Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 16, 2002 (the
"Agreement"), by and among Publishers Group Incorporated, a California
corporation ("PGI"), each of the individuals and entities listed under the
heading "Principal Shareholders" on the signature pages hereto (each being a
"Principal Shareholder," and all of them together being the "Principal
Shareholders"), Xxxxxxx Xxxxxx, as the representative designated pursuant to
Section 14.11 hereof (the "Representative"), Advanced Marketing Services, Inc.,
a Delaware corporation ("AMS"), and Nautilus Merger Sub, Inc., a California
corporation and wholly owned subsidiary of AMS ("Merger Sub").
RECITALS:
WHEREAS, each of Publishers Group West Incorporated, a California
corporation ("PGW"), and Avalon Publishing Group Incorporated, a California
corporation ("Avalon"), is a wholly-owned subsidiary of PGI.
WHEREAS, AMS desires to acquire (the "Acquisition") all of the
capital stock of PGW.
WHEREAS, the parties desire that the Acquisition be structured as a
merger (the "Merger") of Merger Sub with and into PGI, immediately preceded by
(i) the sale (the "Avalon Divestiture") of all of the capital stock of Avalon to
a new entity affiliated with certain of the Principal Shareholders and (ii) the
sale (the "Canada Divestiture") of PGW's Canadian operations.
NOW, THEREFORE, in consideration of, and premised upon, the various
representations, warranties, covenants and other agreements and undertakings of
the parties contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
1.1 DEFINITIONS. Certain capitalized terms used in this Agreement
shall have the meanings ascribed to them in Exhibit A.
1.2 TERMS GENERALLY. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Agreement include both the
plural and the singular;
(b) the words "herein," "hereof," "hereby" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(c) the words "including" and "include" and other words of
similar import shall be deemed to be followed by the phrase "without
limitation";
(d) the symbol "$" and the term "dollar" shall mean the United
States dollar, the lawful currency of the United States of America; and
(e) the phrases "as of the date hereof", "as of the date of
this Agreement" or other phrases of similar import refer to January 16, 2002.
ARTICLE II
THE MERGER
2.1 MERGER. Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the California Corporations Code (the
"California Code"), at the Effective Time, Merger Sub shall be merged with and
into PGI whereupon PGI shall continue as the surviving corporation (sometimes
referred to herein as the "Surviving Corporation") and the separate corporate
existence of Merger Sub shall cease.
2.2 EFFECTIVE TIME.
(a) The Merger shall be effective when a properly executed
agreement of merger (together with any other documents, certificates and
instruments required by law to effectuate and consummate the Merger) shall be
filed with the Secretary of State of the State of California (or at such other
time as shall be specified in such agreement of merger), which filing shall be
made as soon as practicable after satisfaction of the conditions set forth in
Articles X and XI.
(b) When used herein, the term "Effective Time" shall mean the
date and time at which the Merger becomes effective and the term "Closing Date"
shall mean the date on which the Effective Time occurs.
(c) The parties shall use reasonable best efforts to
consummate the Merger on the first Business Day following notification by each
party that all conditions to its obligations to effect the Closing set forth in
Articles X and XI have been satisfied.
2.3 ARTICLES OF INCORPORATION. At the Effective Time, the Articles
of Incorporation of the Surviving Corporation shall be amended such that they
are substantially in the form of the Articles of Incorporation of Merger Sub
that were in effect immediately prior to the Effective Time.
2.4 BY-LAWS. At the Effective Time, the By-laws of the Surviving
Corporation shall be amended such that they are substantially in the form of the
By-laws of Merger Sub that were in effect immediately prior to the Effective
Time.
2.5 OFFICERS AND DIRECTORS. The officers and directors of Merger Sub
immediately prior to the Effective Time shall be the officers and directors of
the Surviving Corporation until their successors shall have been duly elected
and qualified.
2.6 EFFECT OF MERGER. At the Effective Time, the Merger shall have
the effects set forth in the California Code.
ARTICLE III
CONVERSION
3.1 CONVERSION. The manner and basis of converting the shares of
common stock, par value $.01 per share, of Merger Sub (the "Merger Sub Common
Stock") and the PGI Common Stock, and the consideration that the holders of such
shares shall receive are as follows:
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder thereof, each share of PGI Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares of PGI Common Stock as to which dissenters' rights have not been
withdrawn or forfeited under Chapter 13 of the California Code, if an effective
demand for payment of fair market value with respect to such shares under
Chapter 13 of the California Code was required and given prior to the Effective
Time, if any, which shares entitle their holders to dissenters' rights under the
California Code) shall be converted into the right to receive (i) the Initial
Price Per Common Share and (ii) the Deferred Payment. At the Effective Time,
upon such conversion, each share of PGI Common Stock issued and outstanding
prior to the Effective Time shall be cancelled and retired and shall cease to
exist. Following the Effective Time, and except as provided above, any
certificates or other instrument representing any share of PGI Common Stock
outstanding immediately prior to the Effective Time shall thereafter only
represent the right to receive, upon surrender thereof, the Initial Price Per
Common Share and the Deferred Payment.
(b) At the Effective Time, each share of Merger Sub Common
Stock, issued and outstanding immediately prior to the Effective Time, shall be
converted into, and become the right to receive, one share of the common stock,
par value $.01 per share, of the Surviving Corporation (the "Surviving
Corporation Common Stock"), by virtue of the Merger and without any action on
the part of the holder thereof. Immediately upon such conversion into shares of
the Surviving Corporation Common Stock, each share of Merger Sub Common Stock
shall be cancelled and retired and shall cease to exist.
(c) As of the Effective Time, the stock transfer books of PGI
shall be closed.
3.2 EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, but in no event later than 30 days after the Closing Date, each holder of
an outstanding certificate or certificates which, prior thereto, represented
shares of PGI Common Stock and each holder of a vested and exercisable Option
shall, upon surrender to the Surviving Corporation of such certificate or
certificates (or a lost stock certificate affidavit and indemnity with respect
thereto reasonably acceptable to AMS) together with an executed Letter of
Transmittal, in the case of PGI Common Stock, and properly executed exercise
notice together with an executed Letter of Transmittal, in the case of an
Option, be entitled to the Initial Price Per Common Share and Deferred Payment
for each share of PGI Common Stock represented by such certificate or
certificates so surrendered, or the Initial Price Per Option Share and Deferred
Payment, in the case of each Option with respect to which an exercise notice is
so surrendered, for each share of PGI Common Stock represented by such Option.
If payment is to be paid to any person other than the person in whose name the
certificate or certificates representing shares of PGI Common Stock surrendered
in exchange therefor is registered, it shall be a condition to such exchange
that written instructions with respect thereto, reasonably satisfactory to AMS,
shall be provided to AMS with (i) payment of any transfer or other taxes
required by reason of the payment for such consideration to a person other than
the registered holder of the certificate or certificates surrendered, or (ii)
establishment to the reasonable satisfaction of the Surviving Corporation that
such tax has been paid or, if AMS reasonably demonstrates that a tax may be
applicable, that it is not applicable. All amounts payable under this Section
3.2 shall be (i) paid in immediately available same-day funds, without interest,
one full Business Day after the date when the applicable holder satisfies the
procedures contemplated by this Section 3.2, subject to Section 5.3, (ii) net of
any debt owing by such holder (other than up to $10,000 owed by Xxxxxx Xxxxxx
for relocation expenses, which shall survive the Closing) to PGI or PGW and
(iii) subject to any required withholding of taxes. PGI shall be solely
responsible for mailing the Letters of Transmittal to the holders of PGI Common
Stock and Options.
ARTICLE IV
DISSENTING STOCKHOLDERS
4.1 ELECTION. Any shares of PGI Common Stock as to which the holder
thereof shall have properly demanded payment of fair market value in accordance
with the requirements of Chapter 13 of the California Code (any holder duly
making such demand is referred to herein as a "Dissenting Stockholder") shall
not be converted into the right to receive the Initial Price Per Common Share
and Deferred Payment, unless and until such holder shall have failed to perfect
or shall have effectively withdrawn or lost, the right to appraisal of and
payment for such shares of PGI Common Stock under Chapter 13 of the California
Code. In the event that a demand for payment of fair market value under the
California Code was not required prior to the Effective Time, at such time as a
holder of shares of PGI Common Stock subsequently properly makes such demand,
certificates for shares of PGI Common Stock as to which such dissenters' rights
are properly demanded shall thereupon cease to represent the right to receive
the Initial Price Per Common Share and Deferred Payment, and shall represent
only the right to receive payment for such shares under Chapter 13 of the
California Code.
4.2 EXPENSES. All costs and expenses incurred by AMS or the
Surviving Corporation with respect to any Dissenting Stockholder (including,
without limitation, all amounts payable in respect of such Dissenting
Stockholder's certificates formerly representing PGI Common Stock and all
financial advisors' and attorneys' fees and expenses incurred in connection with
any appraisal proceeding relating thereto) shall, to the extent such costs and
expenses exceed the aggregate Initial Price Per Common Share and Deferred
Payment that would have been payable to such Dissenting Stockholder had he, she
or it not dissented in accordance with Chapter 13 of the California Code, be
deemed transaction expenses of PGI and shall, at the option of AMS, be paid to
AMS out of the Escrow Fund or, to the extent that the Escrow Fund has been
exhausted, shall be reimbursed to AMS by the Principal Shareholders.
ARTICLE V
CLOSING; ADJUSTMENT
5.1 CLOSING. The Closing shall take place at the offices of Xxxxxx
Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
at 10:00 a.m., local time, on January 31, 2002, or, at such other place, time
and date as the parties hereto may agree in writing.
5.2 CLOSING DELIVERIES. Each party agrees to deliver, or cause to be
delivered, all certificates and other documents required to be delivered by or
on behalf of such party pursuant to Article X or Article XI, as applicable.
5.3 CLOSING PAYMENTS. AMS shall make, or cause to be made, on the
Closing Date, the payment of the Initial Price Per Common Share and the Initial
Price Per Option Share with respect to each share (or underlying share, in the
case of Options) of PGI Common Stock surrendered to the Surviving Corporation at
Closing with an appropriate Letter of Transmittal (and notice of exercise, in
the case of shares underlying Options) if such Letter of Transmittal and
applicable share certificate, Option and notice of exercise was presented to AMS
for inspection no later than one full Business Day prior to the Closing Date.
5.4 ESCROW. At Closing, AMS shall deposit, or cause to be deposited,
$4,000,000 into escrow subject to the Escrow Agreement.
5.5 MERGER CONSIDERATION ADJUSTMENT.
(a) As soon as practicable after the Closing Date, PGI's
current auditors, Ernst & Young LLP, shall, on behalf of the holders of PGI
Common Stock and vested and exercisable Options immediately prior to the
Effective Time, issue an Agreed-Upon Procedures report, under standards
established by the American Institute of Certified Public Accountants, with
respect to the Representative's calculation of Adjusted Net Book Value which
calculation shall use GAAP applied consistently with the balance sheet of PGI at
December 31, 2000. The Representative and AMS shall cooperate in determining the
procedures to be performed by Ernst & Young LLP on the Representative's
calculation of Adjusted Net Book Value. AMS shall cause PGW to provide
reasonable cooperation to Ernst & Young LLP in connection with such report. PGW
shall request Ernst & Young LLP to cooperate with Xxxxxx Xxxxxxxx, LLP in
connection with Xxxxxx Xxxxxxxx, LLP's examination of such calculation on behalf
of AMS.
(b) As promptly as practicable, but in no event later than 90
days after the Closing Date, the Representative shall notify AMS in writing of
the Representative's determination on which Ernst & Young LLP shall issue an
Agreed-Upon Procedures report per section (a) of Adjusted Net Book Value which
determination shall set forth in reasonable detail the Representative's
calculation of Adjusted Net Book Value. Full access to all Ernst & Young LLP
workpapers prepared and other books and records of the Company utilized in
connection with the audit of the Financial Statements at December 31, 2001 and
in the preparation of Representative's calculation and access to Ernst & Young
LLP's engagement team personnel and papers in accordance with Ernst & Young
LLP's customary practices shall be made available to AMS and its advisors at
such time. AMS will notify the Representative in writing (the "Dispute Notice")
within 30 days after receiving Representative's Schedule if AMS disagrees with
Representative's calculation of Adjusted Net Book Value as set forth in
Representative's Schedule, which notice shall set forth in reasonable detail the
basis for such disagreement, the dollar amounts involved and AMS's calculation
of Adjusted Net Book Value. If no Dispute Notice is received by the
Representative within such 30-day period, the Representative's calculation of
Adjusted Net Book Value as set forth in Representative's Schedule shall be final
and binding upon the parties hereto.
(c) Upon receipt by the Representative of the Dispute Notice,
the Representative and AMS shall negotiate in good faith to resolve any
disagreement with respect to Adjusted Net Book Value set forth in the Dispute
Notice. To the extent AMS and the Representative are unable to agree with
respect to Adjusted Net Book Value within 10 days after receipt by the
Representative of the Dispute Notice, AMS and the Representative shall promptly
select a mutually acceptable nationally recognized accounting firm with no
material relationship to AMS, the Representative or the Principal Shareholders
and submit their dispute to such accounting firm for a binding resolution.
Adjusted Net Book Value, as agreed upon by the Representative and AMS, as deemed
agreed upon pursuant to the last sentence of Section 5.5(b) or as determined by
such accounting firm, in accordance herewith, shall be termed the "Final
Adjusted Net Book Value." The fees and expenses of such accounting firm shall be
paid by the party hereto whose determination of Adjusted Net Book Value as
initially submitted to such accounting firm is further away, in the aggregate,
from the Final Adjusted Net Book Value.
(d) If the Final Adjusted Net Book Value is greater than
$7,640,000, AMS shall deposit the amount of such difference as an addition to
the Escrow Fund within one Business Day after determination of the Final
Adjusted Net Book Value. If the Final Adjusted Net Book Value is less than
$7,640,000, the amount of such difference shall be paid to AMS from the Escrow
Fund within one Business Day after determination of the Final Adjusted Net Book
Value.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO PGI
Except, with respect to each paragraph in this Article VI, as
specifically set forth in the Disclosure Schedule with respect to such
paragraph, and except as relates to the Avalon Divestiture, Canada Divestiture
and the transfer of life insurance as contemplated by the Transition Services
Agreement, PGI and each Principal Shareholder, severally but not jointly,
represents and warrants to AMS and Merger Sub the following (and the parties
agree that any claim for a breach of any such representation or warranty must be
asserted within the time limitations set forth in Section 12.1):
6.1 INCORPORATION, QUALIFICATION AND CORPORATE AUTHORITY. Each of
PGI and PGW has been duly incorporated and is validly existing and in good
standing under the laws of the State of California, and each has all requisite
corporate power and authority to conduct its business and to own, lease or
operate the properties and assets that it purports to own, lease or operate.
Each of PGI and PGW is duly qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction set forth on Schedule
6.1, which Schedule includes each jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where the failure to be so
qualified or in good standing would not in the aggregate be reasonably likely to
have a Material Adverse Effect. Neither PGI nor PGW has received any notice or
assertion from the Secretary of State or comparable official of any jurisdiction
to the effect that it is required to be qualified or otherwise authorized to do
business therein, in which it has not qualified or obtained such authorization.
PGI has no Subsidiaries other than PGW, Avalon and the Subsidiaries of Avalon;
PROVIDED, HOWEVER, that at Closing, PGW will be PGI's only Subsidiary and PGW
has (and will have) no Subsidiaries.
6.2 ARTICLES OF INCORPORATION AND BYLAWS; AUTHORIZATION.
(a) PGI has provided to AMS copies of the Articles of
Incorporation of PGI and PGW, including any amendments thereto through the date
hereof (certified as of a recent date by the Secretary of State or comparable
official of the jurisdiction of such entity's formation), and the By-laws
(certified as of the date hereof by the Secretary or comparable officer of such
entity), which copies are complete and correct as of the date hereof. Neither
PGI nor PGW is in default in the performance, observation or fulfillment of its
respective Articles of Incorporation or By-laws except where such default would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
(b) PGI has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated herein, and this Agreement has been duly executed
and delivered by PGI pursuant to any necessary authorization and, assuming this
Agreement constitutes a valid and binding obligation of the other parties
hereto, constitutes the legal, valid and binding obligation of PGI enforceable
against PGI in accordance with its terms, except to the extent that
enforceability thereof may be limited by: (i) applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws from time to
time in effect affecting generally the enforcement of creditors' rights and
remedies; and (ii) general principles of equity, including, without limitation,
principles of reasonableness, good faith and fair dealing (regardless of whether
enforceability is considered in a proceeding at law or in equity).
6.3 FINANCIAL STATEMENTS
(a) The Financial Statements (i) that have been audited, have
been prepared in accordance with GAAP throughout the periods covered thereby
with only such deviations from such accounting principles and/or their
consistent application as are described in Schedule 6.3 hereto (and except as
may be indicated therein or in the notes thereto), (ii) fairly represent, in all
material respects, the consolidated financial condition, results of operations
and cash flows of PGI and PGW as of the respective dates and for the periods
referred to therein and (iii) are set forth in full on Annex 6.3(a) hereto.
(b) Where reserves and accrued liabilities have been disclosed
on or reflected in the Financial Statements, such reserves and accruals are
sufficient, in the aggregate, to provide for the contingencies and liabilities
for which they have been established.
(c) Except as disclosed on Schedule 6.3(c), neither PGI nor
PGW has any assets, liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) other than
(i) liabilities reflected or reserved against on the balance sheet as of June
30, 2001 of PGI and PGW (the "Balance Sheet"), (ii) liabilities of a type
customarily reflected in a corporate balance sheet prepared in accordance with
GAAP that have arisen in the ordinary course of business since the Balance Sheet
Date and (iii) liabilities which are so immaterial or so remote (or both) that
GAAP does not require their inclusion in a corporate balance sheet. Except as
disclosed on the Schedules hereto, PGI has no liabilities other than those of
its Subsidiaries. Except as disclosed on the Schedules hereto, the only assets
of PGI are the capital stock of PGW and Avalon.
6.4 CERTAIN AGREEMENTS.
(a) With respect to that certain agreement, dated August 25,
1998, by and between J-V Eastern Distribution, Inc., ("J-V East") and PGW, PGW
is under no obligation or commitment, explicitly or implicitly, to utilize the
services of J-V East and may cease utilizing the services of J-V East at any
time, or reduce such utilization at any time, without penalty.
(b) PGW entered into a fulfillment agreement with Nexar Book
Distribution, Inc. ("Nexar") on May 5, 1998. On April 28, 2000 PGW and Nexar
entered into an oral agreement, confirmed in writing by Xxxx Xxxxxx, President
of Nexar, to amend the May 5, 1998 agreement. The oral agreement contained
numerous provisions under which the parties have since conducted their
relationship, notwithstanding the lack of mutual execution of a formal document
evidencing such oral agreement. One of the provisions of such oral agreement,
confirmed in writing, specifically amended the termination provisions of the May
5, 1998 agreement to cause the relationship to terminate on December 31, 2002
without payment by PGW or any other action by the parties, and such provision is
enforceable notwithstanding the lack of a signed agreement and, upon such
termination, all materials held by Nexar under such agreement shall be returned
to PGW without payment by PGW or other action by the parties.
6.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
separately as to each entity on Schedule 6.5, since the Balance Sheet Date there
has not been any:
(a) change, occurrence or event which (together with other
changes, occurrences and events) has had or is reasonably likely to have a
Material Adverse Effect;
(b) declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to, or
split, combination or reclassification of, any PGI Common Stock or any issuance
or the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for PGI Common Stock other than (i) by reason of
exercise of Options or warrants granted and existing as of the Balance Sheet
Date or (ii) issuance of replacements for lost stock certificates;
(c) except as set forth in clause (b) above, issuance or sale
of PGI Common Stock or other capital stock of PGI or PGW, or any right to
acquire such shares, by PGI or PGW or any authorization for such action or any
issuance or grant of any options or warrants;
(d) change in the condition (financial or otherwise), assets,
liabilities (fixed or contingent), obligations, indebtedness, operations,
earnings or business of PGI and PGW, except for changes which have been in the
ordinary course of business which, in accordance with GAAP applied in a manner
consistent with such application in the Financial Statements, have been fully
recorded in the books and records of PGI and PGW and which would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect;
(e) other than pursuant to existing collective bargaining
agreements, employment agreements, corporate policies, practices and procedures
or existing plans and arrangements described on Schedule 6.5(e) hereto, (i)
increase in the compensation payable or to become payable by PGI or PGW to any
of their officers, directors, employees, independent contractors or agents
(collectively, "PGI Personnel") whose total compensation for services rendered
to PGI or PGW is currently at an annual rate of more than $50,000, or any
increase of general applicability in the compensation payable to PGI Personnel,
(ii) bonus, incentive compensation, service award or other like benefit,
granted, made or accrued, contingently or otherwise, of or to the credit of PGI
Personnel, or (iii) employee welfare, pension, retirement, profit-sharing or
similar payment or arrangement made or agreed to by PGI or PGW; PROVIDED,
HOWEVER, that PGI and PGW may have, to the extent included in the projections
heretofore provided to AMS, made normal bonus payments to their officers and
employees (but no increase in the executive compensation beyond projected cost
of living increases in the aggregate);
(f) strikes, picketing, unfair labor practices, demands for
recognition, petitions or other labor disputes (other than grievance procedures
in the ordinary course of business), or any controversies or unsettled
grievances threatened between PGI or PGW and any PGI Personnel or any collective
bargaining organization representing or seeking to represent PGI Personnel;
(g) except as described on Schedule 6.5(g), addition to or
modification of the employee benefit plans, arrangements or practices of PGI or
any of its Subsidiaries that affects PGI or PGW;
(h) except as described on Schedule 6.5(h), establishment,
agreement to establish or any change in any pension, retirement or welfare plan
of PGI or any of its Subsidiaries not theretofore in effect that affects PGI or
PGW;
(i) mortgage, pledge or subjection to any Encumbrance of any
of the assets, tangible or intangible, of PGI or PGW except (i) the lien for
current real and personal property taxes incurred but not yet due and payable,
(ii) materialmen's or like liens or obligations arising in the ordinary course
of business securing obligations not yet due and payable, or (iii) purchase
money security interests or similar liens arising in the ordinary course of
business in an amount not to exceed in the case of this clause (iii) $25,000, in
the aggregate;
(j) sale, assignment, lease or transfer of any properties or
assets, tangible or intangible, of PGI or PGW which are material, singly or in
the aggregate, to PGI or PGW other than in the ordinary course of business and
consistent with past practice or any conducting of business other than in the
ordinary course and consistent with past practice, or any acquisition of all or
any part of the assets, properties, stock or business of any Person other than
in the ordinary course of business and consistent with past practice;
(k) except as described on Schedule 6.5(k), cancellation of
any debt or waiver of any claim, account receivable or any right of significant
value to PGI or PGW, not in the ordinary course of business and involving more
than $25,000 in any one instance or series of related instances;
(l) transaction, contract, agreement or commitment, except in
the ordinary course of business or as was ordinary and necessary in connection
with the transactions contemplated hereby and involving more than $10,000 in any
one instance or series of related instances;
(m) amendment, cancellation or termination by PGI or PGW of
any contract, agreement or other instrument which is material to PGI or PGW;
(n) liability incurred by PGI or PGW, except liabilities
incurred in the ordinary course of business consistent in both kind and amount
with past practices of PGI and PGW and which would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect;
(o) payment, discharge or satisfaction of any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise) of PGI
or PGW other than current liabilities reflected in the Financial Statements,
current liabilities incurred since the Balance Sheet Date in the ordinary course
of business and consistent with past practice or scheduled payments pursuant to
obligations under loan agreements or other contracts identified on Schedule
6.5(o) hereto;
(p) capital expenditure or the execution of any lease with
respect to any aspect of the business of PGI and PGW, or any incurring liability
therefor, involving payments in excess of $25,000 in the aggregate, including
all forward commitments to purchase equipment or inventory;
(q) borrowing of money by PGI or PGW or guaranteeing of any
indebtedness of others by PGI or PGW other than in the ordinary course of
business and consistent with past practice;
(r) lending of any money or otherwise pledging the credit of
PGI or PGW to any party other than PGI and PGW;
(s) failure to operate the business of PGI and PGW in the
ordinary course so as to preserve the business intact, to keep available to PGI
and PGW the services of the PGI Personnel to the extent they have been providing
services to PGI or PGW, and to preserve for the Surviving Corporation the
goodwill of the publishers, customers and others having business relations with
PGI or PGW except where such failure would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect;
(t) except as described on Schedule 6.5(t), cancellation of,
or failure to continue, insurance coverages of PGI or PGW;
(u) failure to pay any material current obligations of PGI or
PGW in accordance with the general practices of PGI and PGW, except for those
being contested in good faith and disclosed on Schedule 6.5(u) hereto;
(v) damage, destruction or casualty loss relating to PGI or
PGW, whether covered by insurance or not which would, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect;
(w) new transaction entered into by PGI or PGW with any
Affiliate of PGI, PGW or any Principal Shareholder, including any dividend
payment;
(x) except as described on schedule 6.5(x), settlement of any
Tax claim or assessment, surrender of any right to claim a Tax refund, any
action taken or omitted to be taken, if any such action or omission would have
the effect of increasing the Tax liability or reducing any net operating loss,
net capital loss, investment tax credit, or any other credit or tax attribute
which could reduce Taxes (including, without limitation, deductions and credits
related to alternative minimum taxes), involving more than $25,000 in the
aggregate;
(y) hiring or firing of any employees of PGI or PGW having a
title of "manager" (or any employee having a comparable or more senior title);
(z) change in accounting methods, principles, practices,
methods of management or operation by PGI or PGW materially affecting its
respective assets, liabilities or business;
(aa) material change in the method of billing customers or the
credit terms made available by PGI or PGW, to its customers;
(bb) termination, discontinuance, closure or disposal of any
facility or business operation of PGI or PGW;
(cc) extraordinary loss relating to the business of PGI or
PGW;
(dd) termination of or communication of intent or threat to
terminate, by any publisher or supplier, its relationship with PGI or PGW, or
the intention to reduce substantially the quantity of products or services it
sells to or through PGI or PGW, except in the case of publishers and suppliers
whose sales are not, in the aggregate, material to the business or the financial
condition of PGI or PGW;
(ee) termination of or communication of intent or threat to
terminate, by any customer, its relationship with PGI or PGW, or the intention
to reduce substantially the quantity of products or services it purchases from
PGI or PGW, or its dissatisfaction with the products or services sold by PGI or
PGW, except in the ordinary course of business or in the case of customers whose
purchases are not, in the aggregate, material to the business or the financial
condition of PGI or PGW, or
(ff) agreement, authorization or commitment by PGI or PGW to
do any of the foregoing.
6.6 CAPITALIZATION.
(a) Schedule 6.6(a) sets forth, as of the date hereof, the
authorized and outstanding capital stock of PGI and any options, warrants or
other agreements to purchase any capital stock of PGI to which PGI is a party,
together with the ownership thereof. Except for Options exercised at Closing,
all options, warrants and other agreements to purchase any capital stock of PGI
shall be cancelled at the Closing, by virtue of the Merger, with no obligation
or liability to any holder thereof as a result of such cancellation. Except as
set forth on Schedule 6.6(a), (i) there are no existing subscriptions, warrants,
rights, options, calls, contacts, understandings, commitments, restrictions or
arrangements of any character whatsoever, or agreements to grant the same to
which PGI is a party or is otherwise bound, relating to the issuance, sale,
delivery or transfer, or voting of any PGI Common Stock, Options or warrants,
and (ii) PGI does not have any outstanding securities convertible into or
exchangeable or exercisable for any shares of capital stock of PGI or any
subscriptions, warrants, rights, options, calls, contracts, understandings,
commitments, restrictions or arrangements of any character whatsoever with
respect to the issuance, sale or delivery of such convertible securities.
(b) The outstanding shares of PGI Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The
issuance and sale of all such shares have been in compliance in all material
respects with all applicable federal and state securities laws.
(c) All of the outstanding equity securities and other
securities of each of PGW and Avalon are owned of record and beneficially by PGI
free and clear of all liens and Encumbrances. Immediately prior to the Closing,
and without any act or involvement of AMS, PGI shall have sold all of the
capital stock of Avalon to a third party in the Avalon Divestiture. There are no
warrants, options, convertible or exchangeable securities, preemptive rights or
agreements relating to the issuance, sale, or transfer of any equity securities
or other securities of PGW or Avalon. Neither PGI nor PGW owns, or has any
agreements to acquire, any equity securities or other securities of any person
(other than PGW or Avalon) or any direct or indirect equity or ownership
interest in any other business.
6.7 NO DEFAULTS OR CONFLICTS. Other than as described in Schedule
6.7, separately as to each entity, the execution and delivery of this Agreement
by PGI and the Principal Shareholders and the consummation of the transactions
contemplated hereby do not and, on the Closing Date, will not
(a) result in any violation of the charter or by-laws of PGI
or PGW,
(b) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event which, with the giving of notice
or lapse of time, or both, would constitute a default) under, or result in the
acceleration of performance under, or termination or cancellation or in a right
of termination or cancellation of, or result in being declared void, voidable,
without further binding effect or subject to amendment or modification of any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, deed of trust, license, agreement, contract or any other instrument or
commitment or obligation to which PGI or PGW is a party, or by which PGI, PGW,
or any assets or properties of PGI or PGW, may be bound or affected; no such
violation, conflict, breach, termination, cancellation or default could
reasonably be expected to have a Material Adverse Effect, unless otherwise
indicated on Schedule 6.7,
(c) result in the creation of any Encumbrance upon the PGI
Common Stock or any of the capital stock, assets or properties of PGI or PGW,
(d) violate any order, writ, injunction, decree, judgment,
ruling, statute, rule or regulation applicable to PGI, PGW, or any assets or
properties of PGI or PGW, which violation could be reasonably likely to have a
Material Adverse Effect, or
(e) be reasonably likely to have a Material Adverse Effect on
any Permit (as defined below) that is required for the conduct of the business
of PGI or PGW.
6.8 NO GOVERNMENTAL AUTHORIZATION OR CONSENTS REQUIRED. Other than
as described on Schedule 6.8, as of the Closing Date, no authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority will be required to be obtained or made in connection with the due
execution, delivery and performance by PGI and the Principal Shareholders of
this Agreement and the consummation of the transactions contemplated hereby in
compliance with all applicable laws, including, without limitation, the
continued operation of PGI's and PGW's business and properties after the Closing
in a manner consistent with their present operation.
6.9 PERMITS. Schedule 6.9 describes, separately as to PGI and PGW,
and AMS has been furnished access to, all Federal, state, local and foreign
governmental approvals, consents, authorities (including, without limitation,
all easements, rights of way and similar authorities), authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
(including, but not limited to, all of the forgoing pursuant to any
Environmental Law) and pending applications therefor of, by, or with any
Governmental Authority which are material to PGI or PGW or the operation of
their business (collectively, "Permits"). To the Knowledge of PGI, those Permits
are (a) the only Permits material to the conduct of the business of PGI and PGW
as presently conducted and (b) all Permits necessary for it to conduct its
business as presently conducted, and there has occurred no default under any
Permit, except for the absence of Permits and for defaults under Permits which
could not reasonably likely to have a Material Adverse Effect. There are no
proceedings pending or, to the knowledge of PGI, threatened relating to the
suspension, revocation or modification of any Permit, except such as could not
be reasonably likely to have a Material Adverse Effect. No registration,
application, notice, consent, order or other action is required by virtue of the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby to avoid the loss or violation of any license, permit or
other authorization.
6.10 NO ACTIONS, SUITS OR PROCEEDINGS.
(a) Except as disclosed on Schedule 6.10 separately as to each
entity, there is no action, suit, arbitration, administrative or other
proceeding or investigation by a Governmental Authority pending against, or, to
the Knowledge of PGI, threatened against PGI or any of its Subsidiaries which
questions the validity or legality of this Agreement or of the transactions
contemplated hereby, which seeks to prevent the consummation of the transactions
contemplated hereby or which would materially and adversely affect the Principal
Shareholders' ability to perform their obligations hereunder, or which could be
reasonably likely to have a Material Adverse Effect.
(b) PGI or PGW has timely provided all notices required to be
given to its insurance carriers to preserve coverage of claims under such
policies, and (i) except as described on Schedule 6.10(b), neither PGI nor PGW,
as insureds, has received notice that any of the insurance carriers identified
in such insurance policies have denied coverage in respect of any claims, and
(ii) to the Knowledge of PGI, other than with respect to the Borders Claim, such
insurance policies provide full and adequate coverage with respect to claims in
the ordinary course of business subject to the terms and of conditions of such
insurance policies.
6.11 CONTRACTS. Schedule 6.11 lists, separately as to each entity,
and AMS has been furnished access to, all written and oral agreements, contracts
and commitments relating to the business of PGI and PGW not otherwise listed in
any other Schedule hereto with an annual payment by PGI or PGW, or annual gross
margins to PGI or PGW, in excess of $100,000 individually or which cannot be
canceled upon ninety days' notice in the case of contracts requiring payments by
PGI or PGW (other than purchase orders entered into in the ordinary course of
business at standard prices) and any (i) agreements under which PGI or PGW has
limited or restricted its right to compete with any person in any respect; (ii)
contract or agreement to indemnify any person or guaranty any obligation for any
liability or indebtedness, contingent or otherwise, of a third party (other than
pursuant to contracts entered into with customers and facility lessors in the
ordinary course of business and on customary terms); (iii) joint venture
agreement; (iv) contract relating to the acquisition by PGI or PGW of any
operating business or the capital stock of any Person; or (v) consulting
contracts (or any oral consulting contracts) of PGI or PGW; PROVIDED, HOWEVER,
that the publisher contracts of PGW to which AMS has not been provided access as
of the date hereof have annual gross margins to PGW of less than $900,000 in the
aggregate. With respect to such publisher contracts, PGI and the Principal
Shareholders represent and warrant that the terms thereof shall be as set forth
on Schedule 6.11 hereto, and that no such contract shall contain a prohibition
on change of control triggered by the transactions contemplated hereby or shall
contain any other unusual termination rights or other provisions materially
adverse to PGW. With respect to all contracts to which PGI or PGW is a party,
neither PGI nor PGW is in breach thereof or default thereunder and there does
not exist under any such contract any event which, with the giving of notice or
the lapse of time, would constitute such a breach or default, except for such
breaches, defaults and events as to which requisite waivers or consents have
been, or will be, obtained (including such waivers and consents as set forth in
Schedule 6.9) or which, in the aggregate, could not be reasonably likely to have
a Material Adverse Effect. To the Knowledge of PGI, no party to any such
agreement is or, with notice, the lapse of time or both, will be in default
under any provision of any such agreement. PGI and PGW have, or at Closing will
have, obtained all consents and approvals required to be obtained by PGI or PGW
under any contract, agreement or commitment referred to on Schedule 6.11 in
connection with the consummation of the transactions contemplated by this
Agreement. Neither PGI nor PGW is a party to or bound by any contract or
arrangement which restricts its freedom to carry on its business in the book
trade in any part of the world in such a manner as it may think fit, other than
as relates to provisions in any given distribution agreement that restrict the
freedom of PGW (or withhold certain rights from PGW) with respect to the
products subject to such agreement. Neither PGI nor PGW has outstanding any bid
or tender or sale or service proposal which is substantial in relation to its
business or which, if accepted, would be likely to result in a loss which would
be material to PGI or PGW. Neither PGI nor PGW has reason to believe that there
is a contract to which it is a party which by reason of the transactions
contemplated hereby gives any other contracting party the right to terminate any
contract or to impose any additional obligation by virtue of such transaction.
For purposes of this Agreement, "contract" includes any understanding,
arrangement or commitment however described.
6.12 REAL PROPERTY; LEASES.
(a) Neither PGI nor PGW owns, or has owned, real property.
(b) Schedule 6.12(b) lists, separately as to each entity, all
real property leases and any and all amendments thereto relating to the leased
real property to which PGI or PGW is a party or is bound, all premises occupied
by PGI or PGW under rental arrangements without leases (including in each case
the amount of rent and the type of occupancy), and all contracts to which PGI or
PGW is a party for the sale or purchase of real property (the "Leases"). Except
as disclosed in Schedule 6.12(b), (i) PGI or PGW has good and valid title to the
leasehold estates conveyed under the Leases, free and clear of all liens,
encumbrances, easements, rights of way, building or use restrictions,
exceptions, reservations, or limitations that interfere with or impair in any
material respect the present and continued use thereof in the usual and normal
conduct of the business of PGI and PGW, (ii) each of the Leases is in full force
and effect and is enforceable against the landlord which is party thereto in
accordance with its terms, and PGI and PGW has in all respects performed all the
obligations required to be performed by it to the date hereof under the Leases
and possesses and quietly enjoys said properties under the Leases, (iii) there
are no subleases under the Leases and none of the Leases has been assigned, (iv)
no notices of default or notices of termination have been issued with respect to
the Leases which have not been withdrawn or cancelled, (v) neither PGI nor PGW
is in default under any Lease, except for such defaults as would not be
reasonably expected to give rise to a right of termination, cancellation,
modification or acceleration of any right under the Leases or otherwise that
would not be reasonably likely to have a Material Adverse Effect, (vi) neither
PGI nor PGW has received written or, to the Knowledge of PGI, oral notice of (A)
a proceeding in eminent domain or other similar proceeding affecting the leased
real property and there are no such pending or threatened proceedings, in each
case, where such violation or proceeding could individually or in the aggregate,
be reasonably likely to have a Material Adverse Effect, or (B) any violation of
any applicable regulation, ordinance or other law, order, regulation or
requirement relating to the use and operation of the leased real property and
PGI has no Knowledge of such violation, and (vii) PGI and PGW have, or at
closing will have, obtained all consents and approvals required to be obtained
by PGI or PGW under any Lease in connection with the consummation of the
transactions contemplated by this Agreement.
6.13 PERSONAL PROPERTY.
(a) Schedule 6.13(a) sets forth the most current available
register of personal property owned or leased by PGI and PGW, set forth
separately as to each such entity, as of a recent date indicating the current
aggregate depreciated book value of owned items and the terms and annual lease
payments of leased items. All of the personal property of PGI and PGW is in good
operating condition and is reasonable and warranted in the present course of the
business conducted by PGI and PGW, ordinary wear and tear excepted, and except
as would not be reasonably likely to have a Material Adverse Effect.
(b) Except for (i) liens for current Taxes not yet due and
payable or Taxes, the validity of which is being contested in good faith by
appropriate proceedings; (ii) liens listed on Schedule 6.13(b) attached hereto;
and (iii) such other imperfections of title, liens, charges, Encumbrances or
other security interests which, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, PGI has good, valid and marketable
title to all of the personal properties and tangible assets which it purports to
own (including those listed on Schedule 6.13(a)), free and clear of all liens
and Encumbrances of any nature whatsoever.
6.14 INTELLECTUAL PROPERTY.
(a) Schedule 6.14 sets forth, separately as to each entity, a
complete list of (i) all patents of any description and pending applications
therefor, all registrations of trademarks and of other marks, all registrations
of trade names, labels or other trade rights, all pending applications for any
such registrations or entries of the foregoing, all copyright registrations
(including, for Computer Software (as defined below) and pending applications
therefor, all other copyrights, trademarks, and other marks, trade names, trade
secrets, inventions, know-how, databases, customer lists and other trade rights,
and all other inventions, formulae and designs, whether or not patentable
(collectively, "Intellectual Properties"), in the case of each of the foregoing,
whether U.S. or foreign, all to the extent that the foregoing items are material
to the business of PGI and PGW (except that all patents and patent applications,
and trademark and copyright registrations, whether or not material, are also
included) and are owned in whole or in part or used by PGI and PGW, and all
licenses relating thereto other than the Licenses (as hereinafter defined); and
(ii) all material computer software (including, without limitation, all computer
programs object code, source code, user interface, data bases and documentation)
owned in whole or in part or used by PGI and PGW (the "Computer Software"), and
all licenses relating thereto (other than licenses for commercially available
software for personal computers) (the "Licenses").
(b) Neither PGI nor PGW, nor any third party with which PGI or
PGW has a contract, has received notice of, and to the Knowledge of PGI, neither
PGI nor PGW is infringing upon, or otherwise violating, and none has violated,
the intellectual property or other proprietary rights of any third party.
Without limiting the generality of the foregoing, to the Knowledge of PGI, no
trademark, service xxxx, trade name or corporate name used by PGI or PGW,
infringes or dilutes the trademark, service xxxx, corporate name or trade name
of any person. There exists no event, condition or occurrence which, with the
giving of notice or lapse of time, or both, would constitute a breach or default
by PGI or PGW under any agreement granting PGI or PGW rights to Intellectual
Properties. No party to any agreement granting PGI or PGW rights to Intellectual
Properties has given PGI or PGW notice of its intention to cancel, terminate or
fail to renew any such agreement.
(c) There is no action, suit or proceeding pending, nor to the
Knowledge of PGI, has any litigation been overtly threatened in writing, against
any third party concerning a claim that such third party has infringed any
trademark, service xxxx, trade name, copyright or patent owned by PGI or PGW.
(d) No Person other than PGI and PGW has an ownership interest
in, or a right to receive a royalty or similar payment with respect to, any of
the Intellectual Properties or Computer Software listed on Schedule 6.14 hereto,
except as noted in such Schedule. No intellectual property or other proprietary
rights other than the Intellectual Properties, the Computer Software and the
Licenses are required to enable PGI and PGW to conduct its business as now
conducted. PGI or PGW has good title to, or is licensed to use, all of the
Intellectual Properties listed, separately for each such entity, on Schedule
6.14, free and clear of any Encumbrance or royalty or other payment requirements
of any nature whatsoever, which rights are freely assignable by PGI or PGW to
any person without payment, consent of any person or other restriction except as
noted in such Schedule. The Intellectual Properties are valid and enforceable,
and none of the Intellectual Properties has been canceled, abandoned, licensed,
sublicensed, or assigned, nor is there any obligation to grant any license,
sublicense, or assignment, by PGI or PGW. Either PGI or PGW is listed in the
records of the appropriate U.S. and foreign governmental agency as the sole and
exclusive owner of record for each registration, grant and application listed in
Schedule 6.14.
(e) Details of all confidentiality agreements which restrict
the free use or disclosure of any proprietary information of PGI or PGW are set
forth on Schedule 6.14(e). Except as subject to express obligations of
confidentiality, neither PGI nor PGW has disclosed nor is it obliged to disclose
any proprietary information of PGI or PGW to any third party.
(f) None of PGI's or PGW's records, systems, controls, data or
information are recorded, stored, maintained, operated or otherwise wholly or
partly dependent on or held by any means (including any electronic, mechanical
or photographic process where computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of PGI or PGW.
(g) All Computer Software which is not the subject of a
written license from a third party was either (i) written or created by the
employees of PGI or PGW in the ordinary course of their duties or (ii) written
for PGI or PGW by a third party invoiced and paid for by PGI or PGW and all
intellectual property rights in such Computer Software are vested in PGI or PGW.
To the knowledge of PGI, no Computer Software is or has been affected by any
virus or other extraneously induced malfunction or contamination in the two year
period prior to completion of this agreement and PGI operates reasonable
controls to avoid such infections or contamination. It is not necessary to incur
any further expenditure on the modification, development, expansion or (save for
replacement in the normal course of business) replacement of the Computer
Software in order for PGI and PGW to carry on their business as presently
conducted. Neither PGI nor PGW has received any report from any consultant or
third party recommending the incurring of such expenditure.
(h) All computer systems, excluding Computer Software, used by
PGI or PGW are owned and operated by, and are under the control of, PGI or PGW
and are not wholly or partly dependent on any facilities which are not under the
ownership, operation or control of PGI or PGW. Immediately following the
completion of the transactions contemplated hereby, no action will be necessary
to enable such systems to continue to be used by PGI and PGW to the same extent
and in the same manner as they have been used prior to the date hereof.
(i) Except as described on Schedule 6.14(j), (i) neither PGI
nor PGW utilizes, or has any agreement with, any non-employee programmers or
developers and (ii) to the Knowledge of PGI, no programmer or developer of PGI
or PGW has expressed to PGI or PGW an intent to cease providing services to PGI
or PGW (as an employee or an independent contractor) on substantially the same
terms as he or she currently provides such services.
(j) Except as described on Schedule 6.14(k), no material
hardware or software renewals, release/version upgrades or maintenance events
will, to the Knowledge of PGI, be required in the 24-month period from the date
hereof in order for PGI and PGW to continue to operate in the ordinary course.
(k) Except as described on Schedule 6.14(k), PGI and PGW have
adequate back-up capabilities and recovery plans to reasonably assure continued
operations in the event of fire or other disaster.
6.15 EMPLOYMENT MATTERS. Part A of Schedule 6.15 lists, separately
as to each entity, all employment contracts, including collective bargaining
agreements, to which PGI or PGW is a party or by which it is bound, and, with
respect to all such contracts, neither PGI nor PGW is in breach thereof or
default thereunder and to the Knowledge of PGI there does not exist under any
such contract any event which, with the giving of notice or the lapse of time,
would constitute such a breach or default by PGI or PGW, except for such
breaches, defaults and events which could not be reasonably likely to have a
Material Adverse Effect. Except as set forth in Part B of Schedule 6.15, to the
Knowledge of PGI, there are not in existence or threatened any (a) grievance or
arbitration proceedings arising out of agreements to which PGI or PGW is a
party, including any collective bargaining agreements to which PGI or PGW is a
party, (b) unfair labor practices or employment-related claims, including but
not limited to employment discrimination charges, complaints or claims against
PGI or PGW, in each case, before the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other government agency or court or
other tribunal, which could be reasonably likely to have a Material Adverse
Effect, (c) strikes, work stoppages, work slowdowns, lockouts or other material
labor disturbances involving employees of PGI or PGW, and there have not been
any since January 1, 2000, or (d) representation or certification proceedings or
petitions seeking a representation or certification proceeding involving the
employees of PGI or PGW. Each of PGI and PGW is and has been in substantial
compliance with all notice and other requirements under the Worker Adjustment
and Retraining Notification Act ("WARN Act") or similar state or provincial
statute.
6.16 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except (1) for any noncompliance specifically covered by
any other representation or warranty contained in this Article VI (for example,
Taxes, employee matters, Employee Plans and environmental compliance) (it being
the intention of the parties that any such noncompliance will be governed, if at
all, by such other representations and warranties), (2) as set forth in Schedule
6.16, and (3) for such exceptions as would not collectively be reasonably likely
to have a Material Adverse Effect:
(i) Each of PGI and PGW is, and at all times since the
Balance Sheet Date, has been, in compliance with all applicable statutes,
regulations, orders, ordinances and other laws of the United States of America,
all state, provincial, local and foreign governments and other governmental
bodies and authorities and agencies of any of the foregoing to which they are
subject (each a "Legal Requirement" and collectively, "Legal Requirements");
(ii) no event has occurred or circumstances exists that
(with or without notice or lapse of time) (A) would constitute or result in a
violation by PGI or PGW of, or a failure on the part of any of PGI or PGW to
comply with, any Legal Requirement or (B) would give rise to any obligation on
the part of PGI or PGW to undertake, or to bear all or any material portion of
the cost of, any remedial action under any Legal Requirement;
(iii) neither PGI nor PGW has received any notice or
other communication from any Governmental Authority agency (A) regarding any
actual or alleged violation of, or failure to comply with, any Legal Requirement
by any of them, (B) regarding any actual or alleged obligation on the part of
any of them to undertake, or to bear all or any portion of the cost of, any
remedial action under any Legal Requirement or (C) that any of them is subject
to any material injunction, writ, judgment, order or decree from a Governmental
Authority.
(b) To the Knowledge of PGI, there is not presently pending
any proceeding, hearing or investigation with respect to the adoption of
amendments or modifications to any Legal Requirements which, if adopted, would
be reasonably likely to have a Material Adverse Effect. PGI and PGW have
obtained all material Permits which are required in connection with the
operations of their business as presently conducted. All such Permits are in
full force and effect and no proceedings for the suspension or cancellation of
any such Permit is pending or, to the Knowledge of PGI, threatened. Neither PGI,
nor PGW, nor any PGI Personnel, nor any Principal Shareholder has made any
payment of funds of PGI or PGW prohibited by law, and no funds of PGI or PGW
have been set aside to be used for any payment prohibited by law.
6.17 ENVIRONMENTAL COMPLIANCE. Except as set forth on Schedule 6.17
and except as could not, in the aggregate, be reasonably likely to have a
Material Adverse Effect: (a) each of PGI and PGW is in compliance with all
applicable Environmental Laws; (b) each of PGI and PGW has obtained and is in
compliance with all necessary permits or authorizations that are required under
Environmental Laws; (c) there has been no Release at any of the properties owned
or operated by PGI or PGW; (d) no Environmental Actions have been asserted
against PGI or PGW nor does PGI have Knowledge or written notice of any
threatened or pending Environmental Action against PGI or PGW; (e) to the
Knowledge of PGI, no Environmental Actions have been asserted or threatened to
be asserted against PGI or PGW for any Release at any facilities that may have
received Hazardous Materials generated by PGI or PGW; (f) PGI has furnished or
given AMS access to all environmental site assessments conducted by, or at the
expense of, PGI and PGW (all of which are listed on Schedule 6.17), and all
documents in the possession, custody or control of PGI or PGW, relating to
environmental conditions at any property currently or formerly owned or operated
by PGI or PGW; and (g) no underground or aboveground storage tanks exist at any
of the properties owned by PGI or PGW.
6.18 TAXES.
(a) Except as set forth on Schedule 6.18(a): (i) all Tax
Returns of PGI and its Subsidiaries required by law to be filed have been timely
filed, such returns are true, correct and complete, and all Taxes required to be
shown on such returns as due and payable have been paid; (ii) PGI and its
Subsidiaries have timely paid all Taxes not required to be shown on Tax Returns;
and (iii) PGI and its Subsidiaries have established on their books reserves or
accruals adequate in accordance with GAAP in respect of any income and corporate
franchise Tax liability for any years of PGI or such Subsidiaries not finally
determined or with respect to which the applicable statute of limitations has
not expired. PGI has provided AMS with access to complete and accurate copies of
all Tax Returns filed by PGI and its Subsidiaries for all periods for which the
statute of limitations is still open. PGI and its Subsidiaries have no liability
for Taxes except to the extent reflected on the Balance Sheet or incurred in the
ordinary course of business after the Balance Sheet Date. Subsequent to the
Balance Sheet Date, PGI and its Subsidiaries have not paid any Taxes
attributable to periods prior thereto that were not reflected on the Balance
Sheet Date.
(b) Except as set forth on Schedule 6.18(b), PGI and its
Subsidiaries have complied in all material respects with all applicable laws,
rules and regulations relating to information reporting with respect to payments
made to third parties and the withholding or collection of and payment of
withheld or collected Taxes and have timely withheld from employee wages and
other payments and paid over or remitted to the proper Governmental Authority
all amounts required to be so withheld or collected and paid over or remitted.
(c) Except as set forth on Schedule 6.18(c): (i) no
Governmental Authority has proposed, asserted or assessed or, to the Knowledge
of PGI, threatened in writing to propose or assert or assess, any deficiency,
assessment or claim with respect to Taxes which has not been paid or otherwise
settled and, to the Knowledge of PGI, there would be no proper basis for any
such deficiency, assessment or claim; and (ii) no federal, state, provincial,
local or foreign audits, examinations, investigations or other administrative
proceedings or court proceedings are presently pending or, to the Knowledge of
PGI, threatened in writing with regard to any Taxes owing or allegedly owing by,
or Tax Returns filed by or on behalf of, PGI or its Subsidiaries.
(d) Except as set forth on Schedule 6.18(d), neither PGI nor
any of its Subsidiaries has in effect, or has been requested to make, any waiver
or extension of any statute of limitations with respect to Taxes.
(e) PGI is not a United States real property holding
corporation within the meaning of Section 897 of the Code.
(f) No property of PGI or any of its Subsidiaries is subject
to a tax benefit transfer lease subject to the provisions of former Section
168(f)(8) of the Code.
(g) Neither PGI nor any of its Subsidiaries has filed a
consent or made an election under Section 341(f) of the Code or any comparable
provision of state law.
(h) Neither PGI nor any of its Subsidiaries has agreed to or
is required to make any adjustment under Section 481(a) of the Code.
(i) Except as set forth on Schedule 6.18(i), there are no
requests for rulings in respect of any Tax pending by PGI or its Subsidiaries
with any Governmental Authority; and neither PGI nor its Subsidiaries have
received any written ruling of a Governmental Authority relating to Taxes or
entered into any written and legally binding agreement with a Governmental
Authority relating to Taxes.
(j) Neither PGI nor any of its Subsidiaries has made any
payments or is obligated to make any payments that will not be deductible under
Section 280G of the Code and none of the transactions contemplated by this
Agreement will require AMS or any of AMS's Affiliates to make any payment that
will not be deductible under Section 280G of the Code.
(k) Neither PGI nor any of its Subsidiaries have any liability
to any other party under any Tax sharing agreement or Tax indemnity agreement.
(l) No election under Section 338 of the Code has been filed
with respect to PGI or any of its Subsidiaries.
(m) Since the Balance Sheet Date, neither PGI nor any of its
Subsidiaries has changed any Tax election or any Tax accounting method.
(n) Except as set forth in Schedule 6.18(n), Canadian federal
and provincial income tax assessments have been issued to PGI and its
Subsidiaries covering all fiscal periods ended prior to the Closing.
(o) Schedule 6.18(o) accurately sets out, for purposes of the
Income Tax Act (Canada), the adjusted cost base of the capital properties held
be PGI and its Subsidiaries in Canada.
(p) PGI and its Subsidiaries are duly registered for purposes
of all Canadian Taxes applicable to the activities thereof.
(q) Except as set forth in Schedule 6.18(q), neither PGI nor
any of its Subsidiaries owns, or within the preceding 12 months has owned, any
"taxable Canadian property" as defined in the INCOME TAX ACT (CANADA).
(r) PGI and its Subsidiaries have obtained all required
certificates, have sent all required notices and have paid all non resident
Taxes in Canada in respect of a disposition of any "taxable Canadian property",
as defined in the INCOME TAX ACT (CANADA).
(s) No debt or other obligation of PGI or its Subsidiaries has
been or will be settled or extinguished on or prior the Closing Date such that
the provisions of Section 80 of the INCOME TAX ACT (CANADA) applies or would
apply thereto.
All references in this Section 6.18 to PGI and its Subsidiaries
(collective or individually) shall be deemed to include any predecessors thereto
(including any entities that have merged into PGI or any of its Subsidiaries).
6.19 EMPLOYEE BENEFITS.
(a) Set forth on Schedule 6.19(a) hereto, separately as to
each entity, is a complete and correct list of (i) any pension, retirement,
savings, profit sharing, deferred compensation, stock option, stock purchase,
restricted stock, stock award, stock appreciation, phantom stock, bonus or
incentive, severance pay, medical, dental, health, disability, sick pay, life,
death benefit, group insurance, cafeteria, flexible spending, dependent care,
vacation pay, holiday pay, fringe benefit, workers compensation, unemployment,
employee loan, educational assistance, and any other employee benefit plan,
arrangement, contract, agreement, policy or commitment, including, without
limitation, any "employee benefit plan" as defined in Section 3(3) of ERISA, and
(ii) any employment, indemnification, consulting, severance or change-in-control
agreement, in each case whether or not written and (i) which is sponsored or
maintained by PGI or any of its Subsidiaries on behalf of current or former
employees, consultants or directors of PGI or any of its Subsidiaries or their
beneficiaries or dependents, or (ii) by which PGI or any of its Subsidiaries is
bound or with respect to which PGI or any of its Subsidiaries has any obligation
to make payments or contributions or may otherwise have any liability (the
"Employee Plans").
(b) With respect to the Employee Plans, PGI will, no later
than January 24, 2002, have delivered true and complete copies of (1) current
plan documents and plan amendments, or any and all other documents (or written
summaries for any unwritten Employee Plans) that establish or describe the
existence of the plan, trust, arrangement, contract, policy or commitment; (2)
current summary plan descriptions and summaries of material modifications; (3)
the most recent tax qualified determination letters, if any, received from or
applications pending with the Internal Revenue Service; (4) the three most
recent Form 5500 Annual Reports, including related Schedules and audited
financial statements and opinions of independent certified public accountants;
(5) with respect to each Employee Plan that is a defined contribution plan, the
most recent annual and quarterly or monthly valuations; (6) with respect to each
Employee Plan that is a "single-employer plan" within the meaning of Section
4001(a)(15) of ERISA (a "Pension Plan"), a copy of the most recent actuarial
valuation report; (7) the most recent nondiscrimination testing results under
Sections 401(a)(4), 401(k) and 410(b) of the Code, (8) any employee handbook
applicable to the employees of PGI or any of its Subsidiaries and (9) with
respect to each Employee Plan for which there is a Legal Requirement under the
laws of Canada to make filings or reports, a copy of the most recent filing or
report, as applicable.
(c) Each Employee Plan has at all times been operated and
administered in compliance in all material respects with its terms, the
applicable requirements of ERISA and the Code and all other applicable laws
(including regulations and rulings thereunder) of the United States or any
foreign jurisdiction, including their respective political subdivisions. Each
Employee Plan that is intended to be tax qualified under Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service stating that it is so qualified and that any trust associated with the
Plan is tax exempt under Section 501(a) of the Code, and to the Knowledge of
PGI, there is no reason why the qualified status of any such Employee Plan or
trust would be denied or revoked, whether retroactively or prospectively. All
amendments to the Employee Plans that were required to be made through the date
hereof and the Closing Date to maintain the continued qualified status of such
Employee Plans under Section 401(a) of the Code have been or will be made by the
Closing Date. Neither PGI nor PGW is party to a Registered Pensions Plan, as
such term is defined in the INCOME TAX ACT (CANADA).
(d) No disputes, lawsuits, claims (other than routine claims
for benefits), investigations, audits or complaints to, or by, any person or
governmental entity have been filed or are pending or, to the Knowledge of PGI,
threatened with respect to the Employee Plans of PGI or any of its Subsidiaries
in connection with any Employee Plan or the fiduciaries or administrators
thereof, and to the Knowledge of PGI no state of facts or conditions exist which
could be expected to subject PGI or any of its Subsidiaries to any liability
(other than routine claims for benefits) under the terms of the Employee Plan or
applicable law. With respect to each Employee Plan there has not occurred, and
no person or entity is contractually bound to enter into, any nonexempt
"prohibited transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA or other transaction that would result in any tax or
penalty being imposed under Section 4975 of the Code or Section 409 or 502(i) of
ERISA on PGI, any of its Subsidiaries or any person or entity with respect to
which PGI or any of its Subsidiaries has an obligation to indemnify.
(e) None of PGI, its Subsidiaries or any other entity that is
considered one employer with PGI or any of its Subsidiaries under Section 4001
of ERISA or Section 414 of the Code (an "ERISA Affiliate") has at any time
maintained or contributed to or incurred any liability, contingent or otherwise,
with respect to any plan subject to the terms of Title IV of ERISA or Section
412 of the Code.
(f) No Employee Plan is a multiemployer plan (within the
meaning of Section 3(37)(A) of ERISA) and no Employee Plan is a multiple
employer plan (as defined in Section 413 of the Code).
(g) To the extent applicable, all contributions or payments
made or deemed to have been made with respect to each Employee Plan that is a
deferred compensation plan, are presently, and have been during the years to
which they relate, fully deductible pursuant to Section 404 of the Code. As of
the Closing Date, all payments of outstanding contributions, due on or prior to
that date, including minimum contributions, premiums, and funding obligations
imposed by the terms of an Employee Plan or by any law or government agency
shall have been made with respect to each Employee Plan. All contributions to
and payments with respect to or under the Employee Plans that are required to be
made with respect to periods ending on or before the Closing Date have been made
or accrued before the Closing Date by PGI and its Subsidiaries in accordance
with the appropriate plan documents, financial statement, actuarial report,
collective bargaining agreements or insurance contracts or arrangements. With
respect to each Employee Plan that is an "employee welfare benefit plan" under
Section 3(1) of ERISA that is partially or fully funded through a trust, all tax
deductions claimed by PGI and its Subsidiaries relating to any such trust are
allowable, and all tax returns and other governmental filings required to be
filed with respect to any such trust, whether by PGI or any of its Subsidiaries
or the trust, have been made in a timely manner.
(h) No Employee Plan provides medical, life, death or other
welfare benefits (whether or not insured) to retirees or other terminated
employees of PGI or any of its Subsidiaries (other than coverage mandated by
Section 601 of ERISA, Section 4980B of the Code or any similar federal, state,
provincial or local law). No event has occurred and no condition exists with
respect to any plan of PGI or any of its Subsidiaries or an ERISA Affiliate that
is a "group health plan" within the meaning of Section 4980B(g) of the Code
which could subject PGI or any of its Subsidiaries, directly or indirectly, to
any liability under Section 4980B of the Code.
(i) Except as set forth in Schedule 6.19(i), the execution of,
and performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any plan, policy, arrangement or agreement or any
trust or loan that will or may (x) result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any current or former employee, director or independent contractor of PGI or
any of its Subsidiaries or (y) terminate or modify or give a third party a right
to terminate or modify the provisions or terms of any Employee Plan. As a direct
or indirect result of the consummation of the transactions contemplated hereby,
neither AMS nor PGI nor any of its Subsidiaries will be obligated to make a
payment to an individual that would not be deductible as a result of the
application of Section 280G of the Code or applicable law.
(j) Neither PGI nor any of its Subsidiaries has communicated
to present or former employees of PGI or any of its Subsidiaries or formally
adopted or authorized any additional Employee Plan or any change in or
termination of any existing Employee Plan. No Employee Plan covers employees
other than employees of PGI and its Subsidiaries.
(k) Except as described on Schedule 6.19(k), neither PGI nor
PGW shall, from and after the Closing Date, have any commitments, liabilities or
obligations of any kind relating to current or former Avalon employees under any
Employee Plan.
6.20 NO OTHER BROKER. Other than as set forth on Schedule 6.20, no
broker, finder or similar intermediary has acted for, or on behalf of, PGI or
any of its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is
entitled to any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or understanding with
PGI or any of its Subsidiaries or any action taken by it.
6.21 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
Balance Sheet, or thereafter earned and recorded by PGI and PGW, (i) have arisen
only from bona fide transactions entered into in the ordinary course of business
of PGI and PGW and (ii) except with respect to accounts receivable that become
uncollectible as a result of the bankruptcy or insolvency of the relevant
account-debtor of PGI or PGW following the Closing Date, such accounts
receivable have been collected or (based only upon information available at the
date hereof) are reasonably likely to be collectible in the ordinary course of
PGI's and PGW's business at the aggregate gross recorded amounts thereof less,
in the case of accounts receivable reflected on the Balance Sheet, the aggregate
allowance for uncollectible accounts, returns and trade allowances set forth
therein, and in the case of accounts receivable thereafter recorded, an
allowance for uncollectible accounts, returns and trade allowances recorded in a
manner consistent with the reserve set forth in the Balance Sheet.
6.22 MATERIALS HELD AS BAILEE. The materials held by PGW as bailee
reflected in PGW's report of "inventory on hand" at December 31, 2001, a copy of
which is attached hereto as Annex 6.22, in the aggregate with respect to each
agreement with a publisher, (i) accurately reflect such materials as actually
held by PGW as bailee at December 31, 2001 and (ii) constitute all materials
required (consistent with shrinkage allowances) to be held by PGW as bailee at
December 31, 2001. The materials held by PGW as bailee at the Closing Date will
constitute all materials required (consistent with shrinkage allowances) to be
held by PGW as bailee at the Closing Date under agreements with publishers.
6.23 TRANSACTIONS WITH CERTAIN PERSONS. Other than debt or equity
investments by Xxxxxxx Xxxxxx (a Director of PGI and PGW) and his Affiliates and
Xxxxxxx Xxxxxxxxx (a Director of PGI and PGW) and his Affiliates, and except as
disclosed on Schedule 6.23 hereto, separately as to each entity, none of the
Principal Shareholders or any present or former officer, director or employee of
PGI, PGW or any Affiliate thereof is presently a party to any transaction with
PGI or PGW relating to the business of PGI and PGW, including, without
limitation, any contract, agreement or other arrangement (i) providing for the
furnishing of services by, (ii) providing for the rental of real or personal
property from, or (iii) otherwise requiring payments to (other than services as
officers, directors or employees) any such person or to any Person in which any
such person has a substantial interest as a shareholder, member, officer,
director, trustee or partner. All of the transactions set forth on Schedule 6.23
hereto have been entered into on an arms-length basis and the fees and
compensation payable by PGI or PGW and the other terms with respect thereto are
at or better than prevailing market rates. Except as disclosed on Schedule 6.23
hereto, no Affiliate of PGI or PGW and no Principal Shareholder have any
ownership or stock interest in any other enterprise, firm, corporation (other
than AMS), trust, or any other entity which is engaged in any line or lines of
business which are the same as, or competitive with, the line or lines of
business of PGI and PGW.
6.24 OWNERSHIP, CONDITION AND ADEQUACY OF PGW ASSETS.
Notwithstanding anything in this Agreement to the contrary, the assets of PGW
constitute, and on the Closing Date will constitute, all of the assets that are
necessary to permit the business of PGW to be conducted by AMS in substantially
the manner as it has heretofore been conducted by PGW. Each of these assets is
owned or leased both legally and beneficially by PGW free from any third party
rights, and each of those assets capable of possession is in the possession of
PGW. The assets owned and operated by PGW are in good operating condition and
maintenance, normal wear and tear excepted, and are adequate for the conduct of
the business of PGW as heretofore carried on.
6.25 PRODUCT LIABILITY. Neither PGI nor PGW has manufactured, sold
or provided any product or service which does not in any material respect comply
with all applicable laws, regulations or standards or which is defective (in any
material respect) or dangerous or does not conform in all material respects with
any representation or warranty, express or implied, given in respect to it.
Neither PGI nor PGW has received a prohibition notice, a notice to warn or a
suspension notice under any relevant consumer protection act or equivalent
legislation.
6.26 BOOKS AND RECORDS. The books of account and other financial and
corporate records of PGI and PGW have been maintained in accordance with good
business and accounting practices. The minute books of PGI and PGW now contain,
and on the Closing Date will contain, a true, correct and complete record of all
corporate action taken on or prior to the date hereof, or hereafter taken on or
prior to the Closing Date, at the meetings of shareholders and directors and
committees thereof. All documentary and stock transfer tax stamps required in
connection with the issuance and transfer of the capital stock of PGI and PGW
have been duly affixed for transfer.
6.27 CONSEQUENCES OF ACQUISITION. Neither any Person who now has
business dealings with PGI or PGW nor any management employee of PGI or PGW has
notified PGI or PGW, and each of PGI and PGW has no reasonable basis to believe,
that any such Person would or might cease business dealings or employment with
PGI or PGW after the Closing Date. To the Knowledge of PGI, the attitudes or
actions of customers, suppliers, employees and other persons, taken as a whole,
with regard to PGI and PGW will not be materially and prejudicially affected by
the execution of this Agreement or the consummation of the transactions
contemplated hereby.
6.28 INSURANCE. Schedule 6.28 lists each insurance policy owned or
held by PGI or PGW, separately as to each entity, on the date hereof, and each
insurance policy to which PGI or PGW has been a party, a named or additional
insured, or otherwise the beneficiary of coverage at any time with respect to
(i) any and all occurrences that have taken place, claims that have been made,
and suits that have been brought within the past three years and (ii) each
claims as to which the insurance carrier has denied coverage, expressed a
reservation of rights, or raised a question as to coverage. Additionally, all
policies listed on Schedule 6.28 are valid, outstanding, and in full force and
effect, in the amounts shown on Schedule 6.28, until the termination of the
policy period listed on each respective policy, all premiums with respect
thereto covering all periods up to and including the date hereof have been paid
to the extent due and no notice of cancellation or termination has been received
with respect to any such policy. Except as shown on Schedule 6.28, all pending
and third party liability and workers' compensation claims have been reported to
the appropriate insurer, and none of these insurers has denied coverage or
issued a reservation of rights with respect to such claims. The assets and risks
of PGI and PGW are covered by valid and currently effective insurance policies
in such types and amounts as are consistent with customary practices and
standards of companies engaged in business and operations similar to those of
PGI and PGW. To the Knowledge of PGI, PGI and PGW have sufficient insurance
coverage to cover all current occurrences, claims or lawsuits.
6.29 GRANTS AND ALLOWANCES. Full particulars of all grants,
allowances, aids and subsidies paid or made to PGI or PGW during the last three
years by, and of all outstanding claims by PGI or PGW for any such grant,
allowance, aid or subsidy from, any supranational, national or local authority
or government agency are set out in the Financial Statements and neither PGI nor
PGW has done or failed to do any act or thing which could result, nor will the
consummation of the transactions contemplated hereby result, in all or any part
of such grant, allowance, aid or subsidy becoming repayable or forfeited.
6.30 POWERS OF ATTORNEY. Except as set forth on Schedule 6.30,
neither PGI nor PGW has given any power of attorney or authority (express,
implied or ostensible) which is still outstanding or effective to any person to
enter into any contract or commitment on its behalf.
6.31 DISCLOSURE. To the Knowledge of PGI, no representation or
warranty made by PGI or the Principal Shareholders in this Agreement or in any
document provided or to be provided hereunder contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements and information contained herein or therein, in light of the
circumstances under which they are made, not misleading.
ARTICLE VII
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF
THE PRINCIPAL SHAREHOLDERS AND THE REPRESENTATIVE
Each Principal Shareholder and the Representative, severally but not
jointly, with respect to itself, represents and warrants to AMS as follows:
7.1 AUTHORITY. Such party has all requisite power and authority or,
in the case of any party who is a natural person, all requisite capacity to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated herein, and this Agreement has been duly executed
and delivered by such party pursuant to any necessary authorization and,
assuming this Agreement constitutes a valid and binding obligation of the other
parties hereto, constitutes the legal, valid and binding obligation of such
party enforceable against such party in accordance with its terms, except to the
extent that enforceability thereof may be limited by: (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
from time to time in effect affecting generally the enforcement of creditors'
rights and remedies; and (ii) general principles of equity, including, without
limitation, principles of reasonableness, good faith and fair dealing
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
7.2 TITLE. Such Principal Shareholder is, directly or indirectly,
the record and beneficial owner of the PGI Common Stock set forth opposite such
Principal Shareholder's name on Schedule 7.2 hereto free and clear of any lien,
charge, Encumbrance or other security interest.
7.3 NO VIOLATIONS, ETC. None of such party's execution and delivery
of this Agreement, the consummation of the transactions contemplated herein or
compliance by such party with any of the provisions hereof will (i) result in
the creation of any Encumbrance upon such Principal Shareholder's shares of PGI
Common Stock under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, agreement, or any other instrument
or obligation to which such party is a party or by which such party or Principal
Shareholder's shares of PGI Common Stock may be bound or affected, or otherwise
or (ii) violate any order, writ, injunctions, decree, statute, rule or
regulation applicable to such party or such Principal Shareholder's shares of
PGI Common Stock. Except as disclosed on Schedule 7.3 hereto, no consent,
approval, authorization, order, filing, registration or qualification of or with
any court, governmental authority or third person is required to be obtained by
such party in connection with the execution and delivery by such party of this
Agreement or consummation by such party of the transactions contemplated herein
in the manner contemplated hereby.
7.4 NO OTHER AGREEMENTS TO SELL ASSETS OR BUSINESS. Such Principal
Shareholder has no legal obligation, absolute or contingent, to any other Person
to sell such Principal Shareholder's shares of PGI Common Stock (other than in
connection with the Merger) or otherwise affect the sale of PGI, any Subsidiary
or their assets.
7.5 LITIGATION. There is no action, claim, suit, trial, demand,
arbitration or proceeding pending or, to the knowledge of such party, threatened
by or against or affecting such party or such Principal Shareholder's shares of
PGI Common Stock and, to the knowledge of such party, there is no investigation
pending or threatened against or affecting such party or such Principal
Shareholder's shares of PGI Common Stock, in each case before any Governmental
Authority, that could effect the ability of such party to consummate the
transactions contemplated by this Agreement at the Closing. There are no writs,
decrees, injunctions, judgments, decisions, rulings, awards or orders of any
Governmental Authority outstanding against such Principal Shareholder with
respect to such Principal Shareholder's shares of PGI Common Stock.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF AMS AND MERGER SUB
Each of AMS and Merger Sub, jointly and severally, represents and
warrants to PGI and to each Principal Shareholder that:
8.1 INCORPORATION AND CORPORATE AUTHORITY. Each of AMS and Merger
Sub has been duly incorporated and is validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and each has the
requisite corporate power and authority to conduct its business and to own,
lease, or operate the properties and assets that it purports to own, lease or
operate.
8.2 AUTHORIZATION. Each of AMS and Merger Sub has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to consummate the transactions contemplated herein, and this
Agreement has been duly executed and delivered by such party pursuant to any
necessary authorization and, assuming this Agreement constitutes a valid and
binding obligation of the other parties hereto, constitutes the legal, valid and
binding obligation of each of AMS and Merger Sub, enforceable against each of
AMS and Merger Sub in accordance with its terms, except to the extent that the
enforceability thereof may be limited by: (i) applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws from time to
time in effect affecting generally the enforcement of creditors' rights and
remedies; and (ii) general principles of equity, including, without limitation,
principles of reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in equity or at law).
8.3 NO DEFAULTS OR CONFLICTS. The execution and delivery of this
Agreement by each of AMS and Merger Sub and the consummation of the transactions
contemplated hereby do not and, on the Closing Date, will not
(a) result in any violation of the charter or by-laws of AMS
or Merger Sub; or
(b) violate any order, writ, injunction, decree, judgment,
ruling, statute, rule or regulation applicable to AMS or Merger Sub, or any
assets or properties of AMS or Merger Sub (except for such violation as would
not adversely affect the consummation of the transactions contemplated hereby).
8.4 NO GOVERNMENTAL AUTHORIZATION OR CONSENTS REQUIRED. As of the
Closing Date, no authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority will be required to be obtained or
made by AMS or Merger Sub in connection with the due execution and delivery by
AMS and Merger Sub of this Agreement and the consummation by AMS and Merger Sub
of the transactions as contemplated hereby.
8.5 NO ACTIONS, SUITS OR PROCEEDINGS. There is no action, suit or
proceeding pending or threatened against AMS or Merger Sub, nor, to the
knowledge of AMS, has any litigation been overtly threatened in writing to AMS
or Merger Sub before any Governmental Authority with respect to which there is a
substantial possibility of determination which questions the validity or
legality of this Agreement or of the transactions contemplated hereby or which
seeks to prevent the consummation of the transactions contemplated hereby.
8.6 NO OTHER BROKER. Other than U.S. Bancorp Xxxxx Xxxxxxx, the fees
and expenses of which are payable by AMS, no broker, finder or similar
intermediary has acted for or on behalf of AMS in connection with this Agreement
or the transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with AMS or any action taken by AMS.
ARTICLE IX
COVENANTS
The parties hereto covenant and agree as follows:
9.1 CONDUCT OF BUSINESS. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, PGI
shall, and shall cause PGW to, (i) conduct its business and operations only in
the ordinary course, (ii) maintain in full force and effect the insurance
policies set forth on Schedule 6.28 (or policies providing substantially the
same coverage, copies of which will be made available to AMS), (iii) take all
necessary and prudent action to preserve the assets and properties, wherever
located, which are material to the business of PGI and PGW, (iv) maintain its
books and records in accordance with GAAP (except for the use of straight line
assumptions for returns) and in the manner consistent with past practices and
promptly advise AMS in writing of any material adverse change in the condition
(financial or otherwise) of the assets, liabilities, prospects, earnings or
business (in each case, taken as a whole) of PGI and PGW, (v) not, without AMS's
prior written consent, engage in any action which would require disclosure under
Section 9.2 hereto, (vi) not, without AMS's prior written consent, make any
change in the authorized or outstanding capital stock of PGI or otherwise change
its capitalization, and (vii) use its best efforts to preserve the business
organization of PGI and PGW intact, to continue its operations at its present
levels, to keep available to AMS and the Surviving Corporation the services of
the PGI Personnel and to preserve the goodwill of those suppliers, customers,
creditors and others having business relations with PGI and PGW, and refrain
from any significant organizational or personnel changes with respect thereto;
PROVIDED, HOWEVER, that PGI and PGW may (x) to the extent included in the
projections heretofore provided to AMS, make normal bonus payments to their
officers and employees but not increase executive compensation beyond projected
cost of living increases in the aggregate, in each case consistent with past
practice, and (y) incur expenses which are ordinary and necessary in connection
with the transactions contemplated by this Agreement.
9.2 CONFIDENTIALITY; LIQUIDATED DAMAGES.
(a) AMS agrees to be bound by and comply with the provisions
set forth in the Confidentiality Agreement between the parties dated April 16,
2001, as if such provisions were set forth herein, and such provisions are
hereby incorporated herein by reference. In addition, between the date hereof
and December 31, 2002, neither party shall directly or indirectly solicit or,
without five Business Days prior written notice to the other if an employee of
one party seeks employment with the other, hire any of the employees of any
other party or its Subsidiaries, other than by the negotiation of, and
employment under, the Employment Agreements.
(b) AMS and the Representative (on behalf of PGI and the
Principal Shareholders) shall consult with each other prior to issuing any press
release or other public statement with respect to the transactions contemplated
by the Agreement and will not issue any such release or make any such public
statement without the approval of the other, which approval shall not be
unreasonably withheld, except as required by law or the rules or regulations of
any stock exchange.
9.3 FURTHER ASSURANCES. Each of the parties hereto shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its best efforts to fulfill or obtain the fulfillment of the conditions
precedent to the consummation of the transactions contemplated hereby, including
the execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the transactions
contemplated hereby.
9.4 NOTICE OF EVENTS. During the period from the date of this
Agreement to the Closing Date, the Representative shall give prompt notice to
AMS, and AMS shall give prompt notice to the Representative, of: (i) the
occurrence or non-occurrence of any event of which it has knowledge, the
occurrence or non-occurrence of which would be likely to result in any of the
conditions to Closing specified in Articles X or XI not being satisfied timely;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 9.4
shall not limit or otherwise affect the remedies available hereunder to any
party.
9.5 TAX MATTERS. PGI and its Subsidiaries will provide AMS for its
review and approval drafts of all Tax Returns to be filed between the date
hereof and the Closing Date not less than 15 days prior to the filing or due
date (including permitted extensions) for filing such returns, such approval not
to be unreasonably withheld. All such Tax Returns shall be prepared in a manner
consistent with past practice.
9.6 RECORDS. With respect to the financial books and records and
minute books of PGI relating to matters on or prior to the Closing Date: (a) for
a period of four years after the Closing Date, AMS shall not cause or permit
their destruction or disposal without first offering to surrender them to the
Principal Shareholders, and (b) where there is legitimate purpose, including,
without limitation, an audit of any of the Principal Shareholders by the IRS or
any other taxing authority, AMS shall allow the Principal Shareholders and their
respective representatives or agents, at their sole cost and expense, during
regular business hours, reasonable access to such books and records and the
ability to inspect and copy same or (if required) obtain the originals thereof.
9.7 INSURANCE CLAIMS. With respect to any and all claims that have
been made arising out of events, occurrences, or acts prior to the Closing,
regardless of which such claims are brought, the Principal Shareholders shall
cooperate, at AMS's expense with respect to out-of-pocket expenses, with AMS's
and PGI's tendering of such claims to the appropriate insurance carrier of any
occurrence-based or claims-made insurance policies, facilitate the payment of
insurance proceeds with respect thereto, and not take any action to cause the
coverage of PGI or any of its Subsidiaries under any such policy to be reduced
or restricted.
9.8 CERTAIN TAX BENEFITS. AMS shall pay to the holders of PGI Common
Stock and Options immediately prior to the Effective Time, or into the Escrow
Fund to the extent that a payment is to be made prior to the first anniversary
of the date hereof, in proportion to the amounts received by them pursuant to
Section 3.2, an amount equal to the sum of (i) the actual Tax benefit to PGI, if
and when realized, from the exercise of Options at Closing, (ii) 50% of the Tax
benefit to PGI, if and when realized, but only if realized prior to the third
anniversary of the Closing Date, from the capital loss, if any, generated in the
Avalon Divestiture, and (iii) the actual Tax benefit to PGI, if and when
realized, from the payment of the expenses of PGI contemplated by Section 14.1,
in each case within 90 days after filing each tax return utilizing some or all
of such benefit (such payments to be made without duplication) PROVIDED,
HOWEVER, that (a) if AMS shall subsequently suffer a loss, disallowance or
deferral of the Tax benefit giving rise to all or any portion of the payments
described in clause (i) or (ii) hereof (any such event, a "Tax Benefit Loss"),
then the Principal Shareholders shall return to AMS the applicable portion of
such payments attributable to the Tax Benefit Loss within 90 days of receipt of
notice by the Representative from AMS of such Tax Benefit Loss (which notice
shall include a calculation of the amount required to be refunded) and (b)
"realized" for purposes of this Section 9.8 shall include the utilization of
such benefit in estimated tax payments.
9.9 APPROVAL OF MERGER. Each Principal Shareholder shall vote all
shares of PGI Common Stock held by such Principal Shareholder in favor of the
Merger, and shall cause PGI to hold a shareholders meeting, or act by written
consent, to approve the Merger.
9.10 DUE DILIGENCE. No later than January 24, 2002, PGI shall
provide to AMS the documents and information described on Schedule 9.10 hereto.
9.11 WORKERS COMPENSATION ADJUSTMENT. PGI and the Principal
Shareholders represent that, since January 31, 2000, PGI has purchased and
maintained a type of workers compensation insurance which includes a provision
for retroactive premium adjustments, both positive and negative, and that the
current insurance policy will lapse on January 31, 2002 and will not be renewed.
Any retroactive premium adjustment, regardless of how designated, shall be for
the account of the holders of PGI Common Stock and Options (the "Holders").
Accordingly, if there is a premium refund, AMS shall cause PGI to pay the full
amount of the refund to the Escrow Fund or, if the Escrow Fund has been
terminated, to the Holders; similarly, if there is additional premium due, AMS
shall demand and receive from the Escrow Fund (or, if the Escrow Fund has been
terminated, the Principal Shareholders) the amount thereof. In either event, AMS
shall cause PGI to transmit a copy of all relevant correspondence on a timely
basis to the Representative.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF AMS AND MERGER SUB
The obligations of AMS and Merger Sub under this Agreement to
consummate the transactions contemplated hereby at the Closing shall be subject
to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived by AMS and Merger Sub:
10.1 REPRESENTATIONS AND WARRANTIES ACCURATE. All representations
and warranties of PGI and the Principal Shareholders contained in Articles VI
and VII shall be accurate in all material respects on and as of the date of this
Agreement and at and as of the Closing with the same effect as though such
representations and warranties had been made at and as of the Closing, except
for representations and warranties that speak as of a specific date or time
other than the Closing (which need only be true and correct in all material
respects as of such date or time); PROVIDED, HOWEVER, (i) that if any portion of
any such representation or warranty is already qualified by materiality, for
purposes of determining whether this condition has been satisfied with respect
to such portion of such representation or warranty, such portion of such
representation or warranty as so qualified shall be true and correct in all
respects and (ii) if any such representation or warranty is not true and correct
in all material respects at Closing due to an event occurring after the date
hereof that is generally applicable to businesses (I.E., not specific to PGI or
PGW), then such representation or warranty shall, for all purposes under this
Agreement, be deemed true and correct in all material respects at Closing (but
shall not be so deemed as of the date hereof).
10.2 PERFORMANCE. PGI and each of the Principal Shareholders shall
have performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed and complied
with by it or them prior to or on the Closing Date; PROVIDED, HOWEVER, that if
any portion of any such agreement, covenant or condition is already qualified by
materiality, for purposes of determining whether this condition has been
satisfied with respect to such portion of such agreement, covenant or condition,
such portion of such agreement, covenant or condition as so qualified shall have
been complied with in all respects.
10.3 CERTIFICATES. AMS shall have received one or more certificates,
dated as of the Closing Date, signed on behalf of PGI and the Principal
Shareholders by the Representative, to the effect that, to the knowledge of the
Representative, the conditions set forth in Sections 10.1 and 10.2 have been
satisfied.
10.4 AUTHORIZATIONS AND CONSENTS; LEGAL PROHIBITION.
(a) PGI shall have obtained all governmental authorizations,
approvals, consents and waivers, the lack of which prior to the Closing, under
any applicable law, rule or regulation, would render any of the transactions
contemplated hereby legally impermissible.
(b) PGI shall have obtained or made all governmental or
contractual authorizations, approvals, consents, waivers and filings, the lack
of which prior to the Closing, under any applicable law, rule or regulation,
contract or other understanding, would be reasonably likely to materially and
adversely affect AMS's operation of the business of PGI and PGW after the
Closing, or would materially and adversely affect PGI's ability to consummate
the transactions contemplated hereunder.
(c) On the Closing Date, there shall exist no injunction or
other order issued by a court of competent jurisdiction which would prohibit any
of the transactions contemplated hereby.
10.5 RETENTION OF KEY PERSONNEL. The persons listed on Schedule 10.5
shall have entered into employment agreements in substantially the form attached
hereto as Exhibits G-1 through G-6 as applicable (the "Employment Agreements").
The parties acknowledge that the confidentiality and non-interference provisions
of the Employment Agreements are a material inducement for AMS to enter into
this Agreement and Plan of Merger, and AMS acknowledges that its recourse for
any breach of the Employment Agreements shall be against the employee and not
against the Escrow Fund.
10.6 ESCROW AGREEMENT. The Representative and the Escrow Agent shall
have executed and delivered the Escrow Agreement.
10.7 AVALON DISTRIBUTION AGREEMENT. Avalon shall have executed and
delivered the Avalon Distribution Agreement.
10.18 RELEASE. Each Principal Shareholder shall have delivered to
AMS a complete and general release, in form and substance reasonably
satisfactory to AMS and its counsel, of all claims against PGI or any Subsidiary
for any matter or thing whenever arising.
10.9 BOARD APPROVAL. The Board of Directors of AMS shall have
approved the Merger at or before 12:00 noon P.S.T. on January 16, 2002. AMS
covenants to use its good faith efforts to obtain such approval by such date and
time.
10.10 MATERIAL CONTRACTS. No material contracts (or contracts
material in the aggregate) of PGW shall have been modified in any material and
adverse manner or (except for the client publisher agreement with
Grove/Atlantic) be terminable as a result of the Merger.
10.11 AVALON INDEMNITY AGREEMENT. The parties to the Avalon
Indemnity Agreement shall have executed and delivered the Avalon Indemnity
Agreement.
10.12 TRANSITION SERVICES AGREEMENT. Avalon shall have executed and
delivered the Transition Services Agreement.
10.13 PAYOFF LETTERS. At least five days prior to Closing, PGI shall
have delivered to AMS a letter, in customary form, from each of its lenders with
respect to the prepayment of all indebtedness of PGI or PGW to such lender; all
such indebtedness shall be subject to prepayment by AMS without penalty at or
after Closing; and all collateral securing such indebtedness shall be subject to
release upon such prepayment. All such indebtedness is described on Schedule
10.13.
10.14 BOOKS AND RECORDS. All books and records of PGI and PGW,
including without limitation all of the stock certificates of PGW, shall be
delivered to AMS.
10.15 GUARANTEES. AMS shall have received evidence reasonably
satisfactory to it that all guarantee obligations of PGI and PGW with respect to
Avalon have been released without any ongoing liability to PGI or PGW.
10.16 AVALON DIVESTITURE. AMS shall have received evidence
reasonably satisfactory to it that the Avalon Divestiture has occurred in
accordance with the provisions of agreements as set forth on Exhibit H.
10.17 CANADA DIVESTITURE. AMS shall have received evidence
reasonably satisfactory to it that the Canada Divestiture has occurred in
accordance with the provisions of the Asset Purchase Agreement set forth on
Exhibit I (the "Canada Divestiture Agreement").
10.18 GSL ASSOCIATES. AMS shall have received evidence satisfactory
to it that neither PGI nor PGW shall have any obligations or commitments of any
kind to GSL Associates.
10.19 ADDITIONAL DOCUMENTS. AMS shall have been provided reasonable
access to, and reasonable opportunity to photocopy, the documents described on
Schedule 9.10.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PGI,
THE PRINCIPAL SHAREHOLDERS, AND THE REPRESENTATIVE
The obligations of PGI, each of the Principal Shareholders and the
Representative under this Agreement to consummate the transactions contemplated
hereby at the Closing shall be subject to the satisfaction, at or prior to the
Closing, of all of the following conditions, any one or more of which may be
waived by the Representative.
11.1 REPRESENTATIONS AND WARRANTIES ACCURATE. All representations
and warranties of AMS and Merger Sub contained in Article VIII shall be accurate
in all material respects on and as of the date of this Agreement and at and as
of the Closing with the same effect as though such representations and
warranties had been made at and as of the Closing, except for representations
and warranties that speak as of a specific date or time other than the Closing
(which need only be true and correct in all material respects as of such date or
time); PROVIDED, HOWEVER, that if any portion of any such representation or
warranty is already qualified by materiality, for purposes of determining
whether this condition has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty as
so qualified shall be true and correct in all respects.
11.2 PERFORMANCE BY OTHERS. AMS and Merger Sub shall have performed
and complied in all respects with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by it prior to or
on the Closing Date; PROVIDED, HOWEVER, that if any portion of any such
agreement, covenant or condition is already qualified by materiality, for
purposes of determining whether this condition has been satisfied with respect
to such portion of such agreement, covenant or condition, such portion of such
agreement, covenant or condition as so qualified shall have been complied with
in all respects.
11.3 CERTIFICATE. PGI and the Principal Shareholders shall have
received a certificate, dated the Closing Date, signed by the chief executive
officer of each of AMS and Merger Sub, to the effect that, to the knowledge of
such party, the conditions set forth in Sections 11.1 and 11.2 have been
satisfied.
11.4 AUTHORIZATION; LEGAL PROHIBITION.
(a) AMS shall have obtained all governmental authorizations,
approvals, consents and waivers, the lack of which prior to the Closing, under
any applicable law, rule or regulation, would render any of the transactions
contemplated hereby legally impermissible.
(b) AMS and Merger Sub shall have obtained or made all
mandatory governmental or contractual authorizations, approvals, consents,
waivers and filings, the lack of which prior to the Closing, under any
applicable law, rule or regulation, contract or other understanding, would be
reasonably likely to materially and adversely affect AMS's or Merger Sub's
ability to consummate, or cause the consummation of, the transactions
contemplated hereunder.
(c) On the Closing Date, there shall exist no injunction or
other order issued by a court of competent jurisdiction which would prohibit any
of the transactions contemplated hereby.
11.5 RETENTION OF KEY PERSONNEL. The Surviving Corporation shall
have executed and delivered the Employment Agreements.
11.6 ESCROW AGREEMENT. The Surviving Corporation and the Escrow
Agent shall have executed and delivered the Escrow Agreement.
11.7 AVALON DISTRIBUTION AGREEMENT. The Surviving Corporation shall
have executed and delivered its acknowledgment of the Avalon Distribution
Agreement.
11.8 BOARD APPROVAL. The Board of Directors of PGI shall have
approved the Merger at or before 12:00 noon P.S.T. on January 16, 2002. PGI and
each Principal Shareholder covenants to use its, his or her good faith efforts
to obtain such approval by such date and time.
11.9 TRANSITION SERVICES AGREEMENT. The Surviving Corporation shall
have executed and delivered the Transition Services Agreement.
11.10 AVALON DIVESTITURE. The Avalon Divestiture shall have
occurred.
11.11 CANADA DIVESTITURE. The Canada Divestiture shall have
occurred.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.1 SURVIVAL. All of the representations, warranties, covenants and
agreements of the parties contained in this Agreement or in any certificate,
document or other instrument delivered in connection with this Agreement shall
survive (and not be affected in any respect by) the Closing and any
investigation conducted by any party hereto and any information which any party
may receive. Notwithstanding the foregoing, the representations and warranties
contained in or made pursuant to this Agreement and the related indemnity
obligations set forth in Sections 12.2(a)(i) and 12.2(b)(i) hereof shall
terminate on, and no claim or Action with respect thereto may be brought, after
the date 18 months immediately subsequent to the Closing Date; provided,
HOWEVER, that the representations and warranties contained in (a) Sections 6.18
(Taxes) and 6.19 (Employee Benefits) shall survive until the end of the
applicable statute of limitations therefor, (b) Sections 6.6 (Capitalization),
6.2 (Articles of Incorporation; Authorization) and 6.23 (Transactions with
Certain Persons) shall survive indefinitely, (c) Section 6.3 (Financial
Statements) shall survive until the date of issuance of the audit by AMS's
auditors of the AMS consolidated financial statements for the fiscal year ending
March 31, 2003 and (d) Section 6.16(a)(ii) (compliance with Legal Requirements)
shall survive until the first anniversary of the date hereof; and PROVIDED,
FURTHER, that if a breach of Section 6.3 (Financial Statements) also constitutes
a breach of another representation or warranty, the limitations period
applicable to such other representation or warranty shall apply. The
representations and warranties which terminate at a specified date or expiration
of a specified period and the liability of any party with respect to any breach
thereof shall not terminate with respect to any claim, whether or not fixed as
to liability or liquidated as to amount, with respect to which such party has
been given written notice setting forth the facts upon which the claim for
indemnification is based and, if possible, a reasonable estimate of the amount
of the claims, prior to the date 18 months immediately subsequent to the Closing
Date.
12.2 INDEMNIFICATION. The Principal Shareholders and PGI (in the
case of PGI, only until the Effective Time) shall severally indemnify AMS, and
AMS shall indemnify the Principal Shareholders, as set forth below:
(a) Subject to Section 12.1 and to this Section 12.2, each of
the Principal Shareholders and PGI (in the case of PGI, only until the Effective
Time) hereby agrees to severally indemnify, pro-rata in accordance with the
percentages set forth on Schedule 12.2(a), and hold harmless AMS and its
respective directors, officers, employees, agents and Affiliates (collectively,
the "AMS Indemnified Persons") for, from, and against all demands, claims,
actions or causes of action, assessments, losses, damages, liabilities, costs
and expenses, including, without limitation, interest, penalties, disbursements
and expenses (including any reasonable Legal Expenses) (collectively, "Losses")
based upon, arising out of, asserted against, resulting from, imposed on, or
otherwise in respect of (i) the breach of any representation or warranty of PGI
or any of the Principal Shareholders contained in or made pursuant to this
Agreement, (ii) the breach by PGI or any of the Principal Shareholders of, or
the failure by PGI or any of the Principal Shareholders to perform, any of his,
her or its covenants or other agreements contained in this Agreement, (iii) for
a period of 18 months following the Closing Date, PGW's distribution or
publication of THE COMMITTEE: POLITICAL ASSASSINATION IN NORTHERN IRELAND;
PROVIDED, HOWEVER, that no amount shall be claimed under this clause (iii) for
purposes of stopping the release of any amounts under the Escrow Agreement
except to the extent that any AMS Indemnified Person has actually paid, or
become legally obligated to pay, any amount with respect to any Losses under
this clause (iii) and (iv) the breach of any representation or warranty of PGW
or PGI contained in or made pursuant to the Canada Divestiture Agreement to the
extent that such Losses under this clause (iv) exceed $100,000, provided,
however, that the amount of the indemnification otherwise due under this clause
(iv) shall be reduced by 50% to the extent that such Losses exceed $200,000.
Notwithstanding any other provision herein to the contrary, (i) PGI
and the Principal Shareholders shall not be required, pursuant to Section
12.2(a)(i), (ii) or (iii), to indemnify and hold harmless AMS (x) for any single
item of Loss of less than $5,000, it being the intent of the parties that the
parties should not be required to research or dispute items valued at less than
$5,000 and (y) until and to the extent that the aggregate amount of AMS's Losses
under Section 12.2(a)(i), (ii), (iii) and (iv)exceeds $500,000 and (ii) the
cumulative aggregate indemnity obligations of the Principal Shareholders under
Section 12.2(a)(i), (ii), (iii) shall in no event exceed $19 million (inclusive
of the Escrow Fund).
(b) Subject to Section 12.1 and to this Section 12.2, AMS
hereby agrees to indemnify and hold harmless PGI and the Principal Shareholders
and their respective officers, directors, employees, agents and Affiliates
(collectively, the "PGI Indemnified Persons") for, from and against any Losses
based upon, arising out of, asserted against, resulting from, imposed on, or
otherwise in respect of (i) the breach of any representation or warranty of AMS
or Merger Sub contained in or made pursuant to this Agreement or (ii) the breach
by AMS or Merger Sub of, or failure by AMS or Merger Sub to perform, any of its
covenants or other agreements contained in this Agreement.
(c) If any AMS Indemnified Person, on the one hand, or any PGI
Indemnified Person, on the other hand (the "Indemnified Party"), has a claim or
potential claim or receives notice of any claim, potential claim or the
commencement of any Action which could give rise to an obligation on the part of
the Principal Shareholders or PGI, on the one hand, or AMS, on the other hand
(the "Indemnifying Party"), other than a Third Party Indemnification Claim (as
defined below), to provide indemnification pursuant to this Section 12.2, the
Indemnified Party shall promptly give the Indemnifying Party notice thereof (the
"Indemnification Claim"); PROVIDED, HOWEVER, that the failure to give such
prompt notice shall not prevent any Indemnified Party from being indemnified
hereunder for any Losses, except to the extent that the failure to so promptly
notify the Indemnifying Party actually damages the Indemnifying Party.
(d) In the event of a claim, a potential claim or the
commencement of any Action by a third party which could give rise to an
obligation to provide indemnification pursuant to this Article XII, the
Indemnified Party will give the Indemnifying Party prompt written notice thereof
(the "Third Party Indemnification Claim"), but in any event not later than 15
calendar days after receipt of notice of such third party claim; PROVIDED,
HOWEVER, that the failure of the Indemnified Party to so notify the Indemnifying
Party within such 15-day period shall not prevent any Indemnified Party from
being indemnified for any Losses, except to the extent that the failure to so
promptly notify the Indemnifying Party actually damages the Indemnifying Party
or materially prejudices the Indemnifying Party's ability to defend against such
claim.
(e) Any Indemnification Claim or Third Party Indemnification
Claim shall describe the claim in reasonable detail. If the Indemnifying Party
confirms in writing to the Indemnified Party within 15 calendar days after
receipt of the Third Party Indemnification Claim the Indemnifying Party's
responsibility to indemnify and hold harmless the Indemnified Party therefor and
within such 15-day period demonstrates to the Indemnified Party's reasonable
satisfaction that, as of such time, the Indemnifying Party has sufficient
financial resources to indemnify for the full amount of any potential liability
in connection with such claim, the Indemnifying Party may elect to compromise or
defend, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, which counsel shall be reasonably satisfactory to the
Indemnified Party, any Third Party Indemnification Claim. If the Indemnifying
Party elects to compromise or defend any such third party claim, such
Indemnifying Party shall within 15 calendar days (or sooner, if the nature of
the asserted third party claim so requires) notify the Indemnified Party of such
Indemnifying Party's intent to do so, and the Indemnified Party shall cooperate,
at the expense of the Indemnifying Party, in the compromise of, or defense
against, any such third party claim; PROVIDED, HOWEVER, that (i) the Indemnified
Party may, if such Indemnified Party so desires, employ counsel at such
Indemnified Party's own expense to assist in the handling (but not control the
defense) of any such third party claim, (ii) the Indemnifying Party shall keep
the Indemnified Party advised of all material events with respect to any such
third party claim, (iii) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before ceasing to defend against such third
party claim or entering into any settlement, adjustment or compromise of such
third party claim involving injunctive or similar equitable relief being
asserted against any Indemnified Party or any of its or his Affiliates and (iv)
no Indemnifying Party will, without the prior written consent of each
Indemnified Party, settle or compromise or consent to the entry of any judgment
in any pending or threatened action in respect of which indemnification may be
sought hereunder (whether or not any such Indemnified Party is a party to such
action), unless such settlement, compromise or consent by its terms obligates
the Indemnifying Party to pay the full amount of the liability in connection
with such third party claim and includes an unconditional release of all such
Indemnified Parties from all liability arising out of such claim, action, suit
or proceeding. Notwithstanding anything contained herein to the contrary, the
Indemnifying Party shall not be entitled to have sole control over (and if it,
he or she so desires, the Indemnified Party shall have sole control over) the
defense, settlement, adjustment or compromise of any third party non-monetary
claim that seeks an order, injunction or other equitable relief against any
Indemnified Party or its Affiliates which, if successful, is reasonably likely
to interfere with the business, assets, liabilities, obligations, prospects,
financial condition or results of operations of the Indemnified Party or any of
its Affiliates or any matter relating to Taxes of AMS or any of AMS's
Affiliates. If the Indemnifying Party elects not to compromise or defend against
the asserted liability, or fails to notify the Indemnified Party of its, his or
her election as herein provided, the Indemnified Party may, at the Indemnifying
Party's expense, pay, compromise or defend against such asserted liability. In
connection with any defense of a third party claim (whether by the Indemnifying
Parties or the Indemnified Parties), all of the parties shall, and shall cause
their respective Affiliates to, cooperate in the defense or prosecution thereof
and to in good faith retain and furnish such records, information and testimony,
and attend such conferences, discovery proceedings, hearings, trials and
appeals, as may be reasonably requested by a party hereto in connection
therewith.
(f) Anything to the contrary contained herein notwithstanding:
(i) AMS shall seek indemnification from the Escrow Fund, to the extent thereof,
before seeking indemnification from any of the Principal Shareholders and (ii)
the Avalon Indemnity Agreement shall contain additional provisions relating to
indemnification for Losses suffered by AMS as a result of structuring the
Acquisition in the form of the Merger and the Avalon Divestiture rather than a
purchase by AMS of the stock of PGW from PGI, and such additional provisions
shall be read together with the indemnification provisions of this Agreement,
with the provisions of the Avalon Indemnity Agreement controlling in the event
of any direct conflict.
(g) [omitted]
(h) Each Indemnified Party shall act in a commercially
reasonable manner to obtain proceeds under applicable insurance policies with
respect to Losses and shall reimburse the Indemnifying Party, net of
out-of-pocket expenses, to the extent that any such proceeds are obtained after
receipt of an indemnification payment hereunder; PROVIDED, HOWEVER, that
notification to the insurer shall not be required prior to notifying the
Indemnifying Party of any claim hereunder and the Indemnifying Party may not
delay payment hereunder on account of the Indemnified Party's attempt to obtain
insurance proceeds. To the extent required by the insurance policy, the
Indemnified Party shall allow the insurer to assume the defense with respect to
such claim.
(i) Notwithstanding anything herein to the contrary, except
for Section 12.2(a), (f) or (g) hereof, this Section 12.2 shall have no
application to audits or claims for indemnification with respect to Taxes, which
shall be governed exclusively by Section 12.3.
12.3 TAX AUDITS AND INDEMNIFICATION. Any AMS Indemnified Person
shall, in the event such person receives notice (whether orally or in writing)
of any examination, claim, proposed settlement, proposed adjustment or related
matter with respect to any Taxes for which any AMS Indemnified Person may be
indemnified hereunder (the "PGI Tax Controversies"), promptly notify PGI and the
Principal Shareholders thereof, PROVIDED, HOWEVER, that failure to give such
notification shall not affect the indemnification hereunder except to the extent
that PGI or the Principal Shareholders shall have been actually prejudiced as a
result of such failure. AMS and the Principal Shareholders will have the right
to jointly control any audit, administrative or court proceeding relating to PGI
Tax Controversies ("PGI Tax Proceeding"), PROVIDED, HOWEVER, that if the
applicable Taxing Authority offers a settlement or compromise of the Tax
Controversy that is acceptable to the Principal Shareholders, the Principal
Shareholders shall have the right to satisfy their indemnification obligations
with respect to such Tax Controversy by paying to AMS the amount reflected in
such settlement offer or compromise offer (and related interest, penalties,
disbursements and expenses), whereupon AMS will have the sole right to control
such PGI Tax Proceeding.
ARTICLE XIII
TERMINATION OF AGREEMENT
13.1 TERMINATION.
(a) This Agreement may be terminated on or prior to the
Closing as follows:
(i) by consent of AMS and the Representative;
(ii) at the election of AMS or the Representative, if
the Closing Date shall not have occurred on or before January 31, 2002, because
the conditions thereto have not been satisfied on or before that date unless the
failure to consummate the transactions contemplated hereby is the result of a
breach of this Agreement by the party (or, in the case of the Representative,
PGI and the Principal Shareholders) seeking to terminate this Agreement; and
(iii) at the election of AMS or the Representative, if
the other party (or, in the case of Representative, PGI and the Principal
Shareholders) is in material breach of this Agreement.
(b) The termination of this Agreement shall be effectuated by
the delivery by the party terminating this Agreement to each other party of a
written notice of such termination. If this Agreement so terminates, it shall
become null and void and have no further force or effect, except as provided in
Section 13.2.
13.2 SURVIVAL AFTER TERMINATION. If this Agreement is terminated in
accordance with Section 13.1 hereof and the transactions contemplated hereby are
not consummated, this Agreement shall become void and of no further force and
effect, except that the provisions set forth in Sections 9.2 and 14.1 shall
survive the termination of this Agreement. None of the parties hereto shall have
any liability in respect of a termination of this Agreement, except with respect
to Sections 9.2 and 14.1 of this Agreement and except to the extent that failure
to satisfy the conditions of Articles X or XI result from a breach of or default
under any representation, warranty or covenant made by such party under this
Agreement or a breach of or default under the provisions of any agreement made
or to be made pursuant to this Agreement.
ARTICLE XIV
MISCELLANEOUS
14.1 EXPENSES. All costs and expenses (including all legal,
accounting, broker, finder and investment banker fees) relating to this
Agreement, the negotiations leading up to this Agreement and the transactions
contemplated by this Agreement (i) of PGI and the Principal Shareholders, other
than the Absorbed Transaction Expenses, shall be borne by the shareholders of
PGI and (ii) of AMS and Merger Sub shall be borne by AMS. For purposes of this
Section 14.1, "borne by the shareholders of PGI" shall mean that PGW shall pay
such expenses as incurred and such expenses shall be (i) estimated by PGI in
good faith, and PGI shall certify such estimate to AMS no later than five days
prior to the Closing Date and the Initial Amount shall be reduced by the amount
of such estimate and (ii) reflected in Adjusted Net Book Value to the extent not
otherwise deducted from the Initial Amount.
14.2 GOVERNING LAW AND JURISDICTION.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of California without giving effect to the
principles of conflict of laws thereof.
(b) To the extent permitted by law, each party to this
Agreement hereby irrevocably submits to the jurisdiction of any California State
court or United States federal court, in either case sitting in the County of
San Diego, over any suit, action or other proceeding brought by any party
arising out of or relating to this Agreement and each Principal Shareholder and
AMS hereby irrevocably agrees that all claims with respect to such suit, action
or other proceeding shall be heard and determined in such courts.
14.3 BINDING EFFECT; PERSONS BENEFITING; NO ASSIGNMENT. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of such parties. Nothing in this
Agreement is intended or shall be construed to confer upon any entity or person
other than the parties hereto and their respective successors and permitted
assigns any right, remedy or claim under or by reason of this Agreement or any
part hereof. Without the prior written consent of the parties hereto, this
Agreement may not be assigned by any of the parties hereto; PROVIDED, HOWEVER,
that AMS may assign this Agreement to any of its Affiliates.
14.4 AMENDMENTS. This Agreement may not be amended, altered or
modified except by a written instrument executed by all of the parties hereto.
14.5 INTERPRETATION. When a reference is made in this Agreement to a
Section, an Exhibit or Schedule, such reference shall be to a Section of, an
Exhibit to or a Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14.6 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and each of which shall constitute one
and the same instrument.
14.7 ENTIRE AGREEMENT; SCHEDULES. This Agreement, including the
Schedules, Exhibits, certificates and lists referred to herein, and any
documents executed by the parties simultaneously herewith or pursuant hereto,
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersedes all other prior agreements
and understandings, written or oral, between the parties with respect to such
subject matter.
14.8 SEVERABILITY. If any provisions of this Agreement, or the
application thereof to any person or circumstance, is invalid or unenforceable
in any jurisdiction, (a) a substitute and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable in such jurisdiction, the intent and purpose of their invalid or
unenforceable provision; and (b) the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability of such provision affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
14.9 WAIVER. Waiver of any term or condition of this Agreement by
any party shall only be effective if in writing and shall not be construed as a
waiver of any subsequent breach or failure of the same term or condition, or a
waiver of any other term or condition of this Agreement.
14.10 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, or when sent by facsimile, telex or
telecopier (with receipt confirmed), provided a copy is also sent by courier
addressed as follows (or to such other address as a party may designate by
notice to the other):
If to AMS or Merger Sub:
Advanced Marketing Services, Inc.
0000 Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, President and
Chief Executive Officer
Telephone: (000) 000-0000
Fax: (000) 000-0000
with copies to:
Xxxxxx Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telephone (000) 000-0000
Fax: (000) 000-0000
If to the Representative:
Xxxxxxx Xxxxxx
c/o Publishers Group Incorporated
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Telephone: (510) 528-1444 ext. 228
Fax: (000) 000-0000
with copies to:
Xxxxxxxx, Patch, Xxxxx & Bass LLP
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
14.11 THE REPRESENTATIVE. Xxxxxxx Xxxxxx is hereby designated by PGI
and each of the Principal Shareholders to serve as the representative of PGI,
the Principal Shareholders and the other holders of PGI Common Stock and Options
with respect to the matters set forth in this Agreement to be performed by the
Representative, including without limitation receiving all notices hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed as of the day and year first above written.
ADVANCED MARKETING SERVICES, INC.
By: /S/ XXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President and
Chief Executive Officer
NAUTILUS MERGER SUB, INC.
By: /S/ XXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President, Chief Financial
Officer and Secretary
PUBLISHERS GROUP INCORPORATED
By: /S/ XXXXXXX XXXXXX
--------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Chief Executive Officer
REPRESENTATIVE
By: /S/ XXXXXXX XXXXXX
--------------------------------------
Name: Xxxxxxx Xxxxxx
PRINCIPAL SHAREHOLDERS:
/S/ XXXXXXX XXXXXX
------------------------------------------
Xxxxxxx Xxxxxx
/S/ XXXXXXX X. XXXXXX
------------------------------------------
Xxxxxxx X. Xxxxxx
/S/ XXXX XXXXXX
------------------------------------------
Xxxx Xxxxxx
/S/ XXXXXXX XXXXXXX
------------------------------------------
Xxxxxxx Xxxxxxx
/S/ XXXXXXX XXXXXX
------------------------------------------
Xxxxxxx Xxxxxx
EXHIBIT A
DEFINITIONS
The following terms, whenever used in the Agreement, shall have the
following meanings for all purposes of this Agreement (such definitions to be
equally applicable to the singular, plural, masculine, feminine and neuter forms
of the terms herein defined):
"ABSORBED TRANSACTION EXPENSES" means the sum of (i) the audit and
related due diligence fees of Ernst & Young LLP for services provided in
connection with the Merger, not to exceed $105,000, (ii) the fees of Xxxxxxxxx,
Xxxxxxxxx LLP for due diligence and tax returns for PGI for 2001 and January
2002 in connection with the Merger, not to exceed $45,000 and (iii) $18,000.
"ACTION" means any actual or threatened action (at law or in
equity), suit, arbitration, review, inquiry, proceeding or investigation.
"ADJUSTED NET BOOK VALUE" means the net book value of PGI on the
Closing Date, determined in accordance with GAAP applied consistently with the
balance sheet of PGI at December 31, 2000, adjusted to (A) add back (i) the
Absorbed Transaction Expenses (to the extent reflected in net book value on the
Closing Date) and (ii) a positive amount equal to the operating loss of PGW's
e-media division; PROVIDED, HOWEVER, that the amount determined under this
clause (ii) shall not exceed $150,000, (B) subtract the aggregate exercise price
actually received by PGI (excluding cancellation of indebtedness of Avalon in
connection with warrants exercisable by canceling such indebtedness) with
respect to all Options and warrants to acquire PGI Common Stock exercised from
the date hereof to the Closing Date, (C) disregard any tax deductions on account
of such Option and warrant exercises, (D) reflect all returns and reserves on an
actual, rather than straight-line, basis, (E) disregard Avalon and any gain or
loss realized in the Avalon Divestiture, (F) reflect expenses as contemplated by
Section 14.1(i) (other than Absorbed Transaction Expenses) to the extent not
reflected in the Initial Amount, (G) reflect any unreserved expenses related to
Texas franchise taxes and California escheat claims, including penalties and
interest, to the extent not actually reflected as a reduction to the Initial
Amount on the Closing Date, (H) disregard the Canada Divestiture and all
proceeds and consequences relating thereto and (I) add back the expenses
contemplated by clause (i) of Section 14.1 to the extent actually reflected as a
reduction to the Initial Amount on the Closing Date.
"AFFILIATE" means, with respect to any Person, any other Person that
directly, or through one or more intermediaries, controls or is controlled by or
is under common control with, or is an officer or director of, such first
Person. As used in this definition, "control" (including, with correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"AVALON DISTRIBUTION AGREEMENT" means the distribution agreement by
and between Avalon and PGW, dated as of the Closing Date and effective for a
period of five years thereafter, in substantially the form attached hereto as
Exhibit E.
"AVALON INDEMNITY AGREEMENT" means the Indemnity Agreement relating
to Avalon, in substantially the form attached hereto as Exhibit D.
"BALANCE SHEET DATE" means June 30, 2001.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which banking institutions in New York, New York are authorized or
required by law or executive order to close.
"CLOSING" means the consummation of the Merger and the other
transactions contemplated hereby.
"CLOSING DATE" means the date the Closing takes place in accordance
with Section 5.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DEFERRED PAYMENT" means, with respect to any share of PGI Common
Stock, or share of PGI Common Stock underlying any Option, the amount of
proceeds payable to all holders of PGI Common Stock and Options under (i) the
Escrow Agreement and (ii) Section 9.8 hereof, in each case, equal in percentage
to the percentage of the Initial Amount payable with respect to such share or
underlying share.
"DISCLOSURE SCHEDULE" means the disclosure schedule document
attached hereto as Annex A.
"ENCUMBRANCE" means any encumbrance, lien (including environmental
and tax liens) charge, claim, pledge, security interest, conditional sale
agreement or other title retention agreement, lease, mortgage, security
agreement, right of first refusal, option, restriction, tenancy, license,
covenant, right of way, easement or other lien (including the filing of, or
agreement to give, any financing statement under the Uniform Commercial Code or
statute or law of any jurisdiction), preferential arrangement or restriction of
any kind (including any restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes).
"ENVIRONMENT" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), ground waters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL ACTIONS" refers to any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, request for information, letter or other
communication from any governmental agency, department, bureau, office or other
authority, or any third party arising under Environmental Laws or involving
Releases of Hazardous Materials.
"ENVIRONMENTAL LAWS" includes the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., as amended;
the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., as amended;
the Clean Air Act, 42 U.S.C. 7401 et seq., as amended; the Clean Water Act, 33
U.S.C. 1251 et seq., as amended; the Occupational Safety and Health Act, 29
U.S.C. 655 et seq., as amended; and any other foreign federal, state, local or
municipal laws, statutes, regulations, rules, ordinances, policies or guidances
imposing liability or establishing standards for protection of health, safety or
the Environment.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ESCROW AGENT" means Zions First National Bank, as escrow agent
under the Escrow Agreement.
"ESCROW AGREEMENT" means the Escrow Agreement by and among AMS, the
Principal Shareholders and Zions First National Bank, as escrow agent, in
substantially the form attached hereto as Exhibit B.
"ESCROW FUND" means the Escrow Fund as defined in the Escrow
Agreement.
"FINANCIAL STATEMENTS" means (i) the audited consolidated balance
sheets of PGI and its Subsidiaries as at December 31, 2000 and 1999, and the
related consolidated revenues and expenses and changes in retained earnings and
cash flows for the periods then ended certified by its independent certified
public accountants, whose opinions thereon are included therewith, together with
the notes and schedules thereto, and (ii) the unaudited consolidated balance
sheets of PGI and PGW as at June 30, 2001 and the related consolidated revenues
and expenses and changes in retained earnings and cash flows for the six-months
then ended (not including related notes to such financial statements), subject,
in the case of unaudited financial statements, to normal year-end adjustments.
"GAAP" means generally accepted accounting principles as applied in
the United States.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof, or any domestic, foreign or
multinational entity exercising executive, legislative, judicial, regulatory or
administration functions of or pertaining to government, including any
government authority, agency, department, board, bureau, commission or
instrumentality of the United States, any foreign government, any State of the
United States or any political subdivision thereof, and any court, tribunal or
arbitrator(s) of competent jurisdiction.
"HAZARDOUS MATERIALS" means any waste, pollutant, contaminant,
hazardous or toxic substance or waste, special waste, chemical, polychlorinated
biphenyls, petroleum, petroleum-based substance or petroleum-derived product,
substance or waste, within respect to which liability or standards are imposed
pursuant to any Environmental Laws. "Hazardous Materials" does include any
asbestos-containing material.
"INITIAL AMOUNT" means (i) $34,100,000 plus (ii) the aggregate
exercise price actually received by PGI with respect to all Options exercised
from the date hereof to the Closing Date minus (iii) expenses as contemplated by
Section 14.1.
"INITIAL PRICE PER COMMON SHARE" means the quotient of (a) the
Initial Amount divided by (b) the sum of (i) the number of shares of PGI Common
Stock outstanding on the Closing Date and (ii) the number of shares of PGI
Common Stock underlying Options cashlessly exercised on the Closing Date.
"INITIAL PRICE PER OPTION SHARE" means, with respect to each share
of PGI Common Stock underlying an Option, the difference of (i) the Initial
Price Per Common Share minus (ii) the exercise price with respect to such share.
"IRS" means the United States Internal Revenue Service or any
successor entity thereto.
"KNOWLEDGE" means the actual knowledge of any of Xxxxxxx Xxxxxx,
Xxxxxxx Xxxxxxx, Xxxxx XxXxxxxx, Xxxx Xxxxx, Xxxx Xxxxxx and Xxxx Xxxxxx.
"LETTER OF TRANSMITTAL" means a Letter of Transmittal in
substantially the form attached hereto as Exhibit C-1 (in the case of PGI Common
Stock) or Exhibit C-2 (in the case of shares of PGI Common Stock underlying
Options), as applicable.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, results of operations or financial condition of PGI and its
Subsidiaries (other than Avalon and its Subsidiaries) taken as a whole;
PROVIDED, HOWEVER, that after the date on which the Boards of Directors of PGI
and AMS approve the Merger, only events specific to PGI or PGW (and not general
economic conditions or events not specific to PGI or PGW) shall constitute
events that may result in a material adverse effect for purposes of this
definition.
"OPTION PLAN" means PGI's 1995 Nonstatutory Stock Option Plan.
"OPTIONS" means the options to purchase PGI Common Stock granted
under the Option Plan.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization, other form
of business or legal entity or Governmental Authority.
"PGI COMMON STOCK" means the common stock, $0.001 par value per
share, of PGI.
"RELEASE" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing of Hazardous
Materials into the environment.
"SUBSIDIARY" means, as it relates to any Person, any Person of which
such Person (a) directly or indirectly beneficially owns capital stock or other
equity interests having in the aggregate 50% or more of the total combined
voting power, without giving effect to any contingent voting rights, in the
election of directors (or Persons fulfilling similar functions or duties) of
such owned Person or (b) is a general partner.
"TAX" or "TAXES" means all taxes, charges, fees, levies or other
assessments, and all estimated payments thereof, including but not limited to
income, excise, license, severance, stamp, occupation, premium, profits,
windfall, profits, customs duties, capital stock, employment, disability,
registration, alternative or add-on minimum, property, sales, use, value added,
environmental (including Taxes imposed under Section 59A of the Code),
franchise, payroll, transfer, gross receipts, withholding, social security or
similar unemployment taxes, and any other tax of any kind whatsoever, imposed by
any federal, state, local or foreign governmental authority, including any
interest, penalties and additions to tax relating to such taxes, charges, fees,
levies or other assessments.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement by and between PGI and Avalon, effective as of the Closing Date, in
substantially the form attached hereto as Exhibit F.
