EXECUTION COPY
ACQUISITION AGREEMENT
AMONG
PRODUCTION RESOURCE GROUP, L.L.C.,
as Buyer,
ANCHA ELECTRONICS, INC.
as Seller,
and
XXXXXX X. XXXXX AND XXXXX X. XXXXXX
as Shareholders
April 28, 1999
ACQUISITION AGREEMENT
---------------------
ACQUISITION AGREEMENT (the "Agreement"), dated as of April 28, 1999 by and among
PRODUCTION RESOURCE GROUP, L.L.C., a Delaware limited liability company ("PRG"),
as Buyer, ANCHA ELECTRONICS, INC., an Illinois corporation ("ANCHA" or
"Seller"), as Seller and XXXXXX X. XXXXX and XXXXX X. XXXXXX as Shareholders,
("Shareholders.")
RECITALS
A. ANCHA is engaged, in the business of providing specialized
audio, video and show control design, fabrication and installation and related
products (collectively, ANCHA Activities"). Such Business has been carried on
under the name of "Ancha Electronics, Inc." ANCHA has a principal place of
business located at 0000 Xxxxxxxxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxxxxx 00000.
B. PRG is engaged in business as an integrated provider of
goods and services in a variety of related markets, including production
management, theatrical rental, scenery, rigging, supply of physical production
elements (including lighting, scenery, sound and costumes), promotion, themed
attractions, Broadway and touring shows, special events and exhibits and film
and television production, and desires to acquire substantially all of the
assets of ANCHA and to assume the liabilities of ANCHA to the extent indicated
herein. The business operations of Seller to be acquired by PRG hereunder are
collectively referred to herein as the "Business", the assets of Seller to be
acquired by PRG are collectively referred to herein as the "Included Assets",
and such assets of Seller not to be acquired by PRG are collectively referred to
herein as the "Excluded Assets."
C. Subject only to the limitations and exclusions contained in
this Agreement and on the terms and conditions hereinafter set forth, Seller
desire to sell and PRG desires to purchase the Included Assets.
NOW, THEREFORE, in consideration of the recitals and of the
respective covenants, representations, warranties and agreements herein
contained, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
ARTICLE 1
PURCHASE AND SALE
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1.1. Agreement to Contribute. At the Closing (as defined in Section 2.1 hereof)
Seller shall contribute, convey, assign, transfer and deliver to PRG, upon
and subject to the terms and conditions of this Agreement, an undivided
3.8% interest in all of Included Assets, as defined in Section 1.3 below,
in exchange for 2,666 Preferred Units in PRG. The Preferred Units issued to
ANCHA at the Closing will have a liquidation preference of $100,000 and
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will convert into an equal number of Regular Units upon an initial public
offering or a sale of substantially all of the business of PRG. The
Preferred Units will otherwise be entitled to the same rights and
privileges of Regular Units but will not be entitled to participate in any
leveraged recapitalization or similar transaction effected by PRG. In the
event that, upon an initial public offering in which equity is sold to the
public, the value of the equity that would otherwise be exchanged for the
Preferred Units held by ANCHA (calculated at the offering price initially
paid by the public) is less than $100,000 in the aggregate, PRG will cause
the Preferred Units to convert into a number of shares with an aggregate
value equal to $100,000 (calculated at the offering price paid by the
public). In accordance with PRG's credit agreement with The Bank of New
York, as agent, ANCHA will be required to pledge its units (without other
recourse) to The Bank of New York, as agent, as additional security for
PRG's borrowings under such credit agreement, pursuant to the provisions of
Section 13.2 below. Subject to the consent of The Bank of New York, as
agent (or of any substitute senior institutional lender), with such
conditions as The Bank of New York, as agent, or such substitute senior
institutional lender may impose, and provided the conversion to public
equity has not occurred, ANCHA will have the right to require PRG to
repurchase the Preferred Units commencing three years after their original
issuance at the aggregate price of $100,000. PRG will use reasonable best
efforts to obtain the consent of The Bank of New York to allow PRG to honor
and satisfy the redemption rights described in the immediately preceding
sentence. If PRG converts to corporate form, or creates a corporate holding
company to hold the interests in PRG, Seller agrees to contribute its
Preferred Units to such corporation in exchange for an economically
equivalent security of such corporation as reasonably determined by the
Board of Directors of the new corporation.
1.2. Agreement to Sell. At the Closing, except as otherwise specifically
provided in Section 1.4, Seller shall sell, convey, assign, transfer and
deliver to PRG, upon and subject to the terms and conditions of this
Agreement, an undivided 96.2% interest in all of the Included Assets.
1.3. Included Assets. Included Assets do not include any Excluded Assets but
otherwise shall include all of Seller's respective right, title and
interest in and to all of the assets, properties and rights of Seller
constituting the Business or used therein, of every kind and description,
real, personal and mixed, tangible and intangible, wherever situated (which
Business, assets, properties and rights, together with the names and
goodwill contributed pursuant to Section 1.1 hereof are herein sometimes
collectively called the "Assets"), free and clear of all mortgages, liens,
pledges, security interests, charges, claims, restrictions and encumbrances
of any nature whatsoever (except for Permitted Liens as defined in
subsection 3.1.12 hereof), including without limitation, the following
assets, properties and rights of Seller used directly or indirectly in the
conduct of, or generated by or constituting, the Business, except as
otherwise expressly set forth in subsection 1.4 hereof:
(a) the Business as a going concern;
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(b) the name "ANCHA ELECTRONICS" including any variation thereon and all
goodwill associated therewith;
(c) all cash and cash equivalents in transit, on hand or in bank accounts;
(d) all machinery, equipment, tools, vehicles, furniture, furnishings,
leasehold improvements, goods, and other tangible personal property
including, without limitation, the assets listed on Schedule 1.3(d)
hereof;
(e) all prepaid items, utility and similar deposits, insurance return
premiums, if any, unbilled costs and fees;
(f) all office and other supplies and inventories;
(g) all rights under any written or oral contract, agreement, lease, plan,
instrument, registration, license, certificate of occupancy, permit or
approval of any nature, or other document, commitment, arrangement,
undertaking, practice or authorization;
(h) all rights under any patent, trademark, service xxxx, trade name or
copyright, whether registered or unregistered, and any applications
therefor;
(i) all technologies, methods, formulations, data bases, trade secrets,
know-how, inventions and other intellectual property used in the
Business or under development, if any;
(j) all rights or choses in action arising out of occurrences before or
after the Closing, including without limitation all rights under
express or implied warranties relating to the Assets;
(k) all assets and properties reflected on the Closing Date Balance Sheet
(as defined in Section 3.5);
(l) all inventory reflected on the Inventory Schedule attached as Schedule
1.3(l) hereto excluding any inventory which has been sold before the
Closing in the ordinary course of business; and
(m) all information, files, records, data, plans, contracts and recorded
knowledge, including customer and supplier lists, related to the
foregoing.
1.4. Excluded Assets. Notwithstanding the foregoing, neither the Included Assets
not the Business include any of the following (collectively the "Excluded
Assets"):
(a) the corporate seal, certificate of incorporation, minute books, stock
books, tax returns, books of account and records having to do with the
corporate organization of Seller;
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(b) the rights which accrue or will accrue to Seller under this Agreement;
(c) any rights under any written or oral contract, agreement, lease, plan,
instrument, registration, license, certificate of occupancy, permit or
approval of any nature, or other document, commitment, arrangement,
undertaking, practice or authorization to the extent the transfer of
such rights is prohibited by applicable law or requires the consent of
a third party, which consent has not been obtained; provided, however,
that Section 2.3 hereof shall apply to any such rights;
(d) the assets, properties or rights set forth on Schedule 1.4 (d);
(e) all claims of Seller against any of its Shareholders, or their
respective spouses or descendants, or against Ancha Realty Associates;
(f) all Tax attributes of Seller, including any Tax claims, credit or
refunds but not including any employment trust fund, withheld sales or
use or similar taxes which items constitute Included Assets;
(g) all insurance policies not assumed by PRG;
(h) Seller's communications with its accountants and attorneys; and
(i) manufacturer or subcontractor warranties related to any claims
asserted against Seller which are not Assumed Liabilities (which
warranties are retained to the extent that their retention by Seller
does not subject PRG to any incremental liability).
1.5. Agreement to Purchase. At the Closing, PRG shall accept the contribution of
the Included Assets to be contributed pursuant to Section 1.1 hereof and
shall purchase the Included Assets described in Section 1.2 hereof (other
than the Excluded Assets) from Seller, upon and subject to the terms and
conditions of this Agreement and in reliance on the representations,
warranties and covenants of Seller contained herein, (ii) shall issue to
Seller the Preferred Units pursuant to Section 1.1, (iii) shall pay that
portion of the "Purchase Price" described in Section 1.6 (i), and (iv)
shall make the escrow deposit described in Section 1.6(ii). In addition,
PRG shall assume at the Closing and shall timely pay, discharge or perform,
as appropriate, the liabilities and obligations of Seller to the extent and
as provided in Section 1.8 of this Agreement. Except as specifically
provided in Section 1.8 hereof, PRG shall not assume or be responsible for
any of the other liabilities or obligations of Seller, whether related to
or arising under or with respect to the Business, the Included Assets, the
Excluded Assets, or otherwise.
1.6. Purchase Price. The "Purchase Price" shall be the sum of (i) two million
dollars ($2,000,000) which Seller shall pay at Closing by wire transfer of
immediately available funds to such account as Seller shall designate (the
"Cash Portion"), (ii) five hundred thousand dollars ($500,000) (the "Escrow
Deposit") which will be paid to the Escrow Agent
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pursuant to an Escrow Agreement attached as Exhibit A and (iii) the amount
of the Earn-Out Payments to the extent earned pursuant to Section 1.7
hereof.
1.7. Earn Out.
(a) Subject to the terms, conditions and limitations set forth herein, on
the Earn Out Date (as defined below) PRG will pay to Seller an amount
equal to the Earn Out Payment, if any, to the extent earned pursuant
to Section 1.7(b). If, on an Earn Out Date, the common equity of PRG
(or any successor in interest thereto) is publicly traded, PRG may
deliver to the Seller, in lieu of payment of up to one-half of the
Earn Out Payment then due in cash, such number of publicly traded
securities of PRG as has an aggregate value equal to the amount of the
Earn Out Payment so replaced where the value of each such security
will be deemed to equal the average closing price per share for the
ten trading days immediately preceding the date such Earn Out Payment
is due. Such securities may be issued in a transaction which may or
may not be registered under the Securities Act of 1933, as amended
(including the rules and regulations promulgated thereunder, the
"Act").
(b) For the purposes hereof, "Earn Out Payment" means an amount equal to:
(i) 25% of the amount, if any, by which the EBITDA of PRG'S ANCHA
Division for the period from May 1, 1999 through April 30, 2000
exceeds $400,000;
(ii) 25% of the amount, if any, by which the EBITDA of PRG'S ANCHA
Division for the period from May 1, 2000 through April 30, 2001
exceeds $600,000;
(iii) 25% of the amount, if any, by which the EBITDA of PRG'S ANCHA
Division for the period from May 1, 2001 through April 30, 2002
exceeds $700,000;
(iv) 25% of the amount, if any, by which the EBITDA of PRG'S ANCHA
Division for the period from May 1, 2002 through April 30, 2003
exceeds $800,000; and
(v) Two million dollars ($2,000,000) less the aggregate amount of
payments made pursuant to subsections (i) through (iv) hereof
provided that EBITDA for the period May 1, 2001 through April 30,
2004 is at least three million dollars ($3,000,000)
provided, however, that in no event shall the aggregate amount payable pursuant
to this Section (b) exceed two million dollars ($2,000,000).
(c) Each of the periods referenced in paragraphs (i) through (v) of
Section 1.7(b) are referred to as an "Earn Out Period". The amounts
last referenced in each of clauses (i) through (v) are referred to as
"Earn Out Targets." For the purposes hereof
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"EBITDA" means earnings before interest, taxes, depreciation and
amortization of PRG'S ANCHA Division determined for the applicable
fiscal period or periods from the portion PRG's consolidated and
consolidating financial statements properly attributable to PRG'S
ANCHA Division for the applicable period.
(d) Not later than 60 days after the end of each Earn Out Period, PRG
shall deliver to Seller a balance sheet and income and cash flow
statement of PRG'S ANCHA Division, prepared in accordance with GAAP
which shall set forth the EBITDA of PRG'S ANCHA Division for that Earn
Out Period ("PAD Financials"). Seller shall have 30 days from receipt
of such PAD Financials to notify PRG in writing of any objection to
such PAD Financials, in which event, the dispute shall be resolved in
accordance with Section 1.7(f) hereof. If PRG does not receive written
notice from Seller of any objection within 30 days after delivering
such PAD Financials to Seller, PRG shall pay to Seller the applicable
Earn Out Payment, if any, on the 35th day following delivery of such
PAD Financials or such later date as to which all discrepancies as to
such PAD Financials are resolved pursuant to Section 1.7(f) (the "Earn
Out Date").
(e) Notwithstanding anything herein to the contrary, the amount of the
Earn Out Payment will be reduced, on a dollar-for-dollar basis, in an
amount equal to any and all Damages incurred and timely asserted by
PRG on or prior to the Earn Out Date, subject to the limitations
provided in Sections 11.5 and 11.6
(f) If Seller notifies PRG in writing of any objection within 30 days
after receipt of PAD Financials for an Earn Out Period, and includes
therein a written statement of any discrepancies believed to exist,
PRG will promptly pay to Seller any amount which is not in dispute.
Seller and PRG will attempt to jointly resolve such discrepancies
within 15 days of PRG's receipt of Seller's discrepancy statement,
which resolution, if achieved, will be binding upon all parties to
this Agreement and not subject to dispute or review. If Seller and PRG
cannot resolve the discrepancy within such 15-day period, PRG and
Seller will jointly retain Ernst & Young LLP or other nationally
recognized accounting firm mutually acceptable to PRG and Seller to
review the PAD Financials together with Seller's discrepancy statement
and any other relevant documents. The cost of retaining such
accountants shall be borne equally by the Seller, on the one hand, and
PRG, on the other hand. The accountants will report their conclusions
which shall be conclusive and not subject to dispute or review.
Interest shall accrue upon all sums found to be due and not paid from
the original due date thereof to the date of payment at the BONY Rate.
(g) The Earn Out Payment shall be calculated in accordance with the
following:
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(i) EBITDA of PRG's ANCHA Division will be calculated utilizing
the same accounting policies and procedures utilized by PRG in
the preparation of its audited financial statements;
(ii) expenses and liabilities shall exclude any and all
depreciation, amortization or other expense in connection with
the Agreement, or the transactions contemplated herein, including
any legal, accounting or brokerage expense, amortization of
goodwill, and any management, administrative or overhead or
similar expense or charge imposed by PRG or any Related Person
other than (a) reasonable charges for working capital (other than
working capital utilized for the Purchase Price and the Earn Out
Payments) and (b) the allocable share of other direct operating
expenses (such as insurance, health plan and telecommunications
charges) incurred by PRG which would have been incurred by ANCHA
had ANCHA remained a separate stand-alone entity; and
(iii) revenue shall include any and all revenues of PRG's ANCHA
Division.
(h) PRG recognizes that PRG's ANCHA Division will require working
capital and other resources to operate its business and meet the
Earn Out Targets. Following the Closing, PRG shall use reasonable
commercial efforts to provide working capital and other resources
to PRG's ANCHA Division consistent with its business needs
subject, however, to PRG?s business practices and constraints.
Notwithstanding anything herein to the contrary, this Section
1.7(h) shall not be deemed a guaranty of the achievement of the
Earn Out Targets.
1.8 Assumption of Liabilities. At the Closing hereunder and except as otherwise
specifically provided in Section 1.8(e), PRG shall assume and shall timely
pay, discharge or perform, as appropriate, without duplication, each and
all of the following liabilities and obligations of Seller (collectively
the "Assumed Liabilities") but no others:
(a) all liabilities and obligations of Seller in respect of the
Business if and to the extent that the same were reflected on the
1998 Balance Sheet and remain unpaid and undischarged on the
Closing Date;
(b) the indebtedness or other obligation of Seller to Xxxxxx Bank
pursuant to a line of credit or other loan in a maximum aggregate
amount not to exceed $2,500,000 (payoff letters from Xxxxxx Bank
are attached as Schedule 1.8(b) hereto).
(c) all liabilities and obligations of Seller arising in the regular
and ordinary course of the Business from the 1998 Balance Sheet
Date through the Closing Date, to the extent that the same remain
unpaid and undischarged on the Closing Date, including all
accrued payroll taxes, advanced xxxxxxxx to customers, accounts
payable, wages and vacation payable, accrued state income and
sales taxes and real estate taxes, jobs in progress as
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of the Closing Date, and all warranty work required to be
performed by Seller in the ordinary course of business; and
(d) all liabilities and obligations of Seller in respect of the
agreements, contracts, commitments and leases which are
specifically identified in any schedule required by and attached
to this Agreement including those set forth on Schedule 1.8(d).
(e) In no event, however, shall PRG assume or incur any liability or
obligation under this Section 1.8 or otherwise in respect of any
of the following liabilities or existing as of the 1998 Balance
Sheet Date and which under GAAP should have been reflected on the
1998 Balance Sheet or the notes thereto as a liability or
obligation, if and to the extent that the same were neither
reflected on the 1998 Balance Sheet nor referenced on Schedule
1.8(e):
(i) liabilities or obligations arising out of any
breach by Seller of any provision of any agreement,
contract, commitment or lease, including but not limited
to liabilities or obligations arising out of Seller's
failure to perform any agreement, contract, commitment or
lease in accordance with its terms prior to the Closing,
except for warranty work in the ordinary course of
business.
(ii) except as set forth in Section 1.8(b), any
indebtedness for borrowed money, including without
limitation, any indebtedness arising under any note,
debenture, bond, letter of credit agreement, loan
agreement or other contract or commitment for the
borrowing or lending of money relating to the Business or
agreement or arrangement for a line of credit, or any
guaranties, in any manner, whether directly or indirectly,
of any indebtedness, dividend or other obligation of any
other Person relating to the Business (other than
endorsements in the ordinary course of business of
negotiable instruments for deposit or collection);
(iii) any product liability or similar claim for injury
to person or property, regardless of when made or
asserted, which arises out of or is based upon any express
or implied representation, warranty, agreement or
guarantee made by Seller, or alleged to have been made by
Seller, or which is imposed or asserted to be imposed by
operation of law, in connection with any service performed
or product sold or leased by or on behalf of Seller on or
prior to the Closing, including without limitation any
claim relating to any product delivered in connection with
the performance of such service and any claim seeking
recovery for consequential damage, lost revenue or income;
(iv) any federal, state or local income or other Tax
imposed on Seller or any Shareholder (i) payable with
respect to the business, assets, properties or operations
of Seller or any Shareholder or any member of any
affiliated group of which Seller or any Shareholder is a
member for any period prior to the Closing
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Date, or (ii) incident to or arising as a consequence of
the negotiation or consummation by Seller or Shareholders
of this Agreement and the transactions contemplated
hereby;
(v) any liability or obligation under or in connection
with the Excluded Assets;
(vi) any liability or obligation arising prior to or as
a result of the Closing to any employees, agents or
independent contractors of Seller, whether or not employed
by PRG after the Closing, or under any benefit arrangement
with respect thereto, except for obligations incurred in
the ordinary course of the Business;
(vii) any liability or obligation of Seller or any
Shareholder arising or incurred in connection with the
negotiation, preparation and execution of this Agreement
and the consummation of the transactions contemplated
hereby (including without limitation fees and expenses of
counsel, accountants and other experts);
(viii) any liability or obligation of Seller or any
Shareholder to or relating to any Person affiliated with
Seller; and
(ix) any liability or obligation relating to any
employee benefit plan not specifically assumed by PRG,
except as otherwise specifically provided above.
The parties hereby acknowledge and agree that nothing contained in this
Agreement shall be construed to obligate PRG to continue any compensation,
commission or similar arrangement following the Closing for the benefit of any
of ANCHA's employees hired by PRG.
1.9 Allocation of Purchase Price.
1.9.1 The parties agree that the Purchase Price will be allocated as follows:
Asset Amount
----- ------
Accounts Receivable Seller's Tax Basis
Inventory Seller's Tax Basis
Property, Plant and Equipment Seller's Tax Basis
Prepaid Expenses and Deposits Seller's Tax Basis
Intangibles (Section 197) Remainder of Purchase Price
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1.9.2 The parties hereto shall timely file with the Internal Revenue Service a
Form 8594 consistent with the allocations provided for in this Section 1.9.
Seller and PRG each hereby covenant and agree that it will not take a position
on any income tax return, before any governmental agency charged with the
collection of any income tax, or in any judicial proceeding that is in any way
inconsistent with the terms of this Section 1.9 or such Form 8594. Nothing in
this Section 1.9.2 shall require that PRG utilize the same method for financial
reporting and tax purposes.
1.10 Consents to Filings. Seller shall provide, and shall use its reasonable
best efforts to cause its accountants to provide, such consents as are
reasonably necessary for the filing of the Audited Financial Statements, as
defined in the Escrow Agreement, with the Securities and Exchange Commission
and, to the extent necessary, other regulatory agencies.
ARTICLE 2
CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS,
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CHANGE IN NAME AND FURTHER ASSURANCES
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2.1 Closing. The closing (the "Closing") of the sale and purchase of the Assets
shall take place within two (2) business days of the satisfaction of the
condition set forth in Section 7.4 below, or on such other date as may be
mutually agreed upon in writing by PRG and Seller. The date of the Closing is
sometimes herein referred to as the "Closing Date." The Closing shall take place
at the offices of PRG, or at such other location as the parties shall mutually
agree and shall be effective immediately after the close of business on April
30, 1999 and the termination of ANCHA's 401K plan.
2.2 Items to be Delivered at Closing. At the Closing and subject to the
terms and conditions herein contained:
(i) Seller shall deliver to PRG such bills of sale with covenants of
warranty, assignments, endorsements, and other good and
sufficient instruments and documents of conveyance and transfer,
in form reasonably satisfactory to PRG and its counsel, as shall
be necessary and effective to transfer and assign to, and vest
in, PRG all of Seller's right, title and interest in and to the
Included Assets including without limitation, (a) good and valid
title in and to all of the Included Assets owned by Seller, (b)
assignments of all leasehold interests in and to all of the
Included Assets leased by Seller as lessee, and (c) all of
Seller's rights under all agreements, contracts, commitments,
leases, plans, bids, quotations, proposals, instruments and other
documents included in the Included Assets to which Seller is
party or by which it has rights on the Closing Date, and
simultaneously with such delivery, all such actions shall be
taken as may be required to put PRG in actual possession and
operating control of the Assets. Nothing in this
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Section 2.2 shall be deemed to require Seller to transfer any of
the Excluded Assets to PRG.
(ii) PRG shall deliver to the Seller the Cash Portion, and the
certificates for the Preferred Units which PRG shall promptly
deliver to Bank of New York, and an undertaking, in the form
attached hereto as Exhibit B, whereby PRG will assume and agree
to timely pay, discharge or perform, as appropriate, the Assumed
Liabilities to the extent and as provided in Section 1.8 hereof.
In addition PRG shall deliver the Escrow Deposit to the Escrow
Agent, and shall pay to Xxxxxx Bank, by wire transfer, the amount
due to it and described in Section 1.8(b).
(iii) At or prior to the Closing, the parties hereto shall also
deliver to each other the agreements, opinions, certificates and
other documents and instruments referred to in Article 7 and 8
hereof.
(iv) At the Closing, PRG, as tenant, shall execute and deliver to
Xxxxxx Bank, N.A., as Trustee under Trust Agreement dated June
18, 1996 and known as Trust No. 6700, as landlord, the Rolling
Xxxxxxx Lease in the form of Exhibit C.
2.3 Third Party Consents. To the extent that Seller's rights under any
agreement, contract, commitment, lease, authorization or other Asset to be
assigned to PRG hereunder may not be assigned without the consent of another
person which has not been obtained, this Agreement shall not constitute an
agreement to assign the same if an attempted assignment would constitute a
breach thereof or be unlawful, and Seller shall use its best efforts to obtain
any such required consent(s) as promptly as possible. If any such consent shall
not be obtained or if any attempted assignment would be ineffective or would
impair PRG's rights under the Included Asset in question so that PRG would not
in effect acquire the benefit of all such rights, Seller, to the maximum extent
permitted by law, shall after the Closing, as PRG's agent and at PRG's sole cost
and expense, use Seller's reasonable best efforts to obtain for PRG the benefits
thereunder and shall cooperate, and at PRG's sole cost and expense, to the
maximum extent permitted by law, with PRG in any other reasonable arrangement
designed to provide such benefits to PRG.
2.4 Change in Name. On the Closing Date, Seller and the Shareholders shall
deliver to PRG all such executed documents as may be required to change Seller's
name on that date to another name bearing no similarity to ?ANCHA ELECTRONICS?
including but not limited to a name change amendment with the Secretary of State
of Illinois and appropriate name change notices for each state where Seller is
qualified to do business. Seller hereby irrevocably grants PRG a power of
attorney and appoints PRG as its attorney-in-fact to file all such documents on
or after the Closing Date, and PRG shall promptly file same and evidence such
filings to Seller. The power granted hereunder is coupled with an interest and
shall survive the death, incompetency, bankruptcy and dissolution of Seller and
each Shareholder.
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2.5 Further Assurances. Seller and the Shareholders, from time to time after the
Closing, at PRG's request and shall execute, acknowledge and deliver to PRG such
other instruments of conveyance and transfer and shall take such other actions
and execute and deliver such other documents, certifications and further
assurances as PRG may reasonably require in order to vest more effectively in
PRG, or to put PRG more fully in possession of, any of the Included Assets, or
to better enable PRG to complete, perform or discharge any of the Assumed
Liabilities. Each of the parties hereto will cooperate with the other parties
hereto and take other actions as may be reasonably requested from time to time
by any other party hereto as necessary to carry out, evidence and confirm the
intended purposes of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
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Subject to the limitations on time and liability set forth in
Sections 11.5 and 11.6 herein, and except as set forth in the applicable section
of the Disclosure Schedule attached hereto, Seller represents and warrants to
PRG as follows:
3.1 Organization and Good Standing.
(a) Part 3.1 of the Disclosure Schedule contains a complete
and accurate list for ANCHA of its name, its jurisdiction of organization, other
jurisdictions in which it is authorized to do business and its capitalization
(including the identity of each shareholder and the number and class of shares
held by each). ANCHA is a company duly organized, validly existing and in good
standing under the laws of the State of Illinois with full corporate power and
authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use and to perform all its
obligations under Applicable Contracts. ANCHA is duly qualified to do business
as a foreign company and is in good standing in each jurisdiction where the
conduct of the business by it requires it to be so qualified, except where the
failure to be so qualified would not have a Material Adverse Effect on the
business or operations of ANCHA.
(b) Seller has delivered to PRG copies of the Organizational
Documents of ANCHA, as currently in effect.
(c) Seller has delivered to PRG a list of the officers and
directors of ANCHA.
3.2 Authority; No Conflict.
(a) The execution, delivery and performance of this Agreement
by ANCHA has been duly authorized by all necessary action of ANCHA and
Shareholders. This Agreement has been duly executed and delivered by ANCHA and
Shareholders and constitutes the legal, valid and binding obligation of ANCHA
and Shareholders, enforceable against ANCHA and Shareholders in
13
accordance with its terms. Upon the execution and delivery by Seller of this
Agreement and the other documents entered into in connection herewith with the
acquisition contemplated hereby (collectively, the "Seller's Closing
Documents"), the Seller's Closing Documents will constitute the legal, valid and
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms. ANCHA and the Shareholders have the absolute and
unrestricted right, power, authority and capacity to execute and deliver this
Agreement and the Seller's Closing Documents and to perform their respective
obligations under this Agreement and the Seller's Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated hereby will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a
violation of (A) any provision of the Organizational Documents
of ANCHA, or (B) any resolution adopted by the board of
directors or the shareholders of ANCHA;
(ii) contravene, conflict with or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the transactions contemplated
hereby or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which ANCHA,
Shareholders, or any of the assets owned or used by ANCHA or
Shareholders may be subject;
(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate or modify, any Governmental Authorization
that is held by ANCHA or that otherwise relates to the
business of, or any of the assets owned or used by, ANCHA or
Shareholders;
(iv) cause PRG, solely as a result of its acquisition
of ANCHA pursuant to this Agreement, and not as a result of
any assets or income of PRG or any jurisdictions in which PRG
does business, or ANCHA to become subject to, or to become
liable for the payment of, any transfer or similar Tax;
(v) violate, conflict with or result in the breach of
any term, condition or provision of, or require the consent of
any other Person under (a) any existing law, ordinance, or
governmental rule or regulation to which ANCHA or any
Shareholder is subject, (b) any judgment, order, writ,
injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which
is applicable to ANCHA or any Shareholder or (c) any mortgage,
indenture, agreement, contract, commitment, lease, plan,
authorization, or other instrument, document or understanding,
oral or written, to which ANCHA or any Shareholder is a party,
by which ANCHA or any Shareholder may have rights or by which
any of the assets owned by ANCHA may be bound or affected, or
give any party with rights
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thereunder the right to terminate, modify, accelerate or
otherwise change the existing rights or obligations of ANCHA
or any Shareholder thereunder, in each case where such
violation, conflict or breach has had a Material Adverse
Effect.
(vi) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any
Encumbrance upon or with respect to any of the Included Assets
owned or used by ANCHA, except any Encumbrance either created
as a result of the acquisition of Included Assets pursuant to
this Agreement, or claiming an interest through PRG.
Except as set forth in Part 3.2 of the Disclosure Schedule, no Shareholder or
ANCHA is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the transactions contemplated hereby.
3.3 No Options. Except as set forth on Part 3.3 of the Disclosure Schedule,
ANCHA is not a party to any existing agreements, options, commitments, or
rights with, of or to any Person to acquire any of any ANCHA's assets,
properties or rights or any interest therein, except for those contracts
entered into in the ordinary course of business consistent with past
practice for the sale of inventory of ANCHA.
3.4 Capitalization. The authorized equity securities of ANCHA consist of
20,000 shares of common stock, no par value, of which 7,150 shares are
issued and outstanding. The ANCHA Shares constitute all of the issued and
outstanding equity securities of ANCHA. Set forth on Part 3.4 (a) of the
disclosure schedule is a complete and accurate list of all holders of
equity securities of ANCHA, the number of shares of each such class of
equity securities held by each such Person and the percentage of each such
class so held, including in each case the percentage of ANCHA Shares so
held ("Percentage Interest") and their respective residential addresses.
The Shareholders are and will be on the Closing Date the record and
beneficial owners and holders of all of the issued and outstanding ANCHA
Shares, free and clear of all Encumbrances. There are no Contracts
relating to the issuance, sale or transfer of any equity securities or
other securities of ANCHA. None of the outstanding equity securities or
other securities of ANCHA was issued in violation of the applicable
securities laws or any other Legal Requirement. Without limiting the
foregoing, there are no outstanding stock powers, powers of attorney or
other similar delegations of authority or instrument of transfer relating
to any of the ANCHA shares.
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3.5 Financial Statements.
Seller has delivered to PRG: balance sheet of ANCHA as of December 31
of each of 1997 and 1998, and the related reviewed consolidated statements of
income, changes in stockholders' equity, and cash flow for each of the fiscal
years then ended, together with the report thereon of McCarthy, Pacilio,
Eiseland & Xxxxxxx, P.C. ("MPE&G"), certified public accountants, including in
each case the notes thereto. The 1997 and 1998 financial statements have been
reviewed by MPE&G. (The balance sheet at December 31, 1998, including the notes
thereto, is referred to herein as the "1998 Balance Sheet.") Such financial
statements and notes fairly present the financial condition and the results of
operations, changes in stockholders' equity and cash flow of ANCHA as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, and the financial statements referred
to in this Section 3.5 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements. In addition, the combined balance sheet of ANCHA as
of the Closing Date (including the notes thereto, the "Closing Date Balance
Sheet") shall fairly present the financial condition of ANCHA as of the Closing
Date in accordance with GAAP prepared in a manner consistent with the other
financial statements referred to herein. No financial statements of any Person
other than ANCHA are required by GAAP to be included in the combined financial
statements of ANCHA.
3.6 Books and Records. The books of account, minute books, stock record books
and other records of ANCHA, all of which have been made available to PRG, are
complete and correct in all material respects. The minute books of ANCHA contain
(or will contain at Closing) resolutions ratifying all prior actions taken by
the Shareholders, the Boards of Directors, and committees of the Boards of
Directors of ANCHA. At the Closing, all of those books and records will be in
the possession of ANCHA but will remain Excluded Assets.
3.7 Title to Properties; Encumbrances. ANCHA does not own any fee interest in
any real property. Part 3.7 of the Disclosure Schedule contains a complete and
accurate list of all real property, including leaseholds or other interests
therein, held by or utilized by ANCHA. Seller has delivered or made available to
PRG copies of the leases and other instruments (whether or not recorded) by
which ANCHA acquired such interests. ANCHA owns all the properties and assets
(whether real, personal or mixed and whether tangible or intangible) that it
purports to own located in the facilities owned or operated by it or reflected
as owned in the books and records of ANCHA, including all of the properties and
assets reflected in the 1998 Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in Part 3.7 of the
Disclosure Schedule and personal property sold since the date of the 1998
Balance Sheet, as the case may be, in the ordinary course of business), and all
of the properties and assets purchased or otherwise acquired by ANCHA since the
date of the 1998 Balance Sheet (except for personal property acquired and sold
since the date of the 1998 Balance Sheet in the ordinary course of business and
consistent with past practice) and except, with respect to all such properties
and assets, (a) mortgages or security interests shown on the 1998 Balance Sheet
as securing specified liabilities or obligations, with respect to which no
16
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the 1998 Balance Sheet
(such mortgages and security interests being limited to the property or assets
so acquired), with respect to which no default (or event that, with notice or
lapse of time, or both, would constitute a default) exists, and (c) liens for
current taxes not yet due. To Seller's Knowledge, all buildings, plants and
structures utilized by ANCHA lie wholly within the boundaries of the real
property utilized by ANCHA and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.
3.8 Condition and Sufficiency of Assets.
(a) The equipment of ANCHA is structurally sound, in good
operating condition and repair and is adequate for the uses to which it is being
put, and none of such equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repair that is not material in nature or cost.
The equipment of ANCHA is sufficient for the continued conduct of the ANCHA
Business after the Closing in substantially the same manner as conducted prior
to the Closing, ordinary wear and tear excepted.
(b) Leased Real Property. With respect to the real property
that is leased by ANCHA (the "Real Property"):
(i) Leases. Seller has delivered to PRG a true and
complete copy of every lease and sublease to which ANCHA is a
tenant or subtenant (each a "Lease" and collectively, the
"Leases"); Part 3.8(b)(i) of the Disclosure Schedule describes
each Lease by setting forth the name of the tenant, the name
of the landlord or sublandlord, a the commencement and
expiration dates of the current term, the security deposited
by ANCHA with the landlord or sublandlord, if any, the monthly
rental (including base and all additional rents), and whether
the assignment of such Lease by ANCHA to PRG requires the
consent of the landlord or sublandlord.
(ii) Leases in Effect. Each Lease is, and at Closing
shall be, in full force and effect, to Seller's Knowledge
shall constitute a legal and permissible use of the applicable
property, and has not been assigned by ANCHA, or modified,
supplemented or amended except as listed on Part 3.8 (b)(ii)
of the Disclosure Schedule, and neither ANCHA nor the landlord
or sublandlord under any Lease is in material default under
any of the Leases, and ANCHA has no Knowledge of any
circumstances or state of facts presently exists which, with
the giving of notice or passage of time, or both, would permit
the landlord or sublandlord under any Lease to terminate any
Lease.
(iii) Utility Services. The water, electric, gas and
sewer utility services and the storm drainage facilities
currently available to the Real Property are adequate
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for the present use of the Real Property by ANCHA in
conducting its business and, to ANCHA's Knowledge, there is
no condition which will result in the termination of the
present access from the Real Property to such utility
services and other facilities.
(iv) Access. To Seller's Knowledge, there are no
restrictions on entrance to or exit from the Real Property to
adjacent public streets and no conditions known to Seller
which will result in the termination of the present access
from the Real Property to existing highways and roads.
(v) Absence of Notice. ANCHA has no Knowledge of
matters which would materially adversely affect the use of the
Real Property or which would require the expenditure of more
than $10,000 to cure breaches, violations or like matters
relating to such Real Property.
(vi) No Violations. ANCHA has no Knowledge that the
Real Property and the present uses thereof do not comply in
all material respects with all regulations and Legal
Requirements of all Governmental Bodies having jurisdiction
over the Real Property, and ANCHA has no reason to believe,
and no Knowledge that the Real Property or any improvements
erected or situate thereon, or the uses conducted thereon or
therein, violate any regulations, Legal Requirement or Order
of any Governmental Body having jurisdiction over the Real
Property.
(vii) No Encumbrances. Between the date of this
Agreement and Closing, ANCHA will not have sold, mortgaged or
encumbered the Leases.
(viii) Executory Contracts. The Disclosure Schedule
contains a description of all executory contracts made by or
on behalf of ANCHA, or by which ANCHA is bound, with respect
to the Real Property ("Executory Contracts"), including,
without limitation, operation, management, maintenance,
utility, and construction contracts. At Closing, Seller shall
deliver to PRG a true and complete copy (the original
execution copy, if available) of each of the Executory
Contracts.
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3.9 Accounts Receivable. All accounts receivable of ANCHA that are reflected on
the 1998 Balance Sheet or on the Closing Date Balance Sheet (collectively, the
"Accounts Receivable") represented or will represent, as of the period then
ended, respectively, valid obligations arising from sales actually made or
services actually performed in the ordinary course of business. Except as set
forth in Part 3.9 of the Disclosure Schedule, Seller is not aware of any fact or
circumstances that would reasonably cause it to believe that any of the Accounts
Receivable either have not been or will not be collected in full, without any
set-off, within 90 days after the day on which it first becomes due and payable.
There is no contest, claim or right of set-off, other than returns in the
ordinary course of business, under any Contract with any obligor of an Account
Receivable relating to the amount or validity of such Accounts Receivable. Part
3.9 of the Disclosure Schedule contains a complete and accurate list of all
Accounts Receivable as of the date of the 1998 Balance Sheet and as of April 20,
1999, which lists sets forth the aging of such Accounts Receivable.
3.10 Inventory. All inventory of ANCHA, whether or not reflected in the 1998
Balance Sheet, consists of a quality and quantity usable and salable or rentable
in the ordinary course of business, except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the 1998 Balance Sheet or on the Closing Date Balance
Sheet, as the case may be. All inventories not written off have been priced at
the lower of cost or net realizable value on a first in, first out basis. The
quantities of each item of inventory (whether raw materials, work-in-process or
finished goods) are not excessive, but are reasonable in the present
circumstances of ANCHA.
3.11 No Undisclosed Liabilities. Except as set forth in Part 3.11 of the
Disclosure Schedule, ANCHA has no Knowledge of any liabilities or obligations of
any nature (whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the 1998 Balance
Sheet and liabilities incurred in the ordinary course of business, consistent
with past practice since the date thereof, and which in the aggregate do not and
will not cause a Material Adverse Effect. For purposes of this Agreement, the
term "liabilities" shall include, without limitation, any indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured.
3.12 Taxes. Except as set forth on Part 3.12 of the Disclosure Schedule, all tax
returns required to be filed by Seller ("Tax Returns") in any jurisdiction have
been filed and all taxes, assessments, fees and other governmental charges upon
Seller or upon any of Seller's properties, income or franchises ("Taxes"), which
are shown to be due and payable in such Tax Returns have been paid except for
such Taxes the payment of which is being contested by Seller in good faith by
appropriate proceedings and with respect to which Seller has set aside on its
books reserves deemed by it to be adequate. For all taxable years ended on or
before December 31, 1995, the federal income tax liability of Seller has been
satisfied and either the period of limitations on assessment of additional
federal income tax has expired or Seller has entered into an agreement with the
Internal Revenue Service closing conclusively the total tax liability for the
taxable year. Seller has not executed any
19
waiver or waivers that would have the effect of extending the applicable statute
of limitations in respect of income tax liabilities. Seller does not know of any
proposed additional tax assessment against it for which provision has not been
made on its accounts, and no controversy in respect of additional federal or
state income taxes due since said date is pending or to the Knowledge of Seller
threatened. Seller is not being audited or challenged for any federal or state
income tax liability for any period by the Internal Revenue Service or any state
taxing authority. The provisions for Taxes on the books of Seller are deemed
adequate in all material respects by Seller. Seller has not received any notice
of assessment or proposed assessment in connection with any taxes or any nature
whatsoever and there are not pending tax examinations of or tax claims asserted
against Seller or any assets or properties of Seller which could adversely
affect PRG. There are no tax liens (other than any lien for current taxes not
yet due and payable) on any of the assets or properties of Seller. Seller has
made all deposits required by law to be made with respect to employees'
withholding and other employment taxes, including without limitation the portion
of such deposits relating to taxes imposed upon Seller. ANCHA is not now and has
not at any time been a member of any affiliated, consolidated or unitary group
(as defined in the Internal Revenue Code of 1986, as amended (the "Code") of
companies or similar group of companies.
3.13 No Material Adverse Effect. Since the date of the 1998 Balance Sheet, there
has not been any event that has had, and no event has occurred or circumstance
exists that could reasonably be expected to result in, a Material Adverse Effect
with respect to ANCHA, the Included Assets or the Business.
3.14 Employee Benefits.
(a) Part 3.14(a) of the Disclosure Schedule sets forth a
complete list of all pension and other employee benefit, fringe benefit and
compensation plans and arrangements covering directors, employees, former
directors or employees, or their respective dependents, of ANCHA (the "Plans").
The Plans have been administered in accordance with and otherwise comply, in all
material respects, with all Legal Requirements and with their terms; may be
amended or terminated by ANCHA at any time without notice or approval and
without any liability other than for benefits previously accrued as of the
amendment or termination date; and, if intended to be tax qualified, are and
have always been so tax qualified, in all material respects, and have received
favorable rulings to this effect covering such Plans since their inception.
(b) All ANCHA contributions and payments due and owing to or
with respect to the Plans have been timely paid or properly accrued and reserved
on the 1998 Balance Sheet, and ANCHA has complied with any minimum funding
requirements imposed by Legal Requirement or the terms of any Plan, and no Plan
has any accumulated funding deficiency. There exists no pending or Threatened
dispute or claim with respect to any Plan. No Plan is the subject of audit or
notice of intended audit by any Governmental Body. No fiduciary breach or
prohibited transaction has occurred with respect to any Plan.
20
(c) Except as set forth in Part 3.14(c) of the Disclosure
Schedules, there are no multi-employer or multiple employer plans (as defined in
the U.S. Internal Revenue Code and/or the U.S. Employee Retirement Income
Security Act ("ERISA") and related laws and regulations) which include ANCHA. No
Plan has been terminated and no reportable event (as defined in ERISA and
related laws and regulations) has occurred with respect to any Plan.
3.15 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.15(a) of the Disclosure
Schedule, and except for such violations as could not reasonably be expected to
have a Material Adverse Effect on PRG:
(i) ANCHA is, and at all times since January 1, 1995
has been, in compliance, in all material respects, with each
Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use
of any of its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may
constitute or result in a violation by ANCHA of, or a failure
on the part of ANCHA to comply with, any Legal Requirement, or
(B) may give rise to any obligation on the part of ANCHA to
undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(iii) ANCHA has not received, at any time since
January 1, 1993, any notice or other communication (whether
oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible or
potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible or potential
obligation on the part of ANCHA to undertake, or to bear all
or any portion of the cost of, any remedial action of any
nature.
(b) Part 3.15(b) of the Disclosure Schedule contains a
complete and accurate list of each Governmental Authorization that is held by
ANCHA or that otherwise relates to the business of, or to any of the assets
owned or used by, ANCHA. Each Governmental Authorization listed or required to
be listed in Part 3.15(b) of the Disclosure Schedule is valid and in full force
and effect. Except as set forth in Part 3.15(b) of the Disclosure Schedule:
(i) ANCHA is, and at all times since January 1, 1995 has been,
in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in
Part 3.15(b) of the Disclosure Schedule;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a
21
failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.15(b) of the
Disclosure Schedule, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation or termination of, or
any modification to, any Governmental Authorization listed or required
to be listed in Part 3.15(b) of the Disclosure Schedule;
(iii) ANCHA has not received, at any time since January 1,
1993, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual,
alleged, possible or potential violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to, any
Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Part 3.15(b) of the Disclosure Schedule have been duly filed
on a timely basis with the appropriate Governmental Bodies, and all
other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with
the appropriate Governmental Bodies.
(c) The Governmental Authorizations listed in Part 3.15(b) of
the Disclosure Schedule collectively constitute all of the Governmental
Authorizations necessary to permit ANCHA to conduct and operate its business
lawfully in the manner it currently conducts and operates such business and to
permit ANCHA to own and use its assets in the manner in which it currently own
and use such assets.
3.16 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.16(a) of the Disclosure
Schedule, there is no pending Proceeding the result of which could reasonably be
expected to have a Material Adverse Effect with respect to ANCHA, the Included
Assets and/or the Business:
(i) that has been commenced by or against ANCHA or
that otherwise relates to or may affect the Business of, or
any of the Included Assets owned or used by, ANCHA; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering
with, any of the transactions contemplated hereby.
(b) No such Proceeding has been Threatened, and no event has
occurred or circumstance exists that may give rise to or serve as a basis for
the commencement of any such
22
Proceeding. Seller has delivered to PRG copies of all pleadings, correspondence
and other documents relating to each Proceeding listed in Part 3.16(a) of the
Disclosure Schedule. The Proceedings listed in Part 3.16(a) of the Disclosure
Schedule will not have a Material Adverse Effect on the business, operations,
assets, condition or prospects of ANCHA.
(c) Except as set forth in Part 3.16(c) of the Disclosure
Schedule, and except for such Orders as could not reasonably be expected to have
a Material Adverse Effect with respect to ANCHA, the Included Assets and/or the
Business:
(i) there is no Order to which ANCHA, or any of the assets
owned or used by ANCHA, is subject;
(ii) neither Seller nor Shareholder is subject to any
Order that relates to the Business of, or any of the Included
Assets owned or used by, ANCHA; and
(iii) no officer or director of ANCHA is subject to any
Order that prohibits such officer or director from engaging in
or continuing any conduct, activity or practice relating to
the business of ANCHA.
(d) Except as set forth in Part 3.16(d) of the Disclosure
Schedule, and where the breach of the following representations could not
reasonably be expected to have a Material Adverse Effect with respect to ANCHA,
the Included Assets and/or the Business:
(i) ANCHA is, and at all times since January 1, 1995 has
been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets
owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of
time) a violation of or failure to comply with any term or
requirement of any Order to which ANCHA, or any of the assets
owned or used by ANCHA, is subject; and
(iii) ANCHA has no Knowledge regarding any actual,
alleged, possible or potential violation of, or failure to
comply with, any term or requirement of any Order to which
ANCHA, or any of the Included Assets owned or used by ANCHA,
is or has been subject.
3.17 Absence of Certain Changes and Events. Except as set forth in Part 3.17 of
the Disclosure Schedule, since the date of the 1998 Balance Sheet, ANCHA has
conducted its businesses only in the ordinary course of business and there has
not been any:
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(a) change in ANCHA's authorized or issued share capital;
grant of any option or right to purchase share capital of ANCHA; issuance of any
security convertible into or exchangeable for such share capital; grant of any
registration rights; purchase, redemption, retirement or other acquisition by
ANCHA of any shares of any such share capital; or declaration or payment of any
dividend or other distribution or payment in respect of share capital;
(b) amendment to the Organizational Documents of ANCHA;
(c) declaration, setting aside or payment of any dividend or
distribution or making or agreeing to make any other distribution or payment in
respect of its capital shares or redemption, purchase or other acquisition or
agreement to redeem, purchase or acquire any of its capital shares;
(d) increase by ANCHA in any bonuses, salaries or other
compensation to any shareholder, director, officer or (except in the ordinary
course of business) employee or entry into any employment, severance or similar
Contract with any director, officer or employee;
(e) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement or other employee benefit plan for or with any employees of
ANCHA;
(f) damage, destruction or loss, whether or not covered by
insurance, (i) materially and adversely affecting its business, operations,
assets, properties or prospects or (ii) of any item or items carried on its
books of account individually or in the aggregate of more than $25,000 or
suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit or similar agreement or (ii) any Applicable Contract or
transaction involving a total remaining commitment by or to ANCHA of at least
$25,000;
(h) sale (other than sales of inventory or obsolete equipment
in the ordinary course of business), lease or other disposition of any asset or
property of ANCHA or mortgage, pledge or imposition of any lien or other
encumbrance on any material asset or property of ANCHA, including the sale,
lease or other disposition of any of the Intellectual Property Assets;
(i) making or suffering any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound (except for change orders that occur in the ordinary
course of business), or cancellation, modification or waiver of any substantial
debts or claims held by it or waiver of any rights of substantial value, whether
or not in the ordinary course of business, other than with the prior written
consent of PRG;
24
(j) material change in the accounting methods used by ANCHA;
(k) incurrence of any liabilities, other than liabilities
incurred in the ordinary course of business consistent with past practice, or
discharge or satisfaction of any lien or encumbrance, or payment of any
liabilities, other than in the ordinary course of business consistent with past
practice, or failure to pay or discharge when due any liabilities of which the
failure to pay or discharge has caused or will cause any material damage or risk
of material loss to it or any of its assets or properties other than with the
prior written consent of PRG;
(l) creation of, incurrence, assumption or guarantee of any
indebtedness for money borrowed, or mortgaging, pledging or subjecting of any of
its assets to any mortgage, lien, pledge, security interest, conditional sales
contract or other encumbrance of any nature whatsoever, except for Permitted
Liens, other than with the prior written consent of PRG; for purposes of this
Section 3.17, "Permitted Liens" shall mean (a) liens for current real or
personal property taxes not yet due and payable, (b) liens disclosed in Section
3.17 of the Disclosure Schedule, (c) statutory liens for amounts not yet due and
payable, and (d) liens that individually and in the aggregate are immaterial in
character, amount, and extent, and which do not detract from the value or
interfere with the present or proposed use of the properties they affect, (e)
liens incurred in the ordinary course of business;
(m) event which has caused a Material Adverse Effect with
respect to ANCHA, the ANCHA Shares or any Shareholder with respect to such
Shareholder's interest in ANCHA Shares;
(n) commitment or agreement for capital expenditures or
capital additions or betterments except such as may be involved in ordinary
repair, maintenance or replacement of its assets, other than with the prior
written consent of PRG;
(o) notice or actual Knowledge of any actual or threatened
labor trouble, strike or other occurrence, event or condition of any similar
character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects; or
(p) agreement, whether oral or written, by ANCHA to do any of
the foregoing.
25
3.18 Contracts; No Defaults.
(a) Part 3.18(a) of the Disclosure Schedule contains a
complete and accurate list, and Seller has delivered to PRG true and complete
copies, of:
(i) each Contract or group of related Contracts that
involves performance of services or delivery of goods or
materials by ANCHA of an amount or value in excess of $25,000;
(ii) each Contract or group of related Contracts that
was not entered into by ANCHA in the ordinary course of
business and that involves expenditures or receipts of or by
ANCHA in excess of $25,000;
(iii) each Contract or group of related Contracts,
including each lease, rental or occupancy agreement, license,
installment and conditional sale agreement entered into by
ANCHA affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or
personal property (except personal property leases and
installment and conditional sales agreements having unpaid a
value per item or aggregate payments of less than $25,000 and
with terms of less than one year);
(iv) each mortgage, indenture, credit agreement,
letter of credit or other financing agreement;
(v) each licensing agreement or other Contract or
group of related Contracts made by ANCHA with respect to
patents, trademarks, copyrights or other intellectual
property, including agreements with current or former
employees, consultants or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other
Contract or group of related Contracts entered into by ANCHA
to or with any labor union or other employee representative of
a group of employees;
(vii) each joint venture, partnership and other
Contract or group of related Contracts (however named) entered
into by ANCHA involving a sharing of profits, losses, costs or
liabilities by ANCHA with any other Person;
(viii) each Contract or group of related Contracts
entered into by ANCHA containing covenants that in any way
purport to materially restrict the business activity of ANCHA
or any Related Person of ANCHA or materially limit the freedom
26
of ANCHA or any Related Person of ANCHA to engage in any line
of business or to compete with any Person;
(ix) each Contract or group of related Contracts
entered into by ANCHA providing for payments to or by any
Person based on sales, purchases or profits, other than direct
payments for goods;
(x) each power of attorney granted by ANCHA that is
currently effective and outstanding;
(xi) each Contract or group of related Contracts
entered into by ANCHA other than in the ordinary course of
business that contains or provides for an express undertaking
by ANCHA to be responsible for consequential damages;
(xii) each Contract or group of related Contracts
entered into by ANCHA for capital expenditures in excess of
$25,000;
(xiii) each written warranty, guaranty and other
similar undertaking with respect to contractual performance
extended by ANCHA; and
(xiv) each amendment, supplement and modification
(whether oral or written) in respect of any of the foregoing.
Part 3.18(a) of the Disclosure Schedule sets forth reasonably
complete details concerning such Contracts or group of related Contracts,
including the parties to the Contracts and the amount of the remaining
commitment of ANCHA under the Contracts.
(b) Except as set forth in Part 3.18(b) of the Disclosure
Schedule, to the Knowledge of Shareholders and ANCHA, no officer or director of
ANCHA is bound by any Contract that purports to limit the ability of such
officer or director to (i) engage in or continue any conduct, activity or
practice relating to the business of ANCHA or (ii) assign to ANCHA or to any
other Person any rights to any invention, improvement or discovery.
(c) Except as set forth in Part 3.18(c) of the Disclosure
Schedule, each Contract identified or required to be identified in Part 3.18(a)
of the Disclosure Schedule is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.18(d) of the Disclosure
Schedule:
(i) ANCHA is in full compliance with all applicable
terms and requirements of each Applicable Contract under which
ANCHA has any obligation
27
or liability or by which ANCHA or any of the assets owned or
used by ANCHA is bound;
(ii) ANCHA has no Knowledge that any other Person
that has any obligation or liability under any Applicable
Contract under which ANCHA has any rights is not in full
compliance with all applicable terms and requirements of such
Applicable Contract, in all material respects;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene,
conflict with, or result in a material violation or breach of,
or give ANCHA or other Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Applicable Contract; and
(iv) ANCHA has not given to or received from any
other Person, any notice or other communication (whether oral
or written) regarding any actual, alleged, possible or
potential violation or breach of, or default under, any
Applicable Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to
ANCHA under current or completed Applicable Contracts with any Person and no
such Person has made written demand for such renegotiation.
(f) The Applicable Contracts relating to the sale, design,
manufacture or provision of products or services by ANCHA have been entered into
in the ordinary course of business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement.
3.19 Insurance.
(a) Seller has delivered to PRG:
(i) true and complete copies of all policies of
insurance to which ANCHA is a party or under which ANCHA, or
any director or officer of ANCHA in their capacity as such, is
or has been covered at any time within the three years
preceding the date of this Agreement; and
(ii) true and complete copies of all pending
applications for policies of insurance.
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(b) Part 3.19(b) of the Disclosure Schedule describes:
(i) any self-insurance arrangement by or affecting
ANCHA, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk by
ANCHA; and
(iii) all obligations of ANCHA to third parties with
respect to insurance (including such obligations under leases
and service agreements) and identifies the policy under which
such coverage is provided.
(c) Part 3.19(c) of the Disclosure Schedule sets forth, by
year, for the current policy year and each of the three preceding policy years:
(i) a summary of the loss experience under each
policy other than health and dental policies;
(ii) a statement describing each closed claim under
each such insurance policy that resulted in a payment in an
amount in excess of $25,000 during such period, and each open
claim under each such insurance policy with respect to which a
reserve in excess of $25,000 has been established by the
insurer, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer,
type of insurance and period of coverage; and
(C) the amount and a brief description of
the claim; and
(iii) a statement describing the loss experience for
all claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth on Part 3.19(d) of the Disclosure
Schedule:
(i) All policies to which ANCHA is a party or that
provide coverage to either Seller, Shareholders, or any
director or officer of ANCHA:
(A) are valid, outstanding and enforceable;
(B) are issued by an insurer that, to the
Knowledge of Seller and ANCHA, is financially sound
and reputable;
29
(C) taken together, provide, in the
reasonable opinion of Seller reasonable insurance
coverage for the assets and the operations of ANCHA;
(D) are sufficient for compliance with all
Legal Requirements and Applicable Contracts to which
ANCHA is a party or by which any of them is bound;
(E) will continue in full force and effect
following the consummation of the transactions
contemplated hereby; and
(F) do not provide for any retrospective
premium adjustment or other experienced-based
liability on the part of ANCHA.
(ii) ANCHA has not received, with regard to any
policies described in this Section 3.19 (A) any refusal of
coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or
any other indication that any insurance policy is no longer in
full force or effect or will not be renewed or that the issuer
of any policy is not willing or able to perform its
obligations thereunder other than those that have been
replaced or allowed to intentionally lapse.
(iii) ANCHA has paid all premiums due, and has
otherwise performed all of their respective obligations, under
each policy to which ANCHA is a party or that provides
coverage to ANCHA or director thereof.
(iv) ANCHA has given notice to the insurer of all
claims that may be insured thereby.
3.20 Environmental Matters. Except as set forth in Part 3.20 of the
Disclosure Statement:
(a) ANCHA is, and at all times has been, in material
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. No Seller or Group Company has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may be held to
be responsible received, any actual or Threatened order, notice or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal or mixed) in which Seller or ANCHA has had an interest, or with respect
to any property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used or processed by Seller,
30
ANCHA, or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled or received.
(b) ANCHA is not aware of, nor has it received notice of,
pending or Threatened claims, Encumbrances, or other restrictions of any nature,
resulting from any Environmental, Health and Safety Liabilities or arising under
or pursuant to any Environmental Law, with respect to or affecting any of the
Facilities or any other properties and assets (whether real, personal or mixed)
in which Seller or ANCHA has or had an interest.
(c) ANCHA does not have Knowledge of any basis to expect, nor
has any of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning or other communication that relates to Hazardous Activity, Hazardous
Materials, or any alleged, actual or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual or potential obligation to
undertake or bear the cost of any Environmental, Health and Safety Liabilities
with respect to any of the Facilities or any other properties or assets (whether
real, personal or mixed) in which Seller or ANCHA had an interest, or with
respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used or processed by Seller,
ANCHA, or any other Person for whose conduct they are or may be held
responsible, has been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(d) Neither ANCHA, Shareholders, or any other Person for whose
conduct they are or may be held responsible, has any Environmental, Health and
Safety Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal or mixed) in which Seller or ANCHA
(or, to the Knowledge of Seller and ANCHA, any predecessor), has or had an
interest, or at any property geologically or hydrologically adjoining the
Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or at any geologically or hydrologically adjoining
property, including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps or any other part of the Facilities
or such adjoining property, or incorporated into any structure therein or
thereon. No Seller, Group Company, any other Person for whose conduct they are
or may be held responsible, or to the Knowledge of Seller and ANCHA, any other
Person, has permitted or conducted, or is aware of, any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal or mixed) in which Seller or ANCHA has or had an
interest except in full compliance with all applicable Environmental Laws.
(f) There has been no Release or, Threat of Release, of any
Hazardous Materials at or from the Facilities or at any other locations where
any Hazardous Materials were generated, manufactured, refined, transferred,
31
produced, imported, used or processed from or by the Facilities, or from or by
any other properties and assets (whether real, personal or mixed) in which
Seller or ANCHA has or had an interest, or to the Knowledge of Seller and ANCHA
any geologically or hydrologically adjoining property, whether by Seller, ANCHA,
or any other Person.
(g) Seller has delivered to PRG true and complete copies and
results of any reports, studies, analyses, tests or monitoring possessed or
initiated by Seller pertaining to Hazardous Materials or Hazardous Activities
in, on or under the Facilities, or concerning compliance by Seller, or any other
Person for whose conduct they are or may be held responsible, with Environmental
Laws.
3.21 Employees.
(a) Part 3.21(a) of the Disclosure Schedule contains a
complete and accurate list of the following information for each employee or
director of ANCHA, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since January 1, 1998; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under ANCHA's pension or
other employee benefit plan.
(b) To the Knowledge of ANCHA , no officer, senior employee or
director of ANCHA is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition or proprietary rights
agreement, between such employee or director and any other Person ("Proprietary
Rights Agreement") that in any way materially adversely affects or will
materially affect (i) the performance of his duties as an officer, senior
employee or director of ANCHA, or (ii) the ability of ANCHA to conduct its
business, including any Proprietary Rights Agreement with ANCHA by any such
officer, senior employee or director. To Seller's Knowledge, no director,
officer or other key employee of ANCHA intends to terminate his employment with
ANCHA.
(c) Part 3.21 of the Disclosure Schedule also contains a
complete and accurate list of the following information for each retired
employee or director of ANCHA, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election and other benefits.
32
3.22 Labor Relations; Compliance. Except as set forth on Part 3.22 of the
Disclosure Schedule, since January 1, 1995, ANCHA has not been a party to any
collective bargaining or other labor Applicable Contract. Since January 1, 1995,
there has not been, and there is not presently pending, existing or Threatened
against ANCHA, (a) any strike, slowdown, picketing, work stoppage or employee
grievance process or (b) any Proceeding against or affecting ANCHA relating to
the alleged violation of any Legal Requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with any Governmental Body, organizational activity, or other labor or
employment dispute against or affecting ANCHA or their premises, and to Seller's
Knowledge no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. ANCHA has complied in all
material respects with all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health and plant closing. ANCHA is not liable for the
payment of any compensation, damages, taxes, fines, penalties or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.23 Intellectual Property.
(a) The term "Intellectual Property Assets" means:
(i) the name "ANCHA Electronics," all fictional
business names, trading names, registered and unregistered
trademarks, service marks and applications (collectively,
"Marks");
(ii) all patents, patent applications and inventions
and discoveries that may be patentable (collectively,
"Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights
in Mask Works"); and
(v) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings and blue prints
(collectively, "Trade Secrets");
in each case, owned, used or licensed by ANCHA as
licensee or licensor.
(b) Part 3.23(b) of the Disclosure Schedule contains a
complete and accurate list and summary description, including any royalties paid
or received by ANCHA, of all Applicable Contracts relating to the Intellectual
Property Assets to which ANCHA is a party or by which ANCHA is bound, except for
any license implied by the sale of a product and perpetual, paid-up licenses for
33
commonly available software programs with a value of less than $500 under which
ANCHA is the licensee. There are no outstanding and or Threatened disputes or
disagreements with respect to any such agreement.
(c) Know-How Necessary for the Business.
The Intellectual Property Assets are all those
necessary for the operation of ANCHA's Business as currently
conducted. ANCHA is the owner of all right, title and interest
in and to each of the Intellectual Property Assets claimed by
ANCHA to be owned by it, free and clear of all liens, security
interests, charges, encumbrances, equities and other adverse
claims, and has the right to use without further payment to a
third party all of the Intellectual Property Assets.
(d) Patents.
(i) Part 3.23(d) of the Disclosure Schedule contains
a complete and accurate list and summary description of all
Patents claimed by ANCHA to be owned by it. ANCHA is the owner
of all right, title and interest in and to each of the Patents
claimed by ANCHA to be owned by it, free and clear of all
liens, security interests, charges, encumbrances, entities and
other adverse claims.
(ii) All of the issued Patents are currently in
compliance with formal legal requirements (including payment
of filing, examination and maintenance fees and proofs of
working or use), are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling
due within ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination or opposition proceeding.
To ANCHA's Knowledge, there is no potentially interfering
patent or patent application of any third party. The
Disclosure Schedule indicates all non-infringement opinions
received by ANCHA.
(iv) No Patent is infringed or, to Seller's
Knowledge, has been challenged or Threatened in any way. None
of the products manufactured and sold, nor any process or
know-how used, by ANCHA infringes or is alleged to infringe
any patent or other proprietary right of any other Person.
(v) All products made, used or sold under the Patents
have been marked with the proper patent notice.
(e) Trademarks.
34
(i) Part 3.23(e) of Disclosure Schedule contains a
complete and accurate list and summary description of all
Marks claimed by ANCHA to be owned by it and of all
jurisdictions in which the Marks have been registered. ANCHA
is the owner of all right, title and interest in and to each
of the Marks, free and clear of all liens, security interests,
charges, encumbrances, equities and other adverse claims.
(ii) All Marks claimed by ANCHA to be owned by it
that have been registered are currently in compliance with all
formal Legal Requirements (including the timely
post-registration filing of affidavits of use and
incontestability and renewal applications), are valid and
enforceable.
(iii) No Xxxx has been or is now involved in any
opposition, invalidation or cancellation and, to Seller's
Knowledge, no such action is Threatened with the respect to
any of the Marks.
(iv) To ANCHA's Knowledge, there is no potentially
interfering trademark or trademark application of any third
party.
(v) No Xxxx is infringed or, to ANCHA's Knowledge,
has been challenged or Threatened in any way, and none of the
Marks used by ANCHA infringes or is alleged to infringe any
trade name, trademark, or service xxxx of any third party.
(vi) All products and materials containing a Xxxx
xxxx the proper registration notice where permitted by law
except where the failure to bear such Xxxx would not have a
Material Adverse Effect.
(f) Copyrights.
(i) Part 3.23(f) of the Disclosure Schedule contains
a complete and accurate list and summary description of all
Copyrights claimed by ANCHA to be owned by it. ANCHA is the
owner of all right, title and interest in and to each of such
Copyrights, free and clear of all liens, security interests,
charges, encumbrances, equities and other adverse claims.
(ii) All the Copyrights have been registeredand are
currently in compliance with formal Legal Requirements, are
valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after
the date of Closing.
(iii) No Copyright is infringed or, to Seller's
Knowledge, has been challenged or Threatened in any way, and
none of the subject matter of any of the Copyrights infringes
35
or is alleged to infringe any copyright of any third party or
is a derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have
been marked with the proper copyright notice law except where
the failure to do so would not have a Material Adverse Effect.
(g) Trade Secrets.
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is current,
accurate and sufficient in detail and content to identify and
explain it and to allow its full and proper use without
reliance on the Knowledge or memory of any individual.
(ii) ANCHA has taken all reasonable precautions to
protect the secrecy, confidentiality and value of such Trade
Secrets.
(iii) ANCHA has good title and an absolute (but not
necessarily exclusive) right to use such Trade Secrets. Such
Trade Secrets are not part of the public knowledge or
literature, and, to ANCHA's Knowledge, have not been used,
divulged or appropriated either for the benefit of any Person
(other than ANCHA) or to the detriment of ANCHA. No such Trade
Secret is subject to any adverse claim or has been challenged
or threatened in any way.
(iv) None of the Intellectual Property Assets used by
Ancha in conducting its Business are owned by the Shareholders
or Related Persons or immediate family of Shareholders.
3.24 Certain Payments. Since January 1, 1995, neither ANCHA nor any of its
directors, officers, agents or employees, or to Seller's Knowledge any other
Person associated with or acting for or on behalf of ANCHA, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, private or public, regardless
of form, whether in money, property or services, which could reasonably be
expected to cause PRG or ANCHA to incur any liabilities (which liabilities would
have a Material Adverse Effect) (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained, for or
in respect of ANCHA or any Related Person of ANCHA or (iv) in violation of any
Legal Requirement; or (b) established or maintained any fund or asset that has
not been recorded in the books and records of ANCHA.
36
3.25 Additional Information. Part 3.25 of the Disclosure Schedule contains
complete and accurate lists and summary descriptions of the following:
(a) all inventory, equipment and furniture and fixtures of
ANCHA included in the 1998 Balance Sheet, specifying such items as are owned and
such as are leased and, with respect to the owned property, specifying its net
book value as such date and, with respect to the leased property as to which a
Group Company is lessee, specifying the identity of the lessor, the rental rate
and the unexpired term of the lease;
(b) all names under which ANCHA has conducted any business
during the last five years; and
(c) lists of ANCHA's current customers and vendors.
3.26 Disclosure.
(a) No representation or warranty of Shareholders or ANCHA in
this Agreement and no statement in the Disclosure Schedule omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading.
(c) There is no fact known to either Seller or Shareholder
that has specific application to ANCHA (other than general economic or industry
conditions) and that has resulted in a Material Adverse Effect with respect to
ANCHA, the Included Assets and/or the Business or, as far as either Seller or
Shareholder can reasonably foresee, could result in a Material Adverse Effect
with respect to ANCHA, the Included Assets and/or the Business, that has not
been set forth in this Agreement or the Disclosure Schedule.
3.27 Relationships with Related Persons. Except as set forth in Part 3.27 of the
Disclosure Schedule or for relationships arising solely as a result of the
Shareholder's ownership interests in ANCHA, no Shareholder or any Related Person
of Seller has, or since January 1, 1995 has had, any interest in any property
(whether real, personal or mixed and whether tangible or intangible), used in or
pertaining to ANCHA's businesses. Except as set forth in Part 3.27 of the
Disclosure Schedule, no Shareholder or any Related Person of Seller is, or since
January 1, 1995 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with ANCHA
or (ii) engaged in competition with ANCHA with respect to any line of the
products or services of ANCHA (a "Competing Business") in any market presently
37
served by ANCHA except for passive investments in less than one percent of the
outstanding share capital of any Competing Business that is publicly traded on
any recognized exchange or in an over-the-counter market. Except as set forth in
Part 3.27 of the Disclosure Schedule, no Shareholder or any Related Person of
Seller is a party to any Applicable Contract with, or has any claim or right
against, ANCHA.
3.28 Brokers or Finders. ANCHA has not utilized the services of any broker or
finder and shall hold PRG harmless against any claim therefor related to the
transactions contemplated by this Agreement.
3.29 Investment Representations.
Seller represents and warrants to PRG that Seller:
(a) He will be purchasing the Preferred Units for his own
account without the participation of any other Person, with the intent of
holding the Preferred Units for investment and without the intent of
participating, directly or indirectly, in a distribution of the Preferred Units
and not with a view to, or for resale in connection with, any distribution of
the Preferred Units or any portion thereof;
(b) He can sustain a complete loss of this investment in the
Preferred Units and has no need for liquidity in this investment;
(c) He will have evaluated the risk of investing in the
Preferred Units and will be acquiring the Preferred Units based only upon His
independent examination and judgment as to the prospect of the Company as
determined from information obtained directly by him from the Company or Related
Persons thereof;
(d) It is domiciled in the state of Illinois and shall advise
PRG immediately prior to its purchase of the Preferred Units if its state of
organization changes; and
(e) It qualifies as an "accredited investor" as defined in
Regulation D promulgated pursuant to the Act.
(f) Seller has received and reviewed a copy of PRG's
Registration Statement on Form S-4 and such other materials pertaining to PRG as
Seller desires and has been provided sufficient opportunity to question members
of the management of PRG.
38
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
PRG represents and warrants to ANCHA and Shareholders as follows:
4.1 Organization and Good Standing.
(a) Standing. PRG is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
(b) Copies of the Organization Documents of PRG as currently in
effect have been filed as exhibits to PRG's filings with the Securities &
Exchange Commission..
4.2 Authority; No Conflict.
(a) The execution, delivery and performance of this Agreement
by PRG have been duly authorized by all necessary action of PRG and its members
and managers. This Agreement has been duly executed and delivered by PRG and
constitutes the legal, valid and binding obligation of PRG enforceable against
PRG in accordance with its terms. PRG has the absolute and unrestricted right,
power and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement except as specifically set forth herein.
(b) Except as set forth in Section 7.4 hereof, neither the
execution and delivery of this Agreement by PRG nor the consummation or
performance of any of PRG's obligations herein or transactions contemplated
hereby by PRG will give any Person the right to prevent, delay or otherwise
interfere with any of the transactions contemplated hereby pursuant to:
(i) any provision of PRG's Organizational Documents;
(ii) any resolution adopted by the board of advisors,
managers or the members of PRG;
(iii) any Legal Requirement or Order to which PRG may
be subject; or
(iv) any Applicable Contract to which PRG is a party
or by which PRG may be bound.
39
(c) Except as set forth in Section 7.4 hereof, PRG is not and
will not be required to obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the transactions contemplated hereby.
4.3 Certain Proceedings. There is no pending Proceeding that has been
commenced against PRG and that challenges, or may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of
the transactions contemplated hereby. To PRG's Knowledge, no such
Proceeding has been Threatened.
4.4 Disclosure. No representation or warranty of PRG in this Agreement omits
to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not
misleading.
4.5 Brokers or Finders. PRG has not utilized the services of any broker or
finder and shall hold ANCHA and Shareholders harmless against any claim
therefor related to the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF SELLER PRIOR TO CLOSING DATE
-----------------------------------------
5.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, so long as PRG is not in breach or default under this
Agreement, Seller will, and will cause ANCHA and its Representatives to,
(a) afford PRG and its Representatives and prospective lenders and their
Representatives (collectively, "PRG's Advisors") reasonable access to
ANCHA's Facilities to the extent ANCHA has a right thereto (including
subsurface testing), provided that such access does not interfere with
Seller's conduct of its business and provided that PRG's advisors do not
call attention to themselves, contracts, books and records, and other
documents and data, (b) furnish PRG and PRG's Advisors with copies of all
such contracts, books and records, and other existing documents and data
as PRG may reasonably request and (c) furnish PRG and PRG's Advisors with
such additional financial, operating and other data and information as PRG
may reasonably request.
5.2 Operation of the Businesses of ANCHA. Between the date of this Agreement
and the Closing Date, Seller will, and will cause ANCHA to:
(a) conduct the business of ANCHA only in the ordinary course
of business;
(b) not declare, set aside or pay any dividend or distribution
or make or agree to make any other distribution or payment in respect of its
capital shares or redeem, purchase or otherwise acquire or agree to redeem,
purchase or acquire any of its capital shares;
40
(c) use their best efforts to preserve intact the current
business organization of ANCHA, keep available the services of the current
officers, employees and agents of ANCHA, and maintain the relations and good
will with suppliers, customers, landlords, creditors, employees, agents and
others having business relationships with ANCHA;
(d) not enter into any commitments or arrangements with new
distributors, sales agents or licensees or modify in any material respect or
terminate existing relationships with distributors, sales agents or licensees,
in all cases, without PRG's consent;
(e) confer with PRG concerning operational matters of a
material nature, including regarding any material negotiations or other material
communications relating to any commitment or arrangement with distributors,
sales agents and licensees or the modification or termination of any existing
relationship with any distributor, sales agent or licensee;
(f) otherwise report periodically to PRG concerning the status
of the business, operations and finances of ANCHA; and
(g) notify PRG of any changes in the terms of the insurance
policies and binders referred to on the insurance portion of the Disclosure
Schedule.
5.3 Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not, without the prior consent of PRG, take any affirmative action, or fail to
take any reasonable action within its control, as a result of which any of the
changes or events listed in Section 3.17 is likely to occur.
5.4 Required Approvals. As promptly as practicable after the date of this
Agreement, Seller will make all filings required by Legal Requirements to be
made by it in order to consummate the transactions contemplated hereby. Between
the date of this Agreement and the Closing Date, Seller will (a) cooperate with
PRG with respect to all filings that PRG elects to make or is required by Legal
Requirements to make in connection with the transactions contemplated hereby,
and (b) cooperate with PRG in obtaining all consents identified in Section 7.4
hereof.
5.5 Notification. Between the date of this Agreement and the Closing Date,
Seller will promptly notify PRG in writing if Seller becomes aware of any fact
or condition that causes or constitutes a breach of any of Seller's
representations and warranties as of the date of this Agreement, or if Seller
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Schedule if the Disclosure Schedule were dated the date of the
occurrence or discovery of any such fact or condition, Seller will promptly
deliver to PRG a supplement to the Disclosure Schedule specifying such change,
41
which change shall be included in the Disclosure Schedule only upon PRG's
written consent to such inclusion. During the same period, Seller will promptly
notify PRG of the occurrence of any breach of any covenant of Seller in this
Article 5 or of the occurrence of any event that may make the satisfaction of
the conditions in Article 7 impossible or unlikely.
5.6 Payment of Indebtedness by Related Persons. Seller will cause all
indebtedness owed to ANCHA by any Seller or any Related Person of any Seller to
be paid in full prior to Closing.
5.7 No Negotiation. Until such time, if any, as this Agreement is terminated
pursuant to Article 10, neither the Seller nor Shareholders will, and, they will
ensure that their Related Persons and their respective officers, employees,
agents and representatives will not, directly or indirectly (a) enter into any
agreement or arrangement involving the possible acquisition of any shares or
material assets of ANCHA (other than sales of inventory in the ordinary course
of business), (b) solicit or encourage offers from, engage in any discussion
with, or provide any financial or other ANCHA information to, any Person
relating to any such acquisition, or (c) respond to any inquiries from any
Person relating to any such acquisition except to inform such Person that
discussions are under way with another party, without naming PRG.
5.8 Best Efforts. Between the date of this Agreement and the Closing Date,
Seller and Shareholders will use their best efforts to cause the conditions in
Articles 7 and 8 to be satisfied.
ARTICLE 6
COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
--------------------------------------------
6.1 Approvals of Governmental Bodies. As promptly as practicable after the date
of this Agreement, PRG will, and will cause each of its Related Persons to, make
all filings required by Legal Requirements to be made by them to consummate the
transactions contemplated hereby. Between the date of this Agreement and the
Closing Date, PRG will, and will cause each Related Person to, cooperate with
Seller with respect to all filings that Seller is required by Legal Requirements
to make in connection with the transactions contemplated hereby, and cooperate
with Seller in obtaining all consents identified in Section 2.3; provided that
this Agreement will not require PRG to dispose of or make any change in any
portion of its business or to incur any other burden to obtain a Governmental
Authorization. As promptly as practicable after the date of this Agreement, if
not done previously, PRG will use commercially reasonable efforts to obtain the
consent of the required banks under PRG's credit agreement with The Bank of New
York, as agent for the consummation of the transactions contemplated by this
Agreement.
6.2 Best Efforts. Subject to the provisions of Section 6.1, between the date of
this Agreement and the Closing Date, PRG will use its best efforts to cause the
conditions in Articles 7 and 8 to be satisfied.
42
6.3 Non-Disclosure. PRG is subject to the terms of a certain confidentiality
agreement with Seller dated December 23, 1998 which remains in full force and
effect. PRG shall not breach or default under said confidentiality agreement.
6.4 Notification. Between the date of this Agreement and the Closing Date, PRG
will promptly notify Seller in writing if PRG becomes aware of any fact or
condition that causes or constitutes a breach of any of PRG's or Seller's
representations and warranties as of the date of this Agreement, or if PRG
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, PRG will promptly notify
Seller of the occurrence of any breach of any covenant of PRG in this Article 6
or of the occurrence of any event that may make the satisfaction of the
conditions in Article 8 impossible or unlikely.
ARTICLE 7
CONDITIONS PRECEDENT TO PRG'S OBLIGATION TO CLOSE
-------------------------------------------------
PRG's obligation to purchase the Included Assets and to take
the other actions required to be taken by PRG at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by PRG, in whole or in part):
7.1 Accuracy of Representation. Seller's representation set forth in Section
3.17(m) shall be true, correct and accurate in all respects as of the
Closing Date as if made on the Closing Date; provided, however, that for
the purposes of this Section 7.1, the term Material Adverse Effect shall
mean a diminution in the value of ANCHA, the Included Assets and/or the
Business in an amount equal to at least $200,000.
7.2 Disclosure Schedule. Any information, changes or supplement to the
Disclosure Schedule must be consented to by PRG. If PRG and Seller cannot
mutually agree, in whole or part, upon an amendment to the Disclosure
Schedule, PRG's sole remedy shall be to terminate this Agreement. If in
any such event this Agreement is not so terminated then such disputed
Disclosure Schedule or the disputed portion thereof shall be deemed to be
consented to.
43
7.3 Seller's Performance.
(a) Each of the covenants and obligations that Seller are required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
must have been duly performed and complied with.
(b) Each document required to be delivered pursuant to Section 2.2 must
have been delivered.
7.4 Consents. PRG shall have obtained the consent of the Required Lenders, as
defined in PRG's Credit Agreement with The Bank of New York, as agent.
7.5 No Proceedings. Since the date of this Agreement, there must not have been
commenced or Threatened against Seller, or against any person affiliated
with Seller, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions
contemplated hereby or (b) that may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the
transactions contemplated hereby.
7.6 No Prohibition. Neither the consummation nor the performance of any of the
transactions contemplated hereby will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with,
or result in a material violation of, or cause PRG or any Person
affiliated with PRG to suffer any Material Adverse Effect, as defined in
Section 7.1 above, under (a) any applicable Legal Requirement or Order or
(b) any Legal Requirement or Order that has been published, introduced or
otherwise formally proposed by or before any Governmental Body.
ARTICLE 8
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
----------------------------------------------------
Seller's obligations to sell the Included Assets and the
obligations of Seller and Shareholders to take the other actions required to be
taken by them at the Closing are subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
them, in whole or in part):
8.1 Accuracy of Representations. Each of PRG's representations and warranties in
this Agreement must be true, correct and accurate as of the Closing Date as if
made on the Closing Date.
44
8.2 PRG's Performance.
(a) Each of the covenants and obligations that PRG is
required to perform or to comply with pursuant to
this Agreement at or prior to the Closing must have
been performed and complied with in all material
respects.
(b) PRG must have paid the Cash Portion, made the Escrow
Deposit required pursuant to Section 1.6(ii), and
paid to Xxxxxx Bank the sums described in Section
1.8(b).
(c) PRG shall have delivered the Preferred Units and each
of the documents or other items required by Section
2.2.
8.3 No Proceedings. Since the date of this Agreement, there must not have been
commenced or Threatened against PRG, or against any Person affiliated with
PRG, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the transactions contemplated
hereby, or (b) that may have the effect of preventing, delaying, making
illegal or otherwise interfering with any of the transactions contemplated
hereby.
ARTICLE 9
CONDITIONS PRECEDENT TO PURCHASER'S
-----------------------------------
OBLIGATION TO MAKE EARN OUT PAYMENT
-----------------------------------
PRG's obligation to make the Earn Out Payment and to take the
other actions required to be taken by PRG on the applicable Earn Out Date, is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by PRG in whole or in part):
9.1 Conditions to Closing. The Closing shall have occurred.
9.2 Seller's Performance. If Seller or any Shareholder shall be in default or
breach of any covenant or agreement other than a covenant or agreement not
to compete contained herein or in any employment agreement with ANCHA or
PRG, after giving effect to any cure provision in any such employment
agreement, any Earn Out Payment due to Seller shall be offset by the
amount of Damages incurred by PRG. If Seller or any Shareholder shall be
in default or breach of any covenant or agreement not to compete contained
herein or in any employment agreement with ANCHA or PRG, after giving
effect to any cure provision in any such employment agreement, the
following shall apply:
45
(a) if such breach is committed by Seller and/or both
Shareholders, PRG shall have no obligation to make
any Earn Out Payment due thereafter whatsoever; and
(b) if such breach is committed by only one of the
Shareholders, PRG shall have no obligation to make
such portion of any Earn Out Payment due thereafter
as shall equal such Shareholder's Percentage Interest
as of the date of this Agreement.
9.3 No Prohibition. The payment of the Earn Out Payment or Earn Out Payments
contemplated hereby will not, directly or indirectly (with or without notice or
lapse of time) violate any law or regulation applicable to PRG. Furthermore, the
payment of any Earn Out Payment shall not be prohibited by the terms of PRG's
credit agreement with The Bank of New York, as agent (or with any substitute
senior institutional lender) nor shall the making of any such payment cause a
default thereunder; provided however, if any Earn Out Payment is so prohibited,
such Earn Out Payment shall bear interest from and after the date first due
until the date paid at an interest rate equivalent to the rate payable to PRG's
senior institutional lenders ("BONY Rate"), and shall become payable at such
point when such payment is not longer so prohibited or would no longer cause
such a default.
ARTICLE 10
TERMINATION
-----------
10.1 Termination Events. This Agreement may, by notice given prior to or at
the Closing, be terminated:
(a) by PRG or Seller if a material breach of any provision of
this Agreement has been committed by the other party and such
breach has not been waived;
(b) (i) by PRG if any of the conditions in Article 7 has not been
satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the
failure of PRG to comply with its obligations under this
Agreement) and PRG has not waived such condition on or before the
Closing Date; or (ii) by Seller, if any of the conditions in
Article 8 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other
than through the failure of Seller to comply with their
obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date;
(c) by PRG in the event that Included Assets having a value
[book/market?], individually or in the aggregate, exceeding
$200,000 are destroyed or damaged by casualty or otherwise,
46
stolen or lost, or the real property that is the subject of the
Rolling Xxxxxxx Lease is substantially destroyed or damaged by
casualty or otherwise;
(d) by mutual consent of PRG and Seller; or
(e) by either PRG or Seller if the Closing has not occurred
(other than through the failure of any party seeking to terminate
this Agreement to comply fully with its obligations under this
Agreement) on or before 10 business days from the date hereof, or
such later date as the parties may agree upon.
10.2 Effect of Termination. Each party's right of termination under Section 10.1
is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 10.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 14.3 will survive; provided, however, that if this
Agreement is terminated by a party because of the breach of the Agreement by the
other party or because one or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE 11
INDEMNIFICATION; REMEDIES
-------------------------
11.1 Survival; Right to Indemnification Not Affected By Knowledge. Subject to
the time limitation set forth in Section 11.5, representations,
warranties, covenants and obligations in this Agreement, the Disclosure
Schedule, the supplements to the Disclosure Schedule, and any certificate
or document delivered pursuant to this Agreement will survive the
Closing. The waiver by PRG, at or prior to Closing, of any condition
based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, that is
known to and disclosed by PRG pursuant to Section 6.4 shall not affect
the right to indemnification, payment of Damages, or other remedy based
on such representations, warranties, covenants and obligations.
11.2 Indemnification and Payment of Damages by Shareholders. Subject to the
time limitations of Section 11.5 and to the monetary and proportionate
share limitations of Section 11.6 hereof, Seller and each Shareholder
will indemnify and hold harmless PRG, its Representatives, members,
managers, advisors, stockholders, controlling persons and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any loss, liability, claim, damage
(excluding consequential and punitive damages sustained directly by the
Indemnified Person), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether
47
or not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Seller in this Agreement without giving effect to any
supplement to the Disclosure Schedule;
(b) any breach by Seller of any covenant or obligation of
Seller in this Agreement or in any other Transaction Document;
(c) any product shipped or manufactured by, or any services
provided by, Seller prior to the Closing Date, except for
warranty work required in the ordinary course of ANCHA's
business; or
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person
with either Seller or Shareholders (or any Person acting on
their behalf) in connection with any of the transactions
contemplated hereby.
11.3 Indemnification and Payment of Damages by Seller--Environmental Matters
and Taxes. In addition to the provisions of Section 11.2 and pursuant to
this Section 11.3, Seller and each shareholder will indemnify and hold
harmless PRG, ANCHA and the other Indemnified Persons for, and will pay
to PRG and the other Indemnified Persons the amount of, any Damages
(including costs of cleanup, containment or other remediation) arising,
directly or indirectly, from or in connection with:
(a) any Environmental, Health and Safety Liabilities arising
out of or relating to: (i) the ownership, operation or
condition at any time on or prior to the Closing Date of the
Facilities or any other properties and assets (whether real,
personal or mixed and whether tangible or intangible) in which
Seller has or had an interest; (ii) any Hazardous Materials or
other contaminants that were present on the Facilities or such
other properties and assets at any time on or prior to the
Closing Date; (iii) any Hazardous Materials or other
contaminants, wherever located, that were, or were allegedly,
generated, transported, stored, treated, Released or otherwise
handled by Seller or or by any other Person for whose conduct
they are or may be held responsible at any time on or prior to
the Closing Date; or (iv) any Hazardous Activities that were,
or were allegedly, conducted by Seller or by any other Person
for whose conduct they are or may be held responsible;
(b) any bodily injury (including illness, disability and
death, and regardless of when any such bodily injury occurred,
was incurred or manifested itself), personal injury, property
damage (including trespass, nuisance, wrongful eviction and
deprivation of the use of real property), or other damage of
or to any Person, including any employee or former employee of
Seller or any other Person for whose conduct they are or may
48
be held responsible, in any way arising from or allegedly
arising from any Hazardous Activity conducted or allegedly
conducted with respect to the Facilities or the operation of
Seller prior to the Closing Date, or from Hazardous Material
that was (i) present or suspected to be present on or before
the Closing Date on or at the Facilities (or present or
suspected to be present on any other property, if such
Hazardous Material emanated or allegedly emanated from any of
the Facilities and was present or suspected to be present on
any of the Facilities on or prior to the Closing Date) or (ii)
Released or allegedly Released by Seller or any other Person
for whose conduct they are or may be held responsible, at any
time on or prior to the Closing Date.
(c) Seller and/or Shareholders shall assign to PRG any rights
they may to control any Cleanup, any related Proceeding, and,
except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought under
this Section 11.3.
11.4 Indemnification and Payment of Damages by PRG. PRG will indemnify and
hold harmless Seller and Shareholders, and will pay to Seller and
Shareholders the amount of any Damages arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty made by PRG
in this Agreement or in any certificate delivered by PRG
pursuant to this Agreement;
(b) any breach by PRG of any covenant or obligation of PRG in
this Agreement or in any other Transaction Documents;
(c) any warranty work (labor or materials) required by any
customer of Seller for goods and services to have been
provided by Seller before or after Closing in the ordinary
course of the Business;
(d) any claim by any Person against either Seller for
brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been
made by such Person with PRG (or any Person acting on its
behalf) in connection with any of the transactions
contemplated hereby; or
(e) the Assumed Liabilities.
11.5 Time Limitations. If the Closing occurs, Seller and Shareholders will
have no liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, other than those in Sections
3.2, 3.3, 3.4, 3.7, 3.12, and 3.20, unless on or before June 30, 2000 PRG
notifies Seller and Shareholders of a claim specifying the factual basis
49
of that claim in reasonable detail to the extent then known by PRG. If
the Closing occurs, PRG will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date,
unless on or before June 30, 2000, Shareholders notify PRG of a claim
specifying the factual basis of that claim in reasonable detail to the
extent then known by Shareholders. A claim with respect to Sections 3.2,
3.3, 3.4, 3.7, 3.12 or 3.20, or a claim for indemnification or
reimbursement not based upon any representation or warranty or any
covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time within the longest applicable
statute of limitations.
11.6 Limitations on Amount--Seller and Shareholders.
(a) Seller and Shareholders will have no liability (for
indemnification or otherwise) with respect to any Damages until the total of all
Damages exceeds $50,000 but shall then be liable for all Damages above $50,000
up to the maximum limitations contained herein.
(b) The maximum Damages for any breach of the representation
or warranties set forth in Sections 3.1, 3.3, 3.4, 3.7,
3.12 and 3.20 shall be an aggregate of $1,125,000.00.
(c) Except as set forth in subsection (b), the maximum Damages
for any and all breaches of the representations and warranties by Seller or
Shareholders contained herein shall be an aggregate of $500,000.
(d) Any Damages shall first be paid from the Preferred Units
(valued at the greater of their per unit liquidation preference or, if publicly
traded, their market value) and, if necessary, next from the Earn Out Payment
(to the extent then payable) before being paid from any other sources.
(e) Each Shareholder's maximum liability for Damages shall be
equal to such Shareholder's proportionate share of the $500,000 or $1,125,000.00
maximum Damages provided in this Section 11.6 based on such Shareholder's
Percentage Interest in ANCHA as of the date hereof.
(f) Notwithstanding the other provisions of this Agreement,
neither Seller nor any Shareholder shall be liable for any Damages, nor shall
any adjustment to the Purchase Price or other consideration payable to Seller be
made, solely by reason of any item or statement included in or excluded from the
Closing Date Balance Sheet.
11.7 Procedure for Indemnification--Third Party Claims.
(a) Promptly after receipt by an indemnified party of notice
of the commencement of any Proceeding against it by a third party, such
indemnified party will, if a claim is to be made against an indemnifying party
50
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnified party's failure to give
such notice.
(b) If any Proceeding is brought by a third party against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding to the extent that
it wishes unless (i) the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint representation
would be inappropriate or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding or to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Article 11 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within 30
days after such notice is given, give notice to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party will
be bound by any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party, join
in the right to defend, compromise or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
51
(d) Seller and Shareholder hereby consent to the non-exclusive
jurisdiction of any court of competent jurisdiction located in the State of New
York for purposes of any claim that an Indemnified Person may have under this
Agreement with respect to such Proceeding or the matters alleged therein, and
agree that process may be served on Seller with respect to such a claim anywhere
in the world.
11.8 Procedure for Indemnification--Other Claims. A claim for indemnification
for any matter not involving a third-party claim may be asserted by notice to
the party from whom indemnification is sought.
11.9 Payment. Upon the determination of a liability hereunder, if any party (a
"Paying Party") is required to make a payment to another party (the "Receiving
Party"), subject to the limitations of Sections 11.5 and 11.6, the Paying Party
shall make such payment within 10 days after such determination of the amount of
any claim for indemnification made hereunder. Payments of amounts owed by Seller
to PRG may be made by offsetting the amounts against any other funds payable to
Seller or the Shareholders by PRG. In the event that the Receiving Party is not
promptly paid in full for any such claim pursuant to the foregoing provisions,
it shall have the right (subject to the limitations set forth in Sections 11.5
and 11.6), notwithstanding any other rights that it may have against any other
Person or entity, to set-off the unpaid amount of any such claim against any
amounts owed by it under this Agreement or any other Transaction Document,
including, without limitation, any Earn Out Payment, as provided in Section
1.7(e). Upon the payment in full of any claim, either by set-off or otherwise,
the Paying Party shall be subrogated to the rights of the Receiving Party
against any Person or entity with respect to the subject matter of such claim.
ARTICLE 12
DEFINITIONS
-----------
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this ARTICLE 12:
12.1 "Applicable Contract" means any Contract (a) under which ANCHA has or may
acquire any rights, (b) under which ANCHA has or may become subject to any
obligation or liability or (c) by which ANCHA or any of the Included
Assets owned or used by it is or may become bound.
12.2 "ANCHA Shares" means all of Seller's issued and outstanding shares of
stock.
12.3 "Business" is defined in Recital B.
12.4 "Closing" is defined in Section 2.1.
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12.5 "Closing Date" means the date and time as of which the Closing actually
takes place.
12.6 Intentionally omitted.
12.7 "Consent" means approval, consent, ratification, waiver or other
authorization (including any Governmental Authorization).
12.8 "Contract" means any executory agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that
is legally binding on Seller.
12.9 "Damages" is defined in Section 11.2.
12.10 "Disclosure Schedule" means the disclosure schedule delivered by Seller to
PRG concurrently with the execution and delivery of this Agreement.
12.11 "Earn Out Date" is defined in Section 1.7(d).
12.12 "Earn Out Payment" is defined in Section 1.7(b).
12.13 "Earn Out Period" is defined in Section 1.7(c).
12.14 "Earn Out Target" is defined in Section 1.7(c).
12.15 "EBITDA" is defined in Section 1.7(c).
12.16 "Encumbrance" means any charge, claim, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal or
restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of
ownership.
12.17 "Environment" means soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds,
drainage basins and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal
life and any other environmental medium or natural resource.
12.18 "Environmental, Health and Safety Liabilities" means any cost, damages,
expense, liability, obligation or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
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(a) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment or other remediation
or response actions required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such action has been required or requested
by any Governmental Body or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, investigative or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
12.19 "Environmental Law" means any Legal Requirement that requires or
relates to:
(a) advising appropriate authorities, employees and the public
of intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release or
minimizing the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged
and used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing
the threat of release or paying the costs of such clean up or prevention; or
54
(h) making responsible parties pay private parties, or groups
of them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
12.20 "Excluded Assets" is defined in Section 1.4.
12.21 "Executory Contracts" is defined in Section 3.8(b)(viii).
12.22 "Facilities" means any real property, leaseholds or other interests in
real property currently or formerly owned or operated by Seller and any
buildings, plants, structures or equipment (including motor vehicles,
tank cars and rolling stock) currently or formerly owned or operated by
Seller.
12.23 "GAAP" means generally accepted United States accounting principles, as
applied by PRG; provided, however, that for purposes of Sections 1.8(e)
and 3.5, GAAP shall mean generally accepted United States accounting
principles as consistently applied by ANCHA.
12.24 "Governmental Authorization" means any approval, consent, license,
permit, waiver or other authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
12.25 "Governmental Body" means any:
(a) nation, state, city, district or other political
subdivision or jurisdiction of any nature;
(b) national, local, foreign or other government;
(c) governmental or quasi-governmental authority of any
nature (including any governmental ministry, agency, branch, department,
official or entity and any court or other tribunal);
(d) multinational organization or body; or
(e) body exercising or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
12.26 Intentionally omitted.
12.27 "Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment or
use (including any withdrawal or other use of groundwater) of Hazardous
Materials in, on, under, about or from the Facilities or any part
thereof into the Environment, and any other act, business, operation or
thing that increases the danger, or risk of danger, or poses an
55
unreasonable risk of harm to Persons or property on or off the
Facilities, or that may affect the value of the Facilities or ANCHA.
12.28 "Hazardous Materials" means any waste or other substance that is
listed, defined, designated or classified as, or otherwise determined
to be, hazardous, radioactive or toxic or a pollutant or a contaminant
under or pursuant to any Environmental Law, including any admixture or
solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
12.29 "Included Assets" is defined in Section 1.3.
12.30 "Intellectual Property Assets" is defined in Section 3.23
12.31 "Knowledge." An individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
business in the ordinary course.
An entity will be deemed to have "Knowledge" of a particular
fact or other matter if any individual who is serving, or who has at any time
served, as a director, officer, partner or trustee of such entity (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
12.32 "Legal Requirement" means any national, local, foreign, international,
multinational or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute or treaty.
12.33 "Material Adverse Effect" means, except as provided in Sections 7.1 and
7.6, a diminution in the value of PRG in an amount equal to $25,000, or
with respect to any Person, the occurrence of any event which could
reasonably be expected to cause a material adverse change to the
prospects of such Person and its subsidiaries, taken as a whole, or on
the ability of such Person or any Related Person to consummate the
transactions contemplated hereby.
12.34 "Material Interest" means 5% or more of the share capital of or other
ownership interest in any Person.
12.35 "1998 Balance Sheet" is defined in Section 3.5.
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12.36 "Occupational Safety and Health Law" means any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by
industry associations and insurance companies), designed to provide
safe and healthful working conditions.
12.37 "Order" means any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Body or by any arbitrator.
12.38 "Organizational Documents" means (a) the memorandum, articles or
certificate of incorporation or association and the bylaws and any
similar constitutive document of a company; (b) the partnership or
other similar agreement of any general or limited partnership or any
association or other entity; (c) any charter or similar document
adopted or filed in connection with the creation, formation or
organization of any Person; (d) any filing or registration with any
trade, commercial or other similar registry; and (e) any amendment to
any of the foregoing.
12.39 "Percentage Interest" is defined in Section 3.4.
12.40 "Person" means any individual, company, partnership, limited liability
company, Governmental Body or other entity of any nature.
12.41 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought,
conducted or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.
12.42 "Preferred Units" means the "Preferred Units" issued by PRG pursuant to
the Organization Documents.
12.43 "PRG" is defined in the first paragraph of this Agreement.
12.44 "PRG's ANCHA Division" means the Business as conducted by PRG or its
successors in interest to such Business.
12.45 "Regular Units" means the "Regular Units" issued by PRG pursuant to its
Organizational Documents as such term is defined therein.
12.46 "Related Person" means with respect to a Person:
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(a) any Person that, individually or jointly, directly or
indirectly controls, is directly or indirectly controlled by, or is directly or
indirectly under common control with such specified Person (including, without
limitation, officers and directors thereof); or
(b) any Person that holds a Material Interest in such
specified Person (or any Person in which such specified Person holds a Material
Interest).
12.47 "Release" means any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping or other releasing into the
Environment, whether intentional or unintentional.
12.48 "Rolling Xxxxxxx Lease" means that certain Rolling Xxxxxxx Lease in the
form attached to this Agreement as Exhibit C.
12.49 "Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other
representative of such Person, including legal counsel, accountants and
financial advisors.
12.50 "Seller" is defined in the first paragraph of this Agreement.
12.51 "Subsidiary" means with respect to any Person (the "Owner"), of which
securities or other interests having the power to elect a majority of
that entity's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of that
entity (other than securities or other interests having such power only
upon the happening of a contingency that has not occurred) are held by
the Owner or one or more of its Subsidiaries.
12.52 "Taxes" means all taxes, however denominated, including interest,
penalties and other additions to tax that may become payable, imposed
by any Legal Requirement or any Governmental Body, including all taxes,
withholdings and other charges in respect of income, profits, gains,
payroll, unemployment insurance, social security or other social
benefits taxes, sales, use, value added, ad valorem, excise, franchise,
gross receipts, business licenses, occupations, real or personal
property, stamps, transfers, environment and workers' compensation,
which is imposed on ANCHA or which ANCHA is required to withhold or
collect.
12.53 "Tax Return" means any return (including any information return),
report, statement, schedule, notice, form or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation, or enforcement of
or compliance with any Legal Requirement relating to any Tax.
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12.54 "Threat of Release" means a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
12.55 "Threatened." A claim, Proceeding, dispute, action or other matter will
be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances
exist, that would lead a prudent person to conclude that such a claim,
Proceeding, dispute, action or other matter is likely to be asserted,
commenced, taken or otherwise pursued in the future.
12.56 "Transaction Documents." This Agreement, including all schedules and
exhibits hereto, the Rolling Xxxxxxx Lease and any employment or
consulting agreement entered into in connection herewith.
ARTICLE 13
POST-CLOSING COVENANTS
----------------------
13.1 Covenant Not to Compete. Seller and Shareholders each severally agree that
during the "Non-Compete Term" (as hereinafter defined) and except on
behalf of PRG, so long as PRG shall not be in breach or default under this
Agreement or the Rolling Xxxxxxx Lease, such Person will not directly or
indirectly:
(a) own, manage, operate, join, control or participate in the
ownership, management, operation or control of any business,
whether in corporate, proprietorship or partnership form or
otherwise where such business is competitive with the ANCHA
Activities or any business conducted by Signal Perfection, Ltd
("SPL") as of the date of this Agreement (collectively,
"Competitive Activities");
(b) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any
Person or other entity engaged in any of the Competitive
Activities;
(c) influence or attempt to influence any Person or other
entity that is a contracting party with PRG , SPL or ANCHA at
any time to terminate any written or oral agreement with PRG,
SPL or ANCHA except to the extent that he is acting on behalf
of PRG or SPL in good faith;
(d) solicit or engage in the Competitive Activities with any
person who is or was an ANCHA, PRG or SPL customer during the
Non-Compete Term; or
59
(e) either on its own account or in conjunction with or on
behalf of any other Person, solicit, entice away from PRG,
ANCHA or SPL, or hire any officer, employee or customer of any
such Person as of the date hereof or at any time thereafter,
whether or not such officer, employee or customer would commit
a breach of contract by reason of leaving service or
transferring business.
The "Non-Compete Term" shall commence on the date hereof and
end on the fifth anniversary of the date hereof.
The parties hereto specifically acknowledge and agree that the
remedy at law for any breach of the foregoing will be inadequate and that the
PRG, in addition to any other relief available to it, shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damage. In the event that the provisions of this Section 13.1 should ever
be deemed to exceed the limitation provided by applicable law, then the parties
hereto agree that such provisions shall be reformed to set forth the maximum
limitations permitted. The parties acknowledge that the covenant contained
herein is an essential part of the transaction embodied herein.
The parties further agree that any obligations of Seller or
Shareholders pursuant to this Section 13.1 or in any covenant or agreement not
to compete contained in any other agreement with any Shareholder shall not apply
in the event that PRG breaches any of its representations, warranties, covenants
or obligations under this Agreement; provided, however, that Seller shall have
complied with all notice provisions of this Agreement and dispute resolution
procedures pursuant to Section 14.5 hereof.
13.2 Pledge of Preferred Units. So long as substantially all outstanding
Preferred Units of PRG are required to be pledged, Seller agrees to
pledge to The Bank of New York, as agent, for security for payment of
the obligation of PRG under its credit agreement, all of its right,
title and interest in the Preferred Units. Such pledge shall be without
other recourse to Seller and shall be evidenced by a pledge or other
agreement in form and substance satisfactory to The Bank of New York,
provided that neither Seller nor any Shareholder has any affirmative
obligation under any such agreement.
13.3 Transactions with Related Persons. From and after the date hereof, no
Seller or any Related Person of Seller shall own (of record or as a
beneficial owner) an equity interest or any other financial or profit
interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with ANCHA or (ii) engaged in a
Competing Business in any market presently served by ANCHA except for
passive investments in less than one percent of the outstanding share
capital of any Competing Business that is publicly traded on any
recognized exchange or in an over-the-counter market.
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13.4 Payments to ANCHA Employees. Nothing in this Agreement shall be
construed to preclude or prohibit Seller and/or Shareholders from
paying any sum after the Closing to any Person employed by ANCHA prior
to the Closing, including any payment pursuant to any Salary
Continuation Agreement referred to in Part 3.14 of the Disclosure
Schedule, or any modification thereto, or any portion of any Earn Out
Payment based upon employment with PRG or any other terms whatsoever.
13.5 Access to Records. Each of the parties shall retain, and provide
reasonable access to the other parties to, such books and records
relating to the Included Assets and/or the Assumed Liabilities as may
be in such party's possession or under such party's control.
ARTICLE 14
GENERAL PROVISIONS
------------------
14.1 Expenses. Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of agents, representatives, counsel and accountants. Seller will
pay all amounts payable to its accountants, attorneys and solicitors in
connection this Agreement and the transactions contemplated hereby. In the
event of termination of this Agreement, the obligation of each party to
pay its own expenses will be subject to any rights of such party arising
from a breach of this Agreement by another party.
14.2 Public Announcements. Any public announcement or similar publicity with
respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as PRG and ANCHA
jointly determines; provided, however, that PRG shall be permitted to make
any disclosure which it reasonably believes to be necessary or advisable
in order to comply with its public reporting requirements. Unless
consented to by PRG and ANCHA in advance or required by Legal
Requirements, prior to the Closing, Seller and PRG shall keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any Person; provided, however, that PRG shall make public
disclosures in accordance with its public reporting requirements. Seller
and PRG will consult with each other concerning the means by which ANCHA's
employees, customers and suppliers and others having dealings with ANCHA
will be informed of the transactions contemplated hereby, and PRG will
have the right to be present for any such communication.
14.3 Confidentiality.
(a) Between the date of this Agreement and the Closing Date,
PRG, ANCHA and Shareholders will maintain in confidence, and will cause the
directors, officers, employees, agents and advisors of PRG and ANCHA to maintain
61
in confidence, any written, oral or other information obtained in confidence
from another party or ANCHA in connection with this Agreement or the
transactions contemplated hereby, unless (i) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (ii) the
use of such information is necessary or appropriate in making any filing
including, without limitation, any filing with the Securities and Exchange
Commission, or obtaining any consent or approval required for the consummation
of the transactions contemplated hereby, or (iii) the furnishing or use of such
information is required by law, regulation or legal process.
(b) If the transactions contemplated hereby are not
consummated, each party will return or destroy such written information and
copies thereof. Whether or not the Closing takes place, Seller and Shareholders
waive any cause of action, right or claim arising out of the access of PRG or
its representatives to any trade secrets or other confidential information of
ANCHA except for the intentional competitive misuse by PRG of such trade secrets
or confidential information.
14.4 Notices. All notices, requests, demands, and other communications required
or permitted by this Agreement shall be in writing in the English language and
(a) delivered by messenger prior to 5:00 p.m. local time; (b) transmitted by
telecopier prior to 5:00 p.m. local time; or (c) delivered prior to 5:00 p.m.
local time by a reputable international courier service, with courier charges
paid or payable by the sender. All such notices and other communications shall
be addressed as follows to the respective parties set forth below or to such
other address as any such party may hereafter specify in writing:
Notices to PRG shall be addressed to:
Xxxxxx X. Manners, Esq.
General Counsel
Production Resource Group, L.L.C.
000 Xxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxx Xxxx 00000
facsimile: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Pepe & Hazard
Xxxxxxx Square
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
facsimile (000) 000-0000
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Notices to ANCHA shall be addressed to:
Xxxxxx X.Xxxxx
000 Xxxx Xxx Xxxx.
Xxxxxxxx, Xxxxxxx 00000
and to:
Xxxxx X. Xxxxxx
000 Xxxxxxx Xxxx
Xxx Xxxxx Xxxxxxx, Xxxxxxxx 00000
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With a copy to:
Xxxxxx X. Xxxxx (#332902)
Xxxxx & Xxxxxxxx, Ltd.
000 Xxxxx XxXxxxx Xxxxxx, 00xx xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Notices to the Shareholders shall be addressed to the address
set forth next to their name on the signature pages hereof:
Notices shall be deemed to have been given (i) on the day of
delivery (evidenced by a signed receipt) if delivered by messenger; (ii) one
business day after it has been delivered to a reputable international courier
service; or (iii) on the day sent by telecopy if the transmission is confirmed
by the sender's telecopier.
14.5 Dispute Resolution.
(a) Except as set forth in clause (b) below, any disagreement,
difference or dispute between any of the parties hereto relating in any way to
this Agreement, the rights or obligations of the parties hereunder or the
transactions contemplated hereby shall be settled by arbitration held in New
York, New York, in accordance with the procedural rules of The American
Arbitration Association. The arbitration shall be held before a single
arbitrator. The arbitrator shall be selected by the mutual agreement of Seller
and PRG, but if they do not so agree within 20 days after the date of the notice
referred to above, the selection shall be made pursuant to the rules from the
panels of arbitrators maintained by such Association. Any award or other
decision of the arbitrators shall be final, unappealable and binding on the
parties. Any party may seek judgment upon any award in any court having
jurisdiction or an application may be made to such court for the judicial
acceptance of the award and for an order of enforcement.
(b) Notwithstanding clause (a) above, any party hereto may
bring an action in any court of competent jurisdiction (i) for provisional
relief pending the outcome of arbitration, including pre-judgment attachment or
sequestration of assets, (ii) for injunctive relief, including specific
enforcement of the obligations of a party hereunder or (iii) to compel
arbitration or enforce any arbitral award. For purposes of any proceeding
authorized by this clause (b), each party hereby consents to the non-exclusive
jurisdiction of the state and federal courts of competent jurisdiction located
in the State of New York.
14.6 Further Assurances. The parties agree (a) to furnish upon request to each
other such further information, (b) to execute and deliver to each other such
other documents and (c) to do such other acts and things, all as the other party
may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
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14.7 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
14.8 Entire Agreement and Modification. This Agreement, when executed and
delivered, supersedes all prior agreements between the parties with respect to
its subject matter (including the letter of intent between PRG and Seller dated
March 10, 1999) and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended except by a written agreement executed by the party to be charged
with the amendment.
14.9 Disclosure Schedule.
(a) Although the parties shall endeavor to relate the
disclosures in the Disclosure Schedule, and those in any Supplement thereto, to
the representations and warranties in the Section of the Agreement to which they
expressly relate, they shall also reasonably relate to the other representations
or warranties in this Agreement.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Disclosure Schedule (other than
an exception expressly set forth as such in the Disclosure Schedule with respect
to a specifically identified representation or warranty), the statements in the
body of this Agreement will control.
14.10 Assignments, Successors and No Third Party Rights. Neither party may
assign any of its rights under this Agreement without the prior consent of the
other parties except that PRG may assign any of its rights under this Agreement
to any affiliate of PRG, and Seller may assign its rights under this Agreement
to its Shareholders. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
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all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
14.11 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
14.12 Section Headings, Construction. The headings of Sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement and all Sections
subnumbered, indented or included therein. All words used in this Agreement will
be construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms, and shall mean "including, but not limited to" or "including",
without limitation," which shall have the same meaning.
14.13 Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the laws of the State of New York, U.S.A. without
regard to conflicts of laws principles.
14.14 Counterparts. This Agreement may be executed in two or more counterparts,
each of which will be deemed to be an original of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
Signature Page Follows
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
PRODUCTION RESOURCE GROUP, L.L.C.
By: /s/ Xxxxxxxx X. Xxxxxx
__________________________________
Name: Xxxxxxxx X. Xxxxxx
Title: Manager
ANCHA ELECTRONICS, INC.
By: /s/ Xxxxx X. Xxxxxx
__________________________________
Name: Xxxxx X. Xxxxxx
Title: President
Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
---------------------------------------
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