EXHIBIT 6.16
As of December 23, 1998
Mr. Xxx Xxxxxx
00000 Xxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Xx. Xxxxxx Xxxxx
000 00xx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Re: Michel/Xxxxx, Inc./Stock Purchase
Dear Xxx and Xxxxxx:
This letter will confirm the terms of the agreement ("Agreement") reached
between Xxx Xxxxxx ("Michel") and Xxxxxx Xxxxx ("Xxxxx") (individually, a
"Seller" and collectively, "Sellers"), as sole owner of Michel/Xxxxx, Inc.
("MR"), on the one hand, and Total Film Group, Inc. ("Total"), on the other
hand, with respect to the acquisition by Total of 100% of MR's issued and
outstanding capital stock for the possible purpose of forming a new marketing
and design company in combination with Xxxx Communications, Inc. and/or other
entities. For the purpose of this letter, such possible new marketing and
design company shall be named Total Communications, Inc. ("TC"). The terms
are the following:
1. Definitions: In addition to the terms defined elsewhere in the
Agreement, the following terms when used in this Agreement shall have
the following meaning:
a. "Agreement" means this deal letter together with all the exhibits and
schedules referred to herein.
b. "Closing Date" means on such date as the parties shall mutually
designate, but in any event on or before January 6, 1999.
c. "Disclosure Schedule" means the schedule of even date herewith written
by Sellers and containing exceptions to the specific representations
and warranties.
d. "Due Diligence Report" means the due diligence report established, upon
Total's request, by Sellers on the general legal, social and tax
matters related to MR, and the financial statements as of December 31,
1997, as well as MR's operations and statements for the period from
January 1, 1998 to November 30, 1998.
e. "Knowledge" or "known" or "best knowledge" means, with respect to any
representation or warranty or other statement in this Agreement
qualified by the knowledge of any party, such party's actual knowledge,
but including all facts which such party should have
discovered by conducting such reasonable examination as a reasonably
prudent person would conduct in making such representation, warranty or
other statement.
f. "Shares" means 100% of MR's issued and outstanding capital stock.
2. Conditions Precedent:
a. Total and Sellers each acknowledge and agree that the obligations of
Total are expressly conditioned upon and subject to the following: (i)
Total's receipt of this Agreement fully executed by Sellers; (ii) the
representations and warranties of Sellers contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date as though made at and as of that date (except where such
representation and warranty is made as of a date specifically set forth
therein), and Sellers shall have delivered to Total a certificate to
that effect; and (iii) Sellers shall in all material respects have
performed and complied with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by
Sellers at the Closing Date, and Sellers shall have delivered to Total
a certificate to that effect.
b. The obligations of Sellers under this Agreement are subject, at the
option of Sellers, to the satisfaction or waiver of each of the
following conditions at or prior to the Closing Date: (i) the
representations and warranties of Total contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date as though made at and as of that date (except where such
representation and warranty is made as of a date specifically set forth
therein), and Total shall have delivered to Sellers a certificate to
such effect; (ii) Total shall in all material respects have performed
and complied with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by it at the Closing
Date, and Total shall have delivered to Sellers a certificate to that
effect; and (iii) Michel and Xxxxx shall have been fully released from
their guaranties or other personal liability with respect to the
obligations of MR described in Exhibit 6 of the Disclosure Schedule for
which Michel or Xxxxx has executed a guaranty or otherwise incurred any
personal liability.
3. Purchase of Shares/Consideration:
a. Sale: Subject to the terms and conditions set forth herein, on the
Closing Date, Michel and Xxxxx shall sell and transfer to Total and
Total shall purchase from Michel and Xxxxx 100% of the Shares. Michel
and Xxxxx represent and warrant that they have no interest in the
assets of MR, whether real, personal, tangible or intangible including
the goodwill, business and trade names of MR, which shall remain the
property of MR after the closing of the purchase of the Shares by
Total. The parties acknowledge that Exhibit 15 of the Disclosure
Schedule lists certain items which are owned personally by Michel or
Xxxxx and which are located at the offices of XX. Xxxxxx and Xxxxx
shall be permitted to remove such items from such offices at any time.
b. Consideration: In consideration for the sale and transfer of 100% of
the Shares and all of MR's assets and property, Total shall deliver to
Michel and Xxxxx a number of shares of common stock of Total (the
"Total Shares") having an aggregate value equal to $318,700. For
purposes hereof, the value per share of Total Shares shall be deemed to
be the average closing bid price per share of Total common stock on the
OTC Bulletin Board on each of the ten consecutive trading days
immediately prior to the Closing Date on which such shares may be
traded. Of the Total Shares, 50% shall be delivered to Michel and 50%
shall be delivered to Russo.
c. Financial Control: On the Closing Date, Total shall have the exclusive
right to control MR's finances and shall immediately assume
responsibility for handling all financial affairs of MR including,
without limitation, collecting accounts receivable and assuring that
all accounts payable and other debts are timely paid. Total shall take
responsibility for the finances, accounting, administration, personnel
and all management functions and shall be responsible for the operation
of MR except to the extent such duties may be delegated to Michel and
Xxxxx pursuant to their Employment Agreements.
d. Transfer Taxes: Any California and/or Delaware transfer tax which may
be payable in connection with the sale of the Shares will be the sole
responsibility of Sellers.
e. Expenses: Total agrees to pay, without right of reimbursement from
Sellers, the costs incurred by it in the performance of its obligations
under this Agreement and the consummation of the transactions
contemplated hereby, including the fees and disbursements of its
counsel, accountants and consultants employed by it in connection
herewith. Total shall cause MR to pay, without right of reimbursement
from Sellers, the costs incurred by Sellers in connection with the
transactions contemplated hereby, including the fees and disbursements
of their counsel and accountants employed by them in connection
herewith.
f. Release of Guaranties: Total shall pay on the Closing Date or otherwise
secure the discharge of Sellers' liability under each guaranty or other
personal obligation which either Seller may have with respect to any of
the obligations of MR described in Section 2(b)(iii).
4. Closing:
The closing shall take place at the offices of Total on the Closing Date. At
the closing, Sellers shall deliver to Total stock certificates representing
the Shares duly endorsed for transfer to Total, and Total shall deliver to
Sellers stock certificates representing the Total Shares in the name of
Sellers as designated by each of them prior to the Closing Date. On the
Closing Date, MR shall be in possession of all of MR's property, assets,
operating agreements, records, books, correspondence and intellectual
property. After the closing, Total shall have all rights of ownership of MR.
5. Indemnity:
a. Subject to the limitations set forth in this Section 5 below, Sellers
hereby agree severally and proportionately to indemnify and hold
harmless Total (and its successors, assigns, representatives and
agents) from and against any and all claims, demands, causes of action,
costs (including reasonable attorneys' fees and costs), expenses,
losses and damages (collectively, "Losses") arising out of or resulting
from any breach by Sellers of any of Sellers' representations,
warranties and agreements contained in this Agreement, net of (i) any
tax adjustments, benefits, savings or reductions, and (ii) any
insurance proceeds, in either case to which Total (or such other
indemnified party) is entitled by virtue of such claims, demands,
causes of action, costs, expenses, losses and damages. Each of the
Sellers shall bear fifty percent (50%) of any indemnification liability
hereunder. Sellers may, but shall not be obligated to, satisfy any
claims of Total or any of its successors, assigns, representatives or
agents for indemnification by transferring to such indemnified party
Total Shares having a value equal to the amount of indemnification
owing to such indemnified party, with each Total Share being valued at
the amount per share determined under Section 3(b) above (with the
number and price per share of Total Shares to be transferred being
subject to appropriate adjustment in the event of any stock dividend,
split, subdivision, combination, reclassification, merger or
reorganization affecting the shares of Total common stock).
x. Xxxxxxx' representations and warranties contained herein shall survive
for a period of three (3) years from the Closing Date and shall then
expire. Upon the expiration of a representation or warranty pursuant to
this Section 5(b), unless written notice of a claim based on such
representations or warranty specifying in reasonable detail the facts
on which the claim is based shall have been delivered to the Sellers
prior to the expiration of such representation or warranty, such
representation or warranty shall be deemed to be of no further force or
effect, as if never made, and no action may be brought based on the
same, whether for breach of contract, tort or under any other legal
theory.
c. No claim for indemnification will be made by Total or any of its
successors, assigns, representatives or agents unless the aggregate of
all Losses incurred by such party otherwise indemnified against
hereunder exceeds $5,000 and only to the extent of any such Losses in
excess of $5,000. The Sellers shall not be required to pay
indemnification for Losses (whether in an action for indemnification or
otherwise) by Total or any of its successors, assigns, representatives
or agents (including any Losses previously recovered) in excess of an
aggregate maximum amount of $468,700; provided, however, that that such
maximum amount shall not apply to any Losses which are incurred as a
result of any fraudulent misrepresentation of the Sellers.
d. Indemnification as provided in this Section 5 shall be the exclusive
remedy for monetary damages (whether at law or in equity). Without
limiting the foregoing, neither Sellers nor any of the respective
officers, employees, agents, stockholders, affiliates or
representatives of MR or Sellers shall have any liability or obligation
to Total in respect of any statement,
representation, warranty or assurance of any kind made by any of them,
except for the representations and warranties set forth in this
Agreement or the Disclosure Schedule.
6. Employment Agreements:
On or before January 31, 1998, Total shall enter into an Employment Agreement
with each of Michel and Xxxxx (each, an "Employment Agreement"). Promptly
after the Closing Date, Total shall prepare and deliver to each of Michel and
Xxxxx an initial draft of such Employment Agreement. Such Employment
Agreement shall contain the terms summarized in Exhibit A attached hereto and
such further provisions as the parties mutually agree upon. Total shall have
the right to assign such Employment Agreements to TC or to any of its
subsidiaries or related entities; provided, however, that any such assignment
shall not be deemed to relieve Total of any liability for the performance of
such Employment Agreements; and provided, further that each of Michel and
Xxxxx may terminate his Employment Agreement (upon 60 days written notice to
Total) if in his sole discretion he elects to do so at any time after any
such assignment which has not been approved in writing by him in advance
(other than the contemplated assignment to TC, which Michel and Xxxxx hereby
approve in advance). Notwithstanding the foregoing, Total may provide written
notification to Michel and Xxxxx of such assignment, and if neither Michel
nor Xxxxx objects to such assignment within ten (10) business days after his
receipt of such notification, their right to terminate their respective
Employment Agreements after such assignment shall be deemed waived. If either
Michel or Xxxxx is entitled under this Section 6 to terminate his employment
after such assignment and does so, Total shall be obligated to pay the
balance then due on the Employment Agreement when such balance would
otherwise be payable under the Employment Agreement (i.e., the total amount
of Fixed and Incentive Compensation provided below and the value of all other
benefits set forth herein through the end of the then current Term or renewal
term (or through the end of the next succeeding renewal term if such
termination occurs in the final sixty (60) days of any year and no notice of
non-renewal is provided by either party prior to such sixty-day period)).
Such payment shall be made at the expiration of the 60-day notice period.
7. Representations and Warranties of Sellers:
The representations and warranties are made severally and proportionately by
each Seller.
All the specific representations and warranties made herein are true and
correct on the date hereof effective on the Closing Date and shall survive
the date of this Agreement for the period set forth in Section 5(b). All
statements made in the Disclosure Schedule are deemed representations.
a. Corporate and Stock Representation:
(i) Capitalization: The shares of MR are duly and validly issued in
compliance with all applicable laws and regulations and fully paid, and
constitute all of the issued shares in MR. MR has not issued any other
shares, bonds, convertibles, or similar instruments. No option,
warrant, agreement or commitment of any kind obligating MR to issue any
equity interests in other stock exists. MR is not obligated or
committed to purchase, redeem or otherwise acquire any of its
outstanding shares or options related thereto.
(ii) Ownership of the Shares: The Shares are owned by Sellers free and
clear of all liens, pledges, encumbrances, claims, options or
restrictions affecting any of the rights attached to such Shares. Each
Seller has full legal right, power and authority to enter into this
Agreement and to assign and transfer the Shares held by him to Total.
(iii) Incorporation of MR: MR is in all respects duly organized, in
good standing and validly existing under the laws of the State of
California, and MR has all the requisite corporate power to own its
assets and to carry out its business as it is now conducted, and said
business has been conducted and is now being conducted to the best
knowledge of Sellers in conformity with all applicable laws and
regulations. No action is pending or threatened, to the best knowledge
of Sellers, to declare MR bankrupt and it has not filed or commenced
any proceedings for judicial or extra-judicial arrangements or
settlements with its creditors.
(iv) Corporate Documents: Sellers have delivered to Total, true and
complete and updated copies of the latest version of the by-laws and
all other corporate charter documents of MR. A copy of such documents
is attached in Exhibit 1 of the Disclosure Schedule. To the best
knowledge of the Sellers, all accounts, books, financial and other
records of whatsoever kind of MR required to be maintained by law have
been fully, properly and accurately maintained in all material respects
in accordance with applicable law and contain due and accurate records
in all material respects of all matters required to be rendered
therein, and reflect truly and accurately in all material respects all
transactions involving the businesses and affairs of MR. The minute
books of MR contain complete and accurate records of all shareholders'
and directors' meetings and of all actions taken by such shareholders
and directors. The meetings referred to in such minute books were duly
and validly adopted. The signature(s) appearing on all documents
contained in such minute books is/are the true signature(s) of the
person(s) purporting to have signed. The books of registered shares or
other registered stock of MR reflect accurately the number of shares or
other stock held by the Sellers.
(v) Representation and Banks: Set forth in Exhibit 2 of the Disclosure
Schedule are: (1) the names and addresses of all banks and other
financial institutions in which MR has an account with the names and
addresses of all persons authorized to draw on said accounts, and (2)
the names and addresses of all persons holding a power of attorney on
behalf of MR and the subject and scope of such power of attorney.
b. Assets: Except as set forth in Exhibit 3 of the Disclosure Schedule, MR
is the owner free and clear of all mortgages, liens, pledges,
encumbrances, claims, preemption rights, options, restrictions,
easements and commitments of any kind of all installations, accounts
receivable, cash and all other fixed and current assets, including but
not limited to raw materials, in process products and finished products
that it presently owns; the list of the leasing agreements and rentals
is set forth in Exhibit 4 of the Disclosure Schedule. There is no
pledge on the assets of MR to the benefit of any third party except as
set forth in Exhibit 4 of the Disclosure Schedule.
c. Intellectual Property: Set forth in Exhibit 5 of the Disclosure
Statement is a true and complete list and copy of all trademarks,
currently used trade names, corporate names and logos, whether
registered or not, used, or owned but not used by MR (the "Intellectual
Property"), and of all license agreements (as a licensor or licensee)
relating to the Intellectual Property.
d. Contracts and Commitments:
(i) List of Agreements and Commitments: Set forth in Exhibit 7 of the
Disclosure Schedule is a true and complete list of all material
agreements and commitments (other than license agreements related to
intellectual property, insurance policies or labor agreements referred
to in other sections of this Agreement) to which MR is a party or by
which it or any of its assets may be bound.
(ii) Real Property Leases: Set forth in Exhibit 8 of the Disclosure
Schedule is a complete list and copy of all the lease agreements of
real property.
(iii) MR has not entered into any written or oral agreement, commitment
or understanding limiting or restraining it from carrying out its
activities the way it would appear most appropriate to it, and notably
from engaging or competing in any business in which it may engage, with
any third party.
(iv) Debts to and from related parties: MR is not indebted to any past
or present director, officer or employee of Sellers or MR, other than
for payment of salaries and compensation for services actually rendered
to MR in the ordinary course of business and reimbursement of expenses
incurred in the ordinary course of business, except as set forth in
Exhibit 9-A of the Disclosure Schedule. Except as set forth in Exhibit
9-B of the Disclosure Schedule, there are no debts owed to MR by any of
the same persons.
e. Insurance: Set forth in Exhibit 10 of the Disclosure Schedule is a true
and complete list and copy of all insurance policies maintained by MR.
All the assets of MR have been adequately insured with reputable and
notably solvent insurance carriers; the insurance policies are still in
force and full effect and all related premiums have been and still are
fully paid in due course, and MR is, in the good faith judgment of its
directors, adequately insured against the risks which it deemed
appropriate. Neither Sellers nor MR has received any notification of
cancellation or suspension of any policy or any notification of the
cancellation, suspension or reduction of the coverage thereunder.
f. Employees: Set forth in Exhibit 11 of the Disclosure Schedule is a true
and complete list of all employees of MR (other than Sellers)
specifying their current salary, commissions, remuneration in kind,
bonuses, pensions and other benefits.
g. Compliance with laws, agreements and litigation: Except as disclosed in
Exhibit 12 of the Disclosure Schedule.
(i) To the best of Sellers' knowledge, MR has complied with all
applicable laws, regulations, court decisions, arbitration awards and
other legal requirements affecting its business and operations.
(ii) To the best of Sellers' knowledge, all written agreements of any
kind to which MR is a party or by which it or any of its assets may be
bound are valid and enforceable in accordance with their terms.
(iii) No material claim, investigation, action or proceeding is pending
or, to the knowledge of MR threatened against MR, before any court,
arbitrator, tribunal or official authority.
(iv) Sellers have the right, power, capacity and authority to enter
into this Agreement and to consummate the transactions contemplated
therein. No prior authorization, consent or approval of, or
notification to, any other person, firm or entity is required in order
for Sellers to consummate the transactions contemplated hereby.
h. Financial Statements:
(i) Referenced Financial Statements: Set forth in Exhibit 13 of the
Disclosure Schedule is the unaudited Financial Statement of MR at and
for the eleven months ended November 30, 1998.
(ii) Taxes: Except as set forth in Exhibit 14 of the Disclosure
Schedule there are no tax liens or mortgages on any assets of MR and
there are no pending tax examinations or tax claims asserted on MR, or
to the best knowledge of Sellers, any basis of such claim.
8. Representations and Warranties of Total: Total hereby represents and
warrants to Sellers as follows:
a. Corporate and Stock Representation:
(i) Capitalization: The Total Shares will, upon issuance thereof in
accordance with the provisions hereof, be duly and validly issued in
compliance with all applicable laws and regulations and fully paid, and
will represent approximately __% of the issued and outstanding shares
in Total.
(ii) The Total Shares: Upon issuance thereof to Sellers, the Total
Shares will be free and clear of all liens, pledges, encumbrances,
claims, options or restrictions affecting any of the rights attached to
such Total Shares. Total has full legal right, power and authority to
enter into this Agreement and to issue the Total Shares to Sellers.
(iii) Incorporation of Total. Total is in all respects duly organized,
in good standing and validly existing under the laws of the State of
Delaware, and Total has all the requisite corporate power to own its
assets and to carry out its business as it is now conducted, and
said business has been conducted and is now being conducted to the best
knowledge of Total in conformity with all applicable laws and
regulations. No action is pending or threatened, to the best knowledge
of Total, to declare Total bankrupt and it has not filed or commenced
any proceedings for judicial or extra-judicial arrangements or
settlements with its creditors.
(iv) Corporate Documents: Total has delivered to Sellers, true and
complete and updated copies of the latest version of the by-laws and
all other corporate charter documents of Total. To the best knowledge
of Total, all accounts, books, financial and other records of
whatsoever kind of Total required to be maintained by law have been
fully, properly and accurately maintained in all material respects in
accordance with applicable law and contain due and accurate records in
all material respects of all matters required to be rendered therein,
and reflect truly and accurately in all material respects all
transactions involving the businesses and affairs of Total.
b. Annual Report. Total has provided to the Sellers a true and complete
copy of its Annual Report for the year ended December 31, 1997. Except
as disclosed by Total to Sellers in writing, since December 31, 1997,
there has been no material adverse effect on Total's business,
financial condition, results of operations or prospects. To the best
knowledge of Total, the Total annual report provided to Sellers does
not contain any untrue statement of a material fact.
9. Plan of Reorganization:
Total and Seller hereby adopt this Agreement as a "plan of reorganization"
within the meaning of sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations. No party shall take any action inconsistent with the
treatment of the transfer of the Shares hereby as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code.
10. Miscellaneous:
a. Notices: All notices hereunder shall be made in writing by personal
delivery or first class registered or certified mail to the applicable
address indicated below, or to such other address as the applicable
party may designate by written notice to the other, and the date of
such mailing or delivery shall be deemed the date of such notice.
Total Film Group, Inc.
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Xxxxxx Xxxxx, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 0
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Xxx Xxxxxx
00000 Xxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Xxxxxx Xxxxx
000 00xx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Copies of any notices sent to MR or any of the Sellers shall be
delivered in addition to Xxxxxxx X. Hansen, Gibson, Xxxx & Xxxxxxxx
LLP, 0000 Xxxxxxx Xxxx Xxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000.
b. Assignment: Except as provided herein, this Agreement may not be
assigned by any party without the prior written consent of the other
party. This Agreement shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
c. Governing Law: This Agreement has been made and entered into in Los
Angeles County, and shall be construed in accordance with the laws of
the State of California applicable to agreements which are signed and
fully performed within such State. All actions, proceedings or
litigation brought by any party against another shall be instituted and
prosecuted solely within the State of California and not anywhere else.
d. Entire Agreement. This Agreement, its exhibits and the Disclosure
Schedule, the documents incorporated by reference, and the documents
executed on the Closing Date in connection herewith, constitute the
entire agreement between the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings,
oral and written, between the parties hereto with respect to the
subject matter hereof.
e. Attorneys' Fees. If any litigation is commenced (including any
proceedings in a bankruptcy court) between the parties hereto or their
representatives concerning any provision of this Agreement or the
rights and duties of any person or entity hereunder, solely as between
the parties hereto or their successors, the party or parties prevailing
in such proceeding will be entitled to the reasonable attorneys' fees
and expenses of counsel and court costs incurred by reason of such
litigation.
f. Severability. The validity, legality or enforceability of the remainder
of this Agreement will not be affected even if one or more of the
provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
g. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
If the above terms are in accordance with your understanding, please acknowledge
your agreement by signing where indicated below.
Sincerely yours,
Total Film Group, Inc.
By: /s/ Xxxxxx Xxxxx
Its: President
Agreed and Accepted this 23rd day of December, 1998.
/s/ D. Xxxxxx Xxxxxx, Xx.
/s/ Xxxxxx Xxxxx
Exhibit A
Principal Terms of Employment Agreements
For the purpose of this Exhibit, the employing entity shall be called "Company".
The material terms of the Employment Agreements of Michel and Xxxxx are the
following:
a. Title and Capacity:
(i) Michel: Executive Vice President and Chief Operating Officer of TC
(or, pending the formation of TC, each of Xxxx Communications and MR).
(ii) Xxxxx: Executive Vice President and Co-Creative Director of TC
(or, pending the formation of TC, each of Xxxx Communications and MR).
b. Term/Exclusivity:
(i) The Term shall be one (1) year commencing as of January 1, 1999,
which shall be subject to automatic renewal for one (1) additional year
commencing as of January 1, 2000 unless the Company notifies Michel or
Xxxxx , as the case may be, of its desire not to renew at least sixty
(60) days prior to December 31, 1999. If so renewed, the Term shall be
subject to automatic renewal for an additional renewal period of one
(1) year through December 31, 2001, unless either party notifies the
other of its desire not to renew at least sixty (60) days prior to
December 31, 2000; provided, however, that if Michel or Xxxxx, as the
case may be, provides such notice of non-renewal, then during the year
ending December 31, 2001, he shall not (A) compete with the Company's
business, (B) call on, solicit, take away or attempt to call on ,
solicit or take away any of the customers of the Company or (C) solicit
any of the Company's employees to leave the employ of the Company. The
Term and possible extension(s) shall be subject to earlier termination
as briefly described in subparagraph f below.
(ii) The services shall be exclusive and all results and proceeds of
services owned by Company; provided, however, that Sellers shall be
entitled to devote a non-material portion of their time to other
activities and business interests.
(iii) The services shall be rendered in Company's business premises in
Los Angeles County, which shall be not more than ten (10) miles from
the current location of Total's offices at 0000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxx
Xxxxx, Xxxxxxxxxx.
c. Fixed Compensation:
For each of Michel and Xxxxx:
(i) For year 1: $150,000 per year.
(ii) For possible year 2: $175,000 per year.
(iii) For possible year 3: $195,000 per year.
Such compensation shall be payable in accordance with Company's standard payroll
policies and shall have deducted any applicable withholding taxes and standard
and legally required deductions.
d. Incentive Compensation:
Each of Michel and Xxxxx shall receive within 30 days after Total reports its
revenues for 1999 and each calendar year during which he is employed under
this Agreement, and in any event within 120 days after the end of each such
year, an incentive compensation payment ("Incentive Compensation") equal to
six and one-third percent (6.333%) of the amount, if any, by which (i) the
gross sales revenue of TC (which for purposes of this paragraph (d) shall
include in any event MR, Xxxx Communications, Skyrocket Interactive and any
business unit providing similar services which may be created or acquired by
Total, TC or their subsidiaries or affiliates) during such calendar year,
exceeds (ii) the gross sales revenue in 1998 of MR, Xxxx Communications and
Skyrocket Interactive. For purposes hereof, gross sales revenues shall be
determined in accordance with generally accepted accounting principles,
consistently applied, and shall be the amount of gross sales revenues of TC
which are reflected in the audited financial statements of Total. Such gross
sales revenues shall be certified by the chief financial officer of Total and
shall be subject to reasonable opportunity for audit thereof by Michel, Xxxxx
or their respective representatives. Michel and Xxxxx shall not audit the
books of the Company more than once in any twelve month period. Any such
audit shall be conducted during normal business hours after reasonable
advance notice to Total and shall be completed within thirty (30) days after
Total provides all requested records.
e. Benefits:
(i) Automobile Allowance: Monthly automobile allowance equal to the sum
of (a) $395.00 in the case of Michel and $391.78 in the case of Xxxxx
plus (b) the lesser of (i) the incremental monthly cost to each of
Michel and Xxxxx, as the case may be, of insuring his leased car on his
personal automobile insurance policy with coverage comparable to that
currently maintained by the Company or (ii) the monthly cost currently
being incurred by MR in insuring such car.
(ii) Business Expenses: Reasonable business and travel expenses will be
reimbursed to each of Michel and Xxxxx. Such expenses shall be
reimbursed within 30 days after delivery to Company of an itemized
statement and sufficient backup documentation. In no event shall the
nature and amount of such expenses be less than the expenses currently
provided by MR (on an annual basis).
(iii) Medical and other benefits: The Company shall provide to each of
the Sellers and their dependents the same medical and dental coverage
as is maintained for Xxxxxx Xxxxx or his successor as Total's chief
executive officer. In the event that such medical and
dental coverage is not available in full (whether as a result of any
pre-existing condition exclusion or otherwise) until a later date, the
Company shall, in the interim, pay or reimburse Michel and Xxxxx for
the cost of maintaining their current coverage after the Closing Date
under COBRA. On or before June 30, 1999, the Company will adopt a
401(k) plan or other tax deferred savings plan providing benefits to
Sellers which are substantially the same as those currently provided to
Sellers under the Simple XXX currently provided by MR to Sellers. The
Company shall take whatever action is necessary in accordance with
applicable law to terminate the active participation of the
participants in such Simple XXX. Upon the expiration of the current
term of the life insurance policies currently maintained by MR for the
benefit of Michel and Xxxxx (which the parties understand to be May 14,
1999 in the case of Xxxxx and July 27, 1999 in the case of Michel), the
Company shall either renew such coverage or provide insurance coverage
of at least the same amounts for the remainder of the Term of
employment of Michel or Xxxxx, as the case may be. Upon the expiration
of the current term of the disability insurance policy currently
maintained by MR for Michel and Xxxxx (which the parties understand to
be March 2, 1999, the Company shall either renew such coverage or
provide disability insurance coverage of at least the same amounts with
at least the same benefits for the remainder of the Term of employment
of Michel or Xxxxx, as the case may be.
(iv) Vacation: twenty working days per accruing, for accounting
purposes, prorata for each week of services rendered hereunder, to be
utilized at such times and periods as shall be mutually agreed in good
faith between the parties.
(v) Travel: all travel shall be conducted during normal business hours;
same class of travel and accommodations as provided to other similar
level executives of Total.
f. Termination:
(i) Death or Disability: Immediately upon death or upon notice for
absence caused by disability for 60 consecutive days (or 90 days in the
aggregate) in any 12 month period of the Term, all Fixed and Incentive
Compensation vested to the date of death or disability is paid;
provided, however, that the Company shall have no right to terminate
either Seller's employment as a result of the disability of such Seller
unless such Seller is entitled to full benefits for permanent, total
disability under the disability insurance policy maintained by the
Company for the benefit of such Seller pursuant to Section (e)(iii)
above.
(ii) For Cause: Immediately upon cause for termination; Customary
definition (including (a) material breach which is not cured within
five (5) days after the Company provides written notice of such breach,
(b) felony and (c) alcoholism); all accrued Fixed and Incentive
Compensation vested to the termination date is paid, without prejudice
to any of Company's other rights. In the event of termination for cause
of a Seller in accordance with the foregoing sentence, the prohibitions
set forth in Section (b)(i)(A), (B) and (C) shall apply for one year
after the effective date of such termination.
(iii) Without cause: Upon 3 (three) months prior notice; provided,
however, that in the event that either Seller is terminated without
cause pursuant to this Section (f)(iii), such Seller shall be entitled
to his full Fixed and Incentive Compensation and all other benefits set
forth herein through the end of the then current Term or renewal term
(or through the end of the next succeeding renewal term if such
termination occurs in the final sixty (60) days of any year and no
notice of non-renewal is provided by either party prior to such
sixty-day period).
(iv) In the event of the termination of the employment of either Seller
by the Company, then irrespective of whether such termination is
voluntary or involuntary or with or without cause, such Seller shall
thereafter hold in confidence and not disclose any of the trade secrets
or confidential information of the Company which is not known or
available to the public, except that such Seller may disclose any such
trade secret or confidential information to the extent and only to the
extent required by law or legal process.
x. Xxxxxxx' Right to Terminate Employment Agreement:
(i) Each of Michel and Xxxxx may terminate his employment agreement
(upon 60 days written notice to Total) if in his sole discretion he
elects to do so at any time after any entity or person other than Total
acquires a controlling interest in TC, any entity or person other than
Xxxxxx Xxxxx acquires a controlling interest in Total. Notwithstanding
the foregoing, Total may provide written notification to Michel and
Xxxxx of such acquisition, and if neither Michel nor Xxxxx objects to
such acquisition within ten (10) business days after his receipt of
such notification, their right to terminate their respective Employment
Agreements after such acquisition shall be deemed waived. For purposes
hereof, the term "controlling interest" shall mean ownership of record
and beneficially of capital stock or other equity securities of TC or
Total, as the case may be, having at least 50% of the total voting
power of the such company or the total right to any dividends or other
distributions by such company, whether in the ordinary course or upon
liquidation. If either Michel or Xxxxx elects to terminate his
employment in such event, Total shall be obligated to pay the balance
then due on the Employment Agreement (i.e., the total amount of Fixed
and Incentive Compensation and the value of all other benefits set
forth herein through the end of the then current Term or renewal term
(or through the end of the next succeeding renewal term if such
termination occurs in the final sixty (60) days of any year and no
notice of non-renewal is provided by either party prior to such
sixty-day period)). Such payment shall be made at the expiration of the
60-day notice period; provided, however, that such Incentive
Compensation shall be paid at the time such Incentive Compensation
would otherwise be payable hereunder.
(ii) Each of Michel and Xxxxx may terminate his employment agreement
(upon 60 days' written notice) if in his sole discretion he elects to
do so at any time after he is asked or instructed to report to any
person other than Xxxxxx Xxxxx. Notwithstanding the foregoing, Total
may provide written notification to Michel and Xxxxx of such change in
reporting relationship, and if neither Michel nor Xxxxx objects to such
change within thirty (30) days after his receipt of such notification,
their right to terminate their respective
Employment Agreements after such change shall be deemed waived. If such
decision is made, Total shall be obligated to pay the balance then due
on the Employment Agreement (i.e., the total amount of Fixed and
Incentive Compensation and the value of all other benefits set forth
herein through the end of the then current Term or renewal term (or
through the end of the next succeeding renewal term if such termination
occurs in the final sixty (60) days of any year and no notice of
non-renewal is provided by either party prior to such sixty-day
period)). Such payment shall be made at the expiration of the 60-day
notice period; provided, however, that such Incentive Compensation
shall be paid at the time such Incentive Compensation would otherwise
be payable hereunder.
h. No Duty to Mitigate Damages. In the event of the termination of the
employment of either Seller, whether in accordance with the provisions
of this Agreement or otherwise, such Seller shall have no obligation to
seek employment or to accept any employment in order to mitigate the
damages or other amounts owing by the Company to such Seller hereunder,
and in the event that such Seller accepts other employment, any
compensation earned by him in connection therewith shall not reduce or
otherwise affect the amount of any payment required to be made to such
Seller as a result of such termination.
As of July 28, 1999
Mr. D. Xxxxxx Xxxxxx
00000 Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Xx. Xxxxxx Xxxxx
000 00xx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Re: Michel/Xxxxx, Inc. / Stock Purchase
Dear Xxx and Howie:
Reference is hereby made to the agreement ("Agreement") dated as of December
23rd, 1998 between D. Xxxxxx Xxxxxx and Xxxxxx Xxxxx, on the one hand, and
Total Film Group, Inc.("Total"), on the other hand, with respect to the
acquisition by Total of one hundred percent (100%) of Michel/Xxxxx, Inc.
issued and outstanding capital stock.
The Agreement is amended as follows:
1. The provisions of Paragraph 3.b are hereby intentionally deleted and
replaced by the following provisions: "In consideration for the sale
and transfer of 100% of the Shares and all of MR's assets and property,
Total shall deliver to Michel and Xxxxx 100,000 shares of common stock
of Total ("Total Shares"), such certificates to bear a restrictive
legend in compliance with Rule 144 promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, as
follows: 50,000 of said shares to be delivered to D. Xxxxxx Xxxxxx and
50,000 of said shares to be delivered to Xxxxxx Xxxxx.
2. The provisions of Paragraph 3.e are hereby intentionally deleted and
replaced by the following provisions: "Each party agrees to pay,
without right of reimbursement from the other party, the costs incurred
by it in the performance of its obligations under this Agreement and
the consummation of the transactions contemplated hereby, including the
fees and disbursements of its counsels, accountants and consultants
employed by such party in connection herewith; provided, however, that
Total agrees, upon presentation of the appropriate invoice, to pay
Sellers' attorneys' fees up to $12,800 (twelve thousand eight hundred
dollars)".
3. In Paragraph 8.b., 2nd line, the words "December 31, 1997" are hereby
intentionally deleted and replaced by the words "June 30, 1998".
4. In Paragraph 8.b., 3rd line, the words "December 31, 1997" are hereby
intentionally deleted and replaced by the words "June 30, 1998".
5. The provisions of Paragraph d. of Exhibit A are hereby intentionally
deleted and replaced by the following provisions:
"IX. Incentive Compensation & Stock Option:
A. Incentive Compensation: Each of Michel and Xxxxx shall receive within
thirty (30) days after Company reports its revenues for the six (6)
month period ended June 30, 1999 and then for each fiscal year during
which he is employed under this Agreement, and in any event within one
hundred and twenty (120) days after the end of such six (6) month
period ended June 30, 1999 and then of each such fiscal year, an
incentive compensation payment ("Incentive Compensation") equal to five
percent (5%) of the net profits of TC and its wholly owned
subsidiaries. The term "net profits" as used in this paragraph, shall
mean TC's and its wholly owned subsidiaries' consolidated annual net
operating income before the deduction or allowance for federal or state
income taxes. The determination of net profits shall be made by TC's
auditor in accordance with generally accepted accounting principles,
consistent with TC's past accounting practices, and shall be conclusive
on all parties. Michel and Xxxxx may, at their own expense, but not
more than once annually, audit the applicable records. Any such audit
shall be conducted only by a public accountant during reasonable
business hours after reasonable advance notice and in such manner as
not to interfere with Company's normal business activities and shall
not continue more than thirty (30) consecutive days.
B. Stock Option: As additional compensation, Total hereby grants to each
of Michel and Xxxxx the option to purchase 50,000 shares of common
stock of Total as set forth in the form of Stock Option attached hereto
as Exhibit B and incorporated herein by this reference".
6. In Paragraph e.(iv) of Exhibit A, 1st line, the word "annum" is added
between the words "twenty working days per" and the word "accruing".
All other terms and conditions of the Agreement remain the same.
Thank you for acknowledging your agreement with the above terms by signing
where indicated below.
Sincerely yours,
TOTAL FILM GROUP, INC.
By: /s/ Xxxxxx Xxxxx Date: 12/23/99
Its: President
ACCEPTED AND AGREED:
/s/ Xxxxxx Xxxxxx, Xx. Date: 12/23/99
/s/ Xxxxxx Xxxxx Date: 12/23/99
