Exhibit 10.16
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 1, 1996
AMONG
PGI COMPANY J,
EPIC ENTERPRISES OF NEVADA, INC.,
XXXXX XXXXXXXX,
XXXXXXX XXXXXXXX
AND
XXXXXX XXXXXXXX
TABLE OF CONTENTS
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1. Definitions.......................................................... 2
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1.1. Use of Defined Terms......................................... 2
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1.2. Accounting Terms............................................. 2
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1.3. Exhibition Ownership and Exhibition Management............... 2
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1.4. Sections, Exhibits and Schedules............................. 3
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1.5. Miscellaneous Terms.......................................... 3
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1.6. Buyer's Parent............................................... 3
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2. Purchase and Sale of the Company Shares.............................. 3
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2.1. Purchase and Sale of the Company Shares...................... 3
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2.2. Purchase Price............................................... 4
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2.3. Definition of Net Income Pre-Tax............................. 8
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2.4. Financial Statements for Fiscal Years 1997 and 1998.......... 9
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3. Closing.............................................................. 9
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4. Deliveries at the Closing............................................ 9
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4.1. Deliveries to the Buyer by the Sellers....................... 9
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4.2. Deliveries to the Sellers by the Buyer....................... 12
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5. Representations and Warranties of the Company and Sellers............ 13
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5.1. Ownership; Transfer of the Company Shares.................... 14
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5.2. Authority.................................................... 14
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5.3. Approvals.................................................... 16
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5.4. No Brokers................................................... 16
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5.5. Organization, Qualification to Do Business................... 16
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5.6. Capital Stock................................................ 18
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5.7. No Subsidiaries, Etc. ....................................... 18
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5.8. Financial Statements......................................... 18
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5.9. Absence of Certain Changes................................... 19
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5.10. Taxes........................................................ 22
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5.11. Non-Contravention............................................ 23
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5.12. Title to and Condition of the Assets of the Company.......... 24
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5.13. Litigation................................................... 24
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5.14. Employee Benefit Plans and Other Arrangements................ 25
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5.15. Contracts.................................................... 27
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5.16. Insurance.................................................... 28
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5.17. Trademarks, Etc.............................................. 28
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5.18. Transactions with Interested Persons......................... 30
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5.19 Compliance with Laws, etc.................................... 30
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5.20. No Undisclosed Liabilities, Etc.............................. 31
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5.21. Environmental Matters........................................ 31
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5.22. Governmental Authorizations and Regulations.................. 33
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5.23. Accounting Practices......................................... 33
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5.24. Minute Books................................................. 34
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5.25. Employee Matters............................................. 34
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5.26. Accuracy of Information Furnished............................ 35
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5.27. Disclosure................................................... 35
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6. Representations and Warranties of Buyer................................ 36
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6.1. Authority for Agreements..................................... 36
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6.2. Non-Contravention............................................ 36
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6.3. Approvals.................................................... 37
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6.4. No Brokers................................................... 37
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6.5. Accuracy of Information Furnished............................ 37
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6.6. Organization, Good Standing.................................. 38
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7. Covenants of the Company and Each of the Sellers....................... 38
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7.1. Access, Information and Documents............................ 38
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7.2. Conduct of Business Pending Closing.......................... 39
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7.3. Consents and Approvals....................................... 41
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7.4. Confidential Material........................................ 41
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7.5. Liability for Federal, State and Local Taxes................. 42
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7.6. Claims Experience............................................ 43
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7.7. Employment and Employee Benefits............................. 43
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7.8. Non-Competition.............................................. 44
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7.9. Further Assurances........................................... 45
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7.10. Termination of Company's Benefit Plans....................... 45
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7.11. Release of Liens............................................. 46
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8. Covenants of the Buyer................................................. 46
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8.1. Confidential Information..................................... 46
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8.2. Consents and Agreements...................................... 47
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8.3. Employment and Employee Benefits............................. 47
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8.4. Termination of Company's Benefit Plans....................... 49
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8.5. Undisclosed Liabilities...................................... 49
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8.6. Payment of Assumed Liabilities............................... 49
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8.7. Seller's Personal Guarantees................................. 50
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8.8. Further Assurances........................................... 50
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9. Conditions Precedent to the Sellers' Obligation to Sell the Company
Shares................................................................. 50
9.1. The Buyer's Performance...................................... 50
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9.2. Consents and Approvals....................................... 51
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9.3. No Legal Impediment.......................................... 51
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10. Conditions Precedent to the Buyer's Obligation to Purchase the
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Company's Shares..................................................... 51
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10.1. Company's and the Sellers' Performance........................ 52
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10.2. Consents and Approvals........................................ 52
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10.3. Physical Properties........................................... 53
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10.4. No Legal Impediment........................................... 53
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10.5. Closing of Buyer's Purchase of Epic Enterprises of Nevada,
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Inc............................................................. 53
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11. Termination.......................................................... 53
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11.1. Termination by the Buyer...................................... 53
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11.2. Termination by the Company or the Sellers..................... 54
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11.3. Effect of Termination......................................... 54
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12. Indemnification...................................................... 55
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12.1. Indemnification of the Buyer and the Company.................. 55
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12.2. Indemnification of the Sellers................................ 57
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12.3. Procedure for Indemnification................................. 58
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12.4. Survival of Representations, Warranties, Covenants and
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Indemnification................................................. 60
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13. Miscellaneous........................................................ 60
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13.1. Complete Agreement; Amendments; Waivers....................... 60
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13.2. Counterparts.................................................. 61
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13.3. Successors and Assigns........................................ 61
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13.4. Governing Law................................................. 62
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13.5. Notices....................................................... 62
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13.6. Expenses...................................................... 64
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13.7. Headings; Form of Words....................................... 64
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13.8. Severability.................................................. 64
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT (the "Agreement") dated as of the 1st day of July,
1996 by and among PGI Company J, a Virginia corporation (the "Buyer"), Epic
Enterprises of Nevada, Inc., a Nevada corporation ("Epic L.V." or the
"Company"), Xxxxx Xxxxxxxx, an individual residing at 000 Xxxxxxxx Xxxxxx, Xx.
000, Xxx Xxxxx XX 00000 ("X. Xxxxxxxx"), Xxxxxxx Xxxxxxxx, an individual
residing at 000 Xxxxx Xxxxxx, Xx. 000, Xxx Xxxxx, XX 00000 ("X. Xxxxxxxx") and
Xxxxxx Xxxxxxxx, an individual residing at 0000-X Xxxxx Xxxxx Xxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000 ("X. Xxxxxxxx") (collectively, X. Xxxxxxxx, X. Xxxxxxxx and X.
Xxxxxxxx shall be referred to as the "Sellers" and individually as a "Seller");
and
WHEREAS, Sellers are the sole stockholders of Epic L.V. owning One Thousand
(1,000) shares of the common stock of Epic, which comprise all of the issued and
outstanding shares of common stock of Epic; and
WHEREAS, the Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to the Buyer, one hundred percent (100%) of the outstanding
capital stock of the Company (the "Company Shares") 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.
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1.1. Use of Defined Terms. Any defined term used in the plural
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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 relevant
class.
1.2. Accounting Terms. All accounting terms not otherwise
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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 required to be submitted by this Agreement
shall be prepared on a modified accrual basis, applied on an historically
consistent basis.
1.3. Leisure and Convention Housing Services, Business Centers
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and Destination Management Business. Leisure and Convention Housing Services is
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the provision of people and material for the housing of attendees to a
convention, exhibition or similar event. Business Centers is the operation of
centers providing general business services to the general public. Such general
business services include but are not limited to posting packages by U.S. mail
or overnight carrier, copying, faxing and
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providing mailboxes for the receipt of U.S. mail. Destination management
business is providing hotel reservation services, transportation reservation
services and event logistical services.
1.4. Sections, Exhibits and Schedules. References in this Agreement
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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.
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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."
1.6. Buyer's Parent. The parent Company of Buyer is Production
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Group International, Inc. (hereinafter known as "Buyer's Parent").
2. Purchase and Sale of the Company Shares.
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2.1. Purchase and Sale of the Company Shares.
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Upon the terms and provisions of this Agreement, the Buyer agrees to purchase
and accept delivery from the Sellers, and the Sellers agree to sell, assign,
transfer, and deliver to the Buyer, at the Closing provided for in Section 3
hereof, common stock certificates representing One Thousand (1,000) share of
Common
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Stock of Epic L.V., constituting one hundred percent (100%) of the outstanding
shares of capital stock of Epic L.V., 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
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(the "Purchase Price") for the Company Shares is a sum of the following:
(a) The Buyer will, at the Closing, deliver to the Sellers, by
certified checks payable to the order of the Sellers ("Certified Checks"), or at
Buyer's option, by wire transfer to the account of each of the Sellers as set
forth on Schedule 2.2(a) ("Wire Transfers") the aggregate amount of One Million
Dollars ($1,000,000).
(b) If the aggregate of the Net Income Pre-Tax in the periods July 1,
1996 - December 31, 1996 ("Fiscal Year 1996"), January 1, 1997 - December 31,
1997 ("Fiscal Year 1997") and January 1, 1998 - December 31, 1998 ("Fiscal Year
1998") ("Aggregate Net Income Pre-Tax 1996-1998") from the existing business of
the Company, defined as the annual business generated by the employees of the
Company who were employed as of Closing or their replacements, any business from
the Company account as of the date of this Agreement taken over by people other
than now current employees of the Company or their replacements ("Existing
Business") and business from the Safari's Las Vegas destination management
business is ***
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
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***, Seller will receive no additional purchase price amount.
(c) If the Aggregate Net Income Pre-Tax 1996-1998 is greater than ***
but less than ****, Seller will be paid a pro rata amount of **** with **** paid
to Seller for **** of Aggregate Net Income Pre-Tax 1996-1998 and **** paid to
Seller for Aggregate Net Income Pre-Tax of **** or greater. Any monies due to
Sellers under this Section 2.2(c) will be paid to Sellers within *** days of the
end of Fiscal Year 1998 minus any monies paid Sellers pursuant to Section
2.2(d)(i) hereof.
(d)(i) If the aggregate of the net Income Pre-Tax in Fiscal Years 1996
and 1997 ("Aggregate Net Income Pre-Tax 1996 and 1997") equals or is greater
than ****, Buyer will pay Sellers **** of what would be paid to the Sellers
under Section 2.2(c) above, as if the Aggregate Net Income Pre-Tax 1996 and 1997
was the Aggregate Net Income Pre-Tax 1996-1998, within **** days of the end of
Fiscal Year 1997.
(ii) If the pro rata amount to be paid to Sellers pursuant to Section
2.2(c) hereof does not equal or
* CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION
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exceed what is paid to the Sellers pursuant to Section 2.2(d)(i), Seller will
remit and refund to Buyer any monies paid under Section 2.2(d)(i) but not earned
under Section 2.2(c) within five (5) days of notice from Buyer.
(e) The Sellers will, at the Closing, provide the following to
Buyer: (i) a schedule of Company's accounts receivable as of July 1, 1996,
based on all information available to Sellers as of date of Closing in the
form attached hereto as Schedule 2.2(e)(i); and (ii) a schedule of accounts
payable as of July 1, 1996, as updated at the Closing in the form attached
hereto as Schedule 2.2(e)(ii).
In the event that any accounts receivable set forth on Schedule
2.2(e)(i) have not been paid to the Company within sixty (60) days after the
Closing incurred by the Company prior to Closing, Buyer shall have the right to
offset the amount of such unpaid accounts receivable from future payments to
Sellers, including but not limited to payments of the Purchase Price.
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 Closing but not scheduled on Schedule 2.2(e)(ii) are paid by the Company
or Buyer after the Closing, Buyer shall have the right to offset the amount of
such undisclosed accounts payable or undisclosed
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liabilities paid by the Company or Buyer from any future payments to Sellers,
including but not limited to payments of the Purchase Price.
(f) The Sellers shall designate in writing to Buyer, prior to the
Closing, the proration of the Purchase Price among each of the Sellers.
2.3. Definition of Net Income Pre-Tax. For the purpose of
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calculating the Purchase Price to be paid to Sellers under the terms of Sections
2.2(b), 2.2(c) and 2.2(d) above, Net Income Pre-Tax shall be defined as income
from the Existing Business and new business of the Company prior to charges for
federal, state or local income taxes, but after all expenses relating to the
Existing Business and new business of the Company except: (i) any corporate
expense of the Buyer not incurred in the ordinary course of business charged to
the Company unless mutually agreed otherwise; and (ii) depreciation on all new
fixed assets of the Company added after Closing and not added in the ordinary
course of business.
2.4. Financial Statements for Fiscal Years 1996, 1997 and 1998.
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During Fiscal Years 1996, 1997 and 1998 the Company's financial statements will
be prepared on an accrual basis in accordance with GAAP. Sellers shall have the
right to inspect and/or audit Company's financial statements relating to Fiscal
Years 1996, 1997 and 1998 during business hours at Sellers' expense on
reasonable notice to Company.
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3. Closing.
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3.1. Closing. The closing of the purchase and sale of the
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Company Shares (the "Closing") will take place at the offices of the Buyer (or
at such other place as the parties may mutually agree) at 2:00 p.m. on July 2,
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 July __, 1996. The date and
time of the Closing are referred to herein as the "Closing Date."
4. Deliveries at the Closing.
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4.1. Deliveries to the Buyer by the Sellers. At the Closing, the
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Sellers will deliver to the Buyer:
(a) Against receipt of the Wire Transfers or Certified Checks, the
Sellers 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;
(b) A certificate, in form and substance reasonably acceptable to the
Buyer, executed by the President of Epic, 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; (ii) attached thereto is a true and
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complete copy of the Articles of Incorporation of the Company, as amended and in
effect as of the Closing Date; and (iii) attached thereto is a true and complete
copy of resolutions adopted by the Board of Directors and shareholders of the
Company authorizing the execution, delivery and performance of this Agreement
and such resolutions have not been modified, rescinded, or amended and are in
full force and effect;
(c) A certificate, in form and substance reasonably acceptable to the
Buyer, executed by the Sellers, dated as of the Closing Date, certifying as to
the accuracy of the Company's and the Sellers' 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.
(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 the Company's employment agreements;
(g) Control over all assets of the Company including cash held in
the Company's name or owned by the Company;
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(h) Any schedules that are to be updated as of the Closing Date;
(i) An opinion of Sellers' counsel in the form attached hereto as
Exhibit 4.1(i); and
(j) As qualified and provided in Section 7.3 hereinbelow, the
fully executed assignment or consent for the change of ownership, whichever is
applicable, for the Franchise Agreements between Mail Boxes, Etc., U.S.A., Inc.
and the Company.
4.2. Deliveries to the Sellers by the Buyer. At the Closing, the
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Buyer will deliver to the Sellers the following:
(a) The sum of One Million Dollars ($1,000,000) by Certified
Check or Wire Transfer to the Sellers' accounts, against receipt of the stock
certificates for the Company Shares in accordance with Section 4.1(a) and 2.2(a)
above; and
(b) A certificate, in form and substance reasonably acceptable
to the Sellers, 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;
(c) A certificate, in form and substance reasonably acceptable to
the Buyer, executed by the President of Buyer, and attested to by the Secretary
of the Buyer, dated as of the Closing Date, and certifying that: (i) attached
thereto is a true and complete copy of the By-laws of the Buyer in effect as
of the Closing Date; (ii) attached thereto is a true and complete copy of the
Articles of Incorporation of the Buyer, as amended and in effect as of the
Closing Date; and (iii) attached thereto is a true and complete copy of a
certificate of Buyer's Secretary certifying as to the resolutions adopted by the
Board of Directors and shareholders of the Buyer authorizing the execution,
delivery and performance of this Agreement and such resolutions have not been
modified, rescinded, or amended and are in full force and effect; and
(d) A fully executed guarantee agreement between Production
Group International, Inc. and Sellers (the "Guarantee") in form annexed hereto
as Exhibit 4.2(c).
5. Representations and Warranties of the Company and Sellers.
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The Company, each of the Sellers, jointly, severally, individually and in their
capacity as officers and directors of the Company, represent and warrant 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
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Shares are duly authorized, validly issued, fully paid, and non-assessable. The
Sellers own the Company Shares set forth next to their names on Schedule 5.1,
free and clear of all liens, encumbrances, pledges, charges, security interests,
rights, options, or other adverse interests of any kind except as to a Buy-Sell
Agreement between Sellers to which each waives his rights. Sellers have 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,
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 Sellers have the power and authority to
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execute and deliver this Agreement and each of the Sellers and the Company have
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 such Company. No other proceeding on the part of the Company or
the Sellers is necessary to authorize the execution and delivery of this
Agreement or any of the Transaction Documents to which the Company or the
Sellers is a party or the performance by the
Company or the Sellers of any of the transactions contemplated hereby or
thereby. This Agreement, and each of the Transaction Documents to which the
Company or the Sellers is a party, has been duly executed and delivered on
behalf of the Company and the Sellers and when executed and delivered by all
required parties thereto, will be a legal, valid, and binding obligation of the
Company and the Sellers enforceable against the Company and the Sellers 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
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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 Company or the Sellers, 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
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the Transaction Documents, and the
transactions contemplated hereby and thereby, have been carried out by the
Company and the Sellers 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.
5.5. Organization, Qualification to Do Business.
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(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada, 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 duly
qualified or licensed to do business as a foreign corporation in any
jurisdictions outside of the State of Nevada in which it conducts business
except for the jurisdictions listed on Schedule 5.5(a).
(b) Other entities of the Company, listed on Schedule 5.5(b), 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 entity's Articles of Incorporation, By-laws
or organizational
documents, whichever is applicable, and all amendments thereto. Schedule 5.5(b)
lists each subsidiary entity which 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
any of the Company by any person or entity based upon the failure of the Company
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'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(e) above.
5.6. Capital Stock. Epic L.V.'s authorized capital stock consists
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of ___________ (___) shares of Common Stock, ______ par value per share; (ii)
the only issued and outstanding shares of capital stock of Epic L.V. are One
Thousand (1,000) shares of Epic L.V.'s Common Stock, all of which One Thousand
(1,000) shares are owned beneficially and of record by the Sellers; (iii) there
are no outstanding subscriptions, options, conversion rights, warrants, or other
agreements or commitments of any nature whatsoever (either firm or conditional)
obligating Epic L.V. to issue, deliver, sell, or cause to be issued, delivered,
or sold any additional shares of capital stock of Epic L.V., or obligating Epic
L.V. 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 Epic L.V. to
offer any shares of its capital stock to any person, except as to a Buy-Sell
Agreement between the Sellers to which each waives his rights.
5.7. No Subsidiaries, Etc. The Company does not own, directly or
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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
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Buyer complete and correct copies of (a) the Company's income tax returns for
the fiscal years ended December 31, 1993, December 31, 1994 and December 31,
1995; and (b) the Company's unaudited financial statements for the fiscal years
ended December 31, 1993, December 31, 1994 and December 31, 1995; and (c)
financial statements dated December 31, 1995. Any advances made by the Company
to the Company's officers or employees and any advances made by any officer or
employee that appear in the December 31, 1995 financial statements or were made
subsequent to December 31, 1995 shall be settled and eliminated prior to
Closing. All such financial statements have been prepared on a modified accrual
accounting basis and on an historically consistent basis throughout the periods
indicated and present fairly and accurately 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
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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, and the Company
has not:
(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, 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;
(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, 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 use 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, state, county, municipal, and
foreign tax returns required by law to be filed by the Company, and the Sellers
as of December 31, 1995 have been duly filed, and all taxes (including without
limitation sales, use, property, and payroll taxes), assessments, fee, and other
governmental charges together any and all penalties, fines, and interest thereon
("Taxes") upon the Company, and the Sellers or upon the Sellers' properties,
assets, revenues, income, sales, or franchises that have become due and payable
in respect of the periods or transaction 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 or the Sellers any deficiency or claim for additional Taxes or interest
thereon or penalties in connection therewith. The Company and the Sellers 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. Sellers have delivered to
buyer copies of all federal, state and local tax returns for the Company for the
last three years.
5.11. Non-Contravention. Except to the extent 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; (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 or the Sellers 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 or the
Sellers; or (d) violate or conflict with any other material restriction or any
law, ordinance, or rule to which the company or the Sellers or any property of
the Company or the Sellers is subject.
5.12. Title to and Condition of the Assets of the Company.
---------------------------------------------------
(a) The Company has good and marketable title to all assets owned
by them free and clear of all mortgages, liens, charges, encumbrances,
easements, 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 dated January 31, 1996
referred to in Section 5.8 hereof constitute all of the tangible assets and
properties that the Company owns, uses, or holds in connection with its
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 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
25
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.
(b) The Company owns 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 or owned by the Company 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 copies of each lease by which the Company acquired its
interest in the personal property described in Schedule 5.12(b). The Company has
not 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 use
of such real estate. Each lease pursuant to which the Company 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 any event that with notice or lapse of time or both
would constitute such a material default by the Company. Each property used in
the business of the Company is reflected in the balance sheet of the Company as
of December 31, 1995, referred to in Section 5.8 hereof.
(c) Sellers have provided Buyer with a complete and accurate list of
all of the Company's accounts payable and liabilities as of July 1, 1996 on
Schedule 5.12(c) and shall update this Schedule 5.12(c) as of the Closing Date.
26
5.13. Litigation. Except as set forth in reasonable detail on
----------
Schedule 5.13 hereto:
(a) There are no, and the Sellers are not aware of any situation
that could result in, actions, suits, proceedings, investigations, or inquiries
pending or threatened against or affecting the business, operations, financial
condition, or prospects of the Company 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, and the Sellers are not aware of any situation
that could result in, actions, suits, proceedings, investigations, or inquiries
pending or threatened against the Sellers at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
(c) The Company is not, and the Sellers are not aware of any
situation that could result 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, and the Sellers are not aware of any situation
that could result in, actions, suits, proceedings, investigations, or inquiries
pending or threatened against the Company at law or in equity in any court or
before any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality.
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) 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 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 40012 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 and correct list
of all agreements, contracts, and commitments to which the Company is a party
that have either payments or receipts of one Thousand Dollars or greater or by
which it or any of its assets is bound as of the date hereof.
(b) The Buyer has been given complete and correct copies of all
written agreements, contracts, and commitments to which the Company 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 is not, and no other party is, in material default
thereunder.
(c) No agreement, contract, or commitment to which the Company is
a party or by which it 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 except those listed on Schedule 5.15(c).
The Company has no outstanding power of attorney, except routine powers of
attorney relating to representation before governmental agencies.
(d) The Company is not a party to any material contract with
any governmental authority. The Company is not 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, the Company knows of no 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 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 has 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 foregoing, and other intellectual property owned by the Company or in
which the Company has registered an interest or for which applications have been
made (collectively, the "Intellectual Property"). Except as other wise set forth
in Schedule 5.17 hereto, (a) all of the Intellectual Property is owned by the
Company free and clear of all liens, encumbrances, or claims whatsoever; none of
the Company's rights in or use of such Intellectual Property infringes on the
rights of others, and Company's rights in said property have not been and are
currently not being, to the knowledge of the Sellers, 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 andy of the Intellectual Property to the Buyer. Except as
set forth in Schedule 5.17 hereto, the Company owns or has the right to use all
of the Intellectual Property necessary to conduct its operations and business
and the Company knows of no claim, or any basis of any claim, that it has
infringed any intellectual property of any other person or that any person has
infringed any of the intellectual 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 Sellers (or Sellers' 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 Sellers' 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 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
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 has 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 conformity with generally accepted accounting principles applied on a basis
consistently used in the preparation of the balance sheet of the Company as of
the fiscal year ending January 31, 1996 referred to in Section 5.8 above.
(b) The Company has not acquired any material amount of accounts
receivable that are uncollectible, and the frequency and amounts of payments
received by the Company with respect to the accounts receivable reflected on the
balance sheet of the Company as at January 31, 1996, referred to in Section 5.8
hereof, do not, in retrospect, render inadequate the reserve for uncollectible
accounts set forth on such balance sheet.
5.21. Environmental Matters.
---------------------
(a) Sellers have no actual knowledge of any 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 related to any Site or off-Site locations to which the Company has
shipped hazardous substances. There has been no violation of or non-compliance
with any environmental law or environmental permit by the Company relating to
operations of the Company or other uses of the site;
32
(d) There are no facts, circumstances, or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions 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 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 on a modified accrual accounting method on an historically
consistent basis 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 contain
------------
complete and accurate records of all meetings and other corporate actions of its
shareholders and Board of Directors and Committees thereof.
5.25. Employee Matters. The Company is not in material violation,
----------------
nor has it been alleged to be in violation, nor has it been charged with any
violation nor is the Company aware of 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 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. The Company is not liable for any
substantial accrued unpaid wages, vacation pay, bonuses, or Employment Act, the
Americans with Disabilities Act, or any other federal or state 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. The
Company is not liable for any substantial 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, the Company is not a
party to any collective bargaining agreement, no such agreement determines the
terms and conditions of employment of any employee of the Company, no collective
bargaining agent has been certified as a representative of any of the employees
of the Company, and no representation campaign or election is now in progress
with respect to any of the Company's employees.
5.26. Accuracy of Information Furnished. This Agreement, the
---------------------------------
Transaction Documents, and the Schedules and Exhibits hereto and thereto
prepared by Sellers 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 misleading.
5.27. Disclosure. The Sellers and the Company has not knowingly
----------
failed to disclose to the Buyer any facts that would have an adverse impact on
the value of the Company Shares or on the assets, liabilities, earnings,
prospects and business of the Company. No representation or warranty by the
Sellers 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 an Warranties of Buyer. The Buyer represents and
--------------------------------------
warrants to the Sellers 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 is obligations hereunder and thereunder. When
executed and 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; or (c) 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 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 Sellers) herein or therein, in light of the circumstances under
which they were made, not misleading.
6.6. Organization, Good Standing. The Buyer is a corporation
---------------------------
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.
6.7. Investigation. Buyer is purchasing shares based on its
-------------
investigation, and Buyer is not solely relying on any statement of either or
both of Sellers as to the anticipated revenues or general business of Company.
7. Covenants of the Company and Each of the Sellers.
------------------------------------------------
7.1. Access, Information and Documents. Pending the Closing, the
---------------------------------
Company and the Sellers will give to the Buyer and to its agents and
representatives (including, but not limited to, accountants, lawyers, and
appraisers) full and complete access during normal working hours to any and all
of the properties, assets, books, records, and other documents of the Company as
the Buyer may determine, and of the Company and the Sellers will furnish to the
Buyer such information and copies of such documents and records as the Buyer
will reasonably request. As part of such examination the Buyer may make such
inquiries of such persons having business relationships with the Company as the
Buyer will determine and the Company, and the Sellers will cooperate fully with
the Buyer in connection therewith.
7.2. Conduct of Business Pending Closing. From the date hereof
-----------------------------------
until the Closing with regard to the Company, except as consented to by the
Buyer in writing:
(a) The Company will maintain itself at all times as a
corporation duly organized, validly existing, and in good standing, as
applicable, under the laws of the jurisdictions under which it is incorporated
and in which it is doing business as a foreign corporation;
(b) The Company will carry on its business and operations in the
normal course, substantially in the manner carried on as of the date hereof and
the Company will not engage in any activity or transaction or make any
commitment to purchase or spend, other than in the ordinary course of their
business as heretofore conducted;
(c) The Company will not declare, authorize, or pay any
distribution or dividend to any of its shareholders and the Company will not
redeem, purchase, or otherwise acquire, or agree to redeem, purchase, or
otherwise acquire, any shares of their own stock;
(d) The Company will not pay or obligate itself to pay any
compensation, commission, or bonus to any director, officer, employee, or
independent contractor as such, except for the regular compensation and
commissions payable to such director, officer, employee, or independent
contractor at the rate in effect on the date of this Agreement or otherwise in
the ordinary course of business;
(e) The Company will continue to carry all of its existing
insurance;
(f) The Company will use its 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 each of them;
(g) The Company will not, and will not obligate itself to,
sell or otherwise dispose of or pledge or otherwise encumber any of its
properties or assets except in the ordinary course of business and the Company
will maintain its facilities, machinery, and equipment in good operating
condition and repair, subject only to ordinary wear and tear;
(h) The Company will not enter into any agreement or under-
standing with any partner, employee, officer, director, or shareholder of
the Company, or any affiliate of any of the foregoing;
(i) The Company will not engage in any activity or transaction
other than in the ordinary course of business as heretofore conducted; and
(j) Without limiting the foregoing, the Company will consult
with the Buyer regarding all significant developments, transactions, contracts,
personnel actions, personnel changes, proposals relating to their business or
similar events prior to taking any action.
7.3. Consents and Approvals. The Company and the Sellers will
----------------------
use their best efforts to obtain prior to the Closing 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 either of the Company or the Sellers in connection with the
execution, delivery, and performance of this Agreement, the Transaction
Documents to which they are a party, and the consummation of the transactions
contemplated hereby and thereby. Notwithstanding the previous sentence,
Sellers, shall, within twenty (20) days of the Closing obtain consent to (a) the
assignment or consent to change of ownership, as applicable, of leases listed on
Schedule 5.12(b) and (b) the assignment or consent to change of ownership, as
applicable, of the Franchise Agreement between Mail Boxes, Etc., U.S.A., Inc.
and the Company. If such assignments or consents are not received within said
time frame, the parties shall negotiate in good faith the resolution of the lack
of such assignment or consent including, without limitation, the financial
consequences of the failure to obtain such assignment or consent.
7.4. Confidential Material. The Company and the Sellers will, and
---------------------
will instruct all of their employees, representatives, agents, and affiliates
to, treat all Confidential Material confidentially and not disclose it except in
accordance herewith; provided, that (a) any Confidential Material may be
disclosed to the Company's or the Sellers' agents who (i) need to have access to
such information and (ii) are directed by either of the Company or the Sellers
to treat such Confidential Material confidentially; (b) any disclosure of
Confidential Material may be made with the prior written consent of the Buyer;
and (c) Confidential Material may be disclosed without liability hereunder to
the extent required by law or by the order or decree of any court or other
governmental authority; provided, however, that the party legally compelled to
disclose the Confidential Material will provide the Buyer with prompt notice of
that fact so that the Buyer may attempt to obtain a protective order or other
appropriate remedy. For purposes of this section, the term "Confidential
Material" will be defined to mean all information furnished by the Buyer or any
of its agents to either of the Company or any of the Sellers or any of their
agents; provided, however, that the term "Confidential Material" will not
include information that (x) becomes generally available to the public other
than as a result of a disclosure by either of the Company, any of the Sellers or
any of their employees, representatives, agents, or affiliates, or (y) was made
available to either of the Company or the Sellers on a non-confidential basis
from a source other than the Buyer or any of its agents, provided, that such
source is not bound by a confidentiality agreement with the Buyer or any of its
agents.
7.5 Liability for Federal, State and Local Taxes. The Sellers 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
Sellers will be responsible for all of Company's federal, state, and local taxes
and any interest, penalty, or expenses incurred thereon for all tax years and
partial tax years ending on or before January 31, 1996. In the event an audit is
commenced or a claim is made for taxes which, if upheld, would be the obligation
of Sellers hereunder, Sellers shall be notified of such audit or claim and shall
defend and, if necessary, pay any taxes, penalties and interest ultimately
assessed.
7.6 Claims Experience. At or prior to the Closing, the Sellers 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.
7.7 Employment and Employee Benefits. The Sellers have delivered to
--------------------------------
the Buyer Schedule 7.7 listing the name, title, and current annual base salary
or hourly rate of each person employed by the Company on June 15, 1996, together
with a statement of the full amount and nature of any other remuneration,
whether in a cash or kind, paid to each such person during the 1995 calendar
year. The Sellers will furnish an updated copy of Schedule 7.7 at the Closing
which will reflect any changes in such information occuring between June 15,
1996, and the Closing Date. The Sellers agree 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 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
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 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, severance, or pension purposes).
7.8. Non-Competition. For a period of *** commencing on the
---------------
Closing Date, Sellers will not:
(a) Directly or indirectly, engage in, own, control, or make an
investment in any business that competes directly or indirectly for the business
of the clients (as of Closing) of the Company or Epic Enterprises, Inc.
("Epic");
(b) Accept employment with any person or entity that competes
directly or indirectly for the business of the clients (as of Closing) of the
Company or Epic;
(c) Directly or indirectly solicit or employ any PGI Company J
and affiliates person who at such time provides services for or is otherwise
employed by the Company, or Epic, or encourage or induce any employee of the
Company or Epic to leave such employment;
(d) Directly or indirectly, divert or attempt to divert from
the Company or Epic, Buyer or Buyer's parent the business of any customer or
client of the Company or Epic that was a customer or client (as of Closing);
7.9. Further Assurances. The Sellers agree, at the Sellers'
------------------
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
*CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPERATELY WITH THE
COMMISSION.
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.
7.10. Termination of Company's Benefit Plans. Sellers shall pay
--------------------------------------
for all expenses and for all liabilities, including funding liabilities and
fiduciary responsibilities related to the termination and distribution of such
plans and if Seller agrees to such a merger, then for the merger of the
Company's pension plan into the 401(K) plan of Buyer's parent.
7.11. Release of Liens.
----------------
(a) Sellers will use commercially reasonable efforts too
obtain within sixty (60) days of Closing releases of all liens which are paid
and satisfied as of the date of Closing and are listed on Schedule 5.12(a).
Upon receipt of the Uniform Commercial Code Termination Statement (UCCTS),
Sellers will file UCCTS in appropriate jurisdiction(s) and deliver a copy of
UCCTS and evidence of filing to Seller.
(b) With regard to liens filed by San Diego National Bank,
Sellers will work with Buyer in replacing the financing provided by San Diego
National Bank which gave rise to the liens with Buyer's or Buyer's Parent's
Letter of Credit.
8. Covenants of the Buyer.
----------------------
8.1. Confidential Information. The Buyer will, and will instruct
------------------------
all of its employees, representatives, agents, and affiliates to, treat all
Confidential Information confidentially and not disclose it except in accordance
herewith; provided, that (a) any Confidential Information may be disclosed to
the Buyer's agents who (i) need to have access to such information and (ii) are
directed by the Buyer to treat such Confidential Information confidentially; (b)
any disclosure of Confidential Information may be made with the prior written
consent of the Company or the Sellers; and (c) Confidential Information may be
disclosed without liability hereunder to the extent required by law or by the
order or decree of any court or other governmental authority; provided, however,
that the party legally compelled to disclose the Confidential Information will
provide the Company or the Sellers, as appropriate, with prompt notice of that
fact so that the Company or any of the Sellers may attempt to obtain a
protective order or other appropriate remedy. For purposes of this section, the
term "Confidential Information" will be defined to mean all information
furnished by the Company or the Sellers or any of their agents to the Buyer or
any of its agents; provided, however, that the term "Confidential Information"
will not include information that (x) becomes generally available to the public
other than as a result of a disclosure by the Buyer or any of its employees,
representatives, agents, or affiliates, or (y) was made available to the Buyer
on a non-confidential basis from a source other than the Company or the Sellers
or any of their agents, provided, that such source is not bound by a
confidentiality agreement with the Company, the Sellers or any of their agents.
The provisions contained in this Section 8.1 will not survive the Closing.
8.2 Consents and Agreements. The Buyer will use its reasonable
-----------------------
commercial efforts to obtain prior to the Closing 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 Buyer in connection with the execution, delivery, and
performance of this Agreement, the Transaction Documents to which it is a party
and the consummation of the transactions contemplated hereby and thereby.
8.3. 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 deems appropriate and will provide Transferring Employees with
substantially similar working terms and working conditions as are provided to
all Buyer's employees. Other than services credit for the purpose of determining
an employee's vacation benefit, the Buyer will be under no obligation to credit
Transferring Employees with past service credit for any purpose (including,
without limitation, severance, or pension purposes).
(b) 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.
(c) Buyer will recommend and use its commercially reasonable
best efforts to make provisions for the Company's employees to transfer their
savings from any of the Company's employee benefit plans, terminated as a result
of this transaction, into Buyer's existing 401(K) plan.
8.4. Termination of Company's Benefit Plans. Sellers with Buyer's
--------------------------------------
assistance (at no cost or expense to Buyer) will cause the Company to terminate
all Company's Employee benefit plans in existence, including but not limited to
defined contribution plans, at Closing or as soon as possible subsequent to
Closing.
8.5. Undisclosed Liabilities. After the Closing Date, Buyer
-----------------------
agrees:
(a) To notify Sellers of any undisclosed payables or liabilities
of which it becomes aware and Sellers 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 Sellers 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 July 1, 1996, and Sellers
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 Sellers.
8.6. Payment of Assumed Liabilities. Buyer will pay all assumed
------------------------------
liabilities listed on Schedule 8.6 in accordance with their terms.
8.7. Seller's Personal Guarantees. Buyer agrees to use
----------------------------
commercially reasonable efforts to replace Sellers' personal guarantees to the
Company's vendors relating to Company accounts payable to vendors for business
expenses with Buyer's credit within sixty (60) days of Closing.
8.8. Further Assurances. The Buyer will, at the request of the
------------------
Sellers and at the Buyer's sole expense, execute and deliver any further
instruments or documents and take all such further action(s) as the Sellers 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 Sellers
its rights, powers, and remedies hereunder and thereunder.
8.9. Replacement Letters of Credit.
-----------------------------
(a) Buyer agrees to work with Sellers to replace the
existing financing from San Diego National Bank, which created the liens on the
Company's inventory, proceeds and products with Buyer's or Buyer's Parent's
Letter of Credit.
(b) Buyer agrees to use commercially reasonable efforts to
replace Seller's personal guarantees on any outstanding leases to which the
Company is a party.
9. Conditions Precedent to the Sellers' Obligation to Sell the Company
-------------------------------------------------------------------
Shares. The obligations of the Sellers 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 Sellers 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 Company and the Sellers 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 Sellers) 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 Sellers, 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.
10. Conditions Precedent to the Buyer's Obligation to Purchase the
--------------------------------------------------------------
Company's Shares. The obligation of the Buyer to purchase the Company Shares is
----------------
subject to the fulfillment prior to or at the Closing of the following
conditions:
10.1. Company's and the Sellers' Performance. There will not be
--------------------------------------
any material error, misstatement, or omission in the representations and
warranties made by the Company or the Sellers in this Agreement; all
representations and warranties by the Company and the Sellers contained in this
Agreement or in any written statement delivered by the Company or the Sellers 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 Sellers
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 Sellers at or before the Closing, including but not
limited to the deliveries to Buyer from Sellers required under Section 4.1
hereof.
10.2. Consents and Approvals. The Company and the Buyer (and to
----------------------
the extent required, the Sellers) will have obtained all consents,
authorization, 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
Sellers, 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.
10.5. Closing of Buyer's Purchase of Epic Enterprises of Nevada,
----------------------------------------------------------
Inc. Either the purchase of Epic Enterprises, Inc. from Sellers shall: (i)
----
have occurred; (ii) occur simultaneously with the Closing of the transaction
contemplated by this Agreement; or (iii) Buyer has waived this condition
precedent and is satisfied that the closing of the aforementioned transaction
will occur shortly after the closing of the transaction contemplated hereunder.
11. Termination. This Agreement may be terminated as follows:
-----------
11.1. Termination by the Buyer. The Buyer may, without liability
------------------------
to the Company or the Sellers, terminate this Agreement by notice to the Company
and the Sellers (a) at any time prior to the Closing if material default is made
by the Company or the Sellers in the observance or in the due and timely
performance of any of the terms hereof to be performed by the Company or the
Sellers that cannot be cured at or prior to the Closing, or (b) at any time
prior to the Closing if the Buyer discovers something unsatisfactory about
either of the Company or the Sellers during its due diligence or (c) at the
Closing if any of the conditions precedent to the performance of the Buyer's
obligations at the Closing will not have been fulfilled.
11.2. Termination by the Company or the Sellers. The Company and
-----------------------------------------
the Sellers may, without liability to the Buyer, terminate this Agreement by
notice to the Buyer (a) at any time prior to the Closing if material default
will be made by the Buyer in the observance or in the due and timely performance
of any of the terms hereof to be performed by the Buyer that cannot be cured at
or prior to the Closing or (b) at the Closing if any of the conditions precedent
to the performance of the Company or the Sellers' obligations at the Closing
have not been fulfilled.
11.3. Effect of Termination. If this Agreement is terminated, this
---------------------
Agreement, except for Sections 7.4 and 8.1, will no longer be of any force or
effect and there will be no liability on the part of any party or its respective
directors, officers, or shareholders except, in the case of termination because
of a material default or material breach resulting from the willful fault of
another party, the aggrieved party or parties may recover from the defaulting
party the amount of expenses incurred by such aggrieved party or parties in
connection with this Agreement and the transactions contemplated hereby which
the aggrieved party or parties would otherwise have to bear pursuant to Section
13.6 of this Agreement. If this Agreement is terminated, Sections 7.4 and 8.1
will remain in full force and effect, and any party, or its respective
directors, officers, agents or representatives, breaching Section 7.4 or Section
8.1 may be held liable for any such breach.
12. Indemnification.
---------------
12.1. Indemnification of the Buyer and the Company.
--------------------------------------------
(a) From and after the Closing Date, the Sellers will indemnify,
defend, and hold harmless the Buyer and the Company and its 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 or the Sellers made in or pursuant to
this Agreement or the Transaction Documents; (ii) the material breach of any
covenant, obligation, or agreement of the Sellers 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 July 1, 1996, 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 except
for the fiscally related matters which include, without limitation, accounts
payable, accounts receivables, debts and obligations of the Company from July 1,
1996 and Closing; (v) any and all taxes of any nature incurred by the Company
prior to July 1, 1996; (vi) the relationship with On-Line Reservations Systems,
Inc. or the Agreement by and between On-Line Reservations Systems, Inc., a
California corporation, and the Company dated September 15, 1994; (vii) with
regard to the Sellers, any personal taxes incurred on or prior to the Closing
Date, 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 party to be indemnified; and (viii) the
Company's Employee Benefit Plans and any other employee benefit agreement
described in Section 5.14 hereinabove; provided, further, that the Sellers 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 Sellers.
(b) Sellers, jointly and severally, will indemnify and hold
harmless Buyer for any and all undisclosed accounts payable or liabilities not
listed on Schedule 8.6 subject to the provisions of Section 2.2(f).
12.2. Indemnification of the Sellers. From and after the Closing
------------------------------
Date, the Buyer will indemnify, defend, and hold harmless the Sellers 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; (c) 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); or (d) the conduct
and/or the operation of the Company post-July 1, 1996; 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 Sellers 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.
12.3. Procedure for Indemnification. After receipt by an
-----------------------------
indemnified party under Section 12.1 or 12.2 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, 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 twenty (20) 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 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).
12.4. 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 Sellers, 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 Sections 7 and 8 of
this Agreement and the provisions contained in Sections 2.2, 2.3, 2.4, and this
Section 12 will survive the Closing.
13. Miscellaneous.
-------------
13.1. 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.
13.2. 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.
13.3. 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.
13.4. 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.
13.5. 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 J
One Courthouse Metro
Suite 200
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000-0000
(Telecopy number (000) 000-0000)
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxxx, Xxxxxxx and Xxxxx, Chartered
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
(Telecopy number (000) 000-0000)
If to the Parent, to:
Xxxx X. Xxxxxxxxx, President
Production Group International, Inc.
One Courthouse Metro
Suite 200
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
(Telecopy number (000) 000-0000)
If to the Company, pre-Closing, to:
Xx. Xxxxx Xxxxxxxx
Epic Enterprises of Nevada, Inc.
0000 Xxx Xxx Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
If to the Company, post-closing, to:
Xxxx X. Xxxxxxxxx, President
PGI Company J
One Courthouse Metro
Suite 100
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
(Telecopy number (000) 000-0000)
If to the Sellers, to:
Xxxxx Xxxxxxxx
Epic Enterprises of Nevada, Inc.
0000 Xxx Xxx Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
with copies to:
Xx. Xxxxx Xxxxxxxx
000 Xxxxxxxx Xxxxxx
Xx. 000
Xxx Xxxxx, XX 00000
Xxxxxxx Xxxxxxxx
000 Xxxxx Xxxxxx
Xx. 000
Xxx Xxxxx, XX 00000
Xxxxxx Xxxxxxxx
0000-X Xxxxx Xxxxx Xxxx
Xxx Xxxxx, XX 00000
with a copy to:
Xxxx Xxxxxxxxx, Esq.
0000 Xxxxxx xxx Xxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000-0000
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 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.
13.6. Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party hereto will bear its own expenses.
13.7. 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.
13.8. 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 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 J
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------
Xxxx X. Xxxxxxxxx
President and Chief Executive
Officer
SELLERS:
/s/ Xxxxx Xxxxxxxx
---------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
---------------------------------
Xxxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxx
COMPANY:
EPIC ENTERPRISES OF NEVADA, INC.
By: /s/ Xxxxxxx Xxxxxxxx
-----------------------------
Name: /s/ Xxxxxxx Xxxxxxxx
---------------------------
Title: Chairman
--------------------------
AMENDMENT NO. 1
EFFECTIVE AS OF JULY 1, 1996
TO
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 1, 1996
AMONG
PGI COMPANY J,
EPIC ENTERPRISES OF NEVADA, INC.,
XXXXX XXXXXXXX,
XXXXXXX XXXXXXXX,
AND
XXXXXX XXXXXXXX
Reference is hereby made to that certain Stock Purchase Agreement dated as
of July 1, 1996 among PGI Company J, Epic Enterprises of Nevada, Inc., Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx (the "Stock Purchase Agreement").
Terms defined in the Stock Purchase Agreement and not otherwise defined herein
are used herein as so defined.
This Amendment is entered into on the ____day of July, 1996 and each of
the Sellers and the Buyer hereby agree that effective as of July 1, 1996, the
Stock Purchase Agreement is hereby amended as follows:
1. The balance sheet referenced in Section 2.2(e) (ii) was delivered to Buyer
on July 3, 1996.
2. Section 5.15(b) is amended by deleting the first sentence in its entirety
and replacing it with the following:
The Buyer has been given complete and correct copies of all written
agreements, contracts, and commitments, or will be provided the same
within ten (10) days after the Closing Date, to which the Company is a
party or by which it or any of its assets is bound, together with all
amendments thereto.
3. Sections 5.20 (a) and (b) are amended by replacing the date(s) of "January
31, 1996" by "December 31, 1995".
4. Section 5.25 is amended by deleting the second sentence in its entirety and
replacing with the following:
The Company is not liable for any substantial accrued unpaid wages, or
for any material tax, penalty, assessment or forfeiture for failure to
comply with any employer/employee matter.
5. Section 7.5 is amended by replacing the date of "January 31, 1996" by "July
1, 1996".
6. Section 12 is amended by adding a subsection (ix) after the word
"hereinabove" at the end of subsection (viii) and before "as provided further"
as follows:
"and (ix) any liability and costs associated with the amendment of the
Company's articles of incorporation to correct, or with claims by third-
parties or governmental entities because of, the misstated par value of
the Company's shares at $10,000 instead of the correct value of $1.00,
provided, however, that the liability and costs for such Damages is
limited to $5,000;"
7. The invalidity or unenforceability of any term or provisions hereof shall
not affect the validity of enforceability of any other term or provisions
hereof. The Stock Purchase Agreement is hereby confirmed in its entirety, as
amended herein. This Agreement may be executed in any number of counterparts
which together shall constitute one instrument and shall bind and insure to the
benefit of the parties hereto and their respective successors and assigns. This
Agreement shall be governed by the laws of the Commonwealth of Virginia.
BUYER:
PGI Company J
By: /s/ Xxxx X. Xxxxxxxxx
----------------------------------
Xxxx X. Xxxxxxxxx
President and Chief Executive
Officer
SELLERS:
/s/ Xxxxx Xxxxxxxx
-------------------------------------
Xxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
-------------------------------------
Xxxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxxxxxx
-------------------------------------
Xxxxxx Xxxxxxxx
COMPANY:
EPIC ENTERPRISES OF NEVADA, INC.
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------
Name: Xxxxxxx Xxxxxxxx
--------------------------------
Title: Chairman
-------------------------------
