<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
June 30, 1997 1-13906
BALLANTYNE OF OMAHA, INC.
-------------------------
(Exact name of Registrant as specified in its charter)
Delaware 47-0587703
------------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4350 Mckinley Street, Omaha, Nebraska 68112
-------------------------------------------
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code:
(402) 453-4444
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- -----
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of the latest practicable date:
Class Outstanding as of July 31, 1997
- ----------------- 9,016,319
Common Stock, $.01
par value
<PAGE>
BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
------------------------------------------
INDEX
-----
Page No.
--------
Part I. Financial Information
Item I. Financial Statements
Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 2 - 3
Consolidated Statements of Income
for the Three Months and Six Months
Ended June 30, 1997 and 1996 4
Consolidated Statements of Stockholders' Equity
for the Six Months Ended June 30, 1997 5
Consolidated Statements of Cash Flows
for the Six Months Ended
June 30, 1997 and 1996 6 - 7
Notes to Consolidated Financial
Statements 8 - 10
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 11 - 14
Part II. Other Information
Item 4. Submission of matters to a vote of
Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Page 1
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BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
June 30, December 31,
1997 1996
------------ -----------
(Unaudited)
Current
Cash $5,685,071 6,042,593
Accounts receivable (less
allowance of $157,850
at June 30, 1997 and
$143,000 at December 31, 1996) 9,913,411 9,090,616
Inventories 15,467,712 11,901,123
Deferred income taxes 596,915 501,025
Other current assets 157,926 103,702
------------ -----------
Total current assets 31,821,035 27,639,059
Net property, plant and equipment 5,418,430 3,863,809
Goodwill, other intangibles and
other assets, net 1,087,695 959,352
------------ -----------
$38,327,160 32,462,220
------------ -----------
------------ -----------
See accompanying notes to consolidated financial statements.
Page 2
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BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
------------ -----------
(Unaudited)
LIABILITIES:
Current:
Due to Canrad $152,629 93,140
Current installments of long-term debt 50,000 308,107
Accounts payable 6,621,739 5,759,722
Accrued expenses 1,695,708 1,655,883
Income taxes 487,839 79,754
------------ -----------
Total current liabilities 9,007,915 7,896,606
Deferred income taxes 399,322 386,472
Long-term debt, excluding current portion 151,219 150,195
------------ -----------
9,558,456 8,433,273
------------ -----------
STOCKHOLDERS' EQUITY:
Preferred stock, par value
$.01 per share; authorized
1,000,000 shares - -
Common stock, par value
$.01 per share; authorized
25,000,000 shares; 8,892,519 shares
issued and outstanding at June 30, 1997
and 8,569,769 at December 31, 1996 88,927 85,698
Additional paid-in capital 20,219,632 18,906,556
Retained earnings 8,460,145 5,036,693
------------ -----------
28,768,704 24,028,947
------------ -----------
$38,327,160 32,462,220
------------ -----------
------------ -----------
See accompanying notes to consolidated financial statements.
Page 3
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BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ------------------------
1997 1996 1997 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales $16,348,995 12,495,223 31,073,809 23,857,860
Cost of sales 11,416,489 8,900,770 21,785,256 17,075,185
------------ ------------ ----------- -----------
Gross profit 4,932,506 3,594,453 9,288,553 6,782,675
Total operating expenses 2,140,526 1,578,922 4,081,292 3,152,602
------------ ------------ ----------- -----------
Income from operations 2,791,980 2,015,531 5,207,261 3,630,073
Net interest income (expense) 51,593 (195,666) 104,773 (381,771)
------------ ------------ ----------- -----------
Income before taxes 2,843,573 1,819,865 5,312,034 3,248,302
Income taxes 988,323 714,757 1,888,582 1,281,020
------------ ------------ ----------- -----------
Net income $ 1,855,250 1,105,108 3,423,452 1,967,282
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Net income per share .20 .15 .36 .27
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Weighted average shares
outstanding 9,388,926 7,171,977 9,392,082 7,171,977
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
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BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Additional
Preferred Common Paid-In Retained
Stock Stock Capital Earnings Total
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 - 85,698 18,906,556 5,036,693 24,028,947
Net Income 3,423,452 3,423,452
Issuance of 322,750 shares of Common Stock
upon exercise of options - 3,229 1,313,076 1,316,305
-----------------------------------------------------------------------
Balance at June 30, 1997 - 88,927 20,219,632 8,460,145 28,768,704
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
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BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 1997 and 1996
1997 1996
----------- ----------
Cash flows from operating activities:
Net income $3,423,452 1,450,831
Depreciation and amortization 435,333 291,362
Changes in assets and liabilities
Trade receivables (415,599) (1,808,909)
Other current assets (42,223) (54,170)
Inventories (2,745,958) (103,372)
Accounts payable 339,913 833,961
Accrued expenses (203,046) 64,403
Income taxes 339,237 (16,839)
Goodwill, other intangibles
and other assets (16,506) 22,963
----------- ----------
Net cash provided by operating activities 1,114,603 680,230
----------- ----------
Cash flow from investing activities:
Capital expenditures (1,287,858) (107,033)
Purchase of net assets (750,000) -
----------- ----------
Net cash used in investing activities (2,037,858) (107,033)
----------- ----------
Cash flows from financing activities:
Change in due to Canrad 59,489 (34,406)
Proceeds from long-term debt 1,896 -
Repayment of long-term debt (811,957) (485,943)
Proceeds from exercise of options 1,316,305 -
----------- ----------
Net cash provided by (used in)
financing activities 565,733 (520,349)
----------- ----------
Page 6
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BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
1997 1996
----------- ----------
Net (decrease) increase in cash (357,522) 52,848
Cash at beginning of year 6,042,593 260,006
----------- ----------
Cash at end of period 5,685,071 312,854
----------- ----------
----------- ----------
Supplemental disclosure of
cash flow information:
Interest payments 11,012 22,193
----------- ----------
----------- ----------
Income tax payments 1,480,497 401,551
----------- ----------
----------- ----------
Other noncash activities in 1996 included approximately $382,300 of additional
capital lease obligations in exchange for equipment.
Other noncash activities in the second quarter of 1997 include recording the
present value of a noncompete agreement for approximately $197,000.
See accompanying notes to consolidated financial statements.
Page 7
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BALLANTYNE OF OMAHA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1997
1. THE COMPANY
Ballantyne of Omaha Inc. ("Ballantyne" or the "Company") and its
subsidiaries Strong International Inc., Ballantyne Fabricators, Inc.,
Xenotech Rental Corp. and Flavor-Crisp of America Inc., develop,
manufacture and distribute commercial motion picture projection
equipment, follow spotlights, computer operated lighting systems and
restaurant equipment. The Company's products are distributed
worldwide through a domestic and international dealer network and are
sold to major movie exhibition companies, sports arenas, auditoriums,
amusement parks, special venues, restaurants, supermarkets and
convenience food stores. 23.1% of the Company's common stock is owned
by Canrad of Delaware Inc. ("Canrad"), which is an indirect wholly-
owned subsidiary of ARC International Corporation.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation. The consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
and include all adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for the periods
presented. All such adjustments are, in the opinion of management, of
a normal, recurring nature. While the Company believes that the
disclosures presented are adequate to make the information not
misleading, it is suggested that these consolidated financial
statements be read in connection with the consolidated financial
statements and related notes included in the Company's latest annual
report on Form 10-K.
2. INVENTORIES
Inventories consist of the following:
June 30, December 31,
1997 1996
----------- ------------
Raw Material $11,354,902 8,888,123
Work-in-process 2,254,141 2,184,945
Finished goods 1,858,669 828,055
----------- ------------
$15,467,712 11,901,123
----------- ------------
----------- ------------
Page 8
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3. NET INCOME PER SHARE
Net income per share is based on the weighted average number of common
shares outstanding. The effects of the assumed exercise of
outstanding stock options and warrants have been included in the
income per share calculation for the period that the shares were
assumed issued using the treasury stock method.
The Company's Board of Directors declared a 3-for-2 stock split of the
Company's common stock on January 29, 1997. The stock split was in
the form of a 50% common stock dividend payable March 5, 1997 to
stockholders of record on February 10, 1997. The Company's Board of
Directors declared a 10% stock distribution on January 23, 1996, which
was issued on March 8, 1996, to shareholders of record on February 9,
1996. This stock distribution resulted in the issuance of 600,000
shares of common stock. The stock distribution is not considered a
distribution of earnings except to the extent that the Company has
retained earnings, but rather had the effect of increasing the number
of outstanding shares.
Per share data have been restated for these stock transactions as of
the earliest period presented.
4. RELATED PARTY TRANSACTIONS
The Company is a party to a management agreement with Canrad, Inc.
Pursuant to the terms of the agreement, Canrad, Inc. provides certain
services to the Company. Such services include strategic planning,
acquisition assistance, procurement of capital and debt arrangements,
securing health and business insurance coverages and other matters.
Fees charged for these services amounted to $150,000 for the six month
periods ended June 30, 1997 and 1996.
5. ACQUISITION
On April 30, 1997, the Company purchased certain net assets, primarily
accounts receivable, inventories and fixed assets of Xenotech Inc.
("Xenotech") for a purchase price of approximately $1,000,000. The
purchase, which was effective as of April 1, 1997, was paid for
through cash flow from operations. The purchase price has been
assigned to the assets acquired based upon the fair market value of
such assets. No goodwill was recorded in connection with the
acquisition. Xenotech produces, sells and rents a complete line of
stationary searchlights and computer operated lighting systems for the
motion picture production, television, live entertainment, theme parks
and architectural industries.
In addition, the Company entered into a five-year non-compete
agreement with Richard Hart, Xenotech's founder and sole proprietor.
The agreement is for a total of $250,000 payable by the Company in
equal installments of $50,000. The present value of the noncompete
payments has been included as part of the total purchase price.
Page 9
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6. RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform to the 1997
presentation.
7. COMMON STOCK
On June 30, 1997, the Company completed a public offering pursuant to
a registration statement on Form S-3 (The "Offering"). Pursuant to
the Offering, Canrad sold 1,932,860 shares of Ballantyne common stock
to the public at the price of $16.875 per share. In addition, Canrad
granted the underwriters an option to purchase an aggregate of up to
333,729 additional shares of common stock at $16.875 per share less
underwriting discounts and commissions to cover over allotments, if
any. The underwriters purchased all 333,729 shares.
While the Company did not offer any shares or pay any expenses
incurred in the offering, the Company did receive $1,146,000 from the
exercise of a warrant and certain stock options, which in aggregate
totaled 280,750 shares and were sold in connection with the Offering.
On June 10, 1997, the stockholders of the Company approved an
amendment to the Company's Certificate of Incorporation to increase
the authorized common stock from 10,000,000 shares to 25,000,000 shares.
The stockholders of the Company also approved an amendment to the 1995
stock option plan to increase the number of shares that may be issued
under the plan from 660,000 shares to 1,060,000 shares.
Page 10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the accompanying unaudited consolidated financial statements and presents a
current assessment of material changes in financial condition and results of
operations. A detailed discussion and analysis for the preceding years appears
in the Registrant's December 31, 1996 Annual Report to Stockholders.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1996
Net sales for the six months ended June 30, 1997 (the "1997 Period")
increased $7.2 million or 30.3% to $31.1 million from $23.9 million for the six
months ended June 30, 1996 (the "1996 Period"). The following table sets forth
comparative consolidated net sales of theatre products and restaurant products
for the respective periods.
Six Months Ended
June 30,
1997 1996
------------- -----------
Theatre Products $29,768,600 22,698,900
Restaurant Products 1,305,200 1,159,000
------------- -----------
$31,073,800 23,857,900
------------- -----------
------------- -----------
Net sales of theatre products increased $7.1 million or 31.1% for the
1997 Period as compared to the 1996 Period. Net sales of commercial motion
picture projection equipment ("Motion picture projection equipment") increased
$6.2 million or 28.7% and net sales of follow spotlights and other lighting
equipment ("lighting equipment") increased $846,000 or 81.5%. The majority of
the increase in net sales of motion picture projection equipment was
attributable to increased sales to domestic customers while the increase in
lighting equipment was due to the acquisition of Xenotech. Net sales of
replacement parts increased $619,760 or 21.8% to $3.5 million for the 1997
Period from $2.8 million in the 1996 Period.
Net sales of restaurant products increased by $146,200 or 12.6% over
the same period in 1996. The increase was mainly due to an increase in sales of
pressure fryers.
Gross profit as a percentage of net sales increased to 29.9% for the
1997 Period from 28.4% for the 1996 Period. The increases were attributable to
improved efficiencies realized by purchasing and manufacturing due to an
increase in production volume.
Operating expenses increased $928,690 or 29.5% for the 1997 Period to
$4,081,292 from $3,152,602 for the 1996 Period. As a percentage of net sales,
operating expenses decreased to 13.1%
Page 11
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for the 1997 Period from 13.2% for the 1996 Period, as a result of a greater
increase in net sales without a proportional significant increase in selling
and general and administrative expenses.
Net interest income was $104,773 for the six months ended June 30,
1997 as compared to net interest expense of $381,771 for the same period in
1996. The decrease in interest expense reflects the repayment of the
Company's Industrial Development Revenue Bonds (the "IDRBs") in March 1997
and the absence of borrowings under the Company's line of credit facility
with Norwest Bank (the "Norwest Facility").
The effective tax rate was 35.6% for the 1997 Period as compared to
the statutory rate of 34%. The difference relates to the effects of state
income taxes and the non-deductibility of certain intangible expenses,
principally goodwill.
QUARTER ENDED JUNE 30, 1997 COMPARED TO THE QUARTER ENDED JUNE 30, 1996
Net sales for the quarter ended June 30, 1997 (the "1997 Period")
increased $3.9 million or 30.8% to $16.3 million from $12.5 million for the
quarter ended June 30, 1996 (the "1996 Period"). The following table sets forth
comparative consolidated net sales of theatre products and restaurant products
for the respective periods:
Three Months Ended
June 30,
1997 1996
------------- ------------
Theatre Products $15,656,500 11,819,500
Restaurant Products 692,500 675,700
------------- ------------
$16,349,000 12,495,200
------------- ------------
------------- ------------
Net sales of theatre products increased $3.8 million or 32.5% for the
1997 Period as compared to the 1996 Period. Net sales of commercial motion
picture projection equipment ("motion picture projection equipment") increased
$3.1 million or 27.6%, while net sales of follow spotlights and other lighting
equipment ("lighting equipment") increased $732,400. The majority of the
increase in net sales of motion picture projection equipment was attributable to
increased sales of such equipment to domestic customers while the increase in
lighting equipment was due to the acquisition of Xenotech. Net sales of
replacement parts increased $473,600 or 34.6% to $1.8 million for the 1997
Period from $1.4 million in the 1996 Period.
Net sales of restaurant products increased by $16,800 or 2.5%, mainly
due to an increase in sales of pressure fryers.
Gross profit as a percentage of net sales increased to 30.2% for the
1997 Period from 28.8% for the 1996 Period. The increase was attributable to
improved efficiencies realized by
Page 12
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purchasing and manufacturing due to an increase in production volume.
Operating expenses increased $561,604 for the 1997 Period as compared
to the 1996 Period. As a percentage of net sales, operating expenses increased
to 13.1% for the 1997 Period from 12.6% for the 1996 Period, as a result of the
acquisition of Xenotech.
Net interest income was $51,593 for the 1997 Period as compared to
interest expense of $195,666 for the 1996 Period. The decrease in interest
expense reflects the repayment of the Company's Industrial Development
Revenue Bonds in March 1997 and the absence of borrowings under the Norwest
Facility.
The effective tax rate was 34.8% for the 1997 Period as compared to
the statutory rate of 34.0%. The difference relates to the effects of state
income taxes and the non-deductibility of certain intangible expense,
principally goodwill.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had $151,219 of long-term debt. The
debt relates entirely to a non-compete agreement with Richard Hart, the former
owner of Xenotech, Inc., which was entered into when the Company purchased
substantially all of the net assets of Xenotech in April 1997.
In September 1995, the Company entered into the Norwest Facility with
Norwest Bank. The Norwest Facility initially provided for a borrowing
commitment of up to $10.0 million. The commitment reduced by $500,000 on the
first anniversary date of such facility and will reduce by $500,000, $1.0
million and $1.0 million on the second, third and fourth anniversary dates
thereof, respectively. The entire amount outstanding under the Norwest Facility
matures on August 30, 2000. At July 31, 1997, $9.5 million was available for
borrowing under the Norwest Facility. Amounts repaid under the Norwest Facility
will be available for reborrowing. Borrowings outstanding under the Norwest
Facility bear interest, payable monthly, at a rate equal to Norwest Bank's
National Money Market Rate as announced from time to time (8.5% at July 31,
1997). All of the Company's assets secure the Norwest Facility. The Norwest
Facility agreement contains certain restrictive covenants which include, among
other things, a prohibition on the payment of cash dividends and requirements
relating to current debt, current debt service coverage and total debt to
tangible net worth ratios and tangible net worth.
Historically the Company has funded its working capital requirements
through cash flow generated by its operations. Net cash provided by operating
activities for the six months ended June 30, 1997 and 1996 was $1,114,603 and
$680,230, respectively. The increase in net cash provided by operating
activities for the six months ended June 30, 1997 was due primarily to increases
in net income, income taxes payable and accounts payable offset by increases in
trade receivables and inventories.
Page 13
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The Company anticipates that internally generated funds and borrowings
under the Norwest Facility will be sufficient to meet its working capital needs.
The Company expects that it will have capital expenditures of $1.7 million in
1997 which include manufacturing equipment and expansion of its current
facility.
The Company does not engage in any currency hedging activities in
connection with its foreign operations and sales. To date, all of the Company's
international sales have been denominated in U.S. dollars, exclusive of Westrex
sales, which are denominated in Hong Kong Sales.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per share" which revises the calculation and
presentation provisions of Accounting Principles Board Opinion 15 and related
interpretations. Statement No. 128 is effective for the Company's fiscal year
ending December 31, 1997. Retroactive application will be required. The
Company believes the adoption of Statement No. 128 will not have a significant
effect on its reported earnings per share.
Page 14
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PART II. Other Information
Item 4. Submission of matter to a vote of security holders.
The Company's regular Annual Meeting of Stockholders was held on
June 10, 1997 for the purpose of electing three nominees as directors and
approving amendments to the Company's 1995 employee Stock Option Plan (the
"Stock Option Plan") and to the Certificate of Incorporation. The amendment
to the Stock Option Plan increased the number of shares that may be issued
under the plan from 660,000 shares to 1,060,000 shares. The amendment to the
Certificate of Incorporation increased the authorized Common Stock from
10,000,000 shares to 25,000,000 shares. With respect to the election of
directors, all three were re-elected. With respect to the amendments, the
following table summarizes the results of the voting.
Amendment to
Certificate of Incorporation Stock Option Plan
---------------------------- -----------------
For 7,554,066 6,258,107
Against 164,343 490,689
Abstain 70,045 74,917
Broker Non-Vote - 964,741
--------- ---------
--------- ---------
Page 15
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.5 Asset Purchase Agreement dated April 1, 1997, between the Company
and Xenotech, Inc.
3.1 Certificate of Incorporation (Incorporated by reference to Exhibits
3.1 and 3.3 to the Registration Statement on Form S-1, File
No. 33-93244 ("Form S-1").
3.1.1 Amendment to the Certificate of Incorporation.
3.2 By-Laws of the Company (Incorporated by reference to Exhibit 3.2 in
Form S-1).
10.15 Stock Option Agreement dated September 19, 1995 (Incorporated by
reference to Exhibit 10.7 in Form S-1).
10.16 Amendment to Stock Option Agreement adopted June 10, 1997.
10.3.4 Employment Agreement dated April 1, 1997 between the Company and
Richard Hart.
10.3.5 Non-competition Agreement dated April 1, 1997 between the Company
and Richard Hart.
11 Computation of net earnings per share for the three and six months
ended June 30, 1997 (included in financial statements)
27 Financial Data Schedule (for SEC information only)
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended June 30, 1997.
Page 16
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be filed on its behalf by the
undersigned, thereunto duly authorized.
BALLANTYNE OF OMAHA, INC.
Date: August 12, 1997 By: /s/ John Wilmers
_______________________________
John Wilmers, President and
Chief Executive Officer
Date: August 12, 1997 By: /s/ Brad French
_______________________________
Brad French, Secretary, Treasurer,
and Chief Financial Officer
Page 17
<PAGE>
<PAGE>
ASSET
PURCHASE AGREEMENT
PARTIES:
This Agreement is made and entered into as of the 1st day of April,
1997, by and between XENOTECH, INC. and XENOTECH RENTS, both of 7344-7348
Bellaire Avenue, North Hollywood, California 91605, both California
corporations (hereinafter collectively referred to as the "Seller"). RICHARD
HART of 528 Erskine Drive, Pacific Palisades, California, 90272 (the
"Stockholder"), and BALLANTYNE OF OMAHA, INC., 4350 McKinley Street,
Omaha, Nebraska 68112, a Delaware corporation (the "Buyer").
RECITALS:
A. Stockholder is the Owner of all of the issued and outstanding capital
stock of Seller.
B. Seller owns certain Assets which it uses in its business for the
design, manufacture, marketing, distribution, leasing, and sale
of lighting equipment.
C. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, substantially all of such assets, and substantially all of
the business of Seller, subject to the assumption of certain
liabilities of the Seller, upon the terms and conditions of this
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
I. DEFINITIONS
For all purposes of this Agreement, the following terms shall have the
following definitions:
A. "Accounts Receivable" shall mean all open, unpaid invoices and
unapplied credit memos of Seller's business as of the date of the Closing,
subject to a bad debt reserve which currently is Sixteen Thousand Four
Hundred Thirty-three Dollars ($16,433) and which
<PAGE>
shall be adjusted at the date of the Closing. A true and correct list of
Accounts Receivable items as of February 28, 1997, specifically identifying
any accounts or amounts in dispute, is attached hereto as Exhibit 1.
B. "Assumed Liabilities" shall mean:
1. All open purchase orders of Seller pertaining to its business;
provided, however, that Buyer shall not assume any open purchase orders
for equipment, parts or supplies entered into after February 28, 1997,
not in the ordinary course of business. A true and correct list of such
current Purchase Orders is attached hereto as Exhibit 2.
2. All obligations of Seller under existing lease agreements
pertaining to the lease of lighting equipment to Seller's customers;
provided, however, that Buyer shall not assume any obligations of Seller
under lease agreements or arrangements entered into after February 28,
1997, not in the ordinary course of business. A true and correct list of
such current Lease Agreements is attached hereto as Exhibit 3.
3. All liabilities in connection with the debt obligations of the
Seller to California United Bank, N.A., under that certain Business Loan
Agreement dated May 16, 1996, and under certain Promissory Notes dated
May 16, 1996, in the amounts of $100,000, $200,000, and $375,000, and
the corresponding liabilities of the Stockholder for such debts under
that certain Commercial Guaranty Agreement dated May 16, 1996. The
unpaid principal balance of said loans as of February 28, 1997, is
$288,410.67.
4. All express Warranty obligations (as defined herein) on any
lighting equipment sold or leased by Seller. True and correct copies
of Seller's Warranty Agreements are attached hereto as Exhibit 4.
5. Seller's liabilities and obligations under that certain Lease
Agreement and Addendum thereto with Stockholder, with respect to its
current facilities located at 7344-7348 Bellaire Avenue, North
Hollywood, California 91605, a copy of which is attached as Exhibit 14
attached hereto.
6. All of the liabilities of Seller as set forth on its Balance
Sheet dated February 28, 1997, except as otherwise specifically excluded
herein.
7. Notwithstanding any other provision contained herein, Assumed
Liabilities shall not include:
a. Any federal, state or local income, sales, use, franchise,
or any other tax payable with respect to the Purchased
Assets, or operations of Seller for any period prior to the
Closing date,
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including, but not limited to any sales taxes, interest and
penalties pertaining to Seller's unresolved sales tax dispute
with taxing authorities in the State of California, in
excess of $100,000, except: (i) income taxes for the fiscal
year ended March 31, 1997; (ii) accrued liability of Seller
for all current taxes that are set forth on the Balance
Sheet dated February 28, 1997; and (iii) all taxes accrued
by Seller during the month of March 1997 in the ordinary
course of business.
b. Any liability or obligation related to any Assets of Seller
not being purchased by Buyer.
c. Any liability or obligation of Seller arising in connection
with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby.
d. Any liability or obligation arising prior to the Closing
with respect to any of Seller's employees, agents or
independent contractors, whether or not subsequently
employed by Buyer.
e. Any claim or injury to person or property occurring prior to
the date of Closing of any nature whatsoever in connection
with the business or operations of Seller, or relating to
any products sold by Seller.
f. Any liability or obligation arising out of any breach by
Seller and/or Stockholder of any provision of any agreement,
contract or other commitment.
g. Any liability or obligation, including accrued interest,
from the Seller to the Stockholder, including, but not
limited to, the loan payable to Stockholder in the amount of
$306,814.51, plus accrued interest as shown on the Balance
Sheet.
h. Any liabilities other than those expressly assumed by Buyer
hereby.
C. "Balance Sheet" shall mean the unaudited Balance Sheet of Seller as
of February 28, 1997, a copy of which is attached hereto as Exhibit 5, which
Balance Sheet has been prepared in accordance with generally accepted
accounting principles applied on a consistent basis. Said Balance Sheet is a
consolidated Balance Sheet of Xenotech, Inc. and Xenotech Rents.
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D. "Contract" shall mean any of Seller's open agreements, leases,
contracts, purchase orders, sales orders, or other commitments that shall
exist as of February 28, 1997, a true and correct list of all of which is
attached hereto as Exhibit 6, and those entered into thereafter by Seller in
the ordinary course of business.
E. "Fixtures and Equipment" shall mean all of the tooling fixtures,
workbenches, shelving, computers, machinery and all other equipment and
fixtures owned by Seller, a true and correct list of which is attached hereto
as Exhibit 7.
F. "Inventory" shall mean all of Seller's inventories held for resale or
lease in the ordinary course of Seller's business to its customers, and all
of the raw materials, work in process, spare parts, finished products,
wrapping, supply and packaging items, and similar items which together
aggregate the amount listed as Inventory on Seller's Balance Sheet, as
adjusted to date of Closing in the ordinary course of business. This term
shall also include all rights to any equipment that would be a part of
Seller's Inventory held for resale or lease, except that it is in the
possession of third parties such as dealers, resellers, lessees, or end users,
if any, which belong to Seller and which do not constitute Accounts
Receivable. A list of Seller's Inventory and loan and lease inventory is
attached hereto as Exhibit 8.
G. "Purchase Assets" shall mean all of the following Assets as of the
date of the Closing pertaining exclusively to Seller's business, except those
Assets specifically excluded herein:
1. All cash, bank accounts, liquid assets, and all other bank
deposits of Seller.
2. All Accounts Receivable;
3. All Contract rights of Seller;
4. All Fixtures and Equipment;
5. All Inventory;
6. All Books and Records of Seller pertaining to the Purchased
Assets;
7. All trademarks, trade names, patents, patent applications and
interests thereunder, licenses, including patent licenses, copyrights
and copyright licenses pertaining to the Purchased Assets, a true and
correct list of which is attached hereto as Exhibit 9;
8. All invention processes, know-how, formulas, drawings,
blueprints, specifications, flow-sheets, manuals, data, trade secrets,
plans, files, software relating to machining programs, and all other
intangible Assets of any nature whatsoever; and
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9. Any and all other assets of any kind or nature whatsoever
related exclusively to the assets and business of Seller, except any
assets specifically excluded herein.
H. "Warranty" shall mean all warranty obligations of Seller, pertaining
to any lighting equipment sold or leased by Seller, which are based on
express warranties only. Buyer does not assume any liability with respect to
any implied warranty or any liability which shall be in the nature of
personal injury or property damage or other consequential damages, except as
stated herein.
I. "Financial Statements" shall mean the Balance Sheet and all other
exhibits and representations herein containing financial information
pertinent to the Purchased Assets.
II. SALE OF ASSETS
A. At Closing, Seller shall sell, assign, transfer, convey and deliver
to Buyer the Purchased Assets, free and clear of all liabilities,
obligations, liens, security interests and encumbrances of any kind, except
those liabilities expressly assumed by Buyer herein.
B. At Closing, Buyer agrees that it will accept and assume the Assumed
Liabilities.
C. At Closing, Buyer shall wire transfer the Purchase Price to Seller's
bank account.
III. CLOSING
The Closing of the sale (the "Closing") shall take place at Seller's
offices on or before April 30, 1997, but shall be effective as of April 1,
1997. At the Closing, Seller shall deliver to Buyer such bills of sale,
endorsements, assignments, and other good and sufficient instruments of
transfer and conveyance as shall be effective to vest in the Buyer good and
marketable title to the Purchased Assets as provided in this Agreement.
IV. PURCHASE PRICE
The Purchase Price shall be Seven Hundred Fifty Thousand Dollars
($750,000).
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V. ALLOCATION OF PURCHASE PRICE
Buyer shall allocate the Purchase Price among the Purchased Assets in
such manner as it shall determine. Such allocation shall be made at or prior
to the date of Closing. Such allocation shall be made in accordance with the
provisions of Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"), and shall be binding upon Buyer and Seller for all purposes
(including financial accounting purposes, financial and regulatory reporting
purposes, and tax purposes). Buyer and Seller also each agree to file IRS Form
8594 consistent with the foregoing and in accordance with Section 1060 of the
Code.
VI. FURTHER ASSURANCES
From time to time, at Buyer's request, whether at or after the Closing
and without further consideration, Seller and Stockholder will execute and
deliver such further instruments of conveyance and transfer and take such
other action as Buyer reasonably may require more effectively to convey and
transfer to Buyer any of the Purchased Assets.
VII. PAYMENT OF SALES AND SIMILAR TAXES
Buyer will pay all sales, transfer, and documentary taxes, if any,
payable in connection with the sale, transfer, and deliveries to be made to
Buyer hereunder.
VIII. EMPLOYEES OF SELLER
It is Buyer's intention to retain in the employment of Buyer all of the
employees of Seller at the present rate of compensation of such employees;
provided, however, that such expression of the Buyer's intention shall not be
construed as imposing any binding legal obligation on the Buyer to retain any
employee or employees of Seller in the employ of Buyer upon and after the
Closing, nor as to the terms of such employment.
IX. EMPLOYMENT OF STOCKHOLDER
A. Buyer shall employ Stockholder effective immediately upon the
Closing of the transactions herein contemplated. Stockholder shall be
employed by Buyer for a term of five (5) years at an annual base salary of
One Hundred Sixty Thousand Dollars ($160,000), and additional compensation in
the form of a Bonus Plan, the terms of which have been agreed upon by Buyer
and Stockholder. Stockholder shall be employed by Buyer in the capacity of
Vice President in charge of a new division of Buyer which shall be comprised
of the business and assets of Seller being purchased hereunder by Buyer. At
Closing, Buyer and Stockholder shall enter into a written Employment
Agreement in the form and of the
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content of Exhibit 10, attached hereto, the terms and conditions of which
are incorporated herein by this reference.
B. In consideration of Stockholder entering into the Employment
Agreement referenced in subparagraph A above, Buyer shall grant to
Stockholder the right and option to purchase Fifteen Thousand (15,000) shares
of the common stock of Buyer, pursuant to Buyer's 1995 Stock Option Plan, and
on the terms and conditions set forth in the Stock Option Agreement
attached hereto as Exhibit 11 (the "Stock Option Agreement"), the terms and
conditions of which are incorporated herein by this reference. At Closing,
Buyer and Stockholder shall execute the Stock Option Agreement.
X. GUARANTY OF ACCOUNTS RECEIVABLE
At the Closing, Seller and Stockholder shall execute and deliver to
Buyer a Guaranty in the form set forth as Exhibit 12 hereto (the
"Guaranty"), under the terms of which Seller and Stockholder shall
unconditionally guarantee that all indebtedness represented by the Accounts
Receivable of Seller as of the Closing date (less Seller's reserve for
doubtful accounts not to exceed Sixteen Thousand Four Hundred Thirty-three
Dollars ($16,433)) will be paid by the respective debtors to Buyer. In the
event such net indebtedness is not paid on or before one hundred eighty (180)
days after the Closing date, Seller and/or Stockholder shall within ten (10)
days following receipt from Buyer of notice to such effect make payment to
Buyer of an amount in cash equal to the difference between the amount
collected by Buyer and the net receivables as shown on the Balance Sheet,
whereupon Buyer shall promptly assign or cause to be assigned to Seller
and/or Stockholder (as the case may be) all rights, claims, actions or causes
of action which Buyer may have relating to such unpaid receivables.
XI. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER
Seller and Stockholder represent, warrant and covenant to and with Buyer
as follows:
A. Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of California, and has full
corporate power and authority to conduct its business as it is presently
being conducted and to own, sell and convey its properties and Assets.
B. Copies of Seller's Certificate of Incorporation and all amendments
thereof to date, certified by the Secretary of State of California, and of
Seller's Bylaws as amended to date, have been delivered to Buyer and are
complete and correct as of the date of this Agreement. At the Closing, Seller
shall deliver to Buyer a Certificate of Good Standing certified by the
Secretary of State of California.
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C. Seller has all necessary corporate power and authority and has
taken all corporate action necessary to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Seller and constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its respective terms.
D. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will result in (1) a
violation of or a conflict with any of the provisions of the Certificate of
Incorporation or Bylaws of Seller, (2) a breach of, or a default under, any
term or provision of any contract, agreement, indebtedness, lease,
commitment, license, franchise, permit, authorization or concession to which
Seller is a party, which breach or default would have a material adverse
effect on the business or financial condition of Seller or its ability to
consummate the transactions contemplated hereby, or (3) a violation by Seller
of any statute, rule, regulation, ordinance, code, order, judgement, writ,
injunction, decree or award, which violation would have a material adverse
effect on the business or financial condition of Seller or its ability to
consummate the transactions contemplated hereby.
E. Seller knows of no and has not been informed of any consent,
approval or authorization of, or declaration, filing or registration with any
governmental or regulatory authority, or any other person or entity which is
required to be made or obtained by Seller in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except the approval of Seller's Board of
Directors.
F. Neither Seller nor any affiliate of Seller has entered into or will
enter into any contract, agreement, arrangement, or understanding with any
person or firm which will result in the obligation of Buyer or any
Stockholder to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated hereby.
G. Seller currently has and will have and will transfer to Buyer at
Closing, good and marketable title to all of the Purchased Assets, free and
clear of all mortgages, pledges, liens, security interests, conditional sales
agreements, charges, encumbrances, restrictions and equities, except those
mortgages, pledges, liens, security interests and other liabilities expressly
assumed by Buyer hereunder.
H. Except as described in Exhibit 15, there are no material actions,
suits, claims, proceedings or investigations pending or, to the best knowledge
of Seller, threatened against or affecting the Purchased Assets, at law or in
equity, or before or by any federal, state, municipal or other governmental
court, department, commission, board, bureau, agency or instrumentality.
Prior to the Closing, either (1) Seller shall have resolved the matters
disclosed in Exhibit 15, or (2) Buyer and Seller shall agree as to how such
matters will be handled.
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I. The Assets being purchased hereunder by Buyer constitute all of the
Assets of Seller.
J. Other than as set forth in this Agreement or the Exhibits hereto,
there are no material liabilities or obligations, secured or unsecured,
whether accrued, absolute, contingent, unasserted or otherwise, affecting the
Purchased Assets. Unless consented to by Buyer in writing, no liabilities
have been or will be incurred since February 28, 1997, except in the ordinary
course of business. Seller has no liabilities or obligations whatsoever,
either accrued, absolute, contingent or otherwise, which are not reflected or
provided for in the Financial Statements except (i) those arising after the
date of the Balance Sheet which are in the ordinary course of business, in
each case in normal amounts and none of which is materially adverse, and
(ii) as and to the extent specifically described in the Schedules hereto.
K. Seller has disclosed to Buyer all facts known by Seller to be
material to the Assets to be acquired by Buyer pursuant to this Agreement. No
written representation or warranty by the Seller in this Agreement or any
written statement or certificate furnished or to be furnished to the Buyer
pursuant hereto, contains or will contain any untrue statement of a material
fact known to Seller, or omits or will omit to state a material fact known to
Seller necessary to make the statements contained therein not misleading.
During the period from the date of this Agreement to the Closing date, Seller
represents and covenants that its business shall in all respects continue to
be operated only in the ordinary course. Seller shall give prompt notice to
Buyer with respect to any material changes in the operation of the business
and any matter or event which comes to Seller's attention and which, if it
had occurred as of the date hereof, would constitute a material breach of the
representations and warranties of Seller contained in this Agreement.
L. All tangible personal property, Equipment, Fixtures and
Inventories included within the Purchased Assets or required to be used in
the ordinary course of Seller's business are in good, merchantable, or in
reasonably repairable condition and are suitable for the purposes for which
they are being used. No value in excess of applicable reserves has been given
to any Inventory with respect to obsolete or discontinued products. All of
the Inventories and Equipment, including Equipment leased to others, are well
maintained and in good operating condition.
M. All Financial Statements provided to Buyer pursuant to this
Agreement and all Exhibits hereto are accurate in all material respects; and
all other financial data relating to the Purchased Assets given by Seller to
Buyer was accurate in all material respects as to what it was represented to
be when given to Buyer.
N. The Accounts Receivable reflected in the Balance Sheet and all
Accounts Receivable arising after the Balance Sheet date through Closing
arose from bona fide transactions in the ordinary course of business and to
the best of Seller's knowledge and belief are valid and collectible within
the limit of the stated bad debt reserve.
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O. Seller warrants that the products which it manufactures do not
violate or infringe upon any valid patent, trade secret or proprietary rights
of others and that Buyer may continue to manufacture such products without
violating any patents, trade secrets or proprietary rights of others, or of
Seller. Seller shall defend any action brought against Buyer based upon a
claim that any of such items infringe upon a patent, trade secret or other
proprietary right. Seller further agrees to indemnify Buyer and hold Buyer
harmless from any or all of judgments, decrees, costs or expenses resulting
from such action.
P. Seller is not a party to any collective bargaining agreement.
There are no controversies between Seller and any of its employees which
might reasonably be expected to materially adversely affect the conduct of
its business, or any unresolved labor union grievances or unfair labor
practice or labor arbitration proceedings pending or threatened relating to
its business, and there are not any organizational efforts presently being
made or threatened involving any of Seller's employees. Seller has not
received notice of any claim that Seller has not complied with any laws
relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining, the payment of social
security and similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that Seller is liable for any
arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing.
Q. Seller is not a party to any contract of employment, either
expressed or implied, with any of its existing employees.
R. The execution and delivery of this Agreement to Buyer and the
consummation of the transactions contemplated hereby have been duly authorized
by Seller's Board of Directors.
S. Exhibit 16 sets forth a complete and correct list and
description of all of the policies of liability, property, workers'
compensation, and all other forms of insurance or bonds carried by Seller for
the benefit of or in connection with the Purchased Assets and the business of
Seller.
T. All representations and warranties contained in this Article XI
shall be construed as being made jointly and severally by Xenotech, Inc.,
Xenotech Rents, and Stockholder.
XII. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
A. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to
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conduct its business as it is presently being conducted and to own and lease
its properties and Assets.
B. Copies of Buyer's Certificate of Incorporation and all
amendments thereof to date, certified by the Secretary of State of Delaware,
and of Buyer's Bylaws as amended to date, have been delivered to Seller and
are complete and correct as of the date of this Agreement.
C. Buyer has all necessary corporate power and authority and has
taken all corporate action necessary to enter into this Agreement, to
consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Buyer and constitutes a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its respective terms.
D. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby will result in (1) a
violation of or a conflict with any of the provisions of the Certificate of
Incorporation or Bylaws of Buyer, (2) a breach of, or a default under, any
term or provision of any contract, agreement, indebtedness, lease,
commitment, license, franchise, permit, authorization or concession to which
Buyer is a party, which breach or default would have a material adverse
effect on the business or financial condition of Buyer or its ability to
consummate the transactions contemplated hereby, or (3) a violation by Buyer
of any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award, which violation would have a material adverse
effect on the business or financial condition of Buyer or its ability to
consummate the transactions contemplated hereby.
E. Buyer knows of no and has not been informed of any consent,
approval or authorization of, or declaration, filing or registration with any
governmental or regulatory authority, or any other person or entity which is
required to be made or obtained by Buyer in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except that Buyer is required to file an
8-K report with the Securities Exchange Commission within fifteen (15) days
after Closing.
F. Neither Buyer nor any affiliate of Buyer has entered into or
will enter into any contract, agreement, arrangement, or understanding with
any person or firm which will result in the obligation of Seller or
Stockholder to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated hereby.
G. The execution and delivery of this Agreement to Seller and the
consummation of the transactions contemplated hereby have been duly
authorized by Buyer's Board of Directors.
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XIII. COVENANTS OF SELLER, STOCKHOLDER, AND BUYER
Seller covenants with Buyer and Buyer covenants with Seller as
follows:
A. Seller shall assign to Buyer all transferable manufacturer,
supplier or contractor warranties or guaranties respecting any of the
Purchased Assets.
B. Effective upon the Closing of the transactions contemplated
hereby, Seller shall no longer use, in any respect, the name or terms
"Xenotech," "Xenotech, Inc." or "Xenotech Rents" without the express written
consent of Buyer. Within six (6) months after Closing, Seller shall either be
dissolved or shall change its corporate name to a name which bears no
resemblance to the name "Xenotech," "Xenotech, Inc." or "Xenotech Rents," and
thereafter shall never use a name or names which shall be similar to such
name or names.
C. Seller shall not use, in any respect, the name, terms, or items
listed in Exhibit 9 hereto without the express written consent of Buyer.
D. Except as otherwise requested by Buyer, and without making any
commitment on its behalf, Seller will use its best efforts to preserve its
business intact; and preserve for Buyer the goodwill of the suppliers,
customers, and others having business relations with Seller prior to Closing.
Until the Closing, Seller shall not acquire any capital assets. In addition,
until Closing, Seller shall make no purchases or sales of Inventory items, or
enter into any contract or transaction, without the consent of Buyer in
writing, except in the ordinary course of its business. Further, Seller has
not and shall not make any distributions or payments (excluding Stockholder's
regular salary and the regular salaries of the employees of the Seller)
between February 28, 1997, and the date of Closing, without the written
consent of Buyer.
E. Buyer and Seller shall mutually approve any public announcement
and/or press release concerning this transaction. However, if a public
announcement or press release is required by the SEC or a listed exchange,
the other party shall give such advance notice as is reasonable under the
circumstances.
XIV. BULK SALES
Seller agrees to cooperate with Buyer in complying with the
provisions of Article 6 of the California Uniform Commercial Code -- Bulk
Transfer -- relating to bulk transfers in connection with the transactions
contemplated by this Agreement. If Buyer shall waive the provisions of the
Bulk Sales Law, Seller and Stockholder shall indemnify and hold Buyer
harmless from any damages, losses or expenses (including reasonable
attorneys' fees) suffered by Buyer from any claim which may be asserted
against Buyer by creditors of Seller for obligations not assumed by Buyer
hereunder which result from noncompliance with the California Bulk Transfer
Law. The parties agree that all necessary procedures to effect such
compliance shall be performed by Seller's counsel on behalf of Buyer at
Buyer's expense.
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XV. COVENANT NOT TO COMPETE
At the Closing, Stockholder and Seller will execute a
Non-Competition Agreement in the form of Exhibit 13 hereto. The effectiveness
of this Agreement and of the Non-Competition Agreement will be contingent
upon the execution of each other.
XVI. ACTIONS BY SELLER AND BUYER AFTER THE CLOSING
A. Seller and Buyer agree that so long as any books, records and
files relating to the business, Assets or operations of the Seller, to the
extent that they pertain to the operations prior to the Closing date relating
to the Purchased Assets, remain in existence and available, Buyer (at its
expense) shall have the right to inspect and to make copies of the same at
any time during business hours for any proper purpose with reasonable advance
notice. Seller further agrees that it shall preserve and maintain all of its
existing books and records relating to the Purchased Assets for a period of
at least five (5) years following the date of Closing.
B. On and after the Closing date, Seller and Buyer will take all
appropriate action and execute all documents, instruments or conveyances of
any kind which may be reasonably necessary or advisable to carry out any of
the provisions hereof.
C. Buyer will assume all express Warranty obligations, as defined
herein.
XVII. INDEMNIFICATIONS
A. BY SELLER AND STOCKHOLDER: It is specifically acknowledged that
Buyer does not assume and will not be responsible for any liabilities of
Seller, except as may be expressly stated herein. Effective as of the Closing
date, Seller and Stockholder shall indemnify and hold harmless Buyer against
and in respect of:
1. All liabilities and obligations of, or claims against,
Seller not expressly assumed by Buyer in this Agreement, including
but not limited to: all obligations of Seller not reflected on
Seller's Balance Sheet dated February 28, 1997; all sales, income
and other tax liabilities, except those expressly assumed by Buyer
pursuant to this Agreement; all employment contracts of Seller; all
employment claims against Seller, including claims of discrimination
or unfair labor practices or of any other nature, whether accruing
prior to or subsequent to Closing, relating to any present or
former employee of Seller while he/she was an employee of Seller,
and any claims of employees of Seller to have any entitlement of
employment with Buyer, unless said claims are based upon an agreement
pursuant to which said employees are expressly retained by Buyer
after the employee has submitted an employment application to Buyer.
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2. Any damage or deficiency resulting from any material
misrepresentation, breach of warranty, or nonfulfillment of any
agreement on the part of Seller and/or the Stockholder under this
Agreement or from any material misrepresentation in or omission
from any certificate or other instrument furnished or to be
furnished to Buyer under this Agreement.
3. Any and all liabilities, claims or damages (whether or
not caused by negligence), including civil or criminal fines,
arising out of or relating to any of the following:
a. Any generation, processing, handling, transportation,
storage, treatment or disposal of solid wastes or
hazardous wastes by Seller, including, but not
limited to, any of such activities occurring with
respect to the business of Seller, the Assets
purchased hereunder, or any facilities or property
of Seller, and
b. Any releases or contamination by Seller or its
predecessors, tenants, vendors, employees, or
agents (including, but not limited to, any releases
as declared under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980,
as amended) to the extent occurring or existing
prior to Closing, including, but not limited to,
such releases to land, ground water, surface water,
or into the air.
B. BY BUYER: Buyer agrees that, on and after the date hereof, it
shall indemnify and save and hold harmless Seller and Stockholder from and
against any and all damages incurred in connection with or arising out of or
resulting from (1) any material breach of any covenant or warranty, or the
inaccuracy of any representation, made by Buyer in or pursuant to this
Agreement; (2) any liability, obligation or commitment of Buyer relating in
any way to the Purchased Assets or Assumed Liabilities; or (3) any claim,
liability, obligation or commitment of any nature which is specifically
assumed by Buyer pursuant to this Agreement.
XVIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to purchase the Purchased Assets from
Seller are subject to the satisfaction, on or before the Closing date, of all
of the following conditions, which conditions may be waived in writing by
Buyer:
A. The representations and warranties of Seller and Stockholder
contained in this Agreement shall have been true in all material respects
when made and, in addition, shall be true in all material respects on and as
of the Closing date with the same force and effect as though made on and as
of the Closing date.
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B. Seller and Stockholder shall have, or have caused to be,
performed and observed, in all material respects, all obligations and
agreements hereunder and shall have complied with all covenants and
conditions contained in this Agreement to be performed and complied with by
them at or prior to the Closing date.
C. If, prior to the Closing date, any material part of the
Purchased Assets is damaged by fire, other casualty, or any cause or activity
not attributable to or under the control of Buyer, Seller shall give Buyer
written notice thereof and Buyer may, at its option, terminate this Agreement
by written notice of such election given to Seller no later than five (5)
working days after receipt of Seller's notice, and upon giving such notice,
both parties shall be fully discharged from all duties hereunder and all
obligations hereof. However, if Buyer shall not so elect, or if an immaterial
part of the Assets is damaged, then Seller hereby assigns to Buyer all of its
rights, title and interest in and to any and all insurance proceeds payable
by reason of such destruction or damage to the Purchased Assets and Seller
hereby agrees to pay Buyer a sum equal to the deductible amount provided in
such policies to the extent necessary to correct such damage.
D. At or prior to the Closing, Seller and Stockholder shall have
executed the Non-Competition Agreement as provided in Article XV herein.
E. There shall not have been, between the date of this Agreement
and the Closing date, any materially adverse change in any of the Purchased
Assets or the current operations of Seller.
F. Seller and Stockholder shall have furnished Buyer with such
certificates in form and substance reasonably satisfactory to counsel for
Buyer as may be reasonably requested by counsel for Buyer to evidence
compliance with the conditions set forth in this Section.
G. Either (1) Seller shall have resolved the matters disclosed in
Exhibit 15, or (2) Buyer and Seller shall have agreed as to how those matters
that will be handled.
H. Stockholder and Buyer shall have executed the Lease Agreement
as provided in Article I herein.
I. Seller and Stockholder shall have executed the Guaranty as
provided in Article IV herein.
J. At or prior to the Closing, Buyer and Stockholder shall have
executed the Employment Agreement as provided in Article IX herein.
K. At or prior to the Closing, Buyer, Seller, and Stockholder
shall have entered into the Escrow Agreement referred to in the Employment
Agreement and Non-Competition Agreement.
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<PAGE>
XIX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to sell the Purchased Assets under this
Agreement to Buyer is subject to the satisfaction, on or before the Closing
date, of all of the following conditions, which conditions may be waived in
writing by Seller:
A. The representations and warranties of Buyer contained in this
Agreement shall have been true in all material respects when made and, in
addition, shall be true in all material respects on and as of the Closing
date with the same force and effect as though made on and as of the Closing
date.
B. Buyer shall have, or have caused to be, performed and observed,
in all material respects, all covenants, agreements and conditions hereof to
be performed or observed by Buyer at or before the Closing.
C. Seller shall have received approval from its Board of Directors
for consummation of this transaction on the terms and conditions contained
herein.
D. Buyer shall have furnished Seller with such certificates in form
and substance reasonably satisfactory to counsel for Seller as may be
reasonably requested by counsel for Seller to evidence compliance with the
conditions set forth in this Section.
E. Either (1) Seller shall have resolved the matters disclosed in
Exhibit 15, or (2) Buyer and Seller shall have agreed as to how those matters
will be handled.
XX. NONASSIGNMENT
Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by any party without the prior written consent of the other
parties. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns, and no other person shall have any right, benefit or obligation
hereunder, as a third-party beneficiary or otherwise.
XXI. EXPENSES
Except as otherwise provided in this Agreement, each party shall pay
its respective expenses, taxes, charges and liabilities incurred in
connection with or arising out of this Agreement, including, without
limitation thereto, counsel fees, accounting fees, and other expenses related
to the assignment and delivery of the Purchased Assets to Buyer.
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<PAGE>
XXII. NOTICES
Unless otherwise provided herein, any notices, request, instruction
or other document to be given hereunder by either party to the other shall be
in writing and delivered personally or mailed by certified mail, postage
prepaid, return receipt requested (such mailed notice to be effective on the
date such receipt is acknowledged or refused), as follows:
IF TO SELLER: Xenotech, Inc.
7344-7348 Bellaire Avenue
North Hollywood, CA 91605
WITH COPY TO: Michael Alan Gutenplan, Esq.
10866 Wilshire Boulevard, 15th Floor
Los Angeles, CA 90024-4303
IF TO STOCKHOLDER: Mr. Richard Hart
528 Erskine Drive
Pacific Palisades, CA 90272
WITH COPY TO: Michael Alan Gutenplan, Esq.
10866 Wilshire Boulevard, 15th Floor
Los Angeles, CA 90024-4303
IF TO BUYER: Ballantyne of Omaha, Inc.
Attn: Ronald Echtenkamp
4350 McKinley Street
Omaha, NE 68112
WITH COPY TO: Marks Clare & Richards
David P. Wilson, Esq.
11605 Miracle Hills Dr., Suite 300
Omaha, NE 68154
or at such other address or designation as is provided by one party to the
other in writing.
XXIII. CHOICE OF LAW
This agreement shall be construed, interpreted and the rights of
the parties determined in accordance with the laws of the State of
California (without reference to the choice of law provisions of California
law).
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<PAGE>
XXIV. SURVIVAL OF WARRANTIES AND REPRESENTATIONS
The representations, warranties and covenants of the parties hereto
contained herein, or in any certificates or other documents delivered prior
to or at the Closing, shall not be deemed waived or otherwise affected by
any investigation theretofore made by either party. Each and every
representation, warranty and covenant of Seller, Stockholder, and Buyer and
the indemnification provisions set forth in Article XV herein shall survive
the Closing date and remain operative and in full force and effect as herein
provided.
XXV. ARBITRATION
If a controversy shall exist between the parties hereto, their suc-
cessors or assigns, arising under or out of this Agreement which they cannot
resolve among themselves, either party to the controversy shall have the
right to submit the same to arbitration in accordance with the commercial
rules of the American Arbitration Association. The arbitration shall apply
the law of the State of California. In addition, either party may exercise
the right to have the dispute or controversy submitted to mediation prior to
an arbitration. Such arbitration shall be conducted in Los Angeles County,
California, with a written record kept of the proceedings. The arbitrator(s)
shall prepare a written summary of findings and facts and conclusions of law
upon which any award is based. The arbitrator(s), if they desire, shall have
access to all books and records of the Buyer and Seller directly pertinent to
this Agreement, as well as any and all other documents and things pertinent
to the matter in arbitration which shall enable them to make a fair and full
settlement of all matters in controversy. In addition, the provisions of
California Code of Civil Procedure Section 1283.05, or any successor section
thereto (allowing discovery in arbitration proceedings), shall be applicable
to the arbitration. Any award made pursuant to arbitration shall be entered
as a judgment by any court of competent jurisdiction on the application of
any party to such arbitration. The successful or prevailing party or parties
through arbitration shall be entitled to recover reasonable attorney fees and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or he may be entitled.
XXVI. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS
This Agreement, together with all exhibits and schedules hereto,
constitutes the entire agreement between the parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
-18-
<PAGE>
XXVII. MULTIPLE COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together constitute one
and the same instrument.
XXVIII. INVALIDITY
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, then
to the maximum extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or
any other such instrument.
XXIX. TITLES
The titles, captions or headings of the Articles and Sections herein
are inserted for convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
XXX. PUBLICITY
Except as specified in Article XIII(E) hereof, neither party shall
issue any press release or make any public statement regarding the
transactions contemplated hereby, without the prior approval of the other
party, and the parties hereto shall issue a mutually acceptable press release
as soon as practicable after the execution and delivery of this Agreement.
XXXI. CONFIDENTIAL INFORMATION
In connection with the negotiation of this Agreement, each party
acknowledged that it has had access to confidential information relating to
the other party. Each party shall treat such information as confidential,
preserve the confidentiality thereof and not duplicate or make use of any
other such information, except to advisors, consultants, lenders and
affiliates in connection with the transactions contemplated hereby or
pursuant to or as required by law. If the transaction is not closed, each
party shall return to the other all confidential information in tangible
form, belonging or relating to the other party or provide a certificate of
destruction of such material acceptable to the other party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers
thereunto duly authorized, on this 8 day of April, 1997, effective as of the
1st day of April, 1997.
"Seller"
XENOTECH, INC. XENOTECH RENTS,
a California corporation a California corporation
By /s/ Richard I. Hart By /s/ Richard I. Hart
------------------------- -------------------------
Title: President Title: President
--------------------- --------------------
"Buyer"
"Stockholder" BALLANTYNE OF OMAHA, INC.
a Delaware corporation
/s/ Richard I. Hart By /s/ Ronald H. Echtenkamp
- --------------------------------- ---------------------------
Richard Hart
Title: Vice Chairman
------------------------
STATE OF Nev. )
) ss.
COUNTY OF Clark )
On this 8 day of April, 1997, before me, the undersigned, a Notary
Public in and for said County, personally appeared the above-named RICHARD
HART, President of XENOTECH, INC., to me known to be the identical person
named in and who executed the foregoing instrument and acknowledged that he
executed the same as his voluntary act and deed and the voluntary and deed of
said corporation.
/s/ Elizabeth A. Halamka
--------------------------------
[NOTARY SEAL] Notary Public
-20-
<PAGE>
STATE OF Nev. )
) ss.
COUNTY OF Clark )
On this 8 day of April, 1997, before me, the undersigned, a Notary
Public in and for said County, personally appeared the above-named RICHARD
HART, President of XENOTECH RENTS, to me known to be the identical person
named in and who executed the foregoing instrument and acknowledged that he
executed the same as his voluntary act and deed and the voluntary and deed of
said corporation.
/s/ Elizabeth A. Halamka
--------------------------------
Notary Public
[NOTARY SEAL]
STATE OF Nev. )
) ss.
COUNTY OF Clark )
On this 8 day of April, 1997, before me, the undersigned, a Notary
Public in and for said County, personally appeared the above-named
Stockholder, RICHARD HART, to me known to be the identical person named in
and who executed the foregoing instrument and acknowledged that he executed
the same as his voluntary act and deed.
/s/ Elizabeth A. Halamka
--------------------------------
Notary Public
[NOTARY SEAL]
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<PAGE>
STATE OF NEBRASKA )
) ss.
COUNTY OF DOUGLAS )
On this 8th day of April, 1997, before me, the undersigned, a Notary
Public in and for said County, personally appeared the above-named Ronald H.
Echtenkamp, Vice Chairman of the Board of BALLANTYNE OF OMAHA, INC. to me
known to be the identical person named in and who executed the foregoing
instrument and acknowledged that he executed the same as his voluntary act
and deed and the voluntary act deed of said corporation.
[NOTARY SEAL]
/s/ Nancy A. Cronin
----------------------------------
Notary Public
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<PAGE>
Exhibit 3.1.1.
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
BALLANTYNE OF OMAHA, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
* * * * *
Ballantyne of Omaha, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify:
FIRST: That the name of the corporation is Ballantyne of Omaha, Inc.
SECOND: That the Corporation's Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on May 30, 1995.
THIRD: That the Board of Directors of the Corporation at a special
meeting of the Board of Directors on April 2, 1997 unanimously adopted a
resolution proposing the following Amendment to the Certificate of
Incorporation of the Corporation:
RESOLVED, that Article FOURTH, Paragraph A, of the Corporation's
Certificate of Incorporation be amended as follows:
FOURTH: A. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is Twenty-Six
Million (26,000,000) shares consisting of Twenty-Five Million
(25,000,000) shares of common stock, par value One Cent ($.01) per share
(the "Common Stock") and One Million (1,000,000) shares of preferred
stock, par value One Cent ($.01) per share (the "Preferred Stock").
FOURTH: That at the annual meeting of stockholders of the
Corporation on June 10, 1997, a majority of the outstanding stock
entitled to vote thereon, voted in favor of the Amendment.
FIFTH: That the aforesaid Amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed on its behalf by the undersigned this 24th day
of June, 1997.
BALLANTYNE OF OMAHA, INC.
/s/ John Wilmers
-----------------------------
John Wilmers
<PAGE>
Exhibit 10.16
FIRST AMENDMENT TO BALLANTYNE OF OMAHA, INC.
1995 STOCK OPTION PLAN
The Ballantyne of Omaha, Inc., 1995 Stock Option Plan is hereby
amended as follows:
1. The second paragraph of Section 6 of the Plan is hereby
amended to read as follows:
"The maximum aggregate number of Shares that may be
issued under the Plan is 1,060,000 Shares; PROVIDED,
HOWEVER, that no more than 75,000 Shares shall be
awarded to any Participant in any calendar year. The
limitations on the number of Shares which may be
subject to Options under the Plan shall be subject to
adjustment as provided in Section 10(b)."
2. All other terms, conditions, and provisions of said Plan
remain the same.
DATED this 25th day of June, 1997.
BALLANTYNE OF OMAHA, INC.
By: /s/ John Wilmers
-------------------------------
John Wilmers, President
ATTEST:
/s/ Brad French
- ---------------------------
Brad French, Secretary
I hereby certify that the above amendment to the Ballantyne of
Omaha, Inc., 1995 Stock Option Plan was approved by the Board of
Directors of the corporation at a special meeting of the Board of
Directors duly called and held on the 2nd day of April, 1997, and was
approved by the Stockholders of the corporation at the annual meeting of
stockholders held on the 10th day of June, 1997.
DATED at Omaha, Nebraska, this 25th day of June, 1997.
/s/ Brad French
-------------------------------
Brad French, Secretary
<PAGE>
EXHIBIT 10.3.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 1, 1997, by and between BALLANTYNE OF
OMAHA, INC., a Delaware corporation, with offices at 4350 McKinley Street,
Omaha, Nebraska 68112 (the "Company"), and RICHARD HART, an individual
residing at 528 Erskine Drive, Pacific Palisades, California 90272 (the
"Employee").
WITNESSETH
WHEREAS, the Employee is joining the Company as a key employee pursuant
to the Company's purchase of substantially all of these assets of
Xenotech, Inc. under that certain Asset Purchase Agreement dated April 8,
1997 (hereinafter the "Purchase Agreement"); and
WHEREAS, pursuant to the Purchase Agreement, Employee and Company have
agreed to enter into an Employment Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties intending to be legally bound agree as follows:
1. EMPLOYMENT
Company hereby employs Employee as Vice President in charge of the
new Xenotech division of the Company, and Employee hereby agrees to be
employed by Company in such capacity, upon the terms and conditions
hereinafter set forth.
2. DUTIES AND SERVICES
(a) Employee shall perform such services as may be assigned to
Employee by the Vice Chairman, the Board of Directors, or the President of
the Company.
(b) Employee agrees to devote all of Employee's time and efforts to
the performance of Employee's duties as an employee of the Company. The
Employee shall not during the term hereof perform any services for any
person, firm or corporation, other than as approved in writing by Company.
The prohibitions of this section shall apply to indirect activities of
Employee as well as direct activities, and will accordingly prohibit
activities of persons with whom Employee is "affiliated," as that term is
defined under the Securities Act of 1933, as amended, and the Rules and
Regulations thereunder.
(c) Employee shall undertake such travel as may be necessary or
desirable to promote the business and affairs of Company.
<PAGE>
3. TERM
(a) Except as otherwise hereinafter specifically provided, the term
of this Employment Agreement shall be for a period of five (5) years
commencing as of April 1, 1997.
(b) Notwithstanding anything to the contrary provided herein, the
Company or the Employee may give the other 120 days' notice prior to the end
of the term, or of any extension or renewal thereof, of such party's
intention to negotiate a new employment arrangement commencing at the end of
the term or to terminate this contract. In the event no such notice is given,
the term described as subparagraph (a) above shall automatically continue for
an additional year, and this subsection (b) shall be applicable again within
such extension.
(c) This Agreement may be terminated by Company, at its discretion,
upon Employee's death, inability to perform or incapacity (being defined as
inability to perform normal activities and functions for a period of 180
consecutive days), or for cause. A termination for cause for purposes of this
Agreement shall be that Employee (i) acted dishonestly or in a grossly
incompetent manner or engaged in willful misconduct in the performance of
Employee's duties, (ii) breached a fiduciary duty to Company, (iii)
intentionally failed to perform reasonably assigned duties which are
materially important in connection with his employment and/or the business of
the Company, (iv) willfully violated any law, rule or regulation (other than
minor traffic violations or similar offenses) or any final cease and desist
order, or (v) breached this Agreement and such breach is not cured by
Employee after ten (10) days' written notice.
(d) This Agreement may be terminated by Employee in the event that
Company breaches this Agreement and such breach is not cured by Company after
ten (10) days' written notice.
4. COMPENSATION
(a) BASIC COMPENSATION. For all of the services to be rendered by
Employee in any capacity hereunder, Company shall pay Employee a salary at
the annual rate of One Hundred Sixty Thousand Dollars ($160,000), and Company
shall review such salary annually as of January 1 during each subsequent year
of this Agreement but in no event shall the basic compensation in each
subsequent year be less than the aforesaid amount. The compensation paid
hereunder to Employee shall be paid in accordance with the payroll practices
conducted by Company and shall be subject to the customary withholding taxes
and other employment taxes as required with respect to compensation paid by a
corporation to an employee.
(b) ADDITIONAL COMPENSATION. In addition to the basic compensation
set forth at Paragraph 4(a) above, Company shall pay Employee additional
compensation based upon the following Bonus Plan:
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<PAGE>
(1) Employee shall be paid an annual bonus which shall be equal
to a percentage of the "annual sales" of the Xenotech division of Company
during each fiscal year of the Company, or portion thereof, during which
Employee is employed by Company; provided, however, that such bonus shall
be payable for a fiscal year only if the net income before taxes of the
Xenotech division for such year, computed without regard to this bonus,
is at least 5 percent of the annual sales for such year.
(2) For purposes of this provision, "annual sales" of the
Xenotech division of Company shall mean all gross revenues of Company
during a fiscal year thereof which were derived from the Xenotech
division, including equipment lease and consignment income and sales of
Xenotech lighting equipment.
(3) The amount of annual additional compensation to be paid to
Employee under this Bonus Plan shall be based upon the following scale:
Xenotech Division Applicable Bonus
Annual Sales Ranges Percentage
------------------- ----------------
$3,000,000.00 - 1.50
$3,999,999.99
$4,000,000.00 - 1.60
$4,499,999.99
$4,500,000.00 - 1.70
$4,999,999.99
$5,000,000.00 - 1.80
$5,499,999.99
$5,500,000.00 - 1.90
$5,999,999.99
$6,000,000.00 2.00
and above
(c) DEFINITION OF PAYMENT. Computation of additional compensation
shall be made by Company within thirty (30) days of the end of each calendar
year, and shall be paid within one (1) month from the date Company makes such
determination.
(d) COMPUTATION PERIOD FOR ADDITIONAL COMPENSATION. Except as
provided as subsection (e), with respect to the determination of additional
compensation for any calendar year in which Employee does not render services
hereunder for the full twelve (12) month period, Company shall compute the
additional compensation in the same manner as described at subsection (b),
for the period from the commencement of such fiscal period
- 3 -
<PAGE>
(i.e. January 1) or the date upon which Employee's services hereunder shall
commence, whichever is later, through the last day of the calendar month
preceding termination or the last day of the fiscal year, whichever is
earlier.
(e) TERMINATION OF EMPLOYMENT. Upon termination of employment for
any reason, Employee shall be entitled to receive the basic compensation
accrued but unpaid as of the date of termination. In addition, Employee shall
continue to be paid at the rate of Fifty Thousand Dollars ($50,000) per year
for the remainder of the initial five (5) year term of this Agreement. Upon
termination of employment of Employee by Company for any reason other than for
cause, Employee shall also be entitled to receive the additional compensation
computed as set forth above. Nothing herein contained shall be construed to
deprive Employee of any other remedy at law or in equity for breach of this
contract by Company if Employee's employment is terminated by Company without
cause. In the event Employee's employment with Company is terminated for cause,
Employee shall forfeit all accrued and unpaid additional compensation as
determined in subsection (b) herein.
(f) DISPUTES. In the event of a dispute in the calculation of
additional compensation by Company hereunder relating to the calculation of
net sales or pre-tax earnings of Company, such net sales and pre-tax earnings
shall be determined by the certified public accountant retained by Company,
and such determination (including any allocations with respect to
transactions between Company and its affiliates) shall be absolute,
conclusive and binding upon Company and Employee, except in the event of
gross malfeasance or fraud.
(g) ESCROW AGREEMENT. Part of Employee's compensation hereunder
shall be subject to the terms and conditions of an Escrow Agreement between
the parties hereto, executed simultaneously herewith, the terms and
conditions of which are incorporated herein by this reference.
5. EXPENSES AND VACATIONS
(a) Company shall reimburse Employee for all reasonable and
necessary travel and entertainment expenses incurred by Employee in the
performance of Employee's duties hereunder upon submission of vouchers and
receipts evidencing such expenses. In addition, Company shall provide
Employee with an automobile to be used in the performance of Employee's
duties hereunder.
(b) Employee shall be entitled to vacation during each twelve (12)
months of employment in accordance with applicable Company policy. All
vacations shall be in addition to recognized national holidays. During all
vacations, Employee's compensation and other benefits as stated herein shall
continue to be paid in full. Such vacations shall be taken only at times
convenient for Company.
- 4 -
<PAGE>
6. OTHER BENEFITS
In addition to the compensation and to the rights provided for
elsewhere in this Agreement, Employee shall be entitled to participate in
each plan of Company now or hereafter adopted for the benefit of employees of
Company, to the extent permitted by such plans and by applicable law,
including, but not limited to: (i) 401(k) profit-sharing plan, (ii) medical
expense insurance program, and (iii) pension plan. Employee is specifically
excluded from participation in the Company's key employees' profit-sharing
plan.
7. DISCLOSURE OF INFORMATION. Employee acknowledges that Company's
trade secrets as they may exist from time to time, including, but not limited
to, Company's list of customers, processes, ideas, plans, programs,
procedures and know-how, are valuable, special and unique assets of Company's
business, access to and knowledge of which are essential to the performance
of Employee's duties hereunder. The parties agree that Employee will not,
during or after the term of Employee's employment by Company, disclose such
secrets to any person, firm, corporation, association or other entity or use
such secrets for any reason or purpose whatsoever; nor shall Employee make
use of any such property for Employee's own purposes or for the benefit of
any person, firm, corporation or other entity (except Company) under any
circumstances during or after the term of Employee's employment. Nothing in
this section shall limit Employee's right to carry Employee's accumulated
career knowledge and professional skills to any future employment, subject to
the specific limitations of the foregoing provisions of this section and the
restrictive covenant elsewhere set forth herein.
8. RESTRICTIVE COVENANT. Employee agrees that at the expiration of this
Agreement or at termination for any reason whatsoever, Employee shall not,
for a period of three (3) years thereafter, or a date which is five (5) years
after the date of this Agreement, whichever is later, without Company's prior
written consent, directly or indirectly, own, manage, operate, join, control,
be employed by, or participate in the ownership, management, operation or
control of, or assist any other person, firm, or corporation as an employee
or otherwise, in the ownership, management, operation or control, financial
or otherwise, of any business or organization anywhere in the world which,
directly or indirectly, competes with the lighting business of the Company or
its affiliated or subsidiary companies; and shall not, directly or
indirectly, by himself or through others, make, manufacture, assemble, sell,
distribute or otherwise deal in lighting products similar to those
manufactured, assembled, sold or distributed by Company. It is the desire and
intent of the parties that the provision of this section shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought.
The parties hereto recognize and agree that in the event of the breach
of any provision of this covenant, there is not a remedy at law adequate to
protect the rights and interest of Company set forth herein, and the
parties therefore agree that Company shall have the right to an injunction
enjoining Employee from violating the provisions of this section. Nothing
herein shall be construed as prohibiting Company from pursuing any other
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<PAGE>
remedies available for such breach or threatened breach, including the recovery
of damages from Employee. In the event that any restriction contained in this
covenant is deemed by any court to be void because it is for an excessive
period of time or restricts Employee from engaging in a business competing
with Company in an excessive geographical area, it is agreed by the parties
that said court shall have the right to decrease the time period or
geographical area covered by such restriction to a time period and/or
geographical area which is not excessive.
It is understood and agreed that in the event Company terminates
Employee without cause or if Company breaches this Agreement and does not
cure said breach as provided in Paragraph 3(d), the provisions of Paragraph 8
are null and void.
9. INVENTIONS AND DISCOVERIES. Employee hereby sells, transfers and
assigns to Company or to any person or entity designated by Company all of
the entire right, title and interest of Employee in and to all inventions,
ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material made or conceived by Employee, solely or jointly,
during the term hereof which relate to the products and services provided by
Company or which otherwise relate or pertain to the business, functions or
operations of Company. Employee agrees to communicate promptly and to
disclose to Company in such form as Employee may be required to do so all
information, details and data pertaining to such inventions, ideas,
disclosures and improvements and to execute and deliver to Company such
formal transfers and assignments and such other papers and documents as may
be required of Employee to permit Company or any person or entity designated
by Company to file and prosecute the patent applications and, as to
copyrightable material, to obtain copyrights thereof.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by certified mail,
return receipt requested, to Employee's residence, in the case of Employee,
or to Company, at the principal offices of Ballantyne of Omaha, Inc.
11. CONSTRUCTION OF AGREEMENT. This Agreement is intended to be
construed and enforced in accordance with the laws of the State of
California, in the same manner as those executed and performed entirely
within the State of California, and without regard to or aid of any
presumption or other rule requiring construction against the party drawing or
causing this Agreement to be drawn.
12. COMMENCEMENT OF ACTIONS OR PROCEEDINGS. Any action or proceeding
brought by a party hereto against another and arising out of the Agreement or
any breach thereof, may be commenced by the service of process in the same
manner as a notice may be served under this Agreement.
13. NON-WAIVER. No provision of this Agreement shall be deemed to have
been waived except if such waiver is contained in a notice given to the party
claiming such waiver
- 6 -
<PAGE>
has occurred and no such waiver shall be deemed to be a waiver of any other
or further similar or dissimilar obligation or liability of the party in
whose favor the waiver was given.
14. ILLEGALITY. If any provision or provisions hereof (or any part
thereof) or the application thereof to any particular facts or circumstances
shall be illegal and unenforceable by reason of any statute or rule of law,
the remaining provisions (or parts thereof) of this Agreement or the
applications of the particular provision or provisions (or parts thereof) to
the other facts or circumstances shall not be affected thereby and shall
remain in full force and effect, it being the intention by this section to
make clear the agreement of the parties that this Agreement shall be enforced
insofar as it may be enforced consistent with law.
15. HEADINGS. The headings of the sections herein are for convenience
only and are part of this Agreement and shall not affect the interpretation
thereof.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties. All prior arrangements or understandings are merged herein. It
may not be changed orally, but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension
or discharge is sought.
17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
shall inure to the benefit of, the successors and assigns of Company, whether
by merger, consolidation, sale or lease of assets, or otherwise.
18. DEFINITION AND GENDER. All terms used herein shall have their
defined meaning, unless the context clearly indicates otherwise. Pronouns for
defined terms shall be construed as masculine, feminine, or neuter, or in the
singular or plural, as the sense required, and to include any and all
successors and substitutions therefor.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date and year first above written.
"Employee" "Company"
BALLANTYNE OF OMAHA, INC.
/s/ Richard Hart By /s/ Ronald H. Echtenkamp
------------------------------- ---------------------------------
Richard Hart Ronald H. Echtenkamp
Vice Chairman
- 7 -
<PAGE>
NON-COMPETITION AGREEMENT
THIS AGREEMENT is made and entered into as of April 1, 1997, by and
between XENOTECH, INC. and XENOTECH RENTS, 7344-7348 Bellaire Avenue, North
Hollywood, California 91605, both California corporations (collectively the
"Seller"), RICHARD HART, 528 Erskine Drive, Pacific Palisades, California
90272, a California resident (the "Stockholder"), and BALLANTYNE OF OMAHA,
INC., 4350 McKinley Street, Omaha, Nebraska 68112, a Delaware corporation
(the "Buyer").
WHEREAS, the parties hereto have entered into an Asset Purchase
Agreement dated as of the 1st day of April, 1997 (the "Asset Purchase
Agreement") wherein Seller has agreed to sell, and Buyer has agreed to buy,
all of the operating assets of Seller; and
WHEREAS, it is specifically provided that as an integral part of said
transaction, an agreement not to compete would be set forth in a separate
agreement between the parties, and that this Agreement is in fulfillment of
the same.
NOW, THEREFORE, for the consideration mentioned in the Asset Purchase
Agreement, and in consideration of the purchase by Buyer of substantially all
of the operating assets of Seller, which is in the business of the design,
manufacture, marketing, distribution, lease and sale of lighting equipment,
and in consideration of Two Hundred Fifty Thousand Dollars ($250,000) to be
paid to Stockholder as hereinafter provided, the parties agree as follows, to
wit:
1. Seller and Stockholder jointly and severally agree that for a period
of time beginning on April 1, 1997, and ending on a date which is three (3)
years after the date of the termination of Stockholder's employment with the
Buyer, or on April 1, 2002, whichever date shall be later, Seller and
Stockholder, or either of them, shall not, without Buyer's prior written
consent, directly or indirectly, own, manage, operate, join, control, be
employed by, or participate in the ownership, management, operation or
control of, or assist any other person, firm, or corporation as an employee
or otherwise, in the ownership, management, operation or control, financial
or otherwise, of any business or organization anywhere in the world which,
directly or indirectly, competes with the lighting business of the Buyer or
its affiliated or subsidiary companies; and Seller and Stockholder, or either
of them, shall not, directly or indirectly, by themselves or through others,
make, manufacture, assemble, sell, distribute or otherwise deal in lighting
products similar to those manufactured, assembled, sold or distributed by
Buyer. Stockholder hereby agrees that he shall not, as a director, an
officer, and the sole stockholder of Seller, take any action which would
cause the Seller to be in violation of any provision of this Agreement.
2. Seller specifically acknowledges that the market for its lighting
business is global and that the restrictions on competition herein contained
are fair and reasonable.
3. Seller and Stockholder specifically acknowledge that a breach by them
or either of them of this Agreement would cause Buyer irreparable harm which
could not be adequately compensated by monetary damages, and therefore,
Seller and Stockholder expressly agree that Buyer shall be entitled to
injunctive or other equitable relief from any
<PAGE>
court having jurisdiction of the parties to prevent a breach of this
Agreement, and that said injunctive or other equitable relief shall be in
addition to any and all other remedies which may be available to Buyer.
4. As consideration for this Non-Competition Agreement, Buyer agrees to
pay to Stockholder the total sum of Two Hundred Fifty Thousand Dollars
($250,000), payable in five (5) annual installments of Fifty Thousand Dollars
($50,000) each, the first such installment being due one year after the date
hereof, such installments continuing on the same date each year until said
total sum shall be paid in full. Payment of such installments shall be
subject to the terms and conditions of an Escrow Agreement between the
parties hereto, executed simultaneously herewith, the terms and conditions of
which are incorporated herein by this reference.
5. This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of California
(without reference to the choice of law provisions of California law.)
6. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, and no other
person shall have any right, benefit or obligation hereunder, as a
third-party beneficiary or otherwise.
7. In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, then
to the maximum extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or
any other such instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf by their respective officers
thereunto duly authorized, all as of the day and year first above written.
XENOTECH, INC. XENOTECH RENTS
"Seller" "Seller"
By /s/ Richard Hart By /s/ Richard Hart
---------------------------- ---------------------------
Richard Hart, Its President Richard Hart, Its President
RICHARD HART BALLANTYNE OF OMAHA, INC.
"Stockholder" "Buyer"
/s/ Richard Hart By /s/ Ronald H. Echtenkamp
- ------------------------------- ---------------------------
Ronald H. Echtenkamp
Vice Chairman
-2-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,685,071
<SECURITIES> 0
<RECEIVABLES> 10,071,261
<ALLOWANCES> 157,850
<INVENTORY> 15,467,712
<CURRENT-ASSETS> 31,821,035
<PP&E> 8,380,432
<DEPRECIATION> 2,962,002
<TOTAL-ASSETS> 38,327,160
<CURRENT-LIABILITIES> 9,007,915
<BONDS> 0
0
0
<COMMON> 88,927
<OTHER-SE> 28,679,777
<TOTAL-LIABILITY-AND-EQUITY> 38,327,160
<SALES> 31,073,809
<TOTAL-REVENUES> 31,073,809
<CGS> 21,785,256
<TOTAL-COSTS> 21,785,256
<OTHER-EXPENSES> 4,067,282
<LOSS-PROVISION> 14,010
<INTEREST-EXPENSE> (104,773)
<INCOME-PRETAX> 5,312,034
<INCOME-TAX> 1,888,582
<INCOME-CONTINUING> 3,423,452
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,423,452
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
