Agreement
This Agreement is entered into by and between MULTIMEDIA DISK DUPLICATORS, A
CALIFORNIA LIMITED PARTNERSHIP and STAR MEDIA PARTNERS, L. P., A CALIFORNIA
LIMITED PARTNERSHIP (hereinafter collectively referred to as the "Partnerships")
on the one hand and APPLIED DATA COMMUNICATIONS, A DELAWARE CORPORATION
(hereinafter "ADC") and XXXXXX X. XXXX, an individual (hereinafter "Xxxx") on
the other this 16th day of December, 1995.
RECITALS
1. On August 20, 1995 the Partnerships filed actions against ADC and Xxxx in
Orange County Superior Court for possession of personal property, breach of
contract, enforcement of continuing guaranty, and for damages. (MULTIMEDIA DISK
DUPLICATORS X. XXX XXX XXXX, XXXX Xx. 000000 and STAR MEDIA PARTNERS L.P. V. ADC
AND XXXX OCSC No. 742046).
2. On November 13, 1995 ADC and Xxxx executed Stipulations to Judgment in those
matters which Stipulation included the requirement that ADC re-commence monthly
payments to the Partnerships in the amounts set forth therein beginning on
October 6, 1995 and running to February, 1997.
3. ADC made the October 6, 1995 payments more than two weeks after the due date
for such payment and has not made any payments for November or December, 1995.
4. On December 13, 1995 the Partnerships submitted to Judge Xxxxxxxxx Xxxx (in
matter number 752046) and Judge Xxxxxx X. Xxxxx (in matter number 752044) for
signature Judgments on Stipulation for Entry of Judgment. The judgments were
in the amount of $733,325.03 (case number 742046) and $655,122.46 (case number
752044) for a total of $1,388,447.49. Both judges indicated that said Judgments
would be signed forthwith and mailed to the Partnerships after filing with the
clerk of the court.
5. ADC and Xxxx desire that the Partnerships not execute on said judgments and
the Partnerships have agreed that, subject to the provisions set forth herein
and any contingencies described or implied hereunder, they will not execute on
said judgment.
1
BASED ON THESE AND OTHER CONSIDERATIONS, THE RECEIPT OF WHICH IS HEREBY
ACKNOWLEDGED BY THE PARTIES, SAID PARTIES HAVE AGREED AS FOLLOWS:
1. ISSUANCE OF SHARES. The Partnerships shall up to 1.7 million shares of
the already issued and authorized shares of common stock in ADC. The
Partnerships, in their sole and absolute discretion, will advise ADC and
Xxxx promptly of the precise number of shares to be given to them. The
figures set forth in this section are based upon representations made to
the Partnerships by ADC and Xxxx that there are approximately 6.5 million
shares of common stock of ADC currently issued and outstanding. ADC and
Xxxx, and any and all officers, employers, and agents of ADC and Xxxx will
immediately undertake all steps necessary for the shares described in this
section to be issued to the Partnerships.
2. DIVISION OF SHARES. Of the shares issued to the Partnerships under the
provisions of paragraph 1, 52.8 percent will be issued to Star Media
Partners, L.P., a California limited partnership and 47.2 percent will be
issued to MultiMedia Disk Duplicators, a California limited partnership.
3. PROXY FROM XXXX. In order to implement the intent of the parties that
the Partnerships assume voting control of the outstanding shares of ADC
stock, immediately upon execution of this Agreement Xxxx will deliver to
the Partnerships his proxy for the voting rights to all shares he owns or
controls in ADC to the extent that, at all times subsequent to the
execution of this Agreement, the Partnerships will own outright or have the
proxies for at least 50.1% of the voting shares of ADC. Xxxx agrees to
execute any and all documents, agreements, and forms reasonably necessary
to implement this provision.
3a. CEDING BACK OF PROXY BY PARTNERSHIPS. Should the Partnerships receive
compensation from ADC and Xxxx, either in moneys or in the publicly traded
share price of unrestricted common stock in ADC which they may at that time
own equal to the judgments referred herein plus any accrued interest
thereon, then the Proxy described in paragraph 3 shall by revoked and the
voting
2
rights of shares owned or controlled by Xxxx shall be returned to him.
4. CORPORATE RECORDS. Immediately upon execution of this Agreement,
Xxxx and ADC will provide to the Partnerships, or any designee of the
Partnerships, all corporate records of ADC including, but not limited to,
articles of incorporation, By-Laws, records and lists of shareholders,
minutes of meetings, and the like. In addition, immediately upon
execution of this Agreement, ADC and Xxxx will provide to the Partnerships
or any designee a list of all creditors of ADC and Xxxx and the nature and
amount of any such indebtedness.
5. MANAGEMENT CONTROL. Immediately upon execution of this Agreement
the Partnerships, or a designee thereof, shall assume control of the
management of ADC. It is also acknowledged that between the execution of
this Agreement and January 1, 1996 there will be an interim period during
which time the procedures and personnel to implement this change of
management control may not yet be in place. During any such interim
period, however, the Partnerships, or their designee, must approve all
material decisions of management including, but not limited to, the
following:
a. Contracts with customers in excess of $25,000.00
b. Contract with vendors in excess of $10,000.00
c. Employment or consultancy contracts
d. All payments on accounts payable in excess of $2,500.00
e. All adjustments to accounts receivable
f. Receipt of any and all moneys from customers, factorers,
or any other source
g. Negotiations with creditors of any kind
During this interim period, ADC and Xxxx shall, on a daily basis, report
to the Partnerships or their designee on all material aspects of the
operations of the company, including, but not limited to, the following:
a. All collections from any source
b. All deposits to any accounts
c. All expenses paid and an accounting of said expenses
6. IMPLEMENTATION OF CONTROL PROVISIONS OF THIS AGREEMENT. In
furtherance of the specific intent of the parties that
3
the Partnerships, or their designee[s] shall take control of the
management and control the majority of the votes on the Board of
Directors immediately upon the execution of this Agreement, the parties
agree that, prior to January 1, 1996, they will execute a definitive
agreement encompassing the following:
a. Appointment of that number of directors to ADC's Board of
Directors which gives the Partnerships a majority of the
votes on said Board;
b. Creation of a management team (in a form as yet
undetermined) in which the Partnerships designee or
designees shall approve, authorize, and review all
matters normally approved, authorized, or reviewed by
ADC's management
7. PAYDOWNS OF JUDGMENT. At any time between the execution of this
Agreement and February 28, 1997 ADC and Xxxx may elect to pay to the
Partnerships all or part of the $1,388,447.49 principal plus interest owed
to the Partnerships by reason of the aforementioned judgments. Upon any
such payments to the Partnerships, the Partnerships will return to ADC
a pro-rata number of shares issued to them pursuant to the provisions of
paragraph one. The exact number of shares to be so returned per dollar
paid will be determined when the number of shares issued to the
Partnerships is known but will be based on a formula so that, if ADC and
Xxxx repay all the principal and interest of the judgment, the
Partnerships will still own a total of 425,000 shares of ADC. Except as
described herein, and unless the Partnerships terminate the Stay of
execution of the Judgment for the reasons described in paragraph 8 or for
any other reason provided by law, ADC and Xxxx will not be required to
make any further lease payments to the Partnerships.
8. ADDITIONAL FINANCING. After this Agreement is executed and those
provisions which must be implemented immediately thereafter are, in fact,
implemented, MultiMedia Finance Corporation "MFC"), the general partner of
MultiMedia Disk Duplicators, will, subject to conducting the necessary
amount of due diligence it deems appropriate, undertake its best efforts
to raise a minimum of $150,000 for the on-going operations of ADC.
Thereafter, and again subject to all elements of this Agreement and those
other agreements necessarily flowing herefrom being implemented, and
4
again subject to due diligence on its part, MFC will undertake its best
efforts to raise additional funds, through a Reg D or similar offering, to
assist ADC in securing a new CD ROM press for its on going business. The
parties recognize that, in order to proceed with these funding proposals,
several additional Agreements must be further negotiated and executed and
that an opinion of counsel for the Partnerships and for MFC in connection
with such additional financing operations must first be obtained. PROVIDED,
HOWEVER that nothing in this section shall be construed as requiring MFC or
anyone else related to any entity which may be a party or signatory to this
Agreement, to actually engage in such financing activities nor create any
cause or claim by ADC, Xxxx, or any other party against MFC or anyone else by
reason of any failure to participate in, or raise the moneys, described
herein. In addition, it is agreed that MFC must agree to any alternative
sources of funding ADC and Xxxx may arrange and, further, that MFC shall not
unreasonably withhold its consent for any such funding.
9. PAYMENTS OUT OF INITIAL FUNDING. ADC and Xxxx agree and acknowledge
that, from the initial moneys raised under the terms of section 6, if any,
the new management of ADC created by this Agreement shall be permitted, at
its sole discretion, to repay loans made to it by third parties for the
purpose of permitting ADC to make prior payments on the leases between
itself and the Partnerships.
10. AGREEMENT TO STAY EXECUTION ON JUDGMENTS; BASES FOR TERMINATING STAY.
This Agreement contains terms that must be implemented immediately and those
which require the preparation of additional documentation, the conduct of
further due diligence, or the negotiation of additional terms. The parties
agree to (i) use their best efforts to carry out the intent of this Agreement
to (ii) expeditiously and in good faith execute any required documents and
negotiate any additional matters, and (iii) to refrain from any activities
which might interfere with the intent of this Agreement. PROVIDED, HOWEVER,
that should ADC and Xxxx materially breach the provisions of this Agreement
or any Agreement flowing herefrom, or should the Partnerships determine, at
any time, that ADC and Xxxx (i) are not acting in good faith (ii) are
delaying implementation of any provision hereof, (iii) have misrepresented
any material fact to the Partnerships or any of their officers, partners,
employees, counsel, agents or assigns or (iv) are preventing the
Partnerships from exercising their best efforts or due
5
diligence, or if for any other reason it appears to the Partnerships that the
intent of this Agreement cannot be implemented, the Partnerships may, without
further notice and in their sole and absolute discretion, execute fully on
the Judgments described previously herein.
11. BOARD MEETING. A special Board of Directors meeting shall be called by
Xxxx immediately upon execution of this Agreement and shall be held within
the shortest time permissible under the By-Laws of ADC at which meeting the
terms and conditions of this Agreement shall be approved and the provisions
set forth herein be implemented.
12. SUBSEQUENT AGREEMENTS. This Agreement contemplates that subsequent
agreements between the parties will be executed forthwith. Except as to the
extent as specifically provided for herein, or to the extent specifically set
forth in any subsequent agreement, the provisions of this Agreement shall
remain in full force and effect and the parties hereto are obligated to fully
perform those acts and obligations set forth herein.
13 MISCELLANEOUS
13.1 This Agreement is executed in the State of California and shall be
interpreted under the procedural and substantive laws of California existing
as of the date of execution without regard to principles of conflicts of
laws.
13.2 Each Party to this Agreement has cooperated in its drafting and
preparation. Hence, in any construction to be made of this Agreement, the
same shall not be construed against any Party on the basis that such Party
was the drafter.
13.3 Should any provision of this Agreement be declared or determined by
any court to be illegal or invalid as a result of any action or proceeding
the validity of the remaining parts, terms, or provisions shall not be
affected thereby and any said illegal or invalid part, term or provision
shall be deemed not to be a part of this Agreement.
13.4 This Agreement sets forth the entire agreement between the Parties
hereto relating to the subject matters herein, and to the extent that it may
conflict with or contradict any such agreements or
6
understandings, fully supersedes any and all prior agreements or
understandings between the Parties hereto, if any, pertaining to the subject
matter hereof. This Agreement may be amended only be a writing signed by all
Parties and their respective attorneys.
13.5 The titles of the various paragraphs are intended solely for
convenience of reference, and are not intended and shall not be deemed for
any purpose whatsoever to modify, explain or place any construction upon any
of the provisions of this Agreement and shall not affect the meaning or
interpretation of this Agreement.
13.6 In any action brought to enforce any provision(s) of this
agreement, in addition to any other relief granted, the prevailing Party
shall recover its reasonable costs of enforcement, including without
limitation, costs and reasonable attorneys fees incurred therein as
provided by California Civil Code Section 1717.
13.7 This Agreement may be executed in multiple copies and by separate
counterparts and each such signed copy shall be deemed an original hereof.
WHEREFORE, the parties hereto execute this Agreement in the City of Irvine,
County of Orange, State of California as of the date first above written.
Applied Data Communications MultiMedia Disk Duplicators
a Delaware corporation a California Limited Partnership
By /s/ Xxxxxx X. Xxxx By /s/ Xxxxxx Xxxxxxx
--------------------------------- ---------------------------------
Xxxxxx X. Xxxx Xxxxxx Xxxxxxx, President
MultiMedia Finance Corporation
General Partner
Xxxxxx X. Xxxx Star Media Partners, L.P.
A California Limited Partnership
/s/ Xxxxxx X. Xxxx By /s/ Xxxxxx Xxxxxxx
----------------------------------- ---------------------------------
Xxxxxx Xxxxxxx, President
Media Capital Associates, Inc
General Partner
7
