FORM OF AGREEMENT AND PLAN OF ORGANIZATION
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AGREEMENT AND PLAN OF ORGANIZATION
dated as of May 9, 1997
by and among
COLLECTIBLES USA, INC.
[COMPANY] ACQUISITION CORP.
(a subsidiary of Collectibles USA, Inc.)
[COMPANY]
and
the STOCKHOLDERS named herein
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TABLE OF CONTENTS
Page
1. THE MERGER 5
1.1 Delivery and Filing of Articles of Merger 5
1.2 Effective Time of the Merger 5
1.3 Certificate of Incorporation, Bylaws and
Board of Directors of Surviving
Corporation 5
1.4 Certain Information With Respect to the
Capital Stock of the COMPANY, CEI and
NEWCO 6
1.5 Effect of Merger 7
2. CONVERSION OF STOCK 8
2.1 Manner of Conversion 8
3. DELIVERY OF MERGER CONSIDERATION 9
4. CLOSING 10
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS 11
5.1 Due Organization 11
5.2 Authorization 12
5.3 Capital Stock of the COMPANY 12
5.4 Transactions in Capital Stock;
Organization Accounting 12
5.5 No Bonus Shares 13
5.6 Subsidiaries 13
5.7 Predecessor Status; etc 13
5.8 Spinoff by the COMPANY 14
5.9 Financial Statements 14
5.10 Liabilities and Obligations 14
5.11 Accounts and Notes Receivable 15
5.12 Intellectual Property; Permits and
Intangibles 16
5.13 Environmental Matters 17
5.14 Personal Property 18
5.15 Significant Customers; Material
Contracts and Commitments 18
5.16 Real Property 19
5.17 Insurance 20
5.18 Compensation; Employment Agreements;
Organized Labor Matters 20
5.19 Employee Plans 21
5.20 Compliance with ERISA 22
5.21 Conformity with Law; Litigation 23
5.22 Taxes 23
5.23 No Violations 27
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5.24 Government Contracts 28
5.25 Absence of Changes 28
5.26 Deposit Accounts; Powers of Attorney 29
5.27 Validity of Obligations 30
5.28 Relations with Governments 30
5.29 Disclosure 30
5.30 Prohibited Activities 31
5.31 Authority; Ownership 32
5.32 Preemptive Rights 32
5.33 No Intention to Dispose of CEI Stock 32
5.34 Transactions with Directors, Officers
and Affiliates. 32
6. REPRESENTATIONS OF CEI and NEWCO 33
6.1 Due Organization 33
6.2 Authorization 34
6.3 Capital Stock of the COMPANY 34
6.4 Transactions in Capital Stock,
Organization Accounting 34
6.5 Subsidiaries 34
6.6 Financial Statements 35
6.7 Liabilities and Obligations 35
6.8 Conformity with Law; Litigation 36
6.9 No Violations 36
6.10 Validity of Obligations 37
6.11 CEI Stock 37
6.12 No Side Agreements 37
6.13 Business; Real Property; Material
Agreements 37
6.14 Taxes 37
7. COVENANTS PRIOR TO CLOSING 40
7.2 Conduct of Business Pending Closing 42
7.3 Prohibited Activities 42
7.4 No Shop 44
7.5 Notice to Bargaining Agents 44
7.6 Agreements 44
7.7 Notification of Certain Matters 44
7.8 Amendment of Schedules 45
7.9 Cooperation in Preparation of
Registration Statement 47
7.10 Final Financial Statements 48
7.11 Further Assurances 48
7.12 Authorized Capital 48
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY 49
8.1 Representations and Warranties 49
8.2 Performance of Obligations 49
8.3 No Litigation 50
8.4 Opinion of Counsel 50
8.5 Registration Statement 50
8.6 Consents and Approvals 50
8.7 Good Standing Certificates 50
8.8 No Material Adverse Change 50
8.9 Closing of IPO 50
8.10 Secretary's Certificate 51
8.11 Employment Agreements 51
8.12 Release 51
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CEI AND NEWCO 51
9.1 Representations and Warranties 52
9.2 Performance of Obligation 52
9.3 No Litigation 52
9.4 Secretary's Certificate 52
9.5 No Material Adverse Change 52
9.6 STOCKHOLDERS' Release 53
9.7 Termination of Related Party Agreements 53
9.8 Opinion of Counsel 53
9.9 Consents and Approvals 53
9.10 Good Standing Certificates 53
9.11 Registration Statement 54
9.12 Employment Agreements 54
9.13 Closing of IPO 54
9.14 FIRPTA Certificate 54
10. COVENANTS OF CEI AND THE STOCKHOLDERS AFTER CLOSING 54
10.1 Release From Guarantees; Repayment of
Certain Obligations 54
10.2 Preservation of Tax and Accounting Treatment 54
10.3 Preparation and Filing of Tax Returns 54
10.4 Directors and Officers. 55
10.5 Preservation of Employee Benefit Plans 55
11. INDEMNIFICATION 56
11.1 General Indemnification by the STOCKHOLDERS 56
11.2 Indemnification by CEI 57
11.3 Third Person Claims 58
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11.4 Exclusive Remedy 60
11.5 Limitations on Indemnification 60
12. TERMINATION OF AGREEMENT 61
12.1 Termination 61
12.2 Liabilities in Event of Terminatio 62
13. NONCOMPETITION 62
13.1 Prohibited Activities 62
13.2 Damages 63
13.3 Reasonable Restraint 63
13.4 Severability; Reformation 63
13.5 Independent Covenant 64
13.6 Materiality 64
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 64
14.1 STOCKHOLDERS 64
14.2 CEI AND NEWCO 65
14.3 Damages 66
14.4 Survival 66
15. TRANSFER RESTRICTIONS 66
15.1 Transfer Restrictions 66
16. FEDERAL AND STATE SECURITIES ACT REPRESENTATIONS 67
16.1 Compliance with Law 68
16.2 Economic Risk; Sophistication 68
17. REGISTRATION RIGHTS 69
17.1 Piggyback Registration Rights 69
17.2 Demand Registration Rights 69
17.3 Registration Procedures 70
17.4 Underwriting Agreement 71
17.5 Availability of Rule 144 71
18. GENERAL 71
18.1 Cooperation 71
18.2 Successors and Assigns 72
18.3 Entire Agreement 72
18.4 Counterparts 72
18.5 Brokers and Agents 72
18.6 Expenses 72
18.7 Notices 73
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18.8 Governing Law 74
18.9 Exercise of Rights and Remedies 74
18.10 Time 74
18.11 Reformation and Severability 74
18.12 Remedies Cumulative 75
18.13 Captions 75
18.14 Amendments and Waivers 75
18.15 Survival of Representations and Warranties 75
ANNEX I FORM OF ARTICLES OF MERGER
ANNEX II CERTIFICATE OF INCORPORATION AND BYLAWS OF CEI AND NEWCO
ANNEX III CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF CEI
ANNEX VI FORM OF OPINION OF COUNSEL TO CEI
ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
May 9, 1997, by and among COLLECTIBLES USA, INC., a Delaware corporation
("CEI"), [COMPANY] ACQUISITION CORP., a Delaware corporation ("NEWCO"),
[COMPANY], a ___________ corporation (the "COMPANY"), and each of [name
stockholders of COMPANY] (the "STOCKHOLDERS"). The STOCKHOLDERS are all the
Stockholders of the COMPANY.
WHEREAS, NEWCO is a corporation duly organized and existing under the
laws of the State of Delaware, having been incorporated on May 5, 1997, solely
for the purpose of completing the transactions set forth herein, and is a
wholly-owned subsidiary of CEI;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that NEWCO merge with and into
the COMPANY pursuant to this Agreement and the applicable provisions of the laws
of the State[s] of Delaware [and ____________];
WHEREAS, CEI is entering into other separate agreements substantially
similar to this Agreement (the "Other Agreements"), each of which is entitled
"Agreement and Plan of Organization," with each of [name Founding Companies
other than COMPANY (collectively, the "Other Founding Companies")], and their
respective stockholders in order to acquire additional collectibles retailers
(the COMPANY, together with each of the Other Founding Companies, are
collectively referred to herein as the "Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO (as
hereinafter defined) of CEI Stock (as hereinafter defined) constitute the "CEI
Plan of Organization;"
WHEREAS, the Boards of Directors of CEI, NEWCO and each of the Founding
Companies have approved and adopted the CEI Plan of Organization as an
integrated plan to transfer the capital stock of the Founding Companies to CEI
and the cash raised in the IPO of CEI Stock to CEI as a transfer of property
under Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the STOCKHOLDERS and the Board of
Directors of the COMPANY and the stockholders and the boards of directors of
each of CEI and NEWCO have approved this Agreement and the transactions
contemplated hereby;
WHEREAS, unless the context otherwise requires, capitalized terms used
in this Agreement or in any schedule attached hereto and not otherwise defined
herein shall have the following meanings for all purposes of this Agreement:
"Acquired Party" has the meaning set forth in Section 5.22.
"Acquisition Companies" means NEWCO and each of the other
Delaware companies wholly-owned by CEI prior to the Funding and
Consummation Date.
"Affiliates" has the meaning set forth in Section 5.8.
"Agreement" has the meaning set forth in the first paragraph
of this Agreement.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Articles of Merger" means those Articles or Certificates of
Merger with respect to the Merger substantially in the form[s] attached
as Annex I hereto or with such changes therein as may be required by
applicable state laws.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"CEI" has the meaning set forth in the first paragraph of this
Agreement.
"CEI Charter Documents" has the meaning set forth in Section
6.1.
"CEI Documents" has the meaning set forth in Section 6.9.
"CEI Financial Statements" has the meaning set forth in
Section 6.6.
"CEI Plan of Organization" has the meaning set forth in the
fourth recital of this Agreement.
"CEI Relevant Group" has the meaning set forth in Section
6.14.
"CEI Stock" means the common stock, par value $.01 per share,
of CEI.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
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"Closing Date" has the meaning set forth in Section 4.
"Code" has the meaning set forth in the fifth recital of this
Agreement.
"COMPANY" has the meaning set forth in the first paragraph of
this Agreement.
"COMPANY Financial Statements" has the meaning set forth in
Section 5.9.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the
second recital of this Agreement.
"Demand Registration" has the meaning set forth in Section
17.2.
"Effective Time of the Merger" means the time as of which the
Merger becomes effective, which the parties hereto contemplate to occur
on the Funding and Consummation Date.
"Environmental Laws" has the meaning set forth in Section
5.13.
"ERISA" has the meaning set forth in Section 5.19.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third
recital of this Agreement.
"Founding Stockholders" has the meaning set forth in Section
17.1.
"Funding and Consummation Date" has the meaning set forth in
Section 4.
"Indemnification Threshold" has the meaning set forth in
Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section
11.3.
"Intellectual Property" means all trademarks, service marks,
trade dress, trade names, patents and copyrights and any registration
or application for any of the foregoing, and any trade secret,
invention, process, know-how, computer software, technology systems,
product design or product packaging.
"IPO" means the initial public offering of CEI Stock pursuant
to the Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section
5.1.
"Material Documents" has the meaning set forth in Section
5.23.
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"Merger" means the merger of NEWCO with and into the COMPANY
pursuant to this Agreement and the applicable provisions of the laws of
the State of Delaware [and other applicable state laws].
"NEWCO" has the meaning set forth in the first paragraph of
this Agreement.
"NEWCO Stock" means the common stock, par value $.01 per
share, of NEWCO.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
"Other Agreements" has the meaning set forth in the third
recital of this Agreement.
"Other Founding Companies" has the meaning set forth in the
third recital of this Agreement.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by CEI and the
Underwriters of the public offering price of the shares of CEI Stock in
the IPO; the parties hereto contemplate that the Pricing shall take
place on or immediately prior to the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration
statement of CEI to be filed on Form S-1 covering the shares of CEI
Stock to be issued in the IPO.
"Relevant Group" has the meaning set forth in Section 5.22(i).
"Restricted Voting Stock" means the Restricted Voting Stock,
par value $0.01 per share, of CEI.
"Returns" has the meaning set forth at the end of Section
5.22.
"Schedule" means each Schedule attached hereto, which shall
reference the relevant sections of this Agreement, on which parties
hereto disclose information as part of their respective
representations, warranties and covenants.
"SEC" means the United States Securities and Exchange
Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"STOCKHOLDERS" has the meaning set forth in the first
paragraph of this Agreement.
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"Surviving Corporation" shall mean the COMPANY as the
surviving party in the Merger.
"Tax" or "Taxes" has the meaning set forth at the end of
Section 5.22.
"Tax Losses" has the meaning set forth in Section 5.22 (xvi).
"Taxing Authority" has the meaning set forth at the end of
Section 5.22.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.6.
"Underwriters" means the prospective underwriters in the IPO,
as identified in the Registration Statement.
"Underwriting Agreement" means the Underwriting Agreement to
be dated the Closing Date between the Underwriters and the Company in
respect of the IPO.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause the Articles of Merger to be signed, verified and filed
with the Secretary of State of the State of Delaware [and the Secretary of State
of the State of __________] and stamped receipt copies of each such filing to be
delivered to CEI on or before the Funding and Consummation Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease and the COMPANY shall be
the surviving party in the Merger. The COMPANY is sometimes hereinafter referred
to as the Surviving Corporation. The Merger will be effected in a single
transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
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(i) the Certificate or Articles of Incorporation of
the COMPANY then in effect shall be the Certificate or Articles of
Incorporation of the Surviving Corporation until changed as provided by
law; (ii) the By-laws of [NEWCO] [the COMPANY] then in effect shall be
the By-laws of the Surviving Corporation until amended as provided by
law.
(ii) the By-laws of [NEWCO] [the COMPANY] then in
effect shall be the By-laws of the Surviving Corporation until amended
as provided by law.
(iii) the Board of Directors of the Surviving
Corporation shall consist of the persons who are on the Board of
Directors of the COMPANY immediately prior to the Effective Time of the
Merger, provided that _______________ shall be elected as a director of
the Surviving Corporation effective as of the Effective Time of the
Merger; the Board of Directors of the Surviving Corporation shall hold
office subject to the provisions of the laws of the State of __________
and of the Certificate of Incorporation and By-laws of the Surviving
Corporation; and
(iv) the officers of the COMPANY immediately prior to
the Effective Time of the Merger shall continue as the officers of the
Surviving Corporation in the same capacity or capacities, and effective
upon the Effective Time of the Merger _________________ shall be
appointed as a vice president of the Surviving Corporation and Xxxxx X.
Xxxxxx shall be appointed as an assistant secretary of the Surviving
Corporation, each of such officers to serve, subject to the provisions
of the Certificate or Articles of Incorporation and By-laws of the
Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, CEI AND NEWCO. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of the
COMPANY, CEI and NEWCO as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized
and outstanding capital stock of the COMPANY is as set forth on
Schedule 1.4 hereto;
(ii) immediately prior to the Funding and
Consummation Date, the authorized capital stock of CEI will consist of
30,000,000 shares of CEI Stock, of which the number of issued and
outstanding shares will be set forth in the Registration Statement,
_____
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shares of Restricted Voting Stock, of which the number of issued and
outstanding shares will be set forth in the Registration Statement, and
500,000 shares of preferred stock, $.01 par value, of which no shares
will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital
stock of NEWCO consists of 3,000 shares of NEWCO Stock, of which ten
(10) shares are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect
of the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") [and the law of
the State of __________]. Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of the COMPANY shall continue unaffected and unimpaired by the Merger
and the corporate franchises, existence and rights of NEWCO shall be merged with
and into the COMPANY, and the COMPANY, as the Surviving Corporation, shall be
fully vested therewith. At the Effective Time of the Merger, the separate
existence of NEWCO shall cease and, in accordance with the terms of this
Agreement, the Surviving Corporation shall possess all the rights, privileges,
immunities and franchises, of a public as well as of a private nature, and all
property, real, personal and mixed, and all debts due on whatever account,
including subscriptions to shares, and all Taxes, including those due and owing
and those accrued, and all other choses in action, and all and every other
interest of or belonging to or due to the COMPANY and NEWCO shall be taken and
deemed to be transferred to, and vested in, the Surviving Corporation without
further act or deed; and all property, rights and privileges, powers and
franchises and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the COMPANY and NEWCO;
and the title to any real estate, or interest therein, whether by deed or
otherwise, vested in the COMPANY and NEWCO under the laws of the state of
incorporation of each thereof, shall not revert or be in any way impaired by
reason of the Merger. Except as otherwise provided herein, the Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of the COMPANY and NEWCO and any claim existing, or action or
proceeding pending, by or against the COMPANY or NEWCO may be prosecuted as if
the Merger had not taken place, or the
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Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of the COMPANY or NEWCO shall be
impaired by the Merger, and all debts, liabilities and duties of the COMPANY and
NEWCO shall attach to the Surviving Corporation, and may be enforced against
such Surviving Corporation to the same extent as if said debts, liabilities and
duties had been incurred or contracted by the Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) CEI Stock and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and
outstanding immediately prior to the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder
thereof, automatically shall be deemed to represent, with respect to
each STOCKHOLDER, (1) the right to receive the number of shares of CEI
Stock set forth on Annex III hereto with respect to such STOCKHOLDER
and (2) the right to receive the amount of cash set forth on Annex III
hereto with respect to such STOCKHOLDER;
(ii) all shares of COMPANY Stock that are held by the
COMPANY as treasury stock shall be cancelled and retired and no shares
of CEI Stock or other consideration shall be delivered or paid in
exchange therefor; and
(iii) each share of NEWCO Stock issued and
outstanding immediately prior to the Effective Time of the Merger,
shall, by virtue of the Merger and without any action on the part of
CEI, automatically be converted into one fully paid and non-assessable
share of common stock of the Surviving Corporation which shall
constitute all of the issued and outstanding shares of common stock of
the Surviving Corporation immediately after the Effective Time of the
Merger.
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All CEI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding CEI
Stock by reason of the provisions of the Certificate of Incorporation of CEI or
as otherwise provided by the Delaware GCL. All voting rights of such CEI Stock
received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and
the STOCKHOLDERS shall not be deprived nor restricted in exercising those
rights. At the Funding and Consummation Date, CEI shall have no class of capital
stock issued and outstanding other than the CEI Stock and the Restricted Voting
Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 On the Funding and Consummation Date the STOCKHOLDERS, who are the
holders of all outstanding certificates representing shares of COMPANY Stock,
shall, upon surrender of such certificates, receive (i) the respective number of
shares of CEI Stock and (ii) the amount of cash set forth on Annex III hereto
with respect to such STOCKHOLDER. The cash payable pursuant to clause (ii) shall
be paid by wire transfer to an account designated by each STOCKHOLDER.
3.2 The STOCKHOLDERS shall deliver in trust to Xxxxxx, Xxxxx & Xxxxxxx
LLP, counsel to CEI, at the Closing the certificates representing COMPANY Stock,
duly endorsed in blank by the STOCKHOLDERS, or accompanied by stock powers duly
endorsed in blank, with signatures guaranteed by a national or state chartered
bank or other financial institution, and with all necessary Transfer Tax and
other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and
cancelled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect
to the endorsement of the stock certificates or other documents of conveyance
with respect to such COMPANY Stock or with respect to the stock powers
accompanying any COMPANY Stock. Upon consummation of the IPO and the
transactions contemplated to occur on the Funding and Consummation Date, all of
such certificates shall be deemed released by such counsel to CEI without any
further action on the part of such counsel.
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4. CLOSING
At or prior to the Pricing, the parties shall take all actions
necessary to prepare to (i) effect the Merger (including, if permitted by
applicable state law, the advance filing with the appropriate state authorities
of the Articles of Merger, which shall become effective at the Effective Time of
the Merger) and (ii) effect the conversion and delivery of shares referred to in
Section 3 hereof; provided, that such actions shall not include the actual
completion of the Merger for purposes of this Agreement or the conversion and
delivery of the shares and transmission of funds by wire referred to in Section
3 hereof, each of which actions shall only be taken upon the Funding and
Consummation Date as herein provided. In the event that there is no Funding and
Consummation Date and this Agreement terminates, CEI hereby covenants and agrees
to do all things required by Delaware law [and all things which counsel for the
COMPANY advise CEI are required by applicable laws of the State of _________] in
order to rescind any merger or other actions effected by the advance filing of
the Articles of Merger as described in this Section. The taking of the actions
described in clauses (i) and (ii) above (the "Closing") shall take place on the
closing date (the "Closing Date") at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. On the Funding and Consummation Date
(x) the Articles of Merger shall be or shall have been filed with the
appropriate state authorities so that they shall be or, as of 8:00 a.m. New York
City time on the Funding and Consummation Date, shall become effective and the
Merger shall thereby be effected, (y) all transactions contemplated by this
Agreement, including the conversion and delivery of shares, the transmission of
funds by wire in an amount equal to the cash portion of the consideration which
the STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to
in Section 3 hereof shall occur and (z) the closing with respect to the IPO
shall occur and be deemed to be completed. The date on which the actions
described in the preceding clauses (x), (y) and (z) occurs shall be referred to
as the "Funding and Consummation Date." During the period from the Closing Date
to the Funding and Consummation Date, this Agreement may only be terminated by
the parties if the underwriting agreement in respect of the IPO is terminated
pursuant to the terms of such underwriting agreement. This Agreement shall
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in any event terminate if the Funding and Consummation Date has not occurred
within 15 business days of the Closing Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) Representations and Warranties of COMPANY and STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally
represent and warrant that all of the following representations and warranties
in this Section 5(A) are true at the date of this Agreement and, subject to
Section 7.8 hereof, shall be true at the time of the Closing and the Funding and
Consummation Date, and that such representations and warranties shall survive
the Funding and Consummation Date for a period of two years (the last day of
such period being the "Expiration Date"), except that (i) the representations
and warranties set forth in Section 5.22 hereof shall survive until such time as
the statute of limitations period has run for all tax periods ended on or prior
to the Funding and Consummation Date, which shall be deemed to be the Expiration
Date for Section 5.22, and (ii) solely for purposes of Section 11.1(iii) hereof
and solely to the extent that, in connection with the IPO, CEI actually incurs
liability under the 1933 Act, the 1934 Act or any other Federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable statute of limitations period,
which shall be deemed to be the Expiration Date for such purposes. For purposes
of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and
all of its subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a material adverse effect on the business,
operations, affairs, prospects, properties, assets or condition (financial or
otherwise), of the COMPANY taken as a whole (as used herein with respect to the
COMPANY, or with respect to any other person, a "Material
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Adverse Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY
is incorporated and contains a list of all jurisdictions in which the COMPANY is
authorized or qualified to do business. True, complete and correct copies of the
Certificate or Articles of Incorporation and By-laws, each as amended, of the
COMPANY (the "Charter Documents") are all attached to Schedule 5.1. The minute
books and stock records of the COMPANY, as heretofore made available to CEI, are
correct and complete in all material respects. The most recent minutes of the
COMPANY, which are dated no earlier than ten business days prior to the date
hereof, affirm and ratify all prior acts of the COMPANY and of its officers and
directors on behalf of the COMPANY.
5.2 AUTHORIZATION. (i) The representatives of the COMPANY executing
this Agreement have the authority to enter into and bind the COMPANY to the
terms of this Agreement and (ii) the COMPANY has the full corporate right, power
and authority to enter into this Agreement and the Merger, subject to any
required approval of the shareholders and the Board of Directors of the COMPANY
described on Schedule 5.2, certified copies of which are attached thereto.
5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth in Section 1.4(i). All of the issued and outstanding
shares of capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and were offered, issued, sold and
delivered by the COMPANY in compliance with all applicable state and Federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder.
5.4 TRANSACTIONS IN CAPITAL STOCK: ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since
January 1, 1994. Except as set forth on Schedule 5.4, (i) no option, warrant,
call, conversion right or commitment
12
of any kind exists which obligates the COMPANY to issue any of its authorized
but unissued capital stock or its treasury stock; (ii) the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof; and (iii) neither the voting stock
structure of the COMPANY nor the relative ownership of shares among any of its
respective stockholders has been altered or changed in contemplation of the
Merger and/or the CEI Plan of Organization. Schedule 5.4 also includes complete
and accurate copies of all stock option or stock purchase plans, including a
list of all outstanding options, warrants or other rights to acquire shares of
the COMPANY's stock and a description of the material terms of such outstanding
options, warrants or other rights.
5.5 NO BONUS SHARES . Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Schedule 5.6 attached hereto lists the name of each
of the COMPANY's subsidiaries and sets forth the number and class of the
authorized capital stock of each of the COMPANY's subsidiaries and the number of
shares of each of the COMPANY's subsidiaries which are issued and outstanding,
all of which shares (except as set forth on Schedule 5.6) are owned beneficially
and of record by the COMPANY, free and clear of all liens, security interests,
pledges, charges, voting trusts, equities, restrictions, encumbrances and claims
of every kind. Except as set forth in Schedule 5.6, the COMPANY does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is the COMPANY,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 PREDECESSOR STATUS: ETC. Set forth on Schedule 5.7 is a list of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
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5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1994.
5.9 FINANCIAL STATEMENTS. Attached to Schedule 5.9 are copies of the
following financial statements of the COMPANY (the "COMPANY Financial
Statements"): the COMPANY's audited Consolidated Balance Sheet as of each of
December 31, 1996, 1995 and 1994 and Consolidated Statements of Income, Cash
Flows and Retained Earnings for each of the years in the three-year period ended
December 31, 1996 (December 31, 1996 being hereinafter referred to as the
"Balance Sheet Date"). Such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
5.9). Except as set forth on Schedule 5.9, such Consolidated Balance Sheets as
of December 31, 1996, 1995 and 1994 present fairly the financial position of the
COMPANY as of the dates indicated thereon, and such Consolidated Statements of
Income, Cash Flows and Retained Earnings present fairly the results of
operations and cash flows for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. (a) The COMPANY has delivered to CEI
an accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet
Date of (i) all liabilities of the COMPANY which are not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in
the COMPANY Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of the COMPANY (including but not limited to all liabilities in
excess of $10,000) and (iii) all loan agreements, indemnity or guaranty
agreements, bonds, mortgages, liens, pledges or other security agreements to
which the COMPANY is a party. Except as set forth on Schedule 5.10, since the
Balance Sheet Date, the COMPANY has not incurred any material liabilities of any
kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise, other than liabilities incurred in the
ordinary course of business.
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(b) The COMPANY has also set forth on Schedule 5.10, in the case of
those contingent liabilities related to pending or threatened litigation, or
other liabilities which are not fixed or are being contested, the following
information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount,
if any, which is likely to become payable with respect to
each such liability. If no estimate is provided, the
estimate shall for purposes of this Agreement be deemed to
be zero.
5.11 ACCOUNTS AND NOTES RECIEVABLE. The COMPANY has delivered to CEI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Within ten (10) days prior to Closing, the COMPANY shall provide
CEI (x) an accurate list of all outstanding receivables obtained subsequent to
the Balance Sheet Date and (y) an aging of all such accounts and notes
receivable showing amounts due in 30 day aging categories (the "A/R Aging
Reports"). Except to the extent reflected on Schedule 5.11 or as disclosed by
the COMPANY to CEI in a writing accompanying the A/R Aging Reports, as the case
may be, the accounts, notes and other receivables shown on Schedule 5.11 and on
the A/R Aging Reports are and shall be, and the COMPANY has no reason to believe
that any such account receivable is not or shall not be, collectible in the
amounts shown (in the case of the accounts and notes receivable set forth on
Schedule 5.11, net of reserves reflected in the Balance Sheet or in the A/R
Aging Reports).
15
5.12 INTELLECTUAL PROPERTY; PERMITS AND INTANGIBLES. (a) The COMPANY
owns or has a valid license to use all Intellectual Property used in connection
with its business, the absence of any of which is reasonably likely to have a
Material Adverse Effect, and the COMPANY has delivered to CEI an accurate list
(which is set forth on Schedule 5.12(a)) of all Intellectual Property owned or
used by the COMPANY. Except as set forth on Schedule 5.12(a), each item of
Intellectual Property owned by the COMPANY is owned free and clear of all Liens
and each other item of Intellectual Property used by the Company is licensed to
the Company pursuant to a license agreement that is valid and in full force and
effect. Except as set forth on Schedule 5.12(a), all right, title and interest
in and to each item of Intellectual Property is owned by the COMPANY and is not
subject to any license, royalty arrangement or pending or threatened claim or
dispute. None of the Intellectual Property owned or, to the COMPANY's knowledge,
none of the Intellectual Property used by the COMPANY nor any product sold by
the COMPANY, infringes any Intellectual Property right of any other entity and,
to the COMPANY's knowledge, no Intellectual Property owned by the COMPANY is
infringed upon by any other entity.
(b) The COMPANY holds all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a Material
Adverse Effect and the COMPANY has delivered to CEI an accurate list and summary
description (which is set forth on Schedule 5.12(b)) of all such licenses,
franchises, permits and other governmental authorizations, including permits,
titles, licenses, franchises and certificates (it being understood and agreed
that a list of all environmental permits and other environmental approvals is
set forth on Schedule 5.13). To the knowledge of the COMPANY, the licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12(b) and 5.13 are valid, and the COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, franchises,
permits and other governmental authorizations listed on Schedules 5.12(b) and
5.13 and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect.
16
Except as specifically provided in Schedule 5.12(a) or 5.12(b), the
transactions contemplated by this Agreement will not result in the infringement
by the COMPANY of any Intellectual Property right of any other entity or the
infringement of any Intellectual Property listed on Schedule 5.12(a), or result
in a default under or a breach or violation of, or adversely affect the rights
and benefits afforded to the COMPANY by, any licenses, franchises, permits or
government authorizations listed on Schedule 5.12(b) or Schedule 5.13.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i)
the COMPANY has complied with and is in compliance with all Federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to it or any
of its properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances including petroleum and petroleum products (as such terms
are defined in any applicable Environmental Law); (ii) the COMPANY has obtained
and adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY except as permitted by
Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to
which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which site is the subject of any Federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the COMPANY, CEI or NEWCO for any clean-up cost, remedial work, damage
to natural resources, property damage or personal injury, including, but not
limited to, any claim under the Comprehensive Environmental Response,
Compensation and Liability
17
Act of 1980, as amended; and (v) the COMPANY has no contingent liability in
connection with any release of any Hazardous Waste or Hazardous Substance into
the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to CEI an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property included
in "depreciable plant, property and equipment" (or similarly named line item) on
the balance sheet of the COMPANY as of the Balance Sheet Date or that will be
included on any balance sheet of the COMPANY prepared after the Balance Sheet
Date, (y) all other personal property owned by the COMPANY with a value
individually in excess of $10,000 (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date and (z) all leases and agreements in
respect of personal property, including, in the case of clause (z), a schedule
of the capital costs of all such assets which are subject to capital leases and
true, complete and correct copies of all such leases and agreements and, in the
case of clauses (x) and (y), an indication as to which of those assets are
currently owned, or were formerly owned, by STOCKHOLDERS or Affiliates of the
COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.14, (i) all personal
property used by the COMPANY in its business is either owned by the COMPANY or
leased by the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of
the personal property listed on Schedule 5.14 is in good working order and
condition, ordinary wear and tear excepted, and (iii) all leases and agreements
included on Schedule 5.14 are in full force and effect and constitute valid and
binding agreements of the COMPANY, and, to the COMPANY'S knowledge, of the
parties (and their successors) thereto in accordance with their respective
terms.
5.15 SIGNIFICANT CUSTOMER; MATERIAL CONTRACTS AND COMMITMENTS. The
COMPANY has delivered to CEI an accurate list (which is set forth on Schedule
5.15) of (i) all significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's revenues for the year
ending on the Balance Sheet Date. Except to the extent set forth on Schedule
5.15, none of the COMPANY's significant customers have cancelled or
substantially reduced or, to the knowledge of the COMPANY, are currently
attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the COMPANY.
18
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to purchase land),
other than contracts, commitments and agreements otherwise listed on Schedule
5.10, 5.14, 5.16, 5.18 or 5.19 (a) in existence as of the Balance Sheet Date and
(b) entered into since the Balance Sheet Date, and in each case has delivered
true, complete and correct copies of such agreements to CEI. The COMPANY has
complied with all material commitments and obligations pertaining to it, and is
not in default under any contracts or agreements listed on Schedule 5.15, and no
notice of default under any such contract or agreement has been received. The
COMPANY has also indicated on Schedule 5.15 a summary description of all plans
or projects involving the opening of new operations, expansion of existing
operations or the acquisition of any personal property, business or assets
requiring, in any event, the payment of more than $25,000 by the COMPANY.
5.16 REAL PROPERTY. Schedule 5.16(a) includes a list of all real
property owned by the COMPANY (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, and all other real property, if any, used by the
COMPANY in the conduct of its business. The COMPANY has good and insurable title
to the real property owned by it, including that reflected on Schedules 5.14 and
5.16, subject to no mortgage, pledge, lien, conditional sale agreement,
encumbrance or charge, except for:
(i) liens reflected on Schedule 5.10 or 5.15 as securing
specified liabilities (with respect to which no default by the
COMPANY exists);
(ii) liens for current taxes not yet due and payable and
assessments not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other
exceptions to title shown of
record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not
adversely affect the current use of the property.
19
Attached to Schedule 5.16(a) are true, complete and correct copies of all title
reports and title insurance policies currently in possession of the COMPANY with
respect to real property owned by the COMPANY.
Schedule 5.16(b) includes an accurate list of real property leased by
the COMPANY and an indication as to which such properties, if any, are currently
owned, or were formerly owned, by STOCKHOLDERS or Affiliates of the COMPANY or
STOCKHOLDERS, and attached to Schedule 5.16(b) are true, complete and correct
copies of all leases and agreements in respect of such real property leased by
the COMPANY. Except as set forth on Schedule 5.16(b), all of such leases
included on Schedule 5.16(b) are in full force and effect and constitute valid
and binding agreements of the COMPANY and, to the COMPANY'S knowledge, of the
parties (and their successors) thereto in accordance with their respective
terms.
5.17 INSURANCE. Set forth on and attached to Schedule 5.17 are (i) an
accurate list as of the Balance Sheet Date of all insurance policies carried by
the COMPANY, (ii) an accurate list of all insurance loss runs and workers'
compensation claims received for the past three (3) policy years and (iii) true,
complete and correct copies of all insurance policies currently in effect. Such
insurance policies evidence all of the insurance that the COMPANY is required to
carry pursuant to all of its contracts and other agreements and pursuant to all
applicable laws. All of such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Funding and
Consummation Date. No insurance carried by the COMPANY has ever been cancelled
by the insurer and the COMPANY has never been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to CEI an accurate list (which is set forth on Schedule
5.18) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the annual rate of compensation (and the portions thereof attributable to
salary, bonus and other compensation, respectively) of each of such persons (i)
for the year ended on the Balance Sheet Date and (ii) for 1997. The COMPANY has
provided to CEI true, complete and correct copies of any employment agreements
for persons listed on Schedule 5.18. Since the Balance Sheet Date, there have
been no increases in the
20
compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases implemented on a
basis consistent with past practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not bound by
or subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) no campaign to establish such representation is in
progress and (iv) there is no pending or, to the COMPANY's knowledge, threatened
labor dispute involving the COMPANY and any group of its employees nor has the
COMPANY experienced any labor interruptions over the past three years. The
COMPANY believes its relationship with employees to be good.
5.19 EMPLOYEE PLANS. The STOCKHOLDERS have delivered to CEI an accurate
schedule (which is set forth on Schedule 5.19) showing all employee benefit
plans of COMPANY, including all employment agreements and other agreements or
arrangements containing "golden parachute" or other similar provisions, and
deferred compensation agreements, together with true, complete and correct
copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.19,
COMPANY does not sponsor, maintain or contribute to any plan program, fund or
arrangement that constitutes an "employee pension benefit plan," nor has COMPANY
any obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. The COMPANY has
not sponsored, maintained or contributed to any employee pension benefit plan
other than the plans set forth on Schedule 5.19, nor is the COMPANY required to
contribute to any retirement plan pursuant to the provisions of
21
any collective bargaining agreement establishing the terms and conditions or
employment of any of COMPANY's employees.
The COMPANY is not now, nor can it as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation or to any
multiemployer employee pension benefit plan under the provisions of Title IV of
ERISA.
All employee benefit plans listed on Schedule 5.19 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations.
All accrued contribution obligations of COMPANY with respect to any
plan listed on Schedule 5.19 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.20 COMPLIANCE WITH ERISA. All such plans listed on Schedule 5.19 that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the Code
are, and have been so qualified and have been determined by the Internal Revenue
Service to be so qualified, and copies of such determination letters are
included as part of Schedule 5.19 hereof. Except as disclosed on Schedule 5.19,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or tax returns) have been timely filed or
distributed, and copies thereof are included as part of Schedule 5.19 hereof.
Neither STOCKHOLDERS, nor any plan listed in Schedule 5.19, nor COMPANY has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such Plan listed in Schedule 5.19 has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and COMPANY has not incurred any liability for
excise tax or penalty due to the Internal Revenue Service nor any liability to
the Pension Benefit Guaranty Corporation. The STOCKHOLDERS further represent
that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and
approval by the Internal Revenue Service;
22
(ii) no such plan listed in Schedule 5.19 subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase
is defined in Section 4043 of ERISA) with respect to any such plan
listed in Schedule 5.19;
(iv) COMPANY has not incurred liability under Section 4062 of
ERISA; and
(v) No circumstances exist pursuant to which the COMPANY could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise
tax or penalty, or being subject to any statutory lien to secure
payment of any such liability) with respect to any plan now or
heretofore maintained or contributed to by any entity other than the
COMPANY that is, or at any time was, a member of a "controlled group"
(as defined in Section 412(n)(6)(B) of the Code) that includes the
COMPANY;
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or 5.13, the COMPANY is not in violation of any law or regulation
which violation would have a Material Adverse Effect, or of any order of any
court or Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any of them;
and except to the extent set forth on Schedule 5.21, 5.10 or 5.13, there are no
claims, actions, suits or proceedings, pending or, to the knowledge of the
COMPANY, threatened, against or affecting the COMPANY, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over it
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in applicable Federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including all
such permits, licenses, orders and other governmental approvals set forth on
Schedules 5.12 and 5.13, and is not in violation of any of the foregoing.
5.22 TAXES. Except as set forth on Schedule 5.22:
23
(i) All Returns required to have been filed by or with respect to
the COMPANY and any affiliated, combined, consolidated, unitary or
similar group of which the COMPANY is or was a member (a "Relevant
Group") with any Taxing Authority have been duly filed, and each such
Return correctly and completely reflects the Tax liability and all
other information required to be reported thereon. All Taxes (whether
or not shown on any Return) owed by the COMPANY, any subsidiary and
any member of a Relevant Group (individually, the "Acquired Party" and
collectively, the "Acquired Parties") have been paid.
(ii) To the knowledge of the COMPANY and the STOCKHOLDERS, the
provisions for Taxes to be paid by the COMPANY and any subsidiaries
(as opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the COMPANY
Financial Statements are sufficient for all unpaid Taxes, being
current taxes not yet due and payable, of such Acquired Party.
(iii) No Acquired Party is a party to any agreement extending the
time within which to file any Return. No claim has ever been made by
any Taxing Authority in a jurisdiction in which an Acquired Party does
not file Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all applicable
Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period.
There is no dispute or claim concerning any Tax liability of any
Acquired Party either (i) claimed or raised by any Taxing Authority or
(ii) otherwise known to any Acquired Party. No issues have been raised
in any examination by any Taxing Authority with respect to any
Acquired Party which, by application of similar principles, reasonably
could be expected to result in a proposed deficiency for any other
period not so examined. Schedule 5.22(v) attached hereto lists all
federal, state, local and foreign income Tax Returns filed by or with
respect to any Acquired Party for all taxable periods ended on or
after January 1, 1991, indicates those Returns, if any, that have been
audited, and indicates those Returns that currently are the subject of
audit. Each Acquired Party has delivered to CEI complete and correct
copies of all federal, state, local and foreign income Tax Returns
filed by, and all Tax examination reports and statements of
deficiencies assessed against or agreed to by, such Acquired Party
since January 1, 1991.
24
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
any Tax assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(viii) No Acquired Party is a party to any Tax allocation or
sharing agreement.
(ix) None of the assets of any Acquired Party constitutes
tax-exempt bond financed property or tax-exempt use property, within
the meaning of Section 168 of the Code. No Acquired Party is a party
to any "safe harbor lease" that is subject to the provisions of
Section 168(f)(8) of the Internal Revenue Code as in effect prior to
the Tax Reform Act of 1986, or to any "long-term contract" within the
meaning of Section 460 of the Code.
(x) No Acquired Party is a "consenting corporation" within the
meaning of Section 341(f)(1) of the Code, or comparable provisions of
any state statutes, and none of the assets of any Acquired Party is
subject to an election under Section 341(f) of the Code or comparable
provisions of any state statutes.
(xi) No Acquired Party is a party to any joint venture,
partnership or other arrangement that is treated as a partnership for
federal income Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any Acquired Party that could
give rise to an adjustment under Section 481 of the Code for periods
after the Funding and Consummation Date.
(xiii) No Acquired Party has received any written ruling of a
Taxing Authority related to Taxes or entered into any written and
legally binding agreement with a Taxing Authority relating to Taxes.
25
(xiv) Each Acquired Party has disclosed (in accordance with
Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of
Section 6662(d) of the Code.
(xv) No Acquired Party has any liability for Taxes of any person
other than such Acquired Party (i) under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or
foreign law), (ii) as a transferee or successor, (iii) by contract or
(iv) otherwise.
(xvi) There currently are no limitations on the utilization of
the net operating losses, built-in losses, capital losses, Tax credits
or other similar items of any Acquired Party (collectively, the "Tax
Losses") under (i) Section 382 of the Code, (ii) Section 383 of the
Code, (iii) Section 384 of the Code, (iv) Section 269 of the Code, (v)
Section 1.1502-15 and Section 1.1502-15A of the Treasury regulations,
(vi) Section 1.1502-21 and Section 1.1502-21A of the Treasury
regulations or (vii) Sections 1.1502-91 through 1.1502-99 of the
Treasury regulations, in each case as in effect both prior to and
following the Tax Reform Act of 1986.
(xvii) At the Balance Sheet Date, the Acquired Parties had
aggregate Tax Losses for federal income Tax purposes as described on
Schedule 5.22(xvii) attached hereto.
(xviii) The COMPANY is not an investment company as defined in
Section 351(e)(1) of the Code.
(xix) The fair market value of the assets of the COMPANY exceeds
the sum of its liabilities, plus the amount of liabilities, if any, to
which the assets are subject.
(xx) The COMPANY is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 351(e)(2) of
the Code.
For purposes of this Section 5.22, the following definitions
shall apply:
"Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax
with any Taxing Authority or governmental agency.
26
"Tax" or "Taxes" means all Federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, deed, stamp, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges of any
nature whatsoever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any governmental agency, board,
bureau, body, department or authority of any United States federal, state or
local jurisdiction or any foreign jurisdiction, having jurisdiction with respect
to any Tax.
5.23 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Except as set forth on Schedule 5.23, neither the COMPANY nor, to the
knowledge of the COMPANY or the STOCKHOLDERS, any other party thereto, is in
default under any lease, instrument, agreement, license, or permit set forth on
Schedule 5.12, 5.13, 5.14, 5.15, 5.16, 5.18 or 5.19 or any other material
agreement to which it is a party or by which its properties are bound (the
"Material Documents"); and, except as set forth on Schedule 5.23, (a) the rights
and benefits of the COMPANY under the Material Documents will not be adversely
affected by the transactions contemplated hereby and (b) the execution of this
Agreement and the performance by the COMPANY and the STOCKHOLDERS of their
obligations hereunder and the consummation by the COMPANY and the STOCKHOLDERS
of the transactions contemplated hereby will not result in any violation or
breach of, or constitute a default under, any of the terms or provisions of the
Material Documents or the Charter Documents. Except as set forth on Schedule
5.23, none of the Material Documents requires notice to, or the consent or
approval of, any governmental agency or other third party with respect to any of
the transactions contemplated hereby in order to remain in full force and effect
and consummation of the transactions contemplated hereby will not give rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit. Except as set forth on Schedule 5.23, none of the Material Documents
prohibits the use or publication by the COMPANY, CEI or NEWCO of the name of any
other party to such Material Document, and none of the Material Documents
27
prohibits or restricts the COMPANY from freely providing services to any other
customer or potential customer of the COMPANY, CEI, NEWCO or any Other Founding
Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
COMPANY is not a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business
of the COMPANY;
(iii) any change in the authorized capital of the COMPANY or the
outstanding securities issued by the Company or any change in the
classes, preferences or other rights defining the ownership interests
in the Company or any grant or issuance of any options, warrants,
calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of the
COMPANY;
(v) any increase in the compensation, bonus, sales commissions or
fees payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely
affecting the business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the COMPANY to any person,
including, without limitation, the STOCKHOLDERS and their affiliates;
28
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including, without
limitation, any indebtedness or obligation of any STOCKHOLDERS or any
affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets,
property or rights of the COMPANY or requiring consent of any party to
the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY,
provided that the COMPANY may negotiate and adjust bills in the course
of good faith disputes with customers in a manner consistent with past
practice, provided, further, that such adjustments shall not be deemed
to be included on Schedule 5.11 unless specifically listed thereon;
(xii) any material breach, amendment or termination of any
contract, agreement, license, permit or other right to which the
COMPANY is a party or as to which it is a beneficiary;
(xiii) any transaction by the COMPANY outside the ordinary course
of its respective businesses;
(xiv) any cancellation or termination of a material contract with
a customer or client prior to the scheduled termination date;
(xv) any other distribution of property or assets by the COMPANY;
or
(xvi) any other activity prohibited by Section 7.3 that is not
specifically included in this Section 5.25.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to
CEI an accurate schedule (which is set forth on Schedule 5.26) as of the date of
this Agreement of:
(i) the name of each financial institution in which the COMPANY
has accounts or safe deposit boxes;
29
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the COMPANY and
a description of the terms of such power of attorney.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the COMPANY and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
COMPANY and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the COMPANY.
5.28 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has it otherwise taken any action which
would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 DISCLOSURE. (a) This Agreement, including the schedules hereto,
together with the completed Directors and Officers Questionnaires and
Registration Statement Questionnaires attached hereto as Schedule 5.29 and all
other documents and information made available to CEI and its representatives in
writing pursuant hereto or thereto, fairly present the business and operations
of the COMPANY for the time periods with respect to which such information was
requested. The COMPANY'S rights under the documents delivered pursuant hereto
would not be materially adversely affected by, and no statement made herein
would be rendered untrue in any material respect by, any other document to which
the COMPANY is a party, or to which its properties are subject, or by any other
fact or circumstance regarding the COMPANY (which fact or circumstance was, or
should reasonably, after due inquiry, have been known to the COMPANY) that is
not disclosed pursuant hereto or thereto. If, prior to the 25th day after the
date of the final prospectus of CEI utilized in connection with the IPO, the
COMPANY or the STOCKHOLDERS become aware of any fact or circumstance which would
change (or, if after
30
the Funding and Consummation Date, would have changed) a representation or
warranty of COMPANY or STOCKHOLDERS in this Agreement or would affect any
document delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to CEI.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of CEI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of the
STOCKHOLDERS at the date of this Agreement and on the Closing Date and on the
Funding and Consummation Date, shall be a precondition to the consummation of
this transaction.
(b) The COMPANY and the STOCKHOLDERS acknowledge and
agree (i) that there exists no firm commitment, binding agreement, or promise or
other assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; (ii) that neither CEI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all;
and (iii) that the decision of the STOCKHOLDERS to enter into this Agreement, or
to vote in favor of or consent to the proposed Merger, has been or will be made
independent of, and without reliance upon, any statements, opinions or other
communications, or due diligence investigations which have been or will be made
or performed by any prospective Underwriter, relative to CEI or the prospective
IPO.
5.30 PROHIBITED ACTIVITES. Except as set forth on Schedule 5.30, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section
31
7.8 hereof, shall be true at the time of the Closing and on the Funding and
Consummation Date, and that the representations and warranties set forth in
Sections 5.31, 5.32 and 5.33 shall survive until the second anniversary of the
Funding and Consummation Date, which shall be deemed to be the Expiration Date
for purposes of those Sections.
5.31 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex IV as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.31, such COMPANY Stock is owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind.
5.32 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby
waives, any preemptive or other right to acquire shares of COMPANY Stock or CEI
Stock that such STOCKHOLDER has or may have had other than rights of any
STOCKHOLDER to acquire CEI Stock pursuant to (i) this Agreement or (ii) any
option granted by CEI.
5.33 NO INTENTION TO DISPOSE OF CEI STOCK. No STOCKHOLDER has any
current plan or intention, or is under any binding commitment or contract, to
sell, exchange or otherwise dispose of shares of CEI Stock received pursuant to
Section 3.1.
5.34 TRANSACTIONS WITH DIRECTORS OFFICERS AND AFFILIATES. Except as
listed on Schedule 5.34 annexed hereto, there have been no transactions since
January 1, 1992 between the COMPANY and any of its directors, officers,
stockholders or affiliates or any of their Family Members (as defined below)
involving $60,000 or more. Each transaction set forth on Schedule 5.34 has been
on reasonable commercial terms which could have been obtained at the time from
bona fide third parties. To the best knowledge of the COMPANY, since January 1,
1992, none of the officers or directors of the COMPANY or any spouse or Family
Member (as defined below) of any of such persons, has been a director, officer
or consultant of, or owns directly or indirectly any interest in, any firm,
corporation, association or business enterprise which during such period has
been a significant supplier, customer or sales agent of the COMPANY or has
competed with or been engaged in any business of the kind being conducted by the
COMPANY except as disclosed on Schedule 5.34 annexed hereto. Except as disclosed
on Schedule 5.34, no
32
Family Member (as defined below) of any STOCKHOLDER, officer or director of the
COMPANY is currently an employee or consultant receiving payments from the
COMPANY or otherwise on the payroll of the COMPANY or has any material claim
whatsoever against or owes any amount to the COMPANY, except for claims in the
ordinary course of business such as for accrued vacation pay and accrued
benefits under employee benefit plans. "Family Member" shall mean all relatives
and their spouses in a relationship of first cousins or closer.
6. REPRESENTATIONS OF CEI AND NEWCO
CEI and NEWCO jointly and severally represent and warrant that all of
the following representations and warranties in this Section 6 are true at the
date of this Agreement and, subject to Section 7.8 hereof, shall be true at the
time of the Closing and the Funding and Consummation Date, and that such
representations and warranties shall survive the Funding and Consummation Date
for a period of two years (the last day of such period being the "Expiration
Date"), except that (i) the warranties and representations set forth in Section
6.14 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Funding and Consummation Date, which
shall be deemed to be the Expiration Date for Section 6.14 and (ii) solely for
purposes of Section 11.2(iv) hereof, and solely to the extent that in connection
with the IPO, CEI actually incurs liability under the 1933 Act, the 1934 Act or
any other Federal or state securities laws, the representations and warranties
set forth herein shall survive until the expiration of any applicable
limitations period, which shall be deemed to be the Expiration Date for such
purposes.
6.1 DUE ORGANIZATION. CEI and NEWCO are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective business in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect. True, complete and correct copies of the
Certificate of Incorporation and By-laws, each as amended, of CEI and NEWCO (the
"CEI Charter Documents") are all attached hereto as Annex II.
33
6.2 AUTHORIZATION. (i) The respective representatives of CEI and NEWCO
executing this Agreement have the authority to enter into and bind CEI and NEWCO
to the terms of this Agreement and (ii) CEI and NEWCO have the full corporate
right, power and authority to enter into this Agreement and the Merger.
6.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of CEI
and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of
the issued and outstanding shares of the capital stock of NEWCO are owned by CEI
and all of the issued and outstanding shares of the capital stock of CEI are
owned by the persons set forth on Annex V hereof, in each case, free and clear
of all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the capital stock of CEI and NEWCO have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by CEI and the persons set forth on Annex V, respectively, and further, such
shares were offered, issued, sold and delivered by CEI and NEWCO in compliance
with all applicable state and Federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of CEI or NEWCO.
6.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 6.4 of this Agreement, and as set forth in the
Registration Statement, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates CEI or NEWCO to issue any of its
authorized but unissued capital stock or its treasury stock; and (ii) neither
CEI nor NEWCO has any obligation (contingent or otherwise) to purchase, redeem
or otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4 also
includes complete and accurate copies of all stock option or stock purchase
plans of CEI and NEWCO, including a list, accurate as of the date hereof, of all
outstanding options, warrants or other rights to acquire shares of their
respective capital stock.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. CEI has no subsidiaries
except for NEWCO and each of the companies identified as "NEWCO" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither CEI nor
NEWCO owns, of record or
34
beneficially, or controls, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is CEI or NEWCO, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. (a) Attached hereto as Schedule 6.6(a) are
copies of the following financial statements of CEI (the "CEI Financial
Statements"), which reflect the results of its operations from inception: CEI's
audited Balance Sheet as of December 31, 1996 and Statements of Income, Cash
Flows and Retained Earnings for the period from inception through December 31,
1996. Such CEI Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted thereon or on Schedule
6.6(a)). Except as set forth on Schedule 6.6(a), such Balance Sheets as of
December 31, 1996 present fairly the financial position of CEI as of such date,
and such Statements of Income, Cash Flows and Retained Earnings present fairly
the results of operations for the period indicated.
(b) Attached hereto as Schedule 6.6(b) are copies of the following
unaudited pro forma combined financial statements for CEI and the Founding
Companies (the "Pro Forma Financial Statements"): combined Balance Sheets as of
December 31, 1995 and December 31, 1996 and Statements of Income, Cash Flows and
Retained Earnings for the years ended December 31, 1994, 1995 and 1996. Such Pro
Forma Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated (except as noted thereon or on Schedule 6.6(b)). Except as set
forth on Schedule 6.6(b), such Balance Sheets, as of the dates thereof, present
fairly the financial position of CEI and the Founding Companies, and such
Statements of Income, Cash Flows and Retained Earnings present fairly the
results of operations for the periods indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7,
CEI and NEWCO have no material liabilities, contingent or otherwise, except as
set forth in or contemplated by this Agreement and the Other Agreements and
except for fees and expenses incurred in connection with the transactions
contemplated hereby and thereby.
35
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither CEI nor NEWCO is in violation of any law or regulation
which violation would have a Material Adverse Effect, or of any order of any
court or Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over either of
them; and except to the extent set forth in Schedule 6.8, there are no material
claims, actions, suits or proceedings, pending or, to the knowledge of CEI or
NEWCO, threatened, against or affecting CEI or NEWCO, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
either of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. CEI and NEWCO have conducted and are
conducting their respective businesses in compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and are not in violation of any of the foregoing.
6.9 NO VIOLATION. Neither CEI nor NEWCO is in violation of any CEI
Charter Document. None of CEI, NEWCO, or, to the knowledge of CEI and NEWCO, any
other party thereto, is in default under any lease, instrument, agreement,
license, or permit to which CEI or NEWCO is a party, or by which CEI or NEWCO,
or any of their respective properties, are bound (collectively, the "CEI
Documents"); and (a) the rights and benefits of CEI and NEWCO under the CEI
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of CEI's and NEWCO's
obligations hereunder and the consummation by them of the transactions
contemplated hereby will not result in any violation or breach or constitute a
default under, any of the terms or provisions of the CEI Documents or the CEI
Charter Documents. Except as set forth on Schedule 6.9, none of the CEI
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect and the consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit of CEI or NEWCO.
36
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by CEI and NEWCO and the performance by them of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of CEI and NEWCO and this Agreement has been duly and
validly authorized by all necessary corporate action and is a legal, valid and
binding obligation of CEI and NEWCO.
6.11 CEI STOCK. At the time of issuance thereof, the CEI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of CEI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the CEI Stock
issued and outstanding as of the date hereof by reason of the provisions of the
Delaware GCL. The shares of CEI Stock to be issued to the STOCKHOLDERS pursuant
to this Agreement will not be registered under the 1933 Act, except as provided
in Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Except with respect to the Schedules and the
merger consideration payable at the Effective Time of the Merger, the Other
Agreements are substantially identical to this Agreement in all material
respects. Neither CEI nor NEWCO has entered or will enter into any agreement
with any of the Founding Companies or any of the stockholders of the Founding
Companies or CEI other than the Other Agreements and the agreements contemplated
by each of the Other Agreements, including the employment agreements referred to
therein.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. Neither CEI nor
NEWCO has conducted any operations or business since inception other than
activities related to the CEI Plan of Organization. Neither CEI nor NEWCO owns
or has at any time owned any real property or any material personal property or
is a party to any other agreement, except as listed on Schedule 6.13 and except
that CEI is a party to the Other Agreements and the agreements contemplated
thereby and to certain agreements which will be filed as Exhibits to the
Registration Statement.
6.14 TAXES. NEWCO is a newly formed entity which has no tax or
operational history. Except as set forth on Schedule 6.14:
(i) All Returns required to have been filed by or with respect to
CEI and any affiliated, combined, consolidated, unitary or similar
group of which CEI is or was a
37
member (a "CEI Relevant Group") with any Taxing Authority have been
duly filed, and each such Return correctly and completely reflects the
Tax liability and all other information required to be reported
thereon. All Taxes (whether or not shown on any Return) owed by the
CEI Relevant Group have been paid.
(ii) The provisions for Taxes due by CEI and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) in the CEI Financial
Statements are sufficient for all unpaid Taxes, being current taxes
not yet due and payable, of the CEI Relevant Group.
(iii) No corporation in the CEI Relevant Group is a party to any
agreement extending the time within which to file any Return. No claim
has ever been made by any Taxing Authority in a jurisdiction in which
a corporation in the CEI Relevant Group does not file Returns that it
is or may be subject to taxation by that jurisdiction.
(iv) Each corporation in the CEI Relevant Group has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(v) No corporation in the CEI Relevant Group expects any Taxing
Authority to assess any additional Taxes against or in respect of it
for any past period. There is no dispute or claim concerning any Tax
liability of any corporation in the CEI Relevant Group either (i)
Claimed or raised by any Taxing Authority or (ii) otherwise known to
any corporation in the CEI Relevant Group. No issues have been raised
in any examination by any Taxing Authority with respect to any
corporation in the CEI Relevant Group which, by application of similar
principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined. Schedule 6.14(v)
attached hereto lists all federal, state, local and foreign income Tax
Returns filed by or with respect to any corporation in the CEI
Relevant Group for all taxable periods, indicates those Returns, if
any, that have been audited, and indicates those Returns that
currently are the subject of audit. Each corporation in the CEI
Relevant Group will make available to the STOCKHOLDERS, at their
request, complete and correct copies of all federal,
38
state, local and foreign income Tax Returns filed by, and all Tax
examination reports and statements of deficiencies assessed against or
agreed to by, CEI.
(vi) No corporation in the CEI Relevant Group has waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency.
(vii) No corporation in the CEI Relevant Group has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could require it to make
any payments, that are not deductible under Section 280G the Code.
(viii) No corporation in the CEI Relevant Group is a party to any
Tax allocation or sharing agreement.
(ix) None of the assets of any corporation in the CEI Relevant
Group constitutes tax-exempt bond financed property or tax-exempt use
property, within the meaning of Section 168 of the Code. No
corporation in the CEI Relevant Group is a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the
Internal Revenue Code as in effect prior to the Tax Reform Act of
1986, or to any "long-term contract" within the meaning of Section 460
of the Code.
(x) No corporation in the CEI Relevant Group is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code, or
comparable provisions of any state statutes, and none of the assets of
any corporation in the CEI Relevant Group is subject to an election
under Section 341(f) of the Code or comparable provisions of any state
statutes.
(xi) No corporation in the CEI Relevant Group is a party to any
joint venture, partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.
(xii) There are no accounting method changes or proposed or
threatened accounting method changes, of any corporation in the CEI
Relevant Group that could give rise to an adjustment under Section 481
of the Code for periods after the Funding and Consummation Date.
39
(xiii) No corporation in the CEI Relevant Group has received any
written ruling of a Taxing Authority related to Taxes or entered into
any written and legally binding agreement with a Taxing Authority
relating to Taxes.
(xiv) Each corporation in the CEI Relevant Group has disclosed
(in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Section 6662(d) of the Code.
(xv) No corporation in the CEI Relevant Group has any liability
for Taxes of any person other than such corporation in the CEI
Relevant Group (i) under Section 1.1502-6 of the Treasury regulations
(or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(xvi) There currently are no limitations on the utilization of
the net operating losses, built-in losses, capital losses, Tax credits
or other similar items of any corporation in the CEI Relevant Group
under (i) Section 382 of the Code, (ii) Section 383 of the Code, (iii)
Section 384 of the Code, (iv) Section 269 of the Code, (v) Section
1.1502-15 and Section 1.1502-15A of the Treasury regulations, (vi)
Section 1.1502-21 and Section 1.1502-21A of the Treasury regulations
or (vii) sections 1.1502-91 through 1.1502-99 of the Treasury
regulations, in each case as in effect both prior to and following the
Tax Reform Act of 1986.
(xvii) Neither CEI nor NEWCO is an investment company as defined
in Section 351(e)(1) of the Code.
(xviii) Neither CEI nor NEWCO is under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
351(e)(2) of the Code.
After giving effect to the Merger, the fair saleable value of the
business and assets of CEI and its subsidiaries will be in excess of the amount
that will be required to pay its principal liabilities on existing debts as they
become due and payable in accordance with their terms.
7. COVENANTS PRIOR TO CLOSING
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7.1 ACCESS AND COOPERATION; DUE DILIGENCE.(a) Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will afford to the
officers and authorized representatives of CEI and the Other Founding Companies
reasonable access, during normal business hours, to all of the COMPANY's sites,
properties, books and records and will furnish CEI with such additional
financial and operating data and other information as to the business and
properties of the COMPANY as CEI or the Other Founding Companies may from time
to time reasonably request. The COMPANY will cooperate with CEI and the Other
Founding Companies and their respective representatives, including CEI's
auditors and counsel, in the preparation of any documents or other material
(including the Registration Statement) which may be required in connection with
the transactions contemplated by this Agreement. CEI, NEWCO, the STOCKHOLDERS
and the COMPANY will treat all information obtained in connection with the
negotiation and performance of this Agreement or the due diligence
investigations conducted with respect to the Other Founding Companies as
confidential in accordance with the provisions of Section 14 hereof. In
addition, CEI will cause each of the Other Agreements, binding each of the Other
Founding Companies, to contain a provision similar to this Section 7.1 and a
provision similar to Section 14 requiring each such Other Founding Company, its
stockholders, directors, officers, representatives, employees and agents to keep
confidential any information obtained by such Other Founding Company and to
provide the COMPANY with reasonable access and information as will be provided
by the COMPANY pursuant to this Section 7.1(a).
(b) Between the date of this Agreement and the Funding and Consummation
Date, CEI will afford to the officers and authorized representatives of the
COMPANY access to all of CEI's and NEWCO's sites, properties, books and records
and will furnish the COMPANY with such additional financial and operating data
and other information as to the business and properties of CEI and NEWCO as the
COMPANY may from time to time reasonably request. CEI and NEWCO will cooperate
with the COMPANY, its representatives, auditors and counsel in the preparation
of any documents or other material which may be required in connection with the
transactions contemplated by this Agreement. The COMPANY will cause all
information
41
obtained in connection with the negotiation and performance of this Agreement to
be treated as confidential in accordance with the provisions of Section 14
hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will, except as set
forth on Schedule 7.2:
(i) carry on its business in the ordinary course substantially as
conducted heretofore and not introduce any new method of management,
operation or accounting;
(ii) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under
agreements relating to or affecting its assets, properties or rights;
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(v) maintain and preserve its business organization intact and
use its best efforts to retain its present key employees and
relationships with suppliers, customers and others having business
relations with the COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments in accordance
with their respective terms and not enter into new or amended debt or
lease instruments, provided that debt and/or lease instruments may be
replaced if such replacement instruments are on terms at least as
favorable to the COMPANY as the instruments being replaced; and
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents, except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Funding and Consummation Date, the COMPANY will not,
without prior written consent of CEI:
(i) make any change in its Articles or Certificate of
Incorporation or By-laws;
42
(ii) grant or issue any securities, options, warrants, calls,
conversion rights or commitments of any kind relating to its
securities of any kind other than in connection with the exercise of
options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or
purchase, redeem or otherwise acquire or retire for value any shares
of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditure, except if it is
in the ordinary course of business (consistent with past practice) and
involves an amount not in excess of $10,000;
(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of $10,000 necessary or desirable for the
conduct of the business of the COMPANY, (2) (A) liens for taxes either
not yet due or being contested in good faith and by appropriate
proceedings (and for which adequate reserves have been established and
are being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary
course of business (the liens set forth in clause (2) being referred
to herein as "Statutory Liens"), or (3) liens set forth on Schedule
5.10 or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business;
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(ix) waive any material right or claim of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past
practice, provided, further, that such
43
adjustments shall not be deemed to be included on Schedule 5.11 unless
specifically listed thereon;
(x) commit a material breach or amend or terminate any material
contract, agreement, permit, license or other right to which the
COMPANY is a party or as to which it is a beneficiary; or
(xi) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 NO SHOP . None of the STOCKHOLDERS or the COMPANY, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Funding and Consummation Date or the termination of this
Agreement in accordance with its terms, directly or indirectly: solicit or
initiate the submission of proposals or offers from any person for, participate
in any discussion pertaining to, or furnish any information to any person other
than CEI or its authorized agents relating to, any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in, the
COMPANY or a merger, consolidation or business combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements. Set forth on
Schedule 7.5 is a copy of such required notice, as sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate (i)
any stockholders' agreements, voting agreements, voting trusts, options,
warrants and employment agreements between the COMPANY and any employee listed
on Schedule 9.12 hereto (other than the new employment agreements contemplated
by Section 9.12) and (ii) any existing agreement between the COMPANY and any
STOCKHOLDER, on or prior to the Funding and Consummation Date. A list of such
termination agreements is set forth on Schedule 7.6 and copies of each such
agreement are attached thereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY
shall give prompt notice to CEI of (i) the occurrence or non-occurrence of any
event the
44
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder. CEI and NEWCO shall give prompt notice to the COMPANY
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
of CEI or NEWCO contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing and (ii) any material failure of CEI or NEWCO
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 7.7 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. (a) Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Funding and
Consummation Date to supplement or amend promptly the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules, provided however, that supplements and amendments to
Schedules 5.10, 5.11, 5.14 and 5.15 shall only have to be delivered at the
Closing Date, unless such Schedule is to be amended to reflect an event
occurring other than in the ordinary course of business.
(b) Until 24 hours prior to the anticipated effectiveness of the
Registration Statement, and notwithstanding the foregoing clause (a), the
provisions of this clause (b) shall apply: no amendment or supplement to a
Schedule prepared by the COMPANY or the STOCKHOLDERS that constitutes or
reflects an event or occurrence that would have a Material Adverse Effect may be
made unless CEI and a majority of the Founding Companies other than the COMPANY
consent to such amendment or supplement; and provided further, that no
45
amendment or supplement to a Schedule prepared by CEI or NEWCO that constitutes
or reflects an event or occurrence that would have a Material Adverse Effect may
be made unless a majority of the Founding Companies consent to such amendment or
supplement. In the event that one of the Other Founding Companies seeks to amend
or supplement a Schedule pursuant to Section 7.8 of one of the Other Agreements,
and such amendment or supplement constitutes or reflects an event or occurrence
that would have a Material Adverse Effect on such Other Founding Company, CEI
shall give the COMPANY notice promptly after it has knowledge thereof. If CEI
and a majority of the Founding Companies consent to such amendment or
supplement, which consent shall have been deemed given by CEI or any Founding
Company if no response is received from CEI or any such Founding Company within
24 hours following receipt of notice of such amendment or supplement (or sooner
if required by the circumstances under which such consent is requested), but the
COMPANY does not give its consent, the COMPANY may terminate this Agreement
pursuant to Section 12.1(iv) hereof. In the event that the COMPANY seeks to
amend or supplement a Schedule pursuant to this Section 7.8 and CEI and a
majority of the Other Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. In the event that CEI or NEWCO seeks to amend
or supplement a Schedule pursuant to this Section 7.8 and a majority of the
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof.
(c) Between 24 hours prior to the anticipated effectiveness of the
Registration Statement and the Funding and Consummation Date, the provisions of
this clause (c) shall apply. No amendment or supplement to a Schedule prepared
by the COMPANY or the STOCKHOLDERS that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless CEI
consents to such amendment or supplement after consultation with the
Underwriters. CEI and NEWCO hereby covenant that neither CEI nor NEWCO will
amend or supplement any Schedule prepared by CEI or NEWCO that constitutes or
reflects an event or occurrence that would have a Material Adverse Effect on CEI
or NEWCO, as the case may be,
46
without consulting with the Underwriters, and CEI shall provide immediate notice
of such amendment or supplement to the Founding Companies.
(d) For all purposes of this Agreement, including without limitation
for purposes of determining whether the conditions set forth in Sections 8.1 and
9.1 have been fulfilled, the Schedules hereto shall be deemed to be the
Schedules as amended or supplemented pursuant to this Section 7.8. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 7.8, except that,
notwithstanding anything to the contrary contained in this Agreement, if the
COMPANY or the STOCKHOLDERS on the one hand, or CEI or NEWCO on the other hand,
amends or supplements a Schedule which results in a termination of this
Agreement and such amendment or supplement arises out of or reflects facts or
circumstances which such party knew about at the time of execution of this
Agreement and knew would result in a termination of this Agreement or if such
amendment or supplement otherwise is proposed in bad faith, such party shall pay
or reimburse CEI or the COMPANY and the STOCKHOLDERS, as the case may be, for
all of the legal, accounting and other out of pocket costs reasonably incurred
in connection with this Agreement and the IPO as it relates to CEI, the COMPANY
and the STOCKHOLDERS.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY
and STOCKHOLDERS shall furnish or cause to be furnished to CEI and the
Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS
requested by CEI or the Underwriters for inclusion in, and will cooperate with
CEI and the Underwriters in the preparation of, the Registration Statement and
the prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement). The
COMPANY and the STOCKHOLDERS agree promptly to advise CEI if at any time during
the period in which a prospectus relating to the offering is required to be
delivered under the Securities Act, any information contained in the prospectus
concerning the COMPANY or the STOCKHOLDERS contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and to provide the
information needed to correct such inaccuracy. Insofar as the information
relates solely to the
47
COMPANY or the STOCKHOLDERS, the COMPANY represents and warrants as to such
information with respect to itself, and each STOCKHOLDER represents and
warrants, as to such information with respect to the COMPANY and himself or
herself, that the Registration Statement at its effective date, at the date of
the Final Prospectus (as defined in the Underwriting Agreement), the Preliminary
Prospectus (as defined in the Underwriting Agreement), and each amendment to the
Registration Statement, and at each closing date with respect to the IPO under
the Underwriting Agreement (including with respect to any over-allotment option)
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
7.10 FINAL FINANCIAL STATMENTS. The COMPANY shall provide prior to the
Funding and Consummation Date, and CEI shall have had sufficient time prior
thereto to review, the unaudited consolidated balance sheets of the COMPANY as
of the end of each fiscal quarter following the Balance Sheet Date that ends at
least 45 days prior to the Funding and Consummation Date, and the unaudited
consolidated statements of income, cash flows and retained earnings of the
COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing
no material adverse change in the financial condition of the COMPANY or the
results of its operations from the financial statements as of the Balance Sheet
Date. Such financial statements shall have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted therein). Except as noted in
such financial statements, all of such financial statements will present fairly
the results of operations of the COMPANY for the periods indicated thereon.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. CEI shall maintain its authorized capital
stock as set forth in the Registration Statement filed with the SEC except for
such changes in authorized capital stock as are made to respond to comments made
by the SEC or requirements of any exchange or automated trading system for which
application is made to register the CEI Stock.
48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of the STOCKHOLDERS and the COMPANY with respect to
actions to be taken on the Closing Date and, to the extent specified in this
Section 8, on the Funding and Consummation Date, are subject to the satisfaction
or waiver on or prior to the Closing Date and/or the Funding and Consummation
Date, as the case may be, of all of the conditions set forth in this Section 8.
As of the Closing Date or the Funding and Consummation Date, as the case may be,
all conditions not satisfied shall be deemed to have been waived by the COMPANY
and the STOCKHOLDERS unless such parties have objected by notifying CEI in
writing of such objection on or before the closing on the Closing Date or
consummation of the transactions on the Funding and Consummation Date,
respectively, except that no such waiver shall be deemed to affect the survival
of the representations and warranties of CEI and NEWCO contained in Section 6
hereof.
8.1 REPRESENTATIONS AND WARRANTIES. All representations and warranties
of CEI and NEWCO contained in Section 6 (as amended by any amendment or
supplement to a Schedule that has received their requisite consents contemplated
by Section 7.8) shall be true and correct in all material respects as of the
Closing Date as though such representations and warranties had been made as of
that time; and a certificate to the foregoing effect dated the Closing Date and
signed by the President or any Vice President of CEI shall have been delivered
to the STOCKHOLDERS.
8.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by CEI and NEWCO
on or before each of the Closing Date and the Funding and Consummation Date
shall have been duly complied with and performed in all material respects on or
before each of the Closing Date and the Funding and Consummation Date, as the
case may be; and certificates to the foregoing effect dated each of the Closing
Date and the Funding and Consummation Date and signed by the President or any
Vice President of CEI shall have been delivered to the STOCKHOLDERS.
49
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANY shall have received an opinion from
counsel for CEI, dated the Closing Date, in the form annexed hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and no stop order suspending the effectiveness of
the Registration Statement shall be in effect and no proceeding therefor shall
have been instituted or shall be pending or contemplated under the 1933 Act and
the Underwriters shall have agreed to acquire on a firm commitment basis,
subject to the conditions set forth in the Underwriting Agreement, on terms such
that the aggregate value of the cash and the number of shares of CEI Stock to be
received by the STOCKHOLDERS is not less than the Minimum Value set forth on
Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
8.7 GOOD STANDING CERTIFICATES. CEI and NEWCO each shall have delivered
to the COMPANY a certificate, dated as of a date no earlier than five days prior
to the Closing Date, duly issued by the Delaware Secretary of State and in each
state in which CEI or NEWCO is authorized to do business, showing that each of
CEI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for CEI and NEWCO,
respectively, for all periods prior to the Closing have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to CEI or NEWCO which would constitute a Material Adverse
Effect.
8.9 CLOSING OF IPO. The closing of the sale of the CEI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
50
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and the Funding and
Consummation Date and signed by the secretary of CEI and of NEWCO, certifying
the truth and correctness of attached copies of the CEI's and NEWCO's respective
Certificates of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the boards of directors and, if
required, the stockholders of CEI and NEWCO approving CEI's and NEWCO's entering
into this Agreement and the consummation of the transactions contemplated
hereby.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 RELEASE . The stockholders of CEI shall have delivered to CEI an
instrument, dated the Closing Date, releasing CEI from any and all (i) claims of
such stockholders against CEI and (ii) obligations of CEI to such stockholders,
except for (x) items specifically identified on Schedule 8.12, (y) continuing
obligations to such stockholders relating to their employment by CEI and (z)
obligations arising under this Agreement or the transactions contemplated
hereby.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CEI AND NEWCO
The obligations of CEI and NEWCO with respect to actions to be taken on
the Closing Date and, to the extent specified in this Section 9, on the Funding
and Consummation Date, are subject to the satisfaction or waiver on or prior to
the Closing Date and/or the Funding and Consummation Date, as the case may be,
of all of the conditions set forth in this Section 9. As of the Closing Date or
the Funding and Consummation Date, as the case may be, all conditions not
satisfied shall be deemed to have been waived by CEI and NEWCO unless such
parties have objected by notifying the COMPANY and the STOCKHOLDERS in writing
of such objection on or before the closing on the Closing Date or consummation
of the transactions on the Funding and Consummation Date, respectively, except
that no such waiver shall be deemed to affect the survival of the
representations and warranties of the COMPANY and the STOCKHOLDERS contained in
Section 5 hereof.
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9.1 REPRESENTATIONS AND WARRANTIES. All the representations and
warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement (as
amended by any amendment or supplement to a Schedule that has received the
requisite consents contemplated by Section 7.8) shall be true and correct in all
material respects as of the Closing Date and the Funding and Consummation Date
with the same effect as though such representations and warranties had been made
on and as of such date; and the STOCKHOLDERS shall have delivered to CEI
certificates dated the Closing Date and signed by them to such effect.
9.2 PERFORMANCE OF OBLIGATIONS. All of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
STOCKHOLDERS and the COMPANY on or before each of the Closing Date and the
Funding and Consummation Date shall have been duly performed or complied with in
all material respects on or before each of the Closing Date and the Funding and
Consummation Date, as the case may be; and the STOCKHOLDERS shall have delivered
to CEI certificates dated the Closing Date and the Funding and Consummation
Date, respectively, and signed by them to such effect.
9.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of CEI as a result of which the
management of CEI deems it inadvisable to proceed with the transactions
hereunder.
9.4 SECRETARY'S CERTIFICATE. CEI shall have received a certificate or
certificates, dated each of the Closing Date and the Funding and Consummation
Date and signed by the secretary of the COMPANY, certifying the truth and
correctness of attached copies of the COMPANY's Certificate or Articles of
Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby.
9.5 NO MATERIAL ADVERSE CHANGE. As of the Closing Date and as of the
Funding and Consummation Date, no event or circumstance shall have occurred with
respect to the COMPANY which would constitute a Material Adverse Effect, and the
COMPANY shall not
52
have suffered any material loss or damages to any of its properties or assets,
whether or not covered by insurance, which change, loss or damage materially
affects or impairs the ability of the COMPANY to conduct its business.
9.6 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to CEI
an instrument dated the Closing Date releasing the COMPANY from any and all (i)
claims of the STOCKHOLDERS against the COMPANY and CEI and (ii) obligations of
the COMPANY and CEI to the STOCKHOLDERS, except for (x) items specifically
identified on Schedules 5.10 and 5.15 as being claims of or obligations to the
STOCKHOLDERS, (y) continuing obligations to the STOCKHOLDERS relating to their
employment by the COMPANY and (z) obligations arising under this Agreement or
the transactions contemplated hereby.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, or as contemplated by Section 9.12, all existing agreements
between the COMPANY and the STOCKHOLDERS shall have been cancelled effective
prior to or as of the Funding and Consummation Date.
9.8 OPINION OF COUNSEL. CEI shall have received an opinion from Counsel
to the COMPANY and the STOCKHOLDERS, dated the Closing Date and including a
statement to the effect that it may be relied upon as of the Funding and
Consummation Date, substantially in the form annexed hereto as Annex VII, and
the Underwriters shall have received a copy of the same opinion addressed to
them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.23 shall have been
obtained.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to
CEI a certificate, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by CEI, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
53
income tax returns and taxes for the COMPANY for all periods prior to the
Closing have been filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENT. Each of the persons listed on Schedule 9.12
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the CEI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to CEI a
certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF CEI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. CEI
shall use its best efforts to have the STOCKHOLDERS released from any and all
guarantees on any indebtedness that they personally guaranteed and from any and
all pledges of assets that they pledged to secure such indebtedness for the
benefit of the COMPANY, with all such guarantees on indebtedness being assumed
by CEI. In the event that CEI cannot obtain such releases from the lenders of
any such guaranteed indebtedness on or prior to 180 days subsequent to the
Funding and Consummation Date, CEI shall pay off or otherwise refinance or
retire such indebtedness.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the Funding
and Consummation Date, CEI shall not and shall not permit any of its
subsidiaries to undertake any act that would jeopardize the tax-free status of
the organization, including liquidate or merge the COMPANY into CEI.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that
end on or before the Funding and
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Consummation Date. Each STOCKHOLDER shall pay or cause to be paid all
Tax liabilities (in excess of all amounts already paid with respect
thereto or properly accrued or reserved with respect thereto on the
COMPANY Financial Statements) shown by such Returns to be due.
(ii) CEI shall file or cause to be filed all separate Returns of,
or that include, any Acquired Party for all taxable periods ending
after the Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries
and affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning
the ownership and Tax basis of property, which such party may possess.
Each party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents
or information so provided. Subject to the preceding sentence, each
party required to file Returns pursuant to this Agreement shall bear
all costs of filing such Returns.
(iv) Each of the COMPANY, NEWCO, CEI and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the
transaction as a transfer of property under Section 351(a) of the
Code.
10.4 DIRECTORS AND OFFICERS. The persons named in the registration
statement shall be appointed as directors and elected as officers of CEI, as and
to the extent set forth in the registration statement, promptly following the
Funding and Consummation Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Funding and
Consummation Date, CEI shall not terminate any health insurance, life insurance
or 401(k) plan in effect at the COMPANY until such time as CEI is able to
replace such plan with a plan that is
55
applicable to CEI and all of its then existing subsidiaries. CEI shall have no
obligation to provide replacement plans that have the same terms and provisions
as the existing plans, provided, that any new health insurance plan shall
provide for coverage for preexisting conditions.
11. INDEMNIFICATION
The STOCKHOLDERS, CEI and NEWCO each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless CEI, NEWCO, the COMPANY and the Surviving Corporation
at all times, from and after the date of this Agreement until the Expiration
Date, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and reasonable expenses of
investigation) incurred by CEI, NEWCO, the COMPANY or the Surviving Corporation
as a result of or arising from (i) any breach of the representations and
warranties of the STOCKHOLDERS or the COMPANY set forth herein (as amended by
any amendment or supplement to a Schedule that has received the requisite
consents contemplated by Section 7.8) or on the schedules or certificates
delivered in connection herewith as of the date made and as of the date any such
representations and warranties are re-confirmed, (ii) any breach on the part of
the STOCKHOLDERS or the COMPANY of any agreement under this Agreement, (iii) any
liability under the 1933 Act, the 1934 Act or other Federal or state law or
regulation, at common law or otherwise, either (1) arising out of or based upon
any untrue statement of a material fact relating to the COMPANY or the
STOCKHOLDERS, and provided to CEI or its counsel by the COMPANY or the
STOCKHOLDERS for inclusion in the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or (2)
arising out of or based upon any omission to state therein a material fact
relating to the COMPANY or the STOCKHOLDERS required to be stated therein or
necessary to make the statements therein not misleading, (iv) the matters
described on Schedule 11.1(iv) or (v) any Tax imposed upon or
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relating to any third party for a pre-Funding and Consummation Date period,
including, in each case, any such Tax for which an Acquired Party may be liable
under Section 1.1502-6 of the Treasury Regulations (or any similar provisions of
state, local of foreign law), as a transferee or successor, by contract or
otherwise, provided, however, (A) that in the case of any indemnity arising
pursuant to clause (iii), such indemnity shall not inure to the benefit of CEI,
NEWCO, the COMPANY or the Surviving Corporation to the extent that such untrue
statement was made in, or omission occurred in, any preliminary prospectus and
the STOCKHOLDERS provided, in writing, corrected information to CEI counsel and
to CEI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY CEI. CEI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by CEI or NEWCO of
its representations and warranties set forth herein (as amended by any amendment
or supplement to a Schedule that has received the requisite consents
contemplated by Section 7.8) or on the schedules or certificates delivered in
connection herewith as of the date made and as of the date any such
representations and warranties are re-confirmed, (ii) any breach on the part of
CEI or NEWCO of any agreement under this Agreement, (iii) any liability which
the STOCKHOLDERS may incur due to CEI's or NEWCO's failure to be responsible for
the liabilities and obligations of the COMPANY as provided in Section 1 hereof
(except to the extent that CEI or NEWCO has claims against the STOCKHOLDERS by
reason of such liabilities); (iv) any liability under the 1933 Act, the 1934 Act
or other Federal or state law or regulation, at common law or otherwise, either
(1) arising out of or based upon any untrue statement of a material fact
relating to CEI, NEWCO or any of the Other Founding Companies for inclusion in
57
any preliminary prospectus, the Registration Statement or any prospectus forming
a part thereof, or any amendment thereof or supplement thereto, or (2) arising
out of or based upon any omission to state therein a material fact relating to
CEI or NEWCO or any of the Other Founding Companies required to be stated
therein or necessary to make the statements therein not misleading (v) the
matters described on Schedule 11.2(v) or (vi) any liability under the 1933 Act,
the 1934 Act or other Federal or state law regulation, at common law or
otherwise as a result of CEI's failure to include in the Registration Statement
any information provided at least ten days prior to the Funding and Consummation
Date by the COMPANY or the STOCKHOLDERS in writing to CEI or its counsel
specifically for inclusion in the Registration Statement.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party unless the Indemnified
Party is fully released and exonerated. If the Indemnifying Party undertakes to
defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall endeavor to use the same
counsel, which shall be the counsel selected by Indemnifying Party, provided
that if counsel to the Indemnifying Party shall have a conflict of interest in
the opinion of such counsel
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that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and Indemnifying Party will
reimburse the Indemnified Party for the reasonable expenses of its counsel and
experts. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
Section with respect to such Third Person claim shall be limited to the amount
so offered in settlement to said Third Person, and the Indemnifying Party, upon
payment of such settlement amount to such Third Person, shall be deemed released
from any and all obligation or liability with respect thereto. If the
Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for insurance proceeds in determining
the amount of any indemnification obligation under this Section.
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11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
11.5 LIMITATIONS ON INDEMNIFICATION. CEI, NEWCO, the Surviving
Corporation and the other persons or entities indemnified pursuant to Section
11.1 or 11.2 shall not assert any claim other than a Third Person claim for
indemnification hereunder against the STOCKHOLDERS until such time as, and
solely to the extent that, the aggregate of all claims which such persons may
have against such the STOCKHOLDERS shall exceed 1.0% of the sum of (i) the cash
paid to STOCKHOLDERS plus (ii) the value (determined in accordance with the last
paragraph of Section 11.5) of the CEI Stock delivered to STOCKHOLDERS (the
"Indemnification Threshold"), provided, however, that CEI, NEWCO, the Surviving
Corporation and the other persons or entities indemnified pursuant to Section
11.1 may assert and shall be indemnified for any claim under Section 11.1(iv) or
11.1(v) at any time, regardless of whether the aggregate of all claims which
such persons may have against any STOCKHOLDER or all STOCKHOLDERS exceeds the
Indemnification Threshold, it being understood that the amount of any such claim
under Section 11.1(iv) or 11.1(v) shall not be counted towards the
Indemnification Threshold. STOCKHOLDERS shall not assert any claim for
indemnification hereunder against CEI or NEWCO until such time as, and solely to
the extent that, the aggregate of all claims which STOCKHOLDERS may have against
CEI or NEWCO shall exceed $50,000, provided, however, that STOCKHOLDERS and the
other persons or entities indemnified pursuant to Section 11.2 may assert and
shall be indemnified for any claim under Section 11.2(v) at any time, regardless
of whether the aggregate of all claims which such persons may have against any
of CEI, or NEWCO exceeds $50,000, it being understood that the amount of any
such claim under Section 11.2(v) shall not be counted towards such $50,000
amount. No person shall be entitled to indemnification under this Section 11 if
and to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
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Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no STOCKHOLDER shall be liable under this Section 11 for an
amount which exceeds the amount of proceeds received by such STOCKHOLDER in
connection with the Merger, provided that a STOCKHOLDER's indemnification
obligations pursuant to Section 11.1(iv) or 11.1(v) shall not be limited.
Indemnity obligations hereunder may satisfied through the payment of cash or the
delivery of CEI Stock, or a combination thereof. For purposes of calculating the
value of the CEI Stock received or delivered by a STOCKHOLDER (for purposes of
determining the Indemnification Threshold, the limitation on indemnity set forth
in the second preceding sentence and the amount of any indemnity paid), CEI
Stock shall be valued at its initial public offering price as set forth in the
Registration Statement.
12. TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date solely:
(i) by mutual consent of the boards of directors of CEI and the COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by CEI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by October 31, 1997, unless
the failure of such transactions to be consummated is due to the willful failure
of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Funding and Consummation Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by CEI, on the
other hand, if a material breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Funding and Consummation Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
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12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The STOCKHOLDERS will not, for a period of
three (3) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, company, partnership, corporation or business
of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any
collectibles retailing and animation art marketing businesses in direct
competition with CEI or any of the subsidiaries thereof, within the United
States of America or within 100 miles of where the COMPANY or any of its
subsidiaries or any of the Other Founding Companies conducted business prior to
the effectiveness of the Merger (the "Territory") ;
(ii) call upon any person who is, at that time, within the Territory,
an employee of CEI (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of CEI (including the
subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call
upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to the Funding and Consummation Date, a
customer of CEI (including the subsidiaries thereof), of the COMPANY or of any
of the Other Founding Companies within the Territory for the purpose of
soliciting or selling products or services in direct competition with CEI within
the Territory;
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(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the collectibles
retailing and animation art marketing businesses, which candidate, to the actual
knowledge of such STOCKHOLDER after due inquiry, was called upon by CEI
(including the subsidiaries thereof) or for which, to the actual knowledge of
such STOCKHOLDER after due inquiry, CEI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the
COMPANY to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever except to the extent that the COMPANY has in the past
disclosed such information to the public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
CEI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to CEI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that, in the event of
breach by such STOCKHOLDER, the foregoing covenant may be enforced by CEI by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of CEI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CEI.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and this Agreement shall thereby be reformed.
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13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against CEI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by CEI
of such covenants. It is specifically agreed that the period of three (3) years
stated at the beginning of this Section 13, during which the agreements and
covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that
this covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may have, access to certain
confidential information of the COMPANY, the Other Founding Companies, and/or
CEI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or CEI's respective businesses. The STOCKHOLDERS agree that they
will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of CEI, (b) following the Closing, such
information may be disclosed by the STOCKHOLDERS as is required in the course of
performing their duties for CEI or the Surviving Corporation and (c) to counsel
and other advisers, provided that such advisers (other than counsel) agree to
the confidentiality provisions of this Section 14.1, unless (i) such information
becomes known to the public generally through no fault of any such STOCKHOLDERS,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information pursuant
to this clause (ii),
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the STOCKHOLDERS shall give prior written notice thereof to CEI and provide CEI
with the opportunity to contest such disclosure, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any of the STOCKHOLDERS of the provisions of this Section
14, CEI shall be entitled to an injunction restraining such STOCKHOLDERS from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting CEI from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages. In the
event the transactions contemplated by this Agreement are not consummated, the
STOCKHOLDERS shall have none of the above-mentioned restrictions on their
ability to disseminate confidential information with respect to the COMPANY.
14.2 CEI AND NEWCO. CEI and NEWCO recognize and acknowledge that they
had in the past and currently have access to certain confidential information of
the COMPANY, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the COMPANY's business. CEI and NEWCO
agree that, prior to the Closing, or if the Transactions contemplated by this
Agreement are not consummated, they will not use or disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the COMPANY, (b) to counsel and other advisers, provided that such advisors
(other than counsel) agree to the confidentiality provisions of this Section
14.1 and (c) to the Other Founding Companies and their representatives who have
agreed to maintain confidentiality pursuant to Section 7.1(a), unless (i) such
information becomes known to the public generally through no fault of CEI or
NEWCO, (ii) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), CEI and NEWCO shall, if possible, give prior
written notice thereof to the COMPANY and the STOCKHOLDERS and provide the
COMPANY and the STOCKHOLDERS with the opportunity to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party. In the
event of a breach or threatened breach by CEI or NEWCO of the provisions of this
Section, the COMPANY and the
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STOCKHOLDERS shall be entitled to an injunction restraining CEI and NEWCO from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages. Upon any termination of this Agreement, CEI and NEWCO shall
return all confidential information of the Company then in their possession and
shall use commercially reasonable efforts to cause the Other Founding Companies
to return all confidential information of the Company then in their possession.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Funding and Consummation Date, or in the event this Agreement in terminated,
for a period of five years from the date of termination.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers (i) to immediate
family members who agree to be bound by the restrictions set forth in this
Section 15.1 (or trusts for the benefit of the STOCKHOLDERS or family members,
the trustees of which so agree), (ii) pursuant to Rule 144 (as it may be
amended) under the 1933 Act, (iii) pursuant to Section 17 hereof or (iv)
following the first anniversary of the Funding and Consummation Date, pursuant
to an exemption from registration under the Act and applicable state securities
laws, none of the STOCKHOLDERS shall (i) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (a) any shares of
CEI Stock received by the STOCKHOLDERS in the Merger or (b) any interest
(including, without limitation, an option to buy or sell) in any
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such shares of CEI Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of CEI Stock or any
interest therein, the intent or effect of which is to reduce the risk of owning
the shares of CEI Stock acquired pursuant to Section 2 hereof (including, by way
of example and not limitation, engaging in put, call, short-sale, straddle or
similar market transactions). Notwithstanding the foregoing, the STOCKHOLDERS
may encumber or pledge any of such shares of CEI Stock provided the pledgee or
other beneficiary of such encumbrance or pledge agrees to be bound by the
provisions of this Section as if a STOCKHOLDER and party hereto. The
certificates evidencing the CEI Stock delivered to the STOCKHOLDERS pursuant to
Section 3 of this Agreement will bear a legend substantially in the form set
forth below and containing such other information as CEI may deem necessary or
appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION PRIOR TO [anniversary of Funding and Consummation Date
corresponding to end of Rule 144 holding period][(PROVIDED, HOWEVER, THAT SUCH
SHARES MAY BE ENCUMBERED OR PLEDGED PROVIDED THE PLEDGEE OR OTHER BENEFICIARY OF
SUCH ENCUMBRANCE OR PLEDGE AGREES TO BE BOUND BY THE PROVISIONS OF THESE
RESTRICTIONS TO THE SAME EXTENT AS THE HOLDER THEREOF)]. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
DATE SPECIFIED ABOVE (AS IT MAY BE REDUCED AS PROVIDED HEREIN).
16. FEDERAL AND STATE SECURITIES ACT REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of CEI Stock to be delivered to the
STOCKHOLDERS pursuant to this Agreement have not been and will not be registered
under the Act or any state securities laws and therefore may not be resold
without compliance with the Act and any applicable state securities laws. The
CEI Stock to be acquired by the STOCKHOLDERS pursuant to this Agreement is being
acquired solely for their own respective
67
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS covenant, warrant and
represent that none of the shares of CEI Stock issued to the STOCKHOLDERS will
be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC or any applicable
exemption therefrom. All the CEI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT OR
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS AND, IF REQUIRED BY COLLECTIBLES ENTERPRISES, INC., AN
OPINION OF COUNSEL TO COLLECTIBLES ENTERPRISES, INC. STATING THAT REGISTRATION
IS NOT REQUIRED UNDER THE ACT.
16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDERS represent and
warrant that they are able to bear the economic risk of an investment in the CEI
Stock acquired pursuant to this Agreement, can afford to sustain a total loss of
such investment and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment in the CEI Stock. The STOCKHOLDERS represent and warrant that they
have had an adequate opportunity to ask questions and receive answers from the
officers of CEI concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of CEI, the plans for the
operations of the business of CEI, the business, operations and financial
condition of the Other Founding Companies, and any plans for additional
acquisitions and the like. The STOCKHOLDERS have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction.
68
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Funding
and Consummation Date, whenever CEI proposes to register any CEI Stock for its
own or others' account under the 1933 Act for a public offering, other than (i)
any shelf registration of shares to be used as consideration for acquisitions of
additional businesses by CEI and (ii) registrations relating to employee benefit
plans, CEI shall give each of the STOCKHOLDERS prompt written notice of its
intent to do so. Upon the written request of any of the STOCKHOLDERS given
within 30 days after receipt of such notice, CEI shall cause to be included in
such registration all of the CEI Stock issued to the STOCKHOLDERS pursuant to
this Agreement which any such STOCKHOLDER requests, provided that CEI shall have
the right to reduce the number of shares to be included by the STOCKHOLDER in
such registration to the extent that inclusion of such shares could, in the
opinion of tax counsel to CEI or its independent auditors, jeopardize the status
of the transactions contemplated hereby and by the Registration Statement as a
tax-free organization. In addition, if CEI is advised in writing in good faith
by any managing underwriter of an underwritten offering of the securities being
offered pursuant to any registration statement under this Section 17.1 that the
number of shares to be sold by persons other than CEI is greater than the number
of such shares which can be offered without adversely affecting the offering,
CEI may reduce pro rata the number of shares offered for the accounts of such
persons (based upon the number of shares proposed to be sold by each such
person) to a number deemed satisfactory by such managing underwriter, provided,
that, for each such offering made by CEI after the IPO, such reduction shall be
made first by reducing the number of shares to be sold by persons other than
CEI, the STOCKHOLDERS and the stockholders of the Other Founding Companies
(collectively, the STOCKHOLDERS and the stockholders of the other Founding
Companies being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date one year
after the Funding and Consummation Date, the holders of a majority of the shares
of CEI Stock issued to the stockholders of the Founding Companies pursuant to
this Agreement and the Other
69
Agreements that have not been previously registered or sold and that are not
entitled to be sold under Rule 144(k) (or any successor provision) promulgated
under the 1933 Act may request in writing that CEI file a registration statement
under the 1933 Act covering the registration of shares of CEI Stock issued to
such stockholders (including any stock issued as (or issuable upon the
conversion or exchange of any convertible security, warrant, right or other
security that is issued by CEI as) a dividend or other distribution with respect
to, or in exchange for, or in replacement of such CEI Stock) then held by such
stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
such request, CEI shall give written notice of such request to all other
stockholders of the Founding Companies and shall, as soon as practicable but in
no event later than 45 days after notice from any such stockholder, file and
thereafter use its best efforts to cause to become effective a registration
statement covering all such shares. CEI shall be obligated to effect only one
Demand Registration for all stockholders of the Founding Companies.
Notwithstanding the foregoing paragraph, following such a demand a
majority of CEI's disinterested directors (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for a 60 day period.
If at the time of any request by the stockholders of the Founding
Companies for a Demand Registration CEI has fixed plans to file within 60 days
after such request a registration statement covering the sale of any of its
securities in a public offering under the 1933 Act, no registration of the CEI
Stock held by the stockholders of the Founding Companies shall be initiated
under this Section 17.2 until 90 days after the effective date of such
registration unless CEI is no longer proceeding diligently to effect such
registration; provided that CEI shall provide the stockholders of the Founding
Companies the right to participate in such public offering pursuant to, and
subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with
the registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by CEI. In connection with
registrations under Sections 17.1 and 17.2, CEI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration
70
statement with respect to the CEI Stock and use its best efforts to cause such
registration to promptly become and remain effective for a period of at least 45
days (or such shorter period during which stockholders of the Founding Companies
shall have sold all CEI Stock which they requested to be registered); (ii) use
its best efforts to register and qualify the CEI Stock covered by such
registration statement under applicable state securities laws as the holders
shall reasonably request for the distribution of the CEI Stock; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 and 17.2 covering an underwritten registered public
offering, CEI and each participating holder agree to enter into a written
agreement with the managing underwriters in such form and containing such
provisions as are customary in the securities business for such an arrangement
between such managing underwriters and companies of CEI's size and investment
stature, including indemnification provisions.
17.5 AVAILABILITY OF RULE 144. CEI shall not be obligated to register
shares of CEI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any successor provision) promulgated under the
1933 Act are available to such STOCKHOLDER for such shares.
18. GENERAL
18.1 COOPERATION. The COMPANY, the STOCKHOLDERS, CEI and NEWCO shall
each deliver or cause to be delivered to the other on the Funding and
Consummation Date, and at such other times and places as shall be reasonably
agreed to, such additional instruments as the other may reasonably request for
the purpose of carrying out this Agreement. The COMPANY will cooperate and use
its reasonable efforts to have the present officers, directors and employees of
the COMPANY cooperate with CEI on and after the Funding and Consummation Date in
furnishing information, evidence, testimony and other assistance in connection
with any Tax Return filing obligations, actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Funding and Consummation Date.
71
18.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of CEI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 ENTIRE AGREEMENT. This Agreement (including the Schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the STOCKHOLDERS,
the COMPANY, NEWCO and CEI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and CEI,
acting through their respective officers or trustees, duly authorized by their
respective boards of directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the COMPANY shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
18.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.5 BROKERS AND AGENTS. Except as disclosed on Schedule 18.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages or expense arising out of claims for fees or commissions
of brokers employed or alleged to have been employed by such indemnifying party.
18.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, CEI will pay the fees, expenses and disbursements of CEI
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by CEI under this Agreement,
72
including the fees and expenses of Xxxxxx Xxxxxxxx, LLP, Xxxxxx, Xxxxx & Xxxxxxx
LLP, and any other person or entity retained by CEI, and the costs of preparing
the Registration Statement. Whether or not the transactions herein contemplated
shall be consummated, the STOCKHOLDERS shall pay the fees, expenses and
disbursements of the STOCKHOLDERS, the COMPANY and their respective agents,
representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all conditions to be
performed by the COMPANY and the STOCKHOLDERS under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDERS. In addition, each STOCKHOLDER shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") imposed in connection with the Merger, other than
Transfer Taxes, if any, imposed by the State of Delaware. Each STOCKHOLDER shall
file all necessary documentation and Returns with respect to such Transfer
Taxes. In addition, each STOCKHOLDER acknowledges that he, and not the COMPANY
or CEI, will pay all Taxes due upon receipt of the consideration payable
pursuant to Section 2 hereof, and will assume all Tax risks and liabilities of
such STOCKHOLDER in connection with the transactions contemplated hereby.
18.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
(a) If to CEI, or NEWCO, addressed to them at:
Collectibles USA, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
with copies to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxx Xxxxxx
00
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
(b) If to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex IV, with copies to such counsel
as is set forth with respect to each STOCKHOLDER on such
Annex IV;
(c) If to the COMPANY, addressed to it at:
[COMPANY]
-----------------------
-----------------------
Attn: _________________
and marked "Personal and Confidential"
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York without reference to its conflicts of law
provisions.
18.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.10 TIME. Time is of the essence with respect to this Agreement.
18.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
74
18.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
18.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
18.14 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of CEI, NEWCO, the COMPANY and STOCKHOLDERS who will hold or who
hold at least 50% of the CEI Stock issued or to be issued upon consummation of
the Merger. Any amendment or waiver effected in accordance with this Section
18.14 shall be binding upon each of the parties hereto, any other person
receiving CEI Stock in connection with the Merger and each future holder of such
CEI Stock.
18.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Unless otherwise
provided herein, the representations, warranties, covenants and agreements of
the parties made herein and at the time of the Closing or in writing delivered
pursuant to the provisions of this Agreement shall survive the consummation of
the transactions contemplated hereby and any examination on behalf of the
parties until the Expiration Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COLLECTIBLES USA, INC.
By:______________________
Name:
Title:
[COMPANY] ACQUISITION CORP.
By:______________________
Name:
Title:
[COMPANY]
By:______________________
Name:
Title:
STOCKHOLDERS:
______________________
[Name]
______________________
[Name]
ANNEX I
FORM OF ARTICLES OF MERGER
ANNEX II
CERTIFICATE OF INCORPORATION AND BY-LAWS OF CEI AND NEWCO
ANNEX III
CONSIDERATION TO BE PAID TO STOCKHOLDERS
Aggregate consideration to be paid to STOCKHOLDERS:
$__________ in cash and __________ shares of Common Stock of
CEI, to be distributed as follows:
Consideration to be paid to each STOCKHOLDER:
Shares of Common
Stockholder Stock of CEI Cash
TOTALS:
MINIMUM VALUE: $____________
ANNEX IV
STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
The following is a list of the STOCKHOLDERS, their addresses and the number of
shares of the COMPANY Stock held by each thereof:
STOCKHOLDER SHARES OF STOCK HELD
ANNEX V
STOCKHOLDERS AND STOCK OWNERSHIP OF CEI
Name of Shareholder Post-Split No. of Shares
of CEI Owned
ANNEX VI
FORM OF OPINION OF COUNSEL TO CEI
[Date]
[COMPANY]
----------------
----------------
----------------
Ladies and Gentlemen:
We have acted as counsel to Collectibles USA, Inc., a Delaware
corporation ("CEI") and [COMPANY] Acquisition Corp., a Delaware corporation
("NEWCO") in connection with the transactions contemplated by the agreement (the
"Agreement") dated as of May 9, 1997 by and among CEI, NEWCO, [COMPANY] and the
stockholders named therein (the "Stockholders").
This opinion is being delivered to you pursuant to Section 8.4 of the
Agreement. All capitalized terms used herein, unless expressly defined herein,
shall have the meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction, of such documents and corporate and public records as we
deemed to be necessary as a basis for the opinion hereinafter expressed. With
respect to such examination, we have assumed the genuineness of all signatures
appearing on all documents presented to us as originals, and the conformity to
the originals of all documents presented to us as conformed or reproduced
copies. Where factual matters material to such opinion were not independently
established, we have relied upon certificates of appropriate state and local
officials, upon representations of executive officers and responsible employees
and agents of CEI and NEWCO, and upon such other data as we deemed to be
appropriate under the circumstances. We also wish to advise you that when in the
following opinion we have made statements to our "knowledge" we shall mean (with
respect to matters of fact), that after an examination of documents made
available to us by CEI and NEWCO and after inquiry of officers thereof but
without any judgment or litigation searches or any other independent factual
investigation, we have no reason to believe that such statements are factually
incorrect. Statements made to our
"knowledge" shall furthermore refer only to then current actual knowledge of
attorneys of our firm who have worked on matters for CEI and NEWCO.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the qualifications and assumptions set
forth herein, we are of the following opinion:
(i) CEI and NEWCO have each been duly organized and are validly existing in
good standing under the laws of the State of Delaware;
(ii) the Agreement has been duly authorized, executed and delivered by each
of CEI and NEWCO, constitutes the valid and binding agreement of each thereof
and is enforceable against each thereof in accordance with its terms;
(iii) the authorized and outstanding capital stock of CEI is as set forth
in the CEI prospectus (the "Prospectus"), dated _______________, relating to the
sale to the public of __________ shares of CEI; each share of stock to be issued
to the Stockholders, to the stockholders of the Founding Companies other than
the Company and to the Underwriters has been duly and validly authorized and
issued; upon consummation of the transactions set forth in the Agreement and the
Other Agreements, and upon payment by the Underwriters as set forth in the
Underwriting Agreement dated _______________ between the Underwriters and CEI,
each of such shares will be fully paid and nonassessable; and, to our knowledge,
none of such shares will have been issued in violation of the preemptive rights
of any stockholder of CEI;
(iv) to our knowledge, except as set forth in the Prospectus, CEI does not
have any outstanding options, warrants, calls, conversion rights or other
commitments of any kind to issue or sell any of its capital stock;
(v) assuming the due authorization, execution, delivery and filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, the
Merger shall become effective under the laws of the State of Delaware; upon the
consummation of the Merger, no shareholder of CEI will be entitled to any rights
as a dissenting shareholder;
(vi) to our knowledge, (a) neither CEI nor NEWCO is in violation of any
order with respect thereto issued by any court or agency (wherever located) and
(b) there are no claims, actions, suits or proceedings pending, or threatened
against or affecting either CEI or NEWCO, at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality wherever located;
(vii) to our knowledge, neither CEI nor NEWCO is in default, or has
received any notice of default, under any contract or agreement to which it is a
party, except where such default would not have a material adverse effect on
CEI;
2
(viii) to our knowledge, no notice to, consent, authorization, approval
or order of any court or governmental agency or body or of any other third party
is required in connection with the execution, delivery or consummation of the
Agreement by CEI or NEWCO, except for such notices, consents, authorizations,
approvals or orders as have already been made or obtained; and
(ix) the execution of the Agreement and the performance by CEI and NEWCO of
their respective obligations thereunder will not violate any of the terms or
provisions of their respective Articles of Incorporation or By-laws or result in
any breach of or default under any lease, instrument, license, permit or any
other agreement to which they are a party, except where such violations,
breaches or defaults would not have a material adverse effect on CEI.
The opinion set forth in paragraph (ii) above is subject to the following
qualifications: (i) the enforceability of the respective obligations of CEI and
NEWCO under the Agreement are subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereafter in effect relating to
creditors' rights; (ii) the availability of equitable remedies, including
specific performance and injunctive relief, is subject to the discretion of the
court before which any proceeding therefor may be brought; (iii) we have assumed
the due authorization, execution and delivery of the Agreement by each of the
other parties thereto other than CEI and NEWCO and (iv) no opinion is expressed
as to the enforceability of (1) provisions requiring indemnification for
liabilities under the securities law or (2) the non-competition provisions
included therein.
We understand that we have no obligation to update this opinion to reflect
any facts or circumstances occurring after the date hereof, provided however,
that unless we otherwise notify you in or prior to the Funding and Consummation
Date that this opinion may no longer be relied upon, you shall be entitled to
rely on this opinion as of the Funding and Consummation Date if it were dated on
such date.
We render the foregoing opinions as members of the Bar of the State of New
York and express no opinion as to laws other than the laws of the State of New
York, the General Corporation Law of the State of Delaware and the federal laws
of the United States of America (other than federal laws applicable to patents,
copyrights and trademarks).
Very truly yours,
3
ANNEX VII
FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
[Date]
Collectibles Enterprises, Inc.
[address]
[Underwriters]
[address]
Ladies and Gentlemen:
We have acted as counsel to [Company], a [____________] corporation
(the "Company") in connection with the transactions contemplated by the
agreement (the "Agreement") dated as of May 9, 1997 among Collectibles USA, Inc.
("CEI"), [NEWCO], the Company and the stockholders named therein (the
"Stockholders").
This opinion is being delivered to you pursuant to Section 9.8 of the
Agreement. All capitalized terms used herein, unless expressly defined herein,
shall have the meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction, of such documents and corporate and public records as we
deemed to be necessary as a basis for the opinion hereinafter expressed. With
respect to such examination, we have assumed the genuineness of all signatures
appearing on all documents presented to us as originals, and the conformity to
the originals of all documents presented to us as conformed or reproduced
copies. Where factual matters material to such opinion were not independently
established, we have relied upon certificates of appropriate state and local
officials, upon representations of executive officers and responsible employees
and agents of the Company, and upon such other data as we deemed to be
appropriate under the circumstances. We also wish to advise you that when in the
following opinion we have made statements to our "knowledge" we shall mean (with
respect to matters of fact), that after an examination of documents made
available to us by the Company after inquiry of officers of the Company but
without any judgment or litigation searches or any other independent factual
investigation, we have no reason to believe that such statements are factually
incorrect. Statements made to our "knowledge" shall furthermore refer only to
then current actual knowledge of attorneys of our firm who have worked on
matters for the Company.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the qualifications and assumptions set
forth herein, we are of the following opinion:
(i) the COMPANY has been duly organized and is validly existing
or subsisting in good standing under the laws of the State of
[____________];
(ii) the COMPANY is duly qualified to do business as a foreign
corporation in each of the jurisdictions set forth in Schedule 5.1 of
the Agreement and to our knowledge, the COMPANY has the required
authorities and permits to carry on its business in each of such
jurisdictions, except where the failure to be so qualified or have
such authorities and permits would not have a material adverse effect
on the COMPANY;
(iii) based solely on a review of the stock records and minutes
of the COMPANY, the authorized and outstanding capital stock of the
COMPANY is as represented in the Agreement; each share of such stock
has been duly and validly authorized and issued, and, to our
knowledge, is fully paid and nonassessable and was not issued in
violation of the preemptive rights of any STOCKHOLDER;
(iv) to our knowledge, the COMPANY does not have any outstanding
options, warrants, calls, conversion rights or other commitments of
any kind to issue or sell any of its capital stock;
(v) the Agreement has been duly authorized, executed and
delivered by the COMPANY and the STOCKHOLDERS party thereto and
constitutes a valid and binding agreement of the COMPANY and such
STOCKHOLDERS, enforceable against the COMPANY and such STOCKHOLDERS in
accordance with its terms;
(vi) [for non-Delaware Companies only] upon the filing of the
[relevant certificate] with [relevant filing authority] in the state
of [state of incorporation of COMPANY], the Merger shall become
effective under the laws of the state of [state of incorporation of
COMPANY]. Upon the consummation of the Merger, all of the outstanding
stock of the COMPANY will have been duly authorized and issued, and
will be fully paid and nonassessable, and will be beneficially owned
by CEI, free and clear of any security interest, claim, lien or
encumbrance, and no former shareholder of the COMPANY will be entitled
to any rights as a dissenting shareholder, [except . . . describe
exceptions under relevant state law].
(vii) to our knowledge, except to the extent set forth on
Schedules 5.10, 5.21 and 5.24 to the Agreement, (a) the COMPANY is not
in violation of any order with respect to the COMPANY issued by any
court or agency (wherever located) and (b) there are no claims,
actions, suits or proceedings pending, or threatened against or
affecting the COMPANY, at law or in equity, or before or by any
federal, state, municipal or other
2
governmental department, commission, board, bureau, agency or
instrumentality wherever located;
(viii) to our knowledge, except to the extent set forth on
Schedule 5.15 to the Agreement, the COMPANY is not in default, and has
not received any notice of default, under any of the contracts or
agreements listed on such Schedule 5.15;
(ix) to our knowledge, no notice to, consent, authorization,
approval or order of any court or governmental agency or body or of
any other third party is required in connection with the execution,
delivery or consummation of the Agreement by any of the STOCKHOLDERS
except for such notices, consents, authorizations, approvals or orders
as have already been made or obtained; and
(x) the execution of the Agreement and the performance by the
COMPANY and the STOCKHOLDERS party thereto of their respective
obligations thereunder will not violate any of the terms or provisions
of COMPANY's Articles of Incorporation or the By-laws of the COMPANY
or result in any breach of or default under any lease, instrument,
license, permit or any other agreement listed on Schedule 5.12 or 5.15
to the Agreement, except to the extent specifically set forth on such
Schedules.
The opinion set forth in paragraph (v) above is subject to the
following qualifications: (i) the enforceability of the obligations of the
Company under the Agreement is subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to creditors' rights; (ii) the availability of equitable remedies,
including specific performance and injunctive relief, is subject to the
discretion of the court before which any proceeding therefor may be brought;
(iii) we have assumed the due authorization, execution and delivery of the
Agreement by each of the other parties thereto other than the Company and (iv)
no opinion is expressed as to the enforceability of (1) provisions requiring
indemnification for liabilities under the securities law or (2) the
non-competition provisions included therein.
We understand that we have no obligation to update this opinion to
reflect any facts or circumstances occurring after the date hereof, provided
however, that unless we otherwise notify you in or prior to the Funding and
Consummation Date that this opinion may no longer be relied upon, you shall be
entitled to rely on this opinion as of the Funding and Consummation Date if it
were dated on such date.
We render the foregoing opinions as members of the Bar of the State of
[state of incorporation of COMPANY] and express no opinion as to laws other than
the laws of such state, the General Corporation Law of the State of Delaware and
the federal laws of the United States of America (other than federal laws
applicable to patents, copyrights and trademarks).
Very truly yours,
3
ANNEX VIII
FORM OF EMPLOYMENT AGREEMENT
[to come]
SCHEDULE to EXHIBIT 2.1
Identification of Substantially Identical Agreements and Plans of Organization
1 AGREEMENT AND PLAN OF ORGANIZATION made as of May 9, 1997, by and among
COLLECTIBLES USA, INC., a Delaware corporation ("CUI"), FILMART ACQUISITION
CORP., a Delaware corporation, FILMART PRODUCTIONS, INC., a New York
corporation, and each of Xxxx Xxxxxx and Xxxxx Xxxxxxx pursuant to which
$100,000 in cash and 236,363 shares of Common Stock of CUI is to be paid, as
aggregate consideration, to the selling stockholders.*
2 AGREEMENT AND PLAN OF ORGANIZATION made as of May 9, 1997, by and among
COLLECTIBLES USA, INC., a Delaware corporation ("CUI"), ARA ACQUISITION CORP., a
Delaware corporation, AMERICAN ROYAL ARTS CORP., a Delaware corporation, and
Xxxxx Xxxxxxxxx pursuant to which $2,814,000 in cash and 563,636 shares of
Common Stock of CUI is to be paid, as aggregate consideration, to the selling
stockholder.*
3 AGREEMENT AND PLAN OF ORGANIZATION made as of May 9, 1997, by and among
COLLECTIBLES USA, INC., a Delaware corporation ("CUI"), STONE'S ACQUISITION
CORP., a Delaware corporation, STONE'S SHOPS, INC., an Illinois corporation, and
each of Xxxxx Xxxxx and Xxxx Xxxx Xxxxx pursuant to which $1,350,000 in cash and
350,000 shares of Common Stock of CUI is to be paid, as aggregate consideration,
to the selling stockholders.*
4 AGREEMENT AND PLAN OF ORGANIZATION made as of May 9, 1997, by and among
COLLECTIBLES USA, INC., a Delaware corporation ("CUI"), ST. XXXXXX ACQUISITION
CORP., a Delaware corporation, ST. XXXXXX, INC., a New Jersey corporation, and
each of Xxxx Xxxx, Xxxxxx St. Xxxxxx and Xxxxxxxx Xxxxxxxx pursuant to which
$400,000 in cash and 85,000 shares of Common Stock of CUI is to be paid, as
aggregate consideration, to the selling stockholders.*
5 AGREEMENT AND PLAN OF ORGANIZATION made as of May 9, 1997, by and among
COLLECTIBLES USA, INC., a Delaware corporation ("CUI"), XXXXXX ACQUISITION
CORP., a Delaware corporation, XXXXXX STORES, INC., a Florida corporation, and
each of Xxx X. Xxxxxx and Xxx X. Xxxxxx pursuant to which $1,000,000 in cash and
168,181 shares of Common Stock CUI is to be paid, as aggregate consideration, to
the selling stockholders.*
6 AGREEMENT AND PLAN OF ORGANIZATION made as of May 9, 1997, by and among
COLLECTIBLES USA, INC., a Delaware corporation ("CUI"), DKG ACQUISITION CORP., a
Delaware corporation, DKG ENTERPRISES, INC., an Oklahoma corporation, and 4D
Investment Limited Partnership II pursuant to which $1,800,000 in cash and
359,090 shares of Common Stock of CUI is to be paid, as aggregate consideration,
to the selling stockholder.*
7 AGREEMENT AND PLAN OF ORGANIZATION made as of May 9, 1997, by and among
COLLECTIBLES USA, INC., a Delaware corporation ("CUI"), ANIMATION USA
ACQUISITION CORP., a Delaware corporation, ANIMATION USA, INC., a Washington
corporation, and each of Xxxxx Vice, Xxxxx Xxxx, Xxxxxxx X. Vice, Xxxx Vice,
Xxxxxxx X. Vice Revocable Trust, Xxxxx Xxxxxx and Xxxxx X. Xxxxxx pursuant to
which $600,000 in cash and 145,454 shares of Common Stock of CUI is to be paid,
as aggregate consideration, to the selling stockholders.*
* Pursuant to Item 601(b)(2) of Regulation S-K of the Securities Act of 1933, as
amended, supplemental copies of any omitted schedules or annexes will be
furnished to the Commission upon request.
