1
STOCK PURCHASE AGREEMENT
among
TBA ENTERTAINMENT CORPORATION,
XXXXXXX X. XXX,
XXXX X. XXXX,
XXXXXXX X. XXXXX,
XXX X. XXXXXX
and
MAGNUM COMMUNICATIONS, INC.
October 15, 1998
2
TABLE OF CONTENTS
Page
----
ARTICLE 1 - PURCHASE AND SALE OF SHARES......................................................1
1.1 Purchase and Sale.............................................................1
1.2 Purchase Price................................................................1
1.3 Registration Rights...........................................................2
1.4 Closing.......................................................................2
1.5 Further Action................................................................3
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF TBA............................................3
2.1 Organization and Qualification................................................3
2.2 Authority Relative to this Agreement..........................................3
2.3 TBA Common Stock and TBA SEC Documents........................................4
2.4 Certain Corporate Matters.....................................................4
2.5 Broker's Fees.................................................................5
2.6 Absence of Certain Changes....................................................5
2.7 Disclosure....................................................................5
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF MAGNUM
AND THE SHAREHOLDERS..........................................................5
3.1 Organization, Qualification and Corporate Power...............................5
3.2 Capitalization................................................................6
3.3 Authorization of Transaction..................................................6
3.4 Subsidiaries..................................................................7
3.5 Financial Statements..........................................................7
3.6 Events Subsequent to Financial Statements.....................................7
3.7 Undisclosed Liabilities.......................................................9
3.8 Tax Returns and Audits........................................................9
3.9 Books and Records............................................................10
3.10 Real Property................................................................10
3.11 Tangible Property............................................................12
3.12 Intellectual Property........................................................13
3.13 Contracts....................................................................14
3.14 Suppliers and Customers......................................................15
3.15 Notes; Accounts Receivable...................................................16
3.16 Powers of Attorney...........................................................16
3.17 Condition of Property........................................................16
3.18 Insurance....................................................................16
3.19 Litigation...................................................................16
3.20 Employees....................................................................16
3.21 Employee Benefit Plans.......................................................17
3.22 Guarantees...................................................................18
3.23 Legal Compliance.............................................................18
3.24 Certain Business Relationships...............................................18
3.25 Broker's Fees................................................................18
-i-
3
TABLE OF CONTENTS
(Continued)
Page
----
3.26 Environment, Health and Safety...............................................18
3.27 Year 2000....................................................................19
3.28 Disclosure...................................................................19
ARTICLE 4 - Representations and Warranties of the Shareholders..............................19
4.1 Representations Regarding Shares of Magnum...................................19
4.2 Investment Representations...................................................20
4.3 Enforceability...............................................................20
ARTICLE 5 - Conduct of Business Pending The Closing.........................................21
5.1 Conduct of Business by Magnum Pending the Closing............................21
5.2 No Other Bids for Magnum.....................................................23
5.3 Lines of Business and Capital Expenditures...................................24
5.4 Accounting Methods...........................................................24
5.5 Other Actions................................................................24
ARTICLE 6 - Additional Agreements...........................................................24
6.1 Expenses.....................................................................24
6.2 Notification of Certain Matters..............................................25
6.3 Access to Information........................................................25
6.4 Taking of Necessary Action...................................................25
6.5 Notice of Changes............................................................25
6.6 Press Releases...............................................................25
6.7 Employee Matters.............................................................25
6.8 Tax Matters..................................................................26
ARTICLE 7 - Conditions to Closing...........................................................26
7.1 Conditions to Obligations of Each Party to Effect the Closing................26
7.2 Additional Conditions to TBA's Obligations...................................26
7.3 Additional Conditions to the Obligations of Magnum and the Shareholders......28
ARTICLE 8 - Termination, Amendment and Waiver...............................................30
8.1 Termination..................................................................30
8.2 Amendment....................................................................30
8.3 Waiver.......................................................................30
8.4 Effect of Termination........................................................30
ARTICLE 9 - Indemnification.................................................................31
9.1 By TBA and the Shareholders..................................................31
9.2 Claims for Indemnification...................................................31
-ii-
4
TABLE OF CONTENTS
(Continued)
Page
----
9.3 Defense by Indemnifying Party................................................32
9.4 Payment of Indemnification Obligation........................................32
9.5 Arbitration..................................................................32
ARTICLE 10 - General Provisions.............................................................33
10.1 Survival of Representations and Warranties...................................33
10.2 Effect of Due Diligence......................................................33
10.3 Specific Performance.........................................................33
10.4 Notices......................................................................33
10.5 Interpretation...............................................................35
10.6 Severability.................................................................35
10.7 Miscellaneous................................................................35
10.8 Material Adverse Breach......................................................36
10.9 Limitation of Liability......................................................36
SCHEDULE 1.2 Purchase Price Consideration
SCHEDULE 2 Disclosure Schedule
ANNEX I List of TBA SEC Documents
ANNEX II Ownership of Shares
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Registration Rights Agreement
EXHIBIT C Form of Employment Agreements
-iii-
5
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of October 15, 1998 (this
"Agreement"), is by and among TBA Entertainment Corporation, a Delaware
corporation ("TBA"), Xxxxxxx X. Xxx ("Xxx"), Xxxx X. Xxxx ("Xxxx"), Xxxxxxx X.
Xxxxx ("Xxxxx"), Xxx X. Xxxxxx ("Xxxxxx") each individuals, and shareholders of
Magnum (as defined below) (individually referred to as a "Shareholder" and
collectively, the "Shareholders"), and Magnum Communications, Inc., a Texas
corporation ("Magnum").
RECITALS
WHEREAS, the Shareholders own all of the issued and outstanding equity
stock (the "Shares") of Magnum;
WHEREAS, TBA, Magnum and the Shareholders each desire for TBA to acquire
(the "Acquisition") all of the Shares pursuant to the terms and conditions of
this Agreement, as a result of which Magnum will become a wholly-owned
subsidiary of TBA;
NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, the Shareholders agree to sell, assign, transfer and deliver to TBA
at the Closing (as hereinafter defined), and TBA agrees to purchase from the
Shareholders at the Closing, the Shares, free and clear of any and all charges,
claims, community property interests, equitable interests, mortgages, liens,
security interests, pledges, charges, restrictions, rights of assignment, rights
of purchase, voting rights or agreements, rights of first offer or refusal,
options, warrants or encumbrances of any nature (collectively, "Liens").
1.2 Purchase Price. The aggregate purchase price (the "Purchase Price")
for the Shares shall be equal to Three Million Dollars ($3,000,000) and shall be
paid or delivered to the Shareholders at the Closing as follows:
(a) TBA shall issue and deliver to the Shareholders certificates
registered in the Shareholders' names representing the number of
fully-paid and nonassessable shares of TBA common stock, $.001 par value
per share ("TBA Common Stock"), equal to the amount set forth opposite
each such Shareholder's name on Schedule 1.2 divided by the Average
Price (as defined below) (the "Common Stock Portion"). The total
aggregate value of the Common Stock Portion shall equal One Million
Fifty Thousand Dollars ($1,050,000).
-1-
6
(b) TBA shall deliver to the Shareholders by wire transfer to one
or more accounts designated in writing by the Shareholders to TBA prior
to the Closing cash in an amount equal to One Million Fifty Thousand
Dollars ($1,050,000) (the "Cash Portion"). The Cash Portion shall be
allocated among the Shareholders as specified in Schedule 1.2; and
(c) TBA shall deliver to the Shareholders promissory notes (the
"Notes") in the aggregate principal amount of Nine Hundred Thousand
Dollars ($900,000) (the "Note Portion"), each note substantially in the
form of Exhibit A attached hereto (the "Form of Note"), allocated among
the Shareholders as specified in Schedule 1.2.
(d) The term "Average Price" shall mean the average of the prices
of the last trade of the day of TBA Common Stock reported by The Nasdaq
Stock Market for each of the five (5) consecutive trading days ending
five (5) business days preceding the Closing Date; provided, however,
the Average Price may not be less than $3.50 per share of TBA Common
Stock or more than $5.00 per share of TBA Common Stock.
(e) No fraction of a share of TBA Common Stock will be issued to
the Shareholders but in lieu thereof the Shareholders will be paid an
amount in cash equal to the product of (A) the number of fractional
shares to which the Shareholders are otherwise entitled and (B) the
Average Price. No interest shall be paid on such amount.
1.3 Registration Rights. The Shareholders and TBA shall execute a
Registration Rights Agreement (herein so called) in the form attached hereto as
Exhibit B with respect to the shares of TBA Common Stock issued to the
Shareholders pursuant to Section 1.2(a) and the Shareholders shall have the
registration and other rights provided in such Registration Rights Agreement,
which Registration Rights Agreement is hereby incorporated herein by this
reference as if set forth in full in this Agreement. The parties hereto
stipulate and agree that the execution and delivery of the Registration Rights
Agreement is intended to provide the Shareholders with flexibility in
liquidating their investment in TBA Common Stock and does not evidence any
present intention to dispose of such investment.
1.4 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Xxxxxxxx Xxxxxxxx &
Xxxxxx P.C., 0000 Xxx Xxxxxx, 0000 Xxxxxxxxxxx Xxxxx, Xxxxxx, Xxxxx, on October
15, 1998, or as soon as reasonably practicable thereafter as the conditions set
forth in Article 7 have been satisfied or waived (the "Closing Date").
At the Closing:
(a) TBA will (i) pay to the Shareholders the Cash Portion by wire
transfer of immediately available funds, (ii) issue and deliver to the
Shareholders the Common Stock Portion, (iii) execute and deliver to the
Shareholders the Notes, and (iv) execute and deliver to the Shareholders
such other documents and instruments required to be executed and
delivered by TBA under the terms of this Agreement; and
-2-
7
(b) The Shareholders will deliver to TBA (i) certificates
representing the Shares, duly endorsed, and (ii) such other documents
and instruments required to be delivered by the Shareholders under the
terms of this Agreement or reasonably requested by TBA.
1.5 Further Action. If, at any time after the Closing Date, any further
action is necessary or desirable to carry out the purposes of this Agreement or
to vest TBA with full right, title and possession and all rights, privileges and
immunities with respect to any or all of the Shares, the Shareholders shall take
all such action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TBA
TBA hereby represents and warrants to Magnum and the Shareholders as
follows:
2.1 Organization and Qualification. TBA has been duly incorporated and
is validly existing as a corporation and in good standing under the laws of the
State of Delaware and has the requisite corporate power to carry on its business
as now conducted.
2.2 Authority Relative to this Agreement. TBA has the requisite
corporate power and authority to enter into this Agreement, to issue the Notes
and to carry out its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Notes by TBA and the consummation by TBA of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of TBA, and no other corporate proceedings on the part of TBA are
necessary to authorize this Agreement, the Notes and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by TBA
and constitutes the valid and binding obligation of TBA, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity. When issued and
delivered by TBA in accordance with the provisions of this Agreement, the Notes
will be validly issued and will constitute valid and legally binding obligations
of TBA, enforceable against TBA in accordance with their respective terms,
except that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally, and (ii) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances. None of the execution and delivery of this Agreement and the Notes by
TBA, the performance by TBA of its obligations hereunder and thereunder or the
consummation of the transactions contemplated hereby by TBA will require any
consent, approval or notice under, or violate, breach, be in conflict with or
constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under, or permit the termination of, or result in
the creation or imposition of any Lien upon any properties, assets or business
of TBA under any note, bond, indenture, mortgage, deed of trust, lease,
franchise, permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which TBA is a party
or by which TBA or any of its assets or properties is bound or encumbered,
except
-3-
8
those that have already been given, obtained or filed. Other than filings under
the Securities Act of 1933, as amended (the "Securities Act"), if any, necessary
to perfect an exemption from registration under the Securities Act, filings made
with the National Association of Securities Dealers, Inc. to list the shares of
TBA Common Stock to be issued in connection with the Acquisition in the National
Market System of The Nasdaq Stock Market and filings to be made with state
securities regulatory agencies, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary on the part of TBA
for the consummation by TBA of the transactions contemplated by this Agreement.
2.3 TBA Common Stock and TBA SEC Documents. The TBA Common Stock is
listed for trading on the National Market System of The Nasdaq Stock Market. The
shares of TBA Common Stock to be issued by TBA at the Closing have been duly
authorized for such issuance and, when issued and delivered by TBA in accordance
with the provisions of this Agreement, will be validly issued, fully paid, and
nonassessable. The issuance of such shares under this Agreement is not subject
to any preemptive or similar rights. TBA has furnished Magnum and the
Shareholders with a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by TBA with the
Securities and Exchange Commission ("SEC") since January 1, 1998 (the "TBA SEC
Documents"), which are all the documents (other than preliminary materials) that
TBA was required to file with the SEC since such date and all of which documents
are listed on Annex I attached hereto. As of its date, each TBA SEC Document was
in compliance, in all material respects, with the requirements of its form. None
of the TBA SEC Documents, including, without limitation, any financial
statements or schedules included therein, at the time filed, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. The financial statements of TBA included in the TBA SEC Documents
complied, at the time of filing with the SEC, as to form, in all material
respects, with applicable accounting requirements and published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles, applied on a consistent basis during
the periods involved, and fairly presented, in all material respects (subject,
in the case of unaudited statements, to normal, recurring year-end audit
adjustments) the financial position of TBA as and at the dates thereof and the
results of its operations and cash flows for the periods then ended.
2.4 Certain Corporate Matters. TBA is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
ownership of its properties, the employment of its personnel or the conduct of
its business requires it to be so qualified, other than in such jurisdictions
where the failure to so qualify would not, individually or in the aggregate,
have a materially adverse effect on TBA and its subsidiaries, taken as a whole.
TBA has full corporate power and authority and all authorizations, licenses and
permits necessary to carry on the business in which it engages or in which it
proposes presently to engage and to own and use the properties owned and used by
it. TBA has delivered to Magnum and the Shareholders true, accurate and complete
copies of its charter documents and bylaws which reflect all amendments made
thereto at any time prior to the date of this Agreement. The minute books
containing the records of meetings of the shareholders and board of directors of
TBA are accurate and complete in all material respects.
-4-
9
All material corporate actions taken by TBA since its date of incorporation have
been duly authorized and/or subsequently ratified, as necessary. TBA is not in
default under or in violation of any material provision of its charter or
bylaws.
2.5 Broker's Fees. Except for a finder's fee payable solely by TBA to
Xxx, Xxxxxxx, Xxxxxxxxx & Xxxxx, Inc., neither TBA nor anyone on its behalf has
any liability to any broker, finder, investment banker or agent, or has agreed
to pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the Acquisition or any similar transaction.
2.6 Absence of Certain Changes. Since January 1, 1998, there has not
been any material adverse change in the business, assets, results of operations,
condition (financial or otherwise), or prospects of TBA and its subsidiaries
considered as a whole.
2.7 Disclosure. The representations and warranties and statements of
fact made by TBA in this Agreement and in certificates and other written
statements or agreements delivered or to be delivered pursuant to this Agreement
are accurate, correct and complete on the date of this Agreement and will,
except as contemplated hereby, be accurate, correct and complete at the Closing
and do not and will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained herein or therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MAGNUM
AND THE SHAREHOLDERS
Except as set forth in the correspondingly numbered section of the
disclosure schedule attached hereto as Schedule 2 and incorporated herein by
this reference (the "Disclosure Schedule"), Magnum and each Shareholder hereby
severally represents and warrants to TBA as follows as of the date hereof and as
of the Closing Date:
3.1 Organization, Qualification and Corporate Power. Magnum is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Magnum is duly qualified to do
business as a foreign corporation and is in good standing in the jurisdictions
specified in Section 3.1 of the Disclosure Schedule, which are the jurisdictions
in which the ownership of its properties, the employment of its personnel or the
conduct of its business requires that it be so qualified or where a failure to
be so qualified or licensed would have a material adverse effect on its
financial condition, results of operation or business. Magnum has full corporate
power and authority and all authorizations, licenses and permits necessary to
carry on the business in which it is engaged or in which it proposes presently
to engage and to own and use the properties owned and used by it. Magnum has
delivered to TBA true, accurate and complete copies of its charter and bylaws
which reflect all amendments made thereto at any time prior to the
-5-
10
date of this Agreement. The minute books containing the records of meetings of
the shareholders and Board of Directors of Magnum, the stock certificate books
and the stock record books of Magnum are complete and correct in all material
respects. The stock record books of Magnum and the shareholder lists of Magnum
which Magnum has previously furnished to TBA are complete and correct in all
respects and accurately reflect the record and beneficial ownership of all the
outstanding shares of Magnum's capital stock and all other outstanding
securities issued by Magnum. All material corporate actions taken by Magnum
since incorporation have been duly authorized and/or subsequently ratified as
necessary. Magnum is not in default under or in violation of any provision of
its charter or bylaws. Magnum is not in default or in violation of any
restriction, lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability by which it is bound or to
which any of its assets is subject.
3.2 Capitalization. Magnum's entire authorized capital stock consists of
100,000 shares of common stock, no par value per share ("Magnum Common Stock"),
of which 10,000 shares are issued and outstanding and 10,000 shares will be
issued and outstanding immediately prior to the Closing Date. All of the issued
and outstanding shares of Magnum Common Stock have been and, as of the Closing
Date, will be duly authorized and are and, as of the Closing Date, will be
validly issued, fully paid and nonassessable and have not been and, as of the
Closing Date, will not be issued in violation of any pre-emptive rights. There
are no outstanding or authorized options, rights, warrants, calls, convertible
securities, rights to subscribe, conversion rights or other agreements or
commitments to which Magnum is a party or which are binding upon Magnum
providing for the issuance or transfer by Magnum of additional shares of its
capital stock and Magnum has not reserved any shares of its capital stock for
issuance, nor are there any outstanding stock option rights, contracts,
arrangements or commitments based upon the book value, income or other attribute
of Magnum. There are no voting trusts or any other agreements or understandings
with respect to the voting of Magnum's capital stock. Upon consummation of the
Acquisition, TBA will own the entire equity interest in Magnum and Magnum will
not have outstanding any stock or securities convertible or exchangeable for any
shares of its capital stock, nor have outstanding any rights, options,
agreements or arrangements to subscribe for or to purchase its capital stock or
any stock or securities convertible into or exchangeable for its capital stock.
The Shareholders are the only holders of capital stock of Magnum. All capital
stock, options, warrants and other securities issued by Magnum were issued in
compliance, in all respects, with all applicable federal and state securities
laws.
3.3 Authorization of Transaction. Magnum has the requisite corporate
power and authority to enter into this Agreement and perform its obligations
hereunder. The execution, delivery and performance of this Agreement and the
transactions contemplated by this Agreement have been duly authorized by the
Board of Directors of Magnum. No other corporate approval on the part of Magnum
(other than shareholder approval) will be necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Magnum and, upon
approval hereof by the shareholders of Magnum, will constitute the valid and
binding obligation of Magnum, enforceable in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally or by general
principles of equity. None of the execution and delivery of this Agreement by
Magnum, the performance by
-6-
11
Magnum of its obligations hereunder or the consummation of the transactions
contemplated hereby by Magnum will require any consent, approval or notice
under, or violate, breach, be in conflict with or constitute a default (or an
event that, with notice or lapse of time or both, would constitute a default)
under, or permit the termination of, or result in the creation or imposition of
any Lien upon any properties, assets or business of Magnum under any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument or other agreement or commitment or any order,
judgment or decree to which Magnum is a party or by which Magnum or any of its
assets or properties is bound or encumbered, except those that have already been
given, obtained or filed, all as set forth in Section 3.3 of the Disclosure
Schedule. No notice to, filing with or authorization, consent or approval of any
public body or authority is necessary for the consummation by Magnum of the
transactions contemplated by this Agreement.
3.4 Subsidiaries. Magnum does not own and is not obligated to purchase
any equity interest in or any other interest convertible into or exchangeable
for an equity interest in any entity.
3.5 Financial Statements. Magnum has delivered to TBA (a) unaudited
balance sheets as of December 31, 1997, 1996 and 1995, (b) unaudited statements
of operations and statements of cash flows for each of the years in the
three-year period ended December 31, 1997, (c) unaudited balance sheets as of
August 31, 1998, and (d) unaudited statements of operations and statements of
cash flows for the eight (8) months ended August 31, 1998, for Magnum
(collectively, the "Financial Statements"). The Financial Statements have been
prepared on the cash basis of accounting, which basis of accounting has been
applied consistently for all periods and present fairly the financial condition
of Magnum as of such dates and the results of its operations and cash flows for
such periods. Since December 31, 1994, there have been no changes in Magnum's
method of accounting for tax purposes. At Closing, the financial condition of
Magnum shall not be materially different from Magnum's financial condition as
set forth in its financial statements as of August 31, 1998.
3.6 Events Subsequent to Financial Statements. Except as disclosed in
the Financial Statements, since December 31, 1997, there has not been:
(a) any materially adverse change in the financial condition,
results of operations or business of Magnum;
(b) any sale, lease, transfer, license or assignment of any
material assets, tangible or intangible, of Magnum, other than in the
ordinary course of business;
(c) any damage, destruction or property loss, whether or not
covered by insurance, affecting materially adversely the properties or
business of Magnum;
(d) any declaration or setting aside or payment of any dividend
or distribution with respect to the shares of capital stock of Magnum or
any redemption, purchase or other acquisition of any such shares;
-7-
12
(e) any mortgage or pledge of, or subjection to any material
lien, charge, security interest or encumbrance of any kind on, any of
the assets, tangible or intangible, of Magnum (other than liens arising
by operation of law which secure obligations which are not yet due and
payable);
(f) any incurrence of indebtedness or liability or assumption of
obligations by Magnum other than (i) those incurred in the ordinary
course of business, and (ii) those which do not exceed $5,000 in the
aggregate;
(g) any cancellation or compromise by Magnum of any material debt
or claim, except for adjustments made in the ordinary course of business
which, in the aggregate, are not material;
(h) any waiver or release by Magnum of any right of any material
value;
(i) except licenses of software made in the ordinary course of
business, consistently with past practice, any sale, assignment,
transfer or grant by Magnum of any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade names or
copyrights or with respect to any know-how or other intangible assets;
(j) any material arrangement, agreement or undertaking entered
into by Magnum not terminable on 30 days or less notice without cost or
liability (including, without limitation, any payment of or promise to
pay any bonus or special compensation) with employees or any increase in
compensation or benefits to officers or directors of Magnum, other than
in the ordinary course of business;
(k) any change made or authorized in the charter or bylaws of
Magnum;
(l) any issuance, sale or other disposition by Magnum of any
shares of its capital stock or other equity securities, or any grant of
any options, warrants or other rights to purchase or obtain (including
upon conversion or exercise) shares of its capital stock or other equity
securities;
(m) any loan to or other transaction with any officer, director
or shareholder of Magnum giving rise to any claim or right of Magnum
against any such person or of such person against Magnum;
(n) any payment to or other transaction with any officer,
director or shareholder of Magnum involving an amount in excess of
$5,000, individually or in the aggregate, other than the payment of
monthly compensation consistent with customary practice;
(o) any acceleration, termination, modification or cancellation
or threat thereof by any party of any contract, lease or other agreement
or instrument to which Magnum is a
-8-
13
party or by which it is bound so as to affect, materially and adversely,
the properties or business of Magnum; or
(p) any other material transaction or commitment entered into
other than in the ordinary course of business by Magnum.
3.7 Undisclosed Liabilities. Magnum has no material liability or
obligation whatsoever, known or unknown, either accrued, absolute, contingent or
otherwise, except to the extent shown on the Financial Statements or incurred in
the normal and ordinary course of business of Magnum since January 1, 1998
(provided that, liabilities or obligations incurred in connection with the
termination of employees shall not be considered liabilities incurred in the
ordinary course of business). Magnum is not indebted, directly or indirectly, to
any person who is an officer, director or shareholder of Magnum or any affiliate
of any such person in any amount whatsoever other than for salaries for services
rendered or reimbursable business expenses, and no such officer, director,
shareholder or affiliate is indebted to Magnum, except for advances made to
employees of Magnum in the ordinary course of business to meet reimbursable
business expenses anticipated to be incurred by such obligor.
3.8 Tax Returns and Audits. The taxable year of Magnum ends December 31.
Magnum has duly and timely filed or caused to be filed all tax returns (the "Tax
Returns") required to be filed on behalf of itself and has paid in full or fully
reserved against in the Financial Statements all taxes, interest, penalties,
assessments and deficiencies due or claimed to be due on behalf of itself to
foreign, federal, state or local taxing authorities (including taxes on
properties, income, franchises, licenses, sales, use and payrolls). Such Tax
Returns are correct in all material respects, and Magnum is not required to pay
any other taxes for such periods except as shown in such Tax Returns. The income
tax returns filed by Magnum have not been, and are not being, to the knowledge
of Magnum and the Shareholders, examined by the Internal Revenue Service or
other applicable taxing authorities for any period. All taxes or estimates
thereof that are due, or are claimed or asserted by any taxing authority to be
due, have been timely and appropriately paid so as to avoid penalties for
underpayment. Except for amounts not yet due and payable, all tax liabilities to
which the properties of Magnum may be subject have been paid and discharged. The
provisions for income and other taxes payable reflected in the Financial
Statements make adequate provision for all then accrued and unpaid taxes of
Magnum. There are no tax liens (other than liens for taxes which are not yet due
and payable) on any of the property of Magnum, nor are there any pending or
threatened examinations or tax claims asserted. Magnum has not granted any
extensions of limitation periods applicable to tax claims or filed a consent
under Section 341(f) of the Code relating to collapsible corporations. Except in
jurisdictions in which Magnum voluntarily files tax returns, no claim has ever
been made by a taxing authority that Magnum is or may be subject to taxation by
that jurisdiction. True and correct copies of all federal, foreign, state and
local income and other tax returns, notices from foreign, federal, state and
local taxing authorities, tax examination reports and statements of deficiencies
assessed against or agreed to by Magnum since January 1, 1994, have been
delivered to TBA, and the same are listed in Section 3.8 of the Disclosure
Schedule. Magnum is not a party to, or bound by, any tax indemnity, tax sharing
or tax allocation agreement. Magnum is not a party to any agreement that has
resulted or would result in the payment of any "excess parachute
-9-
14
payments" within the meaning of Section 280G of the Code. Magnum has never been
a member of an "affiliated group," as defined in Section 1504(a) of the Code.
All positions taken on federal Tax Returns that could give rise to a penalty for
substantial understatement pursuant to Section 6662(d) of the Code have been
disclosed on such Tax Returns. Magnum is not a United States real property
holding corporation as defined in Section 897 of the Code. No shareholder of
Magnum is a foreign person within the meaning of Section 1445(b)(2) of the Code.
Magnum has not made any tax elections under any section of the Code, including,
without limitation under any of Sections 108, 168, 338, 441, 463, 472, 1017,
1033 or 4977 of the Code (or any predecessor thereof). None of the assets and
properties of Magnum is an asset or property that TBA or any of its affiliates
is or will be required to treat as being (i) owned by any other Person pursuant
to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954 as
amended, and in effect immediately before the enactment of the Tax Reform Act of
1986, or (ii) tax-exempt use property within the meaning of Section 168(h)(1) of
the Code. No closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any state, local, or foreign
law has been entered into by or with respect to Magnum or any assets thereof.
Magnum has not agreed to or is not required to make any adjustment pursuant to
Section 481(a) of the Code (or any predecessor provision) by reason of any
change in any accounting method of Magnum, Magnum has no applications pending
with any taxing authority requesting permission for any changes in any
accounting method of Magnum, and the I.R.S. has not proposed any such adjustment
or change in accounting method therefor. Magnum has not been or is not in
violation (or with notice or lapse of time or both, would be in violation) of
any applicable law relating to the payment of withholding of taxes. Magnum has
duly and timely withheld from salaries, wages and other compensation and paid
over to the appropriate taxing authorities all amounts required to be so
withheld and paid over for all periods under all applicable laws.
3.9 Books and Records. The general ledgers and books of account of
Magnum, all federal, state and local income, franchise, property and other tax
returns filed by Magnum, with respect to its assets, and all other books and
records of Magnum are in all material respects complete and correct and have
been maintained in accordance with good business practice and in accordance with
all applicable procedures required by laws and regulations in all material
respects.
3.10 Real Property. Set forth in Section 3.10 of the Disclosure Schedule
is a complete and accurate list and a brief description of all real property
owned or leased by Magnum, including the office building owned by Magnum located
at 0000 Xxxxxxxx Xxxxx, Xxxxxx, Xxxxx (the "Property"). In connection with the
Property, and any other real property owned by Magnum (collectively, the "Real
Property"):
(a) The Real Property is in good and usable condition in all
material respects (ordinary wear and tear excepted) and is suited for
the purposes for which it is now used, and has no material structural or
mechanical defects and has no defects in lateral support, subjacent
support or subsurface condition, and there are no material repairs,
alterations, replacements, maintenance or other work, structural or
nonstructural, necessary to operate and own the Real Property in the
manner in which it has been operated and owned.
-10-
15
(b) No Shareholder nor Magnum has received notice, written or
otherwise, from any federal, state, municipal or other governmental
instrumentality requiring the correction of any condition with respect
to the Real Property, or any part thereof, by reason of a violation of
any statute, ordinance, rule, regulation, requirement or code.
(c) No Shareholder nor Magnum has received notice or has
knowledge of any special tax assessments, contemplated or actual, and
whether or not assessed and whether or not levied or pending, against
the Real Property.
(d) No Shareholder nor Magnum has knowledge of any pending or
threatened condemnation or eminent domain proceedings which would affect
any of the Real Property.
(e) No Shareholder nor Magnum has granted any rights, options,
rights of first refusal, or other agreements of any kind, which are
currently in effect, to purchase or to otherwise acquire any Real
Property or any part thereof or any interest therein.
(f) No Shareholder nor Magnum is making and will not make any
application for a change in the zoning or use of any Real Property or
any part thereof. To the best of the Shareholders' and Magnum's
knowledge, each Real Property is zoned for each Real Property's current
use without relying for compliance upon a variance of a pre-existing,
nonconforming use. Magnum has one or more permanent Certificate(s) of
Occupancy for each Real Property's current use.
(g) There are no adverse or other parties in possession of any
Real Property, or any part thereof, except Magnum and tenants under a
valid lease.
(h) Magnum has and at the Closing Date will have good and
marketable title and insurable title to all Real Property.
(i) To the best of the Shareholders' and Magnum's knowledge, no
Real Property violates any restriction, covenant or agreement contained
in any easement, restrictive covenant, or similar instrument or
agreement affecting the Real Property, or any part thereof.
(j) No Shareholder nor Magnum has received written notice of, nor
does any Shareholder nor Magnum have other actual knowledge or
information of, any proposed change in the valuation of any Real
Property for real estate taxes from that assessed for the current
assessment period, nor does any Shareholder nor Magnum have any other
actual knowledge or information of any action or proceeding designed to
levy any special assessments against the Real Property.
(k) To the best of the Shareholders' and Magnum's knowledge, all
water, cable television, sewer, gas (if any), electric, telephone, and
drainage facilities and other utilities required for the normal and
proper operation of the Real Property are installed to the property
line, or connected with valid permits, and are in good repair, condition
and working order,
-11-
16
normal wear and tear excepted. To the best of the Shareholders' and
Magnum's knowledge, such utilities and drainage facilities are adequate
to serve the Real Property, and to permit full compliance with all
requirements of all applicable laws and regulations. To the best of the
Shareholders' and Magnum's knowledge, no fact or condition exists which
would result in the termination of such utility services to the Real
Property.
(l) To the best of the Shareholders' and Magnum's knowledge, the
Real Property has full and free access to and from public highways,
streets and roads abutting the Real Property, and there is no pending or
threatened governmental proceeding that would impair or result in the
termination of such access.
(m) No Shareholder nor Magnum has knowledge of any asbestos
contained or located upon any of the Real Property or any improvement
thereon or in the insulation of any part thereof. Furthermore, no
Shareholder nor Magnum has knowledge of any underground storage tanks
in, under or about any of the Real Property.
(n) No Shareholder nor Magnum has knowledge that the Real
Property fails to comply in any material respect with Title III of the
Americans with Disabilities Act of 1990, and all rules, regulations and
guidelines promulgated thereunder, as any of the foregoing may be
amended from time to time.
With respect to each lease set forth in Section 3.10 of the Disclosure Schedule:
(a) the lease has been validly executed and delivered by Magnum and, to the
knowledge of Magnum and the Shareholders, by the other party or parties thereto
and is in full force and effect; (b) neither Magnum nor, to the knowledge of
Magnum and the Shareholders, any other party to the lease is in material breach
or default, and no event has occurred on the part of Magnum or, to the knowledge
of Magnum and the Shareholders, on the part of any other party which, with
notice or lapse of time, would constitute such a material breach or default or
permit termination, modification or acceleration under the lease; (c) the lease
will continue to be binding in accordance with its terms following the
consummation of the Acquisition; (d) Magnum has not repudiated and, to the
knowledge of Magnum and the Shareholders, no other party to the lease has
repudiated any provision thereof; (e) there are no disputes, oral agreements or
delayed payment programs in effect as to the lease; and (f) all facilities
leased thereunder have been approved by all necessary governmental authorities,
have been maintained in accordance with normal industry practice and are in good
condition, working order and repair.
3.11 Tangible Property. Magnum has good and marketable title to, or a
valid leasehold interest in, each item of tangible property, whether real,
personal or mixed, reflected on its books and records as owned or used by it,
subject to no material encumbrances, loans, security interests, mortgages or
pledges.
-12-
17
3.12 Intellectual Property.
(a) Section 3.12(a) of the Disclosure Schedule sets forth a list
of intellectual property owned by Magnum including all patents, patent
applications, trademarks, service marks, trade dress, trade names, trade
secrets, corporate names, customer lists, copyrights, mask works,
technology or intellectual property that are material to the business of
Magnum and registrations or applications to register any of the
foregoing and a list of all licenses or other contracts related thereto
(collectively, the "Intellectual Property"). With respect to each such
item of Intellectual Property:
(i) Magnum is the sole and exclusive owner and has the
sole and exclusive right to use the item in the conduct of its
business;
(ii) no proceedings have been instituted, are pending or
are, to the knowledge of Magnum and the Shareholders, threatened
which challenge the validity, enforceability, use or ownership
thereof;
(iii) the item (A) does not infringe upon or otherwise
violate the rights of others, (B) to the knowledge of Magnum and
the Shareholders is not being infringed upon by others and (C) is
not subject to any outstanding order, decree, judgment,
stipulation or charge;
(iv) no license, sublicense or agreement pertaining to
the item has been granted by Magnum;
(v) Magnum has not received any charge of interference
or infringement with respect to the item;
(vi) except in the ordinary course of business, Magnum
has not agreed to indemnify any person or entity for or against
any infringement with respect to the item;
(vii) the transactions contemplated by this Agreement will
have no material adverse effect on the right, title and interest
of Magnum in the item;
(viii) Magnum has taken all steps which are commercially
reasonable to protect the rights set forth in Section 3.12(a) of
the Disclosure Schedule and will continue to use commercially
reasonable efforts to maintain those rights prior to the Closing
Date so as to not materially adversely affect the validity or
enforcement of such rights; and
(ix) Magnum has supplied TBA with true and complete
copies of all written documentation evidencing its ownership of
the item and of all licenses and other contracts related thereto.
-13-
18
(b) Section 3.12(b) of the Disclosure Schedule sets forth a list
describing all patents, trademarks, trade names, service marks,
copyrights, trade secrets and mask works of others which Magnum
practices or uses that are material to Magnum. With respect to each such
item of intellectual property:
(i) any license agreement covering the item is a valid
and binding agreement, has been validly executed and delivered by
Magnum and, to the knowledge of Magnum and the Shareholders, by
the other parties thereto and is in full force and effect;
(ii) no event has occurred which constitutes a breach of
such license agreement, Magnum has not repudiated and, to the
knowledge of Magnum and the Shareholders, no other party thereto
has repudiated any provision thereof and there are no disputes,
oral arrangements or delayed payment programs in effect as to any
such license agreement;
(iii) Magnum has supplied TBA with a true and complete
copy of the license agreement;
(iv) the transactions contemplated by this Agreement
will have no material adverse effect on the ability of Magnum to
continue using or practicing each such item; and
(v) Magnum is not aware of any claim that the exercise of
the rights granted to Magnum with respect to such item infringes
upon the intellectual property rights of any third party.
(c) Magnum has not infringed, misappropriated or otherwise
violated any intellectual property rights of any third party. Magnum is
not aware of any infringement, misappropriation or violation with
respect to intellectual property which will occur as a result of the
continued operation of the business of Magnum as now conducted or as
presently proposed to be conducted.
(d) Magnum has taken commercially reasonable security measures to
protect the security, confidentiality and value of all the material
intellectual property owned by it.
3.13 Contracts. Section 3.13 of the Disclosure Schedule lists the
following contracts and written arrangements, true and complete copies of which
have been delivered to TBA, to which Magnum is a party:
(a) any contract for the lease of personal property from or to
third parties providing for lease payments in excess of $5,000.00 per
annum;
-14-
19
(b) any contract for the purchase or sale of supplies, products
manufactured by Magnum or other personal property or for the furnishing
or receipt of services which contract calls for performance over a
period of more than one year or which involves more than the sum of
$5,000.00;
(c) any joint venture agreement;
(d) any agreement or instrument under which Magnum is or may
become indebted for borrowed money;
(e) any noncompetition agreement;
(f) any other contract in which the consequences of a default or
termination would have a materially adverse effect on the financial
condition of Magnum or on the prospects or the conduct of the business
of Magnum;
(g) any standard form of license or service agreement; and
(h) any other contract or arrangement not entered into in the
ordinary course of business.
All contracts and arrangements listed in Section 3.13 of the Disclosure Schedule
are valid and binding agreements of Magnum. Neither Magnum nor, to the knowledge
of Magnum and the Shareholders, any other party is in breach or default, and no
event has occurred on the part of Magnum or, to the knowledge of Magnum and the
Shareholders, on the part of any other party to any such contract or arrangement
which with notice or lapse of time would constitute a breach or default or
permit termination under any such contract or arrangement. None of such
contracts or arrangements will be terminated or modified by the consummation of
the Acquisition. Magnum has previously made available to TBA all of the material
service agreements of Magnum with its customers. Magnum is not a party to any
verbal contract or arrangement which, if reduced to written form, would be
required to be listed in Section 3.13 of the Disclosure Schedule under the terms
of subsections (a)-(h) of this Section 3.13.
3.14 Suppliers and Customers. Section 3.14 of the Disclosure Schedule is
a true and correct list of all suppliers of Magnum to whom Magnum made payments,
during the fiscal year ended December 31, 1997, in excess of one percent of
Magnum's gross revenues as reflected in the Financial Statements for such year
and all customers of Magnum that paid Magnum, during the fiscal year ended
December 31, 1997, more than two percent of the gross revenues of Magnum as
reflected in the Financial Statements for such year. Since December 31, 1997, no
material customer of Magnum has notified Magnum that it will substantially
decrease or cease doing business with Magnum.
-15-
20
3.15 Notes; Accounts Receivable. As of the Closing Date, all notes
payable to and accounts receivable of Magnum will be properly reflected on their
respective books and records and will be valid receivables subject to no setoffs
or counterclaims.
3.16 Powers of Attorney. There are no outstanding material powers of
attorney or similar instruments executed by Magnum.
3.17 Condition of Property. Each building, fixture, machine and piece of
equipment (having a net book value of $5,000.00 or more) owned or used by Magnum
is in good operating condition and repair, subject to normal wear and tear, and
is in compliance with all zoning, building and fire codes in all material
respects. Magnum owns or leases under valid lease all buildings, machinery,
equipment and other tangible assets used in the conduct of its business as
presently conducted.
3.18 Insurance. Magnum is insured under the policies listed in Section
3.18 of the Disclosure Schedule (the "Insurance Policies"). The Insurance
Policies are in full force and effect. All premiums due on the Insurance
Policies or renewals thereof have been paid and there is no default by Magnum
under any of the Insurance Policies.
3.19 Litigation. Section 3.19 of the Disclosure Schedule sets forth any
instances in which (a) Magnum is subject to any judgment or order (other than
orders of general applicability) of any court or quasi-judicial or
administrative agency of any jurisdiction, domestic or foreign, or where there
is any charge, complaint, lawsuit or governmental investigation pending or
threatened against Magnum; or (b) Magnum is a plaintiff in any action, domestic
or foreign, judicial or administrative, or any such action exists in which a
counterclaim against Magnum is pending or might be brought. None of the actions,
suits, proceedings or investigations set forth in Section 3.19 of the Disclosure
Schedule could result in any adverse change in the condition, financial or
otherwise, of Magnum, the same being fully reserved against in the Financial
Statements. There are no unsatisfied judgments, orders (other than orders of
general applicability), decrees or stipulations affecting Magnum or to which
Magnum is a party and there is no reason to believe that any such action, suit,
proceeding or investigation may be brought or threatened against Magnum.
3.20 Employees. Magnum has listed in Section 3.20 of the Disclosure
Schedule and has furnished to TBA true and complete copies of: (a) any written
employment agreements with officers and directors of Magnum; and (b) any written
employment agreements with its employees which by their terms may not be
terminated by Magnum at will or which xxxxx xxxxxxxxx payments. Magnum has not
entered into any similar oral employment agreements. To Magnum's and the
Shareholders' knowledge, no key employee or group of employees has any plans to
terminate employment with Magnum. Magnum is not a party to or bound by any
collective bargaining agreement. There are no loans or other obligations payable
or owing by Magnum to any shareholder, officer, director or employee of Magnum
(except salaries and wages incurred and accrued in the ordinary course of
business), nor are there any loans or debts payable or owing by any of such
persons to Magnum or any guarantees by Magnum of any loan or obligation of any
nature to which any such person is a party. Magnum has complied in all material
respects with all laws and regulations which relate to
-16-
21
the employment of labor, employee civil rights or equal employment
opportunities, except for noncompliance with such laws and regulations which
does not and will not affect materially and adversely the business, assets,
results of operations, condition (financial or otherwise), or prospects of
Magnum.
3.21 Employee Benefit Plans. Magnum has listed in Section 3.21 of the
Disclosure Schedule and has furnished to TBA true and complete copies of (a) any
nonqualified deferred or incentive compensation or retirement plans or
arrangements, (b) any qualified retirement plans or arrangements, (c) any other
employee compensation, severance or termination pay or welfare benefit plans,
programs or arrangements and (d) any related trusts, insurance contracts or
other funding arrangements maintained, established or contributed to by Magnum
or to which Magnum is a party or otherwise is bound ("Magnum Employee Benefit
Plans"). Except as required by law, Magnum does not maintain or contribute or
has ever maintained or contributed to any funded or unfunded medical, health or
life insurance plan or arrangement for retirees or terminated employees. Magnum
does not contribute or have any obligation to make and has never contributed or
had any obligation to make any payment or contribution to a "multiemployer
plan," as that term is defined in Section 3(37) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and Magnum has no actual or
potential liability under Section 4201 of ERISA for any complete or partial
withdrawal from a multiemployer plan. Magnum neither maintains, contributes to
or has any liability with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA) which is intended to meet the requirements of
a qualified plan under Section 401(a) of the Code. Magnum neither maintains,
contributes to or has any liability with respect to a plan which is subject to
Title IV of ERISA or Section 412 of the Code. With respect to the employee
benefit plans listed in Section 3.21 of the Disclosure Schedule, Magnum has
furnished to TBA true and complete copies of (i) any summary plan description or
other employee communication materials, (ii) the latest financial statements and
annual reports, and (iii) all documents filed with the Internal Revenue Service
or the Department of Labor since December 31, 1994. All employee benefit plans
and related trusts listed in Section 3.21 of the Disclosure Schedule and
maintained or contributed to by Magnum or with respect to which Magnum now has
or has ever had any liability or potential liability comply in form and in
operation with all requirements of ERISA and the Code. All required reports with
respect to such plans required by applicable law have been filed and all
contributions or payments presently anticipated hereunder have been made or
properly accrued. No applications for rulings, determination letters, advisory
opinions or prohibited transaction exemptions are currently pending before the
Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation with respect to any such employee benefit plans or
arrangements or any related trusts. None of such employee benefit plans or
arrangements, any related trusts, the trustees of any related trusts or the
directors, officers and employees of Magnum is the subject of any lawsuit,
arbitration or other proceeding concerning any benefit claim or other
benefit-related matter (other than routine claims in the ordinary course of
business), and there have been no prohibited transactions as described in
Section 406 of ERISA or as defined in Section 4975 of the Code with respect to
any such plan. Neither Magnum, its directors, officers and employees nor any
other fiduciary, as such term is defined in Section 3 of ERISA, has committed
any breach of fiduciary responsibility imposed by ERISA or any other applicable
law which would subject Magnum or its directors, officers and employees to
liability under ERISA or any applicable law.
-17-
22
3.22 Guarantees. Magnum is not a guarantor or otherwise liable for any
material indebtedness of any other person, firm or corporation other than
endorsements for collection in the ordinary course of business.
3.23 Legal Compliance. Magnum and each of its respective directors,
officers and employees (the individuals only in their capacities as
representatives of Magnum) has complied in all material respects with all
applicable laws and regulations of foreign, federal, state and local governments
and all agencies thereof, except for noncompliance with such laws and
regulations which does not and will not affect materially and adversely the
business, assets, results of operations, condition (financial or otherwise), or
prospects of Magnum, and no claim has been filed against Magnum alleging a
violation of any such laws or regulations. Magnum holds all of the material
permits, licenses, certificates or other authorizations of foreign, federal,
state or local governmental agencies required for the conduct of its business as
presently conducted or proposed to be conducted. Neither Magnum, nor any
director, officer, agent, partner or employee thereof or any other person
associated with or acting for or on behalf of Magnum has directly or indirectly
(a) made or agreed to make any contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment (whether in cash or otherwise) to
any person, private or public, regardless of form, whether in money, property,
or services, in violation of any applicable law, rule or regulation (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, for or in respect of Magnum, or (iv) to
pay for any lobbying or similar services or (b) established or maintained any
fund or asset that has not been recorded in the books and records of Magnum.
3.24 Certain Business Relationships. To the knowledge of Magnum and the
Shareholders, none of the present or former shareholders, directors, officers or
employees of Magnum owns, directly or indirectly, any interest in any business,
corporation or other entity (other than investments in publicly held companies)
which, on the date hereof or within the past 12 months, has been involved in any
manner in any business arrangement or relationship with Magnum, and none of the
foregoing persons owns any property or rights, tangible or intangible, which are
used in the business of Magnum.
3.25 Broker's Fees. Neither Magnum nor anyone on its behalf has any
liability to any broker, finder, investment banker or agent, or has agreed to
pay any brokerage fees, finder's fees or commissions, or to reimburse any
expenses of any broker, finder, investment banker or agent in connection with
the Acquisition or any similar transaction.
3.26 Environment, Health and Safety. Magnum is in compliance with all
material environmental, health and safety laws, including, without limitation,
laws relating to the use and storage of hazardous substances, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand or
notice has been held or commenced against Magnum alleging any failure so to
comply. Magnum has obtained and been in compliance with all of the material
terms and conditions of all permits, licenses and other authorizations which are
required under, and have complied with all other material limitations,
restrictions, conditions, standards, prohibitions,
-18-
23
requirements, obligations, schedules, laws, and timetables which are contained
in, all applicable environmental, health and safety laws.
3.27 Year 2000. The computer programs and technical systems used by
Magnum are year 2000 compliant, will function and operate prior to, during and
after the calendar year 2000 in accordance with their specifications and will
provide the required output without experiencing abnormal ending dates and/or
invalid or incorrect years and shall incorporate century recognition date data,
calculations that use same century and multi-century formulas and date values
that reflect the current century in all transactions. In addition, all such
computer programs and technical systems will process, manage and manipulate data
involving dates, including single century and multi-century formulas, and will
not cause an abnormally ending scenario within the application or generate
incorrect values or invalid results involving such dates.
3.28 Disclosure. The representations and warranties and statements of
fact made by Magnum and the Shareholders in this Agreement, in the Disclosure
Schedule and in certificates and other written statements or agreements
delivered or to be delivered pursuant to this Agreement are accurate, correct
and complete in all material respects on the date of this Agreement and will,
except as contemplated hereby, be accurate, correct and complete in all material
respects on the Closing Date and do not and will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements and information contained herein or therein not
misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as set forth in the correspondingly numbered section of the
Disclosure Schedule, each Shareholder severally represents and warrants to TBA
as to himself only and not with respect to any other Shareholder as follows:
4.1 Representations Regarding Shares of Magnum.
(a) Such Shareholder is the record and beneficial owner of and has good
title to the Shares set forth opposite his name on Annex II attached hereto,
free and clear of any and all Liens. Annex II attached hereto sets forth the
number of shares of capital stock of Magnum owned by the Shareholders.
(b) Such Shareholder has the full right, power and capacity to enter
into this Agreement.
(c) Such Shareholder is not a party to, subject to or bound by any
agreement or any judgment, order, writ, prohibition, injunction or decree of any
court or other governmental body which would prevent the execution or delivery
of this Agreement by such Shareholder.
-19-
24
(d) No broker or finder has acted for such Shareholder in connection
with this Agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commissions in
respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of such Shareholder.
4.2 Investment Representations.
(a) Such Shareholder is acquiring the shares of TBA Common Stock
issued pursuant to this Agreement for his own account for investment and
not with a view to, or for sale in connection with, any distribution
thereof, nor with any present intent of distributing or selling his
shares.
(b) Such Shareholder has reviewed the representations concerning
TBA contained in this Agreement and has made or has had the opportunity
to make inquiry concerning TBA. Such Shareholder has sufficient
knowledge and experience so as to be able to evaluate the risks and
merits of his investment in TBA, and he is able financially to bear the
risks thereof. Such Shareholder is entering into the transactions
contemplated herein based on his own assessment of the merits and risks,
upon his own experience as an officer and/or shareholder of Magnum, and
upon the representations and warranties of TBA in Article 2 of this
Agreement, and is not relying on any business plan, projections,
valuations or other financial information provided to such Shareholder
by TBA (other than the TBA SEC Documents). Such Shareholder further
acknowledges and agrees that TBA has made no assurances of any nature
whatsoever regarding the future operations of TBA and has made no
guarantees as to the profitability of an investment therein.
(c) Such Shareholder understands that the certificates of TBA
Common Stock to be issued to him pursuant to this Agreement will bear a
restrictive legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE 'ACT') OR ANY
OTHER SECURITIES STATUTE AND MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF UNLESS IN THE OPINION OF COUNSEL TO, OR
SATISFACTORY TO THE COMPANY, ANY PROPOSED SALE, TRANSFER OR OTHER
DISPOSITION WOULD NOT VIOLATE OR REQUIRE REGISTRATION UNDER THE
ACT OR ANY OTHER SECURITIES STATUTE."
4.3 Enforceability. This Agreement and all such other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which such Shareholder is a party constitute the valid
and legally binding obligations of such Shareholder, enforceable against such
Shareholder in accordance with their respective terms, except as enforceability
may be limited or affected by applicable bankruptcy, insolvency, moratorium,
reorganization or other laws of general application relating to or affecting
creditors' rights generally.
-20-
25
The execution, delivery and performance by such Shareholder of this
Agreement and the agreements provided for herein, and the consummation by such
Shareholder of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to such Shareholder; (b)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator; or (c) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any Lien upon the properties or assets of such
Shareholder pursuant to, any indenture, mortgage, deed of trust or other
instrument or agreement to which such Shareholder is a party or by which such
Shareholder or any of his properties are or, to the knowledge of such
Shareholder, may be bound, except for violations or conflicts which individually
or in the aggregate would not have a material adverse effect on Magnum's
financial condition or results of operation.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE CLOSING
5.1 Conduct of Business by Magnum Pending the Closing. Magnum covenants
and agrees that, prior to the Closing Date, unless TBA shall otherwise approve
in writing (which approval will not be unreasonably withheld) or as otherwise
expressly contemplated or permitted by this Agreement:
(a) Magnum shall conduct its business and operations, including
its cash management practices, the collection of receivables,
maintenance of facilities and payment of payables, only in the usual and
ordinary course of business and consistent with past custom and practice
in all material respects;
(b) Magnum shall not directly or indirectly do any of the
following: (i) sell, pledge, dispose of or encumber any material portion
of its assets, except in the ordinary course of business; (ii) amend or
propose to amend its charter or bylaws; (iii) split, combine or
reclassify any outstanding shares of its capital stock, or declare, set
aside or pay any dividend or other distribution payable in cash, stock,
property or otherwise with respect to shares of its capital stock; (iv)
redeem, purchase or acquire or offer to acquire any shares of its
capital stock or other securities; (v) create any subsidiaries; or (vi)
enter into or modify any contract, agreement, commitment or arrangement
with respect to any of the matters set forth in this Section 5.1(b);
(c) Magnum shall not (i) issue, sell, pledge or dispose of, or
agree to issue, sell, pledge or dispose of, any additional shares of, or
any options, warrants, conversion privileges or rights of any kind to
acquire any shares of, its capital stock; (ii) acquire (by merger,
consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or division or
material assets thereof; (iii) incur any material indebtedness for
borrowed money, issue any debt securities or guarantee any indebtedness
-21-
26
to others; or (iv) enter into or modify any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(d) Magnum shall not (i) enter into or modify any employment,
severance or similar agreements or arrangements with, or grant any
bonus, salary increase, severance or termination pay to, any officers or
directors; or (ii) in the case of employees who are not officers or
directors, take any action other than in the ordinary course of business
and consistent in all material respects with past practice (none of
which shall be unreasonable or unusual) with respect to the grant of any
bonuses, salary increases, severance or termination pay or with respect
to any increase of benefits payable in effect on January 1, 1998;
(e) Magnum shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee;
(f) Except as otherwise required by its charter or bylaws, by
this Agreement or by applicable law, Magnum shall not call any meeting
of its shareholders and, with respect to any meeting of its shareholders
called by Magnum, shall provide to TBA copies of all written materials
and other information given to the shareholders prior to the time such
materials and information are given to the shareholders;
(g) Magnum shall use commercially reasonable efforts to cause its
current insurance (or reinsurance) policies not to be canceled or
terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies underwritten by insurance and reinsurance companies of
nationally recognized standing providing coverage equal to or greater
than the coverage under the can celled, terminated or lapsed policies
for substantially similar premiums are in full force and effect;
(h) Magnum shall (i) use commercially reasonable efforts to
preserve intact its business organization and goodwill, keep in full
force and effect all material rights, licenses, permits and franchises
relating to its business, keep available the services of its officers
and employees as a group and maintain satisfactory relationships with
suppliers, distributors, customers and others having business
relationships with it; (ii) report on a regular and frequent basis, at
reasonable times, to representatives of TBA regarding operational
matters and the general status of ongoing operations; (iii) use
commercially reasonable efforts not to take any action which would
render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue in any
material respect at any time prior to the Closing Date if then made; and
(iv) notify TBA of any emergency or other change in the normal course of
business or in the operation of its properties and of any tax audits,
tax claims, governmental or third party complaints, investigations or
hearings (or communications indicating that the same may be
contemplated) if such emergency, change, audit, claim, complaint,
investigation or hearing would be material, individually or in the
-22-
27
aggregate, to the financial condition, results of operations or business
of Magnum, or to the ability of Magnum or TBA to consummate the
transactions contemplated by this Agreement;
(i) Magnum shall deliver to TBA promptly (but in any event within
two business days) after the discovery or receipt of notice of any
default under any material agreement to which it is a party or any other
material adverse event or circumstance affecting Magnum (including the
filing of any material litigation against Magnum or the existence of any
dispute with any person or entity which involves a reasonable likelihood
of such litigation being commenced), a certificate of the President of
Magnum specifying the nature and period of the existence thereof and
what actions Magnum has taken and proposes to take with respect thereto;
(j) Magnum shall use commercially reasonable efforts to maintain
its assets in customary repair, order and condition, replace in
accordance with past practice its inoperable, worn out or obsolete
assets with assets of quality at least comparable to the original
quality of the assets being replaced and maintain in all material
respects its books, accounts and records in accordance with past custom
and practice as used in the preparation of the Financial Statements;
(k) Magnum shall use commercially reasonable efforts to maintain
in full force and effect the existence of all material patents,
inventions, trademarks, service marks, trade dress, trade names,
corporate names, copyrights, mask works, trade secrets, licenses,
computer soft xxxx, data and documentation and other proprietary rights,
which it uses or owns;
(l) Magnum shall comply in all material respects with all legal
requirements and contractual obligations applicable to its operations
and business and pay all applicable taxes; and
(m) Magnum shall not enter into any contract (except for artist
performances) requiring payments in excess of $10,000 or for a duration
of more than one (1) year.
For purposes of this Section 5.1, should TBA fail to approve in writing
any action for which its approval is required pursuant to this Section 5.1
within three (3) business days after its receipt of a written request for
approval in accordance with the notice requirements contained herein, the matter
shall be deemed approved by TBA. Notwithstanding any other provision of this
Agreement, the amendment or modification of the Disclosure Schedule by Magnum
after the time TBA has signed this Agreement shall have no effect with respect
to the agreements, covenants and obligations of Magnum and TBA pursuant to this
Section 5.1 and Sections 7.2 and 7.3 of this Agreement.
5.2 No Other Bids for Magnum. Magnum shall not, nor either authorize or
knowingly permit any officer, director, shareholder or employee of, or any
investment banker, attorney, accountant or other representative retained by,
Magnum to make, solicit, initiate, encourage or respond to a submission of a
proposal or offer from any person or entity (other than TBA) relating
-23-
28
to any liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of all or a material portion of the assets of, or any
equity interest in, Magnum or other similar transaction or business combination
involving Magnum (hereinafter collectively referred to as a "Third Party
Offer"). Magnum will not participate in any negotiations regarding, or furnish
to any person or entity (other than TBA) any information with respect to, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any person or entity (other than TBA) to do
or seek any of the foregoing. Magnum will immediately cease and cause to be
terminated any contacts or negotiations currently pending with respect to Third
Party Offers, if any, and shall use its best efforts to cause all reports,
material, data and other written information heretofore disseminated by it or on
its behalf by any such officer, director or employee or any investment banker,
attorney, accountant or other representative in connection with any such Third
Party Offer or any inquiry or proposal related thereto to be promptly returned
to it. Magnum shall promptly notify TBA of the receipt of any Third Party Offer
or any inquiry or communication which might reasonably be expected to lead to
any Third Party Offer and will provide TBA with all information that TBA may
reasonably request with respect thereto.
5.3 Lines of Business and Capital Expenditures. Unless approved in
writing by TBA, Magnum covenants that it will not (a) enter into any new
material line of business; (b) change its investment, liability management and
other material policies in any material respect; or (c) incur or commit to any
capital expenditures, obligations or liabilities in connection therewith.
5.4 Accounting Methods. Unless approved in writing by TBA, Magnum
covenants that it will not change its methods of accounting in effect at
December 31, 1997, except as required by changes in generally accepted
accounting principles as concurred in by Magnum's independent accountants.
Notwithstanding the provisions of the preceding sentence, Magnum will, at the
Shareholders' expense, have its financial statements converted to accrual basis
statements prepared in accordance with generally accepted accounting principles
for the fiscal years 1995, 1996 and 1997 and for the eight month period ended
August 31, 1998.
5.5 Other Actions. Unless approved in writing by TBA, Magnum covenants
that it shall not take any action that would or might reasonably be expected to
result in any of the representations and warranties of Magnum set forth in this
Agreement becoming untrue in any material respect after the date hereof or any
of the conditions to the Closing set forth in Article 7 of this Agreement not
being satisfied.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the other agreements
contemplated hereby and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expenses.
-24-
29
6.2 Notification of Certain Matters. Each party shall give prompt
notice to the others of (a) the occurrence or failure to occur of any event,
which occurrence or failure would result in any Material Adverse Breach (as
defined in Section 10.8 of this Agreement), and (b) any failure of such party,
or any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied hereunder.
6.3 Access to Information. From the date hereof to the Closing Date,
each of Magnum and TBA shall, and shall cause its respective officers,
directors, employees and agents to, afford the officers, employees, agents and
representatives of the other parties hereto (including the Shareholders)
complete access at all reasonable times to such officers, employees and agents
and its properties, books and records (all such access to be arranged through
the respective officers of the parties hereto so as not to be unreasonably
disruptive to any of the parties), and shall furnish each of such parties all
financial, operating, personnel, compensation, tax and other data and
information as such parties, through their respective officers, employees,
agents or representatives, may request.
6.4 Taking of Necessary Action. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees, subject to applicable laws,
to use all reasonable efforts promptly to take or cause to be taken all action
and promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the foregoing,
Magnum and TBA shall use their best efforts to maintain and make all filings
with and obtain all consents, approvals, and/or assurances from third parties
and appropriate governmental agencies and authorities necessary or, in the
opinion of Magnum or TBA, advisable for the consummation of the transactions
contemplated by this Agreement. Each party shall cooperate with the other in
good faith to help the other satisfy its obligations in this Section 6.4.
6.5 Notice of Changes. Each of Magnum and TBA shall each promptly
inform the other in writing if any change shall have occurred or shall have been
threatened (or any development shall have occurred or shall have been threatened
involving a prospective change) in its financial condition, results of
operations or business that is or may reasonably be expected to have a material
adverse effect on its financial condition, results of operations or business.
6.6 Press Releases. Magnum and TBA shall consult with each other as to
the form and substance of any press release or other public disclosure of
matters related to this Agreement or any of the transactions contemplated
hereby; provided, however, that nothing in this Section 6.6 shall be deemed to
prohibit any party hereto from making any disclosure that is required to fulfill
such party's disclosure obligations imposed by law, including, without
limitation, federal securities laws.
6.7 Employee Matters. TBA and Magnum agree that all employees of
Magnum immediately prior to the Closing shall be employed by Magnum immediately
after the Closing at such level of pay which is mutually agreed upon between
each employee and TBA, it being understood that TBA shall not have any
obligations to continue employing such employees for any
-25-
30
length of time or at any level of pay for any length of time thereafter, except
as set forth in binding agreements of employment.
6.8 Tax Matters. From and after the Closing, TBA, on the one hand, and
the Shareholders, on the other hand, shall cooperate fully with each other and
make available or cause to be made available to each other for consultation,
inspection and copying (at such other party's expense) in a timely fashion such
personnel, tax data, tax returns and filings, files, books, records, documents,
financial, technical and operating data, computer records and other information
as may be reasonably required (1) for the preparation by either of them of any
Tax Returns, elections, consents or certificates required to be prepared and
filed by such parties or (2) in connection with any audit or proceeding relating
to taxes relating to the assets of Magnum. TBA agrees to retain all books and
records with respect to tax matters pertinent to Magnum relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations of the respective taxable periods, and to abide by all record
retention agreements entered into with any taxing authority. None of the parties
hereto shall cause an election to be made, an accounting for tax purposes to be
adopted, or a position to be taken on any tax return, or in any tax proceeding,
that is inconsistent with the provisions of this Agreement. In addition, as
custodian of the books and records of Magnum as of the Closing Date, TBA, or its
authorized representatives, shall be responsible for closing such books and
records as of the Closing Date for state and federal income tax and financial
reporting purposes. TBA and the Shareholders shall cooperate fully with each
other in connection with such closing and TBA shall make available to the
Shareholders all financial and income tax data, statements, reports and
information relating to such closing of the books and records as of the Closing
Date.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to Obligations of Each Party to Effect the Closing. The
respective obligations of each party to effect the Closing shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) no order shall have been entered and remain in effect in any
action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal
the consummation of the transactions contemplated hereby; and
(b) The Shareholders shall have provided TBA with a written
agreement not to sell, assign, convey, encumber or otherwise transfer
shares of TBA Common Stock acquired pursuant to this Agreement for a
period of one year following the Closing Date (subject to exceptions set
forth in said agreement).
7.2 Additional Conditions to TBA's Obligations. The obligations of TBA
to effect the Closing are subject to the satisfaction of the following
conditions on or before the Closing Date:
-26-
31
(a) Except for breaches which do not constitute a Material
Adverse Breach (as defined in Section 10.8 of this Agreement) by Magnum
or the Shareholders, the representations and warranties set forth in
Articles 3 and 4 of this Agreement (without regard to any amendments or
modifications of the Disclosure Schedule by Magnum after the time TBA
has signed this Agreement) will be true and correct as of the date
hereof and at and as of the Closing Date, as though then made and as
though the Closing Date were substituted for the date of this Agreement
throughout such representations and warranties and with appropriate
modifications of tense with respect to representations and warranties
made as of a specified date;
(b) Magnum shall have performed, in all material respects, each
obligation and agreement and complied, in all material respects, with
each covenant to be performed and complied with by it under this
Agreement prior to the Closing Date, including, without limitation, all
of its agreements contained in Article 6 of this Agreement;
(c) Except as otherwise disclosed on the Disclosure Schedule, all
consents by governmental or regulatory agencies or otherwise that are
required for the consummation of the transactions contemplated hereby or
that are required for TBA to own, operate or control Magnum or any
portion of the assets of Magnum or to prevent a breach of or a default
under or a termination of any agreement material to Magnum to which
Magnum is a party or to which any material portion of the assets of
Magnum is subject, will have been obtained;
(d) No action or proceeding before any court or governmental body
will be pending or threatened wherein a judgment, decree or order would
prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded or which might
adversely affect the right of TBA to own, operate or control Magnum or
any material portion of the assets of Magnum or the value of the assets
of Magnum;
(e) On or prior to the Closing Date, each of the Shareholders,
Xxxxxxx X. Xxxxxxxx and Xxxxx Xxxxxx shall have entered into employment
agreements with Magnum substantially in the form of Exhibit C attached
hereto dated as of the Closing Date (the "Employment Agreements") and
each Shareholder, Xxxxxxx X. Xxxxxxxx and Xxxxx Xxxxxx shall have
terminated any employment, compensation, consulting, fee, services or
other similar agreements payable to him, or to his affiliated entities,
if any;
(f) At the Closing, Magnum will have delivered to TBA the
following:
(i) a certificate executed on behalf of Magnum by its
President stating that the conditions set forth in Sections
7.2(a) through 7.2(d) of this Agreement have been satisfied;
-27-
32
(ii) certified copies of the resolutions duly adopted by
Magnum's Board of Directors authorizing the execution, delivery
and performance of this Agreement and the other agreements
contemplated hereby and thereby;
(iii) good standing or comparable certificates for Magnum
from the jurisdiction of its incorporation and from every
jurisdiction where a failure to be qualified or licensed would
have a material adverse effect on the financial condition,
results of operations or business of Magnum, dated not earlier
than ten (10) days prior to the Closing Date;
(iv) copies of all third party and governmental consents
(or other evidence satisfactory to TBA) that Magnum is required
to obtain in order to effect the transactions contemplated by
this Agreement;
(v) a copy of Magnum's charter certified by the Secretary
of State of the State of Texas;
(vi) certificates evidencing the Shares, duly endorsed;
and
(vii) such other documents as TBA may reasonably request
in connection with the transactions contemplated hereby;
(g) All proceedings to be taken by Magnum and the Shareholders in
connection with the consummation of the Acquisition at the Closing and
the other transactions contemplated hereby and all documents required to
be delivered by Magnum and the Shareholders in connection with the
Acquisition and the other transactions contemplated hereby will be
reasonably satisfactory in form and substance to TBA.
7.3 Additional Conditions to the Obligations of Magnum and the
Shareholders. The obligations of Magnum and the Shareholders to effect the
Closing are subject to the satisfaction of the following conditions on or before
the Closing Date;
(a) Except for breaches which do not constitute a Material
Adverse Breach (as defined in Section 10.8 of this Agreement) by TBA,
the representations and warranties set forth in Article 2 of this
Agreement will be true and correct as of the date hereof and at and as
of the Closing Date, as though then made and as though the Closing Date
were substituted for the date of this Agreement throughout such
representations and warranties and with appropriate modifications of
tense with respect to representations and warranties made as of a
specified date;
(b) TBA shall have performed, in all material respects, each
obligation and agreement and complied, in all material respects, with
each covenant required to be performed and complied with by it under
this Agreement prior to the Closing Date;
-28-
33
(c) No action or proceeding before any court or government body
will be pending or threatened wherein a judgment, decree or order would
prevent any of the transactions contemplated hereby or cause such
transactions to be declared unlawful or rescinded;
(d) At the Closing, TBA will have delivered to Magnum and the
Shareholders the following:
(i) a certificate executed on behalf of TBA by its Chief
Executive Officer stating that the conditions set forth in
Sections 7.3(a) through (c) of this Agreement have been
satisfied;
(ii) certified copies of the resolutions duly adopted by
TBA's board of directors authorizing the execution, delivery and
performance of this Agreement;
(iii) good standing certificates for TBA from the
Secretary of State of the State of Delaware dated not earlier
than ten (10) days prior to the Closing Date;
(iv) copies of all third party and governmental or
regulatory consents (or other evidence satisfactory to Magnum)
that TBA is required to obtain in order to effect the
transactions contemplated by this Agreement;
(v) copies of TBA's charter certified by the Secretary
of State of the State of Delaware; and
(vi) such other documents as Magnum or the Shareholders
may reasonably request in connection with the transactions
contemplated hereby;
(e) All proceedings to be taken by TBA in connection with the
consummation of the Acquisition at the Closing and all documents
required to be delivered by TBA in connection with the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to Magnum and the Shareholders;
(f) Except as otherwise disclosed to Magnum and the Shareholders,
all consents by governmental or regulatory agencies or otherwise that
are required for the consummation of the transactions contemplated
hereby or that are required for TBA to own, operate or control Magnum or
any portion of the assets of Magnum or to prevent a breach of or a
default under or a termination of any agreement material to Magnum to
which Magnum is a party or to which any material portion of the assets
of Magnum is subject, will have been obtained;
(g) The Employment Agreements will have been executed and
delivered by the Closing Date and there will not have been any changes,
amendments or modifications to, or terminations of, such agreements; and
-29-
34
(h) The Registration Rights Agreement will have been executed and
delivered as of the Closing Date.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by the unanimous written consent of the Shareholders and the
Boards of Directors of TBA and Magnum;
(b) by either TBA or the Shareholders if the Acquisition shall
not have been consummated by November 15, 1998;
(c) by TBA if there has been a misrepresentation or breach of a
representation or warranty or a failure to perform a covenant on the
part of Magnum or the Shareholders with respect to their
representations, warranties and covenants set forth in this Agreement
and any such breach or failure constitutes a Material Adverse Breach;
and
(d) by Magnum if there has been a misrepresentation or a breach
of a representation or warranty or a failure to perform a covenant on
the part of TBA with respect to their representations, warranties and
covenants set forth in this Agreement and any such breach or failure
constitutes a Material Adverse Breach.
8.2 Amendment. This Agreement may not be amended except by an
instrument signed by each of the parties hereto.
8.3 Waiver. At any time prior to the Closing Date, (a) TBA may (i)
extend the time for the performance of any of the obligations or other acts of
Magnum and/or the Shareholders or (ii) waive compliance with any of the
agreements of Magnum and/or the Shareholders or with any conditions to its own
obligations, and (b) Magnum and/or the Shareholders may (i) extend the time for
the performance of any of the obligations or other acts of TBA or (ii) waive
compliance with any of the agreements of TBA or with any conditions to their own
obligations in each case only to the extent such obligations, agreements and
conditions are intended for their benefit.
8.4 Effect of Termination. If this Agreement is terminated as provided
in Section 8.1, this Agreement shall become void and there shall be no liability
or further obligation on the part of any party hereto or any of their respective
shareholders, officers or directors, except (b) that nothing herein and no
termination pursuant hereto will relieve any party from liability for any breach
of this Agreement and (d) the provisions of Sections 6.1 and 6.6 and any
confidentiality agreements by and between TBA and Magnum will survive such
termination.
-30-
35
ARTICLE 9
INDEMNIFICATION
9.1 By TBA and the Shareholders. TBA on the one hand and the
Shareholders (severally based upon the ratio in which they own the Shares
immediately prior to the Closing) with respect to any breach or
misrepresentation by Magnum on the other hand each hereby agree to indemnify and
hold harmless the other against all claims, damages, losses, liabilities, costs
and expenses (including, without limitation, settlement costs and any legal,
accounting or other expenses for defending any actions or threatened actions)
(collectively "Damages") reasonably incurred by TBA and the Shareholders in
connection with each and all of the matters set forth below to the extent they
constitute a Material Adverse Breach.
(a) Any breach by the Indemnifying Party (as defined below) of
any representation or warranty made by such Indemnifying Party in this
Agreement;
(b) Any breach of any covenant, agreement or obligation of the
Indemnifying Party contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement; and
(c) Any misrepresentation contained in any statement, certificate
or schedule furnished by the Indemnifying Party pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement.
Each Shareholder further agrees to indemnify TBA for any breaches of any
representation or warranty, covenant, agreement or obligation of such
Shareholder in his individual capacity made or contained, respectively, in this
Agreement or in the Disclosure Schedule or any certificate required by this
Agreement, or any misrepresentation by such Shareholder, as described in (a)
through (c) above to the extent they constitute a Material Adverse Breach.
9.2 Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the party seeking indemnification (the "Indemnified
Party") shall promptly notify the party from whom indemnification is sought (the
"Indemnifying Party") of the claim and, when known, the facts constituting the
basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as provided
in Section 9.3 of this Agreement in which case the Indemnified Party may settle
or compromise such claim without the prior consent of the Indemnifying Party. If
the Indemnified Party fails to give prompt notice of any claim and such failure
prejudices the Indemnifying Party's position or its ability to defend the claim,
the Indemnifying Party's liability to the
-31-
36
Indemnified Party shall be reduced by the amount, if any, demonstrated to be
directly attributable to the failure to give such notice in a timely manner.
9.3 Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made,
(a) the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third party claim or the amount or nature of any
such settlement, the Indemnifying Party shall have the burden to prove by a
preponderance of the evidence that the Indemnified Party did not defend or
settle such third party claim in a reasonably prudent manner.
9.4 Payment of Indemnification Obligation. All indemnification by TBA,
Magnum or the Shareholders hereunder shall be effected by payment by wire
transfer or delivery of a cashier's or certified check in the amount of the
indemnification liability.
9.5 Arbitration. Any controversy or claim arising out of or relating
to the indemnification provisions of this Agreement, including the right to or
amount of indemnity, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the "AAA")
by three (3) arbitrators. Each of the Indemnifying Party and the Indemnified
Party shall appoint one arbitrator, who shall be an impartial person. If a party
fails to appoint an arbitrator within thirty (30) days from the date a demand to
arbitrate was made, the AAA shall make the appointment of the arbitrator. The
two (2) arbitrators thus appointed shall appoint the third arbitrator, who shall
be an impartial person. If said two (2) arbitrators fail to appoint the third
arbitrator within sixty (60) days from the date a demand to arbitrate was made,
the AAA shall make the appointment of the third arbitrator, who shall be an
impartial person. Should any of the arbitrators appointed die, resign, refuse or
become unable to act before a decision is given, the vacancy shall be filled by
the method set forth in this clause for the original appointment. The
arbitration shall be held in Dallas, Texas and shall be conducted in the English
language. A decision by the arbitrators on the validity and amount of any
indemnification claim shall be final and binding on all the parties. The
arbitrators shall execute and deliver to the respective parties the arbitration
panel's decision in writing. Judgment upon the award, if any, rendered by the
arbitrators (which must be expressed in United States dollars) may be entered in
any court having jurisdiction thereof. In any award, the arbitrators shall
assess the arbitration costs and expenses, including, without
-32-
37
limitation, attorneys fees of the parties, in a manner deemed equitable by the
arbitrators, taking into account the arbitration decision.
ARTICLE 10
GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations and
warranties set forth in this Agreement shall survive the Closing for a period of
one (1) year. Notwithstanding the above, claims resulting from any breach of any
representation or warranty concerning tax or Magnum Employee Benefit Plan
matters shall expire one hundred twenty (120) days after the expiration of any
applicable statute of limitations. Any litigation arising out of or attributable
to a breach of any representation, warranty or covenant contained herein must be
commenced within the applicable period described above. If not commenced within
the applicable period, any such claim will thereafter conclusively be deemed to
be waived regardless of when such claim is or should have been discovered.
10.2 Effect of Due Diligence. No investigation by TBA or Magnum into the
business, operations and condition of the other shall diminish in any way the
effect of any representations or warranties made by either party in this
Agreement or shall relieve such party of any of its obligations under this
Agreement.
10.3 Specific Performance. TBA, Magnum and the Shareholders understand
and agree that the covenants and undertakings on each of their parts herein
contained are uniquely related to the desire of TBA, Magnum and the Shareholders
to consummate the Acquisition, that the Acquisition is a unique business
opportunity for Magnum, TBA, and the Shareholders and that, although monetary
damages may be available for the breach of such covenants and undertakings,
monetary damages would be an inadequate remedy therefor. Accordingly, Magnum,
TBA and the Shareholders agree that TBA shall be entitled to obtain specific
performance by Magnum and the Shareholders of every such covenant and
undertaking contained herein to be performed by Magnum and the Shareholders and
that Magnum and the Shareholders shall be entitled to obtain specific
performance from TBA of each and every covenant and undertaking herein contained
to be observed or performed by TBA.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
sent by telex, telecopy, facsimile or overnight courier, or mailed by registered
or certified mail (postage prepaid and return receipt requested), to the party
to whom the same is so delivered, sent or mailed at the following addresses (or
at such other address for a party as shall be specified by like notice):
-33-
38
(a) if to TBA:
TBA Entertainment Corporation
000 Xxxxxxxx Xxxxxxxxxx Xxx
Xxxxxxx Xxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx III
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
5400 Renaissance Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
(b) if to Magnum:
Magnum Communications, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Office of the Chief Financial Officer
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx
One Quadrangle Tower
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
(c) if to Shareholders:
Xxxxxxx X. Xxx
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Xxxx X. Xxxx
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
-34-
39
Xxxxxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Xxx X. Xxxxxx
0000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxx 00000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx
One Quadrangle Tower
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Notices delivered personally or by telex, telecopy or facsimile shall be deemed
delivered as of actual receipt, mailed notices shall be deemed delivered three
days after mailing and overnight courier notices shall be deemed delivered one
day after the date of sending.
10.5 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated.
10.6 Severability. If any term, provision, covenant or Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants, and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated and the parties shall negotiate in good faith to modify
the Agreement to preserve each party's anticipated benefits under the Agreement.
10.7 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (a) except for any confidentiality
agreements executed in connection with the transactions contemplated hereby,
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof, including, without limitation, the Letter of Intent dated
September 14, 1998 among TBA and the Shareholders; (b) except as expressly set
forth herein, is not intended to confer upon any other person any rights or
remedies hereunder; (c) shall not be assigned by operation of law or otherwise,
except that TBA may assign all or any portion of their rights under this
Agreement to any wholly owned subsidiary but no such assignment shall relieve
TBA of its obligations hereunder, and except that this Agreement may be assigned
by operation of law to any corporation with or into which TBA may be merged; and
(d) shall be governed in all respects, including validity, interpretation and
effect, by the internal laws of the State of Delaware, without giving effect to
the
-35-
40
principles of conflict of laws thereof. Courts within the State of Delaware will
have jurisdiction over any and all disputes between the parties hereto, whether
in law or equity, arising out of or relating to this Agreement. The parties
consent to and agree to submit to the jurisdiction of such courts. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement.
10.8 Material Adverse Breach. Breaches of representations, warranties
and covenants by either party hereto which (a) individually results in damages
to the other party in excess of $25,000 or (b) in the aggregate result in
damages to the other party in excess of $50,000, shall constitute, for purposes
of this Agreement, a "Material Adverse Breach."
10.9 Limitation of Liability. Neither TBA, Magnum, nor the Shareholders
shall have any liability for breach of the representations, warranties and
covenants made by them and contained in this Agreement unless such breach is a
Material Adverse Breach.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
-36-
41
STOCK PURCHASE AGREEMENT
Signature Page
IN WITNESS WHEREOF, TBA, the Shareholders and Magnum have caused this
Agreement to be executed on the date first written above by their respective
officers duly authorized.
TBA ENTERTAINMENT CORPORATION
By: ____________________________________
Xxxxxx Xxxxxxx Xxxxxx III,
Chief Executive Officer
MAGNUM COMMUNICATIONS, INC.
By: _____________________________________
Xxxxxxx X. Xxxxxxxx, Chief Financial
Officer
_________________________________________
Xxxxxxx X. Xxx
_________________________________________
Xxxx X. Xxxx
_________________________________________
Xxxxxxx X. Xxxxx
_________________________________________
Xxx X. Xxxxxx
-37-
42
SCHEDULE 1.2
PURCHASE PRICE CONSIDERATION
Common Stock
Name Portion Cash Portion Note Amount
---- ------------ ------------ -----------
Xxxxxxx X. Xxx $ 514,500 $ 514,500 $ 441,000
Xxxx X. Xxxx 514,500 514,500 441,000
Xxxxxxx X. Xxxxx 10,500 10,500 9,000
Xxx X. Xxxxxx 10,500 10,500 9,000
---------- ---------- ----------
$1,050,000 $1,050,000 $ 900,000
43
SCHEDULE 2
DISCLOSURE SCHEDULE
44
ANNEX I
LIST OF TBA SEC DOCUMENTS
1. Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997;
2. Quarterly Report on Form 10-QSB for the quarterly period ended March 31,
1998;
3. Current Report on Form 8-K filed May 22, 1998, as amended by Form 8-K/A
filed May 26, 1998;
4. Quarterly Report on Form 10-QSB for the quarterly period ended June 30,
1998;
5. Current Report on Form 8-K filed September 1, 1998; and
6. Proxy Statement relating to the Annual Meeting of Stockholders to be
held on October 272, 1998.
45
ANNEX II
OWNERSHIP OF SHARES
Number of Shares of
Shareholder Name Magnum Common Stock
Xxxxxxx X. Xxx 4,900
Xxxx X. Xxxx 4,900
Xxxxxxx X. Xxxxx 100
Xxx X. Xxxxxx 100
46
EXHIBIT A
FORM OF PROMISSORY NOTE
47
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
48
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENTS
