STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT ("Agreement") is effective as of the
31/st/ day of July, 1998 by and among XXXXXX XXXXXXX, XXXXXXX XXXXXX, XXXXXX X.
XXXXXXXXX and XXXX SENIOR (collectively, the "Stockholders"), and METRO GLOBAL
MEDIA, INC., a Delaware corporation.
RECITALS:
A. The Stockholders own all of the issued and outstanding shares of
the capital stock of Fanzine International, Inc., a New Jersey corporation (the
"Company").
B. Metro desires to purchase all of the issued and outstanding
shares of stock of the Company owned by the Stockholders, and the Stockholders
desire to sell such shares to Metro on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF SHARES; CLOSING
1.1 PURCHASE AND SALE. On the Closing Date referred to in
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Section 1.2 hereof, Metro agrees to purchase from the Stockholders, and the
Stockholders agree to sell, assign, transfer and deliver to Metro, free and
clear of all claims, liens and encumbrances, one hundred (100) shares of the
voting common capital stock of the Company (the "Company Shares"), constituting
all of the issued and outstanding capital stock of the Company. Notwithstanding
the foregoing, on the Closing Date, the Company Shares shall be subject to a
Pledge Agreement delivered by substantially in the form of Annex I attached
hereto (the "Pledge Agreement").
1.2 CLOSING. The closing of the transactions contemplated by
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this Agreement (the "Closing") shall take place at the offices of Xxxxxxx,
Green, Fahringer, Roll, Salisbury & Cambria LLP, 00 Xxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxx, Xxx Xxxx 00000-0000, at 10:00 a.m. local time on the later of: (I)
August 1, 1998, or (ii) the second business day following the satisfaction or
waiver of all conditions set forth herein to the obligations of the parties to
consummate the transactions contemplated hereby (other than conditions to be
satisfied at or concurrently with the Closing), or on such other date and at
such other place as Metro and the Stockholders may mutually determine (the
"Closing Date").
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2. PURCHASE PRICE; ADJUSTMENTS
2.1 PURCHASE PRICE. Subject to the adjustment pursuant to
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Sections 2.3 and 2.4, below, the purchase price (the "Purchase Price") to be
paid by Metro to the Stockholders for the shares is estimated to be Seven
Million Five Hundred Thousand Dollars ($7,500,000), payable as hereinafter
provided.
2.2 MANNER OF PAYMENT. The Purchase Price shall be paid as
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follows:
a) On the Closing Date, Metro shall deliver to the
Stockholders One Million (1,000,000) shares of the common stock of Metro (the
"Metro Stock"). The parties agree that the Metro Stock shall be attributed
solely to the Purchase Price and shall not be deemed any form of employment
compensation to any of the Stockholders. Metro shall not make any tax filing
seeking any tax deduction for the Metro Shares as employee compensation.
b) On or before the Closing date, Metro shall deliver to
the Stockholders the sum of Two Million Dollars ($2,000,000), in cash or
certified funds.
c) On or before the date which is ninety (90) days
following the Closing Date, Metro shall deliver to the Stockholders the sum of
One Million Dollars ($ 1,000,000), in cash or certified funds.
d) On or before the date which is one hundred eighty (180)
days following the Closing Date, Metro shall deliver to the Stockholders the sum
of One Million Dollars ($1,000,000), in cash or certified funds.
2.3 RETENTION OF CASH-ON-HAND, PUBLICLY TRADED SECURITIES, AND
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RECEIVABLES. Unless indicated on Schedule 2.3 as being excluded, any (I) cash
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owned by the Company as of the Closing Date, as reflected in its bank statement
(the "Closing Date Cash"), (ii) any publicly traded securities owned by the
Company as of the Closing Date, as reflected in Schedule 3.4 (the "Closing Date
Securities"), and (iii) the total amount, if any, of the Company's accounts
receivable accrued as of the Closing Date, as set forth in the Interim Financial
Statements (as defined in Section 3.5(ii) below), to the extent they are for
services actually performed or goods sold prior to the Closing Date but are not
collected by the Company as of the Closing Date (the "Closing Date
Receivables"), shall be deemed the property of the Shareholders and disbursed to
the Shareholders at such time or times as the Shareholders deem appropriate [the
Closing Date Cash, the Closing Date Securities and the Closing Date Receivables
are hereinafter collectively referred to as the "Closing Date Retained
Property"]. Any liabilities existing as a result of any services performed or
goods produced for which the Closing Date Receivable accrued shall be the sole
responsibility of the Shareholders and shall be timely paid by the Shareholders.
It is the intention of the parties that any receivables and liabilities
attributable to any publication of the Company shipped prior to the Closing Date
shall be, respectively, the property and obligation of the Shareholders, and
that any receivables and liabilities and/or expenses attributable to any
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publication of the Company shipped subsequent to the Closing Date shall be,
respectively, the property and obligation of the Company.
2.4 DECREASES IN PURCHASE Price. If the Company fails to
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generate Pre-Tax Net Earnings After Compensation (as defined in Section 2.5,
below) of at least $1,750,000 (the "Minimum Earnings Level"), in the aggregate,
during any, four (collectively) of the first five Fiscal Quarters (as
hereinafter defined) following the Closing, as designated by Stockholders (such
period referred to as the "Initial Year"), then the Purchase Price shall be
reduced pro rata, in an amount determined by multiplying $7,500,000 by a
fraction, the numerator of which is the Earnings Deficiency (as defined in
Section 2.5, below) for the Initial Year and the denominator of which is the
Minimum Earnings Level (the "Purchase Price Reduction"). The Purchase Price
Reduction shall be paid to Metro, at the election of the Shareholders, either
through (I) the return of such number of the Metro Stock as is equivalent to the
amount determined by multiplying 1,000,000 by a fraction, the numerator of which
is the Earnings Deficiency for the Initial Year and the denominator of which is
the Minimum Earnings Level, or (ii) in cash. Each Stockholder shall have the
individual option to pay to the Company cash in an amount equal to the value of
his pro rata share of the Earnings Deficiency, rather than returning a portion
of the Metro Stock as aforesaid. Such election shall be made by the Stockholders
within four (4) months following the last day of the Initial Year by delivering
to Metro written notice of such election (the "Deficiency Election").
2.5 DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(I) "Pre-Tax Net Earnings After Compensation" shall mean,
with respect to any period, the gross revenues of the
Company for such period less all costs (including,
but not limited to, the Incentive Compensation or
Deferred Compensation paid or payable by the Company
to the Stockholders pursuant to the Employment
Agreements of even date herewith entered into by the
Stockholders and the Company) incurred in connection
with the business operations of the Company other
than (I) taxes, (ii) interest, and (iii) depreciation
and amortization.
(ii) "Fiscal Year" shall mean a consecutive twelve (12)
month period beginning August 1st and ending July
31st of each year.
(iii) "Fiscal Quarter" shall mean any of the four (4)
consecutive three (3) month periods which constitute
a Fiscal Year, with the first such three (3) month
period beginning on the first day of a Fiscal Year.
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(iv) "Earnings Deficiency" shall mean, with respect to any
period, the difference between the Pre-Tax Net
Earnings After Taxes for such period and the Minimum
Earnings Level.
3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
The Stockholders jointly and severally represent and warrant that
all of the following representations and warranties set forth in this Section 3
are true at the date of this Agreement and shall be true at the time of Closing.
For purposes of this Agreement, the term "Material Adverse Effect" means, when
used in reference to the Company, a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise) of the
Company and its subsidiaries taken as a whole. For purposes of this Section 3,
the term "Company" shall mean and refer to the Company and all of its
subsidiaries, if any.
3.1 DUE ORGANIZATION. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
New Jersey, and has all requisite power and authority to carry on its business
as it is now being conducted. The Company is duly qualified to do business and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification necessary,
except where the failure to be so authorized or qualified would not have a
Material Adverse Effect. Schedule 3.1 sets forth a list of all jurisdictions in
which the Company is authorized or qualified to do business. True, complete and
correct copies of the Company's Certificate of Incorporation and By-laws, each
as amended (the "Charter Documents"), are all attached to Schedule 3.1. The
stock records of the Company are attached to Schedule 3.1 and are correct and
complete in all material respects. There are no minutes in the possession of the
Company or the Stockholders which have not been made available to Metro, and all
of such minutes are attached to Schedule 3.1 and are correct and complete in all
respects.
3.2 AUTHORIZATION. The execution, delivery and performance of
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this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all appropriate parties.
3.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock
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of the Company consists solely of (I) two hundred (200) shares of Common Stock,
no par value per share, one hundred (100) of which are issued and outstanding,
and the foregoing capital stock represents all of the Company Stock. All of the
issued and outstanding shares of the capital stock of the Company are owned of
record and beneficially by the Stockholders in the amounts set forth on Schedule
3.3 and are owned free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every
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kind. All of the issued and outstanding shares of the capital stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the Company in
compliance with all applicable state and federal laws concerning the issuance of
securities. None of such shares were issued in violation of any preemptive
rights or similar rights of any past or present stockholder of the Company. No
option, warrant, call, conversion right or commitment of any kind exists which
obligates the Company to issue any shares of its capital stock or obligates any
of the Stockholders to transfer any shares of the Company Stock to any person
except pursuant to this Agreement.
3.4 SUBSIDIARIES. Except as set forth on Schedule 3.4, the
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Company has no subsidiaries or d/b/a names and has not conducted business under
any other name except its legal name on its Certificate of Incorporation.
Except as set forth on Schedule 3.4, the Company does not own, of record or
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beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or other business entity, and the Company is not, directly or
indirectly, a participant in any joint venture, partnership or other non-
corporate entity.
3.5 FINANCIAL STATEMENTS. Complete and correct copies of the
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following financial statements are attached as Schedule 3.5:
(I) the balance sheets of the Company as of December 31,
1997, and the related statements of operations,
stockholder's equity and cash flows for the period
from the Company's formation through December 31,
1997, together with the related notes and schedules
(such balance sheet and related statements, notes and
schedules are referred to as the "Year-End Financial
Statements"); and
(ii) the balance sheet of the Company as of the Closing
Date (the "Balance Sheet Date") and the related
statements of operations, stockholder's equity and
cash flows for the period ending on the Balance Sheet
Date, together with the related notes and schedules
(such balance sheet and related statements, notes and
schedules are referred to as the "Interim Financial
Statements"). The Year-End Financial Statements and
the Interim Financial Statements are collectively
referred to as the "Financial Statements".
The Financial Statements have been prepared from the books
and records of the Company in conformity with generally accepted accounting
principles applied on a basis consistent with preceding years and throughout the
periods involved
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("GAAP") and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in all
material respects in the ordinary course of business, the transactions entered
therein represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
3.6 LIABILITIES AND OBLIGATIONS. Except as and to the extent
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disclosed and adequately provided for on the face of the Financial Statements
(rather than in any notes thereto) or on Schedule 3.6, the Company has no
liabilities or obligations of any kind, whether accrued, absolute, secured or
unsecured, contingent or otherwise. Except and to the extent disclosed on the
face of the Financial Statements (rather than in any notes thereto) or on
Schedule 3.6, there are no claims, liabilities or obligations, nor, to the best
knowledge of the Stockholders, any reasonable basis for assertion against the
Company, of any claim, liability or obligation, of any nature whatsoever.
Schedule 3.6 contains a reasonable estimate by the Stockholders of the maximum
amount which may be payable with respect to liabilities which are not fixed.
For each such liability for which the amount is not fixed, the Stockholders have
provided a summary description of the liability together with copies of all
relevant documentation relating thereto. Notwithstanding the foregoing
provisions of this Section 3.6, the liabilities and obligations required to be
disclosed under this Section 3.6 do not include payables and accruables incurred
in the ordinary course of operating the business of the Company.
3.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 3.7 sets forth an
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accurate list of the accounts and notes receivable of the Company, as of the
Balance Sheet Date and generated subsequent t the Balance Sheet Date, including
any such amounts which are not reflected in the balance sheet as of the Balance
Sheet Date. Receivables from and advances to employees and the Stockholders and
any entities or persons related to or affiliated with any of the Stockholders
are separately identified on Schedule 3.7. Except to the extent reflected on
Schedule 3.7, all such accounts, notes and other receivables were incurred in
the ordinary course of business, are stated in accordance with GAAP and are
collectible in the amounts shown on Schedule 3.7, net of reserves reflected in
the balance sheet as of the Balance Sheet Date.
3.8 PERMITS AND INTANGIBLES. The Company and its employees hold
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all licenses, franchises, permits and other governmental authorizations required
in connection with the conduct of the Company's business. Schedule 3.8 sets
forth an accurate list and summary description of all such licenses, franchises,
permits and other governmental authorizations, including permits, titles
(including licenses, franchises, certificates, trademarks, trade names, patents,
patent applications and copyrights owned or held by the Company or any of its
employees (including interests in software or other technology systems, programs
and intellectual property). The licenses, franchises, permits and other
governmental authorizations listed on Schedule 3.8 are valid, and the Company
has not received any notice that any person intends to cancel, terminate or not
renew any such license, franchise, permit or other governmental authorization.
To the best knowledge of the
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Stockholders, the Company has conducted and is conducting its business in
compliance with the requirements, standards, criteria and conditions set forth
in the licenses, franchises, permits and other governmental authorizations
listed on Schedule 3.8 and is not in violation of any of the foregoing. Except
as specifically set forth on Schedule 3.8, the transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company by, any such
licenses, franchises, permits or government authorizations.
3.9 PERSONAL PROPERTY. Schedule 3.9 sets forth an accurate list
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of (I) all personal property included in "plant, property and equipment" on the
balance sheet of the Company, (ii) all other personal property with an
individual value' in excess of $25,000 (a) owned by the Company as of the
Balance Sheet Date and (b) acquired by the Company since the Balance Sheet Date
and (iii) all leases and agreements in respect of personal property of the
Company, including, in the case of each of (I), (ii) and (iii), an indication as
to which assets are currently owned, or were formerly owned, by any Stockholder
any relative of any Stockholder or any affiliate of the Company or any
Stockholder. True, correct and complete copies of all of the documents listed on
Schedule 3.9 have been delivered to Metro. Except as set forth and specifically
described on Schedule 3.9, (1) all material personal property used by the
Company in its business is either owned by the Company or leased by the Company
pursuant to a lease included on Schedule 3.9, (2) the personal property listed
on Schedule 3.9, subject to ordinary repair and replacement, is reasonably
adequate to operate the business of the Company as currently conducted and (3)
all leases and agreements included on Schedule 3.9 are in full force and effect
and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
3.10 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
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Schedule 3.10 sets forth a list of (I) all customers representing 5% or more of
the Company's revenues in any of the periods covered by the Financial
Statements, and (ii) all material contracts, commitments and similar agreements
to which the Company is a party or by which it or any of its properties are
bound (including, but not limited to, contracts with significant customers,
joint venture or partnership agreements, contracts with any labor organizations,
strategic alliances and options to purchase land). True, complete and correct
copies of such agreements are attached to Schedule 3.10. Except as described on
Schedule 3.10, (a) none of the Company's significant customers (including those
identified on Schedule 3.10) have canceled or substantially reduced or, to the
knowledge of the Company and the Stockholders, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company, and (b) the Company has complied with all
material commitments and obligations pertaining to it, and is not in default
under any contracts or agreements listed on Schedule 3.10 and no notice of
default under any such contract or agreement has been received. Schedule 3.10
also includes a summary description of all plans or projects involving the
opening of new operations, expansion of existing operations, the acquisition of
any property, business or assets requiring, in any event, the payment of more
than $25,000 by the Company.
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3.11 REAL PROPERTY. The Company owns no real property. Schedule
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3.11 includes a list of all real property leased by the Company at the date
hereof, and all other real property, if any, used by the Company in the conduct
of its business. True, complete and correct copies of all leases and agreements
in respect of real property leased by the Company are attached to Schedule 3.11,
and an indication as to which such properties, if any, are currently owned, or
were formerly owned, by any Stockholder, any relative of any Stockholder or any
affiliate of the Company or any Stockholder is included in Schedule 3.1 1.
Except as set forth on Schedule 3.11, all of such leases and agreements included
on Schedule 3.11 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms; provided, however, that each lease between the Company
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and any Stockholder, any relative of any Stockholder or any affiliate of the
Company or any Stockholder in respect of real property leased by the Company
shall be terminated as of the Closing Date.
3.12 INSURANCE. The Company does not maintain any insurance
policies.
3.13 COMPENSATION, EMPLOYMENT AGREEMENTS; ORGANIZED LABOR
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MATTERS. Schedule 3.13 sets forth an accurate list showing all officers,
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directors and key employees of the Company, listing all employment agreements
with such officers, directors and key employees and the rate of compensation
(and the portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons as of (1) the Balance Sheet Date and (ii)
the date hereof Attached to Schedule 3.13 are true, complete and correct copies
of any employment agreements for the persons listed on Schedule 3.13 and all
other employment and other agreements of any nature containing any provision
that could require the Company to make any payment to any person as a result of
the transactions contemplated by this Agreement, which provisions are
specifically identified on Schedule 3.13. Except as set forth on Schedule 3.13,
since the Balance Sheet Date, there have been no increases in the compensation
payable or any special bonuses to any officer, director, key employee or other
employee, except ordinary salary increases implemented on a basis consistent
with past practices.
Except as set forth on Schedule 3.13, (I) the Company is not
bound by or subject to (and none of its respective assets or properties is bound
by or subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company and the
Stockholders, no campaign to establish such representation is in progress and
(iv) there is no pending or, to the best knowledge of the Company and the
Stockholders, threatened, labor dispute involving the Company and any group of
its employees. The Company has not experienced any labor interruptions over the
past five years.
3.14 EMPLOYEE BENEFIT PLANS. Schedule 3.14 sets forth an accurate
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schedule showing all employee benefit plans of the Company (including the
Company's Subsidiaries), including all agreements or arrangements (other than
agreements
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or arrangements set forth on Schedule 3.14) containing "golden parachute" or
other similar provisions, and deferred compensation agreements, together with
true, complete and correct copies of such plans, agreements and any trusts
related thereto, and classifications of employees covered thereby as of the
Balance Sheet Date. Except for the employee benefit plans, if any, described on
Schedule 3.14, the Company (including the Company's Subsidiaries) does not
sponsor, maintain or contribute to any plan, program, fund or arrangement that
constitutes an "employee pension benefit plan," nor does the Company or any
Subsidiary have any obligation to contribute to or accrue or pay any benefits
under any deferred compensation or retirement funding arrangement on behalf of
any employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) or any non-qualified deferred compensation arrangement).
For the purposes of this Agreement, the term employee pension benefit plan"
shall have the same meaning as is given that term in Section 3(2) of ERISA.
Neither the Company nor any Subsidiary has sponsored, maintained or contributed
to any employee pension benefit plan other than the plans set forth on Schedule
3.14, and neither the Company nor any Subsidiary is required to contribute to
any retirement plan pursuant to the provisions of any collective bargaining
agreement establishing the terms and conditions or employment of any of the
Company's or any Subsidiary's employees.
Neither the Company nor any Subsidiary is now, or can as a result of its past
activities become, liable to the Pension Benefit Guaranty Corporation or to any
multi-employer employee pension benefit plan under the provisions of Title IV of
ERISA. All employee benefit plans listed on Schedule 3.14 and the administration
thereof are in substantial compliance with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of Company or any Subsidiary with respect
to any plan listed on Schedule 3.14 have either been fulfilled in their entirety
or are fully reflected on the balance sheet of the Company as of the Balance
Sheet Date. Except as set forth on Schedule 3.14, all plans listed on Schedule
3.14 that are intended to qualify (the "Qualified Plans") under Section 401 (a)
of the Code are and have been so qualified and have been determined by the
Internal Revenue Service to be so qualified, and copies of the determination
letters relating thereto are included as part of Schedule 3.14. Except as
disclosed on Schedule 3.14, all reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audits or tax
returns) have been timely filed or distributed, and copies thereof are included
as part of Schedule 3.14. Neither the Stockholders, any plan listed in Schedule
3.14 nor the Company (including the Company's Subsidiaries) has engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA. No plan listed in Schedule 3.14 has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(l) of ERISA; and the Company (including the Company's Subsidiaries)
has not incurred any liability for excise tax or penalty due to the Internal
Revenue Service or any liability to the Pension Benefit Guaranty Corporation.
There have been no terminations, partial terminations or discontinuance of
contributions to any such Qualified Plan intended
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to qualify under Section 401 (a) of the Code without notice to and approval by
the Internal Revenue Service; no plan listed in Schedule 3.14 subject to the
provisions of Title IV of ERISA has been terminated; there have been no
"reportable events" (as that phrase is defined in Section 4043 of ERISA) with
respect to any such plan listed in Schedule 3.14; the Company (including the
Company's Subsidiaries) has not incurred liability under Section 4062 of ERISA;
and no circumstances exist pursuant to which the Company could have any direct
or indirect liability whatsoever (including, but not limited to, any liability
to any multi-employer plan or the PBGC under Title IV of ERISA or to the
Internal Revenue Service for any excise tax or penalty, or being subject to any
statutory lien to secure payment of any such liability) with respect to any plan
now or heretofore maintained or contributed to by any entity other than the
Company that is, or at any time was, a member of a "controlled group" (as
defined in Section 412(n)(6)(B) of the Code) that includes the Company.
3.15 CONFORMITY WITH LAW; LITIGATION. Except as set forth on
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Schedule 3.15, there are no claims, actions, suits or proceedings, pending or
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having Jurisdiction over the Company.
Except as set forth on Schedule 3.15, no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received by the Company
during the last five years and there is no basis therefor. Except as set forth
on Schedule 3.15, the Company has conducted and now conducts its business in
compliance in all material respects with all laws, regulations, writs,
injunctions, decrees and orders applicable to the Company or its assets. The
Company is not in violation of any law or regulation or any order of any court
or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any of them.
The Company has conducted and is conducting its business in substantial
compliance with the requirements, standards, criteria and conditions set forth
in applicable federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations, including all such permits,
licenses, orders and other governmental approvals set forth on Schedule 3.8.
3.16 TAXES. For purposes of this Agreement, the term "Taxes"
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shall mean all taxes, charges, fees, levies or other assessments including,
without limitation, income, gross receipts, excise, property, sales,
withholding, social security, unemployment, occupation, use, service, license,
payroll, franchise, transfer and recording taxes, fees and charges, imposed by
the United States or any state, local or foreign government or subdivision or
agency thereof, whether computed on a separate, consolidated, unitary, combined
or any other basis; and such term shall include any interest, fines, penalties
or additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. The Company (including any
subsidiaries) has timely filed all requisite federal, state and other Tax
returns or extension requests due on or before the date hereof, and all such Tax
returns are true and accurate in all material respects. Except as set forth on
Schedule 3.16, the Company has not requested or been granted an extension of the
time for filing any Tax return to a date later than the Closing Date. Except as
set forth on Schedule 3.16, there are no audits or examinations in progress or
claims against the
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Company for federal, state or other Taxes (including penalties and interest) for
any period (or portion thereof ending on or prior to the date hereof, and no
notice of any claim for Taxes, whether pending or threatened, has been received.
All Taxes, including interest and penalties (whether or not shown on any Tax
return) due and payable on or prior to the date hereof by the Company, any of
the Company's subsidiaries, or any member of an affiliated or consolidated group
which includes or included the Company or any of the Company's subsidiaries,
have been paid. The amounts shown as accruals for Taxes on the Financial
Statements are sufficient for the payment of all Taxes of the kinds indicated
(including penalties and interest) for all periods shown. Copies of (I) any Tax
examinations, (ii) extensions of time for filing and (iii) the federal, state
and local income tax returns and franchise tax returns of the Company (including
any subsidiaries) for- the last three fiscal years, or such shorter period of
time as any of them shall have existed, are attached hereto as Schedule 3.16.
The Company has not been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(11) of the Code.
Each Stockholder certifies that he is not a foreign person pursuant to
Section 1.14452(b) of the Treasury Regulations. The Stockholders made a valid
election under the provisions of Chapter 1, Subchapter S of the Code, effective
as of August 1, 1997. At all times from and after August 1, 1997, the Company
has been taxed under the provisions of Chapter 1, Subchapter S of the Code. The
Stockholders shall pay, and they hereby indemnify Metro and the Company against,
all income, franchise and/or other taxes payable by the Company or any of its
subsidiaries for all periods (or portions thereof) through and including the
Closing Date. The Company uses the accrual method of accounting for income tax
purposes, and the Company's methods of accounting have not changed.
3.17 NO VIOLATIONS, NO CONSENTS REQUIRED. The Company is not in
-----------------------------------
violation of the Charter Documents. Neither the Company nor any other party
thereto is in material default under any lease, instrument, license, permit or
material agreement to which the Company is a party or by which its properties
--
are bound (the "Material Documents"). Except as set forth in Schedule 3.17, (I)
the execution of this Agreement and the performance of the obligations hereunder
and the consummation of the transactions contemplated hereby will not result in
any material violation or breach or constitute a default under, any of the tem-
is or provisions of the Material Documents or the Charter Documents, and (ii)
the rights and benefits of the Company under the Material Documents will not be
adversely affected by the transactions contemplated hereby. Except as set forth
on Schedule 3.17, none of the Material Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any night or benefit. Except as set forth on Schedule 3.17, none of the
Material Documents prohibits the use or publication by the Company or Metro of
the name of any other party to such Material Document, and none of the Material
Documents prohibits or restricts the Company from freely providing services to
any other customer or potential customer of the Company or Metro.
12
3.18 ABSENCE OF CHANGES. Since the Balance Sheet Date, the
------------------
Company has conducted its operations in the ordinary course of business and,
except as set forth on Schedule 3.18, there has not been:
(I) any material adverse change in the financial
condition, assets, liabilities (contingent or
otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting
the properties or business of the Company;
(iii) any change in the authorized capital of the Company
or its outstanding securities or any change in its
ownership interests or any grant of any options,
warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or
distribution in respect of the capital stock or any
direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the
Company, other than the distribution of all or part
of the Closing Date Retained Property;
(v) any increase in the compensation, bonus, sales
commissions or fee arrangement payable or to become
payable by the Company to any of its officers,
directors, stockholders, employees, consultants or
agents;
(vi) any work interruptions, labor grievances or claims
filed, or any event or condition of any character,
materially adversely affecting the business of the
Company;
(vii) any sale or transfer, or any agreement to sell or
transfer, any material assets, property or rights of
Company to any person, including, without
limitation, the Stockholders and their affiliates;
(viii) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to the
Company, including without limitation any
indebtedness or obligation of any Stockholder or any
13
affiliate thereof,
(ix) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any
interest in any of the assets, property or rights of
the Company or requiring assignment of any party to
the transfer and assignment of any such assets,
property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property,
rights or assets outside of the ordinary course of
the Company's business;
(xi) any waiver of any material rights or claims of the
Company;
(xii) any amendment or termination of any material
contract, agreement, license, permit or other night
to which the Company is a party;
(xiii) any transaction by the Company outside the
ordinary course of its business;
(xiv) any cancellation or termination of a material
contract with a customer or client prior to the
scheduled termination date; or
(xv) any distribution of property or assets by the Company
other than in the ordinary course of business.
3.19 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Schedule 3.19 sets
--------------------------------------
forth a schedule as of the date of this Agreement of: (i) the name of each
financial institution in which the Company has accounts or safe deposit boxes,
(ii) the names in which the accounts or boxes are held, (iii) the type of
account and account number, (iv) the type of account and the amount of cash,
cash equivalents and securities held in such account, and (v) the name of each
person authorized to draw thereon or have access thereto. Schedule 3.19 also
sets forth the name of each person, corporation, firm or other entity holding
any general or special power of attorney from the Company and a description of
the terms of each such power.
3.20 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS.
--------------------------------------------------------
Except as set forth on Schedule 3.20, neither any of the Stockholders nor any
other affiliate of the Company owns, directly or indirectly, any interest in, or
is an officer, director, employee or consultant of or otherwise receives
remuneration from, any business which is a competitor, lessor, lessee, customer
or supplier of the Company. Except as set forth on
14
Schedule 3.20, no officer, director or Stockholder of the Company has, nor
during the period beginning January 1, 1990 through the date hereof had, any
interest in any property, real or personal, tangible or intangible, used in or
pertaining to the Company's business.
3.21 DISCLOSURE. The Stockholders have fully provided Metro or
-----------
its representatives with information that Metro has requested in analyzing
whether to consummate the stock purchase, all of which information is contained
in this Agreement and/or on the documents annexed to this Agreement. None of the
information so provided, nor any representation or warranty of the Stockholders
contained in this Agreement, contains any untrue statement or omits to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. Except
as otherwise set forth in this Agreement or on the documents annexed hereto,
there is no fact known to the Stockholders which has specific application to the
Company (other than general economic or industry conditions) which materially
adversely affects or, so far as the Stockholders can reasonably foresee,
materially threatens, the assets, business, condition (financial or otherwise),
results of operations or prospects of the Company, which has not been described
in this Agreement or the Schedules hereto.
3.22 PROHIBITED ACTIVITIES. Except as set forth on Schedule
----------------------
3.22, the Company has not, between the Balance Sheet Date and the date hereof,
taken any of the actions set forth in Section 5.3.
3.23 PREEMPTIVE RIGHTS. No Stockholder has, and each hereby
-----------------
waives, any preemptive or other right to acquire shares of Company Stock or
Metro Stock that such Stockholder has or may have had other than rights of any
Stockholder to acquire Company Stock or Metro Stock pursuant to (I) this
Agreement, (ii) any option granted by Metro, or (iii) any Employment Agreement
entered into between Metro and such Stockholder.
3.24 CERTAIN BUSINESS PRACTICES. Neither the Company nor any of
--------------------------
its affiliates has given or offered anything of value to any governmental
official, political party or candidate for government office nor has it or any
of them otherwise taken any action which would cause the Company to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended, or any law
of similar effect.
4 REPRESENTATIONS OF METRO
Metro represents and warrants that all of the following
representations and warranties set forth in this Section 4 are true at the date
of this Agreement and shall be true at the time of Closing. For purposes of
this Agreement, the term
15
"Material Adverse Effect" means, when used in reference to Metro, a material
adverse effect on the business, operations, properties, assets or condition
(financial or otherwise) of Metro and its subsidiaries taken as a whole.
4.1 DUE ORGANIZATION. Metro is a corporation duly incorporated,
----------------
validly existing and in good standing under the laws of the State of Delaware,
and has the requisite power and authority to carry on its business as it is now
being conducted. Metro is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business makes such qualification
necessary, except where the failure to be so authorized or qualified would not
have a Material Adverse Effect.
4.2 AUTHORIZATION. (I) The representatives of Metro executing
--------------
this Agreement have the authority to enter into and bind Metro to the terms of
this Agreement and (ii) Metro has the full legal night, power and authority to
enter into this Agreement.
4.3 NO VIOLATIONS. The execution of this Agreement and the
-------------
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any violation or breach or
constitute a default under any of the terms or provisions of Metro's Certificate
of Incorporation or By-laws, each as amended.
4.4 VALIDITY OF OBLIGATIONS. The execution and delivery of this
------------------------
Agreement by Metro and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of Metro and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of Metro.
4.5 METRO STOCK. At the time of issuance thereof, the Metro
------------
Stock to be delivered to the Stockholders pursuant to this Agreement will
constitute valid and legally issued, fully paid and nonassessable shares of
Metro.
5 COVENANTS PRIOR TO CLOSING
5.1 ACCESS AND COOPERATION; DUE DILIGENCE. Between the date of
---------------------------------------
this Agreement and the Closing Date, Stockholders and the Company will afford to
the officers and authorized representatives of Metro access to all of the
Company's sites, properties, books and records and will furnish Metro with such
additional financial and operating data and other information as to the business
and properties of the Company as Metro may from time to time reasonably request.
The Stockholders and the Company will cooperate with Metro, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. Metro and the Stockholders will treat all information
16
obtained in connection with the negotiation and performance of this Agreement as
confidential in accordance with the provisions of Section 12.
5.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of
-------------------------------------
this Agreement and the Closing Date, the Stockholders shall operate the Company
such that the Company will, except as set forth on Schedule 5.2:
(I) carry on its respective businesses in substantially
the same manner as it has heretofore and not
introduce any material new method of management,
operation or accounting;
(ii) maintain its respective properties and facilities,
including those held under leases, in as good working
order and condition as at present, ordinary wear and
tear excepted;
(iii) perform in all material respects all of its
respective obligations under agreements relating to
or affecting its respective assets, properties or
rights;
(iv) use its reasonable efforts to maintain and preserve
its business organization intact, retain its
respective present key employees and maintain its
respective relationships with suppliers, customers
and others having business relations with the
Company;
(v) maintain compliance with all material permits, laws,
rules and regulations, consent orders, and all other
orders of applicable courts, regulatory agencies and
similar governmental authorities; and
(vi) maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments
without the knowledge and consent of Metro (which
consent shall not be unreasonably withheld), provided
that debt and/or lease instruments may be replaced
without the consent of Metro if such replacement
instruments are on terms at least as favorable to the
Company as the instruments being replaced.
5.3 PROHIBITED ACTIVITIES. Except as set forth on Schedule
---------------------
3.22, between the date hereof and the Closing Date, the Stockholders will
operate the Company such that the Company will not, without prior written
consent of Metro:
17
(I) make any change in the Charter Documents;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its
securities of any kind other than in connection with
the exercise of options or warrants;
(iii) declare or pay any dividend, or make any distribution
in respect of its stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire
or retire for value any shares of its stock, except
that the Shareholders may distribute, in such time
and manner as the Shareholders deem appropriate, all
or any part of the Closing Date Retained Property;
(iv) enter into any contract or commitment or incur or
agree to incur any liability or make any capital
expenditures, except in the normal course of business
consistent with past practice in an amount not in
excess of (a) $25,000 individually and (b) $50,000 in
the aggregate, except for the printing of any
publication of the Company (it being understood that
such xxxx shall be payable by the persons or entity
receiving the proceeds of the transaction);
(v) create, assume or permit to exist any mortgage,
pledge or other lien or encumbrance upon any assets
or properties whether now owned or hereafter
acquired, except (a) with respect to purchase money
liens incurred in connection with the acquisition of
equipment with an aggregate cost not in excess of
$5,000 necessary or desirable for the conduct of the
businesses of the Company, (b) (1) liens for taxes
either not yet due or being contested in good faith
and by appropriate proceedings (and for which
contested taxes adequate reserves have been
established and are being maintained) or (2)
printers', materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising
in the ordinary course of business (the liens set
forth in clause (b) being referred to herein as
"Statutory Liens");
(vi) sell, assign, lease or otherwise transfer or dispose
of any property or equipment except in the normal
course of business;
18
(vii) negotiate for the acquisition of any business or
the start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate
with or into any other corporation or other entity;
(ix) waive any material rights or claims of the Company,
provided that the Company may negotiate and adjust
bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(x) commit a material breach or amend or terminate any
material agreement, permit, license or other right of
the Company;
(xi) enter into any other transaction outside the ordinary
course of its business or prohibited hereunder; or
(xii) increase or commit to any increase in the salary,
bonus, commission or other compensation of any
officer, director, employee or agent of the Company.
5.4 NO SHOP. None of the Stockholders, the Company, nor any
--------
agent, officer, director, trustee or any representative of any of the foregoing
will, during the period commencing on the date of this Agreement and ending with
the earlier to occur of the Closing Date or the termination of this Agreement in
accordance with its terms, directly or indirectly:
(I) solicit or initiate the submission of proposals or
offers from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish to any person other than Metro, the
authorized agents of Metro and the financial and
legal advisors of the Company and the Stockholders
any information relating to (a) any acquisition or
purchase of all or a material amount of the assets
of, or any equity interest in, the Company or (b) a
merger, consolidation or business combination
involving the Company.
5.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
-----------------------------
Stockholders shall arrange for the Company to satisfy any requirement for notice
of the
19
transactions contemplated by this Agreement under applicable collective
bargaining agreements, and shall provide Metro with proof that any required
notice has been sent.
5.6 AGREEMENTS. The Stockholders and the Company shall terminate
------------
(I) any stockholders agreements, voting agreements, voting trusts, options,
warrants and employment agreements between the Company and any employee except
as specifically approved in writing by Metro and (ii) any existing agreement
between the Company and any Stockholder except as specifically approved in
writing by Metro, on or prior to the Closing Date. Copies of such termination
agreements shall be delivered to Metro at the Closing or prior thereto.
5.7 NOTIFICATION OF CERTAIN MATTERS. The Stockholders shall
--------------------------------
give prompt notice to Metro of (I) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the Stockholders contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of any Stockholder to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder. Metro shall give prompt notice to the Company of (a) the occurrence
or non-occurrence of any event the occurrence or non-occurrence of which would
be likely to cause any representation or warranty of Metro contained herein to
be untrue or inaccurate in any material respect at or prior to the Closing and
(b) any material failure of Metro to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 5.7 shall not be deemed to (1)
modify the representations or warranties hereunder of the party delivering such
notice, (2) modify the conditions to Closing set forth herein, or (3) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
------------------------
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
occurs to notify the other parties hereto with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Schedules.
5.9 FURTHER ASSURANCES. At any time before or after the Closing,
--------------------
the parties hereto agree to execute and deliver, or cause to be executed and
delivered, such further instruments or documents or take such other action as
may be reasonably necessary or convenient to carry out the transactions
contemplated hereby.
20
6 CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of the Stockholders with respect to actions to be
taken on the Closing Date are subject to the satisfaction or waiver on or prior
to the Closing Date of all of the following conditions.
6.1 REPRESENTATIONS AND WARRANTIES, PERFORMANCE OF OBLIGATIONS.
-----------------------------------------------------------
All representations and warranties of Metro contained in Section 4 that are
qualified by materiality shall be true and correct and all other representations
and warranties of Metro contained in Section 4 shall be true and correct in all
material respects, in each case as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date; all terms, covenants and conditions of this Agreement to be
complied with or performed by Metro on or before the Closing Date shall have
been duly complied with and performed in all material respects; and Metro shall
have delivered to the Stockholders a certificate, dated the Closing Date and
signed by the President or any Vice President of Metro, to such effect.
6.2 NO MATERIAL ADVERSE EFFECT. Since the Balance Sheet Date,
---------------------------
no event or circumstance shall have occurred which has had, or reasonably could
be expected to have, a Material Adverse Effect on Metro, and Metro shall not
have suffered any change, loss or damage to any of its properties or assets,
whether or not covered by insurance, which change, loss or damage could
materially affect or impair the ability of Metro to conduct its business.
6.3 SATISFACTION. All actions, proceedings, instruments and
-------------
documents required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall be reasonably
satisfactory to the Stockholders and their counsel.
6.4 OPINION OF COUNSEL, PLEDGE AGREEMENT, VOTING AGREEMENT. The
-------------------------------------------------------
Stockholders shall have received (1) an opinion from counsel to Metro, dated the
Closing Date, in the form of Annex II hereto, (ii) an executed Pledge Agreement
in the form of Annex I hereto, and (iii) executed Voting Agreement in the form
of Annex V hereto.
6.5 CONSENTS AND APPROVALS. All necessary consents of and
------------------------
filings with any governmental authority or agency relating to the consummation
of the transaction contemplated herein shall have been obtained and made; no
action or proceeding shall have been instituted or threatened to restrain or
prohibit the transaction; and no governmental agency or body shall have taken
any other action or made any request of the Company as a result of which the
Company deems it inadvisable to proceed with the transactions hereunder.
21
6.6 EMPLOYMENT AGREEMENT. Each of the Stockholders shall have
---------------------
been afforded an opportunity to enter into an Employment Agreement with the
Company substantially in the form of Annex III hereto.
7 CONDITIONS PRECEDENT TO OBLIGATIONS OF METRO
The obligations of Metro with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions.
7.1 REPRESENTATIONS AND WARRANTIES, PERFORMANCE OF OBLIGATIONS.
-----------------------------------------------------------
All representations and warranties of the Stockholders contained in this
Agreement that are qualified by materiality shall be true and correct and all
other representations and warranties of the Stockholders contained in this
Agreement shall be true and correct in all material respects, in each case as of
the Closing Date with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date; all terms, covenants
and conditions of this Agreement to be complied with or performed by the
Stockholders on or before the Closing Date shall have been duly complied with
and performed in all material respects; and the Stockholders shall have
delivered to Metro a certificate, dated the Closing Date and signed by the
Stockholders, to such effect.
7.2 NO MATERIAL ADVERSE EFFECT. Since the Balance Sheet Date,
--------------------------
no event or circumstance shall have occurred which has had, or could reasonably
be expected to have, a Material Adverse Effect on the Company, and the Company
shall not have suffered any change, loss or damage to any of its properties or
assets, whether or not covered by insurance, which change, loss or damage could
materially affect or impair the ability of the Company to conduct its business.
7.3 STOCKHOLDERS' RELEASE. The Stockholders shall have
---------------------
delivered to Metro an instrument dated the Closing Date releasing the Company
from (I) any and all claims of the Stockholders against the Company and (ii) all
obligations of the Company to the Stockholders, except for (a) continuing
obligations to the Stockholders relating to their employment by the Company, and
(b) obligations arising under this Agreement or the transactions contemplated
hereby.
7.4 SATISFACTION. All actions, proceedings, instruments and
------------
documents required to carry out the transactions contemplated by this Agreement
or incidental hereto and all other related legal matters shall have been
approved by counsel to Metro.
22
7.5 OPINION OF COUNSEL. Metro shall have received an opinion
------------------
from counsel to the Stockholders, dated the Closing Date, in the form of Annex
IV hereto.
7.6 CONSENTS AND APPROVALS. All necessary consents of and
------------------------
filings with any governmental authority or agency relating to the consummation
of the transactions contemplated herein shall have been obtained and made; all
consents and approvals of third parties listed on Schedule 3.17 shall have been
obtained; no action or proceeding shall have been instituted or threatened to
restrain or prohibit these transactions; and no governmental agency or body
shall have taken any other action or made any request of Metro as a result of
which Metro deems it inadvisable to proceed with the transactions hereunder.
7.7 GOOD STANDING CERTIFICATES. The Stockholders shall have
----------------------------
delivered to Metro a certificate, dated as of a date no earlier than ten days
prior to the Closing Date, duly issued by the appropriate governmental authority
in the State of New Jersey and in each state in which the Company is authorized
to do business and showing that the Company is in good standing and authorized
to do business and that all of the Company's state franchise and/or income tax
returns and taxes for all periods prior to the Closing have been filed and paid.
7.8 RELATED PARTY TRANSACTIONS. All salary continuation
---------------------------
agreements between the Company and any Stockholder shall have been terminated.
All existing leases, agreements and arrangements between the Company and any
Stockholder, any relative of any Stockholder or any affiliate of the Company or
any Stockholder shall have been canceled or the terms thereof shall have been
renegotiated on an arm's length basis satisfactory to Metro.
7.9 EMPLOYMENT AGREEMENTS. Each of the Stockholders shall have
-----------------------
entered into the Employment Agreements referred to in Section 6.7.
8 COVENANTS OF METRO AND THE STOCKHOLDERS AFTER CLOSING
8.1 PREPARATION AND FILING OF TAX RETURNS.
--------------------------------------
(I) The Stockholders shall prepare and file, or cause to
be prepared and filed, all Tax returns for the
Company for all taxable periods that end on or before
the Closing Date, but in each case only after Metro
has reviewed such filings and consented thereto
(which consent shall not be unreasonably withheld or
delayed). The Stockholders shall pay or cause to be
paid all Tax liabilities (in excess of all amounts
23
already paid with respect thereto or properly accrued
or reserved with respect thereto on the Company
Financial Statements) shown by such Tax returns to be
due.
(ii) Each party hereto shall, and shall cause its
subsidiaries and affiliates, if any, to, provide to
each of the other parties hereto such cooperation and
information as any of them reasonably may request in
filing any Tax returns, amended Tax returns or claims
for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit
or other proceeding in respect of Taxes. Such
cooperation and information shall include providing
copies of all relevant portions of relevant Tax
returns, together with relevant accompanying
schedules and relevant work papers, relevant
documents relating to rulings or other determinations
by taxing authorities and relevant records concerning
the ownership and Tax basis of property, which such
party may possess. Each party shall make its
employees reasonably available on a mutually
convenient basis at its cost to provide explanation
of any documents or information so provided. Subject
to the preceding sentence, each party required to
file tax returns pursuant to this Agreement shall
bear all costs of filing such Tax returns.
9 INDEMNIFICATION
The Stockholders and Metro each make the following covenants that
are applicable to them, respectively:
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
-------------------------------------------
(I) The representations and warranties of the
Stockholders made in this Agreement and in the
documents and certificates delivered in connection
herewith shall survive the stock purchase for a
period of four (4) years from the Closing Date,
provided, however, that all representations and
-------- -------
warranties with respect to which a claim is made
within the applicable survival period shall survive
until such claim is finally determined and paid.
24
(ii) The representations and warranties of Metro made in
this Agreement and in the certificates delivered in
connection herewith shall survive the stock purchase
for a period of four (4) years following the Closing
Date; provided, however, that representations and
--------
warranties with respect to which a claim is made
within such four year period shall survive until such
claim is finally determined and paid.
(iii) The date on which a representation or warranty
expires as provided herein is. herein called the
"Expiration Date." No claim for indemnification may
be made with respect to a representation or warranty
after the Expiration Date, other than claims based on
fraud.
9.2 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The Stockholders
---------------------------------------------
covenant and agree that they will jointly and severally indemnify, defend,
protect, and hold harmless Metro and the Company and their respective
subsidiaries and officers, directors, employees, stockholders, agents,
representatives and affiliates at all times from and after the date of this
Agreement until the Expiration Date from and against all claims, damages
actions, suits, proceedings, demands, assessments, adjustments, costs and
expenses (including specifically, but without limitation, reasonable attorneys'
fees and expenses of investigation) (collectively "Damages") incurred by such
indemnified person as a result of or incident to (I) any breach of any
representation or warranty of any Stockholder set forth herein or in any
documents attached hereto, and (ii) any breach or nonfulfillment of any covenant
or agreement by the Stockholders under this Agreement.
9.3 INDEMNIFICATION BY METRO. Metro covenants and agrees that
-------------------------
it will indemnify, defend, protect and hold harmless the Stockholders at all
times from and after the date of this Agreement until the Expiration Date from
and against all Damages incurred by the Stockholders as a result of (I) any
breach of any representation or warranty of Metro set forth herein or in any
documents attached hereto, and (ii) any breach or nonfulfillment of any covenant
or agreement by Metro under this Agreement.
9.4 SPECIFIC INDEMNIFICATION. In addition to the
-------------------------
indemnification provided for in Section 9.2, the Stockholders covenant and agree
that they will jointly and severally indemnify, defend, protect and hold
harmless Metro and its subsidiaries, officers, directors, employees,
stockholders, agents, representatives and affiliates from and against all
Damages incurred by any of them in connection with the items described in
Schedule 3.15 and for liabilities arising from unfiled tax returns described on
Schedule 3.16.
9.5 THIRD PERSON CLAIMS. Promptly after any party hereto (the
-------------------
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement ("Third Person") or the commencement of any
action or
25
proceeding by a Third Person that may give rise to a right of indemnification
hereunder, such Indemnified Party shall give to the party obligated to provide
indemnification hereunder (an "Indemnifying Party") written notice of such claim
or the commencement of such action or proceeding; provided, however, that the
--------
failure to give such notice will not relieve such Indemnifying Party from
liability under this Section 9 with respect to such claim, action or proceeding,
except to the extent that the Indemnifying Party has been actually prejudiced as
a result of such failure. The Indemnifying Party (at its own expense) shall
have the right and shall be given the opportunity to participate with the
Indemnified Party in the defense of such claim, suit or proceeding, provided
that counsel for the Indemnified Party shall act as lead counsel in all matters
pertaining to the defense or settlement of such claim, suit or proceeding. The
Indemnified Party shall not, except at its own cost, make any settlement with
respect to any such claim, suit or proceeding without the prior consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
It is understood and agreed that in situations where failure of the Indemnifying
Party to settle a claim expeditiously could have an adverse effect on the
Indemnified Party, the failure of the Indemnifying Party to act upon the
Indemnified Party's request for consent to such settlement within 10 business
days of the Indemnifying Party's receipt of notice thereof from the Indemnified
Party shall be deemed to constitute consent by the Indemnifying Party of such
settlement for purposes of this Section 9.
9.6 METHOD OF PAYMENT. Except as otherwise provided herein, all
-----------------
claims for indemnification shall be paid in cash.
9.7 LIMITATIONS ON INDEMNIFICATION. Metro, the Company and the
------------------------------
other persons or entities indemnified pursuant to this Section 9 shall not
assert any claim for indemnification hereunder against the Stockholders until
such time as the aggregate of all claims which such persons may have against the
Stockholders shall exceed Ten Thousand Dollars ($10,000) (the "Indemnification
Threshold"). The Stockholders shall not assert any claim for indemnification
hereunder against Metro until such time as the aggregate of all claims which
Stockholders may have against Metro shall exceed the Indemnification Threshold.
No person shall be entitled to indemnification under this
Section 9 if and to the extent that such person's claim for indemnification is
directly or indirectly caused by a breach by such person of any representation,
warranty, covenant or other agreement set forth is this Agreement.
The aggregate liability of the Stockholders for
indemnification claims under this Section 9 shall be limited to $8,000,000;
provided, however, that the aggregate liability of the Stockholders for
-------- -------
indemnification claims under this Section 9 with respect to any breach of any
representation or warranty that relates to (I) Taxes (including, without
limitation, the representations and warranties set forth in Section 3.16), and
(ii) Illegal Acts (including, without limitation, the representations and
warranties set forth in Sections 3.8, 3.15 and 3.24), shall have no limit.
26
10 TERMINATION OF AGREEMENT
10.1 PRE-CLOSING TERMINATION. This Agreement may be terminated
-----------------------
at any time prior to the Closing Date solely:
(I) by mutual consent of the Stockholders and the board
of directors of Metro;
(ii) by the Stockholders or by Metro (acting through its
board of directors), if the transactions
contemplated by this Agreement to take place at the
Closing shall not have been consummated by August
15, 1998 (the "Termination Date"); or
(iii) by the Stockholders, on the one hand, or by Metro,
on the other hand, if a material breach or default
shall be made by the other party in the observance
or in the due and timely performance of any of the
covenants or agreements contained herein, and the
curing of such default shall not have been made on
or before the Termination Date.
10.2 LIABILITIES IN EVENT OF PRE-CLOSING TERMINATION. The
-----------------------------------------------
termination of this Agreement pursuant to Section 10.1 of this Agreement will in
no way limit any obligation or liability of any party based on or arising from a
breach or default by such party with respect to any of its representations,
warranties, covenants or agreements contained in this Agreement including, but
not limited to, legal and audit costs and out of pocket expenses.
10.3 TERMINATION IN THE EVENT OF POST-CLOSING DEFAULT.
------------------------------------------------
10.3.1 DEFAULT IN MAKING REQUIRED PURCHASE PRICE PAYMENTS.
--------------------------------------------------
In the event that Metro defaults, which default remains uncured after fourteen
(14) days written notice thereof to Metro, in making any of the Purchase Price
payments required pursuant to Sections 2.1 and 2.2 of this Agreement, this
Agreement may be terminated by, and at the sole election of, the Stockholders.
In the event of such termination (I) the Company Shares shall immediately be
returned by Metro to the Stockholders, together with a stock powers executed by
Metro in favor of the applicable stockholder; (ii) the Returnable Portion (as
hereinafter defined) of the Metro Shares shall be returned by the Stockholders
to Metro, and any excess portion thereof shall be retained by the Stockholders;
and (111) the Stockholders shall retain as liquidated damages, free and clear of
any claims by Metro, any and all funds paid by Metro pursuant to Sections
2.2(b), (C) and (d) of this Agreement, up to the sum of $4,000,000.
27
10.3.2 DEFAULT IN MAKING REQUIRED REDEMPTION PAYMENTS. In
----------------------------------------------
the event that Metro defaults in timely making any of the redemption payments
required pursuant to Section 13 of this Agreement, then the entirety of any
subsequent Pre Tax Net Earnings After Compensation shall be paid and delivered
to Stockholders until such time as the default is cured or this Agreement is
terminated (the "Default Funds"). In the event that Metro fails to cure the
default within ninety (90) days of the occurrence of the same, the Stockholders
may elect to either (I) terminate this Agreement by giving written notice of
such termination to Metro, or (ii) apply the Default Funds to the payment of the
outstanding redemption payment due. In the event the Stockholders elect to apply
the Default Funds to the payment of the outstanding redemption payment due, all
Pre Tax Net Earnings After Compensation shall continue to be paid to
Stockholders until the default is entirely cured. Alternatively, in the event
that the Stockholders elect to terminate this Agreement, then (I) the Company
Shares shall immediately be returned by Metro to the Stockholders, together with
stock powers executed by Metro in favor of the Stockholders; (ii) the Returnable
Portion (as hereinafter defined) of the Metro Shares shall be returned by the
Stockholders to Metro, and any excess portion thereof shall be retained by the
Stockholders; and (iii) the Stockholders shall retain as liquidated damages,
free and clear of any claims by Metro, any and all funds paid by Metro pursuant
to Sections 2.2(b), (C) and (d) of this Agreement, up to the sum of $4,000,000.
10.3.3 DEFINITIONS. For the purposes of this Agreement,
-----------
the term "Returnable Portion" shall be defined as the amount of the Metro Shares
then collectively owned by the Stockholders, less the amount of the Prior
Receipt Equivalent Shares (as hereinafter defined). For the purposes of this
Agreement, the term "Prior Receipt Equivalent Shares" shall mean the Adjusted
Earnings (as hereinbelow defined) divided by the value (as reflected on the
official records of the stock exchange in which Metro's stock is publicly traded
at the close of business on the date of termination) of one share of Metro's
publicly traded stock (the "Market Share Value"). The "Adjusted Earnings" shall
be defined as the sum of the Net Pre-Tax Earnings After Compensation received by
Metro for each of the two years following the execution of this Agreement (each,
an "Applicable Year"), reduced pro rata in each Applicable Year by an amount
determined by multiplying $1,000,000 by a fraction, the numerator of which is
the number days expired in such Applicable Year as of the date of termination,
and the denominator of which is 365. It is understood and agreed among the
parties that, under no circumstances shall Metro be responsible, in the event of
a default, for liquidated damages in any amount exceeding $3,000,000 (the
aggregate amount of funds paid by Metro pursuant to Sections 2.2(b), (C) and (d)
of this Agreement during the First Year, less up to $1,000,000 in Net Pre-Tax
Earnings After Compensation for each Applicable Year). It is the further
understood and agreed among the parties that, under no circumstances shall Metro
be responsible, in the event of a default, for conveying to the Stockholders any
shares of stock in excess of the Metro Shares delivered pursuant to Section
2.2(a) of this Agreement. The redemption of any shares of Metro Stock pursuant
to Section 13 of this Agreement shall be deemed a final transaction with respect
to such shares, and the proceeds of the same shall not be used in connection
with any of the calculations made pursuant to these Section 10.3.1, 10.3.2 or
10.3.3.
28
11 NON-COMPETITION
11.1 PROHIBITED ACTIVITIES. Except as may be permitted pursuant
---------------------
to the activities identified in Schedule 11. 1, attached hereto, the
Stockholders will not, for a period of three years following the Closing Date,
for any reason whatsoever, directly or indirectly, for themselves or on behalf
of or in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature:
(I) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity,
whether as an employee, independent contractor,
consultant or advisor, or as a sales representative,
in the development, distribution or sale of any non-
adult sophisticate publication or related services or
products in competition with the Company or any of
its subsidiaries in any state of the United States of
America or in any foreign country in which the
Company or any of its subsidiaries is conducting or
has conducted business (the "Territory");
(ii) call upon any person who is an employee of Metro, the
Company or any of their subsidiaries for the purpose
or with the intent of enticing such employee away
from or out of the employ of Metro, the Company or
any of their subsidiaries;
(iii) call upon any person or entity which is, or has been
within two years prior to the Closing Date, a
customer of the Company or any of its subsidiaries
for the purpose of soliciting or selling products or
services in direct competition with the Company or
any of its subsidiaries.
Notwithstanding the above, the foregoing covenant shall not
be deemed to prohibit any Stockholder from (I) acquiring as a passive investor
with no involvement in the operations or management of the business, not more
than one percent (1%) of the capital stock of a competing business whose stock
is traded on a national securities exchange or on an over-the-counter or similar
market; (ii) engaging in any business which such Stockholder is involved in as
of the date of this Agreement, which businesses are specifically set forth on
Schedule 11.1 attached hereto; or (iii) participating in any project which is
offered to, but rejected by, the Company and Metro in accordance with the
Employment Agreement of even date herewith among such Stockholder, Metro and the
Company.
29
11.2 EQUITABLE RELIEF. Because of the difficulty of measuring
-----------------
economic losses to Metro and the Company as a result of a breach of the
foregoing covenant, and because of the immediate and irreparable damage that
could be caused to Metro for which it would have no other adequate remedy, each
Stockholder agrees that the foregoing covenant may be enforced by Metro in the
event of breach by such Stockholder, by injunctions, restraining orders and
other equitable actions.
11.3 REASONABLE RESTRAINT. It is agreed by the parties hereto
--------------------
that the foregoing covenants in this Section 11 impose a reasonable restraint on
the Stockholders in light of the activities and business of the Company on the
date of the execution of this Agreement and the current plans of the Company;
but it is also the intent of Metro and the Stockholders that such covenants be
reasonably construed and enforced in accordance with the changing activities,
business and locations of the Company and its subsidiaries throughout the term
of this covenant. During the term of this covenant, if the Company or one of its
subsidiaries engages in activities similar to the activities currently conducted
by the Company, enters a related or similar business or establishes new
locations for its current activities or business, in each case within the
Territory, then the Stockholders will be prohibited from competing with such
activities or business within the Territory.
11.4 SEVERABILITY; REFORMATION. The covenants in this Section
-------------------------
11 are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
11.5 INDEPENDENT COVENANT. The Stockholders acknowledge that
--------------------
their covenants set forth in this Section 11 are material conditions to Metro's
willingness to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Except as to the requirement to make payments
pursuant to Section 2.2 of this Agreement, and the requirement to accept the
redemption of the Metro Stock pursuant to Section 13 of this Agreement, all of
the covenants in this Section 11 shall be construed as an agreement independent
of any other provision in this Agreement, and the existence of any claim or
cause of action of any Stockholder against Metro or any subsidiary thereof,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Metro of such covenants. It is specifically
agreed that the period of three years stated at the beginning of this Section
11, during which the agreements and covenants of each Stockholder made in this
Section 11 shall be effective, shall be computed by excluding from such
computation any time during which such Stockholder is determined by a court of
competent jurisdiction or by agreement of the parties to have been in violation
of any provision of this Section 11. The covenants contained in Section 11 shall
not be affected by any breach of any other provision hereof by any party hereto
(except as to Sections 2.2 and 13 of this Agreement, as aforesaid) and shall
have no effect if the transactions contemplated by this Agreement are not
consummated.
30
12. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 STOCKHOLDERS' OBLIGATIONS. The Stockholders recognize and
-------------------------
acknowledge that they had in the past, currently have, and in the future may
possibly have, access to certain confidential information of the Company and/or
Metro, such as operational policies, pricing and cost policies, and other
information, that are valuable, special and unique assets of the Company and/or
Metro. The Stockholders agree that they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
Metro, (b) following the Closing, such information may be disclosed by the
Stockholders as is required in the course of performing their duties for Metro
or the Company and (C) to counsel and other advisers, provided that such
advisers (other than counsel) agree to the confidentiality provisions of this
Section 12. 1, unless (I) such information becomes known to the public generally
through no fault of the Stockholders, or (ii) disclosure is required by law or
the order of any governmental authority under color of law, provided, that prior
to disclosing any information pursuant to this clause (ii), the Stockholders
shall, if possible, give prior written notice thereof to Metro and provide Metro
with the opportunity to contest such disclosure. In the event of a breach or
threatened breach by any of the Stockholders of the provisions of this Section,
Metro shall be entitled to injunctive or other equitable relief restraining such
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Metro from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
12.2 EQUITABLE RELIEF. Because of the difficulty of measuring
----------------
economic losses as a result of the breach of the foregoing covenants, and
because of the immediate and irreparable damage that would be caused for which
Metro would have no other adequate remedy, the Stockholders agree that the
foregoing covenants may be enforced against them by injunctions, restraining
orders and other appropriate equitable relief.
12.3 SURVIVAL. The obligations of the parties under this
--------
Article 12 shall survive the termination of this Agreement for a period of two
(2) years.
13. REDEMPTION
13.1 RIGHT OF REDEMPTION. Beginning on the first anniversary
-------------------
date of the Closing Date, in any four (4) of the next five (5) Qualifying
Quarters (as hereinafter defined), the Stockholders (pro rata or as otherwise
agreed upon by the Stockholders) shall have the right, collectively, exercisable
within thirty (30) days following the close of each such Qualifying Quarter, to
request that Metro redeem (and Metro shall be obligated to redeem upon such
request) up to one-quarter of the shares of the Metro Stock owned by the
Stockholders as of the Anniversary Date, for the redemption price of Eight
Dollars ($8.00) per share (the "Redemption Price"). The Stockholders may
exercise such right by delivering to Metro a written request specifying the
number of shares of Metro Stock to be redeemed from each Stockholder (the
"Redemption
31
Notice"). Within fourteen (14) days of its receipt of the Redemption Notice,
Metro will pay to each of the Stockholders the Redemption Price for each of the
Metro Shares redeemed, and the Stockholders shall return said shares to Metro.
The right to redeem set forth herein shall not be cumulative, and if the
Stockholders fail to request that Metro redeem all or any portion of Metro
Shares redeemable during the thirty (30) day period following the next Fiscal
Quarter after the Qualifying Quarter, then the Stockholders' redemption rights
with respect to such shares shall be terminated. For the purposes of this
Agreement, a "Qualifying Quarter" shall be defined as either (I) any Fiscal
Quarter in which the Company generates Pre-Tax Net Earnings After Compensation
of at least $437,500, or (ii) any Fiscal Quarter in which the average Pre-Tax
Net Earnings After Compensation of such Fiscal Quarter and the Fiscal Quarter
immediately preceding it is at least $437,500.
13.2 TERMINATION OF RIGHT OF REDEMPTION. At any time during the
----------------------------------
first year following the Closing, and subsequent to sixty (60) days from the
Closing, Metro may offer in writing to purchase from the Stockholders the
entirety of the Metro Shares (the "Offer to Purchase") at a price equal to
seventy-five percent (75%) of the greater of (I) $8 per share, or (ii) the
Market Value (as hereinafter defined) of the Metro Shares (the "Option Purchase
Price"). For the purposes of this Agreement, the term "Market Value" shall mean
the average price of the Metro Shares (as listed by the exchange on which the
Metro's shares are publicly traded) at the close of trading on each of the
thirty (30) days immediately preceding the written offer by Metro to purchase.
The Stockholders may, individually or collectively, accept the Offer to Purchase
with respect to any quantity, or all, of the Metro Shares then owned by each
accepting Stockholders. Such acceptance shall be in writing and sent to Metro
within thirty (30) days of the Offer to Sell. Within ten (10) days of receipt of
the said written acceptance, Metro shall deliver to the accepting Stockholders
the entirety of the Option Purchase Price, and the accepting Stockholders shall
deliver to Metro the corresponding number of Metro Shares, together with
executed stock powers in favor of Metro. Any of the Metro Shares for which the
Metro Offer has not been accepted in writing within the said thirty (30) day
period shall be deemed to be excluded from the provisions of Section 13.1 of
this Agreement and may not be offered for redemption to Metro.
14. SECURITIES LAW MATTERS
14.1 ECONOMIC RISK; SOPHISTICATION. Each Stockholder represents
-----------------------------
and warrants that such Stockholder has not relied on any of Metro's
representatives, or on the Company or any other Stockholder, in connection with
the acquisition of shares of Metro Stock hereunder. The Stockholders each (I)
have such knowledge, sophistication and experience in business and financial
matters that they are capable of evaluating the merits and risks of an
investment in the shares of Metro Stock, (ii) fully understand the nature, scope
and duration of any limitations on transfer described in this Agreement and
(iii) can bear the economic risk of an investment in the shares of Metro Stock
and can afford a complete loss of such investment. The Stockholders have each
had an adequate opportunity to ask questions and receive answers from the
officers of Metro concerning any and all matters relating to the transactions
described herein including without limitation the background and experience of
the officers and directors of Metro, the plans for the
32
operations of the business of Metro, the business, operations and financial
condition of Metro, and any plans for additional acquisitions and the like. The
Stockholders have each asked any and all questions in the nature described in
the preceding sentence and all questions have been answered to their
satisfaction.
14.2 COMPLIANCE WITH LAW. Each Stockholder covenants that none
-------------------
of the Metro Stock will be offered, sold, assigned, hypothecated, transferred or
otherwise disposed of by such Stockholder except after full compliance with all
of the applicable provisions of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations of the Securities and Exchange Commission.
The Stockholders may, at any time, request that Metro obtain early registration
of the Metro Stock so as to enable the Stockholder to freely trade the same.
Provided that such registration is in the best interests of Metro, consent to
such registration will not be unreasonably withheld by Metro.
14.3. RESALE LIMITATIONS. The Metro Stock to be issued hereunder
------------------
will not be registered pursuant to the Act and no Stockholder may transfer the
Metro Stock except pursuant to registration under the Act, or pursuant to a
valid exemption from registration under the Act (including the limitations on
resale under Rule 144 promulgated under the Act). Metro hereby warrants and
represents that it will, at its own cost and expense, cause the said shares to
be registered, and become fully transferable, as of the first anniversary date
of the Closing Date. Additionally, the certificates evidencing the Metro Stock
issued hereunder will initially bear a legend substantially in the form set
forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), NOR REGISTERED UNDER ANY STATE SECURITIES LAW, AND
ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE
144 UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY.
33
15. GENERAL
15.1 COOPERATION. The Stockholders and Metro shall each deliver
-----------
or cause to be delivered to the other on the Closing Date, and at such other
times and places as shall be reasonably agreed to, such additional instruments
as the other may reasonably request for the purpose of carrying out this
Agreement. The Stockholders will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the Company cooperate with
Metro on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any tax return filing
obligations, evidence, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing
Date.
15.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of
----------------------
the parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto, the
successors of Metro, and the heirs and legal representatives of the
Stockholders.
15.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
----------------
exhibits and annexes attached hereto) constitute the entire agreement and
understanding among the Stockholders and Metro and supersede any prior agreement
and understanding relating to the subject matter of this Agreement. This
Agreement, upon execution, constitutes a valid and binding agreement of the
parties hereto enforceable in accordance with its terms and may be modified or
amended only by a written instrument executed by the Stockholders and Metro
acting through its respective officers, duly authorized by its respective Boards
of Directors.
15.4 COUNTERPARTS. This Agreement may be executed
------------
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument.
15.5 BROKERS AND AGENTS. Each party represents and warrants that
------------------
it employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
15.6 EXPENSES. Whether or not the transactions herein
--------
contemplated shall be consummated, Metro will pay the fees and expenses of
Metro's representatives, accountants and counsel incurred in connection
herewith, and the Stockholders will pay the fees and expenses of the
Stockholders' and the Company's representatives, accountants and counsel
incurred in connection herewith. Each party shall pay all sales, use, transfer,
real property transfer, recording, gains, stock transfer and other similar taxes
and fees ("Transfer Taxes") applicable to it in connection with the stock
transfer. The parties shall respectively file all necessary documentation and
returns with respect to such Transfer Taxes due by it.
34
15.7 NOTICES. All notices and communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party, as follows:
(I) If to Metro, addressed to it at:
Metro Global Media, Inc.
Xxx Xxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx
with a copy to:
Xxxxxxx, Green Xxxxxxxxx,
Roll, Salisbury & Cambria LLP
00 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxx Xxxxxxxxx, Esq.
(ii) If to any Stockholder, addressed to him or her at his
or her address set forth on Schedule 15.7, with a
-------------
copy to:
Xxxxxxx Xxxxxx, Esq.
Fifteen Xxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 15.7 from time to time.
15.8 GOVERNING LAW. This Agreement shall be construed in
-------------
accordance with the laws of the State of New York other than its principles
governing conflicts of laws.
15.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
------------------------------------------
representations, warranties, covenants and agreements of the parties made herein
and at the time of the Closing or in writing delivered pursuant to the
provisions of this Agreement shall survive the consummation of the transactions
contemplated hereby and any examination on behalf of the parties until the
applicable Expiration Date.
35
15.10 EFFECT OF INVESTIGATION; KNOWLEDGE.
----------------------------------
(I) No investigation by the parties hereto in connection
with this Agreement or otherwise shall affect the
representations and warranties of the parties
contained herein or in any document annexed hereto
and each such representation and warranty shall
survive such investigation.
(ii) When a representation or warranty contained herein or
in any document annexed hereto is made to the
"knowledge" of a party, such party shall be deemed to
know all facts and circumstances that a reasonable
investigation of the subject matter of such
representation or warranty would have revealed.
15.11 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise
-------------------------------
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
15.12 TIME. Time is of the essence with respect to this
Agreement.
15.13 REFORMATION AND SEVERABILITY. In case any provision of
----------------------------
this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
15.14 REMEDIES CUMULATIVE. No right, remedy or election given
-------------------
by any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
15.15 CAPTIONS. The headings of this Agreement are inserted
--------
for convenience only, and shall not constitute a part of this Agreement or be
used to construe or interpret any provision hereof.
36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
METRO GLOBAL MEDIA, INC.
By:______________________________
Its:_____________________________
STOCKHOLDERS:
_________________________________
Xxxxxx Xxxxxxx
_________________________________
Xxxxxxx Xxxxxx
_________________________________
Xxxxxx X. Xxxxxxxxx
_________________________________
Bart Senior
