without penalty.
In such event NPSC shall transfer ownership of all the shares
of Buyer which are issued and outstanding to Principals
within 10 days of the expiration of the 30 days notice of
default. NPSC hereby agrees that it will not sell, pledge or
otherwise encumber such shares in Buyer prior to the making
of the last payment due under this Buyout Agreement.
5. Event of Default by Principals. It shall be an
Event of Default by Principals under this Buyout Agreement
if:
(a) Any representation, warranty or
convenant given in the Agreement shall be false in any
material respect; or
(b) Any information provided in any
Schedule to the Agreement shall be false in any material
respect
If an Event of Default by Principals shall occur and be
continuing after the giving of written notice by Buyer
specifying the nature of the default, then no further
payments either in cash or in shares of Common Stock will be
payable under this Buyout Agreement
6. Bankruptcy of a Principal. In the event that
either of the Principals shall file or consent by answer or
otherwise to the entry of an order for relief or approving a
petition for relief or arrangement or any other petition in
bankruptcy, or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or shall make an
assignment for the benefit of his creditors, or shall
consent to the appointment of a receiver, trustee or other
officer with similar powers of himself or of any substantial
part of his property, or shall be adjudicated bankrupt or
insolvent, or shall take action for the purpose of any of the
foregoing; or if a court or governmental authority of
competent jurisdiction shall enter an order appointing a
custodian, receiver, trustee or other officer with similar
powers with respect to either Principal or any substantial
part of his property, or constituting an order for relief or
any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any
jurisdiction, , provided that any such order or petition is
not dismissed within 60 days; then no further payments either
in cash or in shares of Common Stock will be payable to that
Principal, but the rights of the remaining Principal will be
unaffected.
NEW PARADIGM SOFTWARE CORP.
BY:/s/ Mark Blundell_____________
NEW PARADIGM ACQUISITION I CO., INC
By:/s/ Mark Blundell_______
KAPELUS & CIPRIANO, INC.
By:_/s/ Milton Kapelus_____
_/s/ Milton Kapelus________________
MILTON KAPELUS
_/s/ Rocco Cipriano________________
ROCCO CIPRIANO
Appendix A
FORM OF SERIES E PREFERRED SHARES
Schedule 2.2
Fixed Assets: to be recorder at Book Value
Goodwill: to be recordewr for the balance of the Purchase
Price
Exhibit 3.1 (a)(i)
EMPLOYMENT AGREEMENT
AGREEMENT made this 31st day of March 1998 by and
between NEW PARADIGM ACQUISITION I CO., INC., a Delaware
Corporation, having its principal place of business located
at 630 Third Avenue, New York, NY 10017 (hereinafter referred
to as "COMPANY"), NEW PARADIGM SOFTWARE CORP., a New York
Corporation having its principal place of business located at
630 Third Avenue, New York, NY 10017 (hereinafter referred to
as "GUARANTOR") and MILTON KAPELUS residing at 1864 Palmer
Avenue, Larchmont, New York, 10538 (hereinafter referred to
as "EXECUTIVE").
WITNESSETH
WHEREAS, the COMPANY is engaged in the provision of
advertising services and related businesses, and intends to
make acquisitions;
WHEREAS, the GUARANTOR is a public reporting company
which owns 100% of the share capital of COMPANY;
WHEREAS, the EXECUTIVE is to be appointed President and
a Director of the COMPANY;
WHEREAS, in the opinion of the Board of Directors of
COMPANY, the success of the business operations of COMPANY is
contingent upon the performance of the EXECUTIVE and the
continued employment of the EXECUTIVE;
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS
AND CONDITIONS HEREAFTER SET FORTH, THE PARTIES AGREE AS
FOLLOWS:
1. The COMPANY does hereby employ, engage and hire the
EXECUTIVE as President of the COMPANY for a period of three
(3) years from the date hereof ("Employment Period").
2. The EXECUTIVE agrees that he will at all times
faithfully, industriously and to the best of his ability,
experience and talent, perform all of the duties that may be
required of and from him pursuant to the expressed and
implicit terms hereof. EXECUTIVE agrees that he will work
full time for COMPANY and devote all of his working time and
effort to COMPANY.
3. (a) The COMPANY shall pay the EXECUTIVE a minimum base
salary of Seventy Five Thousand Dollars ($75,000) per year
("Minimum Base Salary") in equal semi-monthly installments.
(b) Additionally, EXECUTIVE shall be further entitled to
an expense allowance of Six Hundred and Sixty Six and 67/100
Dollars ($666.67) per month. EXECUTIVE further understands
and recognizes that he will be responsible for tax on this
amount unless he keeps and maintains adequate records of
expenses and allowances. It is expressly recognized that
EXECUTIVE has need of a car for business travel in
Westchester and other places. COMPANY agrees to reimburse
90% of the costs of auto expenses, including lease payments
on a car approved in advance in writing by COMPANY; (the
remaining ten percent (10%) of all such auto expenses being a
good faith estimate of the proportion of personal usage of
the car).
(c) COMPANY further agrees to contribute up to a
maximum of $750 per year toward the cost of a term life
insurance policy on the life of EXECUTIVE, the beneficiary of
which is to be named by EXECUTIVE. It is expressly
understood that EXECUTIVE may elect to pay any difference
between the premium and the $750 maximum, or to discontinue
any such policy.
4. The COMPANY shall not pay or reimburse EXECUTIVE for
any travel and other business expenses incurred by EXECUTIVE
in performing his obligations under this Employment Agreement
with the following exceptions: (i) foreign travel previously
authorized in writing by the President of GUARANTOR; (ii)
expenses incurred on behalf of affiliates of COMPANY
previously authorized in writing by President of GUARANTOR,
and (iii) any other business expense previously authorized
in writing by the President of GUARANTOR.
5. In consideration of EXECUTIVE terminating
simultaneously herewith a certain Shareholder Agreement dated
May 31,1995, GUARANTOR has granted EXECUTIVE options to
purchase shares of the GUARANTOR's Common Stock at the dates
and amounts as shown in Exhibit A.
6. EXECUTIVE expressly agrees that he will not during
the term hereof, be interested directly or indirectly in any
form fashion or manner, as a partner, officer, director,
stockholder, advisor or executive in any other business
similar to the business of COMPANY other than affiliates of
the COMPANY unless agreed to by COMPANY in writing. Nothing
herein contained shall, however, limit the rights of the
EXECUTIVE to own up to Five percent (5%) of the capital stock
or other securities of any corporation whose stock or
securities are publicly owned or regularly traded on a public
exchange or in the over-the-counter market. This paragraph
6, is not intended to restrict EXECUTIVE from profits or
revenues resulting from any publications, lectures, tours, or
consulting which EXECUTIVE undertakes in his own time or with
permission from the COMPANY, provided that such work does not
conflict with the interests of the COMPANY.
7. EXECUTIVE hereby agrees to be bound by the
Confidentiality and Non-Compete Covenant, a copy of which is
annexed hereto and made a part of hereof and marked Exhibit
"B".
8 The payments provided for elsewhere in this Employment
Agreement are in addition to any benefits to which EXECUTIVE
may be, or may become entitled under any group
hospitalization, health, dental care, or sick-leave plan,
life or other insurance or death benefit plan, travel or
accident insurance, auto allowance or auto lease plan, or
executive contingent compensation plan, including, without
limitation, capital accumulation and termination pay
programs, restricted or stock purchase plan, stock option
plan, retirement income or pension plan, or other present or
future group executive benefit plan or program of the COMPANY
for which key executives are or shall become eligible, and
EXECUTIVE shall be eligible to receive during the period of
his employment under this Employment Agreement, all benefits
and emoluments for which key executives are eligible under
every such plan or program to the extent permissible taking
to account the relative position of the EXECUTIVE under the
general terms and provisions of such plans or programs and in
accordance with the provisions thereof.
9. (a) If the EXECUTIVE's employment shall be
terminated other than for Cause, then the provisions of
Paragraph 9 (c) shall apply. Dismissal for Cause is limited
to material, willful and intentional misconduct on the part
of the EXECUTIVE, gross negligence in the carrying out of
EXECUTIVE'S duties hereunder, or refusal of EXECUTIVE to
follow reasonable directives from the COMPANY's board of
Directors("Cause").
(b) Upon the occurrence of any event described in
clauses (i) - (iv) below, EXECUTIVE shall have the right to
elect to terminate his employment under this Employment
Agreement by resignation upon not less than ten (10) days
prior written notice, given within a reasonable period of
time not to exceed, except in the case of a continuing
breach, ninety (90) days after the event giving rise to said
right to elect. The events are as follows: (i) the COMPANY's
failure to elect or re-elect or to appoint or re-appoint
EXECUTIVE to the office of Director or President; or (ii)
liquidation or dissolution of the COMPANY; or (iii) if the
COMPANY requires EXECUTIVE to work at a facility more than 50
miles from Harrison, Westchester County, New York, except by
mutual agreement; or (iv) other material breach of this
Employment Agreement by the COMPANY.
(c) In the event of the termination of EXECUTIVE's
employment, except for Cause as set out in paragraph 9 (a),
or upon the occurrence of any event of resignation as in
9(b), the COMPANY shall pay the EXECUTIVE immediately in a
lump sum, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate as the case may
be, as severance pay or liquidated damages, or both, for the
remaining period of this contract a sum equal to the base
salary and a good faith estimate by COMPANY's board of
Directors as to any bonuses payable under Paragraph 10
hereof; and (ii) the restrictive covenants attached hereto
shall terminate as of the date of such termination or
resignation.
10. (a) Within thirty (30) days of September 30 for
each of the three years of this contract EXECUTIVE shall be
paid a bonus consisting of the sum of (a) Seven Thousand
Five Hundred Dollars ($7,500) for each such period, provided
that the Net Revenues of COMPANY for the six months ending on
the relevant September 30 shall exceed Two Hundred and Fifty
Thousand Dollars ($250,000). and (b) ten percent (10%) of the
amount by which Net Revenues for such period exceeds Two
Hundred and Fifty Thousand Dollars ($250,000), less any
advance received by EXECUTIVE pursuant to paragraph 11 below
and not already deducted from a bonus payment. In the event
Net Revenues for the period are below Two Hundred and Fifty
Thousand Dollars ($250,000), no bonus will be payable.
(b) Within thirty (30) days of March 31 for each of the
three years of this contract, EXECUTIVE shall be paid a bonus
consisting of the sum of (a) Fifteen Thousand Dollars
($15,000) for each such year ended March 31, provided that
the Net Revenues of COMPANY for the year ending on the
relevant March 31 shall exceed Five Hundred Thousand Dollars
($500,000) and (b) ten percent (10%) of the amount by which
Net Revenues for such year exceeds Five Hundred Thousand
Dollars ($500,000), less any and all amounts received by
EXECUTIVE pursuant to paragrapoh 10 (a) above for the
immediately preceding September 30 or pursuant to paragraph
11 below and not already deducted from a bonus payment. In
the event Net Revenues for the year are below Five Hundred
Thousand Dollars ($500,000), no bonus will be payable
(c) For purposesof this paragraph 10, "Net Revenue" shall be
equal to the amount of cash received and retained by COMPANY
from the sale of advertising and related services less the
sum of (i) the costs of the provision of such services
payable to any third party not in the employ of COMPANY,
except as otherwise agreed in writing between the parties,
(ii) any introductory or finder's fee or similar fee or
charge payable in respect of the acquisition of such sale,
(iii) any applicable credits, discounts and rebates,
including, but not limited to, quantity, dealer, distributor
and promotional credits, discounts, adjustments and rebates,
and (iv) taxes (such as sales, use or similar taxes) paid or
payable by COMPANY in connection with such sale. If COMPANY
refunds or issues a credit memo on a customer's price due to
customer dissatisfaction or other valid reason, this negative
price shall result in a reduction in Net Revenue and
therefore a reduction of the Bonus due to EXECUTIVE.
11. EXECUTIVE shall be paid an advance against the
bonus set out in Paragraph 10. above within 30 days of June
30 and December 31 in each year. Such advance shall be
thirty seven and one half percent (37.5%) of the amount which
COMPANY determines in good faith would be payable on the next
bonus payment date if Net revenues continued at their present
rate. COMPANY's determination in this matter shall be final.
This advance will be deducted from the next bonus payment(s)
made by COMPANY to EXECUTIVE until the amount has been
recovered. Tax and other withholdings will be deducted from
this prepayment.
12. As an incentive for EXECUTIVE to assist with
acquisitions by COMPANY or GUARANTOR, EXECUTIVE will receive
a fee of Two and one half percent (2.5%) of the consideration
paid by GUARANTOR or any subsidiary, including COMPANY in the
event that it acquires either Chaffee, Craig, Michos & Rocco
of Kingston, NY or DNA Design of New York, NY. The fee will
be paid in the same manner and in proportion to cash, stock,
or other securities, and in the same time period as the
purchase price is paid. In the event that EXECUTIVE or Rocco
Cipriano introduces to GUARANTOR any other advertising agency
or related business which is acquired by GUARANTOR or any
subsidiary, including COMPANY, then Two and one half percent
(2.5%) of the Net Revenues of the acquired agency will be
considered as gross income of COMPANY for the purpose of the
calculation of the Bonus set out in Paragraph 10.
13. GUARANTOR hereby guarantees the payment of all sums
due to EXECUTIVE from COMPANY hereunder. In the event that
any such payment is overdue, EXECUTIVE shall give written
notice to GUARANTOR within ten (10) days of the due date.
Failure by GUARANTOR to make payment of such guaranteed sum
within five (5) business days of receipt of such notice shall
constitute a material breach of this Employment Agreement.
14. This Employment Agreement contains the total and
entire agreement between the parties and shall as of the
effective date hereof, supersede any and all other agreements
between the parties. All prior understandings and/or
agreements between the parties are hereby deemed superseded
and incorporated into the provisions of this Employment
Agreement. The parties acknowledge and agree that neither of
them has made any representations that are not specifically
set forth therein and each of the parties hereto acknowledge
that he or it has relied upon his or its own judgment in
entering the same.
15. The parties hereto do further agree that no waiver
or modification of this Employment Agreement or of any
covenant, condition or limitation herein contained, shall be
valid, unless in writing and duly executed by the party to be
charged therewith and that no evidence of any proceedings or
litigation between either or the parties arising out of or
affecting this agreement or the rights or obligations of any
party hereunder shall be valid and binding unless such waiver
or modification is in writing, duly executed, and the parties
further agree that the provisions of this paragraph may not
be waived except as herein set forth.
16. The parties hereto agree that it is their intention
and covenant that this Employment Agreement and the
performance hereunder shall be construed in accordance with
and under the laws of the State of New York and that the
terms hereof may be enforced in any court of competent
jurisdiction in any action for specific performance which may
be instituted under this Employment Agreement.
17. The parties agree that in the event of any dispute
arising out of this Employment Agreement, they will submit to
the jurisdiction of the New York Supreme Court, New York
County.
18. All notices required or permitted to be given by
either party hereunder shall be in writing and sent by
facsimile or mailed by registered mail, return receipt
requested or equivalent to the other party addressed as
follows:
If to COMPANY:
The President
New Paradigm Software Corp.
630 Third Avenue
New York, NY 10017
or as amended by COMPANY in written notice to EXECUTIVE.
If to EXECUTIVE:
Milton Kapelus
1864 Palmer Avenue, Larchmont, New York, 10538
or as amended by EXECUTIVE in written notice to COMPANY.
Any notice mailed as provided above shall be deemed
completed on the date of receipt. Any Capitalized terms used
herein shall have the same meanings and definitions as set
forth in the Agreement of Purchase and Sale of the same date
unless specifically stated herein.
IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals the day, month and year first above written.
NEW PARADIGM ACQUISITION I CO., INC.
_/s/ Mark Blundell________________
BY: Mark Blundell
_/s/ Milton Kapelus_______________
MILTON KAPELUS
GUARANTOR: NEW PARADIGM SOFTWARE CORP.
_/s/ Mark Blundell_____________
BY: Mark Blundell
Exhibit A
Options in GUARANTOR
Date of
Grant Amount Exercise Price Plan
3/31/98 100,000 [10% OVER MARKET
3/31/98] ACQUISITION
Note the options granted in respect of an acquisition are
subject to the terms and conditions of the Executive Stock
Option Plan as if they were granted under such plan.
EXHIBIT B
CONFIDENTIALITY AND NON-COMPETE COVENANT
The Undersigned, MILTON KAPELUS ("EXECUTIVE"), hereby
covenants, warrants and agrees that in consideration of NEW
PARADIGM ACQUISITION I CO., INC. ("COMPANY") entering into a
contract of employment by and between the undersigned and
COMPANY that all information, processes, plans, customer
lists, methods of operation and other related information,
which information is material to the business of the COMPANY
and any of its affiliates, will be held strictly confidential
and only utilized during the course of employment at the
COMPANY. The undersigned further is aware that the COMPANY
is relying on the within representation in permitting and
allowing the undersigning access to information and that said
information is considered proprietary and the property of the
COMPANY with the further understanding and agreement that in
no event will said proprietary information be utilized except
with the express written consent of the COMPANY.
During the course of EXECUTIVE's employment except in
furtherance of his duties under the terms and conditions of
this contract, the EXECUTIVE further specifically agrees he
will not at any time, in any fashion, form or manner, either
directly or indirectly, divulge, disclose or communicate to
any person, firm, or corporation, in any matter, whatsoever,
any information of any kind, nature or description concerning
any material matters affecting or relating to the business of
the COMPANY, including without limiting the generality of the
foregoing, any of its clients, its manner of operations, its
plans, processes, programs, or other data of any kind, nature
or description without regard to whether any or all of the
foregoing matter shall be deemed confidential, material or
important, that the parties hereto stipulating that as
between them the same are important, material, confidential
and gravely affect the effective and successful conduct of
the business of the COMPANY and its good will and that any
breach of the terms of this paragraph is a material breach
thereof, except where the EXECUTIVE shall be acting on behalf
of the COMPANY.
EXECUTIVE specifically understands and agrees that the
knowledge of client activities, information and related
matters concerning COMPANY and its clients are proprietary
and are deemed the property of COMPANY and that prior to the
expiration or termination of the within agreement and for a
period of two (2) years thereafter, EXECUTIVE understands and
agrees that said proprietary information shall not be
utilized by EXECUTIVE without COMPANY's express written
consent. EXECUTIVE further agrees not to compete with
COMPANY by entering into any competing or related business
activity situated or active within Fifty 50 miles of
COMPANY's offices for a period of one (1) years. EXECUTIVE
further agrees that for a period of two (2) years following
the termination of the within agreement he will not solicit
any past or present clients of COMPANY or any of its
affiliates. In addition thereto, EXECUTIVE recognizes and
agrees that should there be any violation of the within
covenant that EXECUTIVE consents to the jurisdiction of the
New York State Supreme Court, New York County, for any action
requesting injunctive relief and damages insofar as COMPANY
is concerned should EXECUTIVE violate any part of the within
covenant.
Should any of the obligations hereunder be found to be
illegal or unenforceable, as being too broad with respect to
the duration, scope or subject matter thereof, such
obligations shall be deemed and construed to be reduced to
the maximum duration or scope allowed by law.
EXECUTIVE further understands and agrees that COMPANY in
entering into the within agreement is relying upon
EXECUTIVE's representation and warranty that all trade secret
and other proprietary information of COMPANY will be kept
strictly confidential by EXECUTIVE and not utilized by
EXECUTIVE in any manner whatsoever other than on COMPANY's
behalf and during the course of EXECUTIVE's employment with
COMPANY.
_/s/ Milton Kapelus_
Milton Kapelus
Exhibit 3.1 (a) (ii)
EMPLOYMENT AGREEMENT
AGREEMENT made this 31st day of March 1998 by and
between NEW PARADIGM ACQUISITION I CO., INC., a Delaware
Corporation, having its principal place of business located
at 630 Third Avenue, New York, NY 10017 (hereinafter referred
to as "COMPANY"), NEW PARADIGM SOFTWARE CORP., a New York
Corporation having its principal place of business located at
630 Third Avenue, New York, NY 10017 (hereinafter referred to
as "GUARANTOR") and ROCCO CIPRIANO residing at of 126
Highview Street, Mamaroneck, New York, 10543 (hereinafter
referred to as "EXECUTIVE").
WITNESSETH
WHEREAS, the COMPANY is engaged in the provision of
advertising services and related businesses, and intends to
make acquisitions;
WHEREAS, the GUARANTOR is a public reporting company
which owns 100% of the share capital of COMPANY;
WHEREAS, the EXECUTIVE is to be appointed Executive Vice
President and a Director of the COMPANY;
WHEREAS, in the opinion of the Board of Directors of
COMPANY, the success of the business operations of COMPANY is
contingent upon the performance of the EXECUTIVE and the
continued employment of the EXECUTIVE;
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS
AND CONDITIONS HEREAFTER SET FORTH, THE PARTIES AGREE AS
FOLLOWS:
1. The COMPANY does hereby employ, engage and hire the
EXECUTIVE as Executive Vice President of the COMPANY for a
period of three (3) years from the date hereof ("Employment
Period").
2. The EXECUTIVE agrees that he will at all times
faithfully, industriously and to the best of his ability,
experience and talent, perform all of the duties that may be
required of and from him pursuant to the expressed and
implicit terms hereof. EXECUTIVE agrees that he will work
full time for COMPANY and devote all of his working time and
effort to COMPANY
3. (a) The COMPANY shall pay the EXECUTIVE a minimum base
salary of Seventy Five Thousand Dollars ($75,000) per year
("Minimum Base Salary") in equal semi-monthly installments.
(b) Additionally, EXECUTIVE shall be further entitled to
an expense allowance of Six Hundred and Sixty Six and 67/100
Dollars ($666.67) per month. EXECUTIVE further understands
and recognizes that he will be responsible for tax on this
amount unless he keeps and maintains adequate records of
expenses and allowances. It is expressly recognized that
EXECUTIVE has need of a car for business travel in
Westchester and other places. COMPANY agrees to reimburse
90% of the costs of auto expenses, including lease payments
on a car approved in advance in writing by COMPANY; (the
remaining ten percent (10%) of all such auto expenses being a
good faith estimate of the proportion of personal usage of
the car).
(c) COMPANY further agrees to contribute up to a
maximum of $750 per year toward the cost of a term life
insurance policy on the life of EXECUTIVE, the beneficiary of
which is to be named by EXECUTIVE. It is expressly
understood that EXECUTIVE may elect to pay any difference
between the premium and the $750 maximum, or to discontinue
any such policy.
4. The COMPANY shall not pay or reimburse EXECUTIVE for
any travel and other business expenses incurred by EXECUTIVE
in performing his obligations under this Employment Agreement
with the following exceptions: (i) foreign travel previously
authorized in writing by the President of GUARANTOR; (ii)
expenses incurred on behalf of affiliates of COMPANY
previously authorized in writing by President of GUARANTOR,
and (iii) any other business expense previously authorized
in writing by the President of GUARANTOR.
5. In consideration of EXECUTIVE terminating
simultaneously herewith a certain Shareholder Agreement dated
May 31, 1996, GUARANTOR has granted EXECUTIVE options to
purchase shares of the GUARANTOR's Common Stock at the dates
and amounts as shown in Exhibit A.
6. EXECUTIVE expressly agrees that he will not during
the term hereof, be interested directly or indirectly in any
form fashion or manner, as a partner, officer, director,
stockholder, advisor or executive in any other business
similar to the business of COMPANY other than affiliates of
the COMPANY unless agreed to by COMPANY in writing. Nothing
herein contained shall, however, limit the rights of the
EXECUTIVE to own up to Five percent (5%) of the capital stock
or other securities of any corporation whose stock or
securities are publicly owned or regularly traded on a public
exchange or in the over-the-counter market. This paragraph
6, is not intended to restrict EXECUTIVE from profits or
revenues resulting from any publications, lectures, tours, or
consulting which EXECUTIVE undertakes in his own time or with
permission from the COMPANY, provided that such work does not
conflict with the interests of the COMPANY.
7. EXECUTIVE hereby agrees to be bound by the
Confidentiality and Non-Compete Covenant, a copy of which is
annexed hereto and made a part of hereof and marked Exhibit
"B".
8 The payments provided for elsewhere in this Employment
Agreement are in addition to any benefits to which EXECUTIVE
may be, or may become entitled under any group
hospitalization, health, dental care, or sick-leave plan,
life or other insurance or death benefit plan, travel or
accident insurance, auto allowance or auto lease plan, or
executive contingent compensation plan, including, without
limitation, capital accumulation and termination pay
programs, restricted or stock purchase plan, stock option
plan, retirement income or pension plan, or other present or
future group executive benefit plan or program of the COMPANY
for which key executives are or shall become eligible, and
EXECUTIVE shall be eligible to receive during the period of
his employment under this Employment Agreement, all benefits
and emoluments for which key executives are eligible under
every such plan or program to the extent permissible taking
to account the relative position of the EXECUTIVE under the
general terms and provisions of such plans or programs and in
accordance with the provisions thereof.
9. (a) If the EXECUTIVE's employment shall be
terminated other than for Cause, then the provisions of
Paragraph 9 (c) shall apply. Dismissal for Cause is limited
to material, willful and intentional misconduct on the part
of the EXECUTIVE, gross negligence in the carrying out of
EXECUTIVE'S duties hereunder, or refusal of EXECUTIVE to
follow reasonable directives from the COMPANY's board of
directors.("Cause").
(b) Upon the occurrence of any event described in
clauses (i) - (iv) below, EXECUTIVE shall have the right to
elect to terminate his employment under this Employment
Agreement by resignation upon not less than ten (10) days
prior written notice, given within a reasonable period of
time not to exceed, except in the case of a continuing
breach, ninety (90) days after the event giving rise to said
right to elect. The events are as follows: (i) the COMPANY's
failure to elect or re-elect or to appoint or re-appoint
EXECUTIVE to the office of Director or Executive Vice
President; or (ii) liquidation or dissolution of the COMPANY;
or (iii) if the COMPANY requires EXECUTIVE to work at a
facility more than 50 miles from Harrison, Westchester
County, New York, except by mutual agreement; or (iv) other
material breach of this Employment Agreement by the COMPANY.
(c) In the event of the termination of EXECUTIVE's
employment, except for Cause as set out in paragraph 9 (a),
or upon the occurrence of any event of resignation as in
9(b), the COMPANY shall pay the EXECUTIVE immediately in a
lump sum, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate as the case may
be, as severance pay or liquidated damages, or both, for the
remaining period of this contract a sum equal to the base
salary and a good faith estimate by COMPANY's board of
Directors as to any bonuses payable under Paragraph 10
hereof; and (ii) the restrictive covenants attached hereto
shall terminate as of the date of such termination or
resignation.
10. (a) Within thirty (30) days of September 30 for each
of the three years of this contract EXECUTIVE shall be paid a
bonus consisting of the sum of (a) Seven Thousand Five
Hundred Dollars ($7,500) for each such period, provided that
the Net Revenues of COMPANY for the six months ending on the
relevant September 30 shall exceed Two Hundred and Fifty
Thousand Dollars ($250,000). and (b) ten percent (10%) of the
amount by which Net Revenues for such period exceeds Two
Hundred and Fifty Thousand Dollars ($250,000), less any
advance received by EXECUTIVE pursuant to paragraph 11 below
and not already deducted from a bonus payment. In the event
Net Revenues for the period are below Two Hundred and Fifty
Thousand Dollars ($250,000), no bonus will be payable.
(b) Within thirty (30) days of March 31 for each of the
three years of this contract, EXECUTIVE shall be paid a bonus
consisting of the sum of (a) Fifteen Thousand Dollars
($15,000) for each such year ended March 31, provided that
the Net Revenues of COMPANY for the year ending on the
relevant March 31 shall exceed Five Hundred Thousand Dollars
($500,000) and (b) ten percent (10%) of the amount by which
Net Revenues for such year exceeds Five Hundred Thousand
Dollars ($500,000), less any and all amounts received by
EXECUTIVE pursuant to paragrapoh 10 (a) above for the
immediately preceding September 30 or pursuant to paragraph
11 below and not already deducted from a bonus payment. In
the event Net Revenues for the year are below Five Hundred
Thousand Dollars ($500,000), no bonus will be payable
(c) For purposesof this paragraph 10, "Net Revenue" shall be
equal to the amount of cash received and retained by COMPANY
from the sale of advertising and related services less the
sum of (i) the costs of the provision of such services
payable to any third party not in the employ of COMPANY,
except as otherwise agreed in writing between the parties,
(ii) any introductory or finder's fee or similar fee or
charge payable in respect of the acquisition of such sale,
(iii) any applicable credits, discounts and rebates,
including, but not limited to, quantity, dealer, distributor
and promotional credits, discounts, adjustments and rebates,
and (iv) taxes (such as sales, use or similar taxes) paid or
payable by COMPANY in connection with such sale. If COMPANY
refunds or issues a credit memo on a customer's price due to
customer dissatisfaction or other valid reason, this negative
price shall result in a reduction in Net Revenue and
therefore a reduction of the Bonus due to EXECUTIVE.
11. EXECUTIVE shall be paid an advance against the
bonus set out in Paragraph 10. above within 30 days of June
30 and December 31 in each year. Such advance shall be
thirty seven and one half percent (37.5%) of the amount which
COMPANY determines in good faith would be payable on the next
bonus payment date if Net revenues continued at their present
rate. COMPANY's determination in this matter shall be final.
This advance will be deducted from the next bonus payment(s)
made by COMPANY to EXECUTIVE until the amount has been
recovered. Tax and other withholdings will be deducted from
this prepayment.
12. As an incentive for EXECUTIVE to assist with
acquisitions by COMPANY or GUARANTOR, EXECUTIVE will receive
a fee of Two and one half percent (2.5%) of the consideration
paid by GUARANTOR or any subsidiary, including COMPANY in the
event that it acquires either Chaffee, Craig, Michos & Rocco
of Kingston, NY or DNA Design of New York, NY. The fee will
be paid in the same manner and in proportion to cash, stock,
or other securities, and in the same time period as the
purchase price is paid. In the event that EXECUTIVE or Milton
Kapelus introduces to GUARANTOR any other advertising agency
or related business which is acquired by GUARANTOR or any
subsidiary, including COMPANY, then Two and one half percent
(2.5%) of the Net Revenues of the acquired agency will be
considered as gross income of COMPANY for the purpose of the
calculation of the Bonus set out in Paragraph 10.
13. GUARANTOR hereby guarantees the payment of all sums
due to EXECUTIVE from COMPANY hereunder. In the event that
any such payment is overdue, EXECUTIVE shall give written
notice to GUARANTOR within ten (10) days of the due date.
Failure by GUARANTOR to make payment of such guaranteed sum
within five (5) business days of receipt of such notice shall
constitute a material breach of this Employment Agreement.
14. This Employment Agreement contains the total and
entire agreement between the parties and shall as of the
effective date hereof, supersede any and all other agreements
between the parties. All prior understandings and/or
agreements between the parties are hereby deemed superseded
and incorporated into the provisions of this Employment
Agreement. The parties acknowledge and agree that neither of
them has made any representations that are not specifically
set forth therein and each of the parties hereto acknowledge
that he or it has relied upon his or its own judgment in
entering the same.
15. The parties hereto do further agree that no waiver
or modification of this Employment Agreement or of any
covenant, condition or limitation herein contained, shall be
valid, unless in writing and duly executed by the party to be
charged therewith and that no evidence of any proceedings or
litigation between either or the parties arising out of or
affecting this agreement or the rights or obligations of any
party hereunder shall be valid and binding unless such waiver
or modification is in writing, duly executed, and the parties
further agree that the provisions of this paragraph may not
be waived except as herein set forth.
16. The parties hereto agree that it is their intention
and covenant that this Employment Agreement and the
performance hereunder shall be construed in accordance with
and under the laws of the State of New York and that the
terms hereof may be enforced in any court of competent
jurisdiction in any action for specific performance which may
be instituted under this Employment Agreement.
17. The parties agree that in the event of any dispute
arising out of this Employment Agreement, they will submit to
the jurisdiction of the New York Supreme Court, New York
County.
18. All notices required or permitted to be given by
either party hereunder shall be in writing and sent by
facsimile or mailed by registered mail, return receipt
requested or equivalent to the other party addressed as
follows:
If to COMPANY:
The President
New Paradigm Software Corp.
630 Third Avenue
New York, NY 10017
or as amended by COMPANY in written notice to EXECUTIVE.
If to EXECUTIVE:
Rocco Cipriano
of 126 Highview Street, Mamaroneck, New York, 10543
or as amended by EXECUTIVE in written notice to COMPANY.
Any notice mailed as provided above shall be deemed
completed on the date of receipt. Any Capitalized terms used
herein shall have the same meanings and definitions as set
forth in the Agreement of Purchase and Sale of the same date
unless specifically stated herein.
IN WITNESS WHEREOF, the parties have hereunto set their
hands and seals the day, month and year first above written.
NEW PARADIGM ACQUISITION I CO., INC.
_/s/ Mark Blundell______________
BY: Mark Blundell
__/s/Rocco Cipriano_____________
ROCCO CIPRIANO
GUARANTOR: NEW PARADIGM SOFTWARE CORP.
_/s/ Mark Blundell___________
BY: Mark Blundell
Exhibit A
Options in GUARANTOR
Date of
Grant Amount Exercise Price Plan
3/31/98 100,000 [10% OVER MARKET
OFFER ON 3/31/98] ACQUISITION
Note the options granted in respect of an acquisition are
subject to the terms and conditions of the Executive Stock
Option Plan as if they were granted under such plan.
EXHIBIT B
CONFIDENTIALITY AND NON-COMPETE COVENANT
The Undersigned, ROCCO CIPRIANO ("EXECUTIVE"), hereby
covenants, warrants and agrees that in consideration of NEW
PARADIGM ACQUISITION I CO., INC. ("COMPANY") entering into a
contract of employment by and between the undersigned and
COMPANY that all information, processes, plans, customer
lists, methods of operation and other related information,
which information is material to the business of the COMPANY
and any of its affiliates, will be held strictly confidential
and only utilized during the course of employment at the
COMPANY. The undersigned further is aware that the COMPANY
is relying on the within representation in permitting and
allowing the undersigning access to information and that said
information is considered proprietary and the property of the
COMPANY with the further understanding and agreement that in
no event will said proprietary information be utilized except
with the express written consent of the COMPANY.
During the course of EXECUTIVE's employment except in
furtherance of his duties under the terms and conditions of
this contract, the EXECUTIVE further specifically agrees he
will not at any time, in any fashion, form or manner, either
directly or indirectly, divulge, disclose or communicate to
any person, firm, or corporation, in any matter, whatsoever,
any information of any kind, nature or description concerning
any material matters affecting or relating to the business of
the COMPANY, including without limiting the generality of the
foregoing, any of its clients, its manner of operations, its
plans, processes, programs, or other data of any kind, nature
or description without regard to whether any or all of the
foregoing matter shall be deemed confidential, material or
important, that the parties hereto stipulating that as
between them the same are important, material, confidential
and gravely affect the effective and successful conduct of
the business of the COMPANY and its good will and that any
breach of the terms of this paragraph is a material breach
thereof, except where the EXECUTIVE shall be acting on behalf
of the COMPANY.
EXECUTIVE specifically understands and agrees that the
knowledge of client activities, information and related
matters concerning COMPANY and its clients are proprietary
and are deemed the property of COMPANY and that prior to the
expiration or termination of the within agreement and for a
period of two (2) years thereafter, EXECUTIVE understands and
agrees that said proprietary information shall not be
utilized by EXECUTIVE without COMPANY's express written
consent. EXECUTIVE further agrees not to compete with
COMPANY by entering into any competing or related business
activity situated or active within Fifty 50 miles of
COMPANY's offices for a period of one (1) years. EXECUTIVE
further agrees that for a period of two (2) years following
the termination of the within agreement he will not solicit
any past or present clients of COMPANY or any of its
affiliates. In addition thereto, EXECUTIVE recognizes and
agrees that should there be any violation of the within
covenant that EXECUTIVE consents to the jurisdiction of the
New York State Supreme Court, New York County, for any action
requesting injunctive relief and damages insofar as COMPANY
is concerned should EXECUTIVE violate any part of the within
covenant.
Should any of the obligations hereunder be found to be
illegal or unenforceable, as being to broad with respect to
the duration, scope or subject matter thereof, such
obligations shall be deemed and construed to be reduced to
the maximum duration or scope allowed by law.
EXECUTIVE further understands and agrees that COMPANY in
entering into the within agreement is relying upon
EXECUTIVE's representation and warranty that all trade secret
and other proprietary information of COMPANY will be kept
strictly confidential by EXECUTIVE and not utilized by
EXECUTIVE in any manner whatsoever other than on COMPANY's
behalf and during the course of EXECUTIVE's employment with
COMPANY.
_/s/ Rocco Cipriano_
Rocco Cipriano
Exhibit 4.2 (b) - 1
FORM OF ASSIGNMENT OF COPYRIGHTS
WHEREAS KAPELUS & CIPRIANO, INC., a corporation having
its principal office at 550 Mamaroneck Avenue, Harrison, New
York ("SKC") has good right and title to all copyrights shown
on Schedule A which is annexed hereto and made a part hereof
("Copyrights"); and
WHEREAS NEW PARADIGM ACQUISITION I CO. INC., a
Delaware corporation having its principal office at 630 Third
Avenue, New York, New York ("NPAIC") has acquired said
Copyrights pursuant to the terms and conditions of a certain
Agreement of Purchase and Sale of Assets, dated the date
hereof.
NOW, THEREFORE, for good and valuable consideration,
receipt of which is hereby acknowledged, the parties agree as
follows:
SKC does hereby assign to NPAIC all of its right title
and interest in and to the aforementioned Copyrights,
together with the goodwill of the business symbolized by
same.
SKC hereby reiterates and ratifies all representations
and warranties which it has made with respect to such
Copyrights as set forth in the aforesaid Agreement of
Purchase and Sale of Assets as if such representations were
set forth herein in their entirety.
KAPELUS & CIPRIANO, INC.
By:__/s/ Milton Kapelus____________
[Notary ]
Exhibit 4.2 (b) - 2
FORM OF ASSIGNMENT OF TRADEMARKS
WHEREAS KAPELUS & CIPRIANO, INC., a corporation having
its principal office at 550 Mamaroneck Avenue, Harrison, New
York ("SKC") has adopted the trademarks shown on Schedule A
which is annexed hereto and made a part hereof
("Trademarks"); and
WHEREAS NEW PARADIGM ACQUISITION I CO. INC., a
Delaware corporation having its principal office at 630 Third
Avenue, New York, New York ("NPAIC") has acquired said
Trademarks pursuant to the terms and conditions of a certain
Agreement of Purchase and Sale of Assets, dated the date
hereof.
NOW, THEREFORE, for good and valuable consideration,
receipt of which is hereby acknowledged, the parties agree as
follows:
SKC does hereby assign to NPAIC all of its right title
and interest in and to the aforementioned Trademarks,
together with the goodwill of the business symbolized by
these marks.
SKC hereby reiterates and ratifies all representations
and warranties which it has made with respect to such
Trademarks as set forth in the aforesaid Agreement of
Purchase and Sale of Assets as if such representations were
set forth herein in their entirety.
KAPELUS & CIPRIANO, INC.
By:_/s/ Milton Kapelus_____________
[Notary
Schedule 4.2 (d)
[List of contracts to be assigned]
TO BE PROVIDED
Exhibit 4.2 (d)
[Form of Assignment of contracts
Exhibit 4.2(e)
FORM OF OPINION LETTER
New Paradigm Acquisition I Co., Inc.
630 Third Avenue
New York
NY 10017
Gentlemen:
We have acted as counsel for Kapelus & Cipriano,
Inc. ("Seller"), a New York sub-chapter S corporation in
connection with the execution and delivery of the following
documents:
a) An Agreement of Purchase and Sale of Assets between
Seller and New Paradigm Acquisition I Co. Inc. ("Buyer")
dated March 31, 1998 (the "Purchase Agreement");
The foregoing are collectively referred to as the Documents.
Capitalized terms used herein shall have the meanings
assigned to said terms in the Documents.
We have reviewed such matters of law and have
examined such documents, records, agreements, and
certificates of public officials and officers of the Seller
as we have deemed necessary for the opinions hereinafter
expressed. In such examination, we have assumed the
genuineness of signatures on original documents and the
conformity to original documents of all copies submitted to
us as certified, conformed or photographic copies; and as to
certificates of public officials, we have assumed the same to
have been properly given and to be accurate. As to various
questions of fact material to our opinion, we have relied
upon the attached certificates of officers of Seller. As to
any matter of fact contained in such certificates of officers
of the Seller, we have no reason to believe such certificates
to be inaccurate.
On the basis of the foregoing, we are of the
opinion that:
1. Seller is a sub-chapter S corporation duly organized
and validly existing and in good standing under the laws of
the State of New York and has all requisite corporate power
and authority to carry on its business as now conducted and
as proposed to be conducted.
2. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or
filing with, any federal, state or local governmental
authority on the part of Seller is required in connection
with the consummation of the transactions contemplated by the
Documents or related documents.
3. All corporate action on the part of Seller, its
officers and directors necessary for the authorization,
execution and delivery of the Purchase Agreement has been
taken and the performance of all obligations of Seller
thereunder, and the Purchase Agreement, constitute valid and
legally binding obligations of Seller enforceable in
accordance with their respective terms except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other
similar laws relating to or affecting the rights of creditors
generally, including, without limitation, laws relating to
fraudulent transfers or conveyances, preferences and
equitable subordination. The enforceability of the Seller's
obligations under the Purchase Agreement, is subject to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
4 The execution, delivery and performance of the
Documents and the consummation of the transactions
contemplated thereby, do not nor will not (i) conflict with
or violate any provisions of the Certificate of Incorporation
or By-Laws of Seller, (ii) to our knowledge, with or without
the giving of notice or the passage of time, or both, result
in a breach of, or violate, or be in conflict with, or
constitute a default under, or permit the termination of, or
cause of permit acceleration under, any agreement or
instrument of any debt or obligation to which Seller is a
party or any of its assets is subject or bound, (iii) to our
knowledge, require the consent of any party to any agreement
to which the Seller is a party, or to which any of the
Purchased Assets is subject or bound, (iv) to our knowledge,
result in the creation or imposition of any lien upon any of
the Purchased Assets, or (v) violate any law, rule or
regulation or, to our knowledge, any order, judgment, decree
or award, of any court, governmental authority or arbitrator
to or by which the Seller or any of the Purchased Assets is
subject or bound.
Very truly yours,
Exhibit 4.3(e)
FORM OF CURTO BARTON OPINION LETTER
Curto Barton & Alesi, P.C.
Suite One North Five
One Huntington Quadrangle
Melville NY 11747
FORM TO BE PROVIDED - IT SHALL GENERALLY STATE:
1. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the
state of Delaware. NPSC is a corporation duly incorporated,
validly existing and in good standing under the laws of the
state of New York.
2. The execution, delivery and performance of the
Agreement has been duly and validly authorized by all
necessary corporate action of Buyer and NPSC. Buyer and NPSC
have duly executed and delivered the Agreement.
