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EXHIBIT 10.8
ASSET PURCHASE AND SALE AGREEMENT
ASSET PURCHASE AND SALE AGREEMENT, dated as of December 6, 2000 (the "Asset
Purchase Agreement" or "Agreement") between BETELGEUSE PRODUCTIONS, LLC, a
limited liability company organized and existing under the laws of the State of
Delaware ("Seller"), SELECT MEDIA COMMUNICATIONS, INC., a corporation organized
and existing under the laws of the State of New York ("Select"), and BETELGEUSE
PRODUCTIONS, INC., a corporation organized and existing under the laws of the
State of Delaware and a wholly-owned subsidiary of Select ("Betelgeuse" and,
together with Select, "Purchaser").
RECITALS
WHEREAS, Seller operates a post production facility (the "Business"), which
Business has its principal office located at 00 X. 00xx Xxxxxx, Xxxxxxxxx, Xxx
Xxxx Xxxx, XX 00000; and
WHEREAS, Seller desires to sell and Purchaser desires to purchase and assume
certain assets and liabilities of Seller, as described in greater detail and in
accordance with the terms and conditions set forth in this Asset Purchase
Agreement.
NOW, THEREFORE, intending to be legally bound, in accordance with the terms
and conditions set forth in this Asset Purchase Agreement, having determined
that it is in their best interest to execute and deliver this Asset Purchase
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which is acknowledged, Seller and Purchaser agree as follows:
1. DEFINITIONS.
Terms defined in Recitals above shall have the meanings set forth therein
and such Recitals, by this reference, are incorporated in and made a part of
Section 1.1 and this Asset Purchase Agreement.
1.1. GENERAL DEFINITIONS. Unless the context of this Asset Purchase
Agreement clearly requires otherwise, the plural includes the singular, the
singular includes the plural, the use of any gender shall be applicable to all
genders, the part includes the whole, "including" is not limiting, and "or" has
the inclusive meaning of the phrase "and/or". Unless otherwise expressly stated,
the words "hereof", "herein", "hereby", "hereunder", and other similar terms in
this Asset Purchase Agreement refer to this Asset Purchase Agreement as a whole
and not exclusively to any particular provision of this Asset Purchase
Agreement.
"ASSUMED CONTRACTS" shall mean Seller's written contracts relating to the
Business, as set forth and described on Exhibit 1.1 that are to be assigned
by Seller to Purchaser pursuant to Section 2 and assumed by Purchaser
pursuant to the terms and conditions of this Asset Purchase Agreement.
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"ASSUMED LEASES" shall mean those leases set forth and described on Exhibit 1.1
that are to be assigned by Seller to Purchaser pursuant to Section 2 and
assumed by Purchaser pursuant to the terms and conditions of this Asset
Purchase Agreement.
"ATLANTIC BANK LINE OF CREDIT" shall mean the banking arrangement between Seller
and Atlantic Bank.
"BOOKS AND RECORDS" means all of Seller's books and records, including, but not
limited to: minute books; ledgers; records indicating, summarizing, or
evidencing Seller's assets and liabilities; all information relating to
Seller's business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, and other computer-prepared
information and the equipment containing such information.
"BUSINESS" shall have the meaning set forth in the Recitals of this Asset
Purchase Agreement.
"CLOSING" shall have the meaning set forth in Section 6 of this Asset Purchase
Agreement.
"CLOSING DATE" shall have the meaning set forth in Section 6 of this Asset
Purchase Agreement.
"CONTRACT DATE" shall mean the date of execution and delivery of this Asset
Purchase Agreement.
"DUE DILIGENCE" shall mean Purchaser's review of the Books and Records and
financial statements of Seller.
"DUE DILIGENCE COMPLETION DATE" shall mean the date on which Purchaser shall
complete its Due Diligence; provided, however, that such date shall in no
event be more than forty-five (45) days from the date on which the Seller
shall have provided or made available to Purchaser all of its financial
records for the fiscal years ended June 30, 1999 and June 30, 2000,
including, without limitation, the financial statements for such periods
reviewed by the Seller's outside auditors, a list of assets and liabilities,
trial balances, and balance sheets, as evidenced by a certificate executed
by Xxxx Xxxxxxxx and Xxx Xxxxxxxx.
"GAAP" means generally accepted accounting principles, consistently applied, as
in effect from time to time in the United States of America.
"LETTER OF INTENT" shall mean the Letter dated September 11, 2000 from Purchaser
to Seller.
"LIEN" means any security interest, mortgage, hypothecation, pledge, assignment,
lien, or other encumbrance of any kind, including any interest of a vendor
under a conditional sale contract or consignment and any interest of a
lessor under a capital lease.
"PERSON" means any individual person, corporation, partnership, limited
liability company, joint venture, association, company, trust, or entity or
a court or government or any agency or political subdivision thereof.
"PURCHASE PRICE" shall have the meaning set forth in Section 3.1 of this Asset
Purchase Agreement.
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"PURCHASED ASSETS" shall have the meaning set forth in Section 2 of this Asset
Purchase Agreement.
1.2. ACCOUNTING TERMS. All accounting terms or terms of an accounting
character not specifically defined in this Asset Purchase Agreement shall be
construed in accordance with GAAP applied on a basis that is consistent with the
financial statements provided by Seller pursuant to this Asset Purchase
Agreement.
1.3. CONSTRUCTION. Neither this Asset Purchase Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Purchaser
or Seller, whether under any rule of construction or otherwise. On the contrary,
this Asset Purchase Agreement has been reviewed by each of the parties and their
respective legal counsel and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties to this Asset Purchase Agreement.
2. SALE AND PURCHASE OF ASSETS.
At the Closing, Seller shall sell, transfer, and assign to Betelgeuse all of
Seller's right, title, and interest in and to all of the assets of the Business
(the "Purchased Assets"), including but not limited to, the real, personal, and
intangible property described below, free and clear of all known Liens, all as
adjusted for changes occurring in the ordinary course of business as permitted
hereunder between the date of this Asset Purchase Agreement and the Closing
Date.
The Purchased Assets shall include, but not be limited to, the following:
(a) All of the real, personal, and intangible property and assets of the
Business of every kind and description wherever located except for the
Purchase Price paid pursuant to Section 3.1 hereof, including claims,
rights, and chooses in action, whether xxxxxx or inchoate, licenses,
trademarks, technology, tradenames, and including but not limited to the
inventory, furniture, fixtures, equipment, and vehicles and assets not
specifically excluded pursuant to the terms and conditions of this Asset
Purchase Agreement;
(b) All Assumed Contracts;
(c) All Assumed Leases;
(d) All cash (other than the Purchase Price paid pursuant to Section 3.1
hereof) and accounts receivables as of the Closing Date;
(e) All customer files, lists, and records of the Business;
(f) The name "Betelgeuse Productions, Inc.", "Betelgeuse Productions", and
"Betelgeuse" and all related or similar names in which Seller has any
interest as of the Closing Date together with any and all goodwill
attaching to such name or names;
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(g) Such other assets, tangible or intangible, including contract rights,
agreements, insurance policies and licenses, oral or written, relating to
the Business; and
(h) The business telephone number, mailing address, and all advertising for
the Business.
3. PURCHASE PRICE.
3.1. AMOUNT OF PURCHASE PRICE. As full consideration for the purchase of
the assets as set forth in Section 2 of this Asset Purchase Agreement, Purchaser
shall pay or transfer to Seller the following (the "Purchase Price"):
(a) Twenty-Five Thousand ($25,000) Dollars previously paid, the receipt of
which is acknowledged.
(b) Two Hundred Thousand ($200,000) Dollars by law firm check or certified
check payable to Seller on the Contract Date; provided, however, that if
Closing does not take place on or before the Closing Date for any reason
other than a material breach of this Asset Purchase Agreement by Seller,
all of these monies previously paid by Purchaser to Seller shall be
retained by Seller.
(c) On each of the first, second, and third monthly anniversary of the
Contract Date, Purchaser shall pay in cash or by certified check to Seller
One Hundred Thousand ($100,000) dollars; provided, however, that if any of
these payments are not made as herein provided or if Closing does not take
place on or before the Closing Date for any reason other than a material
breach of this Asset Purchase Agreement by Seller, all of these monies
previously paid by Purchaser to Seller shall be retained by Seller.
(d) Ten Million ($10,000,000) Dollars less the amounts previously paid by
Purchaser to Seller pursuant to this Section 3.1 to be paid at Closing as
follows:
(i) One million ($1,000,000) Dollars to be placed in escrow with Xxxxxxx
Xxxxx & Xxxxx, P.C., pursuant to the Escrow Agreement as set forth in Exhibit
3.1 to be delivered to Seller on the first anniversary of the Closing Date;
(ii) The balance of the Purchase Price less the amount of any adjustments
to the Purchase Price as set forth in Section 3.2 below, in cash or by certified
check payable to Seller.
(e) In addition to the consideration described in Section 3.1(a) through (d)
above, Purchaser will issue to Seller shares of Purchaser's Common Stock in
an amount indicated in a written notice from Seller to Purchaser which must
be delivered to Purchaser prior to the earlier of the Closing Date or
January 15, 2001, which amount may not exceed 500,000 shares (the "Share
Consideration"); provided, however, that shares of Purchaser Common Stock
received as part of the Share Consideration pursuant to this Section 3.1
will be subject to certain transfer restrictions such that any transfer of
such shares must comply with applicable state and federal securities laws,
and such shares may not be transferred without
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an opinion of counsel, satisfactory to the Purchaser, that registration of
such shares under the Securities Act of 1933, as amended, is not required
or that such shares can be sold pursuant to Rule 144 of such act or another
applicable exemption.
3.2. PAYMENT ADJUSTMENT. The balance of the Purchase Price set forth in
Section 3.1(d)(ii) payable at Closing shall be reduced on a dollar for dollar
basis to the extent that the Seller's accounts receivable do not exceed Seller's
payables, including without limitation the outstanding amount due on the
Atlantic Bank Line of Credit, by One Hundred Thousand ($100,000) Dollars or
more. Any adjustment shall be made based on information as of the fiscal year
ended June 30, 2000.
3.3. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
as set forth on Exhibit 3.3 of this Asset Purchase Agreement.
4. NO ASSUMPTION OF CERTAIN LIABILITIES BY PURCHASER.
Except as set forth in this Section 4, Purchaser and Seller expressly agree
that Purchaser shall not assume and shall have no liability for or with respect
to the obligations of the Seller under and pursuant to the terms of that certain
employment agreement between Seller and Xx. Xxxxxx XxXxxxxxx (the "DeFilippe
Contract") and the litigation that has been filed (the "DeFilippe Litigation").
Seller agrees that it will defend, indemnify, and hold Purchaser harmless from
any and all claims made, lawsuits commenced, or judgments entered against
Purchaser, including the costs, fees, and expenses of any such claims, lawsuits,
or judgments with respect to the DeFilippe Contract, including without
limitation, the DeFilippe Litigation, except for the portion of the liabilities
which Purchaser assumes pursuant to this Section 4.
Purchaser agrees that it will be responsible only for the payment of the
costs and expenses of the DeFilippe Litigation, including reasonable attorneys
fees, and any final, unappealable judgment entered against Seller in the
DeFilippe Litigation to the extent such costs, expenses, and Final Judgment
exceeds $280,000. Seller shall provide Purchaser with all papers submitted to
the court or served by any party to the DeFilippe Litigation within ten (10)
days of their submission or service. If the trial court awards a judgment that,
together with costs and expenses, exceeds $280,000, Seller shall take an appeal
and use its best efforts to overturn the judgment. If such an appeal is not
successful in reducing any such judgment, together with costs and expenses, to
$280,000 or less, Seller shall seek reconsideration of the ruling and pursue all
further avenues of appeal. Failure of Seller to comply with all the obligations
of this Section 4 shall invalidate the obligations of Purchaser under this
Section 4. If such judgment, together with costs and expenses, is less than
$280,000, Seller shall have the right, but not the obligation, to appeal such
judgment.
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5. ACCESS TO INFORMATION AND DUE DILIGENCE.
Upon reasonable notice to Seller, Seller shall (i) give Purchaser and its
authorized representatives reasonable access during normal business hours to its
offices, plants, and other facilities and to the books and records of it and any
of its subsidiaries, (ii) permit Purchaser to make such reasonable inspections
during normal business hours as it may reasonably request, and (iii) cause
Seller officers or agents to furnish Purchaser with such financial and operating
data and other information with respect to the business and properties of Seller
and its subsidiaries as Purchaser may from time to time reasonably request.
6. CLOSING.
Closing of this transaction (the "Closing") shall be held on or before the
date (the "Closing Date") that is six (6) months from the Due Diligence
Completion Date, time being of the essence; provided, however, that such Closing
Date may be extended by the mutual agreement of the parties in writing. On the
Closing Date, title and possession of the Purchased Assets shall be transferred,
conveyed, and delivered to Purchaser by one or more Bills of Sale substantially
in the form of Exhibit 6. The Closing shall be held at the offices of Fulbright
& Xxxxxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxx Xxxx Xxxx, XX 00000, or such other
location as the parties may mutually agree.
7. CONDITIONS PRECEDENT TO CLOSING BY PURCHASER.
The obligations of the Purchaser to purchase the assets and close shall be
subject to the satisfaction of the following conditions precedent:
(a) The Purchaser shall have received from Fulbright & Xxxxxxxx L.L.P.,
counsel for the Seller, a favorable opinion dated as of the Closing Date,
in form and substance satisfactory to Purchaser and its counsel, Xxxxxxx
Gadon & Xxxxx PC, to the effect that, to the best of Fulbright & Xxxxxxxx
L.L.P.'s knowledge:
(i) Seller is a validly existing limited liability company in good standing
under the laws of the State of Delaware.
(ii) Seller has the power to carry on its business as and where such
business is now being conducted.
(iii) No provisions of the organizational documents of Seller set forth in
the list attached to the opinion of Fulbright & Xxxxxxxx L.L.P. (issued pursuant
to Section 12(j) hereof), prevent Seller from delivering the assets to the
Purchaser in the manner contemplated by this Asset Purchase Agreement or
otherwise prohibit or would be breached by the consummation of the transactions
contemplated herein.
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(iv) Seller has full power, legal right, and authority to enter into,
execute, and deliver this Agreement, and to consummate the transactions
contemplated herein; and this Agreement has been duly executed and delivered by
Seller and is a valid and legally binding obligation of Seller, enforceable in
accordance with its terms except as its validity and enforceability may be
limited by bankruptcy, insolvency, or similar laws of general application
affecting the enforcement of creditors' rights generally.
(b) No action or proceeding shall have been instituted before any court,
agency, or other governmental body to restrain or prohibit the transactions
contemplated hereby.
(c) The representations and warranties of Seller contained in this Agreement
shall be true and correct in all respects as of the Closing Date, with the
same effect as though such representations and warranties had been made on
such date. All of the covenants and agreements of be performed on or before
the Closing Date pursuant to the terms hereof, shall have been duly
performed.
(d) All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Purchaser and its
counsel, and the Purchaser shall have received copies of all of such
documents and other evidence as the Purchaser and its counsel may
reasonably request in order to establish the consummation of such
transactions.
(e) There shall have been no material adverse change or damage to the
premises, the assets, or the business of Seller.
(f) Seller shall have delivered to Purchaser all the documents that they are
required to deliver hereunder including, but not limited to, a list of all
personal property owned by the Seller as of the Closing Date.
(g) To the extent such approval or consent is available or obtainable prior
to Closing, Purchaser shall have obtained the approval or consent of such
government agencies or bodies, as Purchaser shall deem reasonably necessary
in connection with the consummation of the purchase.
8. CONDITIONS PRECEDENT TO CLOSING BY SELLER.
The obligations of the Seller to sell the assets and close shall be subject
to the satisfaction of the following conditions precedent:
(a) The Seller shall have received from Xxxxxxx Xxxxx & Xxxxx, counsel for
the Purchaser, a favorable opinion dated as of the Closing Date, in form
and substance satisfactory to Seller and its counsel, Fulbright & Xxxxxxxx
L.L.P., to the effect that, to the best Xxxxxxx Gadon & Xxxxx 's knowledge:
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(i) Select is a validly existing corporation in good standing under the
laws of the State of New York, and Betelgeuse is a validly existing corporation
in good standing under the laws of the State of Delaware.
(ii) Purchaser has the corporate power to carry on its business as and
where such business is now being conducted.
(iii) No provisions of the organizational documents of Purchaser prevent
Purchaser from receiving the assets from the Seller in the manner contemplated
by this Asset Purchase Agreement or otherwise prohibit or would be breached by
the consummation of the transactions contemplated herein.
(iv) Purchaser has full power, legal right, and authority to enter into,
execute, and deliver this Agreement, and to consummate the transactions
contemplated herein; and this Agreement has been duly executed and delivered by
Purchaser and is a valid and legally binding obligation of Purchaser,
enforceable in accordance with its terms except as its validity and
enforceability may be limited by bankruptcy, insolvency, or similar laws of
general application affecting the enforcement of creditors' rights generally.
(b) No action or proceeding shall have been instituted before any court,
agency, or other governmental body to restrain or prohibit the transactions
contemplated hereby.
(c) The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all respects as of the Closing Date,
with the same effect as though such representations and warranties had been
made on such date. All of the covenants and agreements of be performed on
or before the Closing Date pursuant to the terms hereof, shall have been
duly performed.
(d) All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Seller and its
counsel, and Seller shall have received copies of all of such documents and
other evidence as Seller and its counsel may reasonably request in order to
establish the consummation of such transactions.
(e) There shall have been no material adverse change or damage to the
premises, the assets, or the business of Purchaser.
(f) Purchaser shall have delivered to Seller all the documents that it is
required to deliver hereunder.
(g) To the extent such approval or consent is available or obtainable prior
to Closing, Seller shall have obtained the approval or consent of such
government agencies or bodies, as Seller shall deem reasonably necessary in
connection with the consummation of the purchase.
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9. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller makes the following representations and warranties, each of which is
true and correct on the date hereof and will be true and correct on the Closing
Date.
9.1. CORPORATE EXISTENCE AND QUALIFICATION. Seller is duly organized,
validly existing, and in good standing under the laws of its state of
organization and is duly qualified to conduct its business in each jurisdiction
where the nature of its business or its properties require it be so qualified.
Seller has the power and authority to own and use its properties and to transact
the business in which it is engaged, and to enter into this Agreement and to
consummate the transaction contemplated hereby.
9.2. SUBSIDIARIES. Seller does not own, of record or beneficially, any
capital stock or other securities of any other corporation; does not own,
directly or indirectly, any interest in a business, in a business trust, joint
stock company, or other business organization or association; and is not a party
to any partnership, joint venture, or other business venture. To the extent that
Seller may have previously owned any stock in a corporation, Seller has legally
divested itself of such ownership, has paid all obligations and liabilities
relative to such ownership, has filed all tax returns and paid all taxes
required by such prior ownership and divestment thereof, and certifies that it
has no liability or obligations, contingent or otherwise, relating to such
ownership or sale or divestment thereof.
9.3. AGREEMENT LEGAL AND AUTHORIZED. The execution and delivery of this
Agreement does not, and the consummation by Seller of the transactions
contemplated herein and the fulfillment by Seller of the terms, conditions, and
provisions hereof, will not:
(a) conflict with, or result in a breach of, any of the terms, conditions or
provisions of, or constitute a default under organizational documents or
any agreement or other instrument to which Seller is a party or by which
any of its properties or assets are bound, or grant any other party the
right to terminate an agreement with Seller;
(b) conflict with, violate or result in a breach of any law, administrative
regulation or court decree applicable to Seller;
(c) result in the creation or imposition of any lien, charge or encumbrance
of any nature upon any of the properties or assets of Seller.
9.4. VALID AND BINDING OBLIGATION. Seller has the right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement have been
duly authorized by all necessary corporate action on the part of the Seller.
This Agreement constitutes a valid, binding, and enforceable obligation of
Seller.
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9.5. FINANCIAL STATEMENTS. The reviewed financial statements of Seller
(the "financial statements"), previously delivered by Seller are true, complete,
and correct, have been prepared in conformity with generally accepted accounting
principles consistently maintained and applied and present fairly the financial
position of Seller at the respective dates indicated and the results of
operations of Seller for the respective periods indicated, and the reviewed
financial statements do not omit to state or reflect any material fact
concerning Seller required to be stated or reflected therein or necessary to
make the statements therein not misleading.
9.6. EVENTS SUBSEQUENT TO FINANCIAL STATEMENTS. Since the date of the
financial statements referred to in Section 9.5 above, except as set forth in
Schedule 9.6 there has been no, and there has been no threatened or anticipated:
(a) material adverse change in the financial condition, assets, liabilities,
prospects, or business of Seller;
(b) damage, destruction, or loss, whether or not covered by insurance,
materially adversely affecting the business, prospects or any property of
Seller or any material deterioration in the operating condition of Seller's
assets;
(c) declaration, setting aside or payment of a dividend, return of capital
or other distribution in respect of any of any of Seller's capital stock,
or any direct or indirect redemption, purchase or other acquisition of any
capital stock or securities convertible into or exchangeable for such
capital stock;
(d) strike, lockout, labor trouble or any event or condition of any
character materially adversely affecting the business, properties or
prospects of Seller;
(e) mortgage or pledge of or creation of any other lien, claim or
encumbrance with respect to any of any Seller's assets, whether tangible or
intangible;
(f) making or authorization of any capital expenditures in excess of
$200,000 without the written approval of Purchaser;
(g) cancellation or waiver of any debts or claims of substantial value or
any cancellation or waiver of any debts or claims against any affiliate of
Seller;
(h) sale, transfer or other disposition of any assets of Seller, except
sales of assets in the ordinary course of business and the assignment of
all assets of Betelgeuse Productions, Inc., a New York corporation, to
Seller (other than those related to nProcess, Inc., a Delaware
corporation);
(i) payment, discharge or satisfaction of any liability or obligation,
whether accrued, absolute, contingent, or otherwise, by Seller, other than
the payment, discharge or satisfaction, in the ordinary course of business,
of liabilities or obligations shown or reflected on the financial statement
attached hereto or incurred in the ordinary course of business since the
date thereof;
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(j) adverse change or any threat of any adverse change in Seller's relations
with, or any loss or threat of loss of, any of Seller's important
suppliers, clients or customers;
(k) write-offs as uncollectible of any notes or accounts receivable of
Seller or write-downs of the value of any assets or inventory by Seller
other than in immaterial amounts or in the ordinary course of business
consistent with past practice;
(l) change by Seller in the method of accounting or keeping its books of
record or accounting practices, or any write-up of the book value of any of
Seller's assets;
(m) creation, incurrence, assumption or guarantee by Seller of any
obligations or liabilities, whether absolute, accrued, contingent, or
otherwise and whether due or to become due, except in the ordinary course
of business or any creation, incurrence, assumption or guarantee by Seller
of any indebtedness for money borrowed;
(n) disposition of or failure to keep in effect any rights in, to or for the
use of any material patent, trademark, service xxxx, trade name or
copyright used by Seller, or any disclosure to any person not an employee
or other disposition of any trade secret, process or know-how belonging to
or used by Seller; or
(o) any transaction, agreement or event outside the ordinary course of
Seller's business or inconsistent with past practice.
9.7. UNDISCLOSED LIABILITIES. Seller does not have any liabilities or
obligations whatsoever, whether due or to become due, accrued, absolute,
contingent, or otherwise, including liabilities for or in respect of taxes
(including, without limitation, any interest or penalties relating thereto), and
Seller knows of no basis for any claim against Seller for any liability, except
(a) to the extent set forth and used in determining the net worth of Seller in
the financial statements, (b) to the extent specifically set forth in this
Agreement or on any of the Schedules delivered pursuant hereto, or (c)
liabilities or obligations incurred in the normal and ordinary course of Seller
since compilation of the financial statements. Seller does not know and has no
reasonable ground to know of any basis for the assertion against Seller of any
liability of any nature not included on the financial statements or incurred in
the ordinary course of business since the date thereof.
9.8. TAXES. Except as set forth in Schedule 9.8:
(a) No audit of any federal, state or local income tax returns or other tax
returns by Seller is in progress, or threatened.
(b) There exists no past due unpaid federal, state or local income or other
tax or any tax deficiency by a governmental agency or authority having
jurisdiction assessed against Seller, except for occupancy taxes in the
approximate amount of $200,000.
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(c) All income, profits, franchise, sales and use, occupation, property,
excise, ad valorem and other taxes due have been fully paid, or adequate
reserves have been set up for the same and reflected on the financial
statements, except reserves for such as may have accrued or been incurred
in the ordinary course of business since the compilation of the financial
statement.
(d) There exist no grounds for the assertion or assessment of any additional
taxes against Seller or its assets.
(e) No waiver of any statute of limitations has been given and is in effect
against Seller.
9.9. REAL AND PERSONAL PROPERTY OWNED. Seller has good and marketable
title to all its real and personal property reflected as being owned by it,
subject to the pledge of its accounts receivable to Atlantic Bank and purchase
money liens on its equipment, all as disclosed in the financial statements.
9.10. NECESSARY PROPERTY; TITLE TO ASSETS. The tangible property owned
or leased by Seller, and the intangible personal property constitute all of such
property now used in, and necessary for the conduct of, the business of Seller
in the manner and to the extent presently conducted or planned by it. There
exists no restriction or reservation affecting Seller's title to or the utility
of its assets which would prevent it from utilizing such assets, or any part
thereof after the purchase is consummated, to the same full extent that it might
continue to do so if the transaction contemplated hereby did not take place.
9.11. USE AND CONDITION OF PROPERTY. All currently used property and
assets of Seller are in good operating condition and repair, reasonable wear and
tear excepted, as required for their use in the business of Seller as presently
conducted or planned; and no notice of any violation of any law, statute,
ordinance, or regulation or assessment for public improvements relating to any
of such property or assets has been received by Seller except such as have been
fully complied with. All improvements located on, and the use presently being
made of all real property, leased or owned by Seller, comply with all applicable
zoning ordinances and all other applicable laws. Seller is not aware of any
proposed, pending or threatened change in any such code, ordinance or standard
that would adversely affect the business of Seller or the use of its property
and assets. Seller has not received any written or oral notice or order by any
governmental or other public authority, any insurance company which has issued a
policy with respect to any of such properties or any board of fire underwriters
or other body exercising similar functions which (a) relates to violations or
alleged violations of building, safety, fire or other ordinances or regulations,
(b) claims any defect or deficiency with respect to any of such properties or
(c) requests the performance of any repairs, alterations or other work to or in
any of such properties or in the streets bounding the same.
Seller is not aware of any proposed, pending, or threatened condemnation
proceeding or similar action affecting the property or assets of Seller and
there are no proposed, pending or threatened changes with respect to any streets
or public amenities appurtenant thereto or in the
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vicinity thereof which would adversely affect the business of Seller or the use
of its property and assets.
9.12. INVENTORY. All the inventories of Seller, including those
reflected in the financial statements referred to in Section 9.5, are valued at
the lower of cost or market, the cost thereof being determined on a first-in,
first-out basis, except as disclosed in such financial statements. All of the
inventories of Seller reflected in such financial statements and all inventories
acquired since the date thereof consist of items of a quality and quantity
usable and saleable in the ordinary course of Seller's business within a
reasonable period of time and at normal profit margins, and all of the raw
materials and work-in-process inventory of Seller reflected in such financial
statements and all such inventories acquired since the date thereof can
reasonably be expected to be consumed in the ordinary course of business within
a reasonable period.
9.13. ACCOUNTS RECEIVABLE. All the accounts and notes receivable of
Seller represent amounts receivable for services actually provided, or, in the
case of non-trade accounts or notes, represent amounts receivable in respect of
other bona fide business transactions, have arisen in the ordinary course of
business, are not subject to any counterclaims or offsets and have been billed
and are generally due within thirty (30) days after such billing. Seller has no
reason to believe that any such receivables are not fully collectible in the
normal and ordinary course of business, except to the extent of a reserve in an
amount not in excess of the reserve for doubtful accounts reflected on the
financial statements. There are no refunds, reimbursements, discounts or other
adjustments payable by Seller, and there are no deposits held by Seller which
may in the future become due to Seller's customers except as set forth in a
certificate heretofore delivered by Seller setting forth, at the date of such
certificate, the amount of customer deposits held by Seller. Except with respect
to Atlantic Bank, there are no defenses, rights of set-off, assignments,
pledges, liens, encumbrances, claims, equities or conditions enforceable by
third parties with respect to Seller's accounts receivable.
9.14. CONTRACT AND COMMITMENTS. Except as set forth on Schedule 9.14
hereto, Seller does not have outstanding:
(a) Any contract providing for an expenditure by Seller for the purchase of
any real property, machinery, equipment or other items which are in the
nature of capital investment; or any contract providing for an expenditure
by Seller for the purchase of supplies or other items which are in the
nature of inventory which are not in the ordinary course of business and
consistent with the ordinary course of business and consistent with past
business practices of Seller, except as approved in writing by the
Purchaser.
(b) Any contract, bid or offer to sell products or to provide services to
third parties which (1) is at a price which would result in a net loss on
the sale of such products or providing such services, or (2) is pursuant to
terms or conditions Seller cannot reasonably expect to satisfy or fulfill
in their entirety.
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(c) Any revocable or irrevocable power of attorney to any person, firm, or
seller for any purpose whatsoever.
(d) Any loan agreement, indenture, promissory note, conditional sales
agreement, or other similar type of agreement other than those reflected in
the financial statements or otherwise disclosed in writing to Purchaser.
(e) Any other material contract or commitment which is not cancellable on
thirty (30) days notice or less and which is not specifically set forth on
any other Schedule hereto, or otherwise in this Agreement.
All leases, contracts and other commitments to which Seller is a party or by
which it is bound are in full force and effect; all parties to such leases,
contracts and other commitments have complied with the provisions thereof; no
such party is in default under any of the terms thereof; and no event has
occurred that with the passage of time or the giving of notice or both would
constitute a default by any party under any provision thereof.
9.15. FRANCHISES. A list of all licenses, franchises, agreements, or
authorizations of any kind under which Seller does business is set forth in
Schedule 9.15. True and correct copies of all such written licenses, franchises,
agreements or authorizations have been delivered to Purchaser; and, to Seller's
knowledge, none of Seller's rights under such agreements are being contested and
Seller is not in default under the terms of any such agreements.
9.16. DEBT INSTRUMENTS. A list of all instruments defining the terms on
which Seller has borrowed or is committed to loan money outside of the ordinary
course of its business, or has given or committed to give a guarantee of any
obligation or any other person is set forth in Schedule 9.16. True and correct
copies of such instruments and true and correct summaries of any oral agreements
relating to the matters set forth in Schedule 9.16 have been delivered to
Purchaser.
9.17. REASONABLENESS AND VALIDITY OF CONTRACTS. No purchase commitment
for materials, supplies, component parts or other items of inventory to which
Seller is a party is in excess of normal, ordinary, usual and current
requirements of its business or at a price in excess of the current reasonable
market price. Each of the contracts and agreements to which Seller is a party is
a valid and binding obligation of the parties thereto in accordance with its
terms and conditions. No party to any such contract or agreement is in default
with respect to any term or condition thereof, nor has any event occurred which,
through the passage of time or the giving of notice, or both, would constitute a
default thereunder or would cause the acceleration of any obligation of any
party thereto or the creation of a lien or encumbrance upon any asset of Seller.
9.18. NO BREACH OF CONTRACT. Seller is not in default under, or in
violation of, any provision of its operating agreement, Bylaws, any promissory
note, indenture or any evidence of indebtedness or security therefore, lease,
contract, purchase or other commitment or any other
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agreement to which Seller is a party or by which Seller is bound which may
result in a material adverse effect on the business or condition, financial or
otherwise, of Seller.
9.19. LITIGATION. Except as set forth in Section 4 with respect to the
DeFilippe Litigation and Schedule 9.19, there is no suit, claim, action or
proceeding now pending or threatened before any court, administrative or
regulatory body, or any governmental agency, nor is Seller aware of any grounds
therefor, to which Seller is a party or which may result in any judgment, order,
decree, liability or other determination which will, or could have any material
adverse effect upon the business or conditions, financial or otherwise, of
Seller. No such judgment, order or decree has been entered against Seller nor
any such liability incurred which has, or could have, such effect. There is no
claim, action or proceeding now pending or threatened before any court,
administrative or regulatory body, or any governmental agency, nor is Seller
aware of any grounds therefor, which will, or could, prevent or hamper the
consummation of the transactions contemplated by this Agreement.
9.20. COMPLIANCE WITH LAWS. Schedule 9.20 sets forth a list of all
material permits, certificates, licenses, orders, registrations, franchises,
authorizations and other approvals (including those relating to environmental
matters) from all federal, state, local and foreign bodies and held by Seller.
Seller holds all licenses and permits necessary and required for the conduct of
its businesses. Such licenses and permits are valid and in full force and
effect, and will not be terminated or otherwise adversely affected by the
consummation of the transactions contemplated hereby. All claims, suits, actions
or proceedings (including government investigations and audits) pending or
threatened at any time since June 30, 1999, and the disposition thereof,
relating to the release, discharge or emission of any pollutants or contaminants
(including hazardous and toxic substances) or the handling, generation,
treatment, storage or disposal of any wastes or otherwise relating to the
protection of the environment resulting from or relating to the operation of
Seller are identified on Schedule 9.20 hereto. With respect to each such
pending, threatened or prior matter, Schedule 9.20 lists the date of the claim,
suit, action or proceeding (including governmental investigations and audits),
the claimant or investigating agency, the nature and a brief description of the
matter, the damages claimed or relief sought, and the status or outcome of the
matter. Except as disclosed on Schedule 9.20, since June 30, 1999, no notice,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed, no claim has been asserted and no investigation,
proceeding (including governmental investigations and audits) or review has been
conducted or is pending or threatened by any governmental or other entity (a)
with respect to any alleged violation by Seller of any law, ordinance, rule,
regulation or order of any governmental entity, or (b) with respect to any
alleged failure by Seller to have any permit, certificate, license, approval,
registration or authorization required in connection with its business, or (c)
with respect to any release, generation, treatment, storage, recycling,
transportation or disposal of wastes (including any hazardous or toxic or
polluting substances) generated or released by Seller or any other environmental
matter. Seller has not treated, stored for more than ninety (90) days, recycled
or disposed of any hazardous, toxic or polluting substances on any property now
or previously owned or leased by Seller, nor has anyone else treated, stored for
more than ninety (90) days, recycled or disposed of any hazardous, toxic or
polluting substances on any property now or previously owned or leased by
Seller. Seller has complied with each and is not in violation of
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any federal, state or local law, regulation, permit, provision or ordinance
relating to the generation, storage, transportation, treatment or disposal of
wastes (including hazardous, toxic or polluting substances), has obtained and
adhered to all necessary permits or other approvals necessary to store, dispose
or otherwise handle wastes (including hazardous, toxic and polluting
substances), and has reported, to the extent required by federal, state and
local law, all past and present sites where wastes (including hazardous, toxic
or polluting substances), if any, from Seller have been treated, stored or
disposed. Seller has not transported any hazardous, toxic or polluting
substances or arranged for the transportation of such substances to any location
which is the subject of federal, state or local enforcement actions or other
investigations which may lead to claims against Seller or Purchaser for cleanup
costs, remedial work, damages to natural resources or for personal injury
claims, including, but not limited to, claims or investigations under the
federal Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended ("CERCLA"). Seller shall assume and be solely liable and
responsible for any and all claims, suits, actions, liabilities, costs, damages,
expenses or judgments of any kind relating to pollution control cleanup costs,
remedial work or the environmental matters (including, but not limited to,
claims or investigations under CERCLA) relating to, or arising out of, the use,
possession or operation by Seller of its business, properties or assets prior to
the Closing.
9.21. OFFICERS, DIRECTORS, EMPLOYEES, AND CONSULTANTS. Set forth on
Schedule 9.21 hereto is a complete list of:
(a) All directors of Seller.
(b) All officers (with office held) of Seller.
9.22. INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, AND OTHERS. Except
as set forth on Schedule 9.22 hereto, Seller is not indebted to any director,
officer, employee, or agent of Seller except for amounts due as normal salaries,
wages, bonuses, and reimbursements of ordinary expenses on a current basis.
9.23. OUTSIDE FINANCIAL INTERESTS. Except as set forth in Schedule 9.23
and with the exception of nProcess, Inc., a Delaware Corporation, no officer or
director of Seller has any direct or indirect financial interest in any
competitor, supplier or customer of Seller; provided, however, that for this
purpose ownership of corporate securities having no more than 2% of the
outstanding voting power of any competitor, supplier or customer which
securities are listed on any national securities exchange or traded actively on
the national over-the-counter market shall not be deemed a financial interest
provided such person has no other connection or relationship with such
competitor, supplier, or customer. With regard to SAS Funding, an entity which
is 50% owned by Xxx Xxxxxxxx, Seller is party to equipment leases with SAS
Funding which leases are disclosed on Exhibit 1.1, and such leases were entered
into in arms length transactions with SAS Funding.
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9.24. COMPENSATION AND PERQUISITES OF AGENTS AND EMPLOYEES. Seller has
properly and accurately reflected on its books and records all compensation paid
to and perquisites provided to or on behalf of its agents and employees. Such
compensation and perquisites have been properly and accurately disclosed in the
financial statements, proxy statements and other public or private reports,
records or filings of Seller, to the extent required by law. Neither the
Internal Revenue Service nor any other federal, state local or other
governmental agency or entity has initiated or threatened any investigation of
any deduction claimed by Seller with respect to any of such compensation or
perquisites, the disclosure of such compensation or perquisites in any public or
private reports, records or filings of Seller, or otherwise relating to such
compensation or perquisites.
9.25. LABOR AGREEMENTS, EMPLOYEE BENEFITS, AND EMPLOYMENT AGREEMENTS.
Except as set forth in Schedule 9.25 hereto, there are no long-term employment
contracts or agreements between Seller and any employee, and each of such
contracts or agreements set forth on Schedule 9.25 shall be in full force and
effect as of the Closing Date and shall remain so after giving effect to the
transactions contemplated by this Asset Purchase Agreement. All other employment
arrangements are oral and may be terminated by Seller at will, except to the
extent that "at will" terminations are limited, restricted or prohibited by
applicable state or federal law. Except as set forth in Schedule 9.25 hereto,
Seller is not a party to (a) any union, collective bargaining or similar
agreement, (b) any plan or policy providing for "fringe benefits" to its
employees, including but not limited to, vacation, disability, sick leave,
medical, hospitalization, life insurance and other insurance plans, and related
benefits. There are no negotiations, demands or proposals which are pending or
have been made which concern matters that would be covered, by the type of
agreements listed in this Section.
9.26. OVERTIME, BACK WAGES, VACATION AND MINIMUM WAGES. No present or
former employee of Seller has any material claim against Seller, whether under
federal or state law, any employment agreement, or otherwise, on account of or
for (a) overtime pay, other than overtime pay for the current payroll period,
(b) wages or salary for any period other than the current payroll period, (c)
vacation, time off or pay in lieu of vacation or time off, other than that
earned in respect of the current fiscal year, or (d) any violation of any
statute, ordinance or regulation relating to minimum wages or maximum hours of
work.
9.27. DISCRIMINATION, OCCUPATIONAL SAFETY, WAGE-PRICE STATUTES, AND
REGULATIONS. No person or party, including, but not limited to, governmental
agencies of any kind, has any claim or basis for any action or proceeding,
against Seller arising out of any statute, ordinance or regulation relating to
discrimination in employment or employment practices, occupational safety and
health standards, or inflationary wage or price standards which would have an
adverse effect on the business or condition, financial or otherwise, of Seller.
9.28. LABOR DISPUTES; UNFAIR LABOR PRACTICES. There is neither pending
nor threatened any labor dispute, strike or work stoppage which affects or which
may affect the business of Seller or which may interfere with the continued
operation of Seller. Neither Seller nor any agent, representative or employee of
Seller has committed any unfair labor practice as defined in
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the National Labor Relations Act of 1947, as amended, and there is not now
pending or threatened any charge or complaint against Seller by the National
Labor Relations Board or any representative thereof.
9.29. INSURANCE POLICIES. Set forth on Schedule 9.29 hereto is a list of
all insurance policies and bonds in force of which Seller is the owner, insured
or beneficiary, or covering Seller and any of its properties, operations or
personnel. Also set forth on Schedule 9.29 hereto is a listing of when each such
policy or bond became effective. Policies thereon described evidence insurance
in such amounts and against such risks and losses as are generally maintained
with respect to comparable businesses and properties. There is no default with
respect to any provision contained in any such policy, nor has there been any
failure to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by such policy. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim under,
any such policy has been received by Seller. Seller has not been refused any
insurance, nor has its coverage been limited by any insurance carrier to which
it has applied for insurance or with which it has carried insurance during the
last five (5) years. All products liability and general liability policies
maintained by or for the benefit of Seller have been "occurrence" policies and
not "claims made" policies.
9.30. ENERGY REGULATIONS. Seller is not currently subject to any pending
action resulting from a default or violation of any applicable statute, law,
ordinance, decree, order, rule or regulation of any federal or state
governmental body (including but not limited to the Department of Energy)
relating to energy management, energy allocation or energy conservation.
9.31. GUARANTEES. Seller is not a guarantor, indemnitor, or otherwise
liable for any indebtedness of any other person or firm except as an endorser of
checks received by Seller and deposited in the ordinary course of business.
9.32. CERTAIN PAYMENTS. All of Seller's payments to agents, consultants
and others have been in payment of bona fide fees and commissions and not as
bribes, illegal or improper payments or payments to obtain any treatment to
which Seller was entitled without such payment. Seller has not made any payment
to any person whomsoever or to any entity whatsoever with respect to which a
deduction could be disallowed under Section 162(c) of the Code. Neither the
Internal Revenue Service, the Securities and Exchange Commission, nor any other
federal, state, local, or foreign government agency or entity has initiated or
threatened any investigation of any payments made by Seller and alleged to have
been of the type covered by this Section 9.32.
9.33. BROKER'S FEES. Neither Seller nor any of its officers, directors,
or employees on behalf of Seller has paid or agreed to pay any brokerage fee, or
commission or any finder's fees to any broker, agent or finder on account of
this Agreement or any matters contemplated by it.
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9.34. BANK ACCOUNTS AND SAFE DEPOSIT BOXES. Set forth on Schedule 9.34
hereto are (a) the name, branch, account number, and purpose of all bank
accounts maintained by Seller together with the names of authorized signatories
on each such account, (b) the amounts and terms of each compensating balance and
the reasons therefor, (c) the location of all safe deposit boxes maintained by
Seller together with the names of the persons with authorized access thereto,
and (d) the name and account number of all securities brokers with which Seller
maintains a securities brokerage account and the names of all persons authorized
to deal or give instructions therewith. All Seller's employees except as shall
be designated at Closing shall be removed as signatories thereon or thereto.
9.35. BOOKS AND RECORDS. The books of account, stock record books and
minute books and other corporate records of Seller are in all material respects
complete and correct, have been maintained in accordance with good business
practices and the matters contained therein are accurately reflected, to the
extent appropriate, on the Financial Statements. The operating agreement and
Bylaws and all amendments thereto of Seller, and the minutes books and stock
books of Seller have been made available to Purchaser and are correct and
complete as of the date hereof. All of such records shall remain the property of
Seller after Closing and shall be available to Purchaser on or before that date.
9.36. GOVERNMENTAL CONSENT. No governmental permits, consents, filings,
registrations, or qualifications are necessary to effect the transaction
contemplated hereby.
9.37. FULL DISCLOSURE. Seller shall provide full and unrestricted access
to all financial records of Seller to Purchaser. No representation or warranty
by Seller in this Agreement, or in any certificate, exhibit, schedule or other
document furnished or to be furnished by Seller, pursuant hereto, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained therein not
misleading.
9.38. ABSENCE OF CERTAIN CONDITIONS. Since the date of the financial
statements referred to in Section 9.5, Seller did not:
(a) Mortgage, pledge, or subject to lien, lease, security interest or other
charge or encumbrance any of the properties or assets of Seller;
(b) Transfer, sell, or dispose of any of the assets or properties of Seller,
except in the ordinary and usual course of business;
(c) Incur, create, assume, or guarantee any indebtedness, liabilities, or
obligations other than (a) in the usual and ordinary course of business and
with a maturity date of less than one year or (b) that are incurred
pursuant to contracts disclosed in the Schedule delivered pursuant hereto;
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(d) Enter into any contract or commitment or engage in any transaction which
is not in the usual and ordinary course of business or which is
inconsistent with past practices;
(e) Make any material capital expenditure or enter into any lease of capital
equipment or real estate, other than as set forth in Schedule 9.38(e);
(f) Enter into any contract, other than in the ordinary course of business,
which is to be performed in more than thirty (30) days, other than those
described in writing to Purchaser;
(g) Forgive or cancel any debts or claims or waive any rights except in the
ordinary course of business;
(h) Increase the rate of compensation to the officers, agents, or salaried
employees of Seller, except as in the ordinary course of business;
(i) Increase the rate of compensation to non-salaried employees of Seller,
provided, however, that ordinary merit increases not unusual in character
or amount may be made in the ordinary course of business;
(j) Make any payments of severance or termination pay, except as in the
ordinary course of business;
(k) Enter into or amend any stock option, deferred compensation, bonus,
profit-sharing, incentive compensation payment, pension, retirement,
medical, hospitalization, life insurance, other insurance, or other benefit
plan;
(l) Enter into any employment contracts or collective bargaining agreement,
except as in the ordinary course of business;
(m) Issue any additional shares of stock or other securities other pursuant
to the Membership Interest Purchase Agreement;
(n) Make any distribution to any shareholders or members by way of
dividends, purchase of shares, or otherwise, except as set forth in
Schedule 9.6(c);
(o) Make or institute any unusual or novel method of transacting business or
change any accounting procedures or practices of its financial structure;
(p) Make any amendments to or changes in its operating agreement or Bylaws;
(q) Perform any act, or attempt to do any act, or permit any act or omission
to act, which will cause a breach of any material contract, commitment or
obligation to which Seller is a party;
Provided, however, that should Seller, in the ordinary course of business, take
any action described in subsections (h), (j), (l) or (m) of this Section 9.38,
Seller will provide reasonably prompt notice to Purchaser of the taking of such
action.
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9.39. ERISA; EMPLOYEE BENEFIT PLANS. (a) Except as disclosed in Schedule
9.39, Seller does not sponsor or maintain and is otherwise not a party to or
liable under any plan, program, fund or arrangement (whether or not qualified
for Federal income tax purposes), whether benefitting a single individual or
multiple individuals and whether funded or not, that is an "employee pension
benefit plan," or an "employee welfare benefit plan," as such terms are defined
in the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) Seller has not contributed nor does it contribute to any multi-employer plan
(as defined in Section 3(37) of ERISA), incurred any liability under Section
4201 of ERISA for any complete or partial withdrawal from any multi-employer
plan or assumed any such liability by any prior owner of any of its assets or
properties. (c) Each employee pension benefit plan maintained by Seller and
listed in Schedule 9.39 complies in all material respects with the requirements
of ERISA. No "reportable event" within the meaning of Section 403 of ERISA has
occurred with respect to any such plan and company has not engaged in any
"prohibited transaction" within the meaning of Section 406(a) or (b) of ERISA or
of Section 4975(c) of the Internal Revenue Code, with respect to any such plan;
and no such plan has been terminated in accordance with the procedures set forth
in Section 4041 or 4042 of ERISA. (d) No liability has been incurred by Seller
for any tax imposed by Section 4975 of the Internal Revenue Code with respect to
any plan described in Schedule 9.39. Seller has, and shall have, for all periods
ending on or prior to the Closing, administered each employee pension benefit
plan and each employee welfare benefit plan described in Schedule 9.39 in all
material respects in compliance with the reporting, disclosure and all other
requirements applicable thereto under ERISA, the Internal Revenue Code or any
other applicable law.
10. ADDITIONAL REPRESENTATIONS AND WARRANTIES AND COVENANTS OF SELLER.
Seller represents and warrants the following to be true on the date of this
Agreement and as of the Closing Date:
(a) The Seller owns the Purchased Assets free and clear of all Liens of any
nature except as otherwise disclosed in this Agreement, the schedules
attached hereto or in Seller's financial statements provided to Purchaser.
(b) The Purchased Assets shall be operated and maintained in accordance with
Seller's normal operating standards until the Closing except reasonable
wear and tear incurred in the normal course of Seller's Business is
permitted.
(c) Seller shall not sell, dispose of, transfer, or encumber any of the
Purchased Assets after the execution of this Agreement except in the
regular course of its business and with the express approval of Seller.
(d) Seller shall indemnify and hold Purchaser harmless from any claim or
liability that Purchaser may be subject to as a result of the failure of
Seller to comply with any laws pertaining to the transfer of assets in
bulk, including the Bulk Sales Act, as more specifically set forth in
Section 16.
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11. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
11.1. CORPORATE EXISTENCE AND QUALIFICATION. Purchaser is duly
organized, validly existing, and in good standing under the laws of its state of
organization and is duly qualified to conduct its business in each jurisdiction
where the nature of its business or its properties require it be so qualified.
Purchaser has the power and authority to own and use its properties and to
transact the business in which it is engaged, and to enter into this Agreement
and to consummate the transaction contemplated hereby.
11.2. AGREEMENT LEGAL AND AUTHORIZED. The execution and delivery of this
Agreement does not, and the consummation by Seller of the transactions
contemplated herein and the fulfillment by Seller of the terms, conditions, and
provisions hereof, will not:
(a) conflict with, or result in a breach of, any of the terms, conditions or
provisions of, or constitute a default under organizational documents or
any agreement or other instrument to which Seller is a party or by which
any of its properties or assets are bound, or grant any other party the
right to terminate an agreement with Seller;
(b) conflict with, violate or result in a breach of any law, administrative
regulation or court decree applicable to Purchaser;
(c) result in the creation or imposition of any lien, charge or encumbrance
of any nature upon any of the properties or assets of Purchaser.
11.3. VALID AND BINDING OBLIGATION. Purchaser has the right, power,
legal capacity and authority to enter into and perform its obligations under
this Agreement. The execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action on the part of the
Purchaser. This Agreement constitutes a valid, binding, and enforceable
obligation of Purchaser.
11.4. NO BREACH OF CONTRACT. Purchaser is not in default under, or in
violation of, any provision of its Articles of Incorporation, Bylaws, any
promissory note, indenture or any evidence of indebtedness or security
therefore, lease, contract, purchase or other commitment or any other agreement
to which Purchaser is a party or by which Purchaser is bound which may result in
a material adverse effect on the business or condition, financial or otherwise,
of Purchaser.
11.5. BROKER'S FEES. Neither Purchaser nor any of its officers,
directors, or employees on behalf of Purchaser has paid or agreed to pay any
brokerage fee, or commission or any finder's fees to any broker, agent or finder
on account of this Agreement or any matters contemplated by it.
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11.6. FULL DISCLOSURE. No representation or warranty by Purchaser in this
Agreement, or in any certificate, exhibit, schedule or other document furnished
or to be furnished by Purchaser, pursuant hereto, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
11.7. UNDISCLOSED LIABILITIES. Purchaser does not have any liabilities or
obligations whatsoever, whether due or to become due, accrued, absolute,
contingent, or otherwise, including liabilities for or in respect of taxes
(including, without limitation, any interest or penalties relating thereto), and
Purchaser knows of no basis for any claim against Purchaser for any liability,
except (a) to the extent set forth and used in determining the net worth of
Purchaser in its financial statements included in the Filings (as such term is
defined in Section 11.8 hereof) (the "Purchaser Financial Statements"), (b) to
the extent specifically set forth in this Agreement or on any of the Schedules
delivered pursuant hereto, or (c) liabilities or obligations incurred in the
normal and ordinary course of Purchaser since compilation of the most recent of
the Purchaser Financial Statements. Purchaser does not know and has no
reasonable ground to know of any basis for the assertion against Purchaser of
any liability of any nature not included on the Purchaser Financial Statements
or incurred in the ordinary course of business since the date thereof.
11.8. SEC FILINGS.
(a) Purchaser has made available to Seller (i) its annual report on Form
10-KSB for its fiscal year ended December 31, 1999 (the "10-KSB"), (ii) and
its quarterly report on Form 10-QSB for its fiscal quarters ended March 31,
2000 and June 30, 2000 (the "10-QSBs") (the 10-KSB and 10-QSBs are
collectively referred to herein as the "Filings"). None of the Filings, as
of their respective filing dates, contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading, and all such filed documents
(including the financial statements contained therein), as of their
respective filing dates, complied as to form in all material respects with
the applicable requirements of the Securities Exchange Act of 1934, as
amended.
(b) The financial statements of Purchaser (including the related notes)
included in each of the Filings fairly present the financial position of
Purchaser and the results of operations and changes in financial condition
as of the dates and periods therein specified. Such financial statements
(including the related notes) have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved (except as otherwise noted therein).
11.9. NO MATERIAL ADVERSE CHANGE. Since June 30, 2000, there has been no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations of Purchaser.
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12. SELLER'S CLOSING OBLIGATIONS.
At Closing, Seller shall deliver or cause to be delivered to Purchaser the
following documents:
(a) All necessary assignments, consents, certificates of title, and other
documents or instruments of transfer which shall contain full warranties of
title as shall be effective to vest in Purchaser all of Seller's right,
title, and interest in and to all of the assets being conveyed pursuant to
this Asset Purchase Agreement, free and clear of all liens, charges,
encumbrances, and restrictions;
(b) All contracts, files, commitments, and rights pertaining to Seller's
Business and other data relating to its operations;
(c) Certificates of Good Standing for Seller;
(d) Resolution of Board of Directors of Seller, along with a Certificate of
Incumbency of Directors and Officers, authorizing execution, delivery, and
performance of this Agreement and all documents required for Closing;
(e) Certified copy of Minutes of Shareholders' meetings of Seller
authorizing the entry and completion of all transactions hereunder;
(f) Evidence of all insurance policies, permits, license, and use rights of
the Business;
(g) Consulting and Non-Compete Agreement executed by Xxx Xxxxxxxx
substantially in the form of Exhibit 12(g);
(h) A four year employment agreement with Xxxx Xxxxxxxx substantially in the
form of Exhibit 12(h);
(i) Closing Statement; and
(j) Opinion of Fulbright & Xxxxxxxx L.L.P., counsel to Seller as set forth
in Section 7.
13. PURCHASER'S CLOSING OBLIGATIONS.
At Closing, Purchaser shall deliver to Seller:
(a) Payment of the Purchase Price as set forth in Section 3;
(b) Resolution of Board of Directors of Purchaser, authorizing the execution
of this Agreement and all documents required for Closing;
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(c) An undertaking of certain shareholders of Purchaser providing that,
until Seller shall have obtained the release of Xxxx Xxxxxxxx and Xxx
Xxxxxxxx from their respective obligations on the Assumed Leases and the
Atlantic Bank Line of Credit, as set forth in Section 18, those
shareholders shall cast their respective votes in connection with the
election of directors of Seller to elect Xxx Xxxxxxxx to said Board;
(d) Execution of all other agreements, instruments, and certificates
executed by Purchaser that require Purchaser's agreement and execution;
(e) Certificate of Good Standing;
(f) Opinion of Xxxxxxx Xxxxx & Xxxxx as set forth in Section 8(a); and
(g) Closing Statement.
14. OPERATION OF BUSINESS PENDING CLOSING.
14.1. AFFIRMATIVE COVENANTS OF SELLER. During the period from the date
of this Asset Purchase Agreement to the Closing Date, Seller shall:
(a) Conduct the Business according to the ordinary and usual course and use
Seller's best efforts to maintain and preserve the organization of the
Business, its employees, and relationships with suppliers, customers, and
others, it being understood that Atlantic Bank has indicated that Purchaser
may have to show its credit worthiness to maintain Seller's line of credit
upon consummation of the transactions contemplated by this Asset Purchase
Agreement.
(b) Promptly inform Purchaser in writing of any material changes or material
matters relating to the business, including, without limitation, any
adverse changes in the results of operations or financial position of the
Business or any litigation, proceeding, or government investigation
instituted or threatened against Seller relating to the Business or the
occurrence of any factor that might give rise to any litigation,
proceeding, or investigation as aforesaid.
(c) Afford to Purchaser and its counsel, auditors, and authorized
representatives full access to all personnel, properties, records, and
documents of the Business and shall furnish such financial and other
information with respect to the Business, its personnel, and property as
Purchaser may reasonably require.
(d) Keep Seller adequately insured against fire and casualty until the
Closing Date. Seller shall show continuing evidence that the Seller is
adequately insured against fire and casualty after the Closing Date until
all obligations to Purchaser have been satisfied. If any part of the
Seller's assets is damaged or destroyed by fire or casualty before the
Closing Date, such assets shall be replaced or repaired at Seller's
expense. If it is impossible or impractical to repair or replace such
assets before the Closing Date, the Purchase Price shall
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be reduced by the amount of the loss resulting from the fire or casualty,
unless the value of such damaged or destroyed assets exceeds Fifty Thousand
($50,000.00) Dollars, in which case, at Purchaser's option, this Agreement
may be terminated and all deposits returned in full to Purchaser.
(e) Cause all property owned or leased by it to be insured against all
ordinary and insurable risks (except in respect of any leased property
where the terms of the lease do not impose on lessee the obligation to
maintain insurance) and will operate, maintain, and repair all its property
in a careful, prudent, and efficient manner.
14.2. NEGATIVE COVENANTS OF SELLER. During the period from the date of
this Asset Purchase Agreement to the Closing Date, Seller shall not, without the
prior written consent of Purchaser:
(a) Mortgage, pledge, or subject to lien, security interests, or other
obligations or encumbrance any of the Seller's assets other than in the
ordinary course of business;
(b) Sell or otherwise transfer any of the Seller's assets other than the
sale of inventory in the ordinary course of business; or
(c) Enter into any contract or agreement relating to the business not in the
usual ordinary course or terminate or make any material change in any of
such contracts.
15. NO SHOPPING OR SOLICITATION.
Neither Seller nor any of its officers, directors, members, agents,
shareholders, affiliates, or persons acting on behalf of Seller or any such
person will, directly or indirectly,
(a) solicit, engage in discussions, or negotiate with any person, whether
such discussions or negotiations are initiated by Seller, any of the
foregoing persons, or otherwise, or take any other action intended or
designed to facilitate the efforts of any person other than Purchaser or
Purchaser's representatives relating to any possible alternative agreement
to the transactions contemplated by this Asset Purchase Agreement (with any
such efforts by any such person to be referred to as an "Alternative
Transaction");
(b) provide information to any person with respect to Seller relating to a
possible Alternative Transaction;
(c) enter into an agreement with any person providing for a possible
Alternative Transaction, or
(d) make or authorize any statement, recommendation, or solicitation in
support of or approving any Alternative Transaction.
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16. SELLER'S COMPLIANCE WITH BULK SALES ACT.
Seller agrees that it shall comply in all respects with the provisions of
the applicable Bulk Sales Act relating to the sale of property and/or assets in
bulk, by giving notice to the appropriate governmental agency in the relevant
jurisdiction of the proposed sale of Purchased Assets pursuant to this Asset
Purchase Agreement.
17. CHANGE OF SELLER'S NAME.
On or within five (5) business days of the Closing Date, Seller shall change
its name to a name that does not include the name "Betelgeuse".
18. PURCHASER'S UNDERTAKING TO OBTAIN RELEASE OF CERTAIN OBLIGATIONS
Purchaser agrees to use its best efforts to obtain the release of Xxxx
Xxxxxxxx and Xxx Xxxxxxxx from their respective obligations on the Assumed
Leases; provided, however, that under no circumstances shall the failure of
Purchaser to obtain such releases be construed or deemed a default under, or
breach of, this Asset Purchase Agreement.
Purchaser agrees to pay up to One Million Four Hundred Thousand
($1,400,000.00) Dollars to obtain the release of the personal guaranties of
Xxxxxxxx and Domenico with respect to the Atlantic Bank Line of Credit within
one year from the Closing Date. In furtherance of Purchaser's undertakings in
this Section:
(a) As of the Closing Date, Purchaser will have a positive net working
capital of not less than $1,400,000 represented in part by cash and
marketable securities in at least that amount.
(b) Commencing 30 days after the Closing and on the first day of each month
thereafter through and including the twelfth (12th) monthly anniversary of
the Closing Date, Purchaser agrees to pay or cause to be paid $120,000 per
month for the first eleven (11) payment dates, and $80,000 on the twelfth
payment date to pay down the amounts due under the Atlantic Bank Line of
Credit, which funds will be paid from Purchaser's working capital, and
until the release of the personal guarantees of Xxxx Xxxxxxxx and Xxx
Xxxxxxxx on the Assumed Leases and the Atlantic Bank Line of Credit are
obtained, no dividends, loans or other distributions of any cash flow
attributable to Betelgeuse will be made by Betelgeuse without the consent
of Xxxx Xxxxxxxx and Xxx Xxxxxxxx. Any amounts advanced under the Atlantic
Bank Line of Credit shall be used only for the normal operations of
Betelgeuse and for no other purpose.
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19. PURCHASER'S COVENANT CONCERNING THE PAYMENT OF CERTAIN INDEBTEDNESS.
On or before Closing, Purchaser will have paid all outstanding taxes and
legal fees scheduled to be paid pursuant to prior bankruptcy proceedings as set
forth in Purchaser's Annual Report on Form 10-KSB for the period ended December
31, 1999.
20. PURCHASER'S COVENANT CONCERNING FORMS W-2
Pursuant to the alternative procedure proscribed by Revenue Procedure 96-60,
Purchaser will assume Seller's obligation to furnish Forms W-2 for the calendar
year ending December 31, 2000 to persons who are employed by Seller as of the
Closing ("Closing Employees"). In such event Seller will provide Purchaser with
any information not available to Purchaser relating to periods ending on the
Closing Date necessary for Purchaser to prepare and distribute Forms W-2 to
Closing Employees for the year ending December 31, 2000, which Forms W-2 will
include all remuneration earned by Closing Employees from both Seller and
Purchaser during the year ending December 31, 2000, and Purchaser will prepare
and distribute such Forms.
21. TERMINATION
This Agreement may be terminated at any time prior to Closing only by mutual
consent of Purchaser and Seller or by either if the other is in material breach
of this Asset Purchase Agreement. In addition, if Seller's Earnings Before
Interest, Taxes, Depreciation, and Amortization ("EBITDA") for its fiscal year
ended June 30, 2000 is less than One Million Two Hundred Thousand ($1,200,000)
Dollars (without taking into account any reserve for the DeFillipe Litigation),
Purchaser shall have the option of terminating the transaction without penalty
and obtain the return of all amounts advanced by the Seller (other than the
$25,000 previously paid to Seller as set forth in clause (a) of Section 3.1),
and, in such event, Seller shall pay Purchaser One Hundred Thousand ($100,000)
dollars to reimburse Seller for its costs and expenses, and not as a penalty. If
any party to this Asset Purchase Agreement shall willfully fail to perform its
obligations, any other party may seek any available legal or equitable remedies
in addition to those provided in this Asset Purchase Agreement. The
representations and warranties made by Purchaser and Seller in this Agreement
shall survive through and until the Closing Date.
22. MISCELLANEOUS.
22.1. INTEGRATION. This Asset Purchase Agreement and the other documents
specifically referred to in this Asset Purchase Agreement contain the entire
agreement between the Seller and Purchaser relating to the subject matter of
this Asset Purchase Agreement and supersede all oral statements and prior
writings with respect thereto, except such oral statements and prior writings
relating to the financial condition or business prospects of Seller.
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22.2. SUCCESSORS AND ASSIGNS. All rights of Purchaser and Seller under
this Asset Purchase Agreement shall inure to the benefit of their respective
successors, assigns, and legal representatives and this Asset Purchase Agreement
and all the provisions of this Asset Purchase Agreement shall be binding upon
Purchaser and Seller and their respective successors, assigns, and legal
representatives and all other persons or entities claiming under or through
them. The term "Seller", when used in this Asset Purchase Agreement , shall
include all such successors, assigns, and legal representatives. The term
"Purchaser", when used in this Asset Purchase Agreement, shall include
Purchaser's successors, assigns, and legal representatives. Notwithstanding any
thing to the contrary in the foregoing, Seller may not assign or transfer any of
its rights under this Asset Purchase Agreement without the prior written consent
of Purchaser.
22.3. TIME IS OF THE ESSENCE. Time is of the essence with regard to the
performance of the obligations of Seller and Purchaser in this Asset Purchase
Agreement and each and every term, covenant, and condition in this Asset
Purchase Agreement by or applicable to Seller or Purchaser.
22.4. HEADINGS. The headings preceding the text of the Sections of this
Asset Purchase Agreement are inserted solely for convenience of reference only
and shall neither define nor limit the provisions of this Asset Purchase
Agreement nor constitute a part of this Asset Purchase Agreement nor shall they
affect its meaning, construction, or effect.
22.5. AMENDMENT. This Asset Purchase Agreement may not be amended,
modified, changed, waived, terminated, or discharged orally, but only by an
agreement in writing signed by both Seller and Purchaser.
22.6. SEVERABILITY. Wherever possible each provision of this Asset
Purchase Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but, if any provision of this Asset Purchase
Agreement shall be found to be illegal, invalid, prohibited, or unenforceable
for any reason whatsoever under such law, such provision shall be ineffective to
the extent of such illegality, invalidity, prohibition, or unenforceability
without invalidating the remainder of such provision or the remaining provisions
of this Asset Purchase Agreement.
22.7. COSTS, EXPENSES, AND TAXES. Each of the Purchaser and Seller shall
pay its own expenses in connection with this Agreement and the transactions
contemplated thereby, including the fees and expenses of counsel, certified
public accountants, or other professionals.
22.8. GOVERNING LAW. This Asset Purchase Agreement shall be governed and
construed in accordance with laws of the State of New York (without giving
effect to the conflicts of laws principles thereof) applicable to contracts made
and to be performed in New York.
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22.9. FURTHER ASSURANCES. Each party to this Agreement covenants and
agrees (i) to furnish all information and to make all filings required by any
statute or governmental regulation (ii) to deliver any further instruments and
(iii) to take any further action that may be reasonably requested by the other
in order to carry out the provisions and purposes of this Agreement.
22.10. COUNTERPARTS. This Asset Purchase Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, and each of
which when taken together shall constitute but one and the same instrument and
shall be binding upon each of the undersigned as fully and completely as if all
had signed the same instrument.
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IN WITNESS WHEREOF, INTENDING TO BE LEGALLY BOUND AND INTENDING THIS TO BE A
SEALED INSTRUMENT, SELLER AND PURCHASER HAVE EXECUTED THIS ASSET PURCHASE
AGREEMENT.
BETELGEUSE PRODUCTIONS, LLC, a limited liability company organized and
existing under the laws of the State of Delaware.
By: /s/ Xxxx Xxxxxxxx
--------------------------------------------
Name: Xxxx Xxxxxxxx
Title: President
(Signatures continued on following page)
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SELECT MEDIA COMMUNICATIONS, INC., a corporation organized and existing
under the laws of the State of New York.
By: /s/ Xxxxx Xxxxxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
(Signatures continued on following page)
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BETELGEUSE PRODUCTIONS, INC., a corporation organized and existing under the
laws of the State of Delaware.
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
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Exhibit 1.1
Assumed Contracts
Employment Contracts
- Xxxxxx Xxxxxxxxx
- Xxxxx Xxxxxxxxxx
- Xxxxxx Xxxxx
- Xxxxxx Xxxxxx
- Xxxx Xxxxxxxx
- Xxxx Xxxxx
- Xxxxx Xxxxxxxxxx
- Xxxx XxXxxx
- Xxxx Xxxxx
- Xxxxx Xxxxxxxxxx
- Xxxxx Xxxxx
- Xxxxxx Xxxxxxx Mayhole
- Xxxxxx Xxxxxxxx
Other Contracts
Parallax Agreement - Seller has a relationship with Parallax
Audio whereby Parallax owns two audio suites managed by
Seller; Seller provides various services (e.g.,
engineering, sales, client services, reception) to
Parallax in exchange for 25% of Parallax's gross billing.
WNET Edit Suite Contract
Nprocess Agreement
1.1 Assumed Leases
- Basset Properties Limited Partnership- Real Estate lease for
00 Xxxx 00xx Xxxxxx- Expiring April 30, 2009
- 000 Xxxx Xxxxxx Xxxxx, Xx.-Xxxx Xxxxxx lease for 000 Xxxx
Xxxxxx Xxxxx- 10th floor- Expiring August 31, 2004
35
Equipment Agreements
Company Original Amount Inception Date
- Orix $345,000 2/98
- AEL Lease $299,765 11 /97
- GE Capital $352,158 5/98
- Terminal Leasing $1,347,727 1 /98
- Terminal Leasing $774,296 12/98
- SAS Funding 96101 $ 22,851 6/96
- SAS Funding 94107 $40,000 9/94
- SAS Funding 97101 $114,778 9/97
- SAS Funding 98101 $29,100 3/98
- SAS Funding 99101 $31,140 5/99
- SAS Funding 99104 $100,000 8/99
- SAS Funding 98103 $79,739 8/98
- SAS Funding 98102 $80,100 5/98
- Terminal Leasing changed $982,000 7/00- Start date
to November 2000
- Commercial Resources $165,000 3/00
- Commercial Resources $230,000 11 /00
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Exhibit 3.1 to Exhibit 10.8
Escrow Agreement
Escrow Agreement, dated June 6, 2001 (this "Escrow Agreement" or "Agreement")
by, between, and among BETELGEUSE PRODUCTIONS, L.L.C., a Delaware limited
liability company ("Betelgeuse"), SELECT MEDIA COMMUNICATIONS, INC., a New York
corporation ("SMI"), and XXXXXXX XXXXX & XXXXX, P.C., a Pennsylvania
professional corporation ("Escrow Agent").
RECITALS
WHEREAS, SMCI has entered into an Asset Purchase and Sale Agreement,
dated as of November 28, 2000 ("Asset Purchase Agreement"), providing for SMCI's
acquisition of certain of the assets and liabilities of Betelgeuse.
WHEREAS, In connection with and as a condition of that proposed
acquisition, SMCI has agreed to establish an Escrow Account for the funding of
certain of SMCI's obligations under the Asset Purchase Agreement.
NOW, THEREFORE, intending to be legally bound and in accordance with
the terms and conditions set forth in this Escrow Agreement, having determined
that it is in their best interest to execute and deliver this Escrow Agreement,
and for other good and valuable consideration, the receipt and adequacy of which
is acknowledged, Betelgeuse, SMCI, and Escrow Agent agree as follows:
AGREEMENT
1 DEFINITIONS.
Terms defined above shall have the meanings set forth therein and such
definitions, by this reference, are incorporated in and made a part of Section
1.1 and this Escrow Agreement. Capitalized terms used and not otherwise defined
in this Escrow Agreement shall have the meaning set forth in the Asset Purchase
Agreement.
1.1 GENERAL DEFINITIONS.
"CLOSING DATE" shall have the meaning referred to in the Asset Purchase
Agreement.
"ESCROW ACCOUNT" shall mean the interest-bearing account established by Escrow
Agent with Summit Bank.
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2 APPOINTMENT OF ESCROW AGENT.
Betelgeuse and SMCI do hereby appoint and designate Xxxxxxx Gadon & Xxxxx,
P.C., as the Escrow Agent for the purposes herein set forth, and Xxxxxxx Gadon &
Xxxxx, P.C. does hereby accept the appointment and designation as the Escrow
Agent for the purposes herein set forth.
3 ESCROW FUNDS.
Betelgeuse, SMCI, and the Escrow Agent hereby acknowledge that SMCI has
tendered to the Escrow Agent the sum of one million dollars ($1,000,000) (the
"Escrow Funds") to be held in escrow with the Escrow Agent in accordance with
the terms hereof.
4 DISBURSEMENT OF ESCROW FUNDS.
The Escrow Agent agrees to deposit the Escrow Funds in the name of the
Escrow Agent in the Escrow Account, and to disburse the Escrow Funds from the
Escrow Account in accordance with the terms of this Escrow Agreement. All
interest earned on the Escrow Funds shall be retained in the Escrow Account
until disbursement of the principal thereof, and shall be paid to Betelgeuse
upon the Termination Date, as such term is defined in Section 10 of this Escrow
Agreement. All disbursements of the Escrow Funds required to be made by the
Escrow Agent to the parties designated herein shall be made in accordance with
the terms of this Escrow Agreement and all such disbursements so made shall be
valid and effectual to discharge the liability of the Escrow Agent with respect
thereto, provided the Escrow Agent is not guilty of gross negligence or willful
misconduct.
5 INDEMNIFICATION OF ESCROW AGENT.
Betelgeuse and SMCI hereby agree to indemnify the Escrow Agent for, and to
hold the Escrow Agent harmless from and against, any loss, damage, liability or
expense incurred by the Escrow Agent, without gross negligence or willful
misconduct on the part of the Escrow Agent, arising out of or in connection with
the Escrow Agent entering into this Escrow Agreement and carrying out the duties
of the Escrow Agent hereunder, including, without limitation, all costs, fees,
and expenses (including, reasonable attorneys fees) of defending itself against
any claim of liability arising under the terms hereof, provided the Escrow Agent
does not violate the provisions hereof.
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6 LIABILITY OF ESCROW AGENT.
The Escrow Agent shall have no responsibilities to Betelgeuse or SMCI,
except those specifically provided herein, and the Escrow Agent shall not be
responsible for anything done or omitted to be done by the Escrow Agent
hereunder except for its own gross negligence or willful misconduct. Escrow
Agent shall not be liable to Betelgeuse or SMCI for any actions taken by Escrow
Agent (1) in accordance with the terms of this Escrow Agreement or the Asset
Purchase Agreement, (2) upon the written instructions of Betelgeuse and SMCI,
(3) pursuant to a valid order of a court of competent jurisdiction, or (4) in
good faith based upon the advice of counsel. The Escrow Agent may consult with
counsel of its choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith in
accordance with the opinion of such counsel.
7 RELIANCE BY ESCROW AGENT.
The Escrow Agent may rely, and shall be protected in acting, or in
refraining from acting, upon any written notice, instruction or request
furnished to it pursuant to specific provisions of this Escrow Agreement and the
belief by the Escrow Agent that such written notice, instruction or request is
genuine.
8 DISPUTES.
In the event there is a disagreement or controversy between Betelgeuse and
SMCI concerning the performance by such parties with respect to the terms of
this Escrow Agreement, resulting in adverse claims or demands being made on the
Escrow Agent by Betelgeuse or SMCI in connection with this Escrow Agreement or
the transactions evidenced hereby, or in the event the Escrow Agent, in good
faith, is in doubt as to what action it should take hereunder, the Escrow Agent
may, at its option:
(a) refuse to comply with any claims or demands upon it or refuse to take any
other action so long as such disagreement or doubt exists, and the Escrow
Agent shall not be or become liable in any way to any person or entity for the
failure or refusal of the Escrow Agent to act, and the Escrow Agent shall be
entitled to so refrain from acting until;
(i) the rights of Betelgeuse and SMCI have been fully and finally
adjudicated by a Court of competent jurisdiction; or
(ii) all differences between Betelgeuse and SMCI have been adjusted and
all doubts resolved by agreement between those parties, and the
Escrow Agent shall have been notified thereof in writing signed by
both such parties; or
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(b) file a suit and interpleader and obtain an order from the Court of
appropriate jurisdiction requiring all persons involved to
interplead and litigate in such court their several claims and
rights among themselves and with the Escrow Agent, in which case,
upon the deposit of the Escrow Funds into the registry of the Court,
the Escrow Agent shall be relieved of all further obligations or
liabilities hereunder.
In the event that the Escrow Agent receives any notice, authorization,
request, demand or other communication from either Betelgeuse or SMCI, the
Escrow Agent shall immediately forward a copy of any such notice, authorization,
request, demand or other communication to the other party hereto. The purpose of
this provision is to assure each of the parties hereto that it is informed of
all dealings by all parties hereto with the Escrow Agent.
9 ESCROW AGENT'S FEES AND EXPENSES.
The Escrow Agent shall not charge any fee for the performance of its
services under this Escrow Agreement but Betelgeuse and SMCI shall reimburse the
Escrow Agent for any out-of-pocket expenses actually incurred by the Escrow
Agent in the performance of its services hereunder.
10 TERM OF AGREEMENT.
This Escrow Agreement shall be effective as of the date hereof, and shall
continue in force until the earliest to occur of (1) termination by an
instrument in writing signed by Betelgeuse and SMCI, (2) the disbursement in
full of the Escrow Funds, and (3) the first anniversary of the Closing Date, as
such term is defined in the Asset Purchase Agreement (the earliest of such
dates, to be referred to as the "Termination Date").
11 RESIGNATION OF ESCROW AGENT.
The Escrow Agent may resign and be discharged from its duties and
obligations hereunder by giving notice in writing to Betelgeuse and SMCI of such
resignation, specifying a date when such resignation shall take effect.
12 REMOVAL OF ESCROW AGENT.
The Escrow Agent agrees that Betelgeuse and SMCI may, by mutual agreement at
any time, remove the Escrow Agent hereunder and substitute a bank, a savings and
loan association, a trust company or any other financial institution or
individual, mutually acceptable to such parties, in which event the Escrow
Agent, upon receipt of such written
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notice, shall account for and deliver, or cause to be accounted for and
delivered to such substituted Escrow Agent, the Escrow Funds, and thereafter,
the Escrow Agent shall be discharged of all liability hereunder.
13 MISCELLANEOUS.
13.1 SUCCESSORS AND ASSIGNS. All rights of SMCI and Betelgeuse under this
Escrow Agreement shall inure to the benefit of their respective heirs,
executors, administrators, successors, assigns, and legal representatives and
this Escrow Agreement and all the provisions of this Escrow Agreement shall be
binding upon SMCI and Betelgeuse and their respective heirs, executors,
administrators, successors, assigns, and legal representatives and all other
persons or entities claiming under or through them. Notwithstanding anything to
the contrary in the foregoing, Betelgeuse may not assign or transfer any of his
rights under this Escrow Agreement without the prior written consent of SMCI.
13.2 HEADINGS. The headings preceding the text of the Sections of this Escrow
Agreement are inserted solely for convenience of reference and shall neither
define nor limit the provisions of this Escrow Agreement nor constitute a part
of this Escrow Agreement nor shall they affect its meaning, construction, or
effect.
13.3 AMENDMENT. This Escrow Agreement may not be amended, modified, changed,
waived, terminated, or discharged orally, but only by an agreement in writing
signed by both Betelgeuse and SMCI.
13.4 SEVERABILITY. Wherever possible each provision of this Escrow Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Escrow Agreement shall be found to
be illegal, invalid, prohibited, or unenforceable for any reason whatsoever
under such law, such provision shall be ineffective to the extent of such
illegality, invalidity, prohibition, or unenforceability without invalidating
the remainder of such provision or the remaining provisions of this Escrow
Agreement.
13.5 GOVERNING LAW. This Escrow Agreement shall be governed and construed in
accordance with laws of the State of New York, without giving effect to the
conflicts of laws principles thereof, applicable to contracts made in New York
and any claim, suit, action, or other legal proceedings may be commenced and
maintained in any court of competent jurisdiction in the State of New York.
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13.6 COUNTERPARTS. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and each of which when
taken together shall constitute but one and the same instrument and shall be
binding upon each of the parties as fully and completely as if all had signed
the same instrument.
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In Witness Whereof, intending to be legally bound and intending this to be a
sealed instrument, Betelgeuse, SMCI, and Escrow Agent have executed and
delivered this Escrow Agreement.
Betelgeuse Productions, L.L.C.
---------------------------(seal)
Attest:
By:
------------------------------
Name:
Title:
Select Media Communications, Inc.
By:
---------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
Signatures continued on following page.
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Signatures continued from previous page.
Xxxxxxx Xxxxx & Xxxxx, P.C.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Shareholder
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Exhibit 3.3
Allocation of Purchase Price
The Purchase Price will be allocated to the assets shown on Seller's tax
balance sheet in an amount equal to each such asset's adjusted tax basis, with
any excess allocated to goodwill.
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Exhibit 6
XXXX OF SALE
THIS XXXX OF SALE dated as of June __, 2001, by BETELGEUSE
PRODUCTIONS, LLC, a limited liability company organized and existing under the
laws of the State of Delaware, to SELECT MEDIA COMMUNICATIONS, INC., a
corporation organized and existing under the laws of the State of New York
("Select"), and BETELGEUSE PRODUCTIONS, INC., a corporation organized and
existing under the laws of the State of Delaware and a wholly-owned subsidiary
of Select ("Betelgeuse" and, together with Select, "Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Asset Purchase and Sale Agreement, dated as of
December __, 2000, between Seller and Purchaser (the "PURCHASE AGREEMENT")
provides, among other things, for the transfer and sale to Purchaser of the
assets of Seller, all as more fully described in the Purchase Agreement, for
consideration in the amount and upon the terms provided in the Purchase
Agreement; and
WHEREAS, by this instrument Seller is vesting in Purchaser all
of the properties, assets, and rights of Seller hereinafter described.
NOW, THEREFORE, in consideration of the promises and of other
valuable consideration to Seller in hand paid by Purchaser, at or before the
execution and delivery hereof, the receipt and sufficiency of which by Seller is
hereby acknowledged, Seller has sold, transferred, conveyed, assigned and
delivered, and by this Xxxx of Sale does sell, transfer, convey, assign, and
deliver unto Purchaser, its successors and assigns forever, all of Seller's
right, title and interest in the Purchased Assets (as defined in Section 2 of
the Purchase Agreement).
TO HAVE AND TO HOLD all of the Purchased Assets unto
Purchaser, its successors and assigns to its and their own use forever.
Seller hereby constitutes and appoints Purchaser, its
successors and assigns, Seller's true and lawful attorney- and
attorneys-in-fact, with full power of substitution, in Seller's name and stead,
but on behalf and for the benefit of Purchaser, its successors and assigns, to
demand and receive any and all of the Purchased Assets, and to give receipts and
releases for and in respect of the same, and any part thereof, and from time to
time to institute and prosecute in the name of Seller, or otherwise, for the
benefit of Purchaser, its successors and assigns, any and all proceedings at
law, in equity or otherwise, which Purchaser, its successors and assigns, may
deem proper for the collection or reduction to possession of any of the
Purchased Assets or for the collection and enforcement of any claim or right of
any kind hereby sold, conveyed, transferred and assigned, or intended so to be,
and to do all acts and things in
46
relation to the Purchased Assets which Purchaser, its successors and assigns
shall deem desirable, Seller hereby declaring that the foregoing powers are
coupled with an interest and are and shall be irrevocable by Seller or by their
dissolution or in any manner or for any reason whatsoever.
Seller hereby covenants that, from time to time after the
delivery of this instrument, upon Purchaser's request and without further
consideration, Seller will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, all such further acts, instruments,
assignments and assurances as may be reasonably required more effectively to
convey, transfer to and vest in Purchaser, and to put Purchaser in possession
of, any of the Purchased Assets.
Nothing in this instrument, express or implied, is intended or
shall be construed to confer upon, or give to, any person, firm or corporation
other than Purchaser and its successors and assigns any remedy or claim under or
by reason of this instrument or any terms, covenants or condition hereof, and
all the terms, covenants and conditions, promises and agreements in this
instrument contained shall be for the sole and exclusive benefit of Purchaser
and its successors and assigns.
This instrument is executed by, and shall be binding upon,
Seller, its successors and assigns, for the uses and purposes above set forth
and referred to, effective immediately upon its delivery to Purchaser. This
instrument shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of law.
In the event of any conflict or inconsistency between the
terms of this instrument and the terms of the Purchase Agreement, the terms of
the Purchase Agreement shall control.
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IN WITNESS WHEREOF, Seller has caused this Xxxx of Sale to be executed
on its behalf by its duly authorized officer as of the date first above written.
BETELGEUSE PRODUCTIONS, LLC
By: /s/ Xxxxxx Xxxxxxxx
-------------------------
Xxxxxx Xxxxxxxx
Vice President
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Exhibit 12g to
Exhibit 10.8
Consulting and Non-Compete Agreement
Xxxxxx Xxxxxxxx
Consulting and Non-Compete Agreement, dated June 6, 2001 (this "Consulting and
Non-Compete Agreement" or "Agreement") between Xxxxxx Xxxxxxxx ("Xxxxxxxx") and
Betelgeuse Productions, Inc., a corporation organized and existing under the
laws of the State of Delaware ("Betelgeuse"), and Select Media Communications,
Inc., a corporation organized and existing under the laws of the State of New
York ("SMCI").
RECITALS
WHEREAS, SMCI has entered into an Asset Purchase and Sale Agreement, dated
as of December 6, 2000 ("Asset Purchase Agreement"), providing for SMCI's
acquisition of the assets and liabilities of Betelgeuse Productions L.L.C., a
Delaware limited liability company ("Seller"), and, in connection with and as a
condition of that proposed acquisition, SMCI and Betelgeuse has required and
Domenico has agreed to execute and deliver this Consulting and Non-Compete
Agreement, as described in greater detail and in accordance with the terms and
conditions set forth in this Consulting and Non-Compete Agreement.
NOW, THEREFORE, intending to be legally bound and in accordance with the
terms and conditions set forth in this Consulting and Non-Compete Agreement,
having determined that it is in their best interest to execute and deliver this
Consulting and Non-Compete Agreement, and for other good and valuable
consideration, the receipt and adequacy of which is acknowledged, Domenico,
SMCI, and Betelgeuse agree as follows:
AGREEMENT
1 DEFINITIONS.
Terms defined above shall have the meanings set forth therein and such
definitions, by this reference, are incorporated in and made a part of Section
1.1 and this Consulting and Non-Compete Agreement. Capitalized terms used and
not otherwise defined in this Consulting and Non-Compete Agreement shall have
the meaning set forth in the Asset Purchase Agreement.
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1.1 GENERAL DEFINITIONS.
"BASE COMPENSATION" shall mean an amount of not less than $150,000.00 per
annum less such deductions as are required by law or that Domenico may
elect in accordance with Betelgeuse's policies and procedures.
"CAUSE" shall mean
(a) Domenico's failure to observe or perform any material term or
condition of this Consulting and Non-Compete Agreement; or
(b) Domenico's conviction of or plea of guilty or nolo contendere
to a felony or other crime involving moral turpitude or
misappropriation of funds.
"CLOSING DATE" shall have the meaning referred to in the Asset Purchase
Agreement.
"CONFIDENTIAL INFORMATION" shall mean any information relating in any way to
the business of Betelgeuse disclosed to or known to Domenico as a
consequence of, result of, or through Domenico's employment by Betelgeuse
that consists of technical and non-technical information about
Betelgeuse's products, processes, programs, concepts, forms, business
methods, data, any and all financial and accounting data, marketing,
customers, customer lists, and services and information corresponding
thereto acquired by Domenico prior to or during the Term of Domenico's
employment by Betelgeuse. Confidential Information shall not include any
of such items that are published or are otherwise part of the public
domain, or freely available from trade sources or otherwise.
"DISABILITY" shall mean a physical or mental disability that renders Domenico
unable to perform his duties under this Consulting and Non-Compete
Agreement in a manner that is satisfactory to a majority of the Board of
Directors of Betelgeuse.
"EFFECTIVE DATE" shall mean the Closing Date.
"EXTENSIONS" shall mean those extensions of the Initial Term of this
Consulting and Non-Compete Agreement, if any, made in accordance with and
pursuant to the terms of Section 3.2.
"LONG TERM DISABILITY" shall mean a Disability that continues for a period of
(a) one hundred and eighty (180) days out of any three hundred and
sixty-five (365) day period or (b) a consecutive period of one hundred
and twenty (120) days.
"INITIAL TERM" shall mean the period from the Effective Date through and
including the third anniversary of the Effective Date.
"STOCK OPTION" shall have the meaning set forth in Section 4.1.
"TERM" shall mean the Initial Term and any Extensions.
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1.2 CONSTRUCTION. Neither this Consulting and Non-Compete Agreement nor
any uncertainty or ambiguity herein shall be construed or resolved against
Betelgeuse or Domenico, whether under any rule of construction or otherwise. On
the contrary, this Consulting and Non-Compete Agreement has been reviewed by
each of the parties and their respective legal counsel and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties to this Consulting
and Non-Compete Agreement.
2 RETENTION AS CONSULTANT.
(a) Upon and subject to the terms and conditions set forth in this Consulting
and Non-Compete Agreement, Betelgeuse agrees to retain Domenico as a
consultant and Domenico agrees to act as a consultant to Betelgeuse.
(b) Domenico shall report directly to Xxxx Xxxxxxxx and shall render such
services as may be assigned to him from time to time by Xxxx Xxxxxxxx,
subject to the provisions of Section 2(c) below.
(c) Domenico agrees that he shall during normal working hours devote his best
efforts and attention, and energies to faithfully perform all of the
duties that may be required of him pursuant to the terms of this
Consulting and Non-Compete Agreement, it being understood that Domenico's
duties shall not require Domenico to change the location of his residence
in order to fulfill those duties properly and it being further understood
that approximately one-half of Domenico's normal working hours will be
devoted to the affairs of nProcess, Inc.
(d) Betelgeuse represents and warrants to Domenico that this Consulting and
Non-Compete Agreement has been duly and validly authorized and executed
by and on behalf of Betelgeuse in accordance with its certificate of
incorporation and by-laws and that it constitutes the lawful and valid
obligation of Betelgeuse.
(e) Domenico represents and warrants to Betelgeuse that he is free to accept
his retention as a consultant under this Consulting and Non-Compete
Agreement and that he has no prior or other obligations or commitments of
any kind that would in any way hinder or interfere with his acceptance or
the full performance of such consulting as provided herein.
(f) Domenico agrees that he is being retained as an independent consultant
and will at all times be an independent contractor and not an employee of
SMCI.
3 TERM.
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3.1 INITIAL TERM. Unless earlier terminated in accordance with the provisions
of Section 5 or extended pursuant to Section 3.2, the Term of this Consulting
and Non-Compete Agreement shall be equal to the Initial Term.
3.2 EXTENSIONS. The Term of this Consulting and Non-Compete Agreement may
only be extended for one year with the written consent of both Xxxxxxxx and
Xxxxxxxx.
4 COMPENSATION AND RELATED MATTERS.
During Domenico's retention under this Consulting and Non-Compete Agreement,
Betelgeuse shall pay to Domenico the Base Compensation. The Base Compensation
shall be payable in equal periodic installments in accordance with Betelgeuse's
salary practices.
4.1 STOCK OPTIONS.
4.1.1 GRANT OF OPTIONS AND VESTING. As of the Closing Date, SMCI shall grant
to Domenico, pursuant to the form of Option Agreement attached hereto as Exhibit
A (the "Option Agreement"), a five year incentive stock option (the "Stock
Options") for the purchase of 1,000,000 shares of SMCI's common stock at an
exercise price of $1.00 per share, which option shall vest in equal installments
of 33 1/3% on each of the first, second, and third anniversary of the Closing
Date. None of these shares may be sold prior to the second anniversary of the
Closing Date. All of the Stock Options will be exercisable pursuant to a
Cashless Exercise (as such term is defined in the Option Agreement).
4.1.2 RESTRICTIONS AND LEGENDING. The Stock Options and the shares issuable
upon exercise of the Stock Options granted pursuant to this Section 4.1 (the
"Shares") shall be restricted securities within the meaning of the Securities
Act of 1933 ("Securities Act") and as such shall be subject to restrictions with
respect to their subsequent resale. All Shares of SMCI's Stock issued upon
exercise of the Stock Options shall bear the following legend:
"The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended (the "1933 Act") or the
securities laws of any other jurisdiction and are "restricted securities"
as defined by Rule 144 under the 0000 Xxx. The shares may not be sold,
transferred, pledged, or distributed in the absence of an effective
registration statement registering the shares under the 1933 Act and the
securities laws of any state requiring such registration, or in lieu
thereof, an opinion of counsel, which opinion is satisfactory to the
issuer of the shares, to
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52
the effect that registration is not required under said acts."
Any share certificate issued at any time in exchange or substitution for any
share certificate bearing such legend, except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act, shall also bear such legend, unless, in the Opinion of
Counsel, the shares represented thereby are no longer subject to restrictions on
resale under the Securities Act, or any applicable state securities laws. As
used in this Consulting and Non-Compete Agreement, an "Opinion of Counsel" shall
mean an opinion of counsel selected by Domenico, which opinion is satisfactory
to counsel for SMCI as to the identity of the opining counsel and the form and
substance of the opinion.
4.1.3 SECURITIES LAWS COMPLIANCE PROCEDURES. Domenico represents and
acknowledges that:
(a) he is a sophisticated investor with knowledge and experience in business
and financial matters, knows, or has had the opportunity to acquire, all
information concerning the business, affairs, financial condition and
prospects of SMCI which he deems relevant to make a fully informed
decision regarding the consummation of the transactions contemplated
hereby and is able to bear the economic risk and lack of liquidity
inherent in holding SMCI's Stock.
(b) he has been supplied with copies of all Forms 10-K, 10-Q, and 8-K, and
all proxy statements, filed by SMCI within the preceding three year
period immediately preceding the date of this Agreement.
Without limiting the foregoing, Domenico understands and acknowledges that
neither SMCI nor anyone acting on its behalf has made any representations or
warranties other than those contained in this Consulting and Non-Compete
Agreement or the Asset Purchase Agreement respecting SMCI or the future conduct
of SMCI's business, and Domenico has not relied upon any representations or
warranties other than those contained in this Consulting and Non-Compete
Agreement or the Asset Purchase Agreement in the belief that they were made on
behalf of Betelgeuse or SMCI, as the case may be.
4.1.4 STATUS OF OPTIONS AND SHARES TO BE ISSUED. Domenico agrees,
acknowledges, and confirms that he has been advised and understands as follows:
(a) Any shares of SMCI Stock to be issued to Domenico as a result of his
exercise of the Stock Options will be acquired by him for his own account
and without
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53
a view to any distribution or resale thereof, other than a distribution
or resale that, in the opinion of his counsel, which opinion shall be
satisfactory in form and substance to SMCI, may be made without violating
the registration provisions of the Securities Act or any applicable blue
sky laws.
(b) The shares of SMCI's Stock issued pursuant to the Stock Options will be
"restricted securities" within the meaning of Rule 144 under the
Securities Act and have not been registered under that Act or any state
securities laws and thereafter must be held indefinitely unless they are
subsequently registered under the Securities Act and any state "blue sky
laws" where registration may be required before sale or an exemption from
such registration is available.
(c) Except as specifically provided in the Registration Rights Agreement
attached as Exhibit B to this Consulting and Non-Compete Agreement, SMCI
is under no obligation to register the shares of SMCI Stock issuable upon
exercise of the Stock Options under the Securities Act or any state
securities law or to take any action which would make available an
exemption from such registration.
(d) Except under certain limited circumstances, the above restrictions on the
transfer of the shares of SMCI's Stock will also apply to any and all
shares of capital stock or other securities issued or otherwise acquired
with respect to such shares, including, without limitation, shares and
securities issued or acquired as a result of any stock dividend, stock
split or exchange or any distribution of shares or securities pursuant to
any corporate reorganization, reclassification or similar event.
(e) SMCI and its transfer agent may refuse to effect a transfer of any of the
shares of SMCI Stock by Domenico or any of his successors, personal
representatives, or assigns otherwise than as contemplated hereby.
4.2 BENEFIT PROGRAMS. To the extent Domenico is legally entitled to
participate in Betelgeuse's life insurance, medical, dental, disability, pension
and retirement plans, and other programs as may be approved from time to time by
Betelgeuse for the benefit of its executives ("Benefit Programs"), Domenico
shall have the right to participate in any Benefit Programs so long as he shall
pay for the incremental cost of his participation, which amount shall be
deducted from his Base Compensation.
4.3 OFFICE SPACE. During Domenico's retention under this Consulting and
Non-Compete Agreement, Domenico will be entitled to office space and services
substantially similar to the space and services available to him currently,
subject to such relocations as may be incurred by Betelgeuse and subject to the
approval of Xxxx Xxxxxxxx.
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54
5 TERMINATION OF AGREEMENT.
This Agreement and Domenico's retention under this Consulting and
Non-Compete Agreement may be terminated only under the following circumstances
during the Term of this Consulting and Non-Compete Agreement:
5.1 DEATH OR LONG TERM DISABILITY. The death or Long Term Disability of
Domenico.
5.2 CAUSE. Betelgeuse may terminate Domenico's retention under this
Consulting and Non-Compete Agreement for Cause after written notice to Domenico
and his failure to reasonably cure the reason for termination within twenty (20)
days of such notice.
6 NON-DISCLOSURE OF INFORMATION.
(a) Domenico shall not, directly or indirectly, disclose to any person or
entity for any reason, or use for his own personal benefit, any
Confidential Information either during his employment with SMCI or
following termination of his employment for any reason whatsoever for a
period of three years from the date of this Consulting and Non-Compete
Agreement.
(b) Domenico shall, at all times take all precautions necessary to protect
from loss or disclosure by his of any and all documents or other
information containing, referring to or relating to such Confidential
Information. Upon termination of his employment with Betelgeuse for Cause
or if Domenico terminates the Agreement prior to expiration of the Term,
Domenico shall promptly return to Betelgeuse any and all documents or
other tangible property containing, referring to or relating to such
Confidential Information, whether prepared by him or others.
(c) Notwithstanding any provision to the contrary in this Section 6, this
Section shall not apply to information that Domenico is legally required
to disclose or to information that has become part of the public domain
or is otherwise publicly disclosed through no fault or action of
Domenico; provided, however, if Domenico receives a subpoena or other
order issued by a court of competent jurisdiction or governmental agency
requiring disclosure of any Confidential Information, Domenico shall
promptly notify Betelgeuse of the existence of such order or subpoena and
send a copy thereof to Betelgeuse and cooperate with Betelgeuse, at
Betelgeuse's expense, in Betelgeuse's efforts to obtain satisfactory
resolution of the matter.
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7 RESTRICTIONS ON COMPETITION.
Domenico covenants and agrees that during the Term of this Agreement and for
one (1) year after, Domenico shall not, directly or indirectly engage in,
participate in or assist, as principal or agent, officer, director, employee,
franchisee, consultant, shareholder, or otherwise, alone or in association with
any other person, corporation or other entity, or business which currently or in
the past is or was a client of Betelgeuse and whose activities, services or
products are directly or indirectly competitive with the activities, services or
products of Betelgeuse or its subsidiaries or affiliates anywhere in the United
States; provided, however, that the foregoing covenant shall not prevent
Domenico from being a principal, officer, director, employee or shareholder in
nProcess, Inc., a company engaged in providing management and business plan
assistance, including internet access and web site development, to entrepreneurs
and others engaging primarily in internet activities.
8 NON-SOLICITATION.
During the Term of this Consulting and Non-Compete Agreement and for one (1)
year after, Domenico shall not:
(a) solicit the same business currently being performed by Betelgeuse from
any customer or account that is or was a customer or account of
Betelgeuse or advise any such customer to withdraw, curtail, or cancel
such customer's business with Betelgeuse or otherwise interfere with
Betelgeuse's contractual relations with its customers; provided, however,
that the foregoing covenant shall not prevent Domenico from being a
principal, officer, director, employee or shareholder in nProcess, Inc.,
a company engaged in providing management and business plan assistance,
including internet access and web site development, to entrepreneurs and
others engaging primarily in internet activities.
(b) solicit, or attempt to hire, any officer, employee, consultant, or agent
of Betelgeuse; or
(c) persuade or attempt to persuade any employee of Betelgeuse to terminate
his or her services or employment with Betelgeuse.
9 BETELGEUSE'S RIGHT TO EQUITABLE RELIEF.
Domenico recognizes and acknowledges that the restrictions on Domenico's
activities contained in Sections 6, 7, and Section 8 of this Consulting and
Non-Compete Agreement are reasonable and necessary to protect the legitimate
business interests of Betelgeuse
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56
and that any breach or violation of the provisions of those Sections is likely
to result in irreparable injury to Betelgeuse for which Betelgeuse would have no
adequate remedy at law. Domenico agrees that if he shall breach or violate
Section 6, 7, or Section 8 of this Consulting and Non-Compete Agreement,
Betelgeuse will be entitled, if it so elects, to institute and prosecute
proceedings at law or in equity, including, but not limited to, a proceeding
seeking injunctive relief, to obtain damages with respect to such breach or
violation, or to enforce the specific performance of this Consulting and
Non-Compete Agreement by Domenico or to enjoin Domenico from engaging in any
activity in violation of this Consulting and Non-Compete Agreement. Domenico
acknowledges that in the event of any such breach or violation, Betelgeuse shall
be entitled to preliminary and permanent injunctive relief, without the
necessity of proving actual damages, and to an equitable accounting of all
earnings, profits, and other benefits arising from any such breach or violation,
which rights shall be cumulative and in addition to any other rights or remedies
to which Betelgeuse may be entitled. Domenico agrees that in the event of any
such violation, an action may be commenced for preliminary or permanent
injunctive relief and other equitable relief in any federal or state court of
competent jurisdiction sitting in New York County, New York. Domenico waives, to
the fullest extent permitted by law, any objection that Domenico may now or
hereafter have to such jurisdiction or to the laying of the venue of any such
suit, action, or proceeding brought in such a court and any claim that such
suit, action or proceeding has been brought in an inconvenient forum. Domenico
agrees that effective service of process may be made upon Domenico by mail under
the notice provisions contained in Section 10.1 of this Consulting and
Non-Compete Agreement. Domenico further agrees that the existence of any claim
or cause of action against Betelgeuse, whether predicated upon a breach or
violation by Betelgeuse of this Consulting and Non-Compete Agreement or any
other contract or agreement between Domenico and Betelgeuse, shall not
constitute or be asserted as a defense to the enforcement by Betelgeuse to the
provisions of this Section 9 relating to Betelgeuse's right to injunctive or
other equitable relief for Domenico's breach or violation of Section 6, 7, or
Section 8 of this Consulting and Non-Compete Agreement.
10 MISCELLANEOUS.
10.1 NOTICES. All notices and other communications required or permitted
under this Consulting and Non-Compete Agreement shall be in writing and shall be
deemed to have been given or made if hand delivered, when delivered, if by
nationally recognized overnight courier service, on the following day, or if
mailed by regular mail, on the day of deposit in the United States mail, postage
prepaid, registered or certified mail, return receipt requested, addressed to a
party and sent to its address set forth below or to such other address as such
party may designate from time to time by notice to the other in the manner set
forth in this Consulting and Non-Compete Agreement:
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57
If to Domenico:
Xxxxxx Xxxxxxxx
00 X. 00xx Xxxxxx, Xxxxxxxxx
Xxx Xxxx Xxxx, XX 00000
If to Betelgeuse:
Betelgeuse Productions, Inc.
00 X. 00xx Xxxxxx, Xxxxxxxxx
Xxx Xxxx Xxxx, XX 00000
Attn: [AUTHORIZED OFFICER'S NAME], [AUTHORIZED OFFICER'S TITLE]
If to SMCI:
Select Media Communications, Inc.
00 X. 00xx Xxxxxx, Xxxxxxxxx
Xxx Xxxx Xxxx, XX 00000
Attn: [AUTHORIZED OFFICER'S NAME], [AUTHORIZED OFFICER'S TITLE]
10.2 INTEGRATION. This Consulting and Non-Compete Agreement contains the
entire agreement between Domenico and Betelgeuse relating to the subject matter
of this Consulting and Non-Compete Agreement and supersedes all oral statements
and prior writings with respect thereto.
10.3 SUCCESSORS AND ASSIGNS. All rights of Betelgeuse and Domenico under
this Consulting and Non-Compete Agreement shall inure to the benefit of their
respective heirs, executors, administrators, successors, assigns, and legal
representatives and this Consulting and Non-Compete Agreement and all the
provisions of this Consulting and Non-Compete Agreement shall be binding upon
Betelgeuse and Domenico and their respective heirs, executors, administrators,
successors, assigns, and legal representatives and all other persons or entities
claiming under or through them. Notwithstanding anything to the contrary in the
foregoing, Domenico may not assign or transfer any of his rights under this
Consulting and Non-Compete Agreement without the prior written consent of
Betelgeuse.
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58
10.4 HEADINGS. The headings preceding the text of the Sections of this
Consulting and Non-Compete Agreement are inserted solely for convenience of
reference and shall neither define nor limit the provisions of this Consulting
and Non-Compete Agreement nor constitute a part of this Consulting and
Non-Compete Agreement nor shall they affect its meaning, construction, or
effect.
10.5 AMENDMENT. This Consulting and Non-Compete Agreement may not be amended,
modified, changed, waived, terminated, or discharged orally, but only by an
agreement in writing signed by both Domenico and Betelgeuse.
10.6 SEVERABILITY. Wherever possible each provision of this Consulting and
Non-Compete Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but, if any provision of this Consulting and
Non-Compete Agreement shall be found to be illegal, invalid, prohibited, or
unenforceable for any reason whatsoever under such law, such provision shall be
ineffective to the extent of such illegality, invalidity, prohibition, or
unenforceability without invalidating the remainder of such provision or the
remaining provisions of this Consulting and Non-Compete Agreement.
10.7 COSTS, EXPENSES, AND TAXES. Each of the parties to this Consulting and
Non-Compete Agreement shall pay their or its own expenses in connection with the
execution and delivery of this Consulting and Non-Compete Agreement and the
transactions contemplated thereby, including the fees and expenses of counsel,
certified public accountants, or other professionals.
10.8 GOVERNING LAW. This Consulting and Non-Compete Agreement shall be
governed and construed in accordance with laws of the State of New York, without
giving effect to the conflicts of laws principles thereof, applicable to
contracts made in New York and any claim, suit, action, or other legal
proceedings may be commenced and maintained in any court of competent
jurisdiction in the State of New York.
10.9 REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon either party by
this Consulting and Non-Compete Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and shall be in
addition to any other remedy given under this Consulting and Non-Compete
Agreement or now or hereafter existing at law or in equity. No delay or omission
by either party in exercising any right, remedy, or power under this Consulting
and Non-Compete Agreement or existing at law or in equity shall be construed as
a waiver thereof, and any such right, remedy, or power may be exercised by such
party from time to time and as often
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as may be deemed expedient or necessary by such party in such party's sole
discretion.
10.10 COUNTERPARTS. This Consulting and Non-Compete Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, and each
of which when taken together shall constitute but one and the same instrument
and shall be binding upon each of the parties as fully and completely as if all
had signed the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, intending to be legally bound and intending this to be a
sealed instrument, Domenico and Betelgeuse as of June 6, 2001 have executed this
Consulting and Non-Compete Agreement.
XXXXXX XXXXXXXX
--------------------------(seal)
BETELGEUSE PRODUCTIONS, INC.
By:
--------------------------------
Name: [AUTHORIZED OFFICER'S NAME]
Title: [AUTHORIZED OFFICER'S TITLE]
ATTEST:
By:
--------------------------------
Name:
Title:
(Corporate Seal)
[Signatures continued on following page]
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[Signatures continued from preceding page]
SELECT MEDIA COMMUNICATIONS, INC.
By:
------------------------------------
Name: [AUTHORIZED OFFICER'S NAME]
Title: [AUTHORIZED OFFICER'S TITLE]
ATTEST:
By:
----------------------------
Name:
Title:
(Corporate Seal)
u:\Acquisitions\SelectMedia\Betelgeuse\DomenicoConsultingAgreement.tex
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EXHIBIT A
(Attach Form of Option Agreement allowing cashless exercise)
15
63
Exhibit 12(h)
to
Exhibit 10.8
EMPLOYMENT AGREEMENT
Xxxx Xxxxxxxx
EMPLOYMENT AGREEMENT, dated as of June 6, 2001 (this "Employment Agreement" or
"Agreement") between XXXX XXXXXXXX ("Xxxxxxxx") and BETELGEUSE PRODUCTIONS,
INC., a corporation organized and existing under the laws of the State of
Delaware ("Betelgeuse"), and SELECT MEDIA COMMUNICATIONS, INC., a corporation
organized and existing under the laws of the State of New York ("SMCI").
RECITALS
WHEREAS, SMCI has entered into an Asset Purchase and Sale Agreement, dated
as of December 6, 2000 ("Asset Purchase Agreement"), providing for SMCI's
acquisition of certain of the assets and liabilities of Betelgeuse Productions,
L.L.C., a Delaware limited liability company ("Seller"), and, in connection with
and as a condition of that proposed acquisition, SMCI and Betelgeuse have
required and Xxxxxxxx has agreed to execute and deliver this Employment
Agreement, as described in greater detail and in accordance with the terms and
conditions set forth in this Employment Agreement.
NOW, THEREFORE, intending to be legally bound and in accordance with the
terms and conditions set forth in this Employment Agreement, having determined
that it is in their best interest to execute and deliver this Employment
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which is acknowledged, Xxxxxxxx, SMCI, and Betelgeuse agree as
follows:
AGREEMENT
1 DEFINITIONS.
Terms defined above shall have the meanings set forth therein and such
definitions, by this reference, are incorporated in and made a part of Section
1.1 and this Employment Agreement. Capitalized terms used and not otherwise
defined in this Employment Agreement shall have the meaning set forth in the
Asset Purchase Agreement.
1.1 GENERAL DEFINITIONS.
"BASE SALARY" shall mean an annual salary of not less than $250,000.00 less such
deductions as are required by law or that Xxxxxxxx may elect in accordance
with Betelgeuse's policies and procedures.
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"CAUSE" shall mean
(a) Xxxxxxxx'x failure to observe or perform any material term or condition
of this Employment Agreement; or
(b) Xxxxxxxx'x conviction of or plea of guilty or nolo contendere to a
felony or other crime involving moral turpitude or misappropriation of
funds.
"CLOSING DATE" shall have the meaning referred to in the Asset Purchase
Agreement.
"CONFIDENTIAL INFORMATION" shall mean any information relating in any way to the
business of Betelgeuse disclosed to or known to Xxxxxxxx as a consequence
of, result of, or through Xxxxxxxx'x employment by Betelgeuse that consists
of technical and non-technical information about Betelgeuse's products,
processes, programs, concepts, forms, business methods, data, any and all
financial and accounting data, marketing, customers, customer lists, and
services and information corresponding thereto acquired by Xxxxxxxx prior to
or during the Term of Xxxxxxxx'x employment by Betelgeuse. Confidential
Information shall not include any of such items that are published or are
otherwise part of the public domain, or freely available from trade sources
or otherwise.
"DISABILITY" shall mean a physical or mental disability that renders Servidio
unable to perform his duties under this Employment Agreement in a manner
that is satisfactory to a majority of the Board of Directors of Betelgeuse.
"EFFECTIVE DATE" shall mean the Closing Date.
"EMPLOYEE BENEFITS" shall mean such life insurance, medical, dental, disability,
pension and retirement plans, and other programs as may be approved from
time to time by Betelgeuse for the benefit of its executives.
"EXTENSIONS" shall mean those extensions of the Initial Term of this Employment
Agreement, if any, made in accordance with and pursuant to the terms of
Section 3.2.
"TERM" shall mean the period from the Effective Date through and including the
fourth anniversary of the Effective Date.
"LONG TERM DISABILITY" shall mean a Disability that continues for a period of
(a) one hundred and eighty (180) days out of any three hundred and
sixty-five (365) day period or (b) a consecutive period of one hundred and
twenty (120) days.
"REIMBURSABLE EMPLOYEE EXPENSES" shall mean all reasonable expenses incurred by
Xxxxxxxx in performing services under this Employment Agreement, including,
without limitation, all reasonable expenses of travel and living expenses
while away from home on business at the request of Betelgeuse.
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"STOCK OPTION AGREEMENT" shall have the meaning set forth in Section 4.6.
"STOCK OPTIONS" shall have the meaning set forth in Section 4.6.
"TERM" shall mean the Initial Term and any Extensions.
1.2 CONSTRUCTION. Neither this Employment Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Betelgeuse or Xxxxxxxx,
whether under any rule of construction or otherwise. On the contrary, this
Employment Agreement has been reviewed by each of the parties and their
respective legal counsel and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties to this Employment Agreement.
2 EMPLOYMENT.
(a) Upon and subject to the terms and conditions set forth in this
Employment Agreement, Betelgeuse agrees to employ Xxxxxxxx and Xxxxxxxx
agrees to be employed by Betelgeuse with the titles of Chief Executive
Officer and President of Betelgeuse. While employed, Xxxxxxxx will also
be nominated to serve as a Director of Betelgeuse.
(b) Xxxxxxxx shall report directly to the Board of Directors of Betelgeuse
and shall render such services as may be assigned to him from time to
time by the Board of Directors, including without limitation, the
management of the operations of Division, it being understood and agreed
that the services of Xxxxxxxx shall not require Xxxxxxxx to change the
location of his residence in order to properly render such services.
Xxxxxxxx shall prepare a budget for the continued operation of Division
to which the Board of Betelgeuse shall have final approval.
(c) Xxxxxxxx agrees that he shall at all times during normal working hours
devote his best efforts and substantially all of his time, attention,
and energies to faithfully perform all of the duties that may be
required of him pursuant to the terms of this Employment Agreement.
(d) Betelgeuse represents and warrants to Xxxxxxxx that this Employment
Agreement has been duly and validly authorized and executed by and on
behalf of Betelgeuse in accordance with its certificate of incorporation
and by-laws and that it constitutes the lawful and valid obligation of
Betelgeuse.
(e) Xxxxxxxx represents and warrants to Betelgeuse that he is free to accept
employment under this Employment Agreement and that he has no prior or
other obligations or commitments of any kind that would in any way
hinder or interfere with his acceptance or the full performance of such
employment.
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3 TERM.
3.1 INITIAL TERM. Unless earlier terminated in accordance with the
provisions of Section 6 or extended pursuant to Section 3.2, the Term of this
Employment Agreement shall be equal to the Initial Term.
3.2 EXTENSIONS. The Term of this Employment Agreement may only be extended
from time to time in one year increments with the written consent of both
Betelgeuse and Xxxxxxxx.
4 COMPENSATION AND RELATED MATTERS.
4.1 BASE SALARY. During Xxxxxxxx'x employment under this Employment
Agreement, Betelgeuse shall pay to Xxxxxxxx the Base Salary. Betelgeuse shall
increase the Base Salary no less than 10.0% on each anniversary of this
Employment Agreement. The Base Salary shall be payable in equal periodic
installments in accordance with Betelgeuse's salary practices.
4.2 REIMBURSABLE EXPENSES. During the Term of Xxxxxxxx'x employment under
this Employment Agreement, Xxxxxxxx shall receive reimbursement from Betelgeuse
for all Reimbursable Employee Expenses, provided that such Expenses are incurred
and accounted for and approved in accordance with the standard policies and
procedures established by Betelgeuse for reimbursement of expenses. Betelgeuse
understands that such expenses will be at least $3,000 per month.
4.3 VACATION. Xxxxxxxx shall be entitled to forty-two (42) days of vacation
during each twelve (12) month period of his employment under this Employment
Agreement, to be taken at such times and in such periods as shall not interfere
with the duties required to be rendered by Xxxxxxxx under this Employment
Agreement.
4.4 AUTOMOBILE ALLOWANCE. Xxxxxxxx shall be entitled to an automobile
allowance of eight hundred dollars ($800.00) per month.
4.5 ANNUAL BONUS. Xxxxxxxx shall receive an annual bonus equal to 2% of the
pre tax earnings of the Betelgeuse and 2% of the pre tax earnings of SMCI on a
consolidated basis with a three quarter weighting on Betelgeuse earnings. Thus,
if Betelgeuse earned $1 million dollars and SMCI earned $2 million dollars,
Xxxxxxxx would be entitled to a bonus of $25,000, i.e. 2% x $1,000,000 times 3,
plus 2% of $2,000,000.00 times 1, divided by 4.
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4.6 STOCK OPTIONS.
4.6.1 GRANT OF OPTIONS AND VESTING. As of the Closing Date, SMCI shall
grant to Xxxxxxxx, pursuant to the form of option agreement attached hereto as
Exhibit A (the "Stock Option Agreement"), a five (5) year incentive stock option
(the "Stock Options") for the purchase of 1,000,000 shares of SMCI's common
stock at an exercise price of $1.00 per share, which option shall vest in equal
installments of 33 1/3% on each of the first, second, and third anniversary of
the Closing Date. None of these shares may be sold prior to the second
anniversary of the Closing Date. All of the Stock Options will be exercisable
pursuant to a Cashless Exercise (as such term is defined in the Stock Option
Agreement).
4.6.2 RESTRICTIONS AND LEGENDING. The Stock Options and the shares
issuable upon exercise of the Stock Options granted pursuant to this Section 4.6
(the "Shares") shall be restricted securities within the meaning of the
Securities Act of 1933 (the "Securities Act") and as such shall be subject to
restrictions with respect to their subsequent resale. All Shares of SMCI's Stock
issued upon exercise of the Stock Options shall bear the following legend:
"The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended (the "1933 Act") or the
securities laws of any other jurisdiction and are "restricted
securities" as defined by Rule 144 under the 0000 Xxx. The shares may
not be sold, transferred, pledged, or distributed in the absence of an
effective registration statement registering the shares under the 1933
Act and the securities laws of any state requiring such registration, or
in lieu thereof, an opinion of counsel, which opinion is satisfactory to
the issuer of the shares, to the effect that registration is not
required under said acts."
Any share certificate issued at any time in exchange or substitution for any
share certificate bearing such legend, except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act, shall also bear such legend, unless, in the Opinion of
Counsel, the shares represented thereby are no longer subject to restrictions on
resale under the Securities Act, or any applicable state securities laws. As
used in this Employment Agreement, an "Opinion of Counsel" shall mean an opinion
of counsel selected by Xxxxxxxx, which opinion is satisfactory to counsel for
SMCI as to the identity of the opining counsel and the form and substance of the
opinion.
4.6.3 SECURITIES LAWS COMPLIANCE PROCEDURES. Xxxxxxxx represents and
acknowledges that:
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(a) he is a sophisticated investor with knowledge and experience in business
and financial matters, knows, or has had the opportunity to acquire, all
information concerning the business, affairs, financial condition and
prospects of SMCI which he deems relevant to make a fully informed
decision regarding the consummation of the transactions contemplated
hereby and is able to bear the economic risk and lack of liquidity
inherent in holding SMCI's Stock.
(b) he has been supplied with copies of all Forms 10-K, 10-Q, and 8-K, and
all proxy statements, filed by SMCI within the preceding three year
period immediately preceding the date of this Agreement.
Without limiting the foregoing, Xxxxxxxx understands and acknowledges that
neither SMCI nor anyone acting on its behalf has made any representations or
warranties other than those contained in this Employment Agreement or the Asset
Purchase Agreement respecting SMCI or the future conduct of SMCI's business, and
Xxxxxxxx has not relied upon any representations or warranties other than those
contained in this Employment Agreement or the Asset Purchase Agreement in the
belief that they were made on behalf of Betelgeuse or SMCI, as the case may be.
4.6.4 STATUS OF OPTIONS AND SHARES TO BE ISSUED. Xxxxxxxx agrees,
acknowledges, and confirms that he has been advised and understands as follows:
(a) Any shares of SMCI Stock to be issued to Xxxxxxxx as a result of his
exercise of the Stock Options will be acquired by him for his own
account and without a view to any distribution or resale thereof, other
than a distribution or resale that, in the opinion of his counsel, which
opinion shall be satisfactory in form and substance to SMCI, may be made
without violating the registration provisions of the Securities Act or
any applicable blue sky laws.
(b) The shares of SMCI's Stock issued pursuant to the Stock Options will be
"restricted securities" within the meaning of Rule 144 under the
Securities Act and have not been registered under that Act or any state
securities laws and thereafter must be held indefinitely unless they are
subsequently registered under the Securities Act and any state "blue sky
laws" where registration may be required before sale or an exemption
from such registration is available.
(c) Except as specifically provided in the Registration Rights Agreement
attached as Exhibit B to this Employment Agreement, SMCI is under no
obligation to register the shares of SMCI Stock issuable upon exercise
of the Stock Options under the Securities Act or any state securities
law or to take any action which would make available an exemption from
such registration.
(d) Except under certain limited circumstances, the above restrictions on
the transfer of the shares of SMCI's Stock will also apply to any and
all shares of capital stock or
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other securities issued or otherwise acquired with respect to such
shares, including, without limitation, shares and securities issued or
acquired as a result of any stock dividend, stock split or exchange or
any distribution of shares or securities pursuant to any corporate
reorganization, reclassification or similar event.
(e) SMCI and its transfer agent may refuse to effect a transfer of any of
the shares of SMCI Stock by Xxxxxxxx or any of his successors, personal
representatives, or assigns otherwise than as contemplated hereby.
4.7 OTHER BENEFITS. Xxxxxxxx shall be entitled to Employee Benefits,
including without limitation, the performance bonuses, stock options, and life
and health insurance, in the same manner as the other top three executives of
Betelgeuse; provided, however, that Xxxxxxxx'x Employee Benefits shall be at
least equal to the Employee Benefits enjoyed by Xxxxxxxx as of the date of this
Employment Agreement, as adjusted in accordance with Betelgeuse's historical
benefit policies. Nothing in this Employment Agreement shall affect Betelgeuse's
right to amend, modify, or terminate any retirement or other Employee Benefit
program at any time for any reason.
5 ALLOCATION OF CERTAIN BENEFITS RELATED TO THE DIVISION.
5.1 GRANT OF STOCK OPTIONS. Xxxxxxxx, in his sole discretion, shall have the
right to grant to existing employees of Betelgeuse up to 150,000 shares of
SMCI's stock and Betelgeuse agrees to issue such shares upon notice from
Xxxxxxxx and SMCI's confirmation that such person or persons are then existing
employees of Betelgeuse.
5.2 FREQUENT FLYER MILEAGE. Xxxxxxxx shall have the right to allocate any
frequent flyer mileage accruing to employees of Betelgeuse in connection with
their business travel among the then existing employees of Betelgeuse as
Xxxxxxxx sees fit.
6 TERMINATION OF EMPLOYMENT.
This Agreement and Xxxxxxxx'x employment under this Employment Agreement may
be terminated only under the following circumstances during the Term of this
Employment Agreement:
6.1 DEATH OR LONG TERM DISABILITY. The death or Long Term Disability of
Xxxxxxxx.
6.2 CAUSE. Betelgeuse may terminate Xxxxxxxx'x employment under this
Employment Agreement for Cause after written notice to Xxxxxxxx and his failure
to reasonably
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cure the reason for termination within twenty (20) days of such notice.
7 COMPENSATION UPON TERMINATION OF EMPLOYMENT.
(a) During any period that Xxxxxxxx fails to perform his duties under this
Employment Agreement as a result of a Disability, Xxxxxxxx shall
continue to receive his Base Salary together with benefits provided in
Section 4 above, at the rate then in effect for such period until his
employment is terminated pursuant to Section 6.1; provided, however,
that payments so made to Xxxxxxxx during the any such period shall be
reduced by the sum of the amounts, if any, payable to Xxxxxxxx under
disability benefit plans of Betelgeuse.
(b) If Xxxxxxxx'x employment shall be terminated for Cause under Section
6.2, Betelgeuse shall pay Xxxxxxxx his Base Salary through the date of
termination at the rate in effect at the time a notice of termination is
given plus all accrued and unpaid benefits, including all health and
welfare benefits in which Xxxxxxxx was a participant in accordance with
their terms.
(c) If Xxxxxxxx'x employment is terminated by Betelgeuse prior to or
subsequent to the scheduled expiration of the Initial Term of this
Employment Agreement other than for Cause or as a result of a Long Term
Disability, then Xxxxxxxx shall be entitled to receive payment of his
Base Salary through the expiration of the then current Term of the
Agreement and shall continue to be entitled to receive all accrued and
unpaid benefits, including all health and welfare benefits in which the
Servidio was a participant in accordance with their terms; provided,
however, that, if during the period from the date of termination until
the expiration of the applicable Term Xxxxxxxx shall obtain other
employment, the payments and benefits to Xxxxxxxx under this paragraph
shall be reduced by the amount of compensation and benefits received by
Xxxxxxxx in connection with that other employment.
8 NON-DISCLOSURE OF INFORMATION.
(a) Xxxxxxxx shall not, directly or indirectly, disclose to any person or
entity for any reason, or use for his own personal benefit, any
Confidential Information either during his employment with Betelgeuse or
following termination of his employment for any reason whatsoever for a
period of one (1) year after termination of this Employment Agreement.
(b) Xxxxxxxx shall, at all times take all precautions necessary to protect
from loss or disclosure by his of any and all documents or other
information containing, referring to or relating to such Confidential
Information. Upon termination of his employment with Betelgeuse for
Cause or if Xxxxxxxx terminates the Agreement
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prior to expiration of the Term, Xxxxxxxx shall promptly return to
Betelgeuse any and all documents or other tangible property containing,
referring to or relating to such Confidential Information, whether
prepared by him or others.
(c) Notwithstanding any provision to the contrary in this Section 8, this
Section shall not apply to information which Xxxxxxxx is legally
required to disclose or to information that has become part of the
public domain or is otherwise publicly disclosed through no fault or
action of Xxxxxxxx; provided, however, if Xxxxxxxx receives a subpoena
or other order issued by a court of competent jurisdiction or
governmental agency requiring disclosure of any Confidential
Information, Xxxxxxxx shall promptly notify Betelgeuse of the existence
of such order or subpoena and send a copy thereof to Betelgeuse and
cooperate with Betelgeuse, at Betelgeuse's expense, in Betelgeuse's
efforts to obtain satisfactory resolution of the matter.
9 DISCLOSURE OF INVENTIONS AND ASSIGNMENT OF PATENTS.
(a) Xxxxxxxx shall maintain such records of his work as Betelgeuse may
direct from time to time. Xxxxxxxx shall promptly disclose to
Betelgeuse, in writing, any and all copyrightable works, including
software, and any and all discoveries, inventions, technological
innovations and improvements, whether patentable or not (whether it be a
machine, process, apparatus, article, composition, design, software,
writing or other thing) conceived or made by Xxxxxxxx, solely or
jointly, during the period of his employment with Betelgeuse, whether or
not authorized, conceived or made during working hours or with
Betelgeuse's equipment or facilities, that relates in any manner to the
existing or contemplated business of Betelgeuse. Unless otherwise waived
in writing by Betelgeuse, all such copyrightable works (including
software), discoveries, inventions, technological innovations, and
improvements shall be the exclusive property of Betelgeuse with respect
to any and all countries in the world and Xxxxxxxx shall assign and
hereby does assign all right, title and interest thereto to Betelgeuse.
(b) Xxxxxxxx agrees that in the event of publication by Xxxxxxxx of written
or graphic materials, Betelgeuse will retain and own all rights in said
materials, including right of copyright.
10 RESTRICTIONS ON COMPETITION.
(a) Unless Xxxxxxxx'x employment under this Employment Agreement shall be
terminated solely as a result of Betelgeuse's failure to consent to any
requested extension of the Initial Term of this Employment Agreement or
as a result of Betelgeuse's breach of a material term of this Employment
Agreement, Xxxxxxxx covenants
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and agrees that during the period of Xxxxxxxx'x employment under this
Employment Agreement and for a period of two (2) years following the
termination of Xxxxxxxx'x employment, Servidio shall not, directly or
indirectly engage in, participate in or assist, as principal or agent,
officer, director, employee, franchisee, consultant, shareholder, or
otherwise, alone or in association with any other person, corporation or
other entity, any business that currently is or previously was a
customer of Betelgeuse and whose activities, services or products are
directly or indirectly competitive with the activities, services or
products of Betelgeuse or its subsidiaries or affiliates anywhere in the
United States; provided, however, that the foregoing covenant shall not
prevent Xxxxxxxx from being a principal, officer, director, employee or
shareholder in nProcess, Inc., a company engaged in providing management
and business plan assistance, including internet access and web site
development, to entrepreneurs and others engaging primarily in internet
activities.
(b) During his employment with Betelgeuse, Xxxxxxxx shall not take any
action that might divert from Betelgeuse any opportunity which would be
within the scope of any present or contemplated future business of
Betelgeuse.
(c) In the event of the sale or other disposition of all or substantially
all of Betelgeuse's assets or capital stock, Xxxxxxxx agrees to use his
best efforts, in good faith, to assist the purchaser during the
transition phase for a period of 12 months at Xxxxxxxx'x then current
compensation level. Xxxxxxxx acknowledges, however, that nothing
contained in this Employment Agreement shall be binding upon or
otherwise require the purchaser of Betelgeuse's assets or capital stock
to continue the employment of Xxxxxxxx after any such purchase and sale.
(d) The provisions set forth in Sections 8, 9, and 10 of this Employment
Agreement shall survive the termination of Xxxxxxxx'x employment with
Betelgeuse, or the expiration of this Employment Agreement, as the case
may be, and shall continue to be binding upon Xxxxxxxx in accordance
with their respective terms.
11 NON-SOLICITATION.
During the Term of this Employment Agreement and for a period of two (2)
years following the termination of Xxxxxxxx'x employment under this Employment
Agreement for any reason, Xxxxxxxx shall not:
(a) solicit the same business being performed by Betelgeuse from any
customer or account that is or was a customer or account of Betelgeuse
or advise any such customer to withdraw, curtail, or cancel such
customer's business with Betelgeuse or otherwise interfere with
Betelgeuse's contractual relations with its customers;
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(b) solicit, or attempt to hire, any officer, employee, consultant, or agent
of Betelgeuse; or
(c) persuade or attempt to persuade any employee of Betelgeuse to terminate
his or her services or employment with Betelgeuse.
12 BETELGEUSE'S RIGHT TO EQUITABLE RELIEF.
Xxxxxxxx recognizes and acknowledges that the services to be rendered by him
under this Employment Agreement are of a special and unique character and that
the restrictions on Xxxxxxxx'x activities contained in Sections 8, 9, 10, and
Section 11 of this Employment Agreement are reasonable and necessary to protect
the legitimate business interests of Betelgeuse and that any breach or violation
of the provisions of those Sections is likely to result in irreparable injury to
Betelgeuse for which Betelgeuse would have no adequate remedy at law. Xxxxxxxx
agrees that if he shall breach or violate Section 8, 9, 10, or Section 11 of
this Employment Agreement, Betelgeuse will be entitled, if it so elects, to
institute and prosecute proceedings at law or in equity, including, but not
limited to, a proceeding seeking injunctive relief, to obtain damages with
respect to such breach or violation, or to enforce the specific performance of
this Employment Agreement by Xxxxxxxx or to enjoin Xxxxxxxx from engaging in any
activity in violation of this Employment Agreement. Xxxxxxxx acknowledges that
in the event of any such breach or violation, Betelgeuse shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, and to an equitable accounting of all earnings, profits, and
other benefits arising from any such breach or violation, which rights shall be
cumulative and in addition to any other rights or remedies to which Betelgeuse
may be entitled. Xxxxxxxx agrees that in the event of any such violation, an
action may be commenced for preliminary or permanent injunctive relief and other
equitable relief in any federal or state court of competent jurisdiction sitting
in New York County, New York. Xxxxxxxx waives, to the fullest extent permitted
by law, any objection that Xxxxxxxx may now or hereafter have to such
jurisdiction or to the laying of the venue of any such suit, action, or
proceeding brought in such a court and any claim that such suit, action or
proceeding has been brought in an inconvenient forum. Xxxxxxxx agrees that
effective service of process may be made upon Xxxxxxxx by mail under the notice
provisions contained in Section 16.1 of this Employment Agreement. Xxxxxxxx
further agrees that the existence of any claim or cause of action against
Betelgeuse, whether predicated upon a breach or violation by Betelgeuse of this
Employment Agreement or any other contract or agreement between Xxxxxxxx and
Betelgeuse, shall not constitute or be asserted as a defense to the enforcement
by Betelgeuse of the provisions of this Section 12 relating to Betelgeuse's
right to injunctive or other equitable relief for Xxxxxxxx'x breach or violation
of Section 8, 9, 10, or Section 11 of this Employment Agreement.
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13 KEY MAN LIFE AND DISABILITY INSURANCE.
During the Term of this Employment Agreement, Xxxxxxxx agrees to be subject
to physical examinations for the purpose of determining his insurability for
disability insurance and for life insurance for the benefit of Betelgeuse.
Xxxxxxxx further agrees to execute and deliver any documents that may be
reasonably necessary for Betelgeuse to obtain any such insurance on Xxxxxxxx.
Notwithstanding the foregoing provisions, Xxxxxxxx understands and agrees that
Betelgeuse shall have no obligation to purchase or maintain any key man life or
disability insurance on Xxxxxxxx.
14 MITIGATION OF DAMAGES.
Any liability of Betelgeuse for payments to Xxxxxxxx by virtue of any
wrongful termination of Xxxxxxxx'x employment shall be reduced by and to the
extent of any earnings received by or accrued for the benefit of Xxxxxxxx during
any unexpired part of the Employment Term.
15 ATTACHMENT.
Except as required by law, the right to receive payments under this
Employment Agreement shall not be subject to sale, pledge, encumbrance, charge,
levy, or similar process or assignment, and any attempt to do so shall be null
and void.
16 MISCELLANEOUS.
16.1 NOTICES. All notices and other communications required or permitted
under this Employment Agreement shall be in writing and shall be deemed to have
been given or made if hand delivered, when delivered, if by nationally
recognized overnight courier service, on the following day, or if mailed by
regular mail, on the day of deposit in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to a party and
sent to its address set forth below or to such other address as such party may
designate from time to time by notice to the other in the manner set forth in
this Employment Agreement:
If to Xxxxxxxx :
Xxxx Xxxxxxxx
00 X. 00xx Xxxxxx, Xxxxxxxxx
Xxx Xxxx Xxxx, XX 00000
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If to Betelgeuse :
Betelgeuse Productions, Inc.
00 X. 00xx Xxxxxx, Xxxxxxxxx
Xxx Xxxx Xxxx, XX 00000
Attn: [AUTHORIZED OFFICER'S NAME], [AUTHORIZED OFFICER'S TITLE]
If to SMCI :
Select Media Communications, Inc.
00 X. 00xx Xxxxxx, Xxxxxxxxx
Xxx Xxxx Xxxx, XX 00000
Attn: [AUTHORIZED OFFICER'S NAME], [AUTHORIZED OFFICER'S TITLE]
16.2 INTEGRATION. This Employment Agreement contains the entire agreement
between Xxxxxxxx and Betelgeuse relating to the subject matter of this
Employment Agreement and supersedes all oral statements and prior writings with
respect thereto.
16.3 SUCCESSORS AND ASSIGNS. All rights of Betelgeuse and Xxxxxxxx under
this Employment Agreement shall inure to the benefit of their respective heirs,
executors, administrators, successors, assigns, and legal representatives and
this Employment Agreement and all the provisions of this Employment Agreement
shall be binding upon Betelgeuse and Xxxxxxxx and their respective heirs,
executors, administrators, successors, assigns, and legal representatives and
all other persons or entities claiming under or through them. Notwithstanding
anything to the contrary in the foregoing, Xxxxxxxx may not assign or transfer
any of his rights under this Employment Agreement without the prior written
consent of Betelgeuse.
16.4 HEADINGS. The headings preceding the text of the Sections of this
Employment Agreement are inserted solely for convenience of reference and shall
neither define nor limit the provisions of this Employment Agreement nor
constitute a part of this Employment Agreement nor shall they affect its
meaning, construction, or effect.
16.5 AMENDMENT. This Employment Agreement may not be amended, modified,
changed, waived, terminated, or discharged orally, but only by an agreement in
writing
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signed by both Xxxxxxxx and Betelgeuse.
16.6 SEVERABILITY. Wherever possible each provision of this Employment
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Employment Agreement shall be
found to be illegal, invalid, prohibited, or unenforceable for any reason
whatsoever under such law, such provision shall be ineffective to the extent of
such illegality, invalidity, prohibition, or unenforceability without
invalidating the remainder of such provision or the remaining provisions of this
Employment Agreement.
16.7 COSTS, EXPENSES, AND TAXES. Each of the parties to this Employment
Agreement shall pay their or its own expenses in connection with the execution
and delivery of this Employment Agreement and the transactions contemplated
thereby, including the fees and expenses of counsel, certified public
accountants, or other professionals.
16.8 GOVERNING LAW. This Employment Agreement shall be governed and
construed in accordance with laws of the State of New York, without giving
effect to the conflicts of laws principles thereof, applicable to contracts made
in New York and any claim, suit, action, or other legal proceedings may be
commenced and maintained in any court of competent jurisdiction in the State of
New York.
16.9 REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon either party
by this Employment Agreement is intended to be exclusive of any other remedy,
and each and every such remedy shall be cumulative and shall be in addition to
any other remedy given under this Employment Agreement or now or hereafter
existing at law or in equity. No delay or omission by either party in exercising
any right, remedy, or power under this Employment Agreement or existing at law
or in equity shall be construed as a waiver thereof, and any such right, remedy,
or power may be exercised by such party from time to time and as often as may be
deemed expedient or necessary by such party in such party's sole discretion.
16.10 COUNTERPARTS. This Employment Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and each of which when
taken together shall constitute but one and the same instrument and shall be
binding upon each of the parties as fully and completely as if all had signed
the same instrument.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, intending to be legally bound and intending this to be a
sealed instrument, Xxxxxxxx and Betelgeuse as of June 6, 2001 have executed this
Employment Agreement.
XXXX XXXXXXXX
___________________________________ (seal)
BETELGEUSE PRODUCTIONS, INC.
By: __________________________________________
Name: [AUTHORIZED OFFICER'S NAME]
Title: [AUTHORIZED OFFICER'S TITLE]
ATTEST:
By: __________________________________________
Name:
Title:
(Corporate Seal)
[Signatures continued on following page]
15
78
[Signatures continued from preceding page]
SELECT MEDIA COMMUNICATIONS, INC.
By: __________________________________________
Name: [AUTHORIZED OFFICER'S NAME]
Title: [AUTHORIZED OFFICER'S TITLE]
ATTEST:
By: __________________________________________
Name:
Title:
(Corporate Seal)
u:/Acquisitions/SelectMedia/Betelgeuse/ServidioEmploymentAgreement.tex
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79
EXHIBIT A
Form of Stock Option Agreement
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SCHEDULE 9.6(c)
Subsequent Events
There are minority owners of Seller (who own an aggregate of approximately
5.5 % of the outstanding stock of Seller) whose total investment is $400,000.
Seller and such minority owners are in discussion regarding a possible
repurchase of the Seller's membership interests owned by such minority owners.
Any such repurchase would consist of $400,000 of Seller's current cash account
and the balance would likely be paid from a portion of the Purchase Price.
81
SCHEDULE 9.6(f)
Capital Expenditures
Capital expenditures to occur after June 30, 2000 are as follows:
1. Construction of digital edit room.
2. Construction of 10th floor build out at 00 Xxxx 00xx Xxxxxx
Total estimated cost to Seller is $1,300,000, of which $982,000 will be
financed by a third party leasing arrangement with the remainder being financed
from Seller's cash flow.
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SCHEDULE 9.6 (h)
Subsequent Events
nProcess Inventory @ 10/17/00
MACHINE DESCRIPTION SPECS.
Servers
BXWEB Web Hosting Compaq, dual PII 400, 512 Megs RAM
BCXSQL development Compaq, dual PII 400, 512 Megs RAM
Dogbert development Compaq, PI 200, 128 Megs RAM
Dogfish development Compaq, PI 200, 128 Megs RAM
Sarek development Compaq, PII 400, 256 Megs RAM
Mailhost email, DNS, WINS Compaq, PI 200, 128 Megs RAM
Dogstar development P 133, 64 Megs RAM
Frankentstein development P 133, 64 Megs RAM
Pong development PII 400, 128 Megs RAM
Alaska development PII 266, 64 Megs RAM
WORKSTATIONS
Fdesiderio w/s Dell, PIll 500, 128 Megs RAM
Jreading w/s Dell, PII 400, 128 Megs RAM
Dbergseiter w/s Dell PII 333, 128 Megs RAM
w/s Macintosh, G3/300, 300 Megs RAM
w/s PowerPC 8500/150, 128 Megs RAM
w/s PowerPC 8500/150, 128 Megs RAM
Xxxxxx Xxxxxxx w/s Dell PII 400, 128 Megs RAM
Xxxxxx Xxxxxxx laptop Compaq, PII 233, 128 Megs RAM
Xxxx Xxxxxxx w/s Dell Dimension, PIII 500, 128 Megs RAM
w/s dell optipex P3 667, 128 megs RAM
w/s dell optipex P3 667, 128 megs RAM
w/s Macintosh, G4/500, 128 Megs RAM
w/s Macintosh, G4/500, 128 Megs RAM
83
SCHEDULE 9.8
Taxes
A sales and use tax audit has been performed for the years ended June
30, 1997 through June 30, 1999. The estimated additional tax due, including
interest and penalties is approximately $20,000. There will be no income effect
since this was reserved for in the financial statements.
84
SCHEDULE 9.14
Reference is made to Exhibit 1.1 and Schedule 9.6(f).
85
SCHEDULE 9.15
None, other than organizational documents filed with the State of
Delaware and an Application for Authority filed with the State of New York.
86
SCHEDULE 9.16
1. Credit Agreement with Atlantic Bank.
2. Reference is made to Exhibit 1.1.
87
SCHEDULE 9.19
Litigation
1. Xxxxx Brothers Real Estate - 000 Xxxx Xxxxxx Xxxxx Xxxxxxxx.
Landlord has petitioned eviction proceeding against Seller.
Seller has retained legal counsel to defend this litigation.
2. A minority shareholder of Seller has threatened legal action due to the
proposed sale to Purchaser.
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SCHEDULE 9.20
Reference is made to Schedule 9.15.
89
SCHEDULE 9.21
Officers and Directors
Directors
Xxxx Xxxxxxxx
Xxx Xxxxxxxx
Xxxx Xxxxxxx
Officers
Xxxx Xxxxxxxx- President and Treasurer
Xxx Xxxxxxxx- Vice President and Secretary
90
SCHEDULE 9.22
Indebtedness to Officers
Xxxx Xxxxxxxx- $104,545
Xxx Xxxxxxxx-- $ 76,346
91
SCHEDULE 9.23
Outside Financial Interest
Xxx Xxxxxxxx owns 50% of SAS funding, which leases equipment at arms
length to Seller.
92
SCHEDULE 9.25
Reference is made to Exhibit 1.1.
The Company has the following fringe benefit plans:
Vacation - 2 weeks after the first 6 months
Medical - Oxford Freedom Plan - Employee Contribution of 25%
Dental - Met Life - Employee Contribution of 25%
Long Term Disability - 100% Employee Paid
Life Insurance and Accidental Death and Dismemberment - Employer Paid
93
SCHEDULE 9.29
Insurance Policies
St. Xxxx Fire & Marine - Property, Liability, Umbrella, Crime &
Equipment Floater June 15, 2000 commencement date.
Hartford Insurance Co. - ERISA Bond $250,000 June 15, 2000
commencement date.
All policies are occurrence policies.
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SCHEDULE 9.34
Bank Accounts
The following is a list of bank accounts at Atlantic Bank:
1. Operating Account- # 0001-219057
2. Payroll Account - # 0001-219103
The address of the branch office is as follows:
Atlantic Bank
0 Xxxxx Xxxxx Xxxxxx- 000xx Xxxxx
Xxx Xxxx, XX 00000
The following is a list of bank accounts at Citibank:
1. Money Management Account- # 00000000
2. Day-to-Day Account- # 00000000
The address of the branch office is as follows:
Citibank
00xx Xxxxxx & Xxxx Xxxxxx
Xxx Xxxx, XX 00000
All accounts require both signatures of Xxxx Xxxxxxxx and Xxx Xxxxxxxx
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SCHEDULE 9.38(e)
Capital Expenditures
Reference is made to Schedule 9.6(f).
96
SCHEDULE 9.39
Seller maintains the Betelgeuse Productions 401(k) Profit Sharing Plan.
97
Exhibit H to
Exhibit 12g to
Exhibit 10.8
THIS STOCK OPTION AGREEMENT AND THE SHARES ISSUABLE ON EXERCISE HEREOF ARE
NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE "BLUE SKY" LAWS AND MAY NOT BE TRANSFERRED OR DISPOSED OF
EXCEPT IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF AND IN COMPLIANCE
WITH APPROPRIATE LEGAL REQUIREMENTS.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 6, 2001 (this "Stock Option
Agreement" or "Agreement") between SELECT MEDIA COMMUNICATIONS, INC., a
corporation organized and existing under the laws of the State of New York
("Company"), having an office located at 000 Xxxxx Xxxxxx, Xxxxxx-xxxxxx Xxxxx,
Xxx Xxxx Xxxx, XX 00000, and [NAME OF OPTIONEE]("Optionee"), having an address
at Street Address, City State Zip.
RECITALS
WHEREAS, Betelgeuse Production, L.L.C., a Delaware limited liability company
organized and existing under the laws of the State of Delaware ("Seller"),
having an office located at 00 X. 00xx Xxxxxx, Xxxxxxxxx, Xxx Xxxx Xxxx, XX
00000, operates a post production facility (the "Business"), which Business has
its principal office located at 00 X. 00xx Xxxxxx, Xxxxxxxxx, Xxx Xxxx Xxxx, XX
00000.
WHEREAS, Company and Seller have entered into an Asset Purchase and Sale
Agreement dated as of December 6, 2000 (the "Asset Purchase Agreement")
pursuant to which, among other things, Company and Optionee have agreed to enter
into Employment Agreement (the "Employment Agreement").
WHEREAS, Pursuant to the Employment Agreement, Company has agreed to grant
to Optionee, stock options with respect to Company's common stock as follows:
TOTAL NUMBER OF SHARES SUBJECT TO OPTION: Number of Shares.
EXERCISE PRICE PER SHARE: $1.00 per share.
DATE OF GRANT: Grant Date.
98
EXPIRATION DATE: The fifth anniversary of the Grant Date.
TYPE OF OPTION: Non Statutory Stock Option.
NOW, THEREFORE, intending to be legally bound, in accordance with the terms
and conditions set forth in this Stock Option Agreement, having determined that
it is in their best interest to execute and deliver this Stock Option Agreement,
and for other good and valuable consideration, the receipt and adequacy of which
is acknowledged, Optionee and Company agrees as follows:
1 DEFINITIONS.
1.1 GENERAL DEFINITIONS. Unless the context of this Stock Option Agreement
clearly requires otherwise, the plural includes the singular, the singular
includes the plural, the use of any gender shall be applicable to all genders,
the part includes the whole, "including" is not limiting, and "or" has the
inclusive meaning of the phrase "and/or". Unless otherwise expressly stated, the
words "hereof", "herein", "hereby", "hereunder", and other similar terms in this
Stock Option Agreement refer to this Stock Option Agreement as a whole and not
exclusively to any particular provision of this Stock Option Agreement.
1.2 SPECIFIC DEFINITIONS. Terms defined in Recitals above shall have the
meanings set forth therein and such Recitals, by this reference, are
incorporated in and made a part of this Section 1 and this Stock Option
Agreement. Capitalized terms used and not otherwise defined in this Stock Option
Agreement shall have the meanings set forth in the Asset Purchase Agreement.
"33 ACT" means the Securities Act of 1933, as amended, and any successor
statute, and the rules and regulations promulgated thereunder.
"34 ACT" means the Exchange Act of 1934, as amended, and any successor statute,
and the rules and regulations promulgated thereunder.
"BUSINESS DAY" means a day on which NASDAQ is open for business.
"EXPIRATION DATE" shall mean the fifth anniversary of the Grant Date.
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99
"NASDAQ" means the Nasdaq National Market of The Nasdaq Stock Market.
"SHARES" shall mean the shares of Company's common stock issued from time to
time in accordance with the terms and conditions of this Stock Option
Agreement.
"SEC" means the Securities and Exchange Commission.
2 GRANT OF OPTION.
Company grants to Optionee and Optionee accepts an option to purchase the
total number of shares of common stock of the Company set forth above (the
"Shares") at the exercise price per share set forth above (the "Exercise Price")
subject to all of the terms and conditions of this Stock Option Agreement. The
Option granted pursuant to this Stock Option Agreement is not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
3 RIGHT TO EXERCISE.
During Optionee's continued service with the Company or any Parent or
Subsidiary of the Company, this Option shall become exercisable, in cumulative
increments, with respect to one-third of the Shares covered thereby on each of
the first three (3) anniversaries of the Date of Grant. To the extent that this
Option has become exercisable with respect to the Shares covered thereby, this
Option may thereafter be exercised by Optionee, in whole or in part, at any time
or from time to time prior to the Expiration Date, unless Optionee's service
with the Company pursuant to Optionee's Employment Agreement is terminated
voluntarily by Optionee or for cause as defined in such agreement, in which
event the Option will expire by such termination.
4 RESTRICTION ON EXERCISE.
This Option may not be exercised unless such exercise is in compliance with
the 33 Act, the 34 Act, as amended, the regulations promulgated thereunder, and
all applicable state securities laws as they are in effect on the date of
exercise, and the requirements of any stock exchange or national market system
on which the Company's common stock may be listed at the time of exercise.
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5 MANNER OF EXERCISE.
5.1 EXERCISE. To the extent exercisable under the provisions of this Option,
this Option may be exercised by delivery to the Company of an executed written
notice of exercise to the Company's Secretary stating the number of full Shares
with respect to which it is being exercised, and accompanied by payment of the
Exercise Price for the number of Shares being purchased, together with payment
of the amount, if any, required by the Company to satisfy its tax withholding
obligations resulting from such exercise.
5.2 EXERCISE PRICE. Payment for the Shares may be made:
(a) in cash (by check);
(b) by cancellation of indebtedness of the Company to Optionee;
(c) by surrender of shares of common stock of the Company having a Fair
Market Value equal to the exercise price of the Option;
(d) by waiver of compensation due or accrued to Optionee for services
rendered;
(e) provided that a public market for the Company's stock exists, through a
"same day sale" commitment from Optionee and a broker-dealer that is a
member of the National Association of Securities Dealers (an "NASD
Dealer") whereby Optionee irrevocably elects to exercise the Option and
to sell a portion of the Shares so purchased to pay for the Exercise
Price and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to the Company;
(f) provided that a public market for the Company's stock exists, through a
"margin" commitment from Optionee and an NASD Dealer whereby Optionee
irrevocable elects to exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company (without any
obligation or liability on the part of the Company); or
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(g) by any combination of the foregoing.
5.3 WITHHOLDING TAXES.
5.3.1 Optionee hereby authorizes the Company to withhold from payroll and
any other amounts payable to Optionee, and Optionee otherwise agrees to make
adequate provision for (including by means of a cashless exercise to the extent
permitted by the Company), any sums required to satisfy the federal, state,
local, foreign and any other tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with this Option.
5.3.2 Upon Optionee's request, subject to compliance with any applicable
conditions or restrictions of law, the Company may (but shall be under no
obligation to) withhold from Shares otherwise issuable to Optionee upon the
exercise of this Option a number of whole shares having a Fair Market Value,
determined by the Company as of the date of exercise, not in excess of the
minimum amount of tax required to be withheld by law.
5.4 ISSUANCE OF SHARES/STOCKHOLDER RIGHT. Provided that such notice and
payment are in form and substance satisfactory to the Company and counsel for
the Company, the Company shall cause the Shares to be issued in the name of
Optionee or Optionee's legal representative, Neither Optionee nor any person
entitled to exercise Optionee's rights in the event of death will have any of
the rights of a stockholder with respect to the Shares, except to the extent
that certificates for such Shares shall have been issued upon the exercise of
this Option.
6 NONTRANSFERABILITY OF OPTION.
This Option may not be transferred in any manner other than by will or by
the law of descent and distribution and may be exercised during the lifetime of
Optionee only by Optionee,
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7 NO RIGHT TO CONTINUE AS EMPLOYEE, OFFICER, DIRECTOR, OR CONSULTANT.
Nothing contained in this Option shall: (1) confer upon the Optionee any
right to continue as an Employee, Officer, Director, or Consultant of the
Company or of any Affiliate; or (2) limit in any way the right of the Company or
of any Affiliate to terminate the Optionee's position as an Employee, Officer,
Director, or Consultant of the Company at any time,
8 MISCELLANEOUS.
8.1 BINDING EFFECT AND BENEFIT. This Stock Option Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors, and assigns, except that no party may
assign or transfer its rights or obligations under this Agreement without the
prior written consent of the other parties to this Stock Option Agreement.
8.2 COMMUNICATIONS FROM OPTIONHOLDERS. If Shares are owned of record jointly
by two or more persons, Company may rely on any communication signed by one such
person. Company may ignore communications given by persons who purport to own
Registerable Shares beneficially unless such communications are confirmed by a
record owner, and it may ignore any communications from a record owner that
conflict with previously received communications from another person who is at
the relevant time also a record owner of the same Registerable Shares.
8.3 INTEGRATION. This Stock Option Agreement and the other documents
specifically referred to in this Stock Option Agreement contain the entire
agreement between the Optionholder and Company relating to the subject matter of
this Stock Option Agreement and supersedes all oral statements and prior
writings with respect thereto, except such oral statements and prior writings
relating to the financial condition or business prospects of Optionholder.
8.4 TIME IS OF THE ESSENCE. Time is of the essence with regard to the
performance of the obligations of Seller and Company in this Stock Option
Agreement and
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each and every term, covenant, and condition in this Stock Option Agreement by
or applicable to Seller or Company.
8.5 HEADINGS. The headings preceding the text of the Sections of this Stock
Option Agreement are inserted solely for convenience of reference only and shall
neither define nor limit the provisions of this Stock Option Agreement nor
constitute a part of this Stock Option Agreement nor shall they affect its
meaning, construction, or effect.
8.6 AMENDMENT. This Stock Option Agreement may not be amended, modified,
changed, waived, terminated, or discharged orally, but only by an agreement in
writing signed by both Optionholders and Company.
8.7 SEVERABILITY. Wherever possible each provision of this Stock Option
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but, if any provision of this Stock Option Agreement shall
be found to be illegal, invalid, prohibited, or unenforceable for any reason
whatsoever under such law, such provision shall be ineffective to the extent of
such illegality, invalidity, prohibition, or unenforceability without
invalidating the remainder of such provision or the remaining provisions of this
Stock Option Agreement.
8.8 COSTS, EXPENSES, AND TAXES. Each of the parties to this Stock Option
Agreement shall pay their or its own expenses in connection with this Stock
Option Agreement and the transactions contemplated thereby, including the fees
and expenses of counsel, certified public accountants, or other professionals.
8.9 GOVERNING LAW. This Stock Option Agreement shall be governed and
construed in accordance with laws of the State of New York (without giving
effect to the conflicts of laws principles thereof) applicable to contracts made
and to be performed in New York.
8.10 FURTHER ASSURANCES. Each party to this Stock Option Agreement covenants
and agrees (i) to furnish all information and to make all filings required by
any statute or governmental regulation (ii) to deliver any further instruments
and (iii) to take any
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further action that may be reasonably requested by the other in order to carry
out the provisions and purposes of this Agreement.
8.11 COUNTERPARTS. This Stock Option Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and each of which
when taken together shall constitute but one and the same instrument and shall
be binding upon each of the undersigned as fully and completely as if all had
signed the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, intending to be legally bound and intending this to be a
sealed instrument, Optionholders and Company have executed this Stock Option
Agreement.
SELECT MEDIA COMMUNICATIONS, INC., a corporation organized and existing under
the laws of the State of New York
By: ____________________________________
Name:
Title:
Attest:
By: __________________________________
Name:
Title:
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[Name of Optionee]
_________________________________
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