Exhibit 10.13
STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 1, 1996
BETWEEN
PGI COMPANY H
AND
J. XXXXXXXX XXXXXXX
TABLE OF CONTENTS
1. Definitions.................................................... 2
1.1. Use of Defined Terms..................................... 2
1.2. Accounting Terms......................................... 2
1.3. Production and Entertainment............................. 2
1.4. Sections, Exhibits and Schedules......................... 3
1.5. Miscellaneous Terms...................................... 3
2. Purchase and Sale of the Company Shares........................ 3
2.1. Purchase and Sale of the Company Shares.................. 3
2.2. Purchase Price........................................... 4
2.3. Definition of Profit Before Interest and Taxes........... 9
2.4. Financial Statements and Seller's Right to
Audit.................................................... 10
2.5. Offset Against Purchase Price............................ 11
2.6. Closing Costs ........................................... 12
3. Closing........................................................ 13
3.1. Closing.................................................. 13
4. Deliveries at the Closing...................................... 13
4.1. Deliveries to the Buyer by the Seller.................... 13
4.2. Deliveries to the Seller by the Buyer.................... 15
5. Representations and Warranties of the Seller................... 17
5.1. Ownership; Transfer of the Company Shares................ 17
5.2. Authority................................................ 18
5.3. Approvals................................................ 19
5.4. No Brokers............................................... 19
5.5. Organization, Etc........................................ 20
5.6. Capital Stock............................................ 21
5.7. No Subsidiaries, Etc..................................... 23
5.8. Financial Statements..................................... 23
5.9. Absence of Certain Changes............................... 23
5.10. Taxes.................................................... 26
5.11. Non-Contravention........................................ 27
5.12. Title to and Condition of the Assets of the
Company.................................................. 28
5.13. Litigation............................................... 31
5.14. Employee Benefit Plans and Other Arrangements............ 32
5.15. Contracts................................................ 34
5.16. Insurance................................................ 36
5.17. Trademarks, Etc.......................................... 36
5.18. Transactions with Interested Persons..................... 38
5.19. Compliance with Laws, etc................................ 38
5.20. No Undisclosed Liabilities, Etc.......................... 39
5.21. Environmental Matters.................................... 40
5.22. Governmental Authorizations and Regulations.............. 41
5.23. Accounting Practices..................................... 42
5.24. Minute Books............................................. 42
5.25. Employee Matters......................................... 42
5.26. Accuracy of Information Furnished........................ 43
5.27. Disclosure............................................... 44
6. Representations and Warranties of Buyer........................ 44
6.1. Authority for Agreements................................. 44
6.2. Non-Contravention........................................ 45
6.3. Approvals................................................ 45
6.4. No Brokers............................................... 46
6.5. Accuracy of Information Furnished........................ 46
6.6. Organization, Etc........................................ 46
6.7. Litigation............................................... 47
6.8. Compliance with Laws, Etc................................ 49
6.9. Disclosure............................................... 49
7. Covenants of the Seller........................................ 50
7.1. Employment Contracts..................................... 50
7.2. Liability for Federal, State and Local Taxes............. 50
7.3. Claims Experience........................................ 51
7.4. Employment and Employee Benefits......................... 51
7.5. Non-Competition.......................................... 52
7.6. Subordination Agreement.................................. 53
7.7. Further Assurances....................................... 54
7.8. Loan Repayment........................................... 54
8. Covenants of the Buyer......................................... 55
8.1. Employment and Employee Benefits......................... 55
8.2. Termination of Company's Benefit Plans................... 56
8.3. Certain Life Insurance Policies.......................... 56
8.4. Undisclosed Liabilities.................................. 57
8.5. Payment of Assumed Liabilities........................... 57
8.6. X. Xxxxxxx Employment Agreement.......................... 57
-ii-
8.7. Umbrella Insurance Coverage.............................. 58
8.8. Further Assurances....................................... 58
9. Conditions Precedent to Seller's Obligations to Sell the
Company Shares................................................ 58
9.1. The Buyer's Performance.................................. 58
9.2. Consents and Approvals................................... 59
9.3. No Legal Impediment...................................... 59
10. Conditions Precedent to the Buyer's Obligation to
Purchase the Company Shares................................... 60
10.1. Company's and the Seller's Performance................... 60
10.2. Consents and Approvals................................... 60
10.3. Physical Properties...................................... 61
10.4. No Legal Impediment...................................... 61
11. Events of Default.............................................. 61
11.1. Principal................................................ 61
11.2. Interest................................................. 62
11.3. Payments................................................. 62
11.4. Change of Control........................................ 63
11.5. Keyman................................................... 63
11.6. Bankruptcy; Insolvency................................... 63
12. Remedies Upon Default by Buyer................................. 63
12.1. Declare Notes and Other Elements of the Purchase
Price Due and Payable.................................... 63
12.2. Assignment of the Xxxx................................... 64
12.3. Covenants Not to Compete................................. 65
12.4. Employment Agreements.................................... 64
13. Indemnification................................................ 65
13.1. Indemnification of the Buyer and the Company............. 65
13.2. Indemnification of the Seller............................ 67
13.3. Procedure for Indemnification............................ 68
13.4. Survival of Representations, Warranties,
Covenants and Indemnification............................ 70
-iii-
14. Miscellaneous.................................................. 71
14.1. Complete Agreement; Amendments; Waivers.................. 71
14.2. Counterparts............................................. 71
14.3. Successors and Assigns................................... 72
14.4. Governing Law............................................ 72
14.5. Notices.................................................. 72
14.6. Expenses................................................. 74
14.7. Headings; Form of Words.................................. 74
14.8. Severability............................................. 74
-iv-
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of the 1st
day of January, 1996 by and between PGI Company H, a Virginia corporation (the
"Buyer"), and J. Xxxxxxxx Xxxxxxx, an individual residing at 000 Xxxxxx Xxx,
Xxxxxxx, Xxx Xxxxxx 00000 (the "Seller");
WHEREAS, the Seller is the sole shareholder of Xxx Xxxxx
Productions, Inc. (the "Company"), owning eighty-two and one half (82 1/2)
shares of the common stock of the Company, which comprise all of the outstanding
shares of common stock of Company;
WHEREAS, the Buyer desires to purchase from the Seller, and
the Seller desires to sell to the Buyer, one hundred percent (100%) of the
outstanding capital stock of the Company, all upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual covenants, agreements, representations, and warranties herein
contained, and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto, each intending
to be legally bound, hereby agree as follows:
1. Definitions.
-----------
1.1 Use of Defined Terms. Any defined term used in the plural
--------------------
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any one or more of the members of the relevent
class.
1.2 Accounting Terms. All accounting terms not otherwise
----------------
defined in this Agreement shall be construed in conformity with, and all
financial data of the Buyer required to be submitted by this Agreement shall be
prepared in conformity with, generally accepted accounting principles ("GAAP")
and all financial data of Company and its Subsidiaries required to be submitted
by this Agreement shall be prepared on an income tax basis.
1.3 Production and Entertainment. Production business, is
----------------------------
defined as staged events held by corporations and organizations such as sales
meetings, product launches, and business communications in which the Company
would typically provide for the client conceptual design, coordinate and/or
supply staging and audiovisual services, outside speakers, and key production
personnel and other such materials and support necessary to run such meetings
and events. Entertainment business, is defined as the contracting and
production of well
2
known professional talent to perform at such staged events.
1.4. Sections, Exhibits and Schedules. References in this
--------------------------------
Agreement to Sections, Exhibits and Schedules are to Sections, Exhibits and
Schedules of and to this Agreement. All Exhibits and Schedules to this Agreement
are hereby incorporated herein by this reference as if fully set forth herein.
1.5. Miscellaneous Terms. The term "or" shall not be
-------------------
exclusive. The terms "herein," "hereof," "hereto," "hereunder" and other terms
similar to such terms shall refer to this Agreement as a whole and not merely to
the specific article, section, paragraph or clause where such terms may appear.
The term "including" shall mean "including, but not limited to."
2. Purchase and Sale of the Company Shares.
---------------------------------------
2.1. Purchase and Sale of the Company Shares. Upon the terms
---------------------------------------
and provisions of this Agreement, the Buyer agrees to purchase and accept
delivery from the Seller, and the Seller agrees to sell, assign, transfer, and
deliver to the Buyer, at the Closing provided for in Section 3 hereof, the
common stock certificates representing eighty-two and one half (82 1/2) shares
of Common Stock of the Company, constituting one hundred percent (100%) of the
outstanding shares of capital stock of the Company
3
(the "Company Shares"), free and clear of all liens, claims, charges,
restrictions, equities, or encumbrances of any kind.
2.2. Purchase Price. The purchase price to be paid by
--------------
Buyer (the "Purchase Price") for the Company Shares is a sum of
the following:
(a) The Buyer will, at the Closing, deliver to the
Seller, by certified check payable to the order of the Seller
("Certified Check"), or at Buyer's option, by wire
transfer to the account of the Seller:
J. Xxxxxxxx Xxxxxxx
c/o Chemical Bank
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX
#007-257-252
("Wire Transfer") the amount of Three Million Dollars
($3,000,000).
(b) The Buyer will, at the Closing, deliver to Seller
a series of five (5) subordinated promissory notes of Buyer in the
total amount of Three Million Dollars ($3,000,000) payable to the
Seller in the form annexed as Exhibit 2.2(b) hereto (the "Notes"). The
first of the Notes will be payable on the first anniversary of the
Closing, in the amount of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000). The remaining four Notes will be payable as
follows:
4
Note 2 -- on June 27, 1997
Note 3 -- on September 26, 1997
Note 4 -- on December 26, 1997
Note 5 -- on March 27, 1998;
Each of Notes 2 through 5 shall be in the principal amount of Four Hundred
Thirty-Seven Thousand Five Hundred Dollars
($437,500).
(c) The net working capital of Company as of December
31, 1995 shall be paid to Seller as follows:
(i) The Buyer will, at the Closing, deliver to the
Seller, by Wire Transfer, an additional amount equal to Two Hundred
Thousand Dollars ($200,000); and
(ii) The Buyer will, ninety (90) days after Closing,
deliver to the Seller, by Wire Transfer, an additional amount equal to
One Hundred Fifty Thousand Dollars ($150,000).
(d) The Seller will, at the Closing, provide the
following to Buyer: (i) a schedule of Company's accounts receivable as
of December 31, 1995, based on all information available to Seller as
of date of Closing in the form attached hereto as Schedule 2.2(d)(i);
and (ii) a schedule of accounts payable as of December 31, 1995, as
updated at the Closing in the form attached hereto as Schedule 2.2
(d)(ii).
In the event that any accounts receivable set
5
forth on Schedule 2.2(d)(i) have not been paid to Company within ninety
(90) days after the Closing, Buyer shall have the right to offset the
amount of such unpaid accounts receivable against unpaid portions of
the Purchase Price, subject to Seller's right to collect such accounts
receivable pursuant to Section 2.5(a). In the event that any accounts
receivable existing prior to December 31, 1995 and not scheduled on
Schedule 2.2(d)(i) are paid to the Company within ninety (90) days
after the Closing, the amount of such unscheduled accounts receivable
shall immediately be paid to Seller by Company.
In the event that any undisclosed accounts payable or
undisclosed liability of the Company, including but not limited to
unpaid taxes, fines or penalties related thereto and any employee
benefit plan or arrangement, existing as of December 31, 1995 but not
scheduled on Schedule 2.2(d)(ii) are paid by the Company within ninety
(90) days after the Closing, Buyer shall have the right to offset the
amount of such undisclosed accounts payable or undisclosed liabilities
paid by the Company against unpaid portions of the Purchase Price,
provided that Company first notified Seller of such payable or
liability and offered Seller the opportunity to defend and/or settle
such claim pursuant to Section 2.5(b). In the event that any disclosed
accounts payable and/or liabilities set forth on Schedule 2.2(d)(ii)
are
6
fully discharged by the Company for less than the scheduled value of
such accounts payable and/or liability, Buyer shall pay to Seller the
difference between the scheduled amount and the amount actually paid to
third parties.
(e) The Profit Before Interest and Taxes of the Company
in each of the Calendar Years 1996 and 1997 will be credited with the
amount of any commission shortfall existing as of December 31, 1995, as
set forth on Schedule 2.2(e)(i) hereto, recaptured by Company during
1996 and/or 1997, provided, however, Company shall have no obligation
to pursue the recapture of any such commission shortfalls, and Seller
will take no action to recapture any such commission shortfall after
Closing and Seller has, prior to Closing, taken only those acts and
recovered only those commission shortfalls listed on Schedule
2.2(e)(ii).
(f) If in either the calendar year beginning January 1,
1996 and ending December 31, 1996 ("Calendar Year 1996") or the
calendar year beginning January 1, 1997 and ending December 31, 1997
("Calendar Year 1997"), the existing business of the Company, defined
as the annual business generated by the employees of the Company who
were employed as of the Closing, or their replacements and any
Production or Entertainment business generated from accounts of the
Company as of December 31, 1995 taken over by others employed by the
Company or any of its affiliates
7
("Existing Business"): (i) exceeds ******** ******* *******
************* in net revenue; (ii) generates at least a ***** *******
**** Profit Before Interest and Taxes; and (iii) generates at least ***
******* **** ******* ***** ******** ******* ************ of Profit
Before Interest and Taxes, then, in each such calendar year an amount
of **** ******* ******** ******* ********** will be paid by Buyer to
Seller by Wire Transfer within *** **** **** after the completion of
the applicable Calendar Year end financial audit by the Buyer's outside
public auditor or within one hundred and twenty (120) days after the
end of the applicable Calendar Year, whichever is sooner.
(g) If in either Calendar Year 1996 or Calendar Year
1997, the Existing Business: (i) exceeds ******** ******* *******
************* in net revenue ; (ii) generates at least a **** *******
**** Profit Before Interest and Taxes; and (iii) generates at least ***
******* **** ******* ***** ******* ************ of Profit Before
Interest and Taxes then for each such Calendar Year, in addition to the
amount specified in Section 2.2(f) above, Buyer shall pay an additional
amount of *** ******* ***** ******** ******* ********** by Wire
Transfer, within *** **** **** after the completion of the applicable
Calendar Year end financial audit by the Buyer's outside public auditor
or within one hundred and twenty (120) days after
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
8
the end of the applicable Calendar Year, whichever is
sooner.
(h) If Seller is terminated with or without cause under
the X. Xxxxxxx Employment Agreement (as those terms are defined in such
X. Xxxxxxx Employment Agreement), and if the goals (i) though (iii) set
forth in subsection (f) above are not met in Calendar Year 1996 or
Calendar Year 1997, then the Company shall pay Seller an amount of
$250,000 for each such Calendar Year when Seller is not employed on the
last day of such Calendar Year, provided, however, no payment shall be
made under this Section 2.2(h) if the Seller is terminated because he
was convicted of a criminal offense involving moral turpitude, such as,
but not limited to, larceny, embezzlement, fraud or making false
statements to a government entity or agency.
2.3. Definition of Profit Before Interest and Taxes. For
----------------------------------------------
the purpose of calculating the Purchase Price to be paid to Seller under the
terms of Sections 2.2(f) and 2.2(g) above, Profit Before Interest and Taxes
shall be defined as income from the Existing Business of the Company prior to
any loan interest charges, or charges for federal, state or local income taxes,
but after all expenses relating to the Existing Business of the Company except:
(i) any extraordinary corporate
9
allocation charged by Buyer to the Company; and (ii) depreciation on all new
fixed assets of the Company added after Closing and not added in the ordinary
course of business; and (iii) any corporate expense of the Buyer not incurred in
the ordinary course of business charged to the Company unless mutually agreed
upon.
2.4. Financial Statements and Seller's Right to Audit. During
------------------------------------------------
Calendar Years 1996 and 1997 the Company's financial statements will be prepared
on an accrual basis in accordance with GAAP. Seller shall have the right to
inspect and/or audit Company's financial statements relating to Calendar Years
1996 and 1997 during business hours at Seller's expense on reasonable notice to
Company, provided, however, that if the Profit Before Interest and Taxes has
been understated in any Calendar Year by more than five percent (5%), the
expense of Seller's audit shall be paid by Buyer. It is the intent of the Buyer
and Seller that the change from income tax basis to accrual basis accounting
will not alter the payments, if any, due to Seller under Sections 2.2 (f) and
2.2 (g). Accordingly, the financial statements for Calendar Years 1996 and 1997
shall include statements of Existing Business and Profit Before Interest and
Taxes, prepared both on an accrual basis and on a reconstructed cash basis. In
the event that Buyer and Seller cannot come to mutual agreement after good faith
consultation on
10
the actual amount of Existing Business and/or Profit Before Interest and Taxes
in Calendar Year 1996 and/or 1997, either party may submit the issue of such
disputed amount to arbitration in New York City or Washington, D.C. Said
arbitration shall be conducted under the expedited procedures of the commercial
arbitration rules of the American Arbitration Association before a single
arbitrator who shall be a certified public accountant. The issues to be
arbitrated shall be limited solely to the issue of the disputed amount. The
arbitrator shall make specific findings of fact respecting such disputed amount.
The determination of the arbitrator shall be final and binding upon the parties.
2.5. Offset Against Purchase Price. Buyer and Seller agree
-----------------------------
that Buyer has the right to offset, the amount of: (i) any accounts receivable
of the Company as of the Closing Date that are not paid to Buyer in full in
accordance with their terms; and (ii) any undisclosed accounts payable or
undisclosed liability of the Company, including but not limited to unpaid taxes,
fines or penalties related thereto and any employer matter or employee benefit
plan or arrangement, existing as of the Closing that are paid after Closing by
Buyer or Company, from any future payments to the Seller, including but not
limited to all payments constituting the Purchase Price:
(a) In the event Buyer determines that an account
11
receivable of Company has not been paid in accordance with its contract
terms, Buyer shall notify Seller, providing Seller with the particulars
of the account receivable. Seller may then pursue collection of such
amounts remaining due from the debtor in question at Seller's own
expense. If Seller collects any such amounts on behalf of Company or
Company otherwise receives payment of any such amounts that Buyer has
previously offset from Purchase Price, then Buyer shall within ten (10)
days of receiving any such amount pay Seller such amounts. Seller shall
take no action in collecting such amounts which Buyer reasonably
designates as detrimental to Buyer's continuing relationship with such
debtor.
(b) Any undisclosed accounts payable or undisclosed
liabilities of the Company that existed as of the Closing shall
promptly be brought to the attention of Seller by Company and Seller
shall have the opportunity to defend against and/or settle such claim
at his own expense, unless such action would have an unreasonably
adverse effect on the Company and its on-going business. Company may
offset only amount of such accounts payable or liability actually paid
by it.
2.6. Closing Costs. At the Closing, the Buyer will pay by
-------------
check the sum of Twenty Two Thousand Dollars ($22,000) to
12
Xxxxx, Gold, XxXxxxx, Xxxxxxxx & Xxxxxxxx, attorneys for Seller, to cover legal
drafting costs incurred at Buyer's request.
3. Closing.
-------
3.1. Closing. The closing of the purchase and sale of the
-------
Company Shares (the "Closing") will take place at the offices of Xxxxx, Gold,
XxXxxxx, Xxxxxxxx & Xxxxxxxx (or at such other place as the parties may mutually
agree) at 10:00 a.m. on March 27, 1996, or at such other time and on such other
date as the parties may mutually agree, but in no event will the Closing occur
after March 31, 1996. The date and time of the Closing are referred to herein as
the "Closing Date."
4. Deliveries at the Closing.
-------------------------
4.1. Deliveries to the Buyer by the Seller. At the Closing,
-------------------------------------
the Seller will deliver to the Buyer:
(a) Against receipt of the Wire Transfer or Certified
Check, the Seller will deliver to the Buyer the certificates for one
hundred percent (100%) of the Company Shares, all in accordance with
the requirements of Section 2.1 hereof, which certificates will be duly
endorsed in blank or accompanied by stock powers duly executed in
blank, in proper form for transfer;
13
(b) A certificate, in form and substance reasonably
acceptable to the Buyer, executed by the President of the Company, and
attested to by the Secretary of the Company, dated as of the Closing
Date, and certifying that: (i) attached thereto is a true and complete
copy of the By-laws of the Company in effect as of the Closing Date;
and (ii) attached thereto is a true and complete copy of the Articles
of Incorporation of the Company, as amended and in effect as of the
Closing Date;
(c) A certificate, in form and substance reasonably
acceptable to the Buyer, executed by the Seller, dated as of the
Closing Date, certifying as to the accuracy of the Company's and the
Seller's representations and warranties at and as of the Closing;
(d) Resignations of all of the directors and officers of
the Company, in their capacity as directors, officers and employees,
with the exception of Seller;
(e) A schedule in the form attached hereto as Schedule
4.1(e) of the location of all of the Company's contracts, books,
records, and other data relating to the Company's operations, including
the Company's minutes and stock books;
(f) Copies of all of Company's employment
agreements;
(g) The employment agreement between the Company
14
and the Seller, in the form attached hereto as Exhibit 4.1(g) executed
by Seller (the "X. Xxxxxxx Employment Agreement");
(h) Control over all assets of the Company and its
subsidiaries including cash held in the Company's or its subsidiaries'
name or owned by Company or its subsidiaries as of the Closing;
(i) Any schedules that are to be updated as of the
Closing Date;
(j) An opinion of Seller's counsel in the form attached
hereto as Exhibit 4.1 (j);
(k) The Release between Xxxxx Xxxxxxx and the Company in
the form attached hereto as Exhibit 4.1(k) executed by Xxxxx Xxxxxxx;
and
(l) The Company's cancelled common stock certificates
redeemed from Xxxxx Xxxxxxx.
4.2. Deliveries to the Seller by the Buyer. At the Closing,
-------------------------------------
the Buyer will deliver to the Seller the following:
(a) The sum of three million dollars ($3,000,000) by Wire
Transfer or Certified Check to the Seller's account, against receipt of
the stock certificates for the Company Shares in accordance with
Section 4.1(a) and 2.2(a) above;
(b) Fully executed Notes in the form annexed as
15
Exhibit 2.2(b) above;
(c) A fully executed guarantee agreement between
Production Group International, Inc. and Seller (the "Guarantee"), in
the form annexed as Exhibit 4.2(c) hereto;
(d) A fully executed, undated, trademark assignment of
the trade name "Xxx Xxxxx Productions, Inc." and all trademarks and
associated logos (the "Assignment") from Company to Seller in the form
annexed hereto as Exhibit 4.2 (d)(i), to be deposited in escrow
pursuant to this Agreement and a fully executed escrow agreement (the
"Escrow Agreement") among Buyer, Seller, and Xxxxx, Gold, XxXxxxx,
Xxxxxxxx & Xxxxxxxx as escrow agent in the form annexed as Exhibit
4.2(d)(ii);
(e) A certificate, in form and substance reasonably
acceptable to the Seller, executed by the President of the Buyer, and
attested to by the Secretary of the Buyer, dated as of the Closing
Date, certifying as to the accuracy of the Buyer's representations and
warranties at and as of the Closing;
(f) A certificate, in form and substance reasonably
acceptable to Seller, executed by the President of the Buyer and
attested to by the Secretary of the Buyer, dated the Closing Date, and
certifying that: (i) attached thereto is a true and complete copy of
the By-laws of Buyer, as in effect as of the Closing Date; (ii)
16
attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of Buyer authorizing the execution,
delivery and performance of this Agreement; and that such resolutions
have not been modified, rescinded, or amended and are in full force and
effect; and (iii) attached thereto is a true and complete copy of the
Articles of Incorporation of the Buyer, as amended and as in effect as
of the Closing Date.
5. Representations and Warranties of the Seller. The Seller,
--------------------------------------------
individually and in his capacity as an officer and director of the Company and
its subsidiaries, represents and warrants to the Buyer that as of the date of
this Agreement and as of the Closing Date:
5.1. Ownership; Transfer of the Company Shares. The Company
-----------------------------------------
Shares are duly authorized, validly issued, fully paid, and non-assessable. The
Seller owns the Company Shares free and clear of all liens, encumbrances,
pledges, charges, security interests, rights, options, or other adverse
interests of any kind. The Seller has the right, power, and authority to sell
all of the Company Shares as provided herein, and upon such sale, the Buyer will
receive good and valid title to all of the Company Shares, subject to no liens,
encumbrances, pledges, charges, security interests, rights, options, or other
adverse interests of any kind. The certificates for the Company Shares will be,
17
when delivered to the Buyer, duly endorsed in blank or accompanied by stock
powers duly executed in blank, in proper form for transfer.
5.2. Authority. The Seller has the power and authority to execute
---------
and deliver this Agreement and each of the Seller and the Company has the power
and authority to execute and deliver the other agreements and documents
contemplated by this Agreement (all such agreements and documents will be known
hereafter as the "Transaction Documents", regardless of which party is required
to execute or deliver any such agreement or document) to which it or he is a
party and to carry out its or his obligations hereunder and thereunder, as the
case may be. The execution, delivery, and performance of each of the Transaction
Documents to which the Company is a party and the consummation of the
transactions contemplated thereby have been duly authorized by the Board of
Directors of the Company. No other proceeding on the part of the Company or the
Seller is necessary to authorize the execution and delivery of this Agreement or
any of the Transaction Documents to which the Company or the Seller is a party
or the performance by the Company or the Seller of any of the transactions
contemplated hereby or thereby. This Agreement, and each of the Transaction
Documents to which the Company or the Seller is a party, has been duly executed
and delivered on behalf of the Company and the
18
Seller and when executed and delivered by all required parties thereto, will be
a legal, valid, and binding obligation of the Company and the Seller enforceable
against the Company and the Seller in accordance with their respective terms,
except to the extent that the validity, binding legal effect, or enforceability
of any provisions in the Agreement or any Transaction Document, or any rights
granted herein or thereunder may be subject to or affected by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
similar laws affecting the rights of creditors generally, and general principles
of equity (whether asserted in an action at law or in equity).
5.3. Approvals. No consent, approval, order, or authorization of,
---------
or registration, declaration, or filing with, any governmental authority is
required in connection with the execution and delivery of this Agreement and the
Transaction Documents, by each of the Company or the Seller, or with the
consummation of the transactions contemplated hereby or thereby. No consent of
any third party is necessary to permit the consummation of the transactions
contemplated hereby or thereby.
5.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents, and the transactions contemplated hereby and thereby,
have been carried out by the Company and the Seller without the intervention of
any
19
person or firm in such manner as to give rise to any valid claim against any of
the parties hereto for a brokerage commission or finder's fee.
5.5. Organization, Etc.
-----------------
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New York, and
has all requisite corporate power and authority to own or lease and to
operate its properties and to carry on its business as now being conducted.
The Company has delivered to the Buyer complete and correct copies of the
Company's Articles of Incorporation, By-laws, and all amendments thereto.
The Company is not duly qualified or licensed to do business as a foreign
corporation in any jurisdictions outside the State of New York.
(b) All subsidiary corporations or other entities of the
Company, listed on Schedule 5.7, are duly organized, validly existing, and
in good standing under the laws of the state of their incorporation or
organization and individually have all requisite power and authority to own
or lease and to operate its properties and to carry on its business as now
being conducted. The Company has delivered to the Buyer complete and
correct copies of each subsidiary's Articles of Incorporation, By-laws or
20
organizational documents, whichever is applicable, and all amendments
thereto. No subsidiary entity is qualified or licensed to do business as a
foreign corporation or entity in any jurisdictions outside of the state of
their incorporation or organization.
(c) As of the date of Closing, no claim has been made against
Company by any person or entity based upon the failure of Company or any of
its subsidiaries to qualify or be licensed to do business as a foreign
corporation in any state. In the event a future claim is made based upon
the Company or its subsidiary's failure to qualify or be licensed to do
business as a foreign corporation in any state prior to the Closing Date,
such claim shall be treated as an undisclosed liability in accordance with
Section 2.2(d) above, provided: a liability continuing after the Closing
Date shall be pro-rated to cover only the amount of time prior to the
Closing Date.
5.6. Capital Stock.
-------------
(a)(i) The Company's authorized capital stock consists of two
hundred (200) shares of Common Stock, no par value per share; (ii) the only
issued and outstanding shares of capital stock of the Company are eighty-
two and one half (82 1/2) shares of the Company's Common Stock, all of
which eighty-two and one half (82 1/2) shares are owned
21
beneficially and of record by the Seller; (iii) there are no outstanding
subscriptions, options, conversion rights, warrants, or other agreements or
commitments of any nature whatsoever (either firm or conditional) obligating
the Company to issue, deliver, sell, or cause to be issued, delivered, or
sold any additional shares of capital stock of the Company, or obligating
the Company to grant, extend, or enter into any such agreement or
commitment; and (iv) there are no rights of first refusal, pre-emptive
rights, or other similar agreements obligating the Company to offer any
shares of its capital stock to any person.
(b)(i) The only issued and outstanding shares of capital stock of
the Company's subsidiaries listed on Schedule 5.7 are wholly-owned by the
Company; (ii) there are no outstanding subscriptions, options, conversion
rights, warrants, or other agreements, or commitments of any nature
whatsoever (either firm or conditional) obligating the Company or a
subsidiary to issue, deliver, sell, or cause to be issued, delivered, or
sold, any additional shares of capital stock of any subsidiary, or
obligating the Company or subsidiary to grant, extend, or enter into any
such agreement or commitment; and (iii) there are no rights of first
refusal, preemptive rights, or similar agreements obligating any subsidiary
to offer any shares of its capital stock to any person.
22
5.7. No Subsidiaries, Etc. The Company does not own, directly
--------------------
or indirectly, capital stock or equity in any other corporation or other person
and is not a partner in any partnership or a participant in any joint venture,
except as listed on Schedule 5.7.
5.8. Financial Statements. The Company has delivered to the
--------------------
Buyer complete and correct copies of (a) the Company's consolidated income tax
returns for the calendar years ended December 31, 1993 and 1994 and (b) the
Company's unaudited consolidated financial statements for the calendar year
ended December 31, 1995; and (c) all financial statements completed since
December 31, 1995. All such financial statements have been prepared on an income
tax accounting basis and on an historically consistent basis throughout the
periods indicated and present fairly the financial condition of the Company at
the dates indicated and the results of operations for the periods indicated.
5.9. Absence of Certain Changes. Except to the extent
--------------------------
specifically set forth in reasonable detail on Schedule 5.9 hereto, since
December 31, 1995 there have been no material adverse changes in the assets,
liabilities, properties, business, or prospects of the Company or of any
subsidiary and neither the Company nor any subsidiary has:
23
(a) issued or sold any stock, notes, bonds, or other securities,
or any option to purchase the same, or entered into any agreement with
respect thereto;
(b) declared, set aside, or made any dividend or other
distribution on capital stock or redeemed, purchased, or acquired any
shares thereof, except for the redemption of shares previously owned by
Xxxxx Xxxxxxx, or entered into any agreement in respect of the foregoing;
(c) amended its Articles of Incorporation or By-laws;
(d) other than in the ordinary course of business (i) purchased,
sold, assigned or transferred any material tangible or intangible assets or
property (including cash and cash equivalents); (ii) mortgaged, pledged,
granted or suffered to exist any lien or other encumbrance or charge on any
material tangible or intangible assets or properties, except for liens for
taxes not yet due; or (iii) waived any rights of material value or canceled
any material debts or claims;
(e) incurred any material obligation or liability (absolute or
contingent), except current liabilities and obligations incurred in the
ordinary course of business, or paid any material liability or obligation
(absolute or contingent) other than current liabilities and obligations
incurred in the ordinary course of business;
24
(f) increased, or become obligated to increase, the compensation
or other benefits payable to any officer or director of the Company or any
relative of any such officer or director, or paid a bonus, or granted any
severance or termination pay, or entered into any employment agreement or
other agreement (written or oral) with any officer or salaried employee
(except as may be effected in accordance with the terms of this Agreement);
(g) incurred any damage, destruction, or similar loss, whether
or not covered by insurance, materially affecting the businesses or
properties of the Company;
(h) entered into any transaction other than in the ordinary
course of business;
(i) suffered any strike or other labor trouble materially and
adversely affecting its business, operations, or prospects;
(j) made or permitted any material amendment or termination of
any material contract, agreement, or license to which it is a party other
than in the ordinary course of business;
(k) made any change in its accounting methods or practices with
respect to its condition, operations, business, properties, assets, or
liabilities;
(l) abandoned or disposed of any material trade secret,
trademark, tradename, trademark application,
25
tradename application, or any other intellectual property;
(m) suffered any loss of employees or customers that materially
and adversely affects its business, operations, or prospects;
(n) failed to carry on their business and operations
substantially in the manner carried on as of the date hereof and the Company and
the subsidiaries have not engaged in any activity or transaction or made any
commitment to purchase or spend, other than in the ordinary course of their
business as heretofore conducted;
(o) failed to make their best efforts to preserve its business
organization intact, to keep available to the Buyer the services of its
employees and independent contractors and to preserve for the Buyer its
relationships with suppliers, licensees, distributors, and customers and others
having business relationships with it;
(p) obligated itself to, sell or otherwise dispose of or pledge
or otherwise encumber any of their properties or assets except in the ordinary
course of business or failed to maintain its facilities, machinery, and
equipment in good operating condition and repair, subject only to ordinary wear
and tear.
5.10. Taxes. Except to the extent specifically set forth in reasonable
-----
detail on Schedule 5.10 hereto, all federal,
26
state, county, municipal, and foreign tax returns required by law to be filed by
the Company, any subsidiary, and the Seller as of December 31, 1995 have been
duly filed, and all taxes (including without limitation sales, use, property,
and payroll taxes), assessments, fees, and other governmental charges together
with any and all penalties, fines, and interest thereon ("Taxes") upon the
Company, any subsidiary and the Seller or upon any of the Company's,
subsidiaries' or the Seller's properties, assets, revenues, income, sales, or
franchises that have become due and payable in respect of the periods or
transactions covered thereby, have been paid. Except to the extent specifically
set forth in reasonable detail on Schedule 5.10 hereto, neither the Internal
Revenue Service nor any other taxing authority or agency is now asserting, or is
threatening to assert, against the Company, any subsidiary or the Seller any
deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith. The Company, any subsidiary, and the Seller have not been
granted any waiver of any statute of limitation with respect to, or been granted
any extension of a period for the assessment of, any federal, state, county,
municipal, or foreign income tax. Seller has delivered to Buyer copies of all
federal, state and local tax returns for the Company and all its subsidiaries
for the calendar years 1992, 1993 and 1994.
5.11. Non-Contravention. Except to the extent
-----------------
27
specifically set forth in reasonable detail on Schedule 5.11 hereto, the
execution and delivery of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby will not (a)
violate any provision of the Articles of Incorporation or By-laws of the Company
or any subsidiary; (b) violate any material provision of, or result in the
breach or the acceleration of, or entitle any party to accelerate (whether after
the giving of notice or lapse of time or both) any material obligation under any
mortgage, lien, lease, agreement, license, instrument, order, arbitration award,
judgment, or decree to which either the Company, any subsidiary, or the Seller
is a party or by which it or he is bound; (c) result in the creation or
imposition of any material lien, charge, pledge, security interest, or other
encumbrance upon any property of the Company, any subsidiary or the Seller; or
(d) violate or conflict with any other material restriction or any law,
ordinance, or rule to which the Company, any subsidiary or the Seller or any
property of either the Company, any subsidiary or the Seller is subject.
5.12. Title to and Condition of the Assets of the Company.
---------------------------------------------------
(a) The Company and all subsidiaries have good and marketable
title to all assets owned by them free and clear of all mortgages, liens,
charges, encumbrances, easements,
28
security interests, or title imperfections, except to the extent
specifically set forth in reasonable detail on Schedule 5.12 hereto. The
assets reflected in the financial statements of the Company for its fiscal
year ended December 31, 1995 referred to in Section 5.8 hereof constitute
all of the tangible assets and properties that the Company and its
subsidiaries own, use, or hold in connection with their business, and the
conduct of such business as a going concern, except for additions or
dispositions in the ordinary course of business. The facilities, machinery,
furniture, office, and other equipment of the Company and all subsidiaries
that are used in its business are in good operating condition and repair,
subject only to the ordinary wear and tear of that business, and neither
the Company nor any property or asset owned or leased by it is in violation
of any applicable ordinance, regulation, or building, zoning, environmental
or other law in respect thereof, the violation of which will have a
material adverse effect on the financial condition, the conduct of the
business or the ownership or use of any of the properties or assets of the
Company or its subsidiaries.
(b) The Company and the subsidiaries own no real estate.
Schedule 5.12(b) hereto sets forth all personal property (with monthly
lease payments in excess of One Hundred Dollars ($100.00)) and real estate
leased to the
29
Company or its subsidiaries and specifies in the case of real estate the
location of each property, the use of the facility thereon, the name of the
owner or the names of the lessor and the lessee, the approximate square
footage of improvements. The Company has delivered to the Buyer access to
copies of each lease by which the Company or a subsidiary acquired its
interest in the personal property described in Schedule 5.12(b). Neither
the Company nor any subsidiary has received any written notice from any
governmental agency, board, bureau, body, department, or authority of any
United States or foreign jurisdiction, which materially restricts the use
of any of the real estate described in Schedule 5.12(b) hereto. Except as
set forth in Schedule 5.12(b) hereto, there is no easement, right-of-way
agreement, license, sublease, occupancy agreement, or like instrument with
respect to any of the real estate described in Schedule 5.12(b) hereto
which would have a material adverse effect on the Company's or a
subsidiary's use of such real estate. Each lease pursuant to which the
Company or a subsidiary leases any real or personal property is in full
force and effect and is valid and enforceable in accordance with its terms.
There is not under any such lease any material default by the Company or a
subsidiary, or any event that with notice or lapse of time or both would
constitute such a material default by the Company or a
30
subsidiary. Each property used in the business of the Company or a
subsidiary is reflected in the balance sheet of the Company as of December
31, 1995, referred to in Section 5.8 hereof.
(c) Seller has provided Buyer with a complete and accurate list
of all of the Company's accounts payable and liabilities as of December 31,
1995 on Schedule 5.12(c) and shall update this Schedule 5.12(c) as of the
Closing Date.
5.13. Litigation. Except as set forth in reasonable detail on
----------
Schedule 5.13 hereto:
(a) There are no actions, suits, proceedings, investigations, or
inquiries pending or threatened against or affecting the business,
operations, financial condition, or prospects of the Company or any
subsidiary at law or in equity in any court or before any federal, state,
municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality.
(b) There are no actions, suits, proceedings, investigations,
or inquiries pending or threatened against the Seller at law or in equity
in any court or before any federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality that
reasonably could be expected to have an adverse effect on the Seller's
right or ability to execute and deliver this
31
Agreement and the Transaction Documents or consummate the transactions
contemplated hereby or thereby.
(c) Neither the Company nor any subsidiary is in default in
respect of any judgment, order, writ, injunction, or decree of any court or
any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
(d) There are no actions, suits, proceedings, investigations, or
inquiries pending or threatened against the Company, any subsidiary at law
or in equity in any court or before any federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or
instrumentality that reasonably could be expected to have an adverse effect
on the Company's or any subsidiary's right or ability to execute and
deliver any of the Transaction Documents or consummate the transactions
contemplated thereby.
5.14 Employee Benefit Plans and Other Arrangements.
---------------------------------------------
(a) Employee Plans Generally. Except as set forth in reasonable
------------------------
detail on Schedule 5.14(a) hereto, the Company does not maintain, does not
make any contributions to, or has not been obligated by law or agreement to
establish, maintain, sponsor, or make any contributions to (i) any employee
pension benefit plan as described in Section 3(2)
32
of the Employee Retirement Income Security Act of 1974, as amended, and
regulations thereunder ("ERISA"); (ii) any employee welfare benefit plan as
described in Section 3(1) of ERISA, including, without limitation, any
arrangement providing for the payment of health benefits to former
employees or their beneficiaries; (iii) any formal or informal severance
plan or arrangement, including, without limitation, any arrangement
providing for payments to be made to any person contingent upon a change of
ownership or effective control of the Company or ownership of a substantial
portion of the assets of the Company; or (iv) any other deferred
compensation, bonus, stock option, stock purchase, insurance, or other
employee benefit plan, agreement, fund, or arrangement, whether or not set
forth in writing, providing benefits of economic value to any employee,
former employee, or present or former beneficiary, dependent, or assignee
other than regular salary, wages, or commissions paid substantially
concurrently with the performance of the services for which such benefits
are paid.
(b) Post-Retirement Benefits. Except to the extent required
------------------------
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), the Company has not incurred any current or future
obligation to provide health or life insurance benefits to employees or
33
former employees with respect to any period which extends beyond
retirement or other termination of employment.
(c) ERISA Title IV Considerations. Neither the Company nor any
-----------------------------
member of the Company's controlled group (within the meaning of Section
4001 of ERISA) has incurred (or reasonably expects to incur) any material
liability to the Pension Benefit Guaranty Corporation or any material
liability under Title IV of ERISA, and there are no circumstances that
might result in the imposition of a lien on any of the assets of the
Company pursuant to ERISA Sections 302 or 4068 or Section 412 of the
Internal Revenue Code of 1986, as amended.
(d) Multiemployer Plans. Neither the Company nor any member of
-------------------
the Company's controlled group (within the meaning of Section 4001 of
ERISA) does now have, or during the last five years has had, any obligation
to contribute to, or any other liability or potential liability with
respect to, a "multiemployer plan" as that term is defined in Section 3(37)
of ERISA or a multiple controlled group plan as described in Sections 4063
and 4064 of ERISA (including, without limitation, any withdrawal liability
or plan termination obligations).
5.15. Contracts.
---------
(a) Schedule 5.15(a) hereto contains a complete
34
and correct list of all agreements, contracts, and commitments to which
the Company or any subsidiary is a party or by which it or any of its
assets is bound as of the date hereof.
(b) The Buyer has been given access and upon Buyers's request
Seller will provide complete and correct copies of all written agreements,
contracts, and commitments to which the Company or any subsidiary is a
party or by which it or any of its assets is bound, together with all
amendments thereto. Such agreements, contracts, and commitments are in full
force and effect, and all parties to such agreements, contracts, and
commitments have, in all material respects, performed all obligations
required to be performed by them to date, and the Company and subsidiaries
are not, and no other party is, in material default thereunder.
(c) No agreement, contract, or commitment to which the Company
or any subsidiary is a party or by which its or any of its assets is bound
purports to limit its freedom to compete in any line of business or with
any person or entity. The Company has no outstanding power of attorney,
except routine powers of attorney relating to representation before
governmental agencies.
(d) Neither the Company nor any subsidiary is a party to any
material contract with any governmental
35
authority. Neither the Company nor any subsidiary is a party to any
contract that materially and adversely affects its condition (financial or
otherwise), operations (present or prospective), business (present or
prospective), properties, assets, or liabilities. Except as set forth on
Schedule 5.15(d) hereto, neither the Company nor any subsidiary knows of a
bid or contract proposal made by either that, if accepted or entered into,
might reasonably be expected to result in a loss to the Company.
5.16. Insurance. The Company maintains adequate insurance against
---------
risks for the business in which it and its subsidiaries are engaged, including
without limitation, worker's compensation and comprehensive liability insurance.
All of the Company's and subsidiaries' insurance policies are listed on Schedule
5.16 hereto, are in full force and effect, all premiums due thereon have been
paid, and the Company and the subsidiaries have complied in all material
respects with the provisions of such policies.
5.17. Trademarks, Etc. Schedule 5.17 hereto contains a complete and
---------------
accurate list (including registration numbers and dates of filing, renewal, and
termination) of all trademarks, patents, tradenames, trade secrets, copyrights,
service marks, licenses, all registrations and applications for any of the
36
foregoing, and other intellectual property owned by the Company or any
subsidiary or in which the Company or any subsidiary has registered an interest
or for which applications have been made (collectively, the "Intellectual
Property"). Except as otherwise set forth in Schedule 5.17 hereto, (a) all of
the Intellectual Property is owned by the Company or its subsidiaries free and
clear of all liens, encumbrances, or claims whatsoever; none of the Company's or
any subsidiary's rights in or use of such Intellectual Property infringes on the
rights of others, and Company's or any subsidiary's rights in said property have
not been and are currently not being, to the knowledge of the Seller, threatened
or challenged; (b) all of the Intellectual Property registrations set forth in
Schedule 5.17 have been duly issued and have not been canceled, abandoned, or
otherwise terminated; (c) all of the Intellectual Property applications set
forth in Schedule 5.17 have been duly filed with the appropriate authorities;
and (d) no consents or approvals of any person are necessary to sell, convey,
transfer, assign, and deliver any of the Intellectual Property to the Buyer.
Except as set forth in Schedule 5.17 hereto, the Company and each subsidiary
owns or has the right to use all of the Intellectual Property necessary to
conduct its operations and business and the Company and its subsidiaries know of
no claim, or any basis of any claim, that it has infringed any intellectual
property of any other person or that any other person has infringed any of the
Intellectual
37
Property. Except as set forth in Schedule 5.17 hereto, no third party has been
permitted or licensed to use any of the Intellectual Property and no royalties
or other fees are payable to any third party with respect to any of the
Intellectual Property.
5.18. Transactions with Interested Persons. Except to the extent
------------------------------------
specifically set forth in reasonable detail on Schedule 5.18 hereto and the
financial statements delivered to the Buyer pursuant to Section 5.8 above,
neither the Company nor Seller (or Seller's family members) owns, directly or
indirectly, on an individual or joint basis, an interest in, or serves as an
officer, director, employee, consultant, contractor, or agent of or to any
competitor or supplier of the Company or any person or entity having a contract
or arrangement with the Company, and to the best of Seller's knowledge, no
employee (or family member thereof) of the Company owns, directly or indirectly,
on an individual or joint basis, an interest in, or serves as an officer,
director, employee, consultant, contractor, or agent of or to any competitor or
supplier of the Company or any person or entity having a contract or arrangement
with the Company.
5.19 Compliance with Laws, etc. The Company, and its subsidiaries
-------------------------
have complied with and are in compliance with all federal, state, local, and
foreign statutes, laws, ordinances,
38
regulations, rules, permits, judgments, orders, or decrees applicable to it or
any of its properties, assets, operations, and business, the failure of
compliance with which would have a material adverse effect on the properties,
operations, business, financial condition, or prospects of the Company. There
does not exist any basis for any claim of default under or violation of any such
statute, law, ordinance, regulation, rule, permit, judgment, order, or decree
except such defaults or violations, if any, that in the aggregate do not and
will not materially and adversely affect the properties, operations, business,
financial condition, or prospects of the Company.
5.20. No Undisclosed Liabilities, Etc. Except for the transactions
-------------------------------
contemplated by this Agreement and as set forth in Schedule 5.20 hereto:
(a) The Company and subsidiaries have not incurred any material
liability or obligation (absolute, accrued, contingent, or otherwise) of
any nature (other than liabilities and obligations incurred in the ordinary
course of business) [that would properly be reflected or reserved against
in a balance sheet prepared in a manner historically consistent with that
used in the preparation of the balance sheet of the Company as of December
31, 1995] referred to in Section 5.8 above.
(b) Neither Company nor any subsidiary has
39
acquired any material amount of accounts receivable that are uncollectible.
5.21. Environmental Matters.
---------------------
(a) No releases or threat of releases of hazardous substances
have occurred at, from, in or on any real property owned, leased or
operated by the Company ("Site", or collectively, "Sites"), nor are there
any hazardous substances in, on, about or migrating to any Site;
(b) No releases or threat of releases of hazardous substances
have occurred at, from or in any Site to which a hazardous substance
generated by or from the Company has been disposed of;
(c) There are no past or pending environmental claims against
the Company or any subsidiary related to any Site or off-Site locations
to which the Company or any subsidiary has shipped hazardous substances.
To the Seller's best knowledge, there has been no violation of or non-
compliance with any environmental law or environmental permit by the
Company or any subsidiary relating to operations of the Company or any
subsidiary or other uses of the Site;
(d) There are no facts, circumstances, or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition
of special conditions
40
under any environmental law or environmental permits with respect to the
ownership, occupancy, development, use, or transferability of any Site;
(e) There are no underground storage tanks, polychlorinated
biphenyl-containing materials, or asbestos containing materials located at
any Site;
(f) There are not and there have not been any environmental
conditions at any Site resulting from or arising out of any of Company's
past activities at any Site created prior to or existing at the Closing
Date; and
(g) All necessary environmental permits and other permits for
all activities related to the past operations and current operations at all
Sites were obtained. The Company has fully complied and is in full
compliance with all environmental laws and environmental permits with
respect to activities relating to the Sites.
5.22. Governmental Authorizations and Regulations. Schedule 5.22
-------------------------------------------
hereto lists all licenses, franchises, permits, and other governmental
authorizations held by the Company material to the conduct of its business. Such
licenses, franchises, permits, and other governmental authorizations 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
41
Company holds all licenses, franchises, permits, and other governmental
authorizations, the absence of which could have a material adverse effect
on its business.
5.23. Accounting Practices. The Company makes and keeps accurate books
--------------------
and records, which are not kept in accordance with GAAP. The Company uses income
tax accounting methods to reflect its assets. The Company maintains internal
accounting controls that provide reasonable assurance that (a) transactions are
executed with management's authorization and (b) transactions are recorded as
necessary to permit preparation of the Company's financial statements and to
maintain accountability for the assets of the Company.
5.24. Minute Books. The minute books of the Company and its
------------
subsidiaries contain complete and accurate records of all meetings and other
corporate actions of their shareholders and Board of Directors and Committees
thereof.
5.25. Employee Matters. Neither the Company nor any subsidiary is in
----------------
violation, nor have they been alleged to be in violation, nor have they been
charged with any violation of any of the various provisions of Title VII of the
Federal Civil Rights Act, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, or any other federal or state
42
law dealing with employment discrimination, federal or state wage and hour laws,
federal or state income or unemployment and social security tax withholding
laws, or occupational safety and health laws and applicable standards and
regulations thereunder. Neither the Company nor any subsidiary is liable for any
accrued unpaid wages, vacation pay, bonuses, or commissions, or for any material
tax, penalty, assessment, or forfeiture for failure to comply with any
employer/employee matter. Except as set forth in reasonable detail on Schedule
5.25 hereto, neither Company nor any subsidiary is a party to any collective
bargaining agreement, no such agreement determines the terms and conditions of
employment of any employee of the Company or any subsidiary, no collective
bargaining agent has been certified as a representative of any of the employees
of the Company or any subsidiary, and no representation campaign or election is
now in progress with respect to any of the Company's or any subsidiary's
employees.
5.26. Accuracy of Information Furnished. This Agreement, the
---------------------------------
Transaction Documents, and the Schedules and Exhibits hereto and thereto
prepared by Seller do not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements (excluding
statements concerning solely the Buyer) contained herein or therein, in light of
the circumstances under which they were made, not
43
misleading.
5.27. Disclosure. The Seller and the Company have not knowingly
----------
failed to disclose to the Buyer any facts that would have a material adverse
impact on the value of the Shares or on the assets, liabilities, earnings,
prospects and business of the Company. No representation or warranty by the
Seller contained in this Agreement, and no statement contained in, any Schedule
or Exhibit, or other document attached hereto, or any list, certificate or
writing delivered in connection with or pursuant hereto, contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make the statements (excluding statements concerning solely the Buyer)
contained herein or therein not misleading or necessary in order to provide
fully and fairly the information required to be provided in any such document.
6. Representations and Warranties of Buyer. The Buyer represents and
---------------------------------------
warrants to the Seller that, as of the Closing Date:
6.1. Authority for Agreements. The Buyer has the power and
------------------------
authority to execute this Agreement and the Transaction Documents applicable to
the Buyer and to carry out its obligations hereunder and thereunder. When
executed and
44
delivered by the Buyer, this Agreement will be binding upon and enforceable
against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, reorganization, insolvency, moratorium,
or other similar laws from time to time in effect, affecting creditors' rights
generally, and general principles of equity (whether asserted in an action at
law or in equity).
6.2. Non-Contravention. The execution and delivery of this
-----------------
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby will not (a) violate any provision of the
Articles of Incorporation or By-laws of the Buyer; (b) violate any material
provision of, or result in the breach or the acceleration of, or entitle any
party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation under any mortgage, lien, lease, agreement,
license, instrument, order, arbitration award, judgment, or decree to which the
Buyer is a party or by which it is bound; (c) result in the creation or
imposition of any material lien, charge, pledge, security interest, or other
encumbrance upon any property of the Buyer except for the security interest of
The First National Bank of Maryland; or (d) violate or conflict with any other
material restriction or any law, ordinance, or rule to which the Buyer or its
property is subject.
6.3. Approvals. No consent, approval, order, or
---------
45
authorization of, or registration, declaration, or filing with, any governmental
authority is required in connection with the execution and delivery of this
Agreement and the Transaction Documents by the Buyer or the consummation of the
transactions contemplated hereby or thereby. Except as set forth in Schedule 6.3
hereto, no consent of any third party is necessary to permit the consummation of
the transactions contemplated hereby or thereby.
6.4. No Brokers. All negotiations relating to this Agreement and
----------
the Transaction Documents and the transactions contemplated hereby and thereby
have been carried out by the Buyer without the intervention of any person or
firm in such manner as to give rise to any valid claim against any of the
parties hereto for a brokerage commission or finder's fee.
6.5. Accuracy of Information Furnished. This Agreement and the
---------------------------------
Schedules and Exhibits hereto and thereto prepared by the Buyer do not contain
any untrue statement of a material fact and do not omit to state a material fact
necessary to make the statements (excluding statements concerning solely the
Company or the Seller) herein or therein, in light of the circumstances under
which they were made, not misleading.
6.6. Organization, Etc. The Buyer is a corporation
-----------------
46
duly organized, validly existing, and in good standing under the laws of the
State of Virginia, and has all requisite corporate power and authority to own or
lease and to operate its properties and to carry on its business as now being
conducted. The Buyer has delivered to the Seller complete and correct copies of
the Buyer's Articles of Incorporation, By-laws, and all amendments thereto. The
Buyer is not required to be qualified or licensed to do business as a foreign
corporation in any other jurisdiction except such jurisdictions, if any, in
which the failure to be so qualified or licensed will not have a material
adverse effect on its financial condition, the conduct of its business or the
ownership, lease or use of any of its properties or assets.
6.7. Litigation. Except as set forth in reasonable detail on
----------
Schedule 6.7. hereto:
(a) There are no actions, suits, proceedings,
investigations, or inquiries pending or threatened against or affecting
the business, operations, financial condition, or prospects of the
Buyer or any subsidiary at law or in equity in any court or before any
federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality that reasonably
could be expected to have an adverse effect on the Buyer's right or
ability to execute and deliver this Agreement and the Transaction
47
Documents or consummate the transactions contemplated hereby
or thereby.
(b) There are no actions, suits, proceedings,
investigations, or inquiries pending or threatened against the Buyer at
law or in equity in any court or before any federal, state, municipal,
or other governmental department, commission, board, bureau, agency, or
instrumentality that reasonably could be expected to have an adverse
effect on the Buyer's right or ability to execute and deliver this
Agreement and the Transaction Documents or consummate the transactions
contemplated hereby or thereby.
(c) The Buyer is not in default in respect of any
judgment, order, writ, injunction, or decree of any court or any
federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality that reasonably
could be expected to have an adverse effect on the Buyer's right or
ability to execute and deliver this Agreement and the Transaction
Documents or consummate the transactions contemplated hereby or
thereby.
(d) There are no actions, suits, proceedings,
investigations, or inquiries pending or threatened against the Buyer at
law or in equity in any court or before any federal, state, municipal,
or other governmental department, commission, board, bureau, agency, or
instrumentality that reasonably could be expected to have an adverse
effect on
48
the Buyer's right or ability to execute and deliver this Agreement or
the Transaction Documents or consummate the transactions contemplated
hereby or thereby.
6.8. Compliance with Laws, etc. The Buyer has complied with and
-------------------------
is in compliance with all federal, state, local, and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders, or decrees
applicable to it or any of its properties, assets, operations, and business, the
failure of compliance with which would have a material adverse effect on the
properties, operations, business, financial condition, or prospects of the
Buyer. There does not exist any basis for any claim of default under or
violation of any such statute, law, ordinance, regulation, rule, permit,
judgment, order, or decree except such defaults or violations, if any, that in
the aggregate do not and will not materially and adversely affect the
properties, operations, business, financial condition, or prospects of the
Buyer.
6.9. Disclosure. The Buyer has not knowingly failed to disclose
----------
to the Seller any facts that would have a material adverse impact on the assets,
liabilities, earnings, prospects and business of the Buyer. No representation or
warranty by the Buyer contained in this Agreement, and no statement contained in
any Schedule or Exhibit, or other document attached hereto, or
49
any list, certificate or writing delivered in connection with or pursuant
hereto, contains any untrue statement of material fact, or omits to state a
material fact necessary in order to make the statements (excluding statements
concerning solely the Seller and/or the Company) contained herein and/or therein
not misleading or necessary in order to provide fully and fairly the information
required to be provided in any such document.
7. Covenants of the Seller.
-----------------------
7.1. Employment Contract. At the Closing, the Seller will enter
-------------------
into the X. Xxxxxxx Employment Agreement.
7.2. Liability for Federal, State and Local Taxes. The Seller
--------------------------------------------
will be liable for all federal, state, and local taxes resulting from the
transactions contemplated by this Agreement, including, but not limited to, all
sales, use, and transfer taxes, if any, resulting from this transaction. In
addition, the Seller will be responsible for all of Company's and its
subsidiaries' federal, state, and local taxes and any interest, penalty, or
expenses incurred thereon for all tax years ending on or before December 31,
1995. In the event an audit is commenced or a claim is made for taxes which, if
upheld, would be the obligation of Seller hereunder, Seller shall be notified of
such audit or claim and shall defend and, if necessary, pay any taxes,
50
penalties and interest ultimately assessed.
7.3. Claims Experience. At or prior to the Closing, the Seller
-----------------
will prepare and deliver to the Buyer a description of all claims experience of
the Company during the past three years under all of the insurance policies
listed on Schedule 5.16 hereto, including settled and outstanding claims under
all such policies in respect of general liability and workers' compensation
claims.
7.4. Employment and Employee Benefits. The Seller has delivered
--------------------------------
to the Buyer Schedule 7.4 listing the name, title, and current annual base
salary or hourly rate of each person employed by Company on December 31, 1995,
together with a statement of the full amount and nature of any other
remuneration, whether in cash or kind, paid to each such person during the 1995
calendar year. The Seller will furnish an updated copy of Schedule 7.4 at the
Closing which will reflect any changes in such information occurring between
December 31, 1995, and the Closing Date. The Seller agrees with the Buyer that
any individuals who were full-time employees of the Company on the Closing Date
and who agree to execute the standard PGI Code of Conduct agreement will be
offered continued employment with the Company, effective immediately after the
Closing. Any individuals who accept this offer of employment with the Company
51
will be referred to herein as "Transferring Employees." This employment of
Transferring Employees will be "at will" and nothing herein expressed or implied
confers upon any such Transferring Employee any rights or remedies of any nature
or kind whatsoever under or by reason of this Agreement, including, without
limitation, any rights to employment for a specific period. After the Closing,
the Buyer will make available to Transferring Employees such wages and benefits
as the Buyer, in its sole business judgment, deems appropriate, subject only to
the covenants set forth in Section 8.1 hereof, and the Buyer will be under no
obligation to credit Transferring Employees with past service credit for any
purpose (including, without limitation, vacation, severance, or pension
purposes).
7.5. Non-Competition.
---------------
For a period of **** *** ***** commencing on the Closing Date,
Seller will not:
(a) Directly or indirectly, engage in, own, control, or
make an investment in a business in excess of 2% of the outstanding
shares of such business and hold such investment in a name other than a
"street name" and such business competes directly with the business of
the Company;
(b) Accept employment with any person or entity that
competes directly with the business of the Company;
(c) Directly or indirectly solicit or employ any
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
52
person who at such time provides services for or is otherwise employed
by the Company or the Buyer, or encourage or induce any employee of the
Company or the Buyer to leave such employment;
(d) Directly or indirectly, divert or attempt to divert
from the Company or the Buyer, the business of any customer or client
of the Company or the Buyer.
7.6. Subordination Agreement. At Closing, Seller agrees to sign
-----------------------
a subordination agreement with Buyer's primary financial institution, The First
National Bank of Maryland, in the form attached hereto as Exhibit 7.6 provided
that at Closing, Buyer supplies Seller with a written statement from The First
National Bank of Maryland acknowledging that as of the Closing Date, it does not
have and will not later obtain any security interest or lien in the service xxxx
"Xxx Xxxxx Productions, Inc." (the "Xxxx") and that it waives any provisions of
the subordination agreement that could impair or prevent Seller from acquiring
the Xxxx by assignment upon an Event of Default hereunder. Seller agrees to sign
updates of the subordination agreement described in the immediately preceding
sentence as may be reasonably requested from time to time, provided such updates
are consistent with Exhibit 7.6. Buyer agrees and warrants that it shall not
directly or indirectly encumber or grant any security interest in the Xxxx, or
cause the Xxxx to be encumbered
53
or a security interest in same to be granted to any party. If the Buyer
determines to change its primary financial institution, the Seller shall
cooperate with Buyer in executing a new subordination agreement with such new
institution, provided such new agreement does not restrict any rights or
prejudice any position of Seller beyond the restrictions which may be contained
in Exhibit 7.6, and provided that such financial institution acknowledges and
agrees that it does not have and will not obtain any security interest or lien
in the Xxxx or otherwise prevent Seller from subsequently acquiring the Xxxx by
assignment upon an Event of Default hereunder. This Section will have no force
or effect once Seller has received full satisfaction of all elements of the
Purchase Price.
7.7. Further Assurances. The Seller agrees, at the Seller's
------------------
sole expense, to do or cause to be done such further acts and things and deliver
or cause to be delivered to the Buyer such additional assignments, agreements,
powers, and instruments as the Buyer may reasonably require to carry into effect
the purposes of this Agreement and the Transaction Documents or to better assure
and confirm unto the Buyer its rights, powers, and remedies hereunder and
thereunder.
7.8. Loan Repayment. Seller will at Closing, pay in full
--------------
Seller's loan from Company as reflected on Company's
54
December 31, 1995 year-end financial statement.
8. Covenants of the Buyer.
----------------------
8.1. Employment and Employee Benefits.
--------------------------------
(a) After the Closing, the Buyer agrees to offer continued
employment to Transferring Employees. This employment of Transferring
Employees will be "at will" and nothing herein expressed or implied
confers upon any such Transferring Employee any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement,
including, without limitation, any rights to employment for a
specific period. The Buyer will make available to Transferring
Employees such wages and benefits as the Buyer, in its sole business
judgment, deems appropriate, provided, however, that it will use its
best efforts to initially provide Transferring Employees with
substantially similar working terms and working conditions as they
were afforded as employees of the Company prior to the Closing Date.
The Buyer will be under no obligation to credit Transferring
Employees with past service credit for any purpose (including,
without limitation, vacation, severance, or pension purposes). In
addition to the foregoing, the Buyer will use its best efforts to
offer Transferring Employees who are employed with the Company in a
management position,
55
the opportunity to participate in the Buyer's management benefit
programs, if any, as they exist at the Closing Date.
(b) In addition, Buyer will use its best commercial
efforts to include the Transferring Employees in Buyer's benefit plans,
which include medical coverage and 401(k) plans, at Closing without a
waiting period.
(c) Buyer will recommend to the insurance company
currently providing medical insurance coverage to its employees that
Transferring Employees be covered under such medical insurance without
a required physical examination or the exclusion of existing
conditions.
(d) The cost of incorporating the Transferring Employees
into the Buyer's plan will be paid by the Buyer.
8.2. Termination of Company's Benefit Plans. Buyer will cause
--------------------------------------
the Company to terminate all Company Employee benefit plans in existence at
Closing or as soon as possible subsequent to Closing. Seller retains
responsibility for all liabilities, including funding liabilities and fiduciary
responsibilities related to the termination and distribution of such plans.
8.3. Certain Life Insurance Policies. At Closing, Buyer agrees
-------------------------------
to cause the Company to assign to Seller and Xxxxx Xxxxxxx, individually, the
life insurance policies that the Company owns insuring the lives of said
individuals.
56
8.4. Undisclosed Liabilities. After the Closing Date, Buyer
-----------------------
agrees:
(a) To notify Seller of any undisclosed payables or
liabilities of which it becomes aware and Seller shall have the right
to defend or compromise any of the same unless such action would have
an unreasonably adverse effect on the Company, its affiliates or their
ongoing businesses; and
(b) To notify Seller of any claims or audits the Company
has regarding any local, state or federal tax and any interest, penalty
or expenses incurred for tax years or business conducted prior to
December 31, 1995, and Seller shall have the right to defend or
compromise any of the same, as long as such defense or compromise is
not detrimental to the Company and any taxes, interest or penalties
incurred are paid by Seller.
8.5. Payment of Assumed Liabilities. Buyer will pay all assumed
------------------------------
liabilities listed on Schedule 8.5 in accordance with their terms, and
consistent with the side letter dated March 27, 1996 from J. Xxxxxxxx Xxxxxxx to
Xxxx X. Xxxxxxxxx re: Xxx Xxxxx Productions, Inc. Acquisition.
8.6. X. Xxxxxxx Employment Agreement. At the Closing Buyer will
-------------------------------
cause Company to enter into the X. Xxxxxxx Employment Agreement.
57
8.7. Umbrella Insurance Coverage. Buyer will provide for
---------------------------
umbrella insurance coverage for Company under Parent's general liability policy,
effective immediately as of the Closing.
8.8. Further Assurances. The Buyer will, at the request of the
------------------
Seller and at the Buyer's sole expense, execute and deliver any further
instruments or documents and take all such further action(s) as the Seller may
reasonably request in order to carry into effect the purposes of this Agreement
and the Transaction Documents or to better assure and confirm unto the Seller
its rights, powers, and remedies hereunder and thereunder.
9. Conditions Precedent to the Seller's Obligation to Sell the
-----------------------------------------------------------
Company Shares. The obligations of the Seller to sell the Company Shares is
--------------
subject to the fulfillment prior to or at the Closing of the following
conditions:
9.1. The Buyer's Performance. There will not be any material
-----------------------
error, misstatement, or omission in the representations and warranties made by
the Buyer in this Agreement; all representations and warranties by the Buyer
contained in this Agreement or in any written statement delivered by the Buyer
to the Company or the Seller pursuant to this Agreement will be true in all
material respects at and as of the Closing as though such
58
representations and warranties were made at and as of said time (except (a) as
contemplated by this Agreement and (b) to the extent, if any, the Company and
the Seller will waive the same); and the Buyer will have performed and complied
in all material respects with all the terms, provisions and conditions of this
Agreement to be performed and complied with by the Buyer at or before the
Closing.
9.2. Consents and Approvals. The Company and the Buyer (and to
----------------------
the extent required, the Seller) will have obtained all consents,
authorizations, and approvals under all statutes, laws, ordinances, regulations,
rules, judgments, decrees, and orders of any court or governmental agency,
board, bureau, body, department, or authority or of any other person required to
be obtained by the Company, the Buyer, or the Seller, as the case may be, in
connection with the execution, delivery, and performance of this Agreement, the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
9.3. No Legal Impediment. There will be in effect no
-------------------
injunction, writ, temporary restraining order, or any order of any nature issued
by any court or governmental agency directing that the transactions contemplated
by this Agreement not be consummated.
59
10. Conditions Precedent to the Buyer's Obligation to Purchase the
--------------------------------------------------------------
Company's Shares. The obligation of the Buyer to purchase the Company's Shares
----------------
is subject to the fulfillment prior to or at the Closing of the following
conditions:
10.1. Company's and the Seller's Performance. There will not be
--------------------------------------
any material error, misstatement, or omission in the representations and
warranties made by the Company or the Seller in this Agreement; all
representations and warranties by the Company and the Seller contained in this
Agreement or in any written statement delivered by the Company or the Seller to
the Buyer pursuant to this Agreement will be true in all material respects at
and as of the Closing as though such representations and warranties were made at
and as of said time (except (a) as contemplated by this Agreement and (b) to the
extent, if any, the Buyer will waive the same); and the Company and the Seller
will have performed and complied in all material respects with all the terms,
provisions, and conditions of this Agreement to be performed and complied with
by the Company and the Seller at or before the Closing.
10.2. Consents and Approvals. The Company and the Buyer (and to
----------------------
the extent required, the Seller) will have obtained all consents, authorization,
and approvals under all statutes, laws, ordinances, regulations, rules,
judgments, decrees, and
60
orders of any court or governmental agency, board, bureau, body, department, or
authority or of any other person required to be obtained by the Company, the
Seller, or the Buyer, as the case may be, in connection with the execution,
delivery and performance of this Agreement, the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby.
10.3. Physical Properties. There will have occurred no material
-------------------
damage to or destruction or loss of (whether or not covered by insurance) any of
the Company's facilities, equipment, or other assets.
10.4. No Legal Impediment. There will be in effect no
-------------------
injunction, writ, temporary restraining order, or any order of any nature issued
by any court or governmental agency directing that the transactions contemplated
by this Agreement not be consummated.
11. Events of Default. Any of the specified events set forth herein
-----------------
shall constitute an event of default under this Agreement ("Events of Default").
11.1. Principal. The Buyer shall have failed to pay when due any
---------
portion of the principal amount of the Notes and such failure shall have
continued for ten (10) business days
61
after receipt of written notice from Seller.
11.2. Interest. The Buyer shall have failed to pay when due any
--------
interest under or fee with respect to the Notes and such failure shall have
continued for ten (10) business days after receipt of written notice from
Seller.
11.3. Payments. The Buyer shall have failed to pay when due any
--------
payments due to Seller pursuant to Section 2 of this Agreement, other than
payments due under the Notes, and such failure shall have continued for ten (10)
business days after receipt of written notice from Seller.
11.4. Change of Control. The Buyer shall sell control of Company
-----------------
to any unaffiliated third party.
11.5. Key Man. The Company is sold, resulting in Xxxx Xxxxxxxxx
-------
no longer acting as Chief Executive Officer of the Company.
11.6. Bankruptcy; Insolvency. The Buyer or Company shall suspend
----------------------
or discontinue its business or the business of the Company, or shall make an
assignment for the benefit of creditors, or shall become insolvent or be unable
or generally fail to pay its debts when due, or shall become in any
62
jurisdiction a party or subject to (voluntarily or involuntarily) any
liquidation or dissolution action or proceeding with respect to itself, or any
bankruptcy, reorganization, insolvency or other proceeding for the relief of
financially distressed debtors commenced with respect to it, or a receiver,
liquidator, custodian or trustee shall be appointed for it or a substantial part
of its assets (and with respect to any involuntary action or proceeding, an
order entered in the proceeding is not dismissed within thirty (30) days), or it
shall take any action to effect or which indicates its acquiescence in any of
the foregoing.
12. Remedies Upon Default by Buyer. The Seller shall have the
------------------------------
following rights and remedies (to the permitted by applicable law), in
addition to all other rights and remedies of the Seller under this Agreement,
all such rights and remedies being cumulative, non-exclusive, and enforceable
alternatively, successively and concurrently:
12.1. Declare Notes and Other Elements of the Purchase Price Due and
--------------------------------------------------------------
Payable. Upon the occurrence of an Event of Default and at any time
-------
thereafter,the Seller shall be entitled to declare the Notes, along with all
interest thereon and all other amounts payable due to Seller from Buyer under
this Agreement,to be forthwith due and payable, whereupon the Notes, all such
interest and all such amounts shall become and be forthwith due and
63
payable, without presentment, demand, protest or further notice of any kind, all
of which are expressly waived by the Buyer.
12.2. Assignment of the Xxxx. In the event of the occurrence of an
----------------------
Event of Default described in Sections 11.1, 11.2 or 11.3, in addition to the
remedy set forth in Section 12.1 above, the Seller shall be entitled to notify
the Escrow Agent of Buyer's Default and obtain the Assignment of the Xxxx from
the Escrow Agent in accordance with the terms of the Escrow Agreement attached
as Schedule 4.2(d)(ii) hereto. From that point forward, Buyer and Company will
abandon any use of the Xxxx or any confusingly similar xxxx or designation, and
Seller will have full and unencumbered use of that name and all related Marks.
12.3. Covenants Not To Compete. In the event of the occurrence of an
------------------------
Event of Default described in Sections 11.1, 11.2 or 11.3, in addition to the
remedy set forth in Section 12.1 above, all covenants not to compete, and non-
solicitation agreements, whether expressed in this Agreement, in an Employment
Agreement or otherwise, and all provisions of the PGI Code of Conduct or other
similar restrictions placed on Seller and/or Xxxxx Xxxxxxx will automatically
terminate.
12.4. Employment Agreements. In the event of the occurrence of an
---------------------
Event of Default described in Sections 11.1,
64
11.2 or 11.3, in addition to the remedy set forth in Section 12.1 above, the
Employment Agreement between Company and Seller and the employment agreement
between Company and Xxxxx Xxxxxxx then in existence shall terminate upon an
Event of Default, at the option of Seller, except that any amounts due Seller or
Xxxxx Xxxxxxx under the terms of the Employment Agreements including salary,
bonuses, commissions or otherwise, for services rendered prior to termination,
will be paid by Buyer in accordance with the terms of such Agreements.
13. Indemnification.
13.1. Indemnification of the Buyer and the Company.
--------------------------------------------
(a) From and after the Closing Date, the Seller will
indemnify, defend, and hold harmless the Buyer and the Company and
their respective officers, directors, shareholders, representatives,
agents, and affiliates from, against, and in respect of all third party
claims, liabilities, actions, suits, proceedings, assessments,
judgments, losses, damages, costs, and expenses (including interest,
penalties, and reasonable accountants', experts', and attorneys' fees
and disbursements) (collectively, "Damages"), arising out of, relating
to, or resulting from (i) any material inaccuracy or material breach of
any of the written representations or warranties of the Seller made in
65
or pursuant to this Agreement or the Transaction Documents; (ii) the
material breach of any covenant, obligation, or agreement of the Seller
to be performed, fulfilled, or complied with pursuant to this Agreement
or the Transaction Documents; (iii) any material misrepresentation, or
the omission of any material fact (including without limitation, those
facts required to make the facts otherwise set forth not misleading),
in this Agreement or the Transaction Documents (including all Exhibits
and Schedules hereto and thereto); (iv) the operation of the business
of the Company prior to the Closing, or the acts or omissions of any of
the Company's officers, directors, shareholders, agents, or
representatives prior to the Closing in connection with the operation
of the Company's business; (v) any and all taxes of any nature incurred
by the Company or the subsidiaries prior to December 31, 1995; (vi)
with regard to the Seller, any personal taxes incurred on or prior to
the Closing Date; and (vii) from Xxxxx Xxxxxxx as a shareholder of the
Company, including but not limited to any claims related to the Stock
Purchase Agreement dated as of October 5, 1995 between Xxxxx Xxxxxxx
and the Company; and (viii) the termination by Seller, without Buyer's
consent, of certain of the Company's employees prior to the Closing,
provided that no indemnification will be owed hereunder in any case
where it is determined that Damages result solely from the
66
gross negligence, willful misconduct, or bad faith of the party to be
indemnified; provided, further, that the Seller will not be liable for
indemnification hereunder in respect of any breach of any warranty,
representation, covenant, obligation, or agreement, or any material
misrepresentation or omission, that is not made or is not to be
performed by the Company or the Seller.
(b) Seller will indemnify and hold harmless Buyer for
any and all undisclosed accounts payable or liabilities not listed on
Schedule 8.5 which subsequently come to the attention of the Buyer
subject to the provisions of Section 2.5.
13.2. Indemnification of the Seller. From and after the Closing
-----------------------------
Date, the Buyer will indemnify, defend, and hold harmless the Seller and its
representatives, agents, and affiliates from, against, and in respect of all
third party Damages arising out of, relating to, or resulting from (a) any
material inaccuracy or material breach of any of the written representations or
warranties of the Buyer made in or pursuant to this Agreement or the Transaction
Documents; (b) the material breach of any covenant, obligation, or agreement of
the Buyer to be performed, fulfilled, or complied with pursuant to this
Agreement or the Transaction Documents; or (c) any material misrepresentation or
the omission of any material fact (including, without limitation, those facts
required to make the
67
facts otherwise set forth not misleading) in this Agreement or the Transaction
Documents (including all Exhibits and Schedules hereto and thereto); provided
that no indemnification will be owed hereunder in any case where it is
determined that Damages result solely from the gross negligence, willful
misconduct, or bad faith of the Seller or the Company (pre-Closing); provided,
further, that the Buyer will not be liable for indemnification hereunder in
respect of any breach of any warranty, representation, covenant, obligation, or
agreement, or any material misrepresentation or omission, that is not made or is
not to be performed by the Buyer.
13.3. Procedure for Indemnification. After receipt by an
-----------------------------
indemnified party under Section 13.1 or 13.2 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is materially prejudiced thereby. If any such action
shall be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnified party shall be
entitled to participate therein and,
68
to the extent that it shall wish, to assume the defense thereof with counsel
satisfactory to such indemnified party and, after notice from the indemnifying
party as such indemnified party of its election so to assume the defense thereof
the indemnifying party shall not be liable to such indemnified party under such
Section for any fees of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation. If an indemnifying party
assumes the defense of such an action, (a) no compromise or settlement thereof
may be effected by the indemnifying party without the indemnified party's
consent (which shall not be unreasonably withheld) unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any Person and no effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party and (b) the indemnifying party shall have
no liability with respect to any compromise or settlements thereof effected
without its consent (which will shall not unreasonably withheld). If notice is
given to indemnifying party of the commencement of any action and it does not,
within ten (10) days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense thereof, the
indemnifying party shall be bound by any determination made in such action or
any compromise or
69
settlement thereof effected by the indemnified party. Notwithstanding the
foregoing, if an indemnified party determines in good faith that there is a
reasonable probability that an action may adversely affect it other than as a
result of monetary damages, such indemnified party may, by notice to the
indemnifying party assume the exclusive right to defend, compromise or settle
such action, but the indemnifying party shall not be bound by any determination
of an action so defended or any compromise or settlement thereof effected
without its consent (which shall not unreasonably withheld).
13.4. Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Indemnification. The representations and warranties made in Sections 5 and 6 of
---------------
this Agreement other than those in Sections 5.10, 5.14, 5.19, 5.20, 5.21 and
5.25 will survive the Closing and will expire upon the second anniversary of the
Closing Date, except as to any matter as to which a reasonably specific good
faith claim has been submitted in writing to the Buyer or the Seller, as
applicable, prior to such date. All representations and warranties contained in
Sections 5.10, 5.14, 5.19, 5.20, 5.21 and 5.25 will survive until the expiration
of the applicable statute of limitations period (including extensions thereof)
for any claim in respect of matters covered by Sections 5.10, 5.14, 5.19, 5.20,
5.21 and 5.25 respectively. The covenants contained in Section 8 of this
70
Agreement and the provisions contained in Sections 2.2, 2.3, 2.4, 2.5, 11, 12,
and this Section 13 will survive the Closing.
14. Miscellaneous.
-------------
14.1. Complete Agreement; Amendments; Waivers. This Agreement,
---------------------------------------
together with the Exhibits and Schedules hereto, contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, with respect thereto. This
Agreement may be modified or amended only by a written instrument signed by the
parties hereto. No provision of this Agreement may be waived without a written
instrument signed by the waiving party. The failure of any party to require, in
any one or more instances, the performance of any of the terms, covenants, or
conditions of this Agreement will not be construed as a waiver or relinquishment
of any rights granted hereunder or of the future performance of any such term,
covenant, or condition, but the obligations of the parties with respect thereto
will continue in full force and effect.
14.2. Counterparts. This Agreement may be executed in two (2) or
------------
more counterparts, each of which will be deemed an original, but all of which
together will constitute one (1) and the same instrument.
71
14.3. Successors and Assigns. This Agreement will inure to
----------------------
the benefit of, and be binding upon, the parties hereto and their respective
executors, heirs, and permitted assigns. Neither this Agreement nor any of the
rights or obligations hereunder (or under any document delivered pursuant
hereto) may be assigned by a party hereto without the prior written consent of
the other parties.
14.4. Governing Law. This Agreement will be construed and enforced
-------------
in accordance with the laws of the Commonwealth of Virginia without giving
effect to its conflicts of law principles.
14.5. Notices. All notices, claims, requests, demands, and other
-------
communications hereunder will be in writing and will be duly given if: (a)
personally delivered or sent via telecopy, (b) sent by telegram (other than
where original payment or other documents must be delivered) for delivery within
24 hours, or (c) sent by Federal Express, DHL Worldwide Express, or Airborne
Courier (for next business day delivery), shipping prepaid, as follows:
If to the Buyer, to:
Xxxx X. Xxxxxxxxx, President
PGI Company H
One Courthouse Metro, Suite 200
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
(Telecopy number (000) 000-0000)
72
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxxx, Xxxxxxx and Xxxxx, Chartered
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, XX 00000
If to the Parent, to:
Xxxx X. Xxxxxxxxx, President
Production Group International, Inc.
Xxx Xxxxxxxxxx Xxxxx
Xxxxx 000
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
(Telecopy number (000) 000-0000)
If to the Company, to:
Xxxx X. Xxxxxxxxx, President
Xxx Xxxxx Productions,Inc./PGI Company H
One Courthouse Metro
Suite 100
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
(Telecopy number (000) 000-0000)
If to the Seller, to:
J. Xxxxxxxx Xxxxxxx
000 Xxxxxx Xxx
Xxxxxxx, XX 00000
with a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxx, Gold, XxXxxxx, Xxxxxxxx & Xxxxxxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
or such other address or addresses as the person to whom notice is to be given
may have previously furnished to the others in writing in the manner set forth
above. Notices will be deemed
73
given at the time of personal delivery or completed telecopy, or, if sent by
telegram twenty-four (24) hours after the time sent, or, if sent by Federal
Express, DHL Worldwide Express, or Airborne Courier, one (1) business day after
the date sent.
14.6. Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party hereto will bear its own expenses.
14.7. Headings; Form of Words. The headings contained in this
-----------------------
Agreement (including but not limited to the titles of the Schedules and Exhibits
hereto) have been inserted for the convenience of reference only, and neither
such headings nor the placement of any term hereof under any particular heading
will in any way restrict or modify any of the terms or provisions hereof. Terms
used in the singular will be read in the plural, and vice versa, and terms used
in the masculine gender will be read in the feminine or neuter gender when the
context so requires, and vice versa.
14.8. Severability. The provisions of this Agreement will be
------------
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding, or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed consistent with
the
74
intent of the parties hereto, to the extent reasonably necessary to make
provisions, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
non-binding, or unenforceable in its entirety or partially or as to any party,
for any reason, and if such provision cannot be changed consistent with the
intent of the parties hereto to make it fully legal, valid, binding and
enforceable, then such provision will be stricken from this Agreement, and the
remaining provisions of this Agreement will not in any way be affected or
impaired, but will remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
BUYER:
PGI Company H
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
SELLER:
/s/ J. Xxxxxxxx Xxxxxxx
-------------------------------------
J. Xxxxxxxx Xxxxxxx
/s/ J. Xxxxxxxx Xxxxxxx
-------------------------------------
J. Xxxxxxxx Xxxxxxx
President and Director of
Xxx Xxxxx Productions, Inc. and Subsidiaries
75
