RAM - Draft 07/02/98
EXECUTION COPY
ACQUISITION AGREEMENT
AMONG
PRODUCTION RESOURCE GROUP, L.L.C.
ON ITS OWN BEHALF AND AS NOMINEE
FOR LIGHT & SOUND DESIGN LTD.
Buyer
PRODUCTION ARTS LIGHTING INC.
PRODUCTION ARTS LIGHTING WEST, INC.
PRODUCTION ARTS EUROPE, INC.
Seller
and
Xxxx X. XxXxxx
and
Xxxxxx X. Xxxxx
Sole Shareholders
June 25, 1998
Exhibit A Inventory Schedule
Exhibit B Form of Xxxxxx X. Xxxxx Employment Agreement
Exhibit C Form of Legal Opinion
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated as of June 25, 1998, by and among
PRODUCTION ARTS LIGHTING INC., a New York corporation ("PA"), PRODUCTION ARTS
LIGHTING WEST, INC. a California corporation ("West"), and PRODUCTION ARTS
EUROPE, INC., a Delaware corporation ("Europe") (collectively "Seller"), Xxxx
X. XxXxxx ("McGraw") and Xxxxxx X. Xxxxx ("Xxxxx") (collectively the
"Shareholders"), and PRODUCTION RESOURCE GROUP, L.L.C., a Delaware limited
liability company ("PRG") on its own behalf with respect to the assets sold by
PA and West and as nominee for Light & Sound Design, Ltd., an English company,
with respect to the assets of Europe.
RECITALS
A. Seller is engaged, in the business of providing, renting
and selling specialized lighting equipment and related products (the
"Business"). Such business operations of Seller have been carried on under the
names of "PRODUCTION ARTS LIGHTING INC.", "PRODUCTION ARTS LIGHTING WEST,
INC." and "PRODUCTION ARTS EUROPE, INC." Seller has principal places of
business located at 00 Xxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000, 00000
Xxxxxxx Xxx, Xxxx #0, Xxx Xxxxxx, XX 00000 and 0 Xxxxxxxx Xxxx, Xxxxx, Xxxxxx
X0 0XX, respectively. Shareholders are the sole owners, of record and
beneficially, of all of the issued and outstanding capital stock of each of
the entities constituting Seller.
B. PRG is engaged, in part, in the business of providing set
design, production management, lighting and audio rental and sale and
construction and maintenance services for a variety of staged events and
environments, and desires to acquire all of the above-described business
operations of Seller, except for certain Excluded Assets (as hereinafter
defined). All of the assets related to the business operations of Seller to be
acquired by PRG hereunder are collectively referred to herein as the
"Business" 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 desires to sell and PRG desires to purchase the Business and its
operations, and, on the terms and conditions hereinafter set forth, PRG
desires to assume the liabilities associated with the Business.
D. PRG wishes to employ Xxxxxx X. Xxxxx pursuant to an
employment agreement substantially in the form of Exhibit B hereto.
NOW, THEREFORE, in consideration of the recitals and of the
respective covenants, representations, warranties and agreements herein
contained, and for other good and
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valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Agreement to Sell. At the Closing (as defined in Section 2.1 hereof),
except as otherwise specifically provided in this Section 1.1, Seller
shall sell, convey, assign, transfer and deliver to PRG, upon and
subject to the terms and conditions of this Agreement, all of its
respective rights, titles and interests in and to (a) the Business as
a going concern, (b) the names "PRODUCTION ARTS LIGHTING INC.,"
"PRODUCTION ARTS LIGHTING WEST, INC." and "PRODUCTION ARTS EUROPE,
INC." including any variation thereon and all goodwill associated
therewith, and (c) 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 excluding the Excluded Assets (which Business, name,
goodwill, assets, properties and rights 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).
1.2 Included Assets. The Assets shall include, 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 1.3
hereof:
1.2.1 all cash and cash equivalents in transit, on hand or in bank accounts
except as set forth in Section 1.3 hereof;
1.2.2 all machinery, equipment, tools, vehicles, furniture, furnishings,
leasehold improvements, goods, and other tangible personal property
including, without limitation, the assets listed on Schedule 1.2
hereof;
1.2.3 all prepaid items, utility and similar deposits, insurance return
premiums, if any, unbilled costs and fees;
1.2.4 all supplies and inventories and office and other supplies;
1.2.5 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;
1.2.6 all rights under any event, trademark, service xxxx, trade name or
copyright, whether registered or unregistered, and any applications
therefor;
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1.2.7 all technologies, methods, formulations, data bases, trade secrets,
know-how, inventions and other intellectual property used in the
Business or under development, if any;
1.2.8 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;
1.2.9 all assets and properties reflected on the Closing Balance Sheet (as
defined in Section 1.8);
1.2.10 all inventory reflected on the Inventory Schedule attached as Exhibit
A hereto excluding any inventory which has been sold before the
Closing in the ordinary course of business; and
1.2.11 all information, files, records, data, plans, contracts and recorded
knowledge, including customer and supplier lists, related to the
foregoing.
1.3 Excluded Assets. Notwithstanding the foregoing, the Assets shall not
include any of the following:
1.3.1 the corporate seal, certificate of incorporation, minute books, stock
books, tax returns, books of account or other records having to do
with the corporate organization of Seller;
1.3.2 the cash of Seller in its money market accounts up to a maximum
aggregate amount of two hundred thousand dollars ($200,000);
1.3.3 the notes and other receivables and other assets, properties or rights
of Seller as set forth in Schedule 1.3;
1.3.4 the cash value of life insurance maintained by Seller on McGraw. If
requested by Seller or McGraw, PRG will consent to the assignment of
the life insurance maintained on McGraw to McGraw or his designee;
1.3.5 the rights which accrue or will accrue to Seller under this Agreement;
1.3.6 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;
1.3.7 the rights to any claims of Seller for any federal, state, local or
foreign tax refunds; or
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1.3.8 the assets, properties or rights set forth on Schedule 1.1.2.
1.4 Agreement to Purchase. At the Closing, PRG shall purchase the Assets
(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, in
exchange for the Purchase Price (as defined in Section 1.5 hereof). In
addition, PRG shall assume at the Closing and agree to pay, discharge or
perform, as appropriate, liabilities and obligations of Seller to the
extent and as provided in Section 1.7 of this Agreement (the "Assumed
Liabilities"). Except as specifically provided in Section 1.7 hereof,
PRG shall not assume or be responsible for any of the liabilities or
obligations of Seller, whether related to or arising under or with
respect to the Business, or otherwise.
1.5 Purchase Price. The "Purchase Price" shall be thirteen million seven
hundred thousand dollars ($13,700,000) payable by wire transfer of
immediately available funds to such account as Seller shall designate.
1.6 Allocation of Purchase Price.
1.6.1 The parties agree that the Purchase Price including the Assumed
Liabilities and any non-recourse liabilities to which any Asset is
subject as finally determined shall be allocated among the Assets
acquired by PRG and, with respect to Europe, by PRG as nominee for
Light & Sound Design, Ltd. in accordance with the principles
established in Schedule 1.6.1 hereof, updated to take account of
changes from December 31, 1997 through the Closing Date.
1.6.2 The parties hereto shall timely file with the Internal Revenue Service a
Form 8594 consistent with the allocations provided for in Section
1.6.1. 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 1.6 or such Form 8594.
1.7 Assumption of Liabilities. At the Closing hereunder and except as
otherwise specifically provided in this Section 1.7, PRG shall assume
and agree to pay, discharge or perform, as appropriate, the
liabilities and obligations of Seller except as set forth in Section
1.7.5 hereof including, but not limited to, the following:
1.7.1 all operating liabilities and obligations of Seller in respect of the
Business (including, without limitation, trade payables, accrued
expenses, taxes indicated on Schedule 1.7.1, liabilities relating to
the 401(k) plan to the extent indicated on Schedule 1.7.1, deferred
income on long-term contracts, deposits on rentals, profit-sharing
contributions as set forth in section 1.7.5(ii) and lease commitments
all as existing on the Closing Date and
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assuming operation in the ordinary course of the Business and in
accordance with this Agreement until the Closing.
1.7.2 all liabilities and obligations of Seller in respect of the Business
existing as of the 1997 Balance Sheet Date (as defined in subsection
3.1.6(a)), but only if and to the extent that the same arose in the
regular and ordinary course of business and are reflected on the
Audited 1997 Balance Sheet or notes thereto (as defined in subsection
3.1.6(a)) and remain unpaid and undischarged on the Closing Date (as
defined in Section 2.1 hereof);
1.7.3 all liabilities and obligations of Seller arising in the regular and
ordinary course of the Business between the 1997 Balance Sheet Date
and the Closing Date, to the extent that the same remain unpaid and
undischarged on the Closing Date including, without limitation, any
agreement, contract, commitment or lease which is entered into after
the signing of this Agreement and in conformance herewith, but before
the Closing Date; and
1.7.4 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,
without limitation, one-half of the bulk sales tax expense, the
obligations to employees listed on Schedule 1.7 and the accrued but
unpaid sales tax liabilities to the appropriate agency.
1.7.5 PRG shall not assume or incur any liability or obligation under this
Section 1.7 or otherwise in respect of any of the following
liabilities or obligations:
(i) liabilities existing as of the 1997 Balance Sheet Date, and which
under generally accepted accounting principles should have been
reflected on a balance sheet or the notes thereto as a liability or
obligation, if and to the extent that the same were not reflected on
the 1997 Balance Sheet or notes thereto;
(ii) liabilities and obligations of Seller not arising in the regular and
ordinary course of the Business between the 1997 Balance Sheet Date
and the Closing Date except as listed on Schedule 1.7.5;
(iii) liability for the 1997 profit-sharing contribution of Seller with
respect to Messrs. McGraw or Xxxxx or an amount in excess of one-half
of such liability for any other participant in Seller's profit-sharing
plan;
(iv) 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, but excluding however
any liability arising out of the assignment to PRG of such agreements,
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contracts, commitments or leases in violation of the terms thereof to
the extent that the agreement, contract, commitment or lease is listed
on Schedule 5.1.7 hereof;
(v) 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 or entity relating to the Business
(other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) or distributions to
the Shareholders for the payment of their taxes provided that such
distributions do not cause the Minimum Net Value of Sellers to be less
than the amount specified in and calculated in accordance with Section
5.1.10 hereof;
(vi) 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;
(vii) any federal, state or local income or other tax (a) 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 Date,
or (b) incident to or arising as a consequence of the negotiation or
consummation by Seller or Shareholders of this Agreement and the
transactions contemplated hereby (other than the payment of bulk sales
tax which shall be divided equally between PRG and Seller) and sales
or use taxes except to the extent indicated on Schedule 3.1.9;
(viii) any liability or obligation under or in connection with the Excluded
Assets;
(ix) 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 (except as otherwise specifically
provided herein);
(x) 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);
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(xi) any liability or obligation of Seller or any Shareholder relating
to any entity affiliated with Seller; or
(xii) any liability or obligation relating to any employee benefit plan except
as otherwise specifically provided above.
1.8 Finanial Statements. Seller shall, and shall use reasonable commerical
efforts to cause its accountants to cooperate in the preparation of
any financial statements required by PRG. Without limiting the
foregoing, Seller shall provide, and shall use reasonable commercial
efforts to cause its accountants to provide, such consents as are
reasonably necessary for the filing of such financial statements with
the Securities and Exchange Commission and, to the extent necessary,
other regulatory agencies.
ARTICLE 2
CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS, CHANGE IN
NAME AND FURTHER ASSURANCES
2.1 Closing. The closing (the "Closing") of the sale and purchase of the
Assets shall take place at 10:00 A.M., local time, on June 30, 1998 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.
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 rights, titles and interests in and to the Assets including
without limitation, (a) good and valid title in and to all of the
Assets owned by Seller, (b) assignments of all leasehold interests in
and to all of the 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 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
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 Purchase Price and an undertaking
whereby PRG will assume and agree to pay, discharge or perform, as
appropriate, the Assumed Liabilities to the extent and as provided in
Section 1.7 hereof, in form reasonably satisfactory to Seller and its
counsel.
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(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 V hereof.
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 reasonable commercial efforts to obtain any such
required consent(s) as promptly as possible but shall not be obligated
to expend material funds to do so. If any such consent shall not be
obtained or if any attempted assignment would be ineffective or would
impair PRG's rights under the 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 act after the Closing as PRG's
agent in order to obtain for it the benefits thereunder and shall
cooperate, to the maximum extent permitted by law, with PRG in any
other reasonable arrangement designed to provide such benefits to PRG.
PRG shall pay or reimburse all costs reasonably incurred by Seller in
compliance with this Section 2.3 and shall use reasonable commercial
efforts to assist in having Shareholders released from all personal
guarantees that they have given with respect to liabilities assumed by
PRG hereunder.
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 "PRODUCTION ARTS" including but not limited to a name
change amendment with the Secretaries of State of New York, California
and Delaware 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. The power
granted hereunder is coupled with an interest and shall survive the
death, incompetency, bankruptcy and dissolution of Seller and each
Shareholder.
2.5 Further Assurances. Seller and the Shareholders, from time to time
after the Closing, at PRG's request, 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 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; provided that neither Seller
nor Shareholders shall not be obligated to expend material funds to do
so.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warrants of the Seller. Seller and the
Shareholders hereby represent and warrant to PRG that, except as set
forth on the Disclosure Schedule attached hereto (each of which
exceptions shall specifically identify the relevant section or
subsection hereof to which it relates and shall be deemed to be a
representation and warranty as if made hereunder):
3.1.1 Corporate Existence. Each of PA, West and Europe is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation. Seller is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction where the conduct of the Business by it requires it to
be so qualified, all of which jurisdictions are listed on the
Disclosure Schedule in a manner that identifies the jurisdiction in
which Seller is in good standing and so qualified, except where the
failure to be so qualified would not have a material adverse affect
on the business or operations of PRG, PA, West or Europe.
3.1.2 Corporate Power; Authorization; Enforceable Obligations. Each
Shareholder and Seller has the power (corporate or otherwise),
authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement
by each Seller has been duly authorized by all necessary corporate and
shareholder action. This Agreement has been, and the other agreements,
documents and instruments required to be delivered by Seller in
accordance with the provisions hereof (the "Seller's Documents") shall
be, duly executed and delivered by Seller by duly authorized officers
of Seller, and this Agreement constitutes, and the Seller's Documents
when executed and delivered will constitute, the legal, valid and
binding obligations of Seller, enforceable against Seller in
accordance with their respective terms.
3.1.3 No Interest in Other Entities. Seller does not own any shares of any
corporation or any ownership or other investment interest, either of
record, beneficially or equitably, in any association, partnership,
joint venture, limited liability company or other legal entity,
except for an interest of not more than one percent in any
corporation traded on a nationally-recognized securities exchange or
in the over-the-counter market.
3.1.4 Validity of Contemplated Transactions, etc. The execution, delivery and
performance of this Agreement by Seller does not and will not
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 Seller 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
Seller, (c) the charter documents of Seller or any securities issued
by
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Seller, or (d) any mortgage, indenture, agreement, contract,
commitment, lease, plan, authorization, or other instrument, document
or understanding to which Seller is a party, by which Seller may have
rights or by which any of the Assets may be bound or affected, or
give any party with rights thereunder the right to terminate, modify,
accelerate or otherwise change the existing rights or obligations of
Seller thereunder in each case in a manner which would materially
adversely impair the Assets or otherwise materially adversely affect
the Business. Except as aforesaid, no authorization, approval or
consent of, and no registration or filing with, any governmental or
regulatory official, body or authority is required in connection with
the execution, delivery or performance of this Agreement by Seller.
3.1.5 No Third Party Options. There are no existing agreements, options,
commitments, or rights with, of or to any person to acquire any of
the assets, properties or rights included in the Assets or any
interest therein, except for those contracts entered into in the
normal course of business consistent with past practice for the sale
of inventory of Seller.
3.1.6 Financial Statements; Customer and Vendor List.
(i) Seller has delivered to PRG true and complete copies of (a) the
balance sheet of Seller for the fiscal year ending December 31,
1997, accompanied by a report of the Auditors unqualified as to
scope limitations imposed by the Seller and otherwise without
qualification except as noted therein (the "Audited 1997 Balance
Sheet"); and (b) tax balance sheets and tax returns of Seller for
the fiscal years ending December 31, 1995 and 1996 and the related
statements of income for the periods then ended, each of which has
been prepared on a compilation basis by Seller's independent
certified public accountants; the Audited 1997 Balance Sheet and
the related statements of income, cash flows and changes in
shareholders' equity described in clauses (a) and (b) of this
subsection 3.1.6(i) have been prepared in accordance with
generally accepted accounting principles consistently applied
through the periods involved. Such balance sheets, including the
related notes, fairly present the financial position, assets and
liabilities (whether accrued, absolute, contingent or otherwise)
of Seller at the dates indicated and such statements of income,
cash flows and changes in shareholders' equity fairly present the
respective results of operation, cashflows and changes in
shareholders' equity of the Seller for the periods indicated. The
Audited 1997 Balance Sheet specifically identifies in the
footnotes to the Financial Statements the asset and liabilities
which, if the Closing had been held on the 1997 Balance Sheet
Date, would have been transferred to or assumed by PRG in
accordance herewith. References in this Agreement to the "1997
Balance Sheet Date" shall be deemed to refer to December 31, 1997
except with respect to the physical inventory, in which case it
shall be deemed to refer to the date set forth on Exhibit A.
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(ii) Seller has provided access to PRG to review true and complete
copies of all customer and vendor lists and all historic data in
its possession with respect to prior sales to customers and
purchases from vendors.
3.1.7 Inventory. Except as set forth in the Disclosure Schedule, all inventory
of Seller including resale inventory and rental inventory used in the
conduct of the Business reflected on Exhibit A or acquired since the
date thereof was acquired and has been maintained in the ordinary
course of the Business; is of good and merchantable quality; consists
substantially of a quality, quantity and condition usable, leasable or
saleable in the ordinary course of the Business, and is valued at
reasonable amounts based on the ordinary course of business of Seller
during the past six months; and is not subject to any material
write-down or write-off, except, in each case, where it would not be
reasonably likely to cause a material adverse effect. Seller is not
under any liability or obligation with respect to the return of a
material amount of inventory in the possession of wholesalers,
retailers or other customers.
3.1.8 Absence of Undisclosed Liabilities. Seller has no liabilities or
obligations with respect to the Business, either direct or indirect,
matured or unmatured or absolute, contingent or otherwise, except:
(i) those liabilities or obligations set forth on the 1997 Balance Sheet or
notes thereto and not heretofore paid or discharged;
(ii) liabilities arising in the ordinary course of business under any
agreement, contract, commitment, lease or plan or specifically
disclosed on the Disclosure Schedule; and
(iii) those liabilities or obligations incurred, consistently with past
business practice, in or as a result of the normal and ordinary
course of business since the 1997 Balance Sheet Date including
liabilities or obligations for purchased goods reasonably consistent
with past practice and agreements, contracts, commitments or leases
which are entered into after the signing of this Agreement but before
the Closing Date in accordance with the provisions of this Agreement.
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, liquidated or unliquidated,
secured or unsecured.
3.1.9 Taxes. All tax returns required to be filed by Seller ("Tax Returns") in
any jurisdiction have been filed and all material 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 or would
not be reasonably likely to cause a material adverse effect.
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Schedule 3.1.9 contains a list of all accrued but unpaid sales, use or
similar taxes which have not been paid to the appropriate taxing
authorities. 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 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 material 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 of any nature whatsoever and there are no pending tax
examinations of or to the knowledge of the Seller, tax claims asserted
against Seller or any assets or properties of Seller which would
reasonably be anticipated to materially adversely affect the Business.
There are no tax liens (other than any lien for current taxes not yet
due and payable and for Taxes being contested in good faith, as
indicated on Schedule 3.1.9) 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.
3.1.10 Books of Account. The books, records and accounts of Seller maintained
with respect to the Business accurately and fairly reflect, in all
material respects, the transactions and the assets and liabilities of
Seller with respect to the Business. Seller has not engaged in any
transaction with respect to the Business, maintained any bank account
for the Business or used any of the funds of Seller in the conduct of
the Business, except for transactions, bank accounts and funds related
solely to the Business and reflected in the normally maintained books
and records of the Business.
3.1.11 Existing Condition. Since the 1997 Balance Sheet Date, except as set
forth in the Disclosure Schedule, Seller has not:
(i) incurred any liabilities, other than liabilities incurred in
the ordinary course of business consistent with past
practice, or discharged or satisfied any lien or
encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice,
or failed 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;
(ii) sold, encumbered, assigned or transferred any assets or
properties which would have been included in the Assets if
the Closing had been held on the 1997
12
Balance Sheet Date or an any date since then, except for the
sale of property in the ordinary course of business consistent
with past practice or with the prior written consent of PRG;
(iii) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected 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 (as
defined in subsection 3.1.12), other than with the prior
written consent of PRG;
(iv) made or suffered 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, or canceled,
modified or waived any substantial debts or claims held by
it or waived any rights of substantial value, whether or not
in the ordinary course of business, other than with the
prior written consent of PRG;
(v) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its
capital shares or redeemed, purchased or otherwise acquired
or agreed to redeem, purchase or acquire any of its capital
shares, other than with the prior written consent of PRG
(other than distributions to the Shareholders for the
payment of their taxes in the amount indicated in Schedule
3.1.11);
(vi) suffered any 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 at more than $7,500 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 in
each case which would reasonably be expected to have a
material adverse effect on the Business;
(vii) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition
(financial or otherwise);
(viii) received notice or had knowledge of any actual or threatened
labor dispute, strike or other occurrence, event or
condition of any similar character which has had or would
reasonably be expected to have a material adverse effect on
its business, operations, assets, properties or prospects;
(ix) made commitments or agreements 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;
(x) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary
business expenses) or loan to, any of its
13
employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled, other
than with the prior written consent of PRG;
(xi) changed any of the accounting principles followed by it or
the methods of applying such principles other than with the
prior written consent of PRG; or
(xii) entered into any transaction other than in the ordinary
course of business consistent with past practice, other than
with the prior written consent of PRG. PRG agrees that to
the extent such transaction occurs between the signing of
this Agreement and the Closing Date, the consent of PRG
shall not be unreasonably withheld.
3.1.12 Title to Properties. Seller has good, valid and marketable title to all
of its properties and assets which would be included in the Assets if
the Closing took place on the date hereof, which it purports to own
including, without limitation, all properties and assets reflected in
the 1997 Balance Sheet (except for property sold since the date
thereof in the ordinary course of business consistent with past
practice), and all assets physically on the Business premises on the
date hereof (except assets set forth in Schedule 3.1.12), free and
clear of all mortgages, liens, pledges, security interest, charges,
claims, restrictions and other encumbrances and defects of title of
any nature whatsoever, except for (i) liens for current real or
personal property taxes not yet due and payable, (ii) liens disclosed
in the Disclosure Schedule in response to this Section, (iii)
worker's, carrier's and materialman's liens, and (iv) liens that
individually and in the aggregate are immaterial in character, amount,
and extent, and which do not materially detract from the value or
interfere with the present use of the properties they affect
("Permitted Liens").
3.1.13 Condition for Tangible Assets. All buildings, structures, facilities,
equipment and other material items of tangible property and assets
which would be included in the Assets if the Closing took place on
the date hereof are in reasonable operating condition and repair,
subject to normal wear and maintenance, are usable in the regular and
ordinary course of business, and conform, in all material respects,
to all applicable laws, ordinances, codes, rules and regulations, and
Authorizations (as defined in subsection 3.1.14) relating to their
construction, use and operation. No person other than Seller owns any
equipment or other tangible assets or properties situated on the
premises of Seller or necessary for the operation of the Business,
except for leased items listed on Schedule 3.1.12 and for items that,
individually and in the aggregate, are of immaterial value.
3.1.14 Compliance with Law; Authorizations. Seller has complied with each, and
is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign,
to which Seller's business, operations, assets or properties is subject
("Regulations") except where the violation would not have a material
adverse affect on the Business. Seller owns, holds, possesses or
lawfully uses in the operation of its business all franchises,
licenses, permits, easements, rights,
14
applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for it to conduct
its business as now or previously conducted or for the ownership and
use of the assets owned or used by Seller in the conduct of the
business of Seller, free and clear of all liens, charges, restrictions
and encumbrances and in compliance with all Regulations except where
the failure to own, hold, possess or lawfully use such Authorizations
would not have a material adverse affect on the Business. All such
Authorizations are listed in the Disclosure Schedule. Seller is not in
default, nor has Seller received any notice of any claim of default,
with respect to any such Authorization, except where a default would
not be reasonably likely to cause a material adverse effect. All such
Authorizations are renewable by their terms or in the ordinary course
of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine filing fees. None
of such Authorizations will, to the knowledge of Seller, be adversely
affected by consummation of the transactions contemplated hereby. No
shareholder, director, officer, employee or former employee of Seller
or any affiliates of Seller, or any other person, firm or corporation
owns or has any proprietary, financial or other interest (direct or
indirect) in any Authorization which Seller owns, possesses or uses in
the operation of the business of Seller as now or previously
conducted.
3.1.15 Related Party Transactions. To the knowledge of Seller, no employee,
officer or director of Seller, or member of the immediate family of
any employee, officer or director of Seller presently has, or during
the past three years has had, any direct or indirect ownership
interest in (a) any firm or corporation with which Seller is or was
affiliated or with which Seller presently has, or during the past
three years has had, a business relationship, or (b) any firm or
corporation that competes or during the past three years has competed
with Seller, or (c) any property which is, or during the past three
years was, the subject of any material contract, agreement,
understanding or business relationship. To the knowledge of Seller, no
employee, officer or director of Seller, or member of the immediate
family of any employee, officer or director of Seller presently has,
or during the past three years has had, any direct or indirect
interest in any material contract with Seller.
3.1.16 Litigation. No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the knowledge
of Seller is threatened which relates to the assets of Seller or the
transactions contemplated by this Agreement, nor does Seller know of
any reasonably likely basis for any such litigation, arbitration,
investigation or proceeding, the result of which would materially
adversely affect Seller, its assets or the transactions contemplated
hereby in a manner that would be reasonably likely to materially
adversely affect the Business.
3.1.17 Insurance. The assets, properties and operations of Seller are insured
under various policies of general liability and other forms of
insurance, all of which are listed in the Disclosure Schedule, which
discloses for each policy whether the terms of such policy provide for
retrospective premium adjustments. All such policies are in full force
and
15
effect in accordance with their terms, no notice of cancellation has
been received, since 1995 and there is no existing default or event
which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in amounts which
Seller reasonably believes to be adequate in relation to the business
and assets of Seller and all premiums to date have been paid in full.
Seller has not been refused any insurance, nor has its coverage been
limited, by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the past five
years. The Disclosure Schedule also contains a true and complete
description of all outstanding bonds and other surety arrangements
issued or entered into in connection with the business, assets and
liabilities of Seller.
3.1.18 Contracts and Commitments.
(i) The agreements listed on the Disclosure Schedule constitute all
written and oral agreements to which Seller is a party that are
material to the Business as currently conducted including, without
limitation,
(a) any agreements relating to the construction or purchase of
capital improvements, or the purchase of any materials,
supplies, or equipment involving the expenditure of more than
$50,000;
(b) any employment, consulting, management, or noncompetition
agreement not terminable at will by Seller without liability on
less than 30 days notice;
(c) any bonus, pension, retirement, profit sharing or other plan or
agreement providing for employee benefits other than group
health insurance, sick pay and vacation pay plans for employees
generally;
(d) any license of any patent, copyright, trade secret or other
proprietary right or any other license or franchise, or similar
agreement;
(e) any contract with any labor union or association of employees;
(f) any indemnification agreement relating to infringement of
proprietary rights;
(g) any agreement, contract, or commitment that is reasonably
expected by Seller to be performed at or result in a loss, or
which has or would be reasonably likely to have a material
adverse effect upon the Business;
(h) any lease of personal property material to the operations of
Seller;
(i) any agreement with any broker, finder, investment banker or
underwriter;
(j) any note, debenture, bond, equipment trust agreement, letter of
credit agreement, loan agreement or other contract or commitment
for the borrowing or lending of
16
money relating to the Business or agreement or arrangement for a
line of credit or any guaranties, in any manner, whether directly
or indirectly, or any indebtedness, dividend or other obligation
of any other person or entity relating to the Business (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection); and
(k) any agreements with sales representatives and distributors;
and including each amendment, modification, renewal or extension
or other material ancillary document pertaining thereto (the
"Seller Agreements"). Seller has previously delivered or made
available to Buyer correct and complete copies of each of the
Seller Agreements that are in writing.
(ii) To Seller's knowledge, Seller has not received written notice of
cancellation or termination under any option or right reserved to the other
party to the Seller Agreements or any written notice of default under such
agreement. Except as otherwise disclosed on the Disclosure Schedule, Seller is
not, nor to the knowledge of the persons specified in Schedule 3.1.8, is any
other party, in breach or default of any Seller Agreement, which default would
reasonably be likely to cause a material adverse effect on the Business and,
to the knowledge of the persons specified in Schedule 3.1.8, no event has
occurred that, with notice or lapse of time or both, would constitute such a
breach or default or permit termination, modification or acceleration under
such Seller Agreement, the loss of which would reasonably be anticipated to
cause a material adverse effect on the Business. Section 3.1.27
notwithstanding, a material adverse affect attributable to a breach or default
of a Seller Agreement by a person other than Seller shall mean a breach, or
series of related breaches, which would reasonably to be anticipated to result
in damages exceeding fifty thousand dollars. Except as separately identified
in the Disclosure Schedule, no approval or consent of any person is needed in
order that the Seller Agreements continue in full force and effect following
the assignment of such agreements to PRG. Furthermore, to the knowledge of the
persons specified in Schedule 3.1.8, no Seller Agreement, in the reasonable
opinion of Seller, contains any contractual requirement with which there is a
reasonable likelihood Seller or any other party thereto will be unable to
comply. PRG acknowledges that Seller has many small customers, such as
non-profit entities and that Seller is making this representation without
having made any inquiry of such entities regarding their financial condition.
3.1.19 Additional Information. The Disclosure Schedule contains accurate lists
of the following:
(i) all material inventory, equipment and furniture and fixtures
of Seller included in the Assets as of the 1997 Balance
Sheet Date, specifying such items as are owned and such as
are leased and, with respect to the owned property,
specifying its net book value as of the 1997 Balance Sheet
Date and, with respect to the material leased property as to
which Seller is lessee, specifying the identity of the
lessor, the rental rate and the unexpired term of the lease;
17
(ii) the names and titles of and current annual base salary or
hourly rates and date and amount of most recent raise for
all employees of Seller engaged in the conduct of the
Business, together with a statement of the full amount and
nature of any other remuneration, whether in cash or kind,
paid to each such person during the past or current fiscal
year or payable to each such person in the future and the
bonuses accrued for, the vacation and severance benefits to
which, each such person is entitled; and
(iii) all names under which Seller has conducted any business or
which it has otherwise used during the last five years.
3.1.20 Labor Matters. The Disclosure Schedule contains a complete list of all
written and, to the knowledge of Seller, oral, express or implied,
contracts, commitments or arrangements with any labor union, and
no labor union has requested in writing to the Seller or, to the
best of Seller's knowledge, has sought to represent any of the
employees, representatives or agents of Seller, other than as
disclosed in the Disclosure Schedule. There is no strike or other
labor dispute involving Seller pending, or to the best of Seller's
knowledge, threatened, that would reasonably be likely to have a
material adverse effect on the Business, nor is Seller aware of
any labor organization activity involving its employees, other
than as disclosed in the Disclosure Schedule.
3.1.21 Employees and Related Matters.
(i) The Disclosure Schedule contains a complete list of all written
employee benefit plans whether covering one person or more
than one person, sponsored or maintained by Seller. For the
purposes hereof, the term "employee benefit plan" includes all
written plans, funds, programs and policies providing benefits
of economic value to any employee, former employee, or present
or former beneficiary, dependent or assignee of any such
employee or former employee other than regular salary, wages
or commissions paid substantially concurrently with the
performance of the services for which paid. Without
limitation, the term "employee benefit plan" includes all
employee welfare benefit plans within the meaning of section
3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and all employee pension benefit plans
within the meaning of section 3(2) of ERISA. Each plan
providing benefits which are funded through a policy of
insurance is indicated by the word "insured" placed by the
listing of the plan in the Disclosure Schedule. Neither Seller
nor any trade or business (whether or not incorporated) which,
together with Seller, would be treated as a "controlled group"
under Section 4001(a)(14) of ERISA (an "ERISA Affiliate") is a
contributing employer to a multiemployer plan as defined in
Section 3(37) of ERISA. With respect to employee benefit plans
subject to Title IV of ERISA, Seller has made full and timely
payment of all contributions in material compliance with the
terms of each such plan and Section 412(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Section
203(3) of ERISA; the present fair market value of all assets
of each such plan exceeds the
18
present value of all vested benefits under each such plan, as
determined on the most recent valuation date of such plan and
in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of Seller
or any ERISA Affiliate under Title IV of ERISA; and no
accumulated funding deficiency (as defined in Section 412 of
the Code and Section 302 of ERISA) exists with respect to any
such plan. Neither Seller nor any ERISA Affiliate has incurred
any liability to the Pension Benefit Guaranty Corporation
under ERISA.
(ii) Seller has no obligation to provide medical, life insurance,
disability or other benefits to its or any of its
predecessors retired employees formerly engaged in the
Business.
(iii) Seller is not a party to any collective bargaining
agreement, other than as disclosed in the Disclosure
Schedule.
(iv) Upon execution of this Agreement, PRG shall have no
liability for any withdrawal liability with respect to any
present or former employee of Seller under any employee
benefit or pension plan.
3.1.22 Intellectual Property Matters. Seller does not in the conduct of the
Business utilize any patent, trademark, tradename (other than
"PRODUCTION ARTS LIGHTING INC." "PRODUCTION ARTS LIGHTING WEST" and
"PRODUCTION ARTS EUROPE"), service xxxx, copyright or software except
for those listed on the Disclosure Schedule (the "Intellectual
Property") under Seller's name, all of which (together with the
tradenames "PRODUCTION ARTS LIGHTING, INC." "PRODUCTION ARTS LIGHTING
WEST, INC." and "PRODUCTION ARTS EUROPE, INC.") are owned by Seller
free and clear of any liens, claims, charges or encumbrances. Seller
is not aware of any facts which would reasonably be anticipated to
call into question that Seller does not infringe upon or unlawfully or
wrongfully use any patent, trademark, tradename, service xxxx,
copyright or trade secret owned or claimed by another in a manner that
would reasonably be anticipated to have a material adverse effect on
the Business. Schedule 3.1.22 contains a list of any third-party
subpoenas or other similar written requests with respect to
intellectual property matters received since 1995. Seller is not in
default under, and Seller has not received any notice of any claim of
infringement or any other claim or process relating to any such
patent, trademark, tradename, service xxxx, copyright or trade secret
except in each case that would reasonably be anticipated to have a
material adverse effect on the Business. No present or former employee
of Seller and no other person owns or has any proprietary, financial
or other interest, direct or indirect, in whole or in part, in any
patent, trademark, tradename, service xxxx or copyright, or in any
application therefor, or in any trade secret, which Seller owns,
possesses or uses in its operations as now or heretofore conducted.
The Disclosure Schedule lists all confidentiality or non-disclosure
agreements to which Seller or, to Seller's Knowledge, any of Seller's
employees engaged in the Business is a party which relates to the
Business indicating any which would not be enforceable by PRG.
19
3.1.23 Environmental Matters. Except as set forth on the Disclosure Schedule,
(i) To Seller's knowledge, Seller is not required to obtain any
permits, licenses and other authorizations which are required
in connection with the conduct of the Business under
Regulations relating to pollution or protection of the
environment.
(ii) To Seller's knowledge, Seller is in material compliance with
all limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations, contained in
Regulations relating to pollution or protection of the
environment or contained in any code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
(iii) Seller has no knowledge of, nor has Seller received notice of,
any past, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans which would
be reasonably likely to interfere with or prevent compliance
or continued compliance with those laws or any regulations,
code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved
thereunder, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action,
demand, suit or proceeding regarding the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous
substance or waste.
(iv) To Seller's knowledge, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, demand
letter, notice or violation, investigation, or proceeding
pending or, to Seller's knowledge, threatened against Seller
in connection with the conduct of the Business relating in any
way to those laws relating to pollution or protection of the
environment or any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder except for environmental
matters which would not be reasonably likely to cause a
material adverse effect.
3.1.24 Real Property.
(i) Real Property Defined. All real property (including, without
limitation, all interests in and rights to real property) and
improvements located thereon which are owned or leased by
Seller and used in connection with the Business or included in
the Assets are listed on the Disclosure Schedule in response
to this subsection (collectively, the "Real Property").
(ii) Title to Owned Real Property. Seller does not own any Real
Property.
(iii) Leased Real Property. With respect to the Real Property that
is leased by Seller:
20
(a) Seller has delivered to PRG a true and complete copy of
every lease and sublease to which Seller is a tenant or
subtenant (each a "Lease" and collectively, the "Leases");
and
(b) Each Lease is, and at Closing shall be, in full force and
effect, and, to Seller's knowledge, shall constitute a legal
and permissible use of the applicable property, and has not
been assigned, modified, supplemented or amended except as
listed on the Disclosure Schedule, and, to Seller's
knowledge, neither Seller nor the landlord or sublandlord
under any Lease is in material default under any of the
Leases, and, to Seller's knowledge, no 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.
(c) Seller has received no written notices from any governmental
body, and has no reason to believe, that the Real Property
or any improvements erected or situated thereon, or the uses
conducted thereon or therein, violate any Regulations of any
governmental body having jurisdiction over the Real
Property, except where such violations would not be
reasonably likely to cause a material adverse effect.
(d) Between the date of this Agreement and Closing Seller shall
not sell, mortgage or encumber the Leases.
(e) Executory Contracts. Set forth on the Disclosure Schedule is
a list of all executory contracts made by or on behalf of
Seller, or by which Seller is bound, with respect to the
Real Property ("Executory Contracts"), including, without
limitation, operation, management, maintenance, utility and
construction contracts. At Closing, the Seller shall deliver
to PRG a true and complete copy (the original execution
copy, if available) of each of the Executory Contracts.
3.1.25 Availability of Documents. Seller has made available to PRG copies of
all Documents including, without limitation, all agreements, contracts,
commitments, insurance policies, leases, plans, instruments,
undertakings, authorizations, permits, licenses, patents, trademarks,
trade names, service marks, copyrights and applications therefor
listed in the Disclosure Schedule hereto or referred to herein. All
such copies are true and complete and include all amendments,
supplements and modifications thereto or waivers currently in effect
thereunder.
3.1.26 Completeness of Disclosure. On the Date hereof and on the Closing Date
(i) this Agreement does not contain any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein, in the light of the circumstances under
which such statements were made, not misleading and (ii) there is no
fact known to Seller that materially adversely affects or in the
future may (so far as
21
Seller can now foresee based on facts or knowledge known by Seller
which are not known or reasonably knowable by PRG) materially
adversely affect the Business that has not been set forth in this
Agreement.
3.1.27 Definition of Materiality. Except as otherwise specifically provided
herein, solely for purposes of the representations and warranties
contained in Section 3.1.1 through 3.1.26, Seller and PRG agree that
a breach which would reasonably be anticipated to result in damages
exceeding five thousand dollars shall be deemed to be "material" or
"materially adverse."
3.2 Representations and Warrant. PRG represents and warrants to the
Seller as follows:
3.2.1 Legal Existence. PRG is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
3.2.2 Power and Authorization. PRG has the power, authority and legal right
to execute, deliver and perform this Agreement. 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.
3.2.3 Validity of Contemplated Transactions, etc. The execution, delivery and
performance of this Agreement by PRG does not and will not violate,
conflict with or result in the breach of any term, condition or
provision of, or require the consent of any other party to, (a) any
existing law, ordinance, or governmental rule or regulation to which
PRG 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 PRG, (c) the
charter documents or by-laws of, or any securities issued by, PRG, or
(d) any mortgage, indenture, agreement, contract, commitment, lease,
plan or other instrument, document or understanding, oral or written,
to which PRG is a party or by which PRG is otherwise bound. No
authorization, approval or consent of, and no registration or filing
with, any governmental or regulatory official, body or authority is
required in connection with the execution, delivery and performance
of this Agreement by PRG.
3.2.4 Litigation. No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the
knowledge of PRG is threatened which relates to the assets of PRG or
the transactions contemplated by this Agreement, nor does PRG know of
any reasonably likely basis for any such litigation, arbitration,
investigation or proceeding, the result of which could adversely
affect PRG, its assets or the transactions contemplated hereby.
3.2.5 Funding. PRG has borrowing capacity under its Credit Agreement with
The Bank of New York, as Agent (the "Bank") sufficient to fund the
Purchase Price. PRG has
22
received approval from the Bank for the acquisition contemplated
hereby subject to Bank approval of documentation and other customary
funding conditions.
3.3 Survival of Representations and Warrant. All representations and
warranties made by the parties in this Agreement shall survive the
Closing for a period of twelve months following the Closing Date
except that representations and warranties related to Taxes shall
survive until 30 days after the expiration of the applicable statute
of limitations. Notwithstanding any investigation or audit conducted
before or after the Closing Date or the decision of any party to
complete the Closing, each party shall be entitled to rely upon the
representations and warranties set forth herein and therein.
Notwithstanding the foregoing, the representations and warranties
shall survive to the extent of any specific unresolved claims made by
written notice by PRG pursuant to Article 6 hereof prior to the end of
the survival period until the resolution of such claims.
ARTICLE 4
AGREEMENTS PENDING CLOSING
4.1 Agreements of Seller Pending the Closing. Seller covenants and agrees
that, pending the Closing and except as otherwise agreed to in writing
by PRG:
4.1.1 Business in the Ordinary Course. The Business shall be conducted
solely in the ordinary course consistent with past practice.
4.1.2 Existing Condition. Seller shall not cause nor permit to occur any of
the events or occurrences described in subsection 3.1.11 hereof.
4.1.3 Maintenance of Physical Assets. Seller shall continue to maintain and
service the physical assets used in the conduct of the Business in the
same manner as has been consistent with past practice.
4.1.4 Employeesand Business Relations. Seller shall use its commercially
reasonable efforts to keep available the services of the present
employees and agents of the Business and to maintain the relations and
goodwill with the suppliers, customers, distributors and any others
having business relations with the Business; provided, however, that
the inability of PRG to obtain the services of any employee, supplier,
customer, distributor or agent shall not constitute an event of
default hereunder. Seller shall inform PRG if it has knowledge that
any employee, supplier, customer, distributor or agent intends to
terminate its relationship with Seller as a result of the acquisition
of the Business by PRG.
4.1.5 Maintenance of Insurance. Seller shall notify PRG of any changes in
the terms of the insurance policies and binders referred to on the
insurance portion of the Disclosure Schedule hereto.
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4.1.6 Maintenance of Franchises, etc. Seller shall use its commercially
reasonable efforts to maintain in full force and effect all franchises
currently in effect used in and material to the conduct of the
business of the Business.
4.1.7 Compliance with Laws, etc. Seller shall continue to comply with all
laws, ordinances, rules, regulations and orders applicable to the
Business, and to Seller's operations, assets or properties in respect
thereof, the noncompliance with which might materially adversely
affect the Business or the Assets.
4.1.8 Update Schedules. Seller shall disclose to PRG any material
information contained in their representations and warranties or the
Schedules which, because of an event occurring after the date hereof,
is incomplete or is no longer correct as of all times after the date
hereof until the Closing Date.
4.1.9 Conduct of Business. Seller shall use its commercially reasonable
efforts to conduct its business in such a manner that on the Closing
Date the representations and warranties of Seller contained in this
Agreement shall be true, in all material respects, as though such
representations and warranties were made on and as of such date.
Furthermore, Seller shall cooperate with PRG and use its best efforts
to cause all of the conditions to the obligations of PRG and Seller
under this Agreement to be satisfied on or prior to the Closing Date.
4.1.10 Sale of Assets; Negotiations. Neither Seller nor any Shareholder will
enter into any agreement, discussion, or negotiation with, or provide
information to, any other corporation, firm or other person, or
solicit, encourage, entertain or consider any inquiries or proposals,
with respect to (a) the possible disposition of a material portion of
Seller or any assets of Seller not in the ordinary course of Business,
(b) any business combination involving Seller, whether by way of
merger, consolidation, share exchange or other transaction, (c) the
purchase of any debt or equity security (including without limitation
any options, warrants, rights, or convertible security) issued or to
be issued by Seller, (d) the provision of any loan to Seller not in
the ordinary course of Business or (e) the granting of any security
interest, or the creation of any other lien, encumbrance or charge
upon any asset comprising the Business not in the ordinary course of
business. Seller shall not provide any confidential information
concerning the Business or its properties or assets to any third party
other than in the ordinary course of business. No Shareholder shall,
directly or indirectly, sell or encumber all or any part of the
capital stock of Seller. The obligation contained in this section
4.1.10 will terminate if the closing has not occurred by June 30,
1998. PA and Shareholders acknowledge that PRG will spend substantial
time and money to consummate this transaction in reliance on this
promise of exclusivity and will not unreasonably withhold their
consent to extensions of the time periods in the immediately preceding
sentence provided PRG is moving toward a closing. Seller and
Shareholders acknowledge that the BONY consent may contain customary
funding conditions which will not alter the business agreement
contained herein. PRG acknowledges that the 1997 PA financials are
audited and that previous financials are reviewed rather than audited.
24
4.1.11 Access; Review. Seller shall give to PRG's officers, employees,
counsel, accountants and other representatives including, without
limitation, the Auditors (collectively, the "Agents"), free and full
access to and the right to inspect, during normal business hours, all
of the premises, properties, assets, financial and other records,
contracts and other documents relating to the Business and shall
permit them to consult with the officers, employees, accountants,
counsel and agents of Seller for the purpose of (a) making such
investigation of the Business, including, without limitation, the
1997 Balance Sheet, as PRG shall desire to make and (b) reviewing the
financial statements and financial and operational condition of
Seller, and preparing reviewed financial statements with respect to,
each of the fiscal years of Seller in the [three] year period ending
on December 31, 1997. Furthermore, Seller shall furnish to PRG and
the Agents all such documents and copies of documents and records and
information with respect to the affairs of the Business and copies of
any working papers relating thereto as PRG or such Agents shall from
time to time reasonably request and shall permit PRG and the Agents
to make such physical inventories and inspections of the Assets as
PRG or such Agents may request from time to time. PRG shall pay at
the Closing, the fees, costs and out-of-pocket expenses of the
Auditors incurred in connection with the review and the preparation
of the reviewed financial statements described in this subsection
4.1.11.
4.2 Agreements of PRG Pending the Closing. PRG covenants and agrees that,
pending the Closing and except as otherwise agreed to in writing by
Seller:
4.2.1 Actions of PRG. PRG will not knowingly take any action which would
result in a breach of any of its representations and warranties
hereunder. Furthermore, PRG shall cooperate with Seller and use its
best efforts to cause all of the conditions to the obligations of PRG
and Seller under this Agreement to be satisfied on or prior to the
Closing Date.
4.2.2 Confidentiality. Unless and until the Closing has been consummated,
PRG will hold, and shall cause its counsel, independent certified
public accountants, appraisers and investment bankers to hold in
confidence any confidential data or information made available to PRG
in connection with this Agreement with respect to the Business, using
the same standard of care to protect such confidential data or
information as is used to protect PRG's confidential information;
provided that PRG shall have the right to disclose such information
regarding Seller as it believes, after consultation with counsel is
required in any public filing with the Securities and Exchange
Commission or to its banks and bondholders. Seller and Shareholder
agree to execute such consents and similar documents as may be
required in connection with such filings. If the transactions
contemplated by this Agreement are not consummated, PRG agrees that
it shall return or cause to be returned to Seller all written
materials and all copies thereof that were supplied to PRG by the
Seller that contain any such confidential data or information.
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ARTICLE 5
CONDITIONS PRECEDENT TO THE CLOSING
5.1 Conditions Precedent to PRG's Obligations. All obligations of PRG under
this Agreement are subject to the fulfillment or satisfaction, prior
to or at the Closing, of each of the following conditions precedent:
5.1.1 Representations and Warranties True as of the Closing Date.
The representations and warranties of Seller contained in
this Agreement shall have been true in all material respects
on the date hereof and shall be true in all material
respects on the Closing Date with the same effect as though
such representations and warranties were made as of such
date.
5.1.2 Compliance with this Agreement. Seller shall have performed
and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior
to or at the Closing.
5.1.3 Bank Approval. PRG shall have obtained the approval of the
required lenders under PRG's credit agreement with BONY as
agent for the lenders under PRG's current credit agreement.
5.1.4 Audited Financial Statements. The Auditors shall have
provided PRG with an audited balance sheet of Seller for the
fiscal year ending December 31, 1997; such audited balance
sheet shall have been satisfactory to PRG.
5.1.5 Closing Certificate. PRG shall have received a certificate
from Seller dated the Closing Date, certifying in such
detail as PRG may reasonably request that the conditions
specified in subsections 5.1.1 and 5.1.2 hereof have been
fulfilled and certifying that Seller has obtained all
consents and approvals required with respect to it or the
Business by subsection 5.1.7 hereof.
5.1.6 No Threatened or Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or judgment
relating thereto, shall be threatened or be pending before
any court or governmental or regulatory official, body or
authority in which it is sought to restrain or prohibit or
to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might
reasonably be anticipated to result in any such suit, action
or proceeding shall be pending or threatened.
5.1.7 Consents and Approvals.
(i) Except for consents required by the terms of the contracts,
commitments, agreements or franchises listed in Schedule
5.1.7 hereto, the holders of any indebtedness of Seller, the
lessors or lessees of any real or personal property or assets
leased by Seller, the parties (other than Seller) to any
contract, commitment
26
or agreement to which Seller is a party or subject, any
governmental or regulatory official, body or authority or
any other person which owns or has authority to grant any
franchise and any governmental, judicial or regulatory
official, body or authority having jurisdiction over any
Shareholder, Seller or PRG to the extent that their consent
or approval is required or necessary under the pertinent
debt, lease, contract, commitment or agreement or other
document or instrument or under applicable orders, laws,
rules or regulations, for the consummation of the
transactions contemplated hereby in the manner herein
provided, shall have granted such consent or approval.
(ii) All required federal, state and local regulatory approvals
required to close the transaction (none of which are
currently contemplated to be required) shall have been
obtained.
5.1.8 Material Adverse Changes. No event has occurred which has
caused the Business, operations, assets, properties or
prospects of the Business to have been materially adversely
affected as a result of any event or occurrence and no such
event or occurrence that is reasonably likely to lead to
such an event or occurrence shall be threatened.
5.1.9 Legal Opinion. Sherreff, Xxxxxxxx, Xxxxxxx & Xxxxxxx, LLP,
counsel for Seller, shall have delivered to PRG a written
opinion, dated the Closing Date, in the form of Exhibit C,
attached hereto, with only such changes as shall be in form
and substance reasonably satisfactory to PRG and its
counsel.
5.1.10 Minimum Net Asset Value. At the closing the net asset value
of the Assets shall be a minimum of ten million dollars.
Seller shall provide PRG with a good faith estimate of its
Net Asset Value at least three business days before the
Closing Date. For these purposes "net assets" shall include
cash, accounts receivable (net of allowance for doubtful
accounts), inventory, rental equipment and the other assets
of Seller as set forth in a balance sheet prepared in
accordance with generally accepted accounting principles
("GAAP") with the adjustments listed on Schedule 5.1.10
hereof.
5.1.11 Minimum EBITDA. Seller will demonstrate that it had a EBITDA
for 1997 of at least $4.2 million determined in accordance
with GAAP and with the adjustments listed on Schedule 5.1.11
hereof.
5.2 Conditions Precedent to the Obligations of Seller. All obligations of
Seller under this Agreement are subject to the fulfillment or
satisfaction, prior to or at the Closing, of each of the following
conditions precedent:
5.2.1 Representations and Warranties True as of the Closing Date.
The representations and warranties of PRG contained in this
Agreement shall be true on the Closing
27
Date with the same effect as though such representations and
warranties were made as of such date.
5.2.2 Compliance with this Agreement. PRG shall have performed and
complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to
or at the Closing.
5.2.3 Closing Certificate. Seller shall have received a
certificate from PRG dated the Closing Date certifying in
such detail as Seller may reasonably request that the
conditions specified in subsections 5.2.1 and 5.2.2 hereof
have been fulfilled.
5.2.4 No Threatened or Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or final
judgment relating thereto, shall be threatened or be pending
before any court or governmental or regulatory official,
body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection
with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might
reasonably be anticipated to result in any such suit, action
or proceeding shall be pending or threatened.
ARTICLE 6
INDEMNIFICATION
6.1 General Indemnification Obligation of Seller. From and after the
Closing, Seller and the Shareholders (severally in proportion to their
ownership of Seller on the date hereof), shall reimburse, indemnify
and hold harmless PRG, its officers, directors, employees, agents,
successors and assigns (each an "Indemnified PRG Party") against and
in respect of any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by any Indemnified PRG Party
that result from, relate to or arise out of:
6.1.1 any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
6.1.2 any and all actions, suits, claims, or legal, administrative,
arbitration, governmental or other proceedings or investigations
against any Indemnified PRG Party that relate to Seller or the
Business prior to the Closing Date or which result from or arise out
of any action or inaction prior to the Closing Date of Seller or any
director, officer, employee, agent, representative or subcontractor
of Seller, except for the Assumed Liabilities;
6.1.3 any misrepresentation, breach of warranty or nonfulfillment of any
agreement or covenant on the part of Seller under this Agreement; or
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6.1.4 any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments costs and other expenses
(including, without limitation, reasonable legal fees and expenses)
incident to any of the foregoing or to the enforcement of this
Section 6.1.
6.2 General Information Obligation of PRG. From and after the Closing, PRG
will reimburse, indemnify and hold harmless the Seller and its officers,
directors, employees, agents, successors and assigns (each an
"Indemnified Seller Party") against and in respect of any and all
damages, losses, deficiencies, liabilities costs and expenses incurred
or suffered by any Indemnified Seller Party that result from, relate to
or arise out of:
6.2.1 the Assumed Liabilities;
6.2.2 any misrepresentation, breach of warranty or non-fulfillment of any
agreement or covenant on the part of PRG under this Agreement;
6.2.3 any and all actions, suits, claims, or legal, administrative,
arbitration, governmental or other proceedings or investigations
against any Indemnified Seller Party that relate to the Assumed
Liabilities or the operations of the Business after the Closing Date
or which result from or arise out of any action or inaction after the
Closing Date of PRG or any member, manager, officer, employee, agent,
representative or subcontractor of PRG; or
6.2.4 any and all actions, suits, claims, proceeding, investigations, demands,
assessments, audits, fines, judgments, costs and other expenses
(including, without limitation, reasonable legal fees and expenses)
incident to any of the foregoing or to the enforcement of this
Section 6.2.
6.3 Method of Asserting Claims, etc.
6.3.1 Promptly after receipt by an Indemnified PRG Party or an Indemnified
Seller Party (the "Indemnified Party") of notice of a claim or demand
(an "Asserted Liability") that may result in indemnification pursuant to
Sections 6.1 or 6.2 of this Agreement, the Indemnified Party shall give
written notice thereof (the "Claims Notice") to the party or parties
against whom indemnification is or may be claimed (individually an
"Indemnifying Party", and collectively the "Indemnifying Parties"). The
Claims Notice shall describe the Asserted Liability in reasonably
sufficient detail, based on the information then available, to allow the
Indemnifying Party to evaluate the Asserted Liability. The Indemnifying
Party may elect to compromise or defend, at its own expense and by its
own counsel, reasonably acceptable to the Indemnified Party, any
Asserted Liability; provided, however, that the Indemnifying Party may
not compromise or settle any Asserted Liability without the consent of
the Indemnified Party or Parties unless such compromise or settlement
requires no more than a
29
monetary payment for which the Indemnified Party or Indemnified Parties
hereunder are fully indemnified or involves other matters not binding
upon the Indemnified Party or Indemnified Parties, and (b) if the
Indemnified Party (or any of the Indemnified Parties) is an Indemnified
PRG Party and, in the reasonable opinion of such Indemnified PRG Party,
the Asserted Liability involves an issue or matter which could have a
materially adverse effect on the business, operations, assets,
properties or prospects of the Indemnified PRG Party including without
limitation the administration of the tax returns and responsibilities
under the tax laws of such Indemnified PRG Party, then such Indemnified
PRG Party shall have the right to compromise or defend, by its own
counsel, such Asserted Liability provided that in such case such
Indemnified PRG Party shall waive its right to indemnification
hereunder. If the Indemnifying Party elects to compromise or defend such
Asserted Liability, it shall within thirty (30) calendar days of notice
of the Asserted Liability provided under this Subsection (or sooner, if
the nature of the Asserted Liability so requires) notify the Indemnified
Party or Indemnified Parties in writing of its intent to do so, and the
Indemnified Party or Indemnified Parties shall cooperate, at the expense
of the Indemnifying Party with respect to out-of-pocket expenses of the
Indemnified Party or Indemnified Parties, in the compromise of, or
defense against, such Asserted Liability. If the Indemnifying Party
elects not to compromise or defend the Asserted Liability, fails to
notify the Indemnified Party or Indemnified Parties of its election as
herein provided or contests its obligation to indemnify under this
Section, the Indemnified Party or Indemnified Parties may pay,
compromise or defend such Asserted Liability in respect of any Asserted
Liability for which the Indemnifying Party may have an indemnification
obligation under this Agreement. Notwithstanding the foregoing, the
Indemnified Party or Indemnified Parties and the Indemnifying Party may
participate, at its/their own expense, in the defense of such Asserted
Liability in respect of any Asserted Liability for which the
Indemnifying Party may have an indemnification obligation under this
Agreement. Notwithstanding anything in the foregoing to the contrary,
the party that would be responsible under the terms of this Agreement
for paying the underlying claim in connection with any Asserted
Liability (should that claim ultimately prevail) shall bear the cost of
the defense of the claim (with the exception of the costs incurred by
any party that voluntarily participates in such defense) regardless of
which party actually provides the defense.
6.3.2 If a party hereunder should have a claim against another party hereunder
not involving a third-party claim or demand, the party making the claim
(the "Claiming Party") shall promptly notify the other party of the
claim. Within ten (10) days following receipt of the notice, the party
against which the claim is made (the "Challenged Party") shall notify
the Claiming Party whether it disputes liability with respect to the
claim. If the Challenged Party fails to provide timely notice, the
amount of such claim shall be conclusively deemed a liability of the
Challenged Party hereunder.
30
6.3.3 Payment. Upon the determination of the liability hereunder, if any
party (a "Paying Party") is required to make a payment to another party
(the "Receiving Party"), the Paying Party shall make such payment within
ten (10) days after such determination of the amount of any claim for
indemnification made hereunder. In the event that the Receiving Party is
not paid in full for any such claim pursuant to the foregoing provisions
promptly after the Paying Party's obligation to indemnify has been
determined in accordance herewith, it shall have the right,
notwithstanding any other rights that it may have against any other
person, firm or corporation, to set-off the unpaid amount of any such
claim against any amounts owed by it under any agreements entered into
pursuant to this Agreement, the Seller's Documents or the PRG's
Documents. 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, firm or corporation with respect to
the subject matter of such claim.
6.3.4 Limitation on Liability. Neither Seller nor Shareholders will have any
liability (for indemnification or otherwise) with respect to any amount
otherwise indemnifiable pursuant to section 6.1 until the aggregate
amount exceeds $250,000, and, in such, case, only to the extent the
amount exceeds $250,000. Notwithstanding the indemnification obligations
contained in Section 6.1, Seller shall not be required to indemnify the
Indemnified PRG Parties in an aggregate amount in excess of $2,055,000
(15% of the Purchase Price). Anything to the contrary notwithstanding,
the limitations contained in this Section 6.3.4 shall not apply to (i)
any intentional breach by Seller of any covenant contained in Section
4.1.1 through 4.1.11 hereof, or (ii) brokerage fees indemnified pursuant
to Section 8.2.1.
6.4 Arbitration.
6.4.1 All disputes among the parties hereto under this Article VI shall be
settled by arbitration in New York, New York, before a single arbitrator
pursuant to the commercial arbitration rules of the American Arbitration
Association. Arbitration may be commenced at any time by any party
hereto giving written notice to each other party to a dispute that such
dispute has been referred to arbitration under this Section 6.4. The
arbitrator shall be selected by the mutual agreement of Seller and PRG,
but if they do not so agree within twenty (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 rendered by the arbitrator shall be conclusive and binding
upon the parties hereto; provided, however, that any such award shall be
accompanied by a written opinion of the arbitrator giving the reasons
for the award. This provision for arbitration shall be specifically
enforceable by the parties and the decision of the arbitrator in
accordance herewith shall be final and binding and there shall be no
right of appeal therefrom. Each party shall pay its own expenses of
arbitration and the expenses of the arbitrator shall be equally shared;
provided, however, that if in the opinion of the arbitrator any claim
for indemnification or any defense or objection thereto was
unreasonable, the arbitrator may assess, as part of his
31
award, all or any part of the arbitration expenses of the other party
(including reasonable attorneys' fees) and of the arbitrator against the
party raising such unreasonable claim, defense or objection.
6.4.2 To the extent that arbitration may not be legally permitted hereunder
and the parties to any dispute hereunder may not at the time of such
dispute mutually agree to submit such dispute to arbitration any party
may commence a civil action in a court of appropriate jurisdiction to
solve disputes hereunder. Nothing contained in this Section 6.5 shall
prevent the parties from settling any dispute by mutual agreement at any
time.
6.5 Compliance with Bulk Sales Laws. PRG and Seller hereby waive compliance
by PRG and Seller with the bulk sales law and any other similar laws in
any applicable jurisdiction in respect of the transactions contemplated
by this Agreement.
ARTICLE 7
POST CLOSING MATTERS
7.1 Non-Solicitation. As of the Closing Date, PRG shall offer employment to,
and Seller shall use its commercially reasonable efforts to assist PRG
in employing as new employees of PRG, all persons presently engaged in
the Business who are identified by PRG prior to the Closing Date as
persons that PRG desires to employ (the "Employees"). Except as set
forth in the Disclosure Schedule, Seller shall at its sole cost and
expense terminate effective as of the Closing Date all employment
agreements it has with any of the Employees. Until the first anniversary
of the Closing Date, neither Seller nor any Shareholder shall solicit or
offer employment or cause to be solicited or offered employment to any
Employee.
7.2 Employee Benefits. PRG shall assume that portion of all benefits
(including the arrangements, plans and programs set forth in the
Disclosure Schedule which has been accrued on behalf of each employee
(or is attributable to expenses properly incurred by that employee) as
of the Closing Date. No portion of the assets of any plan, fund, program
or arrangement, written or unwritten, heretofore sponsored or maintained
by Seller (and no amount attributable to any such plan, fund, program or
arrangement) shall be transferred to PRG. PRG shall initially provide at
least the benefits listed on Schedule 7.2, shall not be required to
continue any such plan, fund, program or arrangement after the Closing
Date but will generally provide equivalent benefits. All employees of
Seller who are employed by PRG on or after the Closing Date shall be new
employees of PRG and shall receive prior service credit for any prior
employment by Seller of such employees for purposes of determining their
entitlement to benefits which PRG may, from time to time make available
to its employees.
7.3 Maintenance of Books and Records. Seller and PRG shall each preserve
until the seventh anniversary of the Closing Date all records possessed
or to be possessed by such party relating to any of the assets,
liabilities or business of the Business prior to the Closing Date.
32
After the Closing Date, where there is a legitimate purpose, such party
shall provide the other parties with access, upon prior reasonable
written request specifying the need therefor, during regular business
hours, to (i) the officers and employees of such party and (ii) the
books of account and records of such party, but, in each case, only to
the extent relating to the assets, liabilities or business of the
Business prior to the Closing Date, and the other parties and their
representatives shall have the right to make copies of such books and
records; provided, however, that the foregoing right of access shall not
be exercisable in such a manner as to interfere unreasonably with the
normal operations and business of such party; and further, provided,
that, as to so much of such information as constitutes trade secrets or
confidential business information of such party, the requesting party
and its officers, directors and representatives will use due care to not
disclose such information except (i) as required by law, (ii) with the
prior written consent of such party, which consent shall not be
unreasonably withheld, or (iii) where such information becomes available
to the public generally, or becomes generally known to competitors of
such party, through sources other than the requesting party, its
affiliates or its officers, directors or representatives. Such records
may nevertheless be destroyed by a party after the third anniversary of
the Closing Date if such party sends to the other parties written notice
of its intent to destroy records, specifying with particularly the
contents of the records to be destroyed. Such records may then be
destroyed after the 30th day after such notice is given unless another
party objects to the destruction in which case the party seeking to
destroy the records shall deliver such records to the objecting party.
7.4 Payments Received. Seller and PRG each agree that after the Closing they
will hold and will promptly transfer and deliver to the other, from time
to time as and when received by them, any cash, checks with appropriate
endorsements (using their commercially reasonable efforts not to convert
such checks into cash), or other property that they may receive on or
after the Closing which properly belongs to the other party, including
without limitation any insurance proceeds, and will account to the other
for all such receipts. From and after the Closing, PRG shall have the
right and authority to endorse without recourse the name of Seller on
any check or any other evidences of indebtedness received by PRG on
account of the Business and the Assets transferred to PRG hereunder.
7.5 Use of Name. From and after the Closing Date, Seller will sign such
consents and take such other action as PRG shall reasonably request in
order to permit PRG to use the names "PRODUCTION ARTS" and variants
thereof. From and after the Closing Date, Seller will not itself use any
such names or any names similar thereto or variants thereof.
7.6 UCC Matters. From and after the Closing Date, Seller will refer all
inquiries with respect to ownership of the Assets or the Business to
PRG. In addition, Seller will execute such documents and financing
statements as PRG may request from time to time to evidence transfer of
the Assets to PRG, including any necessary assignments of financing
statements.
7.7 Convenant Not to Compete. Seller and each Shareholder agree that for a
period of five years after the Closing Date, they will not, directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of any theatrical
33
lighting or audio-related business, whether in corporate, proprietorship
or partnership form or otherwise; provided that (i) this covenant shall
not prevent a Shareholder from owning up to one percent (1%) of the
stock of any publicly traded company which may be engaged in such
business, (ii) the Company acknowledges that a company which
manufactures but does not rent lighting equipment would not be viewed as
a competitor for purposes of this noncompetition covenant (iii) a
company that supplies products or services to PRG companies but which
does not directly compete with a material portion of the PRG business as
conducted by PRG on the later of (x) the Closing Date or (y) the last
date on which a Shareholder provides services to PRG under any paid
employment or consulting contract or arrangement would not be viewed as
a competitor for purposes of this noncompetition covenant and (iv) a
company that rents or buys products or services from PRG companies and
then resells these products to its customers would not be viewed as a
competitor for purposes of this noncompetition covenant, provided that
in such case the relevant Shareholder shall use reasonable commercial
efforts to refer business to appropriate PRG companies and provided
further that such company does not directly compete with a material
portion of the PRG business as conducted by PRG on the later of (x) the
Closing Date or (y) the last date on which a Shareholder provides
services to PRG under any paid employment or consulting contract or
arrangement. 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 7.7 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. In the
event of any inconsistency between the Covenant Not to Compete contained
herein and any employment contract between PRG and a shareholder, the
covenant contained in the employment agreement shall control.
ARTICLE 8
MISCELLANEOUS
8.1 Termination Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
8.1.1 by mutual consent of Seller and PRG;
8.1.2 by PRG, at any time if the representations and warranties of Seller
contained in Section 3.1 hereof were incorrect in any material respect
when made or at any time thereafter; or
8.1.3 by Seller, (i) at any time if the representations and warranties of PRG
contained in Section 3.2 hereof were incorrect in any material
respect when made or at any time
34
thereafter, (ii) upon written notice to PRG given at any time after June
30, 1998 (or such later date as shall have been specified in a writing
authorized on behalf of Seller and PRG) if all of the conditions
precedent set forth in Section 5.2 hereof have not been met or (iii)
upon written notice to PRG given at any time after May 31, 1998 (or such
later date as shall have been specified in a writing authorized on
behalf of Seller and PRG) if PRG shall have failed to notify Seller in
writing prior to such date that the condition precedent to PRG's
obligation to close the transactions contemplated herein described in
subsection 5.1.4 has either been deemed satisfied or been waived by PRG.
8.1.4 In the event of the termination and abandonment hereof pursuant to the
provisions of this Section 8.1, this Agreement (except for Section 4.2.2
which shall continue) shall become void and have no effect, without any
liability on the part of any of the parties or their directors or
officers or stockholders in respect of this Agreement.
8.1.5 By either party, if PRG has not tendered payment by July 15, 1998.
8.2 Brokers' and Finders' Fees
8.2.1 Seller represents and warrants to PRG that all negotiations relative to
this Agreement have been carried on by it directly without the
intervention of any person, who may be entitled to any brokerage or
finder's fee or other commission in respect of this Agreement or the
consummation of the transactions contemplated hereby and Seller agrees
to indemnify and hold harmless PRG against any and all claims, losses,
liabilities and expenses which may be asserted against or incurred by it
as a result of Seller's dealings, arrangements or agreements with any
other such person.
8.2.2 PRG represents and warrants to Seller and Shareholders that all
negotiations relative to this Agreement have been carried on by it
directly without the intervention of any person, who may be entitled to
any brokerage or finder's fee or other commission in respect of this
Agreement or the consummation of the transactions contemplated hereby
and PRG agrees to indemnify and hold harmless Seller against any and all
claims, losses, liabilities and expenses which may be asserted against
or incurred by Seller or Shareholders as a result of PRG's dealings,
arrangements or agreements with any other such person.
8.2.3 Sale, Transfer, and Documentary Taxes, etc. Seller shall pay all
federal, state and local sales, documentary and other transfer taxes, if
any, other than bulk sales tax which shall be divided equally between
the parties due as a result of the purchase, sale or transfer of the
Assets and the assumption of the Assumed Liabilities in accordance
herewith whether imposed by law on Seller or PRG and Seller shall
indemnify, reimburse and hold harmless PRG in respect of the liability
for payment of or failure to pay any such taxes or the filing of or
failure to file any reports required in connection therewith.
35
8.2.4 Expenses. Except as otherwise provided in this Agreement, each party
hereto shall pay its own expenses incidental to the negotiation and
preparation of this Agreement, the carrying out of the provisions of
this Agreement and the consummation of the transactions contemplated
hereby.
8.2.5 Contents of Agreement; Parties in Interest; etc. This Agreement sets forth
the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified
except by written instrument duly executed by each of the parties
hereto. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written
or oral, are superseded by this Agreement.
8.2.6 Assignment and Binding Effect. This Agreement may not be assigned prior to
the Closing by any party hereto without the prior written consent of the
other parties; provided that PRG shall have the right to assign its
rights and obligations hereunder to any entity controlled by PRG or by
its principals. Subject to the foregoing, all of the terms and
provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the successors and assigns of each
Shareholder, Seller and PRG.
8.2.7 Waiver. Any term or provision of this Agreement may be waived at any time
by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
8.2.8 Notices. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally or sent
by telegram or by registered or certified mail, postage prepaid, as
follows:
If to PRG, to:
Production Resource Group, L.L.C.
000 Xxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Manners
Facsimile: 000-000-0000
With a required copy to:
Xxxxxxx X. Xxxxxx, Esq.
Pepe & Hazard
Xxxxxxx Square, 000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: 860-522-2796
If to Seller or a Shareholder, to:
36
Production Arts Lighting Inc.
00 Xxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xx. Xxxx X. XxXxxx, President
Facsimile: 000-000-0000
With a required copy to:
Xxxxxx Xxxxx, Esq.
Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as
of the date so delivered, telegraphed or mailed.
8.2.9 Choice of Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York without
regard to principles of conflicts of laws, as applied to agreements
among New York residents entered into and to be performed entirely with
the State of New York.
8.2.10 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the
parties hereto and, in the case of Article VI hereof, the other
Indemnified Parties, and their heirs, executors, administrators, legal
representatives, successors and assigns, and they shall not be construed
as conferring any rights on any other persons.
8.2.11 Headings, Gender and "Person". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender,
masculine, feminine, or neuter, as the context requires. Any reference
to a "person" herein shall include an individual, firm, corporation,
partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
8.2.12 Entire Agreement. When executed and delivered by all parties hereto, this
agreement shall constitute the entire agreement of the parties with
respect to the subject matter contained herein and shall supercede all
prior oral and written agreements among the parties including, without
limitation, binding letter of understanding dated March 16, 1998.
37
8.2.13 Schedules and Exhibits. All Exhibits and Schedules referred to herein are
intended to be and hereby are specifically made a part of this
Agreement.
8.2.14 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of
such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.2.15 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute
but one and the same instrument notwithstanding that not all parties
hereto are signatories to the same counterpart. This Agreement shall
become binding when one or more counterparts taken together shall have
been executed and delivered by the parties. It shall not be necessary
in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts. This Agreement may be
executed by facsimile signature and each party may fully rely upon
facsimile execution; this Agreement shall be fully enforceable against
a party which has executed the Agreement by facsimile.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date first written.
BUYER:
PRODUCTION RESOURCE GROUP, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
---------------------------------------
Its: Executive Vice President
---------------------------------------
SELLER:
PRODUCTION ARTS LIGHTING INC.
By: /s/ Xxxx X. XxXxxx
---------------------------------------
Name: Xxxx X. XxXxxx
---------------------------------------
Its: President
---------------------------------------
PRODUCTION ARTS LIGHTING WEST, INC.
38
By: /s/ Xxxx X. XxXxxx
---------------------------------------
Name: Xxxx X. XxXxxx
---------------------------------------
Its: President
---------------------------------------
PRODUCTION ARTS EUROPE, INC.
By: /s/ Xxxx X. XxXxxx
---------------------------------------
Name: Xxxx X. XxXxxx
---------------------------------------
Its: President
---------------------------------------
SHAREHOLDERS:
/s/ Xxxx X. XxXxxx
---------------------------------------
Xxxx X. XxXxxx
/s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx
